ACCY 206 Chapter Notes - Chapter 6: Financial Statement, Inventory Turnover, Current Asset

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9 Dec 2018

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Discuss how to classify and determine inventory: classifying inventory, how a company classifies its inventory depends on whether the firm is a merchandiser or a manufacturer. In a manufacturing company, some inventory may not yet be ready for sale. Conversely, high levels of raw materials and low levels of finished goods probably signal that management is planning to step up production: many companies have significantly lowered inventory levels and costs using just-in-time (jit) inventory methods. These differ in that they assume flows of costs that may be unrelated to the actual physical flow of goods. The average-cost method instead uses the average weighted by the quantities purchased at each unit cost: there is no accounting requirement that the cost flow assumption be consistent with the physical movement of the goods. Company management selects the appropriate cost flow method: to demonstrate the three cost flow methods, we will use a periodic inventory system.

Related Questions

20.Cost of goods manufactured in a manufacturing company isanalogous to
a.Ending inventory in a merchandising company.
b.Beginning inventory in a merchandising company.
c.Cost of goods available for sale in a merchandisingcompany.
d.Cost of goods purchased in a merchandising company.

23.
Which of the following is not a manufacturing cost category?
a.Cost of goods sold
b. direct materials
c. direct labor
d.Manufacturing overhead

25.
The predetermined overhead rate is based on the relationshipbetween
a.estimated annual costs and actual activity.
b.estimated annual costs and expected annual activity.
c.actual monthly costs and actual annual activity.
d.estimated monthly costs and actual monthly activity.

27.
How have many companies significantly lowered inventory levels andcosts?
a.They use activity-based costing.
b.They utilize an enterprise resource planning system.
c.They have a just-in-time method.
d.They focus on a total quality management system.

28.
The sum of the direct materials costs, direct labor costs, andmanufacturing overhead incurred is the
a.cost of goods manufactured.
b.total manufacturing overhead.
c.total manufacturing costs.
d.total cost of work in process.

29.
Cost of goods manufactured equals $44,000 for 2008. Finished goodsinventory is $2,000 at the beginning of the year and $5,500 at theend of the year. Beginning and ending work in process for 2008 are$4,000 and $5,000, respectively. How much is cost of goods sold forthe year?
a.46500
b.42000
c.40500
d.47500

I need to Prepare entries for a job order, cost system, and cost of goods manufactured schedule, but my numbers aren't matching up. Please answer both parts of the question.

Case Inc. is a construction company specializing in custom patios. The patios are constructed of concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2017, the general ledger for Case Inc. contains the following data.

P15-3A Prepare entries for a job order cost system and cost of goods manufactured schedule
Case Inc. is a construction company specializing in custom patios. The patios are constructed of
concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2017,
the general ledger for Case Inc. contains the following data.

Raw Materials Inventory			$4,200		Manufacturing Overhead Applied		$32,640
Work in Process Inventory			$5,540		Manufacturing Overhead Incurred		$31,650

Subsidiary data for Work in Process Inventory on June 1 are as follows.

	Job Cost Sheets
			Customer Job
	Cost Element		Rodgers		Stevens	Linton
	Direct materials		$600		$800	$900
	Direct labor		320		540	580
	Manufacturing overhead		400		675	725
			$1,320		$2,015	$2,205

During June, raw materials purchased on account were $4,900, and all wages were paid. Additional
overhead costs consisted of depreciation on equipment $900 and miscellaneous costs of $400 incurred
on account.
A summary of materials requisition slips and time tickets for June show the following.

	Customer Job		Materials Requisition slips		Time tickets
	Rodgers		$ 800		$850
	Koss		2,000		800
	Stevens		500		360
	Linton		1,300		1,200
	Rodgers		300		390
			4,900		3,600
	General use		1,500		1,200
			$ 6,400		$4,800

Overhead was charged to jobs at the same rate of $1.25 per dollar of direct labor cost. The patios for
customers Rodgers, Stevens, and Linton were completed during June and sold for a total of $18,900.
Each customer paid in full.

Instructions
(a)	Journalize the June transactions: (1) for purchase of raw materials, factory labor costs incurred,
	and manufacturing overhead costs incurred; (2) assignment of direct materials, labor, and overhead to
	production; and (3) completion of jobs and sale of goods.
(b)	Post the entries to Work in Process Inventory.
(c )	Reconcile the balance in Work in Process Inventory with the costs of unfinished jobs.
(d)	Prepare a cost of goods manufactured schedule for June.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .



(a)(1)	Journalize the June transactions for purchase of raw materials, factory labor costs incurred,
	and manufacturing overhead costs incurred

	Raw Malerials Inventory
		Accounts Payable


	Factory Labor
		Cash


	Manufacturing Overhead
		Accumulated Depreciation- Equipment
		Accounts Payable


(a)(2)	Journalize the June transactions for assignment of direct materials, labor, and overhead to production

	Work in Pricess Inventory
	Manufacturing Overhead
		Raw Malerials Inventory


	Work in Pricess Inventory
	Manufacturing Overhead
		Factory Labor


	Work in Pricess Inventory
		Manufacturing Overhead


(a)(3)	Journalize the June transactions for completion of jobs and sale of goods.

	Finished Goods Inventory
		Work in Process Inventory


	Cash
		Sales


	Cost of Goods Sold
		Finished Goods Inventory


(b)	Post the entries to Work in Process Inventory.

	Work in Process Inventory
	6/1	Balance		June	Completed work
		Direct Materials
		Direct labor
		Overhead applied

	6/30	Balance


(c )	Reconcile the balance in Work in Process Inventory with the costs of unfinished jobs.

	6/30 balance in Work in Process Inventory
	Unfinished Job (Koss)
	Direct materials
	Direct labor
	Manufacturing overhead



(d)	Prepare a cost of goods manufactured schedule for June.

	CASE INC.
	Cost of Goods Manufactured Schedule
	For the Month Ended June 30, 2017

	Work in process, June 1
	Direct materials used
	Direct labor
	Manufacturing overhead applied
	Total manufacturing costs
	Total cost of work in process
	Less: Work in process, June 30
	Cost of goods manufactured



After you have completed P15-3A, consider the following additional question.
1.	Assume that indirect labor and raw materials purchases changed to $1,400 and $6,800 respectively.
	Also assume that overhead is applied at the rate of $1.50 per dollar of direct labor. The three
	completed jobs were sold for $22,000 cash. Revise the journal entries to reflect these changes.

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Show your work

Preparing a Comprehensive Budget

Ginnie Springs Company has been bottling and selling water since1940. The companyâs current owner would like to know how a newproduct would affect the companyâs rent income in the comingyear.

Required

Calculate Ginnie Springs net income for the new product in thecoming year by completing the operating budgets and budgeted incomestatement that follow. Assume that the selling price will remainconstant.

Sales budget

Ginnie Springs Company

Sales Budget

Forthe year Ended December 31

Quarter

	1	2	3	4	Year
Sales in Units	40,000	30,000	50,000	55,000	175,000
Selling price per unit	X $1	X ?	X ?	X ?	X ?
Totals Sales	40,000	$ ?	X ?	X ?	X ?

2. Production Budget:

Ginnie SpringsCompany

ProductionBudget

For the year Ended December31_____________

Quarter

	1	2	3	4	Year
Sales in Units	40,000	?	?	?	?
Plus desired units of ending finished goods inventory*	30,000	?	?	6000	6000
Desired total Units	43000	?	?	?	?
Less desired units of ending finished goods inventory*	4000	?	?	?	4000
Total Production units	39,000	?	?	?	?

*Desired units of ending finished goods inventory = 10% of nextquarterâs budgeted production needs in ounces. Desired ounces ofbeginning direct materials inventory = 20% of current quartersbudgeted production needs in ounces.

3.DirectMaterials Purchases budget

Ginnie SpringsCompany

Direct Materials PurchaseBudget

For the year Ended December31_____________

Quarter

	1	2	3	4	Year
Total production units	39,000	32,000	50,500	55,500	?
Ounces per unit	X 20	X 20	X 20	X 20	X 20
Total production needs in ounces	780,000	?	?	?	?
Plus desired ounces of ending direct materials inventory*	128,000 908,000	? ?	? ?	240,000 ?	240,000 ?
Less desired ounces of ending direct materials inventory*	156,000	?	?	?	156,000
Total ounces of direct material to be purchased	752,000	?	?	?	?
Cost per ounce	X $0.01	X ?	X ?	X ?	X ?
Total cost of direct materials purchases	$7520	?	?	?	?

Desired ounces of ending direct material inventory =20% of nextquarters budgeted production needs in ounces.

Desired ounces of beginning direct materials inventory = 20% ofcurrent quarters budgeted production needs in ounces.

4.Directlabor budget:

Ginnie SpringsCompany

Direct LaborBudget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Total production units	39,000	?	?	?	?
Direct labor hours per units	X 0.001	X ?	X ?	X ?	X ?
Total direct labor hours	39.0	?	?	?	?
Direct labor cost per hour	X $8	X ?	X ?	X ?	X ?
Total direct labor cost	$312	$ ?	$ ?	$ ?	$ ?

5.Overheadbudget

Ginnie SpringsCompany

Overhead Budget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Variable overhead costs:
Factory supplies ($0.01)	$ 390	$ ?	$ ?	$ ?	$ ?
Employee benefits ($0.05)	1,950	?	?	?	?
Inspection ($0.01)	390	?	?	?	?
Maintenance and repairs($0.02)	780	?	?	?	?
Utilities ($0.01)	390	?	?	?	?
Total Variable overheadcosts	$3900	$ ?	$ ?	$ ?	$ ?
Total fixed overhead costs	1416	?	?	?	?
Total overhead costs	$5,316	$ ?	$ ?	$ ?	$ ?

Note: The figures in parentheses are variable costs perunit.

6.Sellingand administrative expenses budget:

Ginnie SpringsCompany

Selling and Administrative Expenses Budget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Variable Selling and Administrative expenses
Delivery expenses ($0.01)	$ 400	$ ?	$ ?	$ ?	$ ?
Sales Commission ($0.02)	800	?	?	?	?
Accounting ($0.01)	400	?	?	?	?
Other administrative expenses($0.01)	400	?	?	?	?
Total Variable selling and administrative exp.	$2,000	$ ?	$ ?	$?	$?
Total fixed selling and administrative exp.	5000	?	?	$?	?
Total selling and administrative expenses	$ 7,000	$ ?	$ ?	$ ?	$ ?

Note: The figures in parentheses arevariable costs per unit

7. Cost of goods manufactured budget:

Ginnie SpringsCompany

Cost of Goods Manufactured Budget

For the year EndedDecember 31_____________

Direct Material Used:

Direct Material Inventory,Beginning

Purchases

Cost of Direct materials available foruse

Less: Direct materials Inventory,ending

Cost of Direct Materialsused

Direct laborcosts:

Overhead costs:

Total manufacturing costs

Work in Process Inventory,beginning*

Less: work in process inventory,ending*

Cost of Goods Manufactured

Units produced

Manufactured cost perunit

It is the companyâs policy to have no units in process at theend of theyear.

8. Budgeted income statement

Ginnie Springs Company

Selling and Administrative Expenses Budget

For the year EndedDecember 31_____________

Sales

Cost of goods sold

Finished goods inventory beginning

Cost of goods manufactured

Cost of Goods available for sale

Less finished goods inventory, ending

Cost of good sold

Gross margin

Selling and administrative expenses

Income from operations

Income taxes expenses (30% tax rate)

Net Income

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ACCY 206 Chapter Notes - Chapter 6: Financial Statement, Inventory Turnover, Current Asset

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