ACCOUNTING PROBLEM AND SOLUTION

E 13.12

Given

Machine Rate per Hour                       $7.50

Percentage of balance applied for direct labor cost    200%

a.       Calculate the cost per unit of a production run of 4260 toy flutes

Where,

       Raw Material Costing      $2880

       108 direct labor hours costing      $1836

       108 machine hours

Solution

Calculation of Total cost

Raw Material                          =          $2880

Labor                                       =          $1836

Machine                                  =          $810     

Balance of the overhead         =          3672               

Total cost                                            $3672

Therefore, the cost per unit of the production   =$3672/4260

                                                                        =0.862

b.      At the end of the February, 3,930 of these toy flutes had been sold. Calculate the ending inventory at February 28.

Solution,

Remaining Unit                       =          4260-3930

                                    =          330

Therefore,

Ending Inventory        =          330 * 0.862

                                                $284.46

P 13.16

Given

Direct Labor Rate                   =          $20

Expected Production Label    =          $50,000

Direct Labor Hours                 =          200,000 Hours

a.       Given,

Units produced=3,800

Direct material cost=$142,000

Number of parts used=83,600

Direct labor cost=17,180

Direct materials                                                                                      $142,000

Direct labor cost (17180*20)                                                                $343,600

Cost of number of parts used (83,600*1.80)                                    $150,480

Total manufacturing cost                                                                     $636080   

Cost per unit= total manufacturing cost/total production units=636080/3,800

                       =167.389

b.      Application rate=Estimated total overhead cost/estimated total direct labor hour

                             =1000000/200,000

                             =5

c.       Activity based costing is important from the managerial point of view because it considers all the cost but manufacturing overhead  considers all manufacturing cost except those classified as direct labor and rawmaterials.

13.18

          a.           Under variable costing,

Raw materials                                          $1,788,800

Direct labor                                               $2,953,600

Variable manufacturing overhead        $748,800

Total cost                                                   $5491200

Cost per recorder=total cost/no of units produced

                                 =5491200/208,000

                                 =26.4

Under absorption costing,

Raw materials                                          $1,788,800

Direct labor                                               $2,953,600

Variable manufacturing overhead        $748,800

Fixed manufacturing overhead              $707,200

Total cost                                                   $6198, 400

Cost per recorder                    =          total cost/no of units produced

                                                 =         6198, 400/208,000

                                                =          29.8

d.        Total units of goods sold      =          208,000-20,400

                                               =          187,600

Under variable costing,

Cost of goods sold                  =          187,600*26.4

                                                 =         4952,640

Under absorption costing,

Cost of goods sold                  =          187,600*29.8

                                                =          5590,480

e.       Digital Voice Recorder Cost in Cost Formula

Total Cost =    Raw Materials + Direct Labor+ Variable Manufacturing Overhead

This formula suggest that producing additional 1,700 recorders does not cost any  additional fixed cost.