CHAPTER 4 AND 5 PROBLEMS
Please complete the following 7 exercises below in either Excel or a
word document (but must be single document). You must show your work
where appropriate (leaving the calculations within Excel cells is
acceptable). Save the document, and submit it in the appropriate week
using the Assignment Submission button.
CHAPTER 4 EXERCISE 3
3. COST FLOWS AND OVERHEAD APPLICATION
Cleveland Metals uses a job cost system and applies factory overhead
to production at a predetermined rate of 180% of direct labor cost.
Data pertaining to recent operations follow.
* Job no. 636 was the only job in process on January 1 of the
current year. The Work in Process account contained a $24,600 balance
on this date.
* Jobs no. 637, 638, and 639 were started during January.
* Total direct material requisitions and direct labor incurred
during January amounted to $89,200 and $114,500, respectively.
* The only job that remained in process on January 31 was job no.
638, with costs of $15,000 for direct materials and $20,000 for direct
* Compute the total cost of the work in process inventory on January
* Compute the cost of jobs completed during January, and present the
proper journal entry to reflect job completion.
CHAPTER 4 EXERCISE 7
7. OVERHEAD APPLICATION: WORKING BACKWARD
The Towson Manufacturing Corporation applies overhead on the basis of
machine hours. The following divisional information is presented for
Actual machine hours
Estimated machine hours
Overhead application rate
Over- (under-) applied overhead
FIND THE UNKNOWNS FOR EACH OF THE DIVISIONS.
CHAPTER 4 PROBLEM 2
2. COMPUTATIONS USING A JOB ORDER SYSTEM
General Corporation employs a job order cost system. On May 1 the
following balances were extracted from the general ledger;
Work in process $ 35,200
Finished goods 86,900
Cost of goods sold 128,700
Work in Process consisted of two jobs, no. 101 ($20,400) and no. 103
($14,800). During May, direct materials requisitioned from the
storeroom amounted to $96,500, and direct labor incurred totaled
$114,500. These figures are subdivided as follows:
Job no. 115 was the only job in process at the end of the month. Job
no. 101 and three "other" jobs were sold during May at a profit of 20%
of cost. The "other" jobs contained material and labor charges of
$21,000 and $17,400, respectively.
General applies overhead daily at the rate of 150% of direct labor
cost as labor summaries are posted to job orders. The firm's fiscal
year ends on May 31.
* Compute the total overhead applied to production during May.
* Compute the cost of the ending work in process inventory.
* Compute the cost of jobs completed during May.
* Compute the cost of goods sold for the year ended May 31.
CHAPTER 5 EXERCISE 1
1. HIGH-LOW METHOD
The following cost data pertain to 20X6 operations of Heritage
The company uses the high-low method to analyze costs.
* Determine the variable cost per order shipped.
* Determine the fixed shipping costs per quarter.
* If present cost behavior patterns continue, determine total
shipping costs for 20X7 if activity amounts to 570 orders.
CHAPTER 5 EXERCISE 2
The treasurer anticipates the following costs for the event, which
will be held at the Regency Hotel:
Dinner cost (per person) 25
Favors and souvenirs (per person) 5
Each person would pay $40 to attend; 200 attendees are expected.
* Will the event be profitable for the sorority? Show computations.
* How many people must attend for the sorority to break even?
* Suppose the sorority encouraged its members to drive to the hotel
and did not charter the buses. Further, a planned menu change will
reduce the cost per meal by $2. If each member will still be charged
$40, compute the contribution margin per person.
CHAPTER 5 EXERCISE 3
3. BREAK-EVEN AND OTHER CVP RELATIONSHIPS
Cedars Hospital has average revenue of $180 per patient day. Variable
costs are $45 per patient day; fixed costs total $4,320,000 per year.
* How many patient days does the hospital need to break even?
* What level of revenue is needed to earn a target income of
* If variable costs drop to $36 per patient day, what increase in
fixed costs can be tolerated without changing the break-even point as
determined in part (a)?
CHAPTER 5 PROBLEM 6
6. DIRECT AND ABSORPTION COSTING
The information that follows pertains to Consumer Products for the
year ended December 31, 20X6.
$3 per unit
$5 per unit
Variable factory overhead
$9 per unit
Fixed factory overhead
Selling & administrative expenses:
$2 per unit
The unit selling price is $26. Assume that costs have been stable in