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Biondi Industries is a manufacturer of chemicals for various purposes. One of the processes used by them is HTP-3 a chemical used in hot tubs and swimming pools; PST-4 a chemical used in pesticides; and RJ-5 a product that is sold to fertilizer manufacturers.
Biondi uses the net-realizable-value method to allocate joint production costs. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. Biondi uses FIFO in valuing its finished good inventories.
Data regarding Biondi’s operation for the month of October are as follows. During this month Biondi incurred joint production costs of $1,7000,000 in the manufacture of HTP-3, PST-4, and RJ-5.
Finished goods inventory in gallons October 1 18,000 52,000 3,000
October sales in gallons 650,000 325,000 150,000
October production in gallons 700,000 350,000 170,000
Additional processing costs $874,000 $816,000 $60,000
Final sales value per gallon $4.00 $6.00 $5.00
Chemicals used HTP -3 PST -4 RJ-5
1. Determine Biondi’s allocation of joint production costs for the month of October, and carry calculation of relative proportions for 4 decimal places
2. Determine the dollar values of the finished goods inventories for HTP-3, PST-4, and RJ-5 as of October 31. Round the cost per gallon to the nearest cent.
3. Suppose Biondi has a new opportunity to sell PST-4 at the split off point for $3.90 per gallon. Prepare an analysis showing whether the company should sell PST-4 at the split off point or continue to process this product further.
Winchester Chemicals uses a joint process to produce VX -4 a chemical used in the manufacture of paints and varnishes; HD-10 a chemical used in household cleaning products; and FT-5 a by-product that is sold to fertilizer manufacturers.
Joint production costs are allocated to the main products on the basis of net realizable value.
The by-product is inventoried at its net realizable value, and this value is used to reduce the joint production costs before allocation to the main products.
During the month of November, Winchester incurred joint production costs of $1,568,000. Data regarding Winchesters November’s operations are as follows:
VX-4 HD-10 FT-5
November production in gallons 600,000 320,000 85,000
Sales value per gallon at split-off None $3.00 $0.90
Separable processing costs $720,000 $920,000 None
Final sales value per gallon $4.00 $6.375 None
Finished goods inventory in gallons on
November 30 (all producted during November)
Disposal costs of $.10 per gallon will be incurred in order to sell the by-product
1. Determine the dollar values of Winchester Chemicals finished goods inventories on November 30- for VX 4 and HD 10
2. Winchester Chemicals has an opportunity to sell HD-10 for its sales value at the split off point. Determine if Winchester
should sell HD-10 at the split-off point or continue to process it further.
Hudson Community College enrolls students in two departments, Liberal Arts and Sciences. The college also has two service departments, the Library and the Computing Services Department. The usage of these two service department’s output for the year is as follows:
The budgeted costs in the two service departments for the year are as follows:
Library …………$600,000
Computing Services ……. 240,000
Required:
Use the direct method to allocate the budgeted costs of the Library and Computing Services Department to the colleges Liberal Arts and Sciences departments.
Information taken from Allied Pipe Company’s records for the most recent year is as follows:
Direct material used…………………………………………………………….. $340,000
Direct labor …………………………………………………………………………. 160,000
Variable manufacturing overhead …………………………………………… 75,000
Fixed manufacturing overhead……………………………………………….. 125,000
Variable selling and administrative costs …………………………………. 70,000
Fixed selling and administrative costs…………………………………….. 37,000
Required:
1. Assuming Allied Pipe Company uses absorption costing compute the inventoriable costs for the year.
2. Compute the year’s inventoriable costs using variable costing.
Easton Pump Company’s planned production for the year just ended was 20,000 units. This production level was achieved, and 21,000 units were sold. Other data follow:
Direct material used ……………………………………………………………………………. $600,000
Direct labor incurred …………………………………………………………………………… 300,000
Fixed manufacturing overhead…………………………………………………………….. 420,000
Variable manufacturing overhead …………………………………………………………. 200,000
Fixed selling and administrative expenses ……………………………………………… 350,000
Variable selling and administrative expenses………………………………………….. 105,000
Finished-goods inventory, January 1 ……………………………………………………… 2,000 units
There were no work-in-process inventories at the beginning or end of the year.
Required:
1. What would be Easton Pump Company’s finished-goods inventory cost on December 31 under the variable-costing method?
2. Which costing method, absorption or variable costing, would show a higher operating income for the year? By what amount?
The controller for Tulsa Photographic Supply Company has established the following activity cost pools and cost drivers.
An order for 1,000 boxes of film development chemicals has the following production requirements.
Machine setups ……………………… 5 Setups
Raw material ………………………… 10,000 pounds
Hazardous materials …………………. 2,000 pounds
Inspections ………………………… 10 inspections
Machine hours ……………………… 500 machine hours
Required:
1. Compute the total overhead that should be assigned to the development-chemical order.
2. What is the overhead cost per box of chemicals?
3. Suppose Tulsa Photographic Supply Company was to use a single predetermined overhead rate based on machine hours, Compute the rate per hour.
4. Under the approach in requirement (3), how much overhead would be assigned to the development chemical order?
a. In total,
b. Per box of chemicals.
5. Explain why these two product-costing systems result in such widely differing costs. Which system do you recommend? Why?
Drs. Glenn Feltham and Gary Entwistle began operations of their physical therapy clinic called Northland Physical Therapy on January 1, 2014. The annual reporting period ends December 31. The Trial Balance on January 1, 2015, was as follows:
Required: (answer questions 5-9)
5. Post adjusting entries from requirement 4 and prepare an adjusted trial balance.
6. Prepare an income statement, statement of retained earnings, and a balance sheet.
7. Prepare the closing journal entry.
8. Post the closing entry from requirement 7 and prepare a post-closing trial balance.
9. How much net income did the physical therapy clinic generate during 2015? What was its net profit margin? Is the business financed primarily by liabilities or stockholders’ equity? What is it’s current ratio?
Meyers Company has two departments, Cutting and Finishing. The company uses a job-order cost system and computes a predetermined overhead rate in each department. The Cutting Department bases its rate on machine-hours, and the Finishing Department bases its rate on direct labor cost. At the beginning of the year, the company made the following estimates:
Department
Cutting
Finishing
Direct labor-hours
11,000
98,000
Machine-hours
65,000
2,500
Manufacturing overhead cost
$
281,000
$
672,800
Direct labor cost
$
66,000
$
580,000
——————————————————————————–
Requirement 1:
Compute the predetermined overhead rate to be used in each department. (Round cost per machine hour to two decimal places and round percentage to nearest whole percent. Omit the “%” and “$” signs, which are provided for you.)
Cutting Department
$
per MH
Finishing Department
% of DLC
Requirement 2:
Assume that the overhead rates that you computed in (1) above are in effect. The job cost sheet for job AF-45, which was started and completed during the year, showed the following:
Department
Cutting
Finishing
Direct labor-hours
11
75
Machine-hours
100
2
Materials requisitioned
$
630
$
760
Direct labor cost
$
66
$
400
Compute the total overhead cost applied to job AF-45. (Round your answer to the nearest dollar amount. Omit the “$” sign in your response.)
Total overhead cost
PR 5-4A Purchases and cash payments journals; accounts payable and general ledgers
Green Mountain Water Testing Service was established on November 16, 2012. Green
Mountain uses field equipment and field supplies (chemicals and other supplies) to analyze water for unsafe contaminants in streams, lakes, and ponds. Transactions related to
purchases and cash payments during the remainder of November are as follows:
Nov. 16. Issued Check No. 1 in payment of rent for the remainder of November, $1,700.
16. Purchased field supplies on account from Hydro Supply Co., $4,380.
16. Purchased field equipment on account from Test-Rite Equipment Co., $16,900.
17. Purchased office supplies on account from Best Office Supply Co., $375.
19. Issued Check No. 2 in payment of field supplies, $2,560, and office supplies, $300.
Post the journals to the accounts payable subsidiary ledger.
23. Purchased office supplies on account from Best Office Supply Co., $580.
23. Issued Check No. 3 to purchase land, $45,000.
24. Issued Check No. 4 to Hydro Supply Co. in payment of invoice, $4,380.
26. Issued Check No. 5 to Test-Rite Equipment Co. in payment of invoice, $16,900.
Post the journals to the accounts payable subsidiary ledger.
30. Acquired land in exchange for field equipment having a cost of $8,000.
30. Purchased field supplies on account from Hydro Supply Co., $5,900.
30. Issued Check No. 6 to Best Office Supply Co. in payment of invoice, $375.
30. Purchased the following from Test-Rite Equipment Co. on account: field supplies, $900, and field equipment, $3,700.
30. Issued Check No. 7 in payment of salaries, $22,400.
Post the journals to the accounts payable subsidiary ledger.
Instructions
1. Journalize the transactions for November. Use a purchases journal and a cash payments journal, similar to those illustrated in this chapter, and a two-column general
journal. Use debit columns for Field Supplies, Office Supplies, and Other Accounts in
the purchases journal. Refer to the following partial chart of accounts:
11
14
15
17
Cash
Field Supplies
Office Supplies
Field Equipment
19
21
61
71
Land
Accounts Payable
Salary Expense
Rent Expense
At the points indicated in the narrative of transactions, post to the following accounts in
the accounts payable subsidiary ledger:
Best Office Supply Co.
Hydro Supply Co.
Test-Rite Equipment Co.
The balances in the ledger of Landscape Services as of December 31, 2016 before adjustments are as follows:
Cash -debit $ 14,500 Tim Welch, Capital – credit $33,050
Supplies – debit 4,150 Tim Welch, Drawing – debit 2,900
Prepaid Insurance – debit 8,700 Service Revenue – credit 52,500
Equipment – debit 42,000 Salary Expense – debit
Supplies Expense
Depreciation Expense
Insurance Expense 26,600
0
0
0
Accumulated Rent Expense – debit 5,000
Depreciation – credit
Salaries Payable 20,200
0 Miscellaneous Expense – debit 1,900
Adjustment data are as follows: supplies on hand, December 31, $1,000; insurance expired for December, $900; depreciation on equipment for December, $1,500; salaries accrued, December 31, $1,000.
(a) Prepare a ten-column work sheet for Landscape Services for December 31 , 2016.
Part 2
On the basis of the adjustment data in the work sheet, journalize the adjusting entries.
Part 3
On the basis of the data in the work sheet, journalize the closing entries.