Application Problems 3

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Application Problems 3


Managerial Accounting


Application Problems Week 3


BE3-7 Trek Company has the following production data for April: units transferred out 40,000, and ending work in progress 5,000 units that are 100% complete for materials and 40% complete for conversion costs. If unit materials cost is $4 and unit conversion cost is $7, determine the cost to be assigned to the units transferred out and the units in ending work in process.


BE3-9 Data for Hollins Company is: Production costs to the Finishing Department in June in Hollins Company are materials $12,000, Labor $29,500, and overhead $18,000. Equivalent units are materials 20,000 and conversion costs 19,000.


Production records indicate that 18,000 unit were transferred out, and 2,000 units in ending work in process were 50% complete as to conversion costs and 100% as to materials. Prepare a cost reconciliation schedule.


E3-7 The Sanding Department of Quik Furniture Company has the following production and manufacturing cost data for March 2017, the first month of operation.


Production: 7,000 units finished and transferred out; 3,000 unit started that 100% complete as to materials and 20% complete as to conversion costs.


Manufacturing costs: Materials $33,000; labor $21,00; and overhead $36,000.


Instructions: Prepare a production cost report


BE4-2 Finney Inc. has conducted an analysis of overhead costs related to one of its product lines using a traditional costing system (volume based) and an activity-based costing system. Here are the results.


                                    Traditional Costing                            ABC


Sales Revenue             $600,000                                             $600,000


Overhead costs          


Product RX3                $34,000                                               $50,000


Product Y12                 36,000                                                20,000


                                    $70,000                                               $70,000


Explain how a difference in the two systems may have occurred.


BE4-8 Rich Novelty Company indentified the following activities in its production and support operations. Classify each of these activities as either value-added or non-value –added.


  1. Machine setup                  (d) Moving work in process

  2. Design engineering           (e) Inspecting and testing

  3. Storing inventory              (f) Paining and packing


E4-8 Wilmington, Inc. manufactures five models of kitchen appliances. The company is installing activity based-costing and has identified the following activities performed at its Mesa plant.


  1. Designing new models

  2. Purchasing raw materials and parts

  3. Storing and managing inventory

  4. Receiving and inspecting new materials and parts

  5. Interviewing and hiring new personnel

  6. Machine forming sheet steel into appliance parts

  7. Manually assembling parts into appliances

  8. Training all the employees of the company

  9. Insuring all tangible fixed assets

  10. Supervising production

  11. Maintaining and repairing Machinery and equipment

  12. Painting and packaging finished appliances


Having analyzed its Mesa plant operations for purposes of installing activity-based costing, Wilmington, Inc. identified its activity cost centers. It It now needs to identify relevant activity cost drivers in order to assign overhead coast to its products.




Using the activities listed above, indentify for each activity one or more cost drivers that might be used to assign overhead to Wilmington’s five products.


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