Question 1. Cost of goods manufactured, income statement, manufacturing company.
Consider the following account balances (in thousands) for the Piedmont Corporation:
1. Prepare a schedule for the cost of goods manufactured for 2011.
2. Revenues for 2011 were $600 million. Prepare the income statement for 2011.
Question 2. Income statement and schedule of cost of goods manufactured. The Howell
Corporation has the following account balances (in millions):
Prepare an income statement and a supporting schedule of cost of goods manufactured for the
year ended December 31, 2011.
,Question 3. CVP computations. Garrett Manufacturing sold 410,000 units of its product for
$68 per unit in 2011. Variable cost per unit is $60 and total fixed costs are $1,640,000.
1. Calculate (a) contribution margin and (b) operating income.
2. Garrett’s current manufacturing process is labor intensive. Kate Schoenen, Garrett’s
production manager, has proposed investing in state-of-the-art manufacturing equipment, which
will increase the annual fixed costs to $5,330,000. The variable costs are expected to decrease
to $54 per unit. Garrett expects to maintain the same sales volume and selling price next year.
How would acceptance of Schoenen’s proposal affect your answers to (a) and (b) in
requirement 1?
3. Should Garrett accept Schoenen’s proposal? Explain.
Question 4. Sales mix, three products. Bobbie’s Bagel Shop sells only coffee and bagels.
Bobbie estimates that every time she sells one bagel, she sells four cups of coffee. The
budgeted cost information for Bobbie’s products for 2011 follows:
1. How many cups of coffee and how many bagels must Bobbie sell in order to break even
assuming the sales mix of four cups of coffee to one bagel, given previously?
2. If the sales mix is four cups of coffee to one bagel, how many units of each product does
Bobbie need to sell to earn operating income before tax of $28,000?
3. Assume that Bobbie decides to add the sale of muffins to her product mix. The selling price
for muffins is $3.00 and the related variable costs are $0.75. Assuming a sales mix of three
cups of coffee to two bagels to one muffin, how many units of each product does Bobbie need
to sell in order to break even? Comment on the results.
Qustion 5. Actual costing, normal costing, accounting for manufacturing overhead.
Destin Products uses a job-costing system with two direct-cost categories (direct materials and
direct manufacturing labor) and one manufacturing overhead cost pool. Destin allocates
manufacturing overhead costs using direct manufacturing labor costs.
Destin provides the following information:
,1. Compute the actual and budgeted manufacturing overhead rates for 2011. Required
2. During March, the job-cost record for Job 626 contained the following information:
Compute the cost of Job 626 using (a) actual costing and (b) normal costing.
3. At the end of 2011, compute the under- or overallocated manufacturing overhead under
normal costing. Why is there no under- or overallocated overhead under actual costing?
Question 6. Budgeted manufacturing overhead rate, allocated manufacturing overhead.
Gammaro Company uses normal costing. It allocates manufacturing overhead costs using a
budgeted rate per machine-hour.
The following data are available for 2011:
1. Calculate the budgeted manufacturing overhead rate.
2. Calculate the manufacturing overhead allocated during 2011.
3. Calculate the amount of under- or overallocated manufacturing overhead.
Question 7. Proration of overhead. The Ride-On-Wave Company (ROW) produces a line of
non-motorized boats. ROW uses a normal-costing system and allocates manufacturing
overhead using direct manufacturing labor cost.
The following data are for 2011:
Inventory balances on December 31, 2011, were as follows:
1. Calculate the manufacturing overhead allocation rate.
2. Compute the amount of under- or overallocated manufacturing overhead.
3. Calculate the ending balances in work in process, finished goods, and cost of goods sold if
underoverallocated manufacturing overhead is as follows:
a. Written off to cost of goods sold
, b. Prorated based on ending balances (before proration) in each of the three accounts
c. Prorated based on the overhead allocated in 2011 in the ending balances (before proration)
in each of the three accounts
4. Which method makes the most sense? Justify your answer.
Question 8. Plant-wide, department, and activity-cost rates. Tarquin’s Trophies makes
trophies and plaques and operates at capacity. Tarquin does large custom orders, such as the
participant trophies for the Mishawaka Little League. The controller has asked you to compare
plant-wide, department, and activity based cost allocation.
Other information follows:
Setup costs vary with the number of batches processed in each department. The budgeted
number of batches for each product line in each department is as follows:
1. Calculate the budgeted cost of trophies and plaques based on a single plant-wide overhead
rate, if total overhead is allocated based on total direct costs.
2. Calculate the budgeted cost of trophies and plaques based on departmental overhead rates,
where forming department overhead costs are allocated based on direct labor costs of the
forming department, and assembly department overhead costs are allocated based on total
direct costs of the assembly department.
3. Calculate the budgeted cost of trophies and plaques if Tarquin allocates overhead costs in
each department using activity-based costing.
Consider the following account balances (in thousands) for the Piedmont Corporation:
1. Prepare a schedule for the cost of goods manufactured for 2011.
2. Revenues for 2011 were $600 million. Prepare the income statement for 2011.
Question 2. Income statement and schedule of cost of goods manufactured. The Howell
Corporation has the following account balances (in millions):
Prepare an income statement and a supporting schedule of cost of goods manufactured for the
year ended December 31, 2011.
,Question 3. CVP computations. Garrett Manufacturing sold 410,000 units of its product for
$68 per unit in 2011. Variable cost per unit is $60 and total fixed costs are $1,640,000.
1. Calculate (a) contribution margin and (b) operating income.
2. Garrett’s current manufacturing process is labor intensive. Kate Schoenen, Garrett’s
production manager, has proposed investing in state-of-the-art manufacturing equipment, which
will increase the annual fixed costs to $5,330,000. The variable costs are expected to decrease
to $54 per unit. Garrett expects to maintain the same sales volume and selling price next year.
How would acceptance of Schoenen’s proposal affect your answers to (a) and (b) in
requirement 1?
3. Should Garrett accept Schoenen’s proposal? Explain.
Question 4. Sales mix, three products. Bobbie’s Bagel Shop sells only coffee and bagels.
Bobbie estimates that every time she sells one bagel, she sells four cups of coffee. The
budgeted cost information for Bobbie’s products for 2011 follows:
1. How many cups of coffee and how many bagels must Bobbie sell in order to break even
assuming the sales mix of four cups of coffee to one bagel, given previously?
2. If the sales mix is four cups of coffee to one bagel, how many units of each product does
Bobbie need to sell to earn operating income before tax of $28,000?
3. Assume that Bobbie decides to add the sale of muffins to her product mix. The selling price
for muffins is $3.00 and the related variable costs are $0.75. Assuming a sales mix of three
cups of coffee to two bagels to one muffin, how many units of each product does Bobbie need
to sell in order to break even? Comment on the results.
Qustion 5. Actual costing, normal costing, accounting for manufacturing overhead.
Destin Products uses a job-costing system with two direct-cost categories (direct materials and
direct manufacturing labor) and one manufacturing overhead cost pool. Destin allocates
manufacturing overhead costs using direct manufacturing labor costs.
Destin provides the following information:
,1. Compute the actual and budgeted manufacturing overhead rates for 2011. Required
2. During March, the job-cost record for Job 626 contained the following information:
Compute the cost of Job 626 using (a) actual costing and (b) normal costing.
3. At the end of 2011, compute the under- or overallocated manufacturing overhead under
normal costing. Why is there no under- or overallocated overhead under actual costing?
Question 6. Budgeted manufacturing overhead rate, allocated manufacturing overhead.
Gammaro Company uses normal costing. It allocates manufacturing overhead costs using a
budgeted rate per machine-hour.
The following data are available for 2011:
1. Calculate the budgeted manufacturing overhead rate.
2. Calculate the manufacturing overhead allocated during 2011.
3. Calculate the amount of under- or overallocated manufacturing overhead.
Question 7. Proration of overhead. The Ride-On-Wave Company (ROW) produces a line of
non-motorized boats. ROW uses a normal-costing system and allocates manufacturing
overhead using direct manufacturing labor cost.
The following data are for 2011:
Inventory balances on December 31, 2011, were as follows:
1. Calculate the manufacturing overhead allocation rate.
2. Compute the amount of under- or overallocated manufacturing overhead.
3. Calculate the ending balances in work in process, finished goods, and cost of goods sold if
underoverallocated manufacturing overhead is as follows:
a. Written off to cost of goods sold
, b. Prorated based on ending balances (before proration) in each of the three accounts
c. Prorated based on the overhead allocated in 2011 in the ending balances (before proration)
in each of the three accounts
4. Which method makes the most sense? Justify your answer.
Question 8. Plant-wide, department, and activity-cost rates. Tarquin’s Trophies makes
trophies and plaques and operates at capacity. Tarquin does large custom orders, such as the
participant trophies for the Mishawaka Little League. The controller has asked you to compare
plant-wide, department, and activity based cost allocation.
Other information follows:
Setup costs vary with the number of batches processed in each department. The budgeted
number of batches for each product line in each department is as follows:
1. Calculate the budgeted cost of trophies and plaques based on a single plant-wide overhead
rate, if total overhead is allocated based on total direct costs.
2. Calculate the budgeted cost of trophies and plaques based on departmental overhead rates,
where forming department overhead costs are allocated based on direct labor costs of the
forming department, and assembly department overhead costs are allocated based on total
direct costs of the assembly department.
3. Calculate the budgeted cost of trophies and plaques if Tarquin allocates overhead costs in
each department using activity-based costing.
