The general ledger of Smokey Mountain Mfg., Inc., showed the following credit balances on January 15: FICA Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,100.00 Employees Income Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,937.50 FUTA Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193.75 State Unemployment Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 775.00 Direct labor earnings amounted to $10,500 from January 16 to 31. Indirect labor was $5,700, and sales and administrative salaries for the same period amounted to $3,800. All wages are subject to FICA, FUTA, state unemployment taxes, and 10% income tax withholding. Required: 1. Prepare the journal entries for the following: a. Recording the payroll. b. Paying the payroll. c. Recording the employer’s payroll tax liability. d. Distributing the payroll costs for January 16 to 31. 2. Prepare the journal entry to record the payment of the amounts due for the month for FICA and income tax withholdings. 3. Calculate the amount of total earnings for the period from January 1 to 15.
> What are three methods traditionally used for applying factory overhead to jobs? Discuss the allocation base used in each method.
> What are the two types of budget data needed to compute predetermined overhead rates?
> What are the shortcomings of waiting until the actual factory overhead expenses are known before recording such costs on the job cost sheets?
> When using the step-down method of distributing service department costs, if a service department receives services from other service departments, will those costs be allocated back to it even though it was the first service department distributed?
> What are the two most frequently used methods of distributing service department costs to production departments?
> Giovanni Construction Company uses the job order cost system. In recording payroll transactions, the following accounts are used: Cash Administrative Salaries Wages Payable Miscellaneous Administrative Expense FICA Tax Payable Sales Salaries Federal Une
> What are two types of departments found in a factory? What is the function or purpose of each?
> What is the function and use of each of the two types of factory overhead analysis spreadsheets?
> How does accounting for factory overhead differ in small enterprises versus large enterprises?
> Listed below are the budgeted factory overhead costs for 2011 for Muncie Manufacturing, Inc., at a projected level of 2,000 units: Expenses: Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> A manufacturing process may produce a considerable quantity of scrap material because of the nature of the product. What methods can be used to account for the sales value of scrap material?
> Fahrenheit Company manufactures a product that requires the use of a considerable amount of natural gas to heat it to a desired temperature. The process requires a constant level of heat, so the furnaces are maintained at a set temperature for 24 hours a
> The cost behavior patterns on page 222 are lettered A through H. The vertical axes of the graphs represent total dollars of expense, and the horizontal axes represent production in units, machine hours, or direct labor hours. In each case, the zero point
> Plano Products, Inc., had a remaining credit balance of $10,000 in its under- and overapplied factory overhead account at yearend. It also had year-end balances in the following accounts: Work in Process . . . . . . . . . . . . . . . . . . . . . . . . .
> Planet Products, Inc., completed Job 2525 on May 31, and there were no jobs in process in the plant. Prior to June 1, the predetermined overhead application rate for June was computed from the following data, based on an estimate of 5,000 direct labor ho
> Ko-Be Corporation has four departmental accounts: Building Maintenance, General Factory Overhead, Machining, and Assembly. The direct labor hour method is used to apply factory overhead to the jobs being worked on in Machining and Assembly. The company e
> An analysis of the payroll for the month of November for Hollywood, Inc., reveals the information shown: Crowe, Eastwood, and Carey are production workers, and Penn is the plant manager. Giamatti is in charge of the office. Cumulative earnings paid (bef
> The following information, taken from the books of Nicholas Company, represents the operations for the month of January: The job cost system is used, and the February cost sheet for Job M45 shows the following: The following actual information was accu
> Manufacturing Company is studying the results of applying factory overhead to production. The following data have been used: estimated factory overhead, $60,000; estimated materials costs, $50,000; estimated direct labor costs, $60,000; estimated direct
> GGT Products, Inc., uses a job order cost system. Selected transactions dealing with factory items for the month follow: a. Requisitioned indirect materials from storeroom, $3,200. b. Purchased, on account, factory supplies for future needs, $4,400. c.
> Julio Manufacturing Company uses activity-based costing. The factory overhead budget for the coming period is $500,000, consisting of the following: Cost Pool Budgeted Amount Direct labor support . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> Lexus Products, Inc., has its factory divided into three departments, with individual factory overhead rates for each department. In each department, all the operations are sufficiently alike for the department to be regarded as a cost center. The estima
> What are the arguments for and against ‘‘backflush’’ costing?
> Barbara-Lee Manufacturing Company uses the job order cost system of accounting. The following is a list of the jobs completed during the month of March, showing the charges for materials requisitioned and for direct labor. Assume that factory overhead i
> Using the information in P4-6, prepare a schedule showing the distribution of the service departments’ expenses using the sequential distribution method in the order of number of other departments served. Mixing . . . . . . . . . . . . . . . . $21,000 F
> Bakery Products, Inc., is divided into five departments, Mixing, Blending, Finishing, Factory Office, and Building Maintenance. The first three departments are engaged in production work. Factory Office and Building Maintenance are service departments. D
> Home Entertainment, Inc., manufactures two types of DVD players: standard and deluxe. It attempts to set selling prices based on a 50% markup on manufacturing costs to cover selling and administrative expenses and to earn an acceptable return for shareho
> Pan-Am Manufacturing Company prepares cost estimates for projects on which it will bid. In order to anticipate the labor cost to be included in a request to bid on a contract for 1,200,000 units that will be delivered to the customer at the rate of 100,0
> Go to the companion Web site at www.cengage.com/accounting/vanderbeck and click on the link to Activity-based costing from Economist.com. Required: Answer the following questions based on the article: 1. If two activities use the same amount of direct c
> Scentsation, Inc., budgeted for 12,000 bottles of perfume Oui during the month of May. The unit cost of Oui was $20, consisting of direct materials, $7; direct labor, $8; and factory overhead, $5 (fixed, $2; variable, $3). a. What would be the unit cost
> Determine: 1. The variable cost per unit, the total fixed cost, and R2. 2. The plotted data points using Chart Wizard. 3. Compare the results to your solutions in E4-2 and E4-3. Indirect Indirect Labor Hours Labor Costs January 400 $ 6,000 February 5
> Using the data in E4-2 and a piece of graph paper: 1. Plot the data points on the graph and draw a line by visual inspection, indicating the trend shown by the data points. 2. Determine the variable cost per unit and the total fixed cost from the informa
> Copper Mountain Company has accumulated the following data over a six-month period: Separate the indirect labor into its fixed and variable components, using the high-low method. Indirect Indirect Labor Hours Labor Costs January 400 $ 6,000 February
> Classify each of the following items of factory overhead as either a fixed or a variable cost. (Include any costs that you consider to be semivariable within the variable category. Remember that variable costs change in total as the volume of production
> What is the difference between throughput time and velocity?
> ETA Company had a remaining credit balance of $20,000 in its under- and overapplied factory overhead account at year-end. The balance was deemed to be large and, therefore, should be closed to Work in Process, Finished Goods, and Cost of Goods Sold. The
> The following form represents an account taken from the general ledger of Brodsky Costumes Company: Answer the following questions: a. What is the title of the account? b. Is this a departmentalized factory? c. What does the balance of $1,100 represent?
> The general ledger of Stephens Products, Inc. contains the following control account: If the materials charged to the one uncompleted job still in process amounted to $3,400, what amount of labor and factory overhead must have been charged to the job if
> The payroll records of XU Corporation for the week ending October 7, the fortieth week in the year, show the following: Required: 1. Complete a work sheet with the following column headings: Employee 3 columns for Earnings for Week: . Use one for Regula
> The books of Prestige Products Company revealed that the following general journal entry had been made at the end of the current accounting period: Factory Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 Und
> Match each of the following cost pools with the most appropriate cost allocation base and determine the overhead rates: Cost Pool Amount Assembly support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
> Job 401k required $5,000 for direct materials, $2,000 for direct labor, 200 direct labor hours, 100 machine hours, two setups, and three design changes. The cost pools and overhead rates for each pool follow: Cost Pool Overhead Rate Assembly support $5/
> a. If the direct labor cost method is used in applying factory overhead and the predetermined rate is 100%, what amount should be charged to Job 2010 for factory overhead? Assume that direct materials used totaled $5,000 and that the direct labor cost to
> A manufacturing company has two service and two production departments. Building Maintenance and Factory Office are the service departments. The production departments are Assembly and Machining. The following data have been estimated for next year’s ope
> What would be the appropriate basis for distributing the costs of each of the following service departments to the user departments? a. Building maintenance b. Inspection and packing c. Machine repair d. Human resources e. Purchasing f. Shipping g. Raw m
> What purpose do digital records and remote computer terminals serve in a payroll system?
> How does the just-in-time approach to production differ from the traditional approach?
> Briefly stated, what are the advantages and disadvantages of (a) the hourly rate wage plan and (b) the piece-rate wage plan?
> What is the difference between direct and indirect labor?
> What are the two alternatives for accounting for the fringe benefits of direct laborers?
> a. Distinguish between defined benefit pension plans and defined contribution pension plans. b. Distinguish between contributory and noncontributory pension plans.
> What is a shift premium, and how is it usually accounted for?
> What are the procedures involved in accounting for labor cost, and what supporting forms are used for each procedure?
> What accounts are used to record employees’ withholding taxes and the employer’s payroll taxes?
> Maintaining internal control over labor cost is necessary for a cost accounting system to function effectively. What are the internal control procedures regarding the charge to the work in process account and the credit to the payroll account in the gene
> In accounting for labor costs, what is the distinction between the accounting treatment for regular pay and overtime premium pay?
> Although payroll records may vary in design, what types of employee data would be found in the payroll records of most manufacturing companies?
> Which of the forms shown in the chapter is the source for the following entries to subsidiary ledger accounts? a. Debits in materials ledger to record materials purchased b. Credits in materials ledger to record materials requisitioned c. Debits in job
> Terri Whelan, SS# 036-47-2189, is a Grade 1 Machinist who earns $20 per hour. On Monday June 12 through Wednesday June 14, she worked four hours per day on each of Jobs 007 and 2525. On Thursday and Friday of the week, she worked six hours per day on Job
> WTA Manufacturing Company operates on a modified wage plan. During one week’s operation, the following direct labor costs were incurred: The employees are machine operators. Piece rates vary with the kind of product being produced. A m
> Why do companies adopt the LIFO method of inventory costing? Your discussion should include the effects on both the income statement and balance sheet.
> A company may select an inventory costing method from a number of commonly used procedures. Briefly, how would you describe each of the following methods? a. First-in, first-out b. Last-in, first-out c. Moving average
> Elite Manufacturing Company uses a job order cost system to cost its products. It recently signed a new contract with the union that calls for time-and-a-half for all work over 40 hours a week and double-time for Saturday and Sunday. Also, a bonus of 1%
> Who originates each of the following forms? a. Purchase requisition b. Purchase order c. Receiving report d. Materials requisition e. Debit-credit memorandum
> What internal control procedures should be established for incoming shipments of materials purchased?
> The following is a list of manufacturing costs incurred by Orleans Products Co. during the month of July: Direct materials used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,000 Indirect materials use
> Illustrations of forms for requisitioning, ordering, and accounting for materials are presented in the chapter. Would you expect these forms, as shown, to be used by all manufacturers? Discuss.
> Purchasing agents are responsible for contacting vendors from which to purchase materials required by production. Why is the purchasing agent also responsible for reviewing and approving incoming vendors’ invoices?
> Briefly, what are the duties of the following employees? a. Purchasing agent b. Receiving clerk c. Storeroom keeper d. Production supervisor
> What are the costs associated with carrying materials in stock?
> How would you define the term economic order quantity?
> The following transactions affecting materials occurred in February: Feb. 1 Balance on hand, 1,200 ft @ $2.76, $3,312.00 (plastic tubing, materials ledger account #906). 5 Issued 60 ft to production on Materials Requisition No. 108. 11 Issued 200 ft on M
> The purchases and issues of rubber gaskets (Materials Ledger #11216) as shown in the records of HD Corporation for the month of November follow: Required: 1. Complete a materials ledger account similar to Figure 2-10 (the ‘â€
> Stacey Womack is considering the implementation of an incentive wage plan to increase productivity in her small manufacturing plant. The plant is nonunion, and employees have been compensated with only an hourly rate plan. Jane Moore, Vice President—Manu
> Cortez Chemical, Inc., requires 500 gallons of material annually; the cost of placing an order is $20, and the annual carrying cost per gallon is $5. Required: 1. Compute the average number of gallons in inventory. 2. Compute the total carrying cost. 3.
> Cortez Chemical, Inc., requires 20,000 gallons of material annually; the cost of placing an order is $20, and the annual carrying cost per gallon is $5. Determine the EOQ from potential order sizes of 300, 400, 500, 600, 700, and 800 gallons by construct
> Marino Company predicts that it will use 25,000 units of material during the year. The expected daily usage is 200 units, and there is an expected lead-time of five days and a desired safety stock of 500 units. The material is expected to cost $5 per uni
> The following inventory data relate to Niagara Corp.: Calculate the following for the year: a. Direct materials purchased. b. Direct labor costs incurred. c. Cost of goods sold. d. Gross profit. Inventories Ending Beginning Finished goods $75,000 $
> Torre, Inc., manufactures electrical equipment from specifications received from customers. Job X10 was for 1,000 motors to be used in a specially designed electrical complex. The following costs were determined for each motor: Materials . . . . . . . .
> One of the tennis racquets that Set Point manufactures is a titanium model (Ace) that sells for $149. The cost of each Ace consists of: Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> An examination of Frosty Corporation’s records reveals the following transactions: a. On December 31, the physical inventory of raw material was 9,950 gallons. The book quantity, using the moving average method, was 10,000 gal@ $0.52 per gal. b. Producti
> T. Hilliary, Inc., uses backflush costing to account for its manufacturing costs. The trigger points for recording inventory transactions are the purchase of materials, the completion of products, and the sale of completed products. Required: 1. Prepare
> Yusane Bolts, Inc., produces 50,000 units each day, and the average number of units in work in process is 200,000. The average annual inventory carrying cost percentage is 25%, and the average work in process is $1,000,000. Required: 1. Determine the th
> The following actions occurred at Sanibel Sheet Metal Company relative to accounting for materials costs for April. Mar. 31 The factory manager informs the storeroom keeper that for the month of April, 2,000 sheets of aluminum are the forecasted usage. A
> Go to the Vanguard Investments’ Web site https://retirementplans.vanguard.com/VGApp/pe/PubHome for retirement information that is linked to the text Web site at www.cengage.com/accounting/vanderbeck. Enter ‘‘401(k) plans’’ in the search area and find th
> Scarlatta’s Manufacturing Company uses a job order cost system. The following accounts have been taken from the books of the company: Required: 1. Analyze the accounts and describe in narrative form what transactions took place. 2. Lis
> Milano’s Specialty Clothing, Inc., uses a job order cost system. A partial list of the accounts being maintained by the company, with their balances as of November 1, follows: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> In the scenario on page 91, Boston Company was trying to decide whether or not to change from a traditional inventory system to a just-in-time (JIT) system. The president, Teresa Francona, wanted to know whether this change would merely affect how goods
> Katy, Inc., manufactures ‘‘smart phones.’’ It is considering the implementation of a JIT system. Costs to reconfigure the production line will amount to $200,000 annually. Estimated benefits from the change to JIT are as follows: The quality advantages o
> The following data are taken from the general ledger and other records of Black Hills Manufacturing Co. on January 31, the end of the first month of operations in the current fiscal year: Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> Go to the text Website at http://www.cengage.com/accounting/vanderbeck and click on the link to the following article: Benefits From Lean and Cellular Manufacturing, by Strategos, Inc.-Consultants, Engineers, Strategists Required: Read the article and a
> Match the materials control form in the left column with the person responsible for its preparation in the right column. (A selection may be used more than once.) a. Purchase requisition 1. Production department supervisor b. Purchase order 2. Sto
> Patriot Company predicts that it will use 360,000 gallons of material during the year. The material is expected to cost $5 per gallon. Patriot anticipates that it will cost $72 to place each order. The annual carrying cost is $4 per gallon. a. Determine
> Aztec Company expects daily usage of 500 pounds of material Inca, an anticipated lead time of seven days, and a desired safety stock of 2,500 pounds. a. Determine the order point. b. Determine the number of pounds to be issued from safety stock if the ne
> David Mfg. Company manufactures an integrated transistor circuit board for repeat customers but also accepts special orders for the same product. Job No. MS1 incurred the following unit costs for 1,000 circuit boards manufactured: Materials . . . . . . .
> Marcia Young earns $25 per hour for up to 400 units of production per day. If she produces more than 400 units per day, she will receive an additional piece rate of $0.50 per unit. Assume that her hours worked and pieces finished for the week just ended
> Venus, Inc., manufactures tennis clothing. During the month, the company cut and assembled 8,000 skirts. One hundred of the skirts did not meet specifications and were considered ‘‘seconds.’’ Seconds are sold for $9.95 per skirt, whereas first-quality sk
> A machine shop manufactures a stainless steel part that is used in an assembled product. Materials charged to a particular job amounted to $600. At the point of final inspection, it was discovered that the material used was inferior to the specifications
> RDI Company uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials
> Mystic Manufacturing Company maintains the following accounts in the general ledger: Materials, Work in Process, Factory Overhead, and Accounts Payable. On June 1, the materials account had a debit balance of $5,000. Following is a summary of materials t
