CHAPTER 2 ACCOUNTING FOR MATERIALS

Summary of Answers

EXERCISE 2-1
1. Raw Materials Inventory 541000
Accounts payable 510000

2. Work in Process 344250

Manufacturing Overhead 38250
Raw materials Inventory 382500

3. Raw Materials Inventory 5900

Work in Process 5100
Manufacturing Overhead 800

4. Accounts payable 4000

Raw Materials inventory 4000

5. Work in process 50000

Accounts payable 50000

6. Raw materials Inventory 107000

Accounts payable 107000

7. Work in Process 120824

Manufacturing Overhead 30200
Raw Materials Inventory 151030

Raw Materials Inventory

510000 382500
5900 4000
107000 150000
86400

Exercise 2-2 Exercise 2-4

1. (36 000) units; (P 82 850) 1. 2 598.1
2. 12 000 units; P 28 300 2. 11.1
3. 4 687.6
Exercise 2-3 4. 3 897.6
1. 2 078.46
2. 69.28
3. 5.20
4. 10 392
5. 2 400
Exercise 2-5
Journal Entries
1. Raw and in Process 200 000
Accounts Payable 200 000

Cost of goods sold 280 000

Payroll 130 000
Various Accounts 150 000

Finished goods 210 000

Raw and in Process 210 000

2. Cost of goods sold 195 000

Finished goods 195 000

3. Cost of goods sold 20 000

Raw and in Process 15 000
Finished goods 5 000

4. Raw materials 200 000

Accounts Payable 200 000

Work in process 200 000

Raw materials 200 000

Work in process Payroll 130 000

Manufacturing overhead 130 000

Manufacturing overhead 150 000

Various Accounts 150 000

Test Material 2-1 Supply the Test Material 2-1 MC Test material 2-3
Answer Problems
1. 1,294,000 11. P 600,000 1. B 1. B 1. C
2. 1,292,000 12. P 200,100 2. D 2. 129700 2. C 11. B
3. 4,640,000 13. P 131,400 3. C 3. A 3. D 12. B
4. 301,429 14. P 4. D 4. C 4. D 13. D
5. 285,000 1,160,000 5. D 5. C 5. A 14. D
6. 708,750 15. P 6. D 6. B 6. B 15. A
7. 156,200 1,637,000 7. A 7. A 7. B 16. C
8. 41,700 16. P 8. B 8. D 8. C 17. C
9. 423,100 1,629,000 9. A 9. C 9. A 18. C
10. 1,625,000 17. P(1000) 10. A 10.36000 10. B
11.B
Exercise 2-2 Units Unit cost Amount
Inventory, August 5 000 P 2.00 10 000
Purchases: August 7 6 000 2.50 15 000
12 8 000 2.30 18 400
15 9 000 2.25 20 250
22 10 000 2.40 24 000
29 10 000 2.35 23 500
Raw materials available 48 000 111 150
Less issuance: August 7 (9 000) (20 000)
14 (9 000) (21 100)
21 (9 000) (20 300)
28 (9 000) (21 450)
Raw materials issued (36 000) (82 850)
Raw materials inventory, end 12 000 28 300

Exercise 2-3
1. Economic Order Quantity or EOQ = 2 x annual demand x cost per order
Annual carrying cost per unit

= 2 x 144 000 x 150 = 2 078.46

(200 x 5%)

2. Number of orders = annual requirement = 144 000 = 69.28

EOQ 2 078.46

3. Time to order = 360 days = 5.20

69.28

4. Total ordering cost = Number of orders per year x Cost per order
= 69.28 x 150 = 10 392
5. (Daily usage x Lead time) + Safety stock = (400 x 5) + 400 = 2 400

Exercise 2-4
1. Economic Order Quantity or EOQ = 2 x annual demand x cost per order
Annual carrying cost per unit

= 2 x 84 375 x 120 = 2 598.1

3

2. Time to order = 360 days = 11. 1 *Computation for 32.48 = 84 375

32.48 2 598

3. Annual demand = 84 375 = 234.38 x 20 days = 4 687.6

360 days 360 days

4. Number of orders x Cost of placing an order = 32. 48 x 120 = 3 897.6

Exercise 2-5
1. Raw and in Process 200 000
Accounts Payable 200 000

Cost of goods sold 280 000

Payroll 130 000
Various Accounts 150 000

Finished goods 210 000

Raw and in Process 210 000

*Materials in RiP (75 000 - 45 000) 30 000

Add: Purchases 200 000
Less: Materials in RiP (50 000 - 30 000) 20 000
Amount backflush RiP to FG 210 000

2. Cost of goods sold 195 000

Finished goods 195 000

*Materials in Finished goods, beg. (80 000 - 35 000) 45 000

Add: Backflush 210 000
Less: Materials in FG, end. (90 000 - 30 000) 60 000
Amount backflush FG to CGS 195 000

3. Conversion cost in Raw and in Process, beg. 45 000

Conversion cost in Raw and in Process, end. 30 000
(15 000)
Conversion cost in finished goods, beg. 35 000
Conversion cost in finished goods, end. 30 000
 (5 000)

Cost of goods sold 20 000

Raw and in Process 15 000
Finished goods 5 000

4. Raw materials 200 000

Accounts Payable 200 000

Work in process 200 000

Raw materials 200 000

Work in process Payroll 130 000

Manufacturing overhead 130 000

Manufacturing overhead 150 000

Various Accounts 150 000

Test Material 2-6

CHAPTER 1 TEST MATERIAL 6

MULTIPLE CHOICE PROBLEMS

1. Direct Materials 977,400

Direct Labor 1,691,500
Manufacturing Overhead 1,353,200
Total Factory Costs 4,022,100

2. Total Factory Costs 4,022,100

Add : Work in Process, beginning 354,000
Less : Work in Process, ending (434,000)
Costs of Goods Manufactured 3,942,100

3. Work in Process

4. Direct Materials 42,200

Utilities 6,960
Office Depreciation 10,000
Rent paid 9,600
Period Costs 68,760
5. Direct Materials 42,400
Direct Labor 100,000
Overhead 61,840
Total Factory Costs 204,240

6. Gross Profit 203,840

7. Cost of Goods Sold 345,000

(3,000)

Costs of Goods Manufactured 348,000

(4,000)
Total Factory Costs 344,000

8. Total Manufacturing Costs 2,081,000

9. Overhead for the year Overhead applied by 117,000

10. Costs of Goods Manufactured 1,841,000