E16-17

Fido Grooming provides grooming services in the local community. In April,

Kevin Oliver, the owner, incurred the following operating costs to groom 650
dogs:
Wages $  3,900
Grooming supplies expense 1,625
Building rent expense 1,300
Utilities 325
Depreciation on equipment 130

Fido Grooming earned $16,300 in revenues from grooming for the month of
April.

Requirement

1. What is Fido's net operating income for April?

(16,300-(3900+1625+1300+325+130)=$9,020

2. What is the cost to groom one dog?

(3900+1625+1300+325+130)/650=$11.20
P16-25A

Charlie's Pets succeeded so well that Charlie decided to manufacture his own
brand of chewing bone—Fido Treats. At the end of December 2012, his
accounting records showed the following:
Inventories: Beginning Ending
Materials $   13,400   $ 9,500
Work in process 0   2,000
Finished goods 0   5,300
Other information:      
Direct material purchases $ 33,000 Utilities for plant $ 1,600
Plant janitorial services 800 Rent of plant 13,000
Sales salaries expense 5,000 Customer service hotline expense 1,400
Delivery expense 1,700 Direct labor 22,000
Sales revenue 109,000    

Requirements
1. Prepare a schedule of cost of goods manufactured for Fido Treats for
the year ended December 31, 2012.

Fido Treats
Schedule of Cost of Good Manufactured
Year Ended December 31, 2012
Beginning work in progress inventory $0
Add: Direct Materials used
Beginning materials inventory $13,400
Direct material purchases 33,000
Available for use: $46,400
Ending materials inventory (9,500)
Ending raw material inventory $36,900
Direct Labor $22,000
Manufacturing overhead:
Utilities for plant $1,600
Plant janitorial services 800
Rent of plant 1,300 $3,700
Total manufacturing costs incurred $62,600
Total manufacturing costs to account $62,600
 for
Less: Ending work in process (2,000)
inventory
Cost of goods manufactured $60,600

2. Prepare an income statement for Fido Treats for the year ended
December 31, 2012.

Fido Treats
Income Statement
Year Ended December 31, 2012
Sales revenue $109,000
Cost of goods sold:
Beginning finished goods inventory $0
Cost of goods manufactured 60,600
Cost of Goods $60,600
Ending (5,300
Cost of goods sold $55,300
Gross profit 53,700
Operating expenses:
Customer service hotline expense $1,400
Delivery expense 1,700
Sales salaries expense 5,000 $8,100
Net income $45,600

3. How does the format of the income statement for Fido Treats differ
from the income statement of a merchandiser?
1) The difference is that the merchandiser uses purchases in computing cost
of goods sold, while the manufacturer uses the cost of goods manufactured.
2) Merchandiser buys the finished goods whereas the manufacturer produces
the finished goods.

4. Fido Treats manufactured 18,075 units of its product in 2012.

Compute the company's unit product cost for the year.
$3.06

P17-26A
Requirements
1. Prepare a similar to Exhibit 17-6 for Job 423. Calculate the predetermined
overhead rate; then allocate manufacturing overhead to the job. In Excel doc

2. Journalize in summary form the requisition of direct materials (including

the movie files) and the assignment of direct labor and manufacturing
overhead to Job 423.

Fido Treats
Trial Balance
November 30, 2012
Account: Debit Credit
Work in process $1,142
Material inventory $1,142

Work in process $400

Manufacturing wages $400

Work in process $500

Manufacturing overhead $500

3. Journalize completion of the job and the sale of the 5,900 DVDs.

Finished goods inventory $2,042

Work in process inventory $2,042

Accounts receivable $7,670

Sales revenue $7,670

Cost of goods sold $2,042

Finished goods inventory $2,042
P17A-11A

Amy Electronics makes CD players in three processes: assembly,

programming, and packaging. Direct materials are added at the beginning of
the assembly process. Conversion costs are incurred evenly throughout the
process. The Assembly Department had no Work in process inventory on
October 31. In mid-November, Amy Electronics started production on
125,000 CD players. Of this number, 95,800 CD players were assembled
during November and transferred out to the Programming Department. The
November 30 Work in process inventory in the Assembly Department was
25% of the way through the assembly process. Direct materials costing
$437,500 were placed in production in Assembly during November, and
Direct labor of $200,800 and Manufacturing overhead of $134,275 were
assigned to that department.

Requirements

1. Compute the number of equivalent units and the cost per equivalent
unit in the Assembly Department for November.
Direct Conversion
Materials Costs
Units accounted for:
CD players that were assembled
during November and transferred out 95,800 95,800

Ending WIP 29,200 7,300

(29,200*25%=7,300)

EQUIVALENT UNITS 125,000 103,100

Direct Conversion Cost/eqt

Materials Costs unit

Beginning WIP 0 0

Costs added during

November 437,500 $335,075
Total costs to acct for $437,500 $335,075
Total equivalent units ÷ 125,000 ÷ 103,100
Cost per equivalent unit $3.50 $3.25 $6.75

Conversion cost will be=$200,800+$134,275=$335,075

2. Assign total costs in the Assembly Department to (a) units completed

and transferred to Programming during November and (b) units still in
process at November 30.

Direct Materials Conversion Costs

Assigning the cost:

CD players that were 95,800*$3.50 95,800*3.25

assembled during November =$335,300 =$311,350
and transferred out

Ending WIP 29200*$3.5 7,300*$3.25

=$102,200 =$23,725

3. Prepare a T-account for Work in process inventory—Assembly to

show its activity during November, including the November 30 balance.

Work in Process Inventory

Beginning Balance 0
Direct materials 437,500 Transferred to programming
646,650
Direct labor 200,800
Manufacturing overhead 134,275
Balance 125,925