HARAMAYA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

ASSIGNMENT OF THE COURSE COST AND MANAGEMENT ACCOUNTING I

Maximum mark …………..%

1. Cost of finished goods manufactured, income statement, manufacturing company.

Consider the following account balances (in thousands) for the Canseco Company.
Canseco Company Beginning of 2011 End of 2011
Direct materials inventor 22000 26000
Work-in-process inventory 21000 20000
Finished goods inventory 18000 23000
Purchases of direct material 75000
Direct manufacturing labo 25000
Indirect manufacturing labor 15000
Plant insurance 9000
Depreciation—plant, building, and equipment 11000
Repairs and maintenance—plant 4000
Marketing, distribution, and customer-service costs 93000
General and administrative costs 29000
Required
1. Prepare a schedule for the cost of goods manufactured for 2011.
2. Revenues for 2011 were $300 million. Prepare the income statement for 2011.
2. Ron Howard recently took over as the controller of Johnson Brothers Manufacturing. Last
month, the previous controller left the company with little notice and left the accounting records
in disarray. Ron needs the ending inventory balances to report first-quarter numbers.
For the previous month (March 2017) Ron was able to piece together the following information:

Direct materials purchased $120,000

Work-in-process inventory,3/1/2017 $ 35,000
Direct materials inventory, 3/1/2017 $ 12,500
Finished-goods inventory, 3/1/2017 $160,000
Conversion costs $330,000
Total manufacturing costs added during the period $420,000
Cost of goods manufactured 4 times direct materials used
Gross margin as a percentage of revenues 20%
Revenues $518,750
Calculate the cost of:
I. Finished-goods inventory, 3/31/2017
II. Work-in-process inventory, 3/31/2017
III. Direct materials inventory, 3/31/2017

3. Cost of goods sold and Direct labor cost for Fews Share Company for June 2007 was
$350,000 and 100,000 respectively. Manufacturing overhead costs are determined to be 80%
of direct labor costs. During June 2007, $110,000 of direct materials were purchased. Other
information for June 2007 follows:
June 1, 2007 June 30, 2007
Direct materials $22,200 $19,000
Work in process 60,000 ?
Finished goods 108,500 105,000
Required: For June 2007
a) compute prime cost
b) compute conversion cost
c) prepare a schedule of cost of goods sold

4. Consider the following information for ABC Company

 Finished goods inventory, beginning……….$4,000
 Work in process inventory, beginning.……..$3,400
 Raw materials inventory, beginning ….…..$31,000
 Sales for the period……………….…...…$95,000
 Direct labor cost………………………….$35,000
The following estimated data were also available:
 Factory overhead cost 30% of conversion cost
 Materials purchased for the period..….$24,000
 Prime cost 80% of cost of goods manufactured.
 Gross profit on sales 25%
 Cost of goods manufactured… ………$80,000
 Selling and distribution costs …………$11,230
 General administrative expense ……….$9,500
Required:
I. Compute ending inventory of
a. direct materials
b. work in process
 c. finished goods
II. Prepare
a. statement of cost of goods manufactured
b. income statement
5. The balances of ABC Manufacturing Company at the beginning and end of the current year
2018 are as follows:
Inventory account End of the year Beginning of the year
Materials $26,000 $22,000
Work in process 9,000 5,000
Finished goods 25,000 38,000
The total amounts debited and credited during the year to the accounts used in recording
manufacturing activities are as follows:

Account Debit Credit

Materials Inventory $400,000 ?
Direct labor payable 189,000 192,000
Manufacturing overhead 393,000 393,000

Required: Compute:
A. Direct material purchased
B. Direct material used
C. Payment of direct labor payroll
D. Total manufacturing cost
E. Cost of finished goods manufactured
F. Cost of goods sold
G. RM, WIP and FG Inventory reported in Balance sheet

6. The following are the beginning and ending balances in the inventory accounts for 2017
Inventory account End of the year Beginning of the year
Materials $62,000 $56,000
Work in process $28,000 $31,000
Finished goods ? 110,000

The amounts debited and credited during the year to the accounts used in recording
manufacturing costs are the following

Account Debit Credit

Materials inventory $828,000 ?
Direct labor payable 474,000 480,000
 Manufacturing overhead 1,000,000 1,000,000
Cost of goods sold 2,000,000 0

Required: Compute:
A. Direct material purchased
B. Direct material used
C. Direct labor paid for the year
D. Total manufacturing cost
E. Cost of finished goods manufactured
F. Ending finished goods
7. A fire destroyed XYZ manufacturing company completely on January 29, 2011. Fortunately,
certain accounting records were kept in another building. It revealed the following for the
period from January 1, 2011 to January 29, 2011.
Direct material used Br 160,000
WIP January 1 34,000
Direct material January 1, 2011 16,000
Finished Goods Inventory January1, 2004 36,000
MOH cost 40% of conversion cost
Revenue 500,000
Direct labor cost 180,000
Prime cost 294,000
Gross profit based on sales 20%
Cost of Goods available for sale 450,000
Required:
a) Direct material destroyed
b) Cost of goods manufactured
c) Finished goods destroyed
d) WIP destroyed
[Q5] Melat recently took over as the controller of Johnson brothers Manufacturing. Last month,
the previous controller left the company with little notice and left the accounting records in
disarray. Melat needs the ending inventory balances to report first quarter numbers. For the
previous month (March 2011) Melat was able to piece together the following information:
 Direct materials purchased $ 240,000
Work-in-process inventory, 3/1/2011 70,000
Direct materials inventory, 3/1/2011 25,000
Finished goods inventory, 3/1/2011 320,000
Conversion Costs 660,000
Total manufacturing costs added during the period 840,000
Cost of goods manufactured 4 times direct materials used
Gross margin as a percentage of revenues 20%
Revenues ……………. ………………………………………………………….1, 037,500
Calculate the cost of:
1. Finished goods inventory, 3/31/2011
2. Work-in-process inventory, 3/31/2011
3. Direct materials inventory, 3/31/2011
8. Assume ABC Co. has estimated overhead costs of Birr 120,000 and actually incurred
overhead cost of birr 135,000.

Required: Pass the necessary journal entries to apply the estimated overhead cost, to record the
actually incurred overhead cost and reconcile the variance assuming the difference is
immaterial.
9. Suppose that Akaki General Metal Work Factory manufactures 35 and 37 gauge corrugated
sheets. The general cost pool is disintegrated in to several activity cost pools related to the
production of the two models.

Activity cost pool Budgeted Cost driver Budgeted level of

overhead cost cost driver
Machine setup $150,000 No. of setups 1,200 setups
Quality control 70,000 No. of inspections 500 inspections
Machine depreciation 50,000 Machine hours 50,000 hours
Engineering and design 80,000 Hours in design dept 10,000 hours

The two models of the factory’s production have the following requirements.
6000 units of 35 gauge 5000 units of 37 gauge
No. of runs (setup) 500 700
No. of inspections 250 250
Machine hours 20,000 30,000
Hours in design dept 4,500 5,500
Required:
A. Compute activity cost pool rates
B. Apply MOH cots to product lines
 C. Calculate MOH cost per unit
10. Assume Haramaya university has a central information unit named as ‘Network and
Administration System Unit’ giving several services to the University society. The users of
this unit are divided in to Academic division and Administration division. Assume further
that the following data apply to the coming budget year:
Fixed cost of operating the computer facility in the relevant
range 6,0000-18,000hours………………………………………..Birr 3,000,000per year
Total capacity available………………………………………………..18,000hours
Budgeted long run usage:
Academic Division…………………………………………………….8,000hours
Administration Division………………………………………………..4,000hours
Total……………………………………………………………………..12,000hours
Budgeted variable cost per hour in the 6,000 to 18,000 hours relevant range birr 200 per
hours used
Note: assume that during the coming year the Academic division actually uses 9,000 hours
and Administration division 3,000 hours. Assuming also budgeted usage as the allocation
base and budgeted rates are used under single rate method and budgeted usage for fixed costs
and actual usage for variable costs under dual rate method.
Required: Allocate the central unit’s costs using single rate method and dual rate method.
11. Commercial Bank of Ethiopia has two service departments, the personnel department and
computing department. The bank has two other departments that directly serve customers, the
deposit department and loan department. In its Harar branch, the usage of the two service
departments’ output for the year 2005 were as follows:
Provider of Service
User of servicePersonnelComputing
Personnel……………………………..___ 15%
Computing……………………………10% __
Deposit……………………………….45% 51%
Loan ………………………………….45% 34%
The costs incurred during the year 2004 in the two service departments were as follows:
Personnel……….….$980,000
Computing………….296,000
Required: Determine the service departments cost allocated to the two operating
departments using:
A. Direct method
B. Step down method
C. Reciprocal method