Question 2: Schedules of cost of goods manufactured and sold; income statement (10 Marks)
The following data refer to Flintoff Fashions for the current year:
Sales revenue $570 000
Work in process inventory, 31 December 18 000
Work in process inventory, 1 January 24 000
Selling and administrative expenses 90 000
Income tax expense 54 000
Purchases of raw materials 108 000
Raw material inventory, 31 December 15 000
Raw material inventory, 1 January 24 000
Direct labour 120 000
Electricity: plant 24 000
Depreciation: plant and equipment 36 000
Finished goods inventory, 31 December 30 000
Finished goods inventory, 1 January 12 000
Indirect material 6 000
Indirect labour 9 000
Other manufacturing overhead 48 000
1 Prepare the schedule of cost of goods manufactured for Flintoff Fashions.
2 Prepare the schedule of cost of goods sold for Flintoff Fashions.
3 Prepare the income statement for Flintoff Fashions.
4 Construct an Excel® spreadsheet to solve all the preceding requirements. Include formulas in your spreadsheet wherever possible. Show how both cost schedules and the income statement will change if:
(a) raw material purchases amounted to $110 400.
(b) indirect labour was $9600.
Question 3: Job costing; department overhead cost allocation: tour operator (10 Marks)
Asian Adventure Holidays offers a series of holiday packages aimed at families, seniors and corporate groups. The financial controller, Jack Tallis, is preparing for the annual board meeting and is concerned about the loss that the business sustained in the past year. He has examined the profits for each of the three departments of the business—family, seniors and corporate—and it seems that the corporate department is the source of the problem.
Jack has asked you to assist him to look more closely at the three packages offered by the corporate department to see which holiday packages are yielding profits and which are not. The three packages are to Thailand, Malaysia and Indonesia. The sales and direct costs of each corporate package for last year are as follows:
|Bali Adventure||Thailand Discovery||Malaysian Orienteering|
|Number of packages sold||10||20||10|
|Number of people per package||5||6||8|
|Revenue per person||$18 000||$12 000||$14 000|
|Direct cost per package:|
|Tour leader||$5 000||$12 000||$9 000|
|Tour assistant||2 000||3 000||6 000|
|Air travel||28 000||30 000||32 000|
|Accommodation||15 000||26 000||24 000|
|Equipment hire||4 000||0||9 000|
|Meals||18 000||15 000||8 000|
To calculate the profitability of each package, a proportion of the overhead costs of running the corporate department needs to be allocated to the three packages. Jack has suggested that these costs could be allocated to each package in proportion to actual sales revenue. For last year these overhead costs were as follows:
|Depreciation on equipment||5 000|
|Rent and property taxes||9 000|
|Other department costs||12 000|
- Calculate the profit per package and the total profitability of each of the three corporate packages.
- Compare the profitability of the three corporate packages.
- Do you consider that the allocation of the corporate department overhead to packages using actual sales revenue is appropriate? Can you suggest a better method?
- Suggest what actions the company could take in regard to the three corporate packages.
Question 4: Cost of goods manufactured; overapplied or underapplied overhead; journal entries (10 Marks)
Cool Cooking Tools Ltd, manufacturer of gourmet cooking utensils, uses job costing. Manufacturing overhead is applied to production at a predetermined overhead rate of 150 per cent of direct labour cost. Any overapplied or underapplied manufacturing overhead is closed to cost of goods sold at the end of each month. Additional information:
Job SR22, consisting of ceramic spoon rests, was the only job in process on 31 January, with accumulated costs as follows:
Direct material $4000
Direct labour 2000
Applied manufacturing overhead 3000
Jobs BS67, TR29 and GT108 were started during February.
Direct materials requisitions during February totalled $26 000.
Direct labour cost of $20 000 was incurred during February.
Manufacturing overhead incurred in February was $32 000.
The only job still in process on 28 February was job number GT108, with costs of $2800 for direct material and $1800 for direct labour.
1 Calculate the cost of goods manufactured for February.
2 Calculate the amount of overapplied or underapplied overhead to be closed to cost of goods sold on 28 February.
Click on Buy Solution and make payment. All prices shown above are in USD. Payment supported in all currencies. Price shown above includes the solution of all questions mentioned on this page. Please note that our prices are fixed (do not bargain).
After making payment, solution is available instantly.Solution is available either in Word or Excel format unless otherwise specified.
If your question is slightly different from the above question, please contact us at email@example.com with your version of question.