CHAPTER 1: Cost classification
Nathan Coroporation had production overhead cost at various levels of activity for the year
200x0 as below:
Labor-hours Total production overhead cost
January 32,000 335,200
February 51,000 524,000
March 21,000 225,000
April 34,000 354,700
May 55,000 565,000
June 42,000 435,800
Production overhead cost in March was breakdown as follows:
Components of production overhead cost
Indirect material (variable) 126,000
Supervisor salaries (fixed) 3,000
Rent & Depreciation (fixed) 8,000
Electricity (mixed) 88,000
Required:
1. Using the high-low method, estimate a cost formula for electricity.
2. What total production overhead cost would you expect to be incurred at 40,000 labor-
hours?
CHAPTER 2: Job-order costing
Thompson Corporation start to produce and sell a new product using a job order costing
system. The transactions occurred during the month of June as flows:
a. Purchased materials on account for $60,000.
b. Requisitioned materials totaling $52,000 for the use in production. Of the total, $22,000
was for the job 612, $18,000 for the job 613 and the remainder for job 614.
c. Incurred direct labor for the month $72,000 with an average wage of $20 per hour. Job
612 used 1,600 hours, job 613 used 1,200 hours and job 614 used 800 hours.
d. Incurred and paid actual overhead of $35,000 (credit various payables)
e. Charged overhead to each job at the rate of $10 per direct labor hour
f. Completed and transferred Job 612 and 613 to finished goods.
g. Sold job 612 on account for a price of cost plus 40%.
Required:
1. Prepare the journal entries for transactions a. through g.
2. Prepare brief job-order cost sheets for Jobs 612, 613 and 614.
3. Disposition of under or over-applied overhead. The company believes that the under-or-
over-applied manufacturing overhead should be considered material.
CHAPTER 3: Process costing
Flexi Plastics Ltd manufactures a highly specialised plastic material that is used
extensively in the car industry. The following data have been compiled for the month
of June. Conversion activity occurs uniformly throughout the production process.
BEG Work in process, 1 June – 1,250 units
Direct material: 100% complete $512,500
Conversion: 70% complete 245,000
Balance in Work in process, 1 June $757,500
Units started during June 8,300 units
Units completed during June and transferred to finished goods inventory ?8100
ENDING Work in process, 30 June – 1,450 units
Direct material: 100%
Conversion: 60%
Costs incurred during June:
Direct material $4,083,600
Conversion 2,719,920
Total costs $6,803,520
Required
1/ The company use a FIFO process costing system. Calculate the followings
a) Equivalent units of production
b) Unit costs
c) Costs of finished goods
d) Costs of ending work in process
2/ The company use a Weighted average process costing system. Calculate the
followings
a) Equivalent units of production
b) Unit costs
c) Costs of finished goods
d) Costs of ending work in process
