Problem 21-2B

Budgeting Systems for Management Accounting Warren / Reeve / Duchac Problem 21-2B solution

Sales, production, direct materials purchases, and direct labor cost budgets

The budget director of Outdoor Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for July 2010 is summarized as follows:

a. Estimated sales for July by sales territory:

b. Estimated inventories at July 1:

c. Desired inventories at July 31:

d. Direct materials used in production:

e. Anticipated purchase price for direct materials:

f. Direct labor requirements:

1. Prepare a sales budget for July.

2. Prepare a production budget for July.

3. Prepare a direct materials purchases budget for July.

4. Prepare a direct labor cost budget for July.

Exercise 21-9

Budgeting Systems for Management Accounting Warren / Reeve / Duchac Exercise 21-9 solution

Direct materials purchases budget
Marino's Frozen Pizza Inc. has determined from its production budget the following estimated production volumes for 12'' and 16'' frozen pizzas for April 2010:

There are three direct materials used in producing the two types of pizza. The quantities of direct materials expected to be used for each pizza are as follows:

In addition, Marino's has determined the following information about each material:

Prepare the April direct materials purchases budget for Marino's Frozen Pizza Inc.

Problem 18-2B

Process Cost System / Cost Accounting Warren / Reeve / Duchac Problem 18-2B solution

Cost of production report
Ariba Coffee Company roasts and packs coffee beans. The process begins by placing coffee beans into the Roasting Department. From the Roasting Department, coffee beans are then transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at March 31, 2010:

1. Prepare a cost of production report, and identify the missing amounts for Work in Process—Roasting Department.


2. Assuming that the March 1 work in process inventory includes $54,600 of direct materials, determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between February and March.

Problem 17-2B

Cost Accounting System / Job Order Costing Warren / Reeve / Duchac Problem 17-2B solution

Entries and schedules for unfinished jobs and completed jobs

Grand Valley Apparel Co. uses a job order cost system. The following data summarize the operations related to production for May 2010, the first month of operations:

a. Materials purchased on account, $68,000.
b. Materials requisitioned and factory labor used:

c. Factory overhead costs incurred on account, $2,750.
d. Depreciation of machinery and equipment, $1,870.
e. The factory overhead rate is $25 per machine hour. Machine hours used:

f. Jobs completed: 401, 402 , 403, and 405.
g. Jobs were shipped and customers were billed as follows: Job 401, $26,000; Job 402, $33,400; Job 405, $23,400.

1. Journalize the entries to record the summarized operations. For a compound transaction, accounts should be listed in chart of account order. If an amount box does not require an entry, leave it blank.



2. After posting the appropriate entries to T accounts, on your own paper, give the following balances:

3. Prepare a schedule of unfinished jobs to support the balance in the work in process account.

4. Prepare a schedule of completed jobs on hand to support the balance in the finished goods account.

Problem 16-1B

Managerial Accounting Concepts and Principles Warren / Reeve / Duchac Problem 16-1B solution

Classifying costs

The following is a list of costs that were incurred in the production and sale of boats. Classify each of the costs as product costs or period costs. Indicate whether each product cost is a direct materials cost, a direct labor cost, or a factory overhead cost. Indicate whether each period cost is a selling expense or an administrative expense.

Problem 16-1A

Managerial Accounting Concepts and Principles Warren / Reeve / Duchac Problem 16-1A solution

Classifying costs

The following is a list of costs that were incurred in the production and sale of lawn mowers.
Classify each of the costs as product costs or period costs. Indicate whether each product cost is a direct materials cost, a direct labor cost, or a factory overhead cost. Indicate whether each period cost is a selling expense or an administrative expense.

Exercise 16-5

Managerial Accounting Concepts and Principles Warren / Reeve / Duchac Exercise 16-5 solution

Concepts and terminology

From the choices presented in parentheses, choose the appropriate term for completing each of the following sentences:

a. Payments of cash or the commitment to pay cash in the future for the purpose of generating revenue are - COSTS
b. The implementation of automatic, robotic factory equipment normally DECREASES the direct labor component of product costs.
c. Feedback is often used to IMPROVE operations.
d. A product, sales territory, department, or activity to which costs are traced is called a COST OBJECT.
e. The balance sheet of a manufacturer would include an account for WORK IN PROCESS INVENTORY.
f. Factory overhead costs combined with direct labor costs are called CONVERSION costs.
g. Advertising costs are usually viewed as PERIOD costs.

Exercise 16-2

Managerial Accounting Concepts and Principles Warren / Reeve / Duchac Exercise 16-2 solution

Classifying costs as direct materials cost, direct labor cost, or factory overhead cost
Indicate whether the following costs of Colgate-Palmolive Company would be classified as direct materials cost, direct labor cost, or factory overhead cost:

Exercise 16-1

Managerial Accounting Concepts and Principles Warren / Reeve / Duchac Exercise 16-1 solution

Classifying costs as direct materials cost, direct labor cost, or factory overhead cost
Indicate whether each of the following costs of an airplane manufacturer would be classified as direct materials cost, direct labor cost, or factory overhead cost: