Group Case 1-2 Part A: Schedule Of Cost Of Goods Manufacture ✓ Solved

GROUP CASE 1 2 Part A: a. Schedule of Cost of Goods Manufactured

Part A: a. Schedule of Cost of Goods Manufactured.

Direct Materials - Beginning materials inventory: $26,000 Add: Purchases of Raw materials: $50,000 Raw materials available for use: $76,000 Deduct: Ending raw materials inventory: $35,000 Raw materials used in production: $41,000 Direct Labor: $23,000 Manufacturing Overhead: $59,000 Total Manufacturing Costs: $123,000 Add: Beginning work in process inventory: $18,000 Deduct: Ending work in process inventory: $22,000 Cost of goods manufactured: $119,000.

Part A: b. Income Statement Sales: $22,000 Cost of goods sold Beginning finished goods inventory: $42,000 Add: Cost of Goods Manufactured: $119,000 Goods Available for Sale: $161,000 Deduct: Ending finished goods inventory: $29,000 Gross Margin: $88,000 Selling and Administrative Expenses: Selling Expenses: $18,000 Administrative Expenses: $43,000 Net Operating Income: $27,000.

Part B: a. Predetermined overhead rates will be 1,710,000/ 95,000 = 18/machine hour. Overhead applied will be 75,000*18 = 1,350,000. Overhead under applied will be 1,687,500 – 1,350,000 = 337,500.

b. Cost of Goods Sold (COGS) allocated to the amount of under applied overheads if the allocation is full is in the COGS will be 337,500. COGS allocated to the amount of under applied overheads if the allocation is full is in the right accounts will be 337,500*759,375/ 1,350,000 = 189,843.75 and this means the difference in the net income will be 337,500 – 189,843.75 = 147,656.25.

Part C: a. Materials Conversion Transferred to next department 22,200 22,200. Ending work in process: Materials: 1,000 units at 80%: 800 Conversion: 1,000 units at 60%: 600 Equivalent units of production 23,000 22,800.

b. Materials Conversion Work in process, beginning: $8,400 $7,200 Cost added during the month $97,600 Total cost (a): $105,800 $136,800 Equivalent units (above) (b): 23,000 22,800 Cost per equivalent unit (a) ÷ (b) $4.60 $6.00.

c. Materials Conversion Total Units transferred out 22,200 22,200 Cost per equivalent unit $4.60 $6.00 Cost transferred out $102,120 $133,200 $235,320.

d. Materials Conversion Total Equivalent units of production: ending work in process Cost per equivalent unit $4.60 $6.00 Cost of ending work in process $3,680 $3,600 $7,280.

Part D: Cost of ending work in progress inventory: (No. of equivalent units cost per equivalent unit) = (330 9.5) +(264 * 20.40) = 3135 + 5385.60 = 8520.60. Cost of ending work in progress inventory = $8520.60.

Cost of units transferred out: Beginning inventory cost=$1920 Beginning inventory equivalent unit= (360 9.5) +(140 20.4) = $6276 Equivalent unit cost = 9.5+20.4 = $29.9 Units started can completed= $3130 cost of units transferred out=1920+6276+ (3130 * 29.9) = 1920+6276+93587 cost of units transferred out =$101,783.

Part E: A. Predetermined rate = 61.02 per DLH H16Z p25p Direct labor hours 2. Predetermined cost overhead per DLH: 61.02 Manufacturing cost overhead per unit 24.22.

B. Estimated overhead costs Total expected activity Activity rate Supporting Direct labor 5,52, Setting up machines 1,32, Parts administration Overhead cost: H16Z P25P Activity Rate ABC cost activity Rate Cost Supporting direct labor Setting up machines Parts administration Total cost 679680 Annual production 30000 Manufacturing overhead cost per unit 22.66.

Paper For Above Instructions

This comprehensive analysis covers various components of manufacturing, cost allocation, and decision-making processes involved in the operations of a manufacturing firm, focusing on Stuart Manufacturing and its associated cases.

Part A: Cost of Goods Manufactured

Understanding the cost of goods manufactured (COGM) is essential for any manufacturing entity. According to the COGM schedule outlined, the total direct materials used amounted to $41,000, made after accounting for the beginning and ending inventory figures. Direct labor and manufacturing overhead further add to this total, leading to a final COGM of $119,000. This number reflects the direct costs attributable to the production activities within a specified period, necessary for determining profitability.

Income Statement Analysis

The income statement presents a critical snapshot of business performance over a period. In the context provided, the sales amounted to $22,000. The gross margin, representing sales minus the cost of goods sold, is calculated to be $88,000 after accounting for the finished goods inventory. This figure indicates how effectively a company can generate revenue from its core operations, demonstrating the importance of managing costs associated with production.

Part B: Overhead Allocation and COGS

Effective overhead allocation is crucial for accurate financial reporting and cost management. The predetermined overhead rate calculated as $18 per machine hour impacts overhead applied and reflects the relationship between estimated costs and activity levels. The under-applied overhead identified ($337,500) highlights the discrepancies between estimated and actual overhead, necessitating careful consideration in financial statements and potentially affecting net operating income.

Part C: Equivalent Units of Production

Determining equivalent units of production (EUP) is a fundamental task in process costing, especially for sectors that have multiple stages of production. The EUP for materials and conversion costs is essential for calculating cost per unit accurately. This method ensures that costs are attributed fairly and transparently, enabling better understanding and control over financial performance.

Part D: Ending Work in Progress Inventory

Calculating the cost of ending work in progress inventory considers the number of equivalent units multiplied by the cost per equivalent unit. This approach provides a precise valuation of the inventory that remains incomplete at the end of a reporting period, crucial for balance sheet accuracy and effective inventory management.

Part E: Cost Analysis and Decision-Making

For manufacturing firms like the ones analyzed, the decision to accept supplier offers or continue production in-house is informed by significant cost evaluations. The dynamics of variable and fixed costs dictate whether to outsource production. A thorough cost-benefit analysis must take into account all relevant costs, including direct materials and labor savings against potential fixed overhead implications.

Part F: Evaluating Product Profitability

Deciding whether to discontinue a product should be based on its financial impact on overall profitability. By isolating avoidable fixed costs and examining variable expenses, businesses can gauge how discontinuing a product influences net operating income. Effective financial oversight will ensure that decisions made are strategically sound and reflect the company's bigger financial picture.

Conclusion

In conclusion, the operations and financial management strategies articulated through the case study underscore the necessity for accurate cost analysis, inventory management, and informed decision-making. By leveraging detailed financial reports and cost structures, firms can enhance profitability while ensuring sustainable operational practices.

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