Ethio-Lens College

Department of Accounting and Finance

Group Assignment of Cost and Management Accounting I
Submission date December 29, 2017 (Friday)
1. For the previous month (March 2011) Ron 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, 3/1/2 $ 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:
A) Finished goods inventory, 3/31/2011
B) Work-in-process inventory, 3/31/2011 190,000
C) Direct materials inventory, 3/31/2011

2. Destin Products uses a job-costing system with two direct-cost categories (direct materials
and direct manufacturing labor) and one manufacturing overhead cost pool. Destin allocates
manufacturing overhead costs using direct manufacturing labor costs. Destin provides the
following information:
Budget for 2011 Actual Results for 2011
Direct material costs $2,000,000 $1,900,000
Direct manufacturing labor costs 1,500,000 1,450,000
Manufacturing overhead costs 2,700,000 2,755,000

A) Compute the actual and budgeted manufacturing overhead rates for 2011. Require
B) During March, the job-cost record for Job 626 contained the following information:
based on the given information compute the cost of Job 626 using (a) actual costing and
(b) normal costing.

Direct materials used $40,000

Direct manufacturing labor costs $30,000
C) compute the under- or over allocated manufacturing overhead
3. Larsen Company manufactures car seats in its San Antonio plant. Each car seat passes through the
assembly department and the testing department. This problem focuses on the assembly department.
The process-costing system at Larsen Company has a single direct-cost category (direct materials)
and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of

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 the process. Conversion costs are added evenly during the process. When the assembly department
finishes work on each car seat, it is immediately transferred to testing. Data for the assembly
department for October 2012 are as follows

Physical Units Direct Conversion Total

Materials Costs Costs

Work in process, beginning inventory (October 1) 5000 1,250,000 402,750

Degree of completion of begging work in process 100% 60%
Started during October 20, 000
Completed and transferred out during October 22,500
Work in process, ending inventory ( October 31) 2,500
Degree of completion of ending work in process 100% 70%
Total costs added during October 4,500,000 2,337,500 50,600

Required (use Weighted Average and FIFO method)

A) For each cost category, compute equivalent units in the assembly department. Show physical
units in the first column of your schedule.
B) For each cost category, summarize total assembly department costs for October 2012 and
calculate the cost per equivalent unit.
C) Assign total costs to units completed and transferred out and to units in ending work in process.
4. Distinguish among spoilage, rework, and scrap.
5. What is the difference b/n normal and abnormal spoilage?
6. Differences in operating income between variable costing and absorption costing are due solely to
accounting for fixed costs. Do you agree? Explain.
7. Using the following data compute product cost per unit and Operating income under Absorption
costing and Variable costing

Given data

Selling price per unit sold ………………………………………..$20

Variable manufacturing cost per unit produced………………….. 12
Fixed manufacturing overhead costs per year…………………… 200,000
Variable selling and administrative expenses per unit sold………. 2
Fixed selling and administrative expenses per year………………. 100,000

Year 1 Year 2 Year 3

Units in beginning inventory …………………… -0- -0- 15,000
Units produced ……………………………………40,000 30,000 20,000
Units sold ………………………………………….40, 000 15,000 35,000
Units in ending inventory ………………..….…… -0- 15,000 -0-

8. What is a joint cost? What is a separable cost?

9. Distinguish between a joint product, main product and a byproduct.
10. Instant Foods produces two types of microwavable products—beef-flavored ramen and shrimp-
flavored ramen. The two products share common inputs such as noodle and spices. The production of
ramen results in a waste product referred to as stock, which Instant dumps at negligible costs in a
local drainage area. In June 2012, the following data were reported for the production and sales of
beef-flavored and shrimp-flavored ramen.

Joint costs (costs of noodles, spices, and other inputs Joint costs
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and processing to split off point) $240,000
Beef Ramen Shrimp Ramen
Beginning inventory(tons) 0 0
Production (tons) 10,000 20,000
Sales (tons) 10,000 20,000
Ending inventory 0 0
Selling price per ton $10 $15
Due to the popularity of its microwavable products, Instant decides to add a new line of products that
targets dieters. These new products are produced by adding a special ingredient to dilute the original
ramen and are to be sold under the names Special B and Special S, respectively. The following is the
monthly data for all the products.

 Beef Ramen ➞Special B: 10,000 tons of Beef Ramen are further processed to yield 12,000 tons
of Special B at additional processing costs of $48,000. Special B, which sells for $18 per ton.
 Shrimp Ramen ➞Special S: 20,000 tons of Shrimp Ramen are further processed to yield 24,000
tons of Special S at additional processing costs of $168,000. Special S sells for $25 per ton.
 Sales during June 2012 are 12,000 tons of Special B and 24,000 tons of Special S.
Required
A) Calculate Instant’s gross-margin percentage for Beef Ramen and Shrimp Ramen when joint
costs are allocated using the following:
a) Sales value at split off method
a) Physical-measure method
B) Calculate Instant’s gross-margin percentage for Special B and Special S when joint costs are
allocated using the following:
a. Net realizable value method
b) Constant gross margin percentage NRV method.

NB: Submission time Friday (11:30-12:00 local time)

Maximum Group members in each class ten students