| January 29, 2016

Question 1
In each of the following situations, determine whether job costing or process costing would be more appropriate.
(1 mark each)
a. An accounting firm l. A landscaping company
b. An oil refinery m. A cola-drink-concentrate producer
c. A custom furniture maker n. A movie studio
d. A tire manufacturer o. A law firm
e. A textbook publisher p. A commercial aircraft manufacture
f. A pharmaceutical company q. A management consulting firm
g. An advertising agency r. A breakfast cereal company
h. An apparel manufacturing company s. A catering service
i. A flour mill t. A paper mill
j. A paint manufacturer u. An auto repair garage
k. A medical care facility

Question 2
The Lyon Company uses a job-order costing system at its Mississauga plant. The plant has a Machining Department and an Assembly Department. Its job-order costing system has two direct-cost categories (direct material and direct labour) and two manufacturing overhead cost allocation bases (the Machining Department – machine hours, the Assembly Department – direct manufacturing labour cost). The beginning of the year estimates are as follows:

Machining Department Assembly Department
Manufacturing overhead $2,160,000 $4,320,000
Direct manufacturing labour costs $1,680,000 $2,400,000
Direct manufacturing labour hours 120,000 240,000
Machine hours 60,000 240,000

1. Compute the pre-determined overhead rate to be used for each department. (5 marks)
2. During February, the cost record for job #494 contained the following:

Machining Department Assembly Department
Direct materials used $54,000 $84,000
Direct manufacturing labour costs $16,800 $18,000
Direct manufacturing labour hours 1,200 1,800
Machine hours 2,400 1,200

Compute the total manufacturing overhead costs to be applied to job #494. (5 marks)
3. At the end of the year, the actual manufacturing overhead costs were $2,520,000 in Machining and $4,440,000 in Assembly. Assume that 66,000 actual machine-hours were used in Machining and that actual direct manufacturing labour costs in Assembly were $2,640,000. Compute the over/under applied manufacturing overhead for each department. (9 marks)
4. Prepare the journal entry to dispose of any total over/underapplied overhead. (2 marks)
5. What income statement amounts, if any, will be affected by the journal entry closing the over/under applied overhead. (1.5 marks)
6. What balance sheet amounts, if any, will be affected by the journal entry closing the over/under applied overhead. (1.5 marks)

Question 3
Partially completed T-accounts and additional information for CanaCorp Inc. for the year ended December 31, 2010 are presented below. CanaCorp Inc. uses a normal job-costing system.

Additional Information
1. Direct manufacturing labour wage rate was $18 per hour.
2. Manufacturing overhead is allocated at $24 per direct manufacturing labour hour.
3. During the year, sales revenues were $1,308,000, and marketing and distribution expenses were $168,000.

1. What was the amount of direct materials issued to manufacturing during 2010? (1 mark)
2. What was the amount of manufacturing overhead allocated to jobs during 2010? (1 mark)
3. What was the cost of jobs completed during 2010? (1 mark)
4. What was the balance in work-in-process inventory on December 31, 2010? (5 marks)
5. What was the cost of goods sold (COGS) before the over/under applied overhead journal entry was recorded? (1 mark)
6. What was the over/under applied overhead for 2010? (3 marks)
7. Record the journal entry to close over/under applied overhead to cost of goods sold. (2 marks)
8. Taking into account the journal entry in requirement 7 what was CanaCorp’s bottom line income (or loss) for the year 2010. (4 marks)

Question 4
Total 15 marks
Laura Duke is examining customer service cost in the Southern Region of Kapitol Products. Kapitol Products has over 200 separate electrical products that are sold with a six-month guarantee of full repair or replacement with a new product. When a product is returned by a customer, a service report card is made. This report includes details of the problem and the time and cost of resolving the problem.
Weekly data for the most recent ten-week period are:

1. Use the high-low method to estimate a cost formula between customer service costs and the number of service reports. (13 marks)
2. What other variables might be cost drivers of monthly customer service cost of Kapitol Products? (2 marks)


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