Advanced Cost AccountingACCT 647

Exam 1 Sample Test

Solution to Problem 1Sales variances

There is a $14,000 decline from budgetedcontribution margin to actual contribution. Thefollowing factors contributed:

(1) 7,000 hours more were sold than budgeted.

(2) The increase in hours was mostly incommercial services . This has changed themix of services. The change in mix was awayfrom the higher contribution margin industrialservice to the lower contribution margincommercial service.

(3) The industrial service contribution has held itsown, from a budgeted $10 per hour to an actual$11 per hour.

(4) The commercial service contribution margin of$5 per hour declined materially from thebudgeted $7 per hour.

567© 2014 by W. David Albrecht

Solution to Problem 2Joint cost allocation

1. Prepare income statements for each product (and the company total) assuming all products aresold at split-off point and joint costs allocated using physical units at split-off

2. Prepare income statements for each product (and the company total) assuming all products aresold at split-off point and joint costs allocated using sales value at split-off

3. Prepare income statements for each product (and the company total) assuming all products(except the by product) are processed further and joint costs allocated by net realizable value.

568© 2014 by W. David Albrecht

4. Optimizing for company profit, identify which products should be sold at the split off point andwhich products should be sold after additional processing. Then prepare income statements foreach product (and the company total) using the most logical allocation of joint costs.

Solution to Problem 3Process costing

(1) FIFO method of process costing.

Analysis of physical flow

BWIP + Started = good units complete + normal spoilage + abnormal spoilage + EWIP5,000 + 78,000 = 83,000 = 71,000 + 1,000 + 1,500 + 9,500

71,000 complete come from 5,000 BWIP and 66,000 started and complete

Table of FIFO equivalent units–work performed this period

Complete Start & Normal AbnormalBWIP Complete Spoilage Spoilage EWIP FIFO EU

Transferred in 0 0% 66,000 100% 1,000 100% 1,500 100% 9,500 100% 78,000Finishing parts 1,000 20% 66,000 100% 950 95% 900 60% 4,750 50% 73,600Labor/MOH 2,000 40% 66,000 100% 700 70% 675 45% 2,850 30% 72,225

Costs to account for

Transferred in Finishing parts Labor/MOH TotalBWIP 76,000 29,000 31,000 136,000Current period 1,320,000 700,000 950,000 2,970,000Total 1,396,000 729,000 981,000 3,106,000

FIFO cost per equivalent unit

Transferred in Finishing parts Labor/MOHCurrent cost 1,320,000 700,000 950,000FIFO EU ÷78,000 ÷73,600 ÷72,225Total 16.923077 9.510870 13.153340

569© 2014 by W. David Albrecht

Cost allocation chart

CGM Transferred in Finishing parts Labor/MOH TotalBWIP 76,000 29,000 31,000To complete BWIP 1,000*9.510870 2,000*13.153340

0 9,511 26,307 Start & completed 66,000*16.923077 66,000*9.510870 66,000*13.153340

1,116,923 627,717 868,120Normal spoilage 1,000*16.923077 950*9.510870 700*13.153340

16,923 9,035 9,2071,209,846 675,263 934,634 2,819,743

Abnormal spoilage1,500*16.923077 900*9.510870 675*13.153340

25,385 8,560 8,879 42,824

Ending work in process 9,500*16.923077 4,750*9.510870 2,850*13.153340

160,769 45,177 37,487 243,433

Total costs allocated 1,396,000 729,000 981,000 3,106,000

(2) Weighted average method of process costing.

Table of weighted average equivalent units

Good units Normal AbnormalSpoilage Spoilage EWIP WAvg EU

Transferred in 71,000 100% 1,000 100% 1,500 100% 9,500 100% 83,000Finishing parts 71,000 100% 950 95% 900 60% 4,750 50% 77,600Labor/MOH 71,000 100% 700 70% 675 45% 2,850 30% 75,225

Costs to account for

Transferred in Finishing parts Labor/MOH TotalBWIP 76,000 29,000 31,000 136,000Current period 1,320,000 700,000 950,000 2,970,000Total 1,396,000 729,000 981,000 3,106,000

Weighted average cost per equivalent unit

Transferred in Finishing parts Labor/MOHTotal cost 1,396,000 729,000 981,000Weighted avg EU ÷83,000 ÷77,600 ÷75,225Total 16.819277 9.394330 13.040877

570© 2014 by W. David Albrecht

Cost allocation chart

CGM Transferred in Finishing parts Labor/MOH Total Good units 71,000*16.819377 71,000*9.394330 71,000*13.040877

1,194,169 666,997 925,902Normal spoilage 1,000*16.819277 950*9.394330 700*13.040877

16,819 8,925 9,1291,210,988 675,922 935,031 2,821,941

Abnormal spoilage1,500*16.819277 900*9.394330 675*13.040877

25,229 8,455 8,803 42,487

Ending work in process 9,500*16.819277 4,750*9.394330 2,850*13.040877

159,783 44,623 37,166 241,572

Total costs allocated 1,396,000 729,000 981,000 3,106,000

571© 2014 by W. David Albrecht