Mikey & Jack’s Adventures (MJA) Inc. has one production department. At MJA, 50%
ID: 2598175 • Letter: M
Question
Mikey & Jack’s Adventures (MJA) Inc. has one production department. At MJA, 50% of the materials are added at the beginning of the process and the remaining 50% of materials are added when the process is 75% complete. Labor and overhead are added evenly throughout the process. The following information pertains to work in process for November Physical units Materials Direct Labor Overhead Beginning work-in-process inventory 1,900 units (75% complete) $25,414.50 $8,697 $2,575.50 Units completed 17,000 units Ending work-in-process inventory 1500 units (60% complete) Added during November: Direct Materials $573,648 (25,160 pounds @ $22.80 per pound) Direct Labor 8,807 hours @ $12 per hour Overhead is applied using a predetermined rate of $10.50 per direct labor hour Additional Information: There was not any beginning Finished Goods inventory for November. MJA sold 13,000 units @ $70 each MJA expected to sell 16,000 units @ $65 each For actual production MJA expected to use 8,988 hours of DL @ $11.90 per hour For actual production MJA expected to use 24,290 pounds of raw materials @ a cost of $23.50 per pound MJA had variable Selling & Administrative expense of $6 per unit MJA had fixed Selling & Administrative expense of $27,000 Total Manufacturing OH for August was $81,250 and 15,000 units were produced Total Manufacturing OH for September was $110,250 and 25,000 units were produced Required (Questions attached here Comprehensive Problem.doc ) What is the amount of the total prime cost added during November? What is the amount of the total conversion cost added during November? Determine the number of units started in November. Compute the equivalent units using the weighted-average method. Compute the cost per equivalent unit using the weighted-average method. Compute the costs of goods transferred out to finished goods and the ending work-in-process inventory using the weighted-average method. Compute the cost of goods sold (total and per unit) Create an absorption (GAAP) income statement for November Create a contribution margin income statement for MJA (for manufacturing cost: DM & DL are variable and overhead is mixed. The variable rate for OH is $2.90 and the fixed portion is $37,750) Calculate the Direct materials usage and price variance (indicate favorable or unfavorable) Calculate the Direct Labor usage and price variance (indicate favorable or unfavorable)
Explanation / Answer
1. Amount of total prime cost added during November Prime cost= Direct materials +Direct labor 573648+105684= 679332 2. Amount of the total conversion cost added during November Conversion costs=Direct labor+Overheads 105684+92473.5= 198157.5 Weighted average method: 4. Equivalent units 3,4,5,6 & 7 Materials Direct Labor OH Units to account for: Beg. WIP 1900 3..Units started 16600 Total 18500 Units accounted for: Units completed & transferred 17000 17000 17000 17000 Ending WIP 1500 750 900 900 Total 18500 17750 17900 17900 4. Equivalent units---------1 17750 17900 17900 Cost of Production report: Costs to account for Total Beg. WIP 25414.5 8697 2575.5 36687 Costs added during Nov. 573648 105684 92473.5 771805.5 Total costs ------------------2 599062.5 114381 95049 808492.5 5. Cost/equivalent unit---2/1 33.75 6.39 5.31 45.45 Costs accounted for 6.Units completed & transferred 573750 108630 90270 772650 7. Ending WIP 25312.5 5751 4779 35842.5 Total 599062.5 114381 95049 808492.5 Cost of goods sold (total and per unit) Per unit 45.45 Total--- 45.45*13000= 590850 Absorption costing Income statement Sales 13000*70 910000 Less: COGS (13000*45.45) 590850 Gross Margin 319150 Less: Variable S&A 13000*6 78000 Fixed s&A 27000 Net Income 214150 Contribution margin Income statement Sales 13000*70 910000 Less: Variable costs: Direct materials 13000*33.75 438750 Direct labor 130000*6.39 83070 Variable MOH 13000*2.9 37700 Total variable mfg.costs 559520 Manufacturing margin 350480 Less: Variable s& A 13000*6 78000 Contribution margin 272480 Less: Fixed costs: Manufactuing OH 37750 S& A OH 27000 Net Income 207730 Direct materials usage Variance (Actual qty.-Std.qty. for actual prodn.)*Std.price/qty. (24290-25160)*22.80= 19836 F Direct Material price variance (Actual Rate/qty.-Std.rate)*Actual qty. (23.50-22.80)*24290= 17003 UF Direct labor usage Variance (Actual hrs.-Std.hrs. for actual prodn.)*Std.rate/hr. (8988-8807)*12= 2172 UF Direct Labor price variance (Actual Rate/hr.-Std.rate)*Actual hrs. (11.90-12)*8988= 898.8 F