BA225 Managerial Accounting


Week 3 Application Problems:

Chapter 3: BE3-6, BE3-8 E3-7

Chapter 4: BE4-2, BE4-8, E4-10BE 3-6Trek Company has the following production data for April: units transferred out 40,000, and ending work in process 5,000 units that are 100% complete for materials, and 40% complete for conversion costs. If unit materials cost $4 and unit conversion cost is $7, determine the costs to be assigned to the units transferred out and the units in ending work in process.

BE 3-8

Data for Cascio Company are given in BE 3-7. Production records indicate that 18,000 units were transferred out, and 2,000 units ending in work in process were 50% complete as to conversion cost and 100% complete as to materials. Prepare a cost reconciliation schedule.




E 3-7

The Sanding Department of Richards Furniture Company has the following production and manufacturing cost data for March 2014, the first month of operation.

Production: 9,000 units finished and transferred out; 3,000 units started that are 100% complete as to materials and 20% complete as to conversion costs. Manufacturing Costs: Materials $33,000; Labor $24,000; overhead $36,000.

Prepare a production cost report.BE 4-2

Finney Inc. has conducted an analysis of overhead costs related to one of its product lines using a traditional costing system (volume based) and an activity-based costing system. Here are its results.TRADITIONAL COSTING ABC

Sales Revenue $600,000 $600,000

Overhead Costs:

Product RX3 $34,000 $50,000

Product Y12 $36,000 $20,000

TOTAL $70,000 $70,000

Explain how a difference in the overhead costs between the two systems may have occurred.

BE 4-8

Rich Novelty Company identified the following activities in its production and support operations. Classify each of these activities as either value-added or non-value-added.

(a) Machine Set-up

(b) Design Engineering

(c) Storing Inventory

(d) Moving Work in Process

(e) Inspecting and Testing

(f) Painting and Packing

E 4-10

Wilmington, Inc. manufactures five models of kitchen appliances at its Mesa plant. The company is installing activity-based costing and has identified the following activities performed at its Mesa plant.

1. Designing new models

2. Purchasing raw materials and parts.

3. Storing and managing inventory

4. Receiving and inspecting raw materials and parts

5. Interviewing and hiring new personnel

6. Machine forming sheet steel into appliance parts

7. Manually assembling parts into appliances

8. Training all employees of the company

9. Insuring all tangible fixed assets

10. Supervising production

11. Maintaining and repairing machinery and equipment

12. Painting and packaging finished appliances


Having analyzed its Mesa plant operations for purposes of installing activity-based-costing, Wilmington, Inc. identified its activity cost centers. It now needs to identify relevant activity cost drivers in order to assign overhead to Wilmington’s five products.



Using the activities listed above, identify for each activity one or more cost drivers that might be used to assign overhead to Wilmington’s five products.




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