ARSI UNIVERSITY

DEPARTMENT OF ACCOUNTING AND

FINANCE

Assignment Of Cost and Management

Accounting I

GROUP MEMBERS
Meklit Regasa Ex/ug 1817
Frewot Seyum Ex/ug 1207
Kalkidan Wondimu Ex/ug 1167
Mekdes Getachewu Ex/ug 1818
Q 1:
i. Journal Entries for February 2003:
1. Purchase of raw materials
RM Inventory Dr. 80,000 Accounts Payable Cr. 80,000
2. Raw materials sent to manufacturing plant floor:
WIP Inventory (Direct) Dr. 52,500 WIP Inventory
(Indirect) Dr. 22,500 RM Inventory Cr. 75,000
3. Accrual of manufacturing labor:
WIP Inventory (Direct Labor) Dr. 40,000 WIP Inventory
(Indirect Labor) Dr. 5,000 Salaries Payable Cr. 45,000
4. Payment for Executive manager’s salary:
Operating Expenses (Management Salaries) Dr. 12,000
Cash Cr. 12,000
5. Payment for factory supervisor’s salary:
Operating Expenses (Factory Supervision) Dr. 2,500
Cash Cr. 2,500
6. Payment for total manufacturing payroll:
WIP Inventory Dr. 45,000 Cash Cr. 45,000
7. Supplies and utilities incurred:
Operating Expenses (Supplies & Utilities) Dr. 4,000
Accounts Payable Cr. 4,000
8. Manufacturing overhead costs incurred:
MOH Expenses Dr. 25,000 Various (Depreciation,
Utilities, Insurance, Rent) Cr. 25,000
 9. Additional depreciation cost:
MOH Expenses Dr. 15,000 Accumulated Depreciation
Cr. 15,000
10. MOH applied during February:
MOH Applied Dr. 35,000 MOH Expenses Cr. 35,000
11. Transfer of goods to finished goods:
Finished Goods Inventory Dr. 100,000 WIP Inventory Cr.
100,000
12. Sale of finished goods:
Accounts Receivable Dr. 150,000 Sales Revenue Cr.
150,000
Cost of Goods Sold Dr. 95,000 Finished Goods
Inventory Cr. 95,000
13. Advertising costs incurred:
Operating Expenses (Advertising) Dr. 10,000 Accounts
Payable Cr. 10,000
ii. Calculation of MOH:
Total MOH Incurred: $25,000
MOH Applied: $35,000
Underapplied MOH: $10,000 (35,000 - 25,000)
iii. Disposing of Underapplied MOH using the
Proration Approach:
To dispose of the underapplied MOH of $10,000 using the
proration approach, we will allocate this amount among the
ending balances of Work in Process, Finished Goods, and
Cost of Goods Sold based on their ending balances.
Assuming ending balances are as follows: - Work in Process
(WIP): $30,000 - Finished Goods Inventory: $25,000 - Cost of
Goods Sold: $100,000
Allocation Calculation: - Total Ending Balances: $30,000
(WIP) + $25,000 (Finished Goods) + $100,000 (Cost of
Goods Sold) = $155,000
Work in Process (WIP): ($30,000 / $155,000) * $10,000
= $1,935.48
Finished Goods Inventory: ($25,000 / $155,000) *
$10,000 = $1,612.90
Cost of Goods Sold: ($100,000 / $155,000) * $10,000 =
$6,451.61
Journal Entries to Dispose of Underapplied MOH: 1.
Work in Process (WIP): - MOH Expenses Dr. $1,935.48 - Work
in Process Cr. $1,935.48
2. Finished Goods Inventory:
MOH Expenses Dr. $1,612.90
Finished Goods Inventory Cr. $1,612.90
Cost of Goods Sold:
MOH Expenses Dr. $6,451.61
Cost of Goods Sold Cr. $6,451.61
This allocation ensures that the underapplied MOH is
prorated based on the ending balances of the respective
accounts in a fair manner.
iv. Cost of Goods Sold Schedule and Income
Statement:
Cost of Goods Sold Schedule:
Beginning Finished Goods Inventory: $20,000
Cost of Goods Manufactured: $127,500
Ending Finished Goods Inventory: $20,000
Cost of Goods Sold: $127,500

Income Statement for February 2003: ``` Sales

Revenue: $150,000 Cost of Goods Sold: $127,500 Gross
Profit: $22,500 Operating Expenses: $68,500 Net Income:
-$46,000

Q 2:
(1) Total Manufacturing Cost:
Total Manufacturing Cost = Direct Materials + Direct Labor
+ Factory Overhead Total Manufacturing Cost = $366,000 +
$523,600 + $468,400 Total Manufacturing Cost =
$1,358,000
(2) Cost of Goods Manufactured:
Cost of Goods Manufactured = Beginning WIP Inventory +
Total Manufacturing Cost - Ending WIP Inventory Cost of
Goods Manufactured = $29,800 + $1,358,000 - $38,800
Cost of Goods Manufactured = $1,349,000
(3) Cost of Goods Sold:
Cost of Goods Sold = Beginning Finished Goods Inventory +
Cost of Goods Manufactured - Ending Finished Goods
Inventory Cost of Goods Sold = $54,200 + $1,349,000 -
$66,000 Cost of Goods Sold = $1,337,200
(4) Income Statement:
Sales Revenue: $1,844,000 Cost of Goods Sold: $1,337,200
Gross Profit: $506,800
Operating Expenses: Factory Overhead: $468,400 Marketing
and Admin Expenses: $344,200 Depreciation: $116,000
Sales Discounts: $8,000 Freight on Materials: $6,600 Total
Operating Expenses: $943,200
Net Income: $506,800 - $943,200 = -$436,400 (Net Loss)

Q 3.
#Calculations for Equivalent Units and Costs for Product Y in
Department 1:
1. Equivalent Units of Production:
Units in beginning WIP: 1000 units
Units started and completed: 4500 units
Total equivalent units: 1000 + 4500 = 5500 units
Equivalent Units for Direct Materials:
All units are considered 100% complete for
materials.
Equivalent units for direct materials: 5500 units
Equivalent Units for Conversion Costs:
Units in beginning WIP: 1000 units * 80% = 800
units
Units started and completed: 4500 units
Total equivalent units for conversion costs: 800 +
4500 = 5300 units
Cost per Equivalent Unit:
Given costs:
Direct materials incurred: Br. 20,000
Conversion costs incurred: Br. 49,920
Cost per equivalent unit for direct materials: Br.
20,000 / 5500 units
Cost per equivalent unit for conversion costs: Br.
49,920 / 5300 units
Total Costs Incurred:
Direct materials incurred: Br. 20,000
Conversion costs incurred: Br. 49,920
Costs Allocated to Ending WIP:
Units in ending WIP: 5500 - 4500 = 1000 units
Direct materials cost for ending WIP: 1000 units *
Cost per equivalent unit for direct materials
Conversion costs for ending WIP: 1000 units * Cost
per equivalent unit for conversion costs
Costs Allocated to Completed Units:
Direct materials cost for completed units: 4500
units * Cost per equivalent unit for direct materials
Conversion costs for completed units: 4500 units *
Cost per equivalent unit for conversion costs