Instructor: Dr. Hall Accounting 460 Estimated time
CPA Problems 50-60 minutes
Handout Problem No. C-20
This problem consists of three unrelated parts.
Part A. The Helper Corporation manufactures one product and accounts for costs by a job-order-cost system. You
have obtained the following information for the year ended December 31, 1978, from the Corporation’s books
and records:
<Total manufacturing cost added during 1978 (sometimes called cost to manufacture) was $1,000,000 based
on actual direct material, actual direct labor, and applied factory overhead on actual direct labor dollars.
<Cost of goods manufactured was $970,000 also based on actual direct material, actual direct labor, and
applied factory overhead.
<Factory overhead was applied to work in process at 75% of direct labor dollars. Applied factory overhead
for the year was 27% of the total manufacturing cost.
<Beginning work-in-process inventory, January 1, was 80% of ending work-in-process inventory, December
31.
Required: Prepare a formal statement of cost of goods manufactured for the year ended December 31, 1978, for
Helper Corporation. Use actual direct material used, actual direct labor, and applied factory overhead. Show
supporting computations in good form.
Part B: Poole, Inc., produces a chemical compound by a unique chemical process which Poole has divided into two
departments, A and B, for accounting purposes. The process functions as follows:
<The formula for the chemical compound requires one pound of Chemical X and one pound of Chemical Y.
In the simplest sense, one pound of Chemical X is processed in Department A and transferred to department
B for further processing where one pound of Chemical Y is added when the process is 50% complete. When
the processing is complete in Department B, the finished chemical compound is transferred to finished goods.
The process is continuous, operating twenty-four hours a day.
<Normal spoilage occurs in Department A. Five percent of Chemical X is lost in the first few seconds of
processing.
<No spoilage occurs in Department B.
<In Department A conversion costs are incurred uniformly throughout the process and are allocated to good
pounds produced because spoilage is normal.
<In Department B conversion costs are allocated equally to each equivalent pound of output.
<Poole’s unit of measure for work-in-process and finished-goods inventories is pounds.
<The following data are available for the month of October 1978:
<
Department A Department B
Work in process, October 1 8,000 pounds 10,000 pounds
Stage of completion of beginning inventory (one batch per dept.) 3/4 3/10
Started or transferred in 50,000 pounds ?
Transferred out 46,500 good pounds ?
Work in process, October 31 ? ?
Stage of completion of ending inventory 1/3 1/5
Total equivalent pounds of material added in Department B - - - 44,500 pounds
Handout Problem No. C-20 (continued)
