UC-NRLF $C 14 57b O LABORATORY MANUAL COST ACCOUNTING 1921 EDITION :••..».....• Fayette H. Elwell B. A., C. P. A. PROFESSOR OF ACCOUNTING THE I INIVERSITY OF WISCONSIN >- Digitized by the Internet Archive in 2007 with funding from IVIicrosoft Corporation http://www.archive.org/details/costaccountingOOelwerich LABORATORY MANUAL COST ACCOUNTING 1921 EDITION • •. / •• ••% V .•• : !:»•!•:. : :•• A ••: • ••* V. • Fayette H. Elwell B. A., C. P. A. PROFESSok OF ACCOUNTING THE UNIVERSITY OF WISCONSIN COPYRIGHT, 1921 By FAYETTE H. ELWELL The Pabker Company Madison, Wisconsin PREFACE From the problems presented in this set are selected those which comprise the laboratory prob- lem work 'for the course in cost accounting given in the Course in Commerce, University of Wisconsin. This set supplements the laboratory material con- tained in the texts and assigned readings. As indicated, many of these questions have been selected from certified public accountant examina- tions. R H.IElwell Madison, Wisconsin September 15, 1921 453245 PROBLEM 1 (Wisconsin, 1916) (a) Give a definition of a "unit" in cost accounting, and briefly explain its use. (b) What cost unit would you recommend for the following industries : 1. Gas Plants 11. Water Works 2. Electric Lighting Utility-' 12. State Prison ..;^. ,^ — 3. Brewery - /"' 13. Tanneries .., 4. Coal Mine " ' - 14. Flour Mills 5. Passenger Railroad - ^/» " ■ - ' ' 15. Knitting Mills 6. Street Railway <"' -^ 16. Creameries 7. Paper Mill 17. Quarries 8. Printing Plant 18. Cement Mills 9. Brick Yard 19. Blast Furnace 10. Canning Factory 20. Foundries PROBLEM 2 It has been determined that the yearly normal capacity of a plant as regards its productive labor is one hundred men working for three hundred days, and that the amount of trading expenses for one year is $30,000. We are asked to make a quotation on one hundred tons of iron, on which we wish to realize a net profit of $10 a ton. Our estimates for costs entering into the product are as follows : 90 tons pig iron at $20.00 a ton. 10 tons scrap iron at $10 a ton. Coal, 50 tons, at $3.00 a ton. Sundry supplies at $5.00 per ton, of product. The productive labor will be $15.00 a ton. The non-productive labor will be 20% on productive wages. Factory expenses (including maintenance, depreciation, etc.) will be 10% on productive wages and the trading expenses are to be based on the daily output, which in this case is estimated at 200 lbs. per day, per man. Show by complete illustration the total cost of this contract, and state how much per lb. we must quote to realize a net profit of $10.00 per ton. PROBLEM 3 (Pennsylvania, 1915) Iron Company "A" purchases on January 1, 1912, all the outstanding capital stock of Iron Company "B," and thereby acquires among other assets two blast furnace plants, viz. : furnace No. 1 and furnace No. 2. Furnace No. 1, of about 100 tons daily capacity, produces 18,000 tons from January 1 to July 1, 1912, and is blown out on this latter date for general repairs to the blowing engines. On September 1, 1912, operations are resumed after spending $6,000. The furnace then produces 40,000 tons and is again blown out on October 1, 1913. This time furnace and stoves are completely relined and, with the entire power plant and other equipment brought to full efficiency at a cost of $40,000, it is expected that henceforth a provision of 20 cents per ton of pig iron produced will be adequate to provide for future relining. It is blown in on January 1, 1914. Furnace No. 2, of about 150 tons daily capacity, has been newly con- structed. It was b-!o'^^n' iri' "on" the 'dilte of purchase and has produced to December 31, 1913, 110,000 tons of iron. No more than ordinary wear and tear is perceptible, and the furnace may run for another year before a general relining, costing about $30,000, is necessary. How should the charges for relming furnace No. 1 be disposed of and what provision should be made for the future relining of furnace No. 2 on December 31, 1913? PROBLEM 4 (Wisconsin, 1918) You have been employed by two baking companies of Superior, the A Co. and the B Co., to prepare a statement of the costs of a pound loaf of bread, and a pound and a half loaf of bread delivered to the dealers. The amount of profit or loss per barrel and per loaf should be obtained. The operating expenses for March are to be used in your analysis. The pound loaf is sold to the dealer for 7^c; the pound and a half loaf for lie. The loaves sold are as follows : 1 Pound VA Pound Loaf Loaf A Company $ 93,000.00 $254,500.00 B Company 145,080.00 377,475.00 A Company B Company Materials Used 23,433.42 32,425.00 Productive Labor 2,500.00 4,000.00 Bakery Expenses: Non-Productive Labor 500.00 200.00 Heat, Light and Power 125.00 300.00 Repairs 375.DO 350.00 Depreciation 200.00 400.00 Insurance 200.00 325.00 Miscellaneous Supplies 250.00 Miscellaneous Bakery Expense 150.00 100.00 Delivery Expenses: Agents' Salaries and Expenses 500.00 1,000.00 Drivers' Salaries 2,000.00 2,000.00 Shipping Department Expense 400.00 700.00 Stable Expense 600.00 1,200.00 Wagon and Harness Expense 250.00 350.00 Automobile Expense 700.00 1,500.00 Advertising 700,00 1,300.00 Administrative Expenses: Officers' Salaries 2,000.00 3,000.00 Office Salaries 300.00 600.00 Office, Heat, Light, etc 50.00 60.00 Taxes 300.00 500.00 Depreciation 40.00 50.00 Stationery and Printing 75.00 250.00 Donations 100.00 75.00 Postage 25.00 50.00 Miscellaneous General Expense 100.00 125.00 The A Company further states that they are able to secure 270 pound loaves from a barrel mix, and 180 pound and a half loaves from a barrel mix. The yield per barrel for the B Company is 267 pound loaves and 175 pound and a half loaves. In conversation with the official of the company, they advise you in your analysis to group the expenses under four headings ; materials, labor, delivery expenses, and overhead. You may employ such distribution of the expense items as you deem best in view of the data presented and the nature of the business. Prepare the report to the two companies as requested, and draw up a summary schedule showing the comparative costs, selling prices and profits or losses for both sizes of bread for both companies. PROBLEM 5 A concern is engaged in manufacturing steel ranges and asks you to decide the following points relating to Range No. 100 : a. Would it be better to continue producing the castings made by process A or to buy them ? b. The concern can use for the second process either Process B or B-1. Which is preferable? c. For the third operation, which is preferable, C or C-1? d. Work out the cost of each process and the cost of the finished article according to the best combination of processes. In points A, B, and C give brief summary of all reasons which lead to the conclusions given your client. Use 6% interest rate in all your calculations involving interest. FOUNDRY DEPARTMENT Process A Labor $5.50 Material 8.00 Other Expenses 6.00 Capital Used, $7,500—2 days Market Price, $23.50 Process B Process B-1 Labor $ 1.80 $ 0.90 Material 1.50 1.60 Other Expenses 3.20 3.50 Capital 3,000.00 1 % days 5,400.00 1 day Assembling Process C Process C-1 Labor $ .70 $ .40 Material 1.30 1.30 Other Expenses 1.20 1.46 Capital 900.00 Vs day 2,400.00 J4 day Sales Expenses, $4.25 Selling Price, $61.50 PROBLEM 6 (lUinois, 1914) A is the owner and operator of a stone quarry, which, owing to weather conditions, cannot be operated between December 1 and February 28. B caused damage to the quarry which delayed the commencement of operations until April 15, from which date the quarry was worked until November 30th and produced 71,000 cu. yds. at a quarry cost of 29c per cu. yd. The product from all sold at 77c per cu. yd. Overhead expense for the year, $10,000. B repaired the quarry at his own expense. You are required by the lawyer for A to indicate the measure of consequential damage as a basis for action. In your answer illustrate your method. PROBLEM 7 (New York, 1915) The Cinema Company, leasing moving picture machines for theaters, has 1,000 machines in operation. On January 1, 1915, the company decides to increase the number of its machines 80% and places an order with the manufacturers of the machines, who agree to complete and deliver the new machines in equal quarterly installments. The company arranges to borrow $60,000, by the sale of five-year 6% notes, it being agreed that a sum equal to 20% of the total issue shall be set aside annually out of the profits of the company for the redemption of such notes. The average annual cost for maintenance was found to be $120 per machine, and $24,880 was estimated for other expenses. What annual charge per machine would the company have to make in order to meet its obligations and pay a dividend of 10% on $200,000 of its capital stock? PROBLEM 8 (North Carolina, 1919) The product of a garment factory consisted of only two grades of gar- ments, viz. : grade "A" and grade "B." There was no difference in the cost of materials and supplies consumed in the two grades, but there was a difference in other manufacturing expenses of which it was impossible to keep separate as to the grades. If the factory ran exclusively on grade "A" the production would amount to 2,800 garments per week ; if it ran exclusively on grade "B" the weekly production would amount to 3,500. The factory, however, made both grades at same time. You were called in at the end of first month's operation to audit the books and prepare cost statement. Your cost statement showed that the average cost per garment was $6.60, Excluding materials and supplies that cost $5.00 per garment. Production of grade "A" was 8,800, grade "B" 3,200. The inventory con- sisted of — grade "A" 1,600 garments, grade "B" 400 garments. Prepare statement showing the value of the inventories for the period. PROBLEM 9 ([New York, 1915) A textile manufacturer operated his mill during a strike period, extending from February 4, 1914, to July 8, 1914. The losses sustained by him during this period are to be compensated for by a manufacturer's association and the parties agree to the following: The mill has 80 looms, but the percentage of loss is to be based on a standard of 60 looms, and only 75% of the looms, which were operated, are to be considered, in the adjustment of the loss, as having been in operation. The remaining looms are the basis for compensation. Fixed charges were $29,263 per annum. A further loss of $4,112.45 occurred by reason of excess charges paid on loom labor and there was a loss of mate- rials from theft and carelessness of strike-breakers amounting to $500. The total productive loom hours accomplished were 43,064. The maxi- mum hours per loom were 1,200. The normal production, at mill cost, would be $119,203.47. Five per cent on actual loss of production was also to be paid. Prepare a statement showing what the manufacturer is entitled to. PROBLEM 10 (North Carolina, 1919) 1. "A" purchased a manufacturing business that had an inventory of finished product amounting to 5,000 pounds. He ran the plant one year and took inventory and found he had 8,000 pounds of finished product on hand. You were called in to make an audit of the books and the examination dis- closed he had sold 20,000 pounds of product and the total cost of making the product amounted to $12,800.00. Prepare a statement showing the cost per pound. 2. The product of a Cloth Mill consisted of three grades of piece goods, designated as grades "A," "B," and "C." The theoretical production per week per loom was as follows: "A" 24.30 pounds "B" • 28.60 pounds "C" 32.20 pounds The entire annual production of the grades was as follows: "A" 100,000 pounds "B" • • 60,000 pounds "C" 140,000 pounds The raw materials used cost an average price of 60 cents per pound, and the total manufacturing expenses amounted to $120,000.00. Prepare a state- ment showing the cost per pound for each of the three grades. PROBLEM 11 (Michigan, 1913) A manufacturing concern has been operating for a period of nine months, but owing to incomplete development of the plant, the production during that period was greatly below the capacity and the cost of production con- sequently abnormal. The directors are anxious to obtain a statement not only showing the result of operations for the nine months, but one which would be fairly indicative of what the results would have been- had condi- tions been normal. Assuming that the actual time lost on account of the frequent stoppages amounted in the aggregate to four months, would the auditor be justified in furnishing the latter statement as well as the former, and if so, how would you proceed to show the desired results from the fol- lowing items : Manufacturing Materials $39,865.69 Taxes and Interest $ 1,398.59 Freight 5,489.22 General Expenses 6,537.14 Productive Wages 8,827.84 Sales 42,363.33 Non-Productive Labor 4,441.73 Finished Goods at Cost 7,346.45 Salaries 6,877.29 PROBLEM 12 (Wisconsin, 1916) 1. (a) Discuss various methods of pricing commodities withdrawn from storerooms. (b) Discuss various methods of evaluating stores on hand. (c) Explain necessary adjustments when physical inventories are more or less than amounts called for by storeroom perpetual inventory cards. (d) When factors should be considered in determining- minimum and maximum quantities of raw materials to be carried in stores? 2. (a) Differentiate between waste and shrinkage as found in manu- facturing plants. In cost accounting: (b) State three methods of treating waste. (c) State two methods of treating shrinkage. (d) State three methods of treating defective goods. (e) State two methods of treating idle time. PROBLEM 13 From the following sets of figures, state exactly what reconciliation should be made at the end of each week for each set, how the various sets and figures prove one another, and also outline a method for determining whether any burden remains to be distributed by the supplementary rate. Your answer must be full and complete. The productive labor charges on jobs for the week are as follows : Job 76 $121.04 Job 77 131.03 Job 78 146.75 The production factor hours charged to job are as follows: Factor No. 12 3 Job 1(> 30 40 SO Job n 80 50 50 Job 78 90 110 100 PROBLEM 14 (Wisconsin, 1918) From such facts as are submitted by the Cool Coal Co. you are requested to distribute the indirect yard and office expenses in an equitable manner between the wholesale and the retail sales of hard coal and soft coal. State your reason for using the method you employ. The indirect yard and office expenses amount to $35,000. The tonnage handled is as follows : Wholesale Retail Total Hard Coal 2,500 10,000 12,500 Soft Coal 45,000 16,000 61,000 47,500 26,000 73,500 The income from sales and the resulting gross profits are as follows: Wholesale Retail Sales Price Gross Profit Sales Price Gross Profit Hard Coal $21,250.00 $1,000.00 $105,000.00 $18,500.00 Soft Coal 168,750.00 13,000.00 88,000.00 35,000.00 $190,000.00 $14,000.00 $193,000.00 $53,500.00 10 PROBLEM 15 1. From the following facts taken from the books at the end of a month, select such figures as may be necessary to properly construct the Manufactur- ing Expense and Factory Expense accounts. Build up these accounts, show- ing the details of the debits and credits of each, the balances, etc. The general and administrative expense was $200, of which $50 was in- curred by time of officers given over to the factory. The total of the Voucher Payable Register column "Factory Expense" is $486.26. Taxes, depreciation, rent, and insurance actually chargeable to the period total $208.82. The mate- rials in process at the end of the month total $1,468.15. $21.00 of the accrued pay roll at the end of the month is chargeable to factory expense. The esti- mated expenses of the factory for the month amount to $554.92. The footings of the finished goods journal for the month are as follows : Finished goods, debit $3,413.91 ; materials in process, credit $2,406.85 ; productive labor, credit $457.53 ; manufacturing expense, credit $549.53. The finished goods account stands debited at the end of the month, $330.86. The productive labor stands debited with $216.46. The job numbers 50, 51, and 52 are in process through the factory and are to date charged with $250.61 of manu- facturing expense. The debit balance to manufacturing expense brought forward from a previous period amounted to $195.48. The accrued interest on notes payable totals $3.07. 2. The total estimated manufacturing expenses for a year amount to $6,000. The charges to Factory Expense for October amount to $600. Manu- facturing expenses to the amount of $470 have been taken up in finished goods during the month. Set up accounts for Manufacturing Expenses and Factory Expenses and make entries to give effect to above facts. Explain meanings of balances. PROBLEM 16 A certain factory employs 259 men. The total number of direct labor hours for the month of April is 48,000 hours and the amount of wages is $16,000. The total burden for the month amounts to $12,000. Job No. 45 is the construction of a heavy machine. The direct labor spent on it amounted to 3,000 hours with a direct wage of $950. The material entering into the machine cost $1,128. What will be the total factory cost of the job, according to : (a) The hourly burden plan? (b) The percentage of wages plan? (c) Suppose the job required the use of three machines on which the rates are as follows : A— 1,000 hours, rate $0,124 per hour B— 400 hours, rate 152 per hour C— 1,200 hours, rate .210 per hour What would be the total factory cost, according to this plan? (d) What possible conditions in the shop would account for these differences ? PROBLEM 17 (Wisconsin, 1916) (a) From the following data, explain and illustrate four methods of distributing the indirect expenses of a factory to production : Items Dept. A Dept. B Dept. C Materials Used $10,000 $5,000 $5,000 Productive Wages Paid 3,200 2,500 3,500 11 Productive Labor Hours 8,000 5,000 10,000 Indirect Expenses 4,000 2,500 2.800 The factory is supposed to -run 2,400 hours a year. (b) Apply the results obtained in (a) to the facts given below for Job No. 10, in order to show the different total job costs obtained by each of the methods. Assume the material and labof (value and time) chargeable to Job No. 10, to be as follows : Item Dept. A Dept. B Dept. C Total Material . . . ." $1.00 $2.00 $1.00 $4.00 Labor Value 1.60 1.50 1.05 4.15 Labor Hours 4 3 3 10 PROBLEM 18 (New York, 1916) The Treasurer of the United Manufacturing Company submitted the following figures, taken from the ledger of the company, as representing the condition of the business, December 31, 1915: Cash $ 7,500 Accounts Receivable 45,000 Notes Receivable 1,875 Inventory: Raw Materials $20,000 Labor 30,000 Manufactured Goods 16,250 66,250 Accounts Payable $ 5,875 Notes Payable 20,000 Capital Stock 80,000 Surplus, December 31, 1915 14,750 $120,625 $120,625 A comparison of the above statement with a former one showed a net loss, for the period, of $6,250. The directors had expected a profit, basing tfieir expectations on the result obtained by applying their cost calculations to the volume of sales for the period, and they employed an accountant to investigate the matter. All the Nominal Accounts had been closed into either the Merchandise Account or the Profit and Loss Account, and an analysis of these accounts disclosed the following: Inventory at Beginning of Period: Raw Material $ 22,500 Labor 32,500 Manufactured Goods 55,000 Purchases During Period 50,000 Labor 87,500 Wages 10,000 Traveling Expenses, Commission, etc 26,250 Salaries 19,000 Rent 3,750 Bad Debts 6,375 Depreciation 1 ,500 Interest 625 Sales 250,000 Return Sales 7,500 The consumption of material and labor shown by the cost records was: Material $45,000 Labor 80,000 Prepare a statement showing any discrepancy that may exist in the above figures; also a statement of assets and liabilities, December 31, 1915. 12 PROBLEM 19 (Institute Examination, November, 1918) The following problem is based upon the estimate cost system. No factory ledger will be used, all accounts being kept on the general ledger. The business is the making of men's clothes, and two principal materials will be used, fine woolens and plain woolens, of which stock records will be kept. Stock records will also be kept for finished goods. (a) The following styles of clothing will be made, and they are estimated to cost: Style 801 Style 802 Style 803 Material Used $12.50 $ 8.00 $ 4.00 Supplies (Linings, Buttons, etc) 3.00 2.50 2.00 Labor 9.00 6.00 4.50 Factory Expenses, 60% 5.40 3.60 2.70 $29.90 $20.10 $13.20 Note that the estimated costs are subdivided into four sections, and that the accounts must be kept to record the corresponding subdivisions of operating costs. (b) The company starts with the following: Dr. Cr. Machinery and Equipment $10,000 Cash 40,000 Capital Stock $50,000 (c) The purchases for the first month, according to voucher records, are: Materials, Fine Woolens, 2,000 yards at $3.00 $ 6,000 Materials, Fine Woolens, 3,000 yards at $1.50 4.500 Rent of Factory 500 Lining, Buttons, and Thread, etc 3,400 Salesmen's Commissions Paid 700 Office Expenses 120 Repairs to Machines and Equipment 350 Electric Power 440 Oil, Waste, and Other Factory Supplies 225 $16,235 (d) The pay rolls are summarized as follows : Foreman and Timekeepers $ 250 Tailors, Cutters, etc. (Direct Labor) 4,6(X) Office and Salesmen's Salaries 750 Inspectors and Other Indirect Factory Wages 435 $6,035 (e) Depreciation on equipment is calculated at 1% per month. (f) The cutting room foreman reports materials for use on garments in progress. 1,400 Yards Fine Woolens 2,200 Yards Plain Woolens (g) The tailoring foreman reports the following garments finished and placed in stock : Style No. 801 200 pieces Style No. 802 300 pieces Style No. 803 200 pieces (h) The sales record is as follows : Invoice No. 1, Style No. 801, 100 Pieces $ 4,000 Invoice No. 2, Style No. 801, 50 Pieces 2,050 Invoice No. 1, Style No. 803, 100 Pieces 2,000 13 Invoice No. 3, Style No. 802, 100 Pieces 3,000 Invoice No. 4, Style No. 802, 100 Pieces 2,800 Invoice No. 4, Style No. 803, 25 Pieces 450 $14,300 (i) Hint : Make entry for cost of sales, (j) Received cash from customers, $9,000. (k) Paid out cash for wages, $6,035, and vouchers, $7,650. (1) Inventories at end of month. (In addition to stock of raw materials and finished goods as shown by stock records.) Supplies, $1,000. Unfinished Goods : Style No. 801, 50 Pieces. All material cut. All supplies provided. Labor half completed. Style No. 802, 100 Pieces. All material cut. Half of supplies provided. Half of labor finished, (m) Prepare balance sheet and profit and loss account for the month. Add or deduct from cost of sales, when preparing profit and loss acount, the unabsorbed labor, expenses, etc. (n) Show how balances of raw material and finished goods are made up. PROBLEM 20 (Michigan, 1915) The Standard Overall Company, employing piece-work operators and estimating material consumption on the basis of spefications, has allowed its cost system to fall behind and employs y9U to pull the work together. You find that, starting the year, opening entries appear on your ledger as follows: Finished Garments $ 11,000 Work in Process 5,000 Raw Material 20,000 Undistributed Department Burden 2,500 Undistributed General Factory Burden 1,000 Subsequent Transactions per Books: Material Purchased 500,000 Material Delivered to Cutting- Room 475,000 Productive Labor (Accrued), Comprising- 850,000 Productive Hours 250,000 Department Burden (Accrued) 100,000 General Factory Burden (Accrued), Including 25,(XK) Hours Non-productive Time 25,000 Selling Expenses 150,000 Administrative Expenses 80,000 Garments Completed, Delivered to Finished Stock 840,000 Garments Sold Valued at Manufacturing- Cost 900.000 Sales (Net) 1,200,000 Taking of Inventory Necessitated the Following Adjustments: Raw Material (Short) 3,000 Work in Process (Over) 5(X) Finished Garments (Short) 1,5(X) Department Burden Rate (Flat) 12 cents per hour General Factory Burden Rate (Flat) 3 cents per hour Raise the necessary ledger accounts and show Manufacturing, Trading, and Profit and Loss Statements, together with Trial Balance at close. 14 PROBLEM 21 (Virginia, 1916) Prepare statements showing cost to produce and profit on sales of a small creamery, the books of which show as follows : January 1, 1915, butter on hand, 1,000 pounds, valued at $350; gathered and sweet cream purchases, 400,000 pounds, purchased on basis of butter fat test at 30c per pound butter fat; coloring matter, $250; other miscellaneous manufacturing supplies, $175 ; freight and commission on purchases, $325 ; labor cost for year, $9,500; insurance and taxes, $165.49; factory light and power, $975 ; depreciation on plant, $685. Inventory, December 31, 1915; 485 pounds of butter, valued at cost; other expenses, such as office salaries, $5,635.50; postage, $175; repairs to office, $73.95. Sales, $125,565; allowances for losses on shipments (to patrons), $143.75. Assume that 1^4 pounds cream tests 1 pound butter fat, and 1 pound of fat produces 16%% in excess weight of fat. Show selling weight and price per pound realized from sales. PROBLEM 22 (North Carolina, 1919) The following is a final trial balance of a Rope Factory, covering the year 1918, which began business January 1 of that year, except the value of the inventory of the finished product at the end of year has not been ascertained and entered on the books : Debits Credits Cash $ 100,000 Accounts Receivable 275,000 Cost of Plant 300,000 Office Expense 8,000 Labor and Maintenance 200,000 Cost of Power 10,000 Machinery Royalty 4,000 Salaries of Officers 15,000 Miscellaneous Factory Expense 5,000 Depreciation for Year 15,000 Miscellaneous Administrative Expenses 5,000 Discounts Allowed 1,000 Materials and Supplies Consumed 500,000 Interest on Loans 2,000 Accounts Payable 15,000 Notes Payable 200,000 Sales 900,000 Capital Stock 200,000 Reserve for Depreciation 100,000 Discounts Received 3,000 Surplus 22,000 $1,440,000 $1,440,000 The total pounds of rope manufactured during the year amounted to 1,478.000 pounds. The inventory at end of year amounted to 200,000 pounds. The market price of rope at end of year was 40 cents per pound. The corporation under T D 2609 adopted the method of taking inventories at cost or market whichever is lower. (a) Prepare a Profit and Loss Account showing the'profits for the year. (b) Prepare a Balance Sheet of the Assets and Liabilities. 15 PROBLEM 23 (Pennsylvania, 1904) A Gas Company shows the following- trial balance at the end of its first year of business : Capital Stock $ 500,000 Bonds 500,000 Accounts Payable 48,000 Gas Accounts 342,600 Manufacturing Labor $ 5,400 Boiler Fuel 3,200 Generator Fuel '. 5,400 . Oil 126,000 Purifiers 3,200 Repairs, Works 2,600 Expense, Works 3,900 Water 1,500 Insurance 300 Taxes 4,800 Distribution Labor and Material 12,000 Office Expense 13,500 Stable Expense 4,000 Repairs, Mains 1,800 Repairs, Meters 600 Repairs, Sewers 700 Street Lighting 300 Advertising 300 Maintenance Arc Lamps 1,500 Licenses 1,000 Discounts 34,000 General Expense 5,000 Sundry Debtors, Gas 40,000 Sundry Debtors, Merchandise 10,000 Cash 29,000 Bond Interest 25,000 Plant 1,055,600 $1,390,600 $1,390,600 The inventory of manufacturing material is $20,000. The inventory of distribution material is $4,000. No other inventories of any description are car'-ted. The amount of gas manufactured during the y^ar was 300,000,000 cubic feet. Amount sold, 270,000,000 cubic feet. Unaccounted for, 30,000,000 cubic feet. Give first, the manufacturing cost of gas sold ; second, the distribution cost of gas sold ; third, prepare statement of operations of the company and balance sheet of assets and liabilities. PROBLEM 24 (Michigan, 1909) A bicycle manufacturing company makes up its account December 31, 1909, for the year. The following are the debits to the Profit and Loss Account : Raw Materials on Hand January 1, 1909 $12,500 Finished Machines on Hand Jan. 1, 1909; 1,600 Wheels at $30 48,000 Purchases of Material 62,500 Productive Labor _ 82,500 Manufacturing Expenses; Coal, Repairs, Paint, Varnish, Super- intendent's Salaries, Unproductive Labor, and Sundry Ex- penses 23,000 16 Agents' Commissions 90,000 Branch Expenses, Rents, Salaries, and Miscellaneous 40,000 Selling Expenses, Travelers' Salaries, Discounts, Rebates, Mis- cellaneous 30,000 Bad Debts 8,000 Depreciation of Machinery and Plant 5,500 The sales for the year were 6,000 wheels, yielding $540,000. The raw material on hand December 31, 1909, taken at cost, was $4,000, and the finished wheels in stock ready for sale numbered 800. Prepare an account from the above showing (a) the number of wheels manufactured ; (b) the manufacturing cost per wheel ; (c) gross manufactur- ing profit; (d) the final net profit for the year, including in the net profit and loss account the stock of finished wheels on hand December 31 at their cost as shown by the accounts. PROBLEM 25 (Illinois, 1918) The accounts of a manufacturer of canned goods appears thus at the close of the fiscal year: Factory Overhead Expense $ 12,682.78 Interest on Investment , 4,039.75 Prime Factory Cost (200,000 doz.) 164,954.92 Legal Expense 7,500.00 . Inventory Finished Goods at Close (72,322 doz.) 64,800.00 Bond Interest 800.00 Canned Goods Purchased (2,000 doz.) 2,000.00 Interest (Debit) 432.50 Brokerage and Commission 3,055.37 Income Taxes (only) 1,573.89 Inventory Finished Goods at Start (20,000 doz.) 18,000.00 Outward Freight 2,125.00 General Expense 2,874.71 Selling Expense 436.48 Sales Allowances 1,124.00 Sales (149,678 doz.) ? It may be assumed that adjustments of inventory and accruals have already been made, except when the contrary is clearly inferred. The U. S. Government takes 25% of the goods manufactured, at cost to manufacturer plus 25 cents per dozen with the further stipulation that no charge shall be included for selling expense. As to sales to regular or civilian trade, the Government also limits the manufacturer's profit on goods manufactured this year, to 25 cents per dozen. Prepare a statement of the items which go to make the Cost, Income, and Profit on each of these two classes of goods. PROBLEM 26 (Virginia, 1916) The books of a corporation with capital of $100,000, engaged in the manu- facture of foundry castings, show after inventory, December 31, 1914, materials and finished works on hand as follows : Pig iron, $5,500; heavy scrap iron, $300; foundry scrap, $165; coke, $640; limestone, $43 ; other materials, $690; finished casting, $250. Inventory January 1, 1914, as foUoAvs : Pig iron, $10,600; heavy scrap iron, 17 $500; foundry scrap, $150; coke, $954.50; limestone, $65; other materials, $1,140; finished castings on hand, $1,075. Purchases during the year as follows: Pig iron, $125,600; heavy scrap iron, $5,400; foundry scrap, $125.60; coke, $16,000; limestone, $375; other materials, $7,325. Cash discount on purchases, $1,340.60; freight, $750.34. The sales were $250,000; carriage outwards, $1,265.10; discount on sales, $2,500; other expenditures, such as taxes, $325; insurance, $175; labor, $53,250; foundry foreman, $2,100; office salaries, $2,500; travelers' salaries and expenses, $4,250; repairs and upkeep of office, $350. 15% depreciation on plant valued at $50,000. Prepare statement showing production cost and year's profit from oper- ation. PROBLEM 27 (Louisiana, 1917) The Mutual Distilling Co. was organized on June 1, 1916, for the purpose of manufacturing alcohol from molasses. It started operations on July 1, 1916, and on December 31, 1916, the Trial Balance of the General Ledger was as follows : Real Estate $ 10,000.00 Buildings 97,000.00 Machinery and Equipment 145,000.00 Capital Stock $250,000.00 Cash 5,700.00 Accounts Receivable 81,500.00 Bills Payable 105,000.00 Accounts Payable 15,183.00 Alcohol Sales 164,126.50 Freight (Outbound) 20,244.50 Relun.'- and Allowances 2,875.00 Molasses 89,124.00 Repairs and Replacements 1,806.50 Cooperage 32,186.00 Superintendence 1,700.00 Factory Labor 6,766.00 Fuel and Engine Room Supplies 5^964.00 Factory Supplies 5,742.50 Brokerage and Commission 4,669.00 Traveling Expenses 1,032.00 Other Selling Expenses 500.00 Salaries of Officers : 6,000.00 Salaries of Clerks 1.800.00 Stationery and Printing 350.00 Insurance 5,500.00 Taxes 1,000.00 Incidental Expenses 2,850.00 Interest and Discount 5,000.00 $534,309.50 $534,309.50 During the six months the company produced 1,237,021 proof gal- lons of alcohol, 812,390 proof gallons were sold, and 424,631 proof gallons remain on hand, valued at $44,458.00 1,782,000 gallons of molasses were purchased, 1,682,000 were used and 100,000 gallons remain on hand, valued at 6,670.00 Inventory of material and supplies as follows : Cooperage $ 5,000.00 Fuel 500.00 Factory Supplies 500.00 18 Prepaid Insurance 1,500.00 Unearned Interest 700.00 A dividend of 5% on the Capital Stock was declared payable in January, 1917; all accounts receivable are considered good. From the above figures prepare : 1. Closing entries. 2. Manufacturing and trading account (from inventory of manu- facturing product and raw material). 3. Profit and Loss Account. In making the closing entries make the necessary reserves for depreciation on buildings and machinery and equipment at such rates as you think proper. 4. Trial Balance Sheet. 5. Return of Annual Net Income. PROBLEM 28 (Pennsylvania, 1914) During the month of July the By-Product Coke Company produces 60,000 tons of coke and recovers 250,000 gallons of tar sold at 3 cents per gallon, 700 tons of sulphate of ammonia sold at $60 per ton, 300,000,000 cubic feet of gas sold at $100 per million cubic feet, and 3,200 tons of breeze and dust sold at 50 cents per ton. The raw materials, direct labor and expenses, as well as sundry operating and general works expenses, are as follows : Applicable to the Production of Sulphate of Coke Tar Ammonia Gas Coal $200,000.00 Handling Coal 2,000.00 Lime $ 1,000.00 Sulphuric Acid 8,000.00 Direct Labor 15,000.00 $ 800.00 2,000.00 $ 750.00 Steam, Water, Elec. Lgt., etc. 3,000.00 500.00 1,000.00 600.00 General Yard and Switching. . 2,500.00 100.00 Laboratory 1,200.00 300.00 Operating Coolers and Ex- hausters 150.00 450.00 Operat'g Tar & Liquor Pump 300.00 200.00 Miscellaneous Supplies 1,200.00 20.00 200.00 150.00 Repairs and Maintenance.... 6,000.00 400.00 1,000.00 300.00 Provision for Relining and Renewals 1,200.00 Provision for Depreciation.. 1,500.00 300.00 500.00 600.00 General Works Expenses.... 4,000.00 100.00 600.00 150.00 $237,600.00 $2,570.00 $14,900.00 $3,000.00 Prepare statements showing the costs of making coke, tar, sulphate of ammonia, and gas, also show these costs per unit of production, viz. : Per ton of coke. Per gallon of tar. Per ton of sulphate of ammonia. Per million cubic feet of gas. • 19 PROBLEM 29 (Adapted from Institute Examination, November, 1920) THE NATIONAL SHALE BRICK COMPANY, INC. Trial Balance— October 31, 1920. Allowances on Sales $ 1,500.00 Accounts Receivable 22,000.00 Accounts Payable $ 19,000.00 Bonds— First Mortgage, 6% 150,000.00 Buildings: Tunnel Kilns 150,000.00 Periodic Kilns 100,000.00 Gas Producer 50,000.00 Dryer Tunnels 10,000.00 Mill— Pans and Machines 10,000.00 Power House 5,000.00 Sheds and Stables 2,000.00 Cash in Bank 2,000.00 Capital— 1,000 Shares at $100.00 each 100,000.00 Coal on Hand 1,200.00 Discounts on Sales 4,500.00 Gas Coal Used— Kiln Firing 55,000.00 Horses and Carts 1.000.00 Inventory — Bricks, November 1, 1919 5,711.75 Interest on Bonds 6,750.00 Insurance 2,500.00 Labor: Quarry 12,000.00 Pans and Machines 36,000.00 Dryer 8,000.00 Setting 27,000.00 Kiln Firing 65.000.00 Unloading, etc 30,000.00 Power 7,000.00 Materials and Supplies Used: Pans and Machines 15,000.00 O'Jarry 3,000.00 l^ryers • 1,500.00 Setting 750.00 Kiln Firing 3,000.00 Unloading Kilns, etc 4,000.00 Power 5,000.00 Machinery and Equipment: Pans and Machines 50,000.00 Power House 15,000.00 Quarry 10,000.00 Materials and Supplies on Hand 1,800.00 Office Supplies and Expense 2^500.00 Prepaid Taxes 600.00 Payroll ... 3,500.00 Quarry Rentals Paid in Advance 7,500.00 Sales— Brick 415,000.00 Sales — Coke — Net 7 000.00 Sales — Broken and Spoiled Brick — Net 2^00000 Salaries — Officers 10,000.00 Salaries — Office 4|000.00 Steam Coal Used: Drying 5,000.00 Power 6,000.00 Quarry 2,000.00 Superintendence 10,000.00 Taxes 3,000.00 Reserve for Depreciation 25.000.00 Unexpired Insurance 750 00 Surplus ., 53,061.75 $774,561.75 $774,561.75 20 The foregoing is the trial balance of the National Shale Brick Company, Inc., manufacturers of shale bricks. The operations consist of (1) blasting, . Office Expense 72.72 34. Shipping and Deliveries 176.80 Included among the credits to No. 13 (Accounts Payable) are the follow- ing items which should be charged to the respective accounts in the factory ledger : General Factory Expense $118.40 Stock Handling Expense 22.12 25 Hand Composition Expense 38.11 Machine Composition Expense 24.85 Job Press Expense 58.05 Small Cylinder Expense 21.44 Medium Cylinder Expense 138.28 Cutting Machine Expense 8.67 Machine Folding Expense 2.21 Bindery, Small Machines Expense 3.99 Bindery, Hand Work Expense 11.19 (d) The data given on the distribution page shows how the various items are to be allocated over the factory accounts. The accounts in Columns 1-7, both inclusive, are to be debited to the several factory accounts and the totals are to be credited to the accounts, the titles of which are used as columnar headings. The use of Columns 8, 9 and 10 are explained in foot notes. The following supplementary facts should be used in closing the books for the month : Item I. Shipping and Deliveries is to be charged with wages to the amount of $125. II. During the month the following materials were requisitioned: Paper $2,387.45 Ink 40.29 Bindery Materials 95.46 Miscellaneous Purchases 92.14 $2,615.34 III. Light is chargeable to the following accounts to the amount stated : Selling Expense $1.15 Shipping and Deliveries 1.82 Office Expense 5.80 $8.77 IV. The "Fixed Charges" for the month are as follows : Credit these accounts in general ledger; debit factory accounts as shown on distribution sheet. Rent $166.67 Insurance 43.43 Taxes 12.21 Depreciation Reserve 278.96 Interest, Plant Investment 162.88 These items are distributed as shown in Column 7 and also to : Selling Expense $ 5.51 Shipping and Deliveries 11.89 Office Expense 31.80 V. The Sales Register shows that the work completed during the month amounted to $9,097.91. VI. "The Selling Expense Account is charged for the actual expenses of selling, while the selling charges account is charged for the amount of these actual expenses which the individual jobs absorb." The job records show that Selling Expense charged to jobs during the month amounted to $386.82. VII. Advertising is to be closed into Selling Expense; Sales Allowances into Sales ; Special Sales, Sales and the Cost of Completed Work into Trading. VIII. Close the two following over-estimates into Reserve for Overhead : Medium Cylinder Department $12.40 Ink Direct 18.70 26 IX. Close the following accounts into Loss and Gain : Discounts. Selling Charges. Selling Expense. Trading. Interest, Plant Investment. Note : If desired, the student may make the journal entries necessary to obtain Statement data. The ruling of the journal advocated in the Standard Accounting System for Printers contains the following columnar headings (left to right) : Debits: 1. Accounts Receivable. 2. Accounts Payable. 3. General Ledger. 4. Factory Accounts. 5. Folio. Account: 6. Description. Credits: 7. Factory Accounts. 8. General Ledger. 9. Accounts Payable. 10. Accounts Receivable. You are asked to close the ledgers and prepare : 1. A statement of Factory Operations, showing cost of completed work, for January. 2. The Operatmg (Income) Statement for the month of January. 3. The Financial Statement of the business on January 31, 19. . DISTRIBUTION OF ITEMS, FACTORY ACCOUNTS 1. 2. 3. 4. S. 6. 7. 8. 9. 10. Reserve General Reserve for Wage Light PowerSpoilage General Fixed Factory Sales for Overhead Expense Charges Expense Overhead a. b. c. d. e. Paper Direct $ 22.19 $2,380.03 $ 8.01 Ink Direct 1.87 61.93 Binderv Materials Direct. 2.03 104.41 28.25 Misc. Purchases Direct.. 4.85 96.99 General Factory Expense $ 350.00 Stock Handling Expense. 7.01 280.00 $ 4.10 $ 1.65 $ 57.50 372.78 Hand Composition Dept.. 19.53 1,107.85 12.80 $ 371.45 160.98 $142.01 1,799.92 112.10 Machine Composition Dept. 6.29 201.86 2.12 4.93 89.54 84.29 34.23 438.93 12.60 Job Press Dept 11.76 402.63 3.80 10.83 $ 4.10 147.31 43.94 56.32 736.89 2.19 Small Cylinder Dept 3.34 87.33 2.22 14.90 44.68 32.81 17.08 231.44 .60 Medium Cylinder Dept. . . 14.02 920.84 14.50 38.40 342.28 103.71 130.83 1,739.08 Cutting Machine Dept 2.16 132.00 1.70 7.86 8.10 52.05 26.56 19.90 257.29 14.98 Machine Folding Dept... 1.94 37.65 3.20 5.12 1.17 22.79 31.57 8.71 113.23 4.25 Bindery Small Machines Dept 2.01 79.96 .85 2.37 36.74 43.33 14.04 178.17 1.14 Bindery Hand Work Dept. 9.92 371.34 4.20 3.90 118.58 30.26 45.28 586.82 32.47 Total $108.92 $3,971.46 $49.49 $86.06 $17.27 $1,225.42 $614.95 $468.40 $9,097.91 $216.59 a. For use of account see page 2. b. See Item IV in problem. c. Credit General Factory Expense in Factory Ledger. d. The amounts in this column (9) are to be credited to the several factory accounts. e. Under-estimates; credit these accounts in Factory Ledger. PROBLEM 34 (Michigan, 1914) The District Machine Company operates a factory cost system controlled by a double entry factory ledger, the opening balances in which appear January 1, 1914, in part as follows : 27 Undistributed Burden $ 15,000 Raw Material 100,000 Work in Process 250,000 Finished Product 98,000 Accrued Payroll 7,000 The following represent the total of the operations for given period : Raw Material Purchased $225,000 Payrolls 155,000 Productive Labor Distribution 150,000 Department Overhead 315,000 Raw Material Consumed 250,000 Product at Cost 825,000 Department Overhead Distributed 325,000 Sales at Cost 905,000 Raise the necessary controlling accounts to show the ledger record of the above operations, together with trial balance at the end of the period. PROBLEM 35 (Ohio, 1918) The Federal Manufacturing Company commenced business on January 1, 1917, with paid up capital of $2,000,000, It has a system of cost accounts which are controlled by the general books. The Trial Balance of the company at December 31, 1917, was as follows: Dr. Cr. Cash $ 30,000 Accounts Receivable 130,000 Notes Receivable 25,000 Raw Materials 150,000 Overhead Burden Work in Process 100,000 Finished Goods 300,000 Dividends Paid 70,000 Plant and Machinery 1,369,750 Profit and Lx5ss $ 23,250 Interest on Plant Investment 60,000 Accounts Payable 41,000 Notes Payable 500 Reserve for Depreciation 50,000 Capital Stock 2,000,000 $2,174,750 $2,174,750 The general books of the company show the following charges and credit to Overhead Account : Factory Executive Salaries (one-third) $ 15,000 Indirect Labor 30,000 Cost Department Salaries 10,000 Superintendents' Salaries 10,000 Repairs of Machinery and Buildings 25,000 Power 5,000 Factory Supplies and Expenses 5,000 Depreciation of Plant and Machinery 50,000 Interest on Plant and Equipment 60,000 Salesmen's Salaries 20,000 Salesmen's Expenses 10,000 Advertising 30,000 Freight Outbound 10,000 Shipping Department, Labor and Expense 15,000 Officers' Salaries (executive, two-thirds) 30,000 Office Salaries (Clerks) 15,000 Office Expenses 5,000 Cash Discount on Sales ISJOOO 28 Interest on Notes Payable 10,000 Allowances to Customers 10,000 Bad Debts 5,000 $385,000 Credits: Cash Discounts on Purchases $ 10,000 Burden applied to cost orders in process during the year (equal to 100% of direct labor) : $375,000 On making an examination of the accounts, you find that the purchase of raw material during the year amounted to $500,000 ; that the cost of direct labor was $375,000 ; and that the sales amounted to $723,250. An analysis of the orders in process discloses the following charges : Materials ; .$25,000 Direct Labor 37,500 Burden (100% direct labor) 37,500 $100,000 The number of units completed and delivered to the warehouse was 100,000, and of this number 70,000 units were sold. You find that a dividend of 3^^o was declared during the fiscal year and that no entry was made on the books. You are asked to prepare a Balance Sheet and a Profit and Loss State- ment; also a statement showing the cost and net profit per unit. Submit your working sheet. PROBLEM 36 (Wisconsin, 1919) The A. Mfg. Co. operates a cost system and on March 31, 1919, the fol- lowing balance is taken from their ledger : Material (Opening Inventory) $ 3,000.00 Material Purchases 8,084.32 Labor (Total Payroll During Period) 5,692.28 Accrued Payroll— First of Period $ 200.00 Insurance Unexpired 828.00 Taxes 1,095.00 Reserve for Depreciation 1,240.00 Work in Process 2,000.00 Finished Goods 3,754.00 Power 483.00 Miscellaneous Supplies and Expenses 985.85 Sales 13,485.60 Sales Returns 865.20 Sales Allowances 50.00 Outbound Freight 120.00 Selling Expense 1,120.53 General Office Expense 1,090.73 Discount on Purchases 165.40 Discount on Sales 95.00 Reserve for Bad Debts 125.00 Accounts Receivable 8,600.40 Accounts Payable 10,233.81 Cash 11,585.50 Land 4,000.00 Buildings 12,000.00 Machinery and Equipment 50,000.00 Capital Stock 100,000.00 Unissued Stock 15,000.00 Surplus 5,000.00 $130,449.81 $130,449.81 29 The distribution of the several factory expenses, among other accounts, is indicated in the tabulation on the following page. Vertical totals give the credits to the accounts used as columnar headings. The horizontal totals give the debits to the accounts listed at the left, which are obviously in addi- tion to those given in the trial balance. CREDIT TO ACCOUNTS Miscellan- » Reserve General eous Debits to Accounts Labor Building Power Insur- Taxes for Repairs Factory Supplies Totals Expense ance Depre- Expense and ciation Expense Building Expense $ 185.00 $ 84.10 $12.00 $20.00 $ 40.00 $ 65.00 $102.50.$ 508.60 Power 300.00 8.00 10.00 40.00 358.00 Repairs 356.40 2.00 2.50 13.33 215.00 589.23 General Factory Expense. 92.60$ 76.29 299.10 467.99 Factory Overhead Dept. A 246.50 101.72 252.30 12.00 15.00 75.00 159.00 $155.90 105.60 1,123.02 Factory Overhead Dept. B 251.20 127.15 336.40 16.00 20.00 100.00 247.80 207.79 125.40 1,431.74 Factory Overhead Dept. C 185.70 101.72 168.20 7.00 8.75 43.75 115.43 104.30 81.50 816.35 Shipping 117.00 50.86 1.00 1.25 8.33 2.00 56.75 237.19 General Expense (office) 50.86 14.00 16.75 8.33 89.94 Totals $1,734.40 $508.60 $841.00 $72.00 $94.25 $328.74 $589.23 $467.99 $985.85 $5,622.06 You are asked to open ledger accounts with each of the items listed above and with such other accounts as may be necessary in order to record: (a) The closing entries and the appropriate revenue accounts. (b) The operating or income statement for the month of March, 1919. (c) The financial statement or balance sheet on March 31, 1919. Notations Cost of Sales Returns $ 597.12 Inventories, March 31, 1919: Material 4,600.00 Work in Process 4,024.86 Finished Goods 7,635.72 Accrued Labor 686.79 Factory Overhead Accounts Credited as Follows: Department A 1802 Hours at 67c 1,207.34 Department B 2523 Hours at 52c 1,311.96 Department C 4418 Hours at 15c 662.70 An account receivable of $64 from goods sold in December is considered lost ; $125 should be reserved for bad debt losses of the month. (d) State the type of a cost accounting system which the above problem illustrates. PROBLEM 37 (Wisconsin, 1915) The main office of the Black Manufacturing Company is located in Mil- waukee, but the factory is at Waukesha. The cost records are kept at the factory, but at the end of each month the necessary data is given the main office so that the proper accounts may be closed into the Manufacturing ac- count, compiled on the general books as a section of the general revenue ac- count. Both cost and general books are kept by double entry. The following accounts having to do with manufacturing appear on the general books of the Black Manufacturing Co., March 31, 1915, before closing entries are made : Inventory, Jobs in Progress, March 1 $ 3,000.00 Inventory, Finished Goods (not yet shipped) March 1 2,000.00 Inventory, Raw Materials, March 1 ^ 5,000.00 Raw Materials Purchased During Month 10,000.00 30 Productive Labor 5,000.00 Rent 200.00 Heat 50.00 Light 25.00 Power / 150.00 Repairs to Machinery 150.00 Sundry Factory SuppHes 25.00 Superintendence 300.00 Unproductive Labor 150.00 The following items of expense should also be considered in building up the accounts on the general books for the month : Taxes (month's share) $ 20.00 Insurance (month's share) 15.00 Depreciation on Plant (month's share) 300.00 The accrued productive labor on March 31, amounts to 1(X).00 The cost records show the following data : Materials Charged to Jobs in Progress, During Month $11,000.00 Materials Charged to Finished Goods, During Month 9,000.00 Labor Charged to Jobs in Progress, During Month 5,100.00 Labor Charged to Finished Goods, During Month 4,000.00 Indirect Expense Charged to Jobs in Progress, During Month.. 1,475.00 Indirect Expense Charged to Finished Goods, IDuring Month.... 1,025.00 Jobs in Progress, Balance March 1 3,000.00 Finished Goods, Balance March 1 2,000.00 Manufacturing Account, Balance March 1 5,000.00 Sales, Goods Shipped During March 20,000.00 Finished Goods, Balance (goods not yet shipped) March 31 1,500.00 (a) Construct the accounts as they would appear on the cost ledger, (b) Close the cost ledger. (c) Give the journal entry connecting the cost and the general books. (d) Compile the Manufacturing account on the general books, showing as the balance thereof the actual cost of goods sold during the month. (e) Reconcile the profits as shown by the general books, with those shown by the cost records. PROBLEM 38 Assuming that a cost accounting system is separate and distinct from and parallel to the general books, prepare, from the Operating Statement given below, detailed debits and credits under each of the accounts as they would appear in : (a) The general financial ledger. (b) The cost ledger. Operating Statement The A Company, for the fiscal year, June 1, 1915-May 31, 1916: Sales $275,000.00 Deduct, Cost of Goods Sold: Cost of Production, Raw Materials: Inventory, June 1, 1915 $ 10,000.00 Purchases 140,000.00 150,000.00 Inventory, May 31, 1916 15,000.00 $135,000.00 Labor: Paid During Year 50,000.00 Accrued, June 1, 1915 1,000.00 49,000.00 Accrued, May 31, 1916 1,500.00 50,500.00 31 Factory Expense: Heat 1,200.00 Light 400.00 Power 2,200.00 Repairs to Plant 2,000.00 Superintendence 3,400.00 Unproductive Labor 1,000.00 Taxes 400.00 Insurance 180.00 Depreciation on Plant 3,600.00 Sundry Factory Supplies 600.00 Share of Admin. Expense 1,000.00 15,980.00 Total Cost of Production 201,480.00 Jobs in Progress, June 1, 1915 14,520.00 Jobs in Progress, May 31, 1916 10,000.00 4,520.00 Cost of Goods Completed During Year 206,000.00 Finished Goods on Hand June 1, 1915.. 4,000.00 Finished Goods on Hand May 31, 1916. . 3,500.00 500.00 Cost of Goods Sold During Year 206,500.00 Gross Trading Profit 68,500.00 Trading Expenses 27,500.00 Net Operating Profits 41,000.00 Add: Income from Investments 15,000.00 Financial Expenditures 10,000.00 5,000.00 Net Profit for Year $46,000.00 Bnsed on the burden rate given the factory, the amount charged for bur- den to jobs in progress during the year was $16,500. (cj Close the cost ledger; (d) give the journal entry which had to be sent the main office before the operating statement could have been com- piled accurately; (e) reconcile the profits as shown by the General books with those shown by the cost records. PROBLEM 39 The X Manufacturing Company operates a cost accounting system sep- arate and distinct from the general books, but at the end of the month the factory gives the main office such data as may be necessary to accurately compile the proper revenue account on the general books. The following accounts, having to do with the manufacturing, appear on the general books of the X Manufacturing Company, April 30, 1916, before closing entries for the month are made : Inventory, Jobs in Progress April 1 $ 7,000.00 Taxes (month's share) 200.00 Insurance (month's share) 90.00 Inventory, Finished Goods April 1 3,000.00 Heat 650.00 Light 150.00 Power 1,000.00 Inventory, Raw Materials April 1 4,800.00 Raw Material Purchases 70,200.00 Accrued Labor, April 1 750.00 Labor Paid During Period 25,250.00 S2 Repairs to Plant 1,000.00 Superintendence 1,700.00 Unproductive Labor 600.00 Depreciation on Plant (month's share) 1,700.00 Sundry Factory Supplies 350.00 Share of Administrative Expense 450.00 The cost records show the following data : Materials Charged to Jobs in Progress During Mo.. 70,000.00 Labor Charged to Jobs in Progress During Month. 25,800.00 Burden Charged to Jobs in Progress During Month 7,500.00 Jobs in Progress, Inventory April 1 $ 7,000.00 Jobs in Progress, Inventory April 30 5,000.00 Finished Goods, Inventory April 1 3,000.00 ' Finished Goods, Inventory April 30 2,300.(K) Goods Shipped During April 132,500.00 (a) Construct the accounts as they would appear on the cost ledger. (b) Close the cost ledger. (c) Give the journal entry connecting the cost and general books. (d) Compile the Manufacturing Account on the general books, showing as the balance thereof the actual cost of goods sold during the month. (e) Reconcile the profits as shown by the General Books with those shown by the Cost Records. (f) Construct the Raw Material and Labor Accounts as they would : - pear in the general ledger. PROBLEM 40 (Pennsylvania, 1911) A textile mill, employing some 700 hands, operates five departments, w'..'.\ a superintendent or head foreman in each. About 500 hands are paid upon a piecework basis, 50 on a part piecework and part day rate, according to the duties assigned to them from day to day ; 100 are on a straight day rate basis, while the remainder are paid weekly salaries but no overtime. Describe clearly and concisely the methods you would recommend for assembling and recording the data entering into the weekly payroll. Also state how you would have the payroll prepared and the wages, as shown thereon, paid to the hands, having in view both economy in the clerical work and the securing of proper safeguards against frauds. PROBLEM 41 (Pennsylvania, 1917) As a result of extended patent litigation, the "A" Manufacturing Com- pany is ordered to account for the profit on the sales of a certain class of goods, which they have been manufacturing. In reply to this order, they submit a statement showing a very small profit on said sales. You are called upon by the attorneys for the complainant and are advised that other manufacturing plants have made very large profits on this same line of articles, and that they desire to verify the correctness of the reports rendered. You visit the plant of the infringer and find that a very large num- ber of different articles are manufactured, that no cost system is in opration, and that while the classification of sales is made as between the different groups of articles manufactured, that no separate costs appear upon the face of the general accounting books. You are also told by the company that in 88 view of the fact that it made only limited total profits durmg the period under review, that the profit on the articles in question could not be anything like what the attorneys for the complainant said should be the case. State just what steps and what studies you would make and what books and records you would examine to determine either the correctness of the reports rendered, or the actual profits obtained from the articles in question, and to what extent, if any, you would tie up these results with the total results of the plant operations. Submit your answer in report form. PROBLEM 42 (Missouri, 1915) The Riverside Manufacturing Company desires to prepare monthly finan- cial statements on sound accounting lines, although the books have not been kept so that the cost of the product may readily be determined therefrom. The trial balance as at January 31 (one month since the previous annual closing) is as follows : Building $ 15,000.00 Machinery, Machine Shop 40,000.00 Machinery, Carpenter Shop 5,000.00 Power House and Equipment 10,000.00 Cash 1,000.00 Acounts Receivable 10,000.00 Accounts Payable $ 5,000.00 Sales 23,000.00 Sales of Scrap Borings 50.00 Labor 6,850.00 Repairs and Supplies 525.00 Fuel : . . . 250.00 Materials Purchased 25,000.00 Salaries and Office Expense 550.00 Capital 75,000.00 Surplus (December 31) 11,125.00 $114,175.00 $114,175.00 The factory operates a machine shop covering 5,000 square feet and using about 500 horsepower, and a carpenter shop covering 3,000 square feet and using about 125 horsepower. Depreciation at 6% per annum on all capital assets is to be written off. An inventory at January 31 discloses the following : Raw Materials $6,500.00 Goods in Process: Material 5,400.00 Labor of Machinists 1,200.00 Labor of Carpenters 300.00 It is required to reconstruct the accounts on a simple plan of cost account- ing, showing the operations of the departments, and to prepare a balance sheet as at January 31. On further analysis of the accounts the expenditure for labor is found to cover the following: Machinists $3,500.00 Carpenters 2,500.00 Machine Shop Foremen and Clerks 300.00 Carpenter Foreman 150.00 Engineers 200.00 Superintendent 150.00 Watchman 50.00 $6,850.00 The expenditure for Repairs and Supplies covers: For the Machine Shop $275.00 For the Carpenter Shop , 150.00 Building Repairs 100.00 $525.00 PROBLEM 43 (New York, 1916) The factory of an automobile company assembles its cars only on receipt of orders from the main office. A summary of the factory operations for a certain period is as follows: Parts Purchased $ 162,500.00 Parts Manufactured (material cost) . 562,500.00 Productive Labor (125% of material) * 703,125.00 Factory Expense .- 1,128,000.00 Cost of Cars: Parts Purchased, Consumed ■ 137,500.00 Parts Manufactured (material cost) 187,500.(X) Productive Labor (145% of material) 471,250.00 Factory Expense 565,500.00 Material on Hand, Unmanufactured 500,000.00 Prepare a technical trial balance of the cost ledger and an inventory of the stock room. PROBLEM 44 (Ohio, 1919) The American Manufacturing Company commenced business on January 1, 1918, with a paid up cash capital equal to the sales for the year 1918. The net profits for the year 1918, were $26,100. Of the total charges to manufacturing during the year, 40% was for materials, 30% for productive labor, and 30% for manufacturing expenses (including 5% depreciation on plant and machinery, amounting to $3,000). The value of the materials used was 80% of the amount purchased, and 90% of the amount purchased was paid during the year. The inventory value of Finished Goods on hand at December 31, 1918, was 10% of the cost of finished units delivered to the warehouse, and the Work in Process at that date was equal to 50% of the cost of units delivered to the warehouse. The Selling and Administrative Expenses were equal to 20% of the Sales; also to 40% of the cost of goods sold. Ninety per cent, of these expenses were paid during the year 1918. Plant and Machiner)'^ purchased during the year were paid for in cash. All labor and manufacturing expenses (exclusive of depreciation) were paid in full up to and including December 31, 1918. Of the total sales for the year, 80% was collected and 1% charged off as worthless. From the given data you are required to prepare a Balance Sheet and a Profit and Loss Statement, showing cost of goods delivered to the ware- house, cost of goods sold, and net profit for the year. 86 Return to desk from which borrowed. This book is DUE on the last date stamped below. NOV 3 APR 19 1946 4Dec*SbCK ^oOct5lPF l60cV51L'iJ llMar'57KK RECD LDj t.I,21-100m-9.'47(A5702sl6)476 VE 028 ^ 4