Systems Design:Activity-Based Costing

Chapter

3

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Assigning Overhead Costs to Products

Plantwide Overhead RatePlantwide Overhead RateA single overhead rate used throughoutA single overhead rate used throughout

an entire factory. A simple method,an entire factory. A simple method,but one that can distort unit product costs.but one that can distort unit product costs.

Plantwide Overhead RatePlantwide Overhead RateA single overhead rate used throughoutA single overhead rate used throughout

an entire factory. A simple method,an entire factory. A simple method,but one that can distort unit product costs.but one that can distort unit product costs.

Direct labor has often used as the allocation base for overhead.

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Plantwide Overhead Rate

Today, direct labor may no longer be a Today, direct labor may no longer be a satisfactory base for allocation of overhead.satisfactory base for allocation of overhead.

Direct labor may no longer be highly Direct labor may no longer be highly correlated with overhead costs.correlated with overhead costs.

No single allocation basis may be able to No single allocation basis may be able to adequately reflect the demands that products adequately reflect the demands that products place on overhead.place on overhead.

Today, direct labor may no longer be a Today, direct labor may no longer be a satisfactory base for allocation of overhead.satisfactory base for allocation of overhead.

Direct labor may no longer be highly Direct labor may no longer be highly correlated with overhead costs.correlated with overhead costs.

No single allocation basis may be able to No single allocation basis may be able to adequately reflect the demands that products adequately reflect the demands that products place on overhead.place on overhead.

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The allocation bases depend on The allocation bases depend on the nature of the workthe nature of the work

performed in each department. performed in each department. In the machining department,In the machining department,overhead may be based on overhead may be based on machine-hours, but in the machine-hours, but in the

assembly departmentassembly departmentoverhead is based on labor-overhead is based on labor-

hours.hours.

The allocation bases depend on The allocation bases depend on the nature of the workthe nature of the work

performed in each department. performed in each department. In the machining department,In the machining department,overhead may be based on overhead may be based on machine-hours, but in the machine-hours, but in the

assembly departmentassembly departmentoverhead is based on labor-overhead is based on labor-

hours.hours.

Finishing Department

Shipping Department

Painting Department

Departmental Overhead Rates

Unfortunately, even departmental rates will not correctly Unfortunately, even departmental rates will not correctly assign overhead in situations where a company has a assign overhead in situations where a company has a

range of products and complex overhead costs.range of products and complex overhead costs.

Unfortunately, even departmental rates will not correctly Unfortunately, even departmental rates will not correctly assign overhead in situations where a company has a assign overhead in situations where a company has a

range of products and complex overhead costs.range of products and complex overhead costs.

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Activity-Based Costing (ABC)

Cost ObjectsCost Objects(e.g., products and customers)(e.g., products and customers)

Cost ObjectsCost Objects(e.g., products and customers)(e.g., products and customers)

ActivitiesActivitiesActivitiesActivities

Consumption of ResourcesConsumption of ResourcesConsumption of ResourcesConsumption of Resources

CostCostCostCost

A number of allocation bases

are used for assigning costs

to products.

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Activity-Based Costing (ABC)

Activity Cost PoolActivity Cost Poola “cost bucket in which a “cost bucket in which

costs related to a costs related to a particular activity are particular activity are

accumulatedaccumulated

Activity Cost PoolActivity Cost Poola “cost bucket in which a “cost bucket in which

costs related to a costs related to a particular activity are particular activity are

accumulatedaccumulated

Each activity has its own activity rate that is used to apply overhead costs.

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Designing an ABC System

Steps for Implementing ABCSteps for Implementing ABC Identify and define activities and activity pools Identify and define activities and activity pools

and develop an activity dictionary.and develop an activity dictionary. Trace or assign costs to activities and cost Trace or assign costs to activities and cost

objects.objects. Calculate activity rates.Calculate activity rates. Assign costs to cost objects.Assign costs to cost objects. Prepare necessary reports.Prepare necessary reports.

Steps for Implementing ABCSteps for Implementing ABC Identify and define activities and activity pools Identify and define activities and activity pools

and develop an activity dictionary.and develop an activity dictionary. Trace or assign costs to activities and cost Trace or assign costs to activities and cost

objects.objects. Calculate activity rates.Calculate activity rates. Assign costs to cost objects.Assign costs to cost objects. Prepare necessary reports.Prepare necessary reports.

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Hierarchy of Activities

Level Activities Activity MeasureUnit-level Processing units on machines Machine-hours

Processing units by hand Direct labor-hoursConsuming factory supplies Units produced

Batch-level Processing purchase orders Purchase orders processedProcessing production orders Production orders processedSetting up equipment Number of setupsHandling materials Pounds of material handled

Product-level Testing new products Hours of testing timeAdministering parts inventories Number of part typesDesigning products Hours of design time

Facility-level General factory administration Direct labor-hoursPlant building and grounds Direct labor-hours

Level Activities Activity MeasureUnit-level Processing units on machines Machine-hours

Processing units by hand Direct labor-hoursConsuming factory supplies Units produced

Batch-level Processing purchase orders Purchase orders processedProcessing production orders Production orders processedSetting up equipment Number of setupsHandling materials Pounds of material handled

Product-level Testing new products Hours of testing timeAdministering parts inventories Number of part typesDesigning products Hours of design time

Facility-level General factory administration Direct labor-hoursPlant building and grounds Direct labor-hours

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Activity-Based Costing at Classic Brass

DirectDirectMaterialsMaterials

DirectDirectMaterialsMaterials

DirectDirectLaborLaborDirectDirectLaborLabor

ShippingShippingCostsCosts

ShippingShippingCostsCosts

ProductsProducts

LaborLaborRelated PoolRelated Pool

LaborLaborRelated PoolRelated Pool

MachineMachineRelated PoolRelated Pool

MachineMachineRelated PoolRelated Pool

SetupSetupPoolPool

SetupSetupPoolPool

ProductionProductionOrder PoolOrder PoolProductionProductionOrder PoolOrder Pool

GeneralGeneralFactory PoolFactory Pool

GeneralGeneralFactory PoolFactory Pool

First-Stage Allocation

Second-Stage Allocations

$/DLH$/DLH$/DLH$/DLH $/MH$/MH$/MH$/MH $/Setup$/Setup$/Setup$/Setup $/Order$/Order$/Order$/Order

Overhead CostsOverhead CostsOverhead CostsOverhead Costs

$/MH$/MH$/MH$/MH

Unit-Level Activity Batch-Level Activity Facility-LevelActivity

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Using Activity-Based Costing

Comtek Sound, Inc. makes two products, a radio with a Comtek Sound, Inc. makes two products, a radio with a built-in tape player and one with a built-in compact disc built-in tape player and one with a built-in compact disc player. For the current year, Comtek has budgets sales player. For the current year, Comtek has budgets sales

of 50,000 CD units and 200,000 tape units.of 50,000 CD units and 200,000 tape units. Both products require two direct labor-hours to Both products require two direct labor-hours to

complete.complete. The company plans to work 500,000 hours to meet The company plans to work 500,000 hours to meet

the budgeted production.the budgeted production. All production is sold to auto manufacturers for All production is sold to auto manufacturers for

installation in new cars and trucks.installation in new cars and trucks. Direct materials cost $90 per unit for the CD unit and Direct materials cost $90 per unit for the CD unit and

$50 for the Tape unit.$50 for the Tape unit. Direct labor costs at $10 per hour are $20 for both Direct labor costs at $10 per hour are $20 for both

the CD and Tape unit.the CD and Tape unit.

Comtek Sound, Inc. makes two products, a radio with a Comtek Sound, Inc. makes two products, a radio with a built-in tape player and one with a built-in compact disc built-in tape player and one with a built-in compact disc player. For the current year, Comtek has budgets sales player. For the current year, Comtek has budgets sales

of 50,000 CD units and 200,000 tape units.of 50,000 CD units and 200,000 tape units. Both products require two direct labor-hours to Both products require two direct labor-hours to

complete.complete. The company plans to work 500,000 hours to meet The company plans to work 500,000 hours to meet

the budgeted production.the budgeted production. All production is sold to auto manufacturers for All production is sold to auto manufacturers for

installation in new cars and trucks.installation in new cars and trucks. Direct materials cost $90 per unit for the CD unit and Direct materials cost $90 per unit for the CD unit and

$50 for the Tape unit.$50 for the Tape unit. Direct labor costs at $10 per hour are $20 for both Direct labor costs at $10 per hour are $20 for both

the CD and Tape unit.the CD and Tape unit.

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Direct Labor-Hours as a Base

Total manufacturing overhead costs for the Total manufacturing overhead costs for the current year are estimated to be $10,000,000. current year are estimated to be $10,000,000.

The company develops the following overhead The company develops the following overhead rate based upon labor-hours:rate based upon labor-hours:

Total manufacturing overhead costs for the Total manufacturing overhead costs for the current year are estimated to be $10,000,000. current year are estimated to be $10,000,000.

The company develops the following overhead The company develops the following overhead rate based upon labor-hours:rate based upon labor-hours:

Predeterminedoverhead rate

$10,000,000500,000 DLH = $20 per DLH=

CD Unit Tape UnitDirect materials 90$ 50$ Direct labor 20 20 Manufacturing overhead 40 40 (2 DLH x $20/DLH)

Unit product cost 150$ 110$

CD Unit Tape UnitDirect materials 90$ 50$ Direct labor 20 20 Manufacturing overhead 40 40 (2 DLH x $20/DLH)

Unit product cost 150$ 110$

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Computing Activity RatesThe ABC project team at Comtek has

developed the following basic information.

Activity and Activity Measures

Estimated Overhead

Cost Total CD Tape

Labor related (DLH) 800,000$ 500,000 100,000 400,000 Machine related (MH) 2,100,000 1,000,000 300,000 700,000 Machine setups (setups) 1,600,000 4,000 3,000 1,000 Production orders (orders) 450,000 1,200 400 800 Product testing (tests) 1,700,000 20,000 16,000 4,000 Material receipts (receipts) 1,000,000 5,000 1,800 3,200 Parts administration (part types) 350,000 700 400 300 General factory (MH) 2,000,000 1,000,000 300,000 700,000

10,000,000$

Expected Activity

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Computing Activity RatesUsing the basic information, we can calculate

the following activity rates:

Activity and Activity Measures

Estimated Overhead

Cost

Total Expected Activity

Labor related (DLH) 800,000$ 500,000 1.60$ per DLHMachine related (MH) 2,100,000 1,000,000 2.10 per MHMachine setups (setups) 1,600,000 4,000 400.00 per setupProduction orders (orders) 450,000 1,200 375.00 per orderProduct testing (tests) 1,700,000 20,000 85.00 per testMaterial receipts (receipts) 1,000,000 5,000 200.00 per receiptParts administration (part types) 350,000 700 500.00 per par typeGeneral factory (MH) 2,000,000 1,000,000 2.00 per MH

10,000,000$

Activity Rate

Using the new activity rates, let’s assign overhead to the two products based upon activity.

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Computing Activity Rates

Activity and Activity MeasuresExpected

Activity AmountExpected

Activity AmountLabor related (DLH) 100,000 160,000$ 400,000 per DLH640,000$ Machine related (MH) 300,000 630,000 700,000 per MH1,470,000 Machine setups (setups) 3,000 1,200,000 1,000 per setup400,000 Production orders (orders) 400 150,000 800 per order300,000 Product testing (tests) 16,000 1,360,000 4,000 per test340,000 Material receipts (receipts) 1,800 360,000 3,200 per receipt640,000 Parts administration (part types) 400 200,000 300 per par type150,000 General factory (MH) 300,000 600,000 700,000 per MH1,400,000 Total overhead cost assigned 4,660,000$ 5,340,000$ Number of units produced 50,000 200,000 Overhead cost per unit 93.20$ 26.70$

CD Units Tape Units

÷ ÷

ABC overhead rate per unitABC overhead rate per unitABC overhead rate per unitABC overhead rate per unit

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Computing Activity Rates

CD Units Tape Units CD Units Tape UnitsDirect material 90.00$ 50.00$ 90.00$ 50.00$ Direct labor 20.00 20.00 20.00 20.00 Manufacturing overhead 93.20 26.70 40.00 40.00 Unit product cost 203.20$ 96.70$ 150.00$ 110.00$

Activity-Based Costing Direct-Labor Costing

Notice that the unit product cost of a tape unit decreased Notice that the unit product cost of a tape unit decreased from $110 to $96.70 . . . . .from $110 to $96.70 . . . . .

Notice that the unit product cost of a tape unit decreased Notice that the unit product cost of a tape unit decreased from $110 to $96.70 . . . . .from $110 to $96.70 . . . . .

. . . . . while the unit cost of a CD unit increased from . . . . . while the unit cost of a CD unit increased from $150 to $203.20.$150 to $203.20.

. . . . . while the unit cost of a CD unit increased from . . . . . while the unit cost of a CD unit increased from $150 to $203.20.$150 to $203.20.

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Shifting of Overhead Cost

CD Units Tape Units CD Units Tape UnitsDirect material 90.00$ 50.00$ 90.00$ 50.00$ Direct labor 20.00 20.00 20.00 20.00 Manufacturing overhead 93.20 26.70 40.00 40.00 Unit product cost 203.20$ 96.70$ 150.00$ 110.00$

Activity-Based Costing Direct-Labor Costing

When a company implements activity-based costing, When a company implements activity-based costing, overhead cost often shifts overhead cost often shifts from high-volume to low-from high-volume to low-

volume productsvolume products with a higher unit product cost with a higher unit product cost resulting for the low-volume products.resulting for the low-volume products.

When a company implements activity-based costing, When a company implements activity-based costing, overhead cost often shifts overhead cost often shifts from high-volume to low-from high-volume to low-

volume productsvolume products with a higher unit product cost with a higher unit product cost resulting for the low-volume products.resulting for the low-volume products.

Low-volume productLow-volume product

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Targeting Process Improvements

Activity-Based ManagementActivity-Based Managementinvolves focusing on activities to eliminate waste, involves focusing on activities to eliminate waste,

decrease processing time, and reduce defects.decrease processing time, and reduce defects.

Activity-Based ManagementActivity-Based Managementinvolves focusing on activities to eliminate waste, involves focusing on activities to eliminate waste,

decrease processing time, and reduce defects.decrease processing time, and reduce defects.

BenchmarkingBenchmarkingis a systematic approach to identifying the activities is a systematic approach to identifying the activities

with the greatest room for improvement. It is based on with the greatest room for improvement. It is based on comparing the performance in an organization with the comparing the performance in an organization with the performance of other, similar organizations known for performance of other, similar organizations known for

their outstanding performance.their outstanding performance.

BenchmarkingBenchmarkingis a systematic approach to identifying the activities is a systematic approach to identifying the activities

with the greatest room for improvement. It is based on with the greatest room for improvement. It is based on comparing the performance in an organization with the comparing the performance in an organization with the performance of other, similar organizations known for performance of other, similar organizations known for

their outstanding performance.their outstanding performance.

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Evaluation of Activity-Based Costing

Benefits of ABCBenefits of ABC Improves the Improves the

accuracy of product accuracy of product costs.costs.

Activity cost pools are Activity cost pools are more homogeneous more homogeneous than departmental than departmental cost pools.cost pools.

Allocates overhead Allocates overhead on the basis of on the basis of activities that cause activities that cause overhead costs.overhead costs.

Benefits of ABCBenefits of ABC Improves the Improves the

accuracy of product accuracy of product costs.costs.

Activity cost pools are Activity cost pools are more homogeneous more homogeneous than departmental than departmental cost pools.cost pools.

Allocates overhead Allocates overhead on the basis of on the basis of activities that cause activities that cause overhead costs.overhead costs.

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Evaluation of Activity-Based Costing

Limitations of ABCLimitations of ABC Cost of Cost of

implementation may implementation may exceed benefits.exceed benefits.

Products costs are Products costs are not always relevant not always relevant when making when making decisions.decisions.

Limitations of ABCLimitations of ABC Cost of Cost of

implementation may implementation may exceed benefits.exceed benefits.

Products costs are Products costs are not always relevant not always relevant when making when making decisions.decisions.

Benefits of ABCBenefits of ABC Improves the Improves the

accuracy of product accuracy of product costs.costs.

Activity cost pools are Activity cost pools are more homogeneous more homogeneous than departmental than departmental cost pools.cost pools.

Allocates overhead Allocates overhead on the basis of on the basis of activities that cause activities that cause overhead costs.overhead costs.

Benefits of ABCBenefits of ABC Improves the Improves the

accuracy of product accuracy of product costs.costs.

Activity cost pools are Activity cost pools are more homogeneous more homogeneous than departmental than departmental cost pools.cost pools.

Allocates overhead Allocates overhead on the basis of on the basis of activities that cause activities that cause overhead costs.overhead costs.

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ABC and Service Industries

Activity-based costing has been implemented Activity-based costing has been implemented in a wide variety of service industries in a wide variety of service industries

including railroads, hospitals, banks, and data including railroads, hospitals, banks, and data service companies.service companies.

Activity-based costing has been implemented Activity-based costing has been implemented in a wide variety of service industries in a wide variety of service industries

including railroads, hospitals, banks, and data including railroads, hospitals, banks, and data service companies.service companies.

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Cost Flows in an ABC System

Sarvik Company uses activity-based costing. Sarvik Company uses activity-based costing. The company has five cost pools shown below.The company has five cost pools shown below.Sarvik Company uses activity-based costing. Sarvik Company uses activity-based costing.

The company has five cost pools shown below.The company has five cost pools shown below.

Activity Cost Pool Activity Measure

Estimated Overhead

CostExpected

ActivityMachine related Machine-hours 175,000$ 5,000 MHsPurchase orders Number of orders 63,000 700 ordersMachine setups Number of setups 92,000 460 setupsProduct testing Number of tests 160,000 200 testsGeneral factory Direct-labor hours 300,000 25,000 DLHs

790,000$

Activity Cost Pool Activity Measure

Estimated Overhead

CostExpected

ActivityMachine related Machine-hours 175,000$ 5,000 MHsPurchase orders Number of orders 63,000 700 ordersMachine setups Number of setups 92,000 460 setupsProduct testing Number of tests 160,000 200 testsGeneral factory Direct-labor hours 300,000 25,000 DLHs

790,000$

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Cost Flows in an ABC System

At the beginning of the year, the company had At the beginning of the year, the company had inventory balance as follows.inventory balance as follows.

At the beginning of the year, the company had At the beginning of the year, the company had inventory balance as follows.inventory balance as follows.

Raw materials $3,000

Work in process 4,000

Finished goods - 0 -

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Cost Flows in an ABC System

Transaction recorded by the company:Transaction recorded by the company:a.a. Raw materials purchased on account, $915,000.Raw materials purchased on account, $915,000.

b.b. Raw materials used in production, $900,000 Raw materials used in production, $900,000 ($810,000 direct and $90,000 indirect).($810,000 direct and $90,000 indirect).

c.c. Factor labor costs, $370,000 ($95,000 direct and Factor labor costs, $370,000 ($95,000 direct and $275,000 indirect).$275,000 indirect).

d.d. Depreciation of factory assets, $180,000.Depreciation of factory assets, $180,000.

e.e. Miscellaneous manufacturing overhead costs, Miscellaneous manufacturing overhead costs, $230,000.$230,000.

f.f. Goods costing $1,650,000 manufactured.Goods costing $1,650,000 manufactured.

Transaction recorded by the company:Transaction recorded by the company:a.a. Raw materials purchased on account, $915,000.Raw materials purchased on account, $915,000.

b.b. Raw materials used in production, $900,000 Raw materials used in production, $900,000 ($810,000 direct and $90,000 indirect).($810,000 direct and $90,000 indirect).

c.c. Factor labor costs, $370,000 ($95,000 direct and Factor labor costs, $370,000 ($95,000 direct and $275,000 indirect).$275,000 indirect).

d.d. Depreciation of factory assets, $180,000.Depreciation of factory assets, $180,000.

e.e. Miscellaneous manufacturing overhead costs, Miscellaneous manufacturing overhead costs, $230,000.$230,000.

f.f. Goods costing $1,650,000 manufactured.Goods costing $1,650,000 manufactured.

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Cost Flows in an ABC System

Manufacturing overhead cost was applied to Manufacturing overhead cost was applied to production. Actual activity during the year production. Actual activity during the year

was as follows:was as follows:1.1. Machine related, 4,600 machine-hours.Machine related, 4,600 machine-hours.

2.2. Purchase orders, 800 orders.Purchase orders, 800 orders.

3.3. Machine setups, 500 setups.Machine setups, 500 setups.

4.4. Product testing, 190 tests.Product testing, 190 tests.

5.5. General factory, 23,000 direct-labor hours.General factory, 23,000 direct-labor hours.

Manufacturing overhead cost was applied to Manufacturing overhead cost was applied to production. Actual activity during the year production. Actual activity during the year

was as follows:was as follows:1.1. Machine related, 4,600 machine-hours.Machine related, 4,600 machine-hours.

2.2. Purchase orders, 800 orders.Purchase orders, 800 orders.

3.3. Machine setups, 500 setups.Machine setups, 500 setups.

4.4. Product testing, 190 tests.Product testing, 190 tests.

5.5. General factory, 23,000 direct-labor hours.General factory, 23,000 direct-labor hours.

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Cost Flows in an ABC System

Description Debit Credita. Raw Materials 915,000

Accounts Payable 915,000

b. Work in Process 810,000 Manufacturing Overhead 90,000 Raw materials 900,000

c. Work in Process 95,000 Manufacturing Overhead 275,000 Wages payable 370,000

Description Debit Credita. Raw Materials 915,000

Accounts Payable 915,000

b. Work in Process 810,000 Manufacturing Overhead 90,000 Raw materials 900,000

c. Work in Process 95,000 Manufacturing Overhead 275,000 Wages payable 370,000

The following journal entries would be used to The following journal entries would be used to record transactions (a) through (c).record transactions (a) through (c).

The following journal entries would be used to The following journal entries would be used to record transactions (a) through (c).record transactions (a) through (c).

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Cost Flows in an ABC System

Predetermined overhead rates are determined as follows:Predetermined overhead rates are determined as follows:Predetermined overhead rates are determined as follows:Predetermined overhead rates are determined as follows:

Activity Cost Pool

Estimated Overhead

Cost

Total Expected

Activity Activity Rate

Machine related 175,000$ 5,000 MHs 35$ MHsPurchase orders 63,000 700 orders 90$ ordersMachine setups 92,000 460 setups 200$ setupsProduct testing 160,000 200 tests 800$ testsGeneral factory 300,000 25,000 DLH 12$ DLHs

790,000$

Activity Cost Pool

Estimated Overhead

Cost

Total Expected

Activity Activity Rate

Machine related 175,000$ 5,000 MHs 35$ MHsPurchase orders 63,000 700 orders 90$ ordersMachine setups 92,000 460 setups 200$ setupsProduct testing 160,000 200 tests 800$ testsGeneral factory 300,000 25,000 DLH 12$ DLHs

790,000$

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Cost Flows in an ABC System

Overhead is applied on the basis of actual Overhead is applied on the basis of actual activities during the year.activities during the year.

Overhead is applied on the basis of actual Overhead is applied on the basis of actual activities during the year.activities during the year.

Activity Cost PoolActivity Rate Actual Activity

Applied Overhead

CostMachine related $35/MH 4,600 MHs 161,000$ Purchase orders $90/order 800 orders 72,000 Machine setups $200/setup 500 setups 100,000 Product testing $800/test 190 tests 152,000 General factory $12/DLH 23,000 DLHs 276,000 Total Overhead Applied 761,000$

Activity Cost PoolActivity Rate Actual Activity

Applied Overhead

CostMachine related $35/MH 4,600 MHs 161,000$ Purchase orders $90/order 800 orders 72,000 Machine setups $200/setup 500 setups 100,000 Product testing $800/test 190 tests 152,000 General factory $12/DLH 23,000 DLHs 276,000 Total Overhead Applied 761,000$

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Cost Flows in an ABC System

The following journal entry is made to record The following journal entry is made to record applied overhead.applied overhead.

The following journal entry is made to record The following journal entry is made to record applied overhead.applied overhead.

Description Debit CreditWork in Process 761,000 Manufacturing Overhead 761,000

Description Debit CreditWork in Process 761,000 Manufacturing Overhead 761,000

© The McGraw-Hill Companies, Inc., 2002Irwin/McGraw-Hill 29

Cost Flows in an ABC System

Description Debit Creditd. Manufacturing Overhead 180,000

Accumulated Depreciation 180,000

e. Manufacturing Overhead 230,000 Accounts Payable 230,000

f. Finished Goods 1,650,000 Work in Process 1,650,000

Description Debit Creditd. Manufacturing Overhead 180,000

Accumulated Depreciation 180,000

e. Manufacturing Overhead 230,000 Accounts Payable 230,000

f. Finished Goods 1,650,000 Work in Process 1,650,000

The following journal entries would be used to The following journal entries would be used to record transactions (d) through (f).record transactions (d) through (f).

The following journal entries would be used to The following journal entries would be used to record transactions (d) through (f).record transactions (d) through (f).

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Bal. 20,000

Bal. 4,000(b) 810,000(c) 95,000(f) 761,000

(g) 1, 650,000Work in Process

Bal. 14,000

Manufacturing Overhead(b) 90,000(c) 275,000(d) 180,000(e) 230,000

(g) 761,000

Raw MaterialsBal. 3,000(a) 915,000Bal. 18,000

(b) 900,000

Accumulated Depreciation(d) 180,000

Accounts Payable(a) 915,000(e) 230,000

Wages Payable

(c) 370,000

Finished GoodsBal. -0-(g) 1,650,000

Underapplied Underapplied Overhead Overhead

CostsCosts

Underapplied Underapplied Overhead Overhead

CostsCosts

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End of Chapter 3End of Chapter 3