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QUESTION 31 Alan Wines Alot (AWA) is a company that specializes in the production of specialty wines and spirits. Its products are particularly popular among the current generation of young CPAs, who feel that these beverages are exactly what they need to endure the long tax busy seasons. You have been recently been hired by AWA as a staff accountant. On the very first day of work, you run into a number of issues with AWA's accounting for production. Answer the following questions regarding AWA'a managerial accounting information. a. [5 points] Refer to AWA's production cost information for the most recent period below: Beginning work-in-process inventory $12,000 Direct materials used 63,000 Direct labor (actual) 31,500 Direct labor (estimated) 28,000 Ending work-in-process inventory 9,500 Estimated total manufacturing overhead 42,000 NOTE: AWA allocates manufacturing overhead on the basis of direct labor cost. Calculate AWA's cost of goods manufactured. b. [5 points) Refer to the information in part a. AWA's actual manufacturing overhead for the period was $45,000. Prepare the journal entry to adjust for overallocated/underallocated manufacturing overhead. TARAN A Ant for Ite nuorhe TOTO costs. Management has gathered the following information on activities related to production: Estimated Overhead Activity Costs Allocation Base Estimated Quantity of the Allocation Base Materials Handling $25,000 Kilograms 125,000 kilograms Packaging 12,000 Machine Hours 1,600 machine hours Quality Assurance 5.000 Cases 6,250 cases Total Overhead Costs $42,000 During the most recent period, AWA handled 135,000 kilograms of materials, used 1,950 machine hours for packaging, and inspected 6,900 cases for quality assurance Calculate AWA's allocated manufacturing overhead under the proposed ABC system. d. [5 points] Detailed information regarding AWA's production and sales is shown below. Number of cases produced 6,300 Number of cases sold 6,000 Sales price per case $60.00 Direct materials per case $10.00 Direct labor per case $5.00 Variable manufacturing overhead cost per case $4.00 Variable selling and administrative cost per case $1.20 Fixed manufacturing overhead $22,050 Fixed selling and administrative cost $14,000 Calculate AWA's operating income under both absorption costing (traditional format) and variable costing contribution margin format). Briefly explain the reason for the difference in operation income under the t methods. Darnah Art 14

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