Chapter 2 Basic Managerial

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Chapter 2--Basic Managerial Accounting Concepts

Student: ___________________________________________________________________________

1. It is beneficial to assign indirect costs to cost objects.True False

2. Price must be greater than cost in order for the firm to generate revenue.True False

3. Accumulating costs is the way that costs are measured and recorded.

True False

. Assigning costs involves the way that a cost is lin!ed to some cost object.True False

". Assigning costs tells the accountant who s#ent the money.True False

$. A cost object is any item such as #roducts% customers% de#artments% regions% and so on% for which costs aremeasured and assigned.True False

&. 'osts are directly% not indirectly% associated with cost objects.True False

(. )irect costs are those costs that cannot be easily and accurately traced to a cost object.True False



*. Indirect costs are costs that are not easily and accurately traced to a cost object.True False

1+. Allocation means that an indirect cost is assigned to a cost object using a reasonable and convenientmethod.True False

11. A variable cost is one that does not increase in total as out#ut increase and does not decrease in total asout#ut decreases.True False

12. A fi,ed cost is a cost that does not increase in total as out#ut increases and does not decrease in total asout#ut decreases.

True False

13. An o##ortunity cost is the benefit given u# or sacrificed when one alternative is chosen over another.True False

1. 'ost is a dollar measure of the resources used to achieve a given benefit.True False

1". A cost object is something for which a com#any wants to !now the cost.True False

1$. The revenue #er unit is called cost.True False

1&. As costs are used u# in the #roduction of revenues% they are said to e,#ire. -,#ired costs are callede,#enses.True False



1(. 'osts are incurred to #roduce future benefits.True False

1*. -,#ired costs are called assets.True False

2+. educing the cost re/uired to achieve a given benefit means that a com#any is becoming less efficient.True False

21. 'osts can be assigned to cost objects in only one way.True False

22. Pro#erty ta,es on a factory building would normally be classified as a fi,ed cost.True False

23. 0lue used in the manufacture of cabinets would be an e,am#le of a fi,ed cost.True False

2. Industries that #rovide intangible services do not normally have direct contact with their customers.True False

2". esearch and develo#ment costs would be classified as #roduct cost.True False

2$. Product costs include direct materials% direct labor% and selling costs.True False

2&. All #roduct costs other than direct materials and indirect labor are called overhead.True False



2(. )irect materials can be directly traced to the goods or services being #roduced.True False

2*. Any costs associated with storing% selling% and delivering the #roduct are classified as #roduct costs.True False

3+. Prime cost is the sum of direct materials cost and direct labor cost.True False

31. Product costs are carried in inventory until the goods are finished.True False

32. ar!eting costs would be classified as #eriod costs.True False

33. The cost of janitorial services for a factory building would be classified as indirect labor.True False

3. Period costs are all costs that are not #roduct costs% such as office su##lies.True False

3". -m#loyees who convert direct materials into a #roduct or who #rovide a service to customers are classifiedas indirect labor.True False

3$. All manufacturing costs are classified as overhead.True False

3&. For e,ternal re#orting #ur#oses% costs must be classified into only three categories.True False



3(. 'ost of goods manufactured re#resents the cost of direct materials% direct labor% and overhead incurredduring the current accounting #eriod.True False

3*. 'ost of goods sold is the total #roduct cost of the units sold during a #eriod.True False

+. ales revenue e/uals the #roduct cost #er unit times the number of units sold.True False

1. 0ross margin is the difference between sales revenue and cost of goods sold.True False

2. Select the appropriate definition for each of the items listed below.

1. direct labor 4 overhead56units #roduced #er7unit conversion

cost 8888

2. direct materials 4 direct labor56units #roduced #er7unit cost of goods

manufactured 88883. total manufacturing costs 4 wor! in #rocess beginning 7 wor! in #rocess ending56units #roduced #er7unit #rime cost 8888


1. A cost that increases in total as out#ut increaseso##ortunity

cost 88882. A cost that stays the same in total regardless ofchanges in out#ut fi,ed cost 88883. A cost that can be easily traced to a cost object indirect cost 8888. A benefit given u# when one alternative is chosenover another #roduct cost 8888". A manufacturing cost #eriod cost 8888$. A cost that is difficult to trace to a cost object direct cost 8888&. A cost that is not inventoried variable cost 8888



. Select the appropriate definition for each of the items listed below.

1. 9eginning finished goods inventory 4 'ost of goodsmanufactured 7 -nding finished goods inventory

Finished goodsinventory 8888

2. The cost of units unfinished at the end of the current #eriod

Totalmanufacturing

costs 88883. direct materials 4 direct labor 4 overhead5 467 the

change in wor! in #rocess inventory from the beginning to the end of the current #eriod

:or! in #rocessinventory 8888

. )irect materials 4 direct labor 4 overhead'ost of goods

sold 8888". The cost of units finished but not sold at the end ofthe current #eriod

'ost of goodsmanufactured 8888

". Select the appropriate item for each of the definitions listed below.

1. #rice , units sold

o#erating

income 8888

2. gross margin 7 selling and administrative e,#ensesselling

e,#enses 88883. sales revenue 7 cost of goods sold sales revenue 8888. 9eginning finished goods inventory 4 'ost of goodsmanufactured 7 -nding finished goods inventory gross margin 8888

". mar!eting and distributing costscost of goods

sold 8888

$. Select the appropriate definition of each of the items listed below.

1. 'ost of #artially com#leted goods ;#erating income 88882. The total cost of goods com#leted during thecurrent #eriod 0ross margin 88883. 0ross margin 7 selling and administrativee,#enses


. The difference between sales revenue and costof goods sold Income tatement 8888". 'overs a #articular #eriod of time :or! in #rocess 8888

&. -,#ired costs are called 888888888888. 8888888888888888888888888888888888888888

(. 88888888888888is the amount of cash or cash e/uivalent sacrificed for goods and6or services that aree,#ected to bring a current or future benefit to the organi<ation. 8888888888888888888888888888888888888888



*. 888888888888888888888 is the way that a cost is lin!ed to some cost object. 8888888888888888888888888888888888888888

"+. A 888888888888888888 is any item such as a #roduct% customer% de#artment% #roject% geogra#hic region% #lan and so on% for which costs are measured and assigned. 8888888888888888888888888888888888888888

"1. 'osts that can be easily and accurately traced to a cost object are called 8888888888. 8888888888888888888888888888888888888888

"2. The #rocess of assigning an indirect cost to a cost object by using a reasonable and convenient method iscalled 8888888888888. 8888888888888888888888888888888888888888

"3. An588888888888888888 is the benefit given u# or sacrificed when one alternative is chosen over another. 8888888888888888888888888888888888888888

". An5 8888888888888888 is a cost that does not increase in total as out#ut increase and does not decrease intotal as out#ut decreases. 8888888888888888888888888888888888888888

"". ;rgani<ations that #roduce #roducts are called 88888888888888888888888. 8888888888888888888888888888888888888888

"$. 8888888888888888 are those costs% both direct and indirect% of #roducing a #roduct in a manufacturing firmor of ac/uiring a #roduct in a merchandising firm and #re#aring it for sale. 8888888888888888888888888888888888888888

"&. aterials that become #art of a #roduct usually are classified as 888888888888888. 8888888888888888888888888888888888888888



"(. Insurance coverage% medical care% and accounting are e,am#les of 88888888888888888 #erformed forcustomers. 8888888888888888888888888888888888888888

"*. 88888888888888888 e/uals the sum of direct materials% direct labor% and manufacturing overhead. 8888888888888888888888888888888888888888

$+. All #roduct costs other than direct materials and direct labor are #ut into a category called 8888888888888888888888888. 8888888888888888888888888888888888888888

$1. 8888888888888888888888 is the sum of direct labor cost and manufacturing overhead cost. 8888888888888888888888888888888888888888

$2. 8888888888888888 and 88888888888888888 costs are considered #eriod costs. 8888888888888888888888888888888888888888

$3. -m#loyees who convert direct materials into a #roduct are classified as 8888888888888. 8888888888888888888888888888888888888888

$. 8888888888888888888 is the cost of the #artially com#leted goods that are still on the factory floor at theend of a time #eriod. 8888888888888888888888888888888888888888

$". The difference between sales revenue and cost of goods sold is !nown as the 88888888888888. 8888888888888888888888888888888888888888

$$. The 8888888888888888888888888888 re#resents that total #roduct cost of goods com#leted during thecurrent #eriod and transferred to finished goods inventory. 8888888888888888888888888888888888888888



$&. -,#ired costs are calledA. fi,ed.9. costs.'. e,#enses.). #rofit.

$(. Assigning costs to cost objectsA. #rovides information for decision ma!ing.9. can be accom#lished in a number of ways.'. can be a sim#le or com#le, #rocess.). do all of these.

$*. An indirect costA. can be easily and accurately traced to a cost object.9. is hard to trace.

'. should never be assigned to a cost object.). do none of these.

&+. A variable cost in totalA. increases as out#ut increases and decreases as out#ut decreases.9. increases as out#ut increases and6or decreases.'. remains constant no matter the level of out#ut.). increases as out#ut decreases and decreases as out#ut increases.

&1. 'ost is=A. the difference between sales revenue and cost of goods sold.9. the benefit given u# or sacrificed when on alternative is chosen over another.'. the amount of cash or cash e/uivalent sacrificed for goods and6or services that are e,#ected to bring a currentor future benefit to the organi<ation.). the revenue #er unit.

&2. Price is not =A. the revenue #er unit.9. greater than cost in order for the firm to earn income.'. the same as cost.). the same as cost #er unit #lus the income #er unit.



&3. Assigning costsA. involves the way that a cost is lin!ed to some cost object.9. tells the com#any why the money was s#ent.'. to a cost object using a reasonable and convenient method is allocation.). all of these.

&. An o##ortunity cost is=A. the benefit given u# or sacrificed when one alternative is chosen over another.9. the cost to mar!et% distribute% and service a #roduct or service.'. the total #roduct cost of goods com#leted during the current #eriod and transferred to finished goodsinventory.). the difference between sales revenue and cost of goods sold.

&". >on7manufacturing costs includeA. mar!eting and administration.

9. direct materials.'. indirect materials.). overhead.

&$. :hich of the following is an e,am#le of an intangible #roduct?A. motorcycle9. eye e,am'. stereo). television

&&. :hich of the following is an e,am#le of a tangible #roduct?A. lawn care9. accounting services'. customer service). com#uter

&(. 'osts are subdivided into what two major functional categories?A. o##ortunity and allocation9. fi,ed and variable'. #roduct and non7#roduction). direct and indirect



&*. Product costsA. are costs that are included in the determining the value of the inventory.9. are manufacturing costs.'. include direct materials% direct labor% and overhead.). are all of these.

(+. :hich of the following would not be a #eriod cost?A. research and develo#ment9. direct materials'. advertising costs). office su##lies

(1. :hich of the following would be an e,am#le of a direct materials cost?A. engine on an air#lane9. screws used to manufacture a lighting fi,ture

'. glue used to build cabinets). nails used to manufacture a table

(2. Product costs consist ofA. #eriod costs.9. indirect materials% indirect labor% and administrative costs.'. direct materials% direct labor% and selling costs.). direct materials% direct labor% and overhead.

(3. :hich of the following is not an e,am#le of a direct materials cost?A. shelves on a boo!case9. engine in a car '. tires on a bicycle). nail used to manufacture a des!

(. aterials in the raw materials account do not become direct materials

A. until they are withdrawn from inventory for use in #roduction.9. until the finished #roduct is sold.'. until they are #urchased from a vendor.). none of these are correct.



(". :hich of the following is an e,am#le of direct labor?A. vice #resident of mar!eting9. assembly line wor!er for televisions'. staff accountant). su#ervisor at a manufacturing #lant

($. )irect labor is an5A. #roduct cost.9. o##ortunity cost.'. administrative cost.). fi,ed cost.

(&. ;verhead includesA. indirect labor.9. indirect materials.

'. su##lies.). all of these.

((. :hich of the following would not be included in overhead?A. mar!eting costs9. #ro#erty ta,es on the factory'. factory utility costs). de#recation on factory machinery

(*. Indirect labor would includeA. salary of the vice7#resident of mar!eting.9. salary of '-;.'. salary of factory su#ervisor.). none of these are correct.

*+. The unit cost

A. is the total #roduct costs divided by the number of units #roduced.9. includes #eriod costs.'. is the total #rime costs divided by the number of units #roduced.). is the total conversion costs divided by the number of units #roduced.



*1. Prime cost isA. indirect materials cost and direct labor cost.9. direct materials cost and direct labor cost.'. direct labor cost and indirect labor cost.). direct materials cost and indirect labor cost.

*2. 'onversion cost is the sum ofA. #roduct costs and #eriod costs.9. selling cost and administrative costs.'. direct labor cost and direct materials costs.). direct labor cost and overhead costs.

*3. Period costsA. are selling costs and administrative costs.9. are used to com#ute #roduct cost.

'. can be included in overhead costs.). are carried in inventory until the goods are sold.

*. :hich of the following is an e,am#le of a #eriod cost?A. research and develo#ment9. selling and mar!eting'. general accounting). all of these

*". 'ost of goods manufactured e/ualsA. the cost of indirect materials used in #roduction.9. the #roduct cost of goods com#leted during the current #eriod.'. the #eriod costs for the current #eriod.). the cost of direct materials and direct labor used during the current #eriod.

*$. 'ost of goods manufactured e/uals

A. total #roduct costs incurred during the current #eriod 4 beginning wor! in #rocess 7 ending wor! in #rocess.9. direct materials cost 4 direct labor cost 4 overhead cost.'. sales 7 cost of goods sold.). none of these are correct.



*&. The cost of the #artially com#leted goods at the end of the #eriod would beA. ending wor! in #rocess inventory.9. cost of goods sold.'. beginning finished goods inventory.). beginning wor! in #rocess inventory.

*(. Product costs are e,#ensedA. when the #roduct is finished.9. when the #roduct unit cost is calculated.'. when the #roduct is sold.). all of these are correct.

**. ancor Inc. had a #er7unit conversion cost of @2."+ during A#ril and incurred direct materials cost of@1++%+++% direct labor costs of @&"%+++% and overhead costs of @"%+++ during the month. ow many units didthey manufacture during the month?

A. &+%+++9. 1(%+++'. (%+++). 3+%+++

1++. Ba!eland Inc. manufactured "%+++ units during the month of arch. They incurred direct materials cost of@1++%+++ and overhead cost of @+%+++. If their #er7unit #rime cost was @2$.++ #er unit how much direct laborcost did they incur during arch?A. @2+%+++

9. @3"%+++'. @*+%+++). @3+%+++

1+1. )uring the month of Canuary% -nter#rise Inc. had total manufacturing costs of @11+%+++. They incurred@+%+++ of direct labor cost and @3+%+++ of overhead cost during the month. If the materials inventory onCanuary 1 was @3%+++ less that the materials inventory on Canuary 31% what was the cost of materials #urchasedduring the month?A. @3&%+++

9. @3%+++'. @+%+++). none of these



1+2. Production costs that are not attached to units that are sold are re#orted as=A. selling e,#enses.9. cost of goods sold.'. administrative costs.). inventory.

1+3. Information from the records of 'ain 'or#oration for )ecember 2+11 are as follows=

ales @1%23+%+++

elling and administrative e,#enses 21+%+++

)irect materials used 2$%+++

)irect labor 3++%+++

Factory overhead +"%+++

Inventories

)ec. 1% 2+11 )ec. 31%2+11

)irect materials @3$%+++ @2%+++

:or! in #rocess &"%+++ (%+++

Finished goods $*%+++ "&%+++

The conversion costs are= A. @*$+%+++.

9. @1%1&*%+++.'. @&+"%+++.). @"$%+++.



1+. Information from the records of 'ain 'or#oration for )ecember 2+11 are as follows=

ales @1%23+%+++





Inventories

)ec. 1% 2+11 )ec. 31%2+11


:or! in #rocess &"%+++ (%+++


The #rime costs are= A. @*$+%+++.9. @"$%+++.'. @&+"%+++.). @*$*%+++.

1+". Figure 2-1.

'oncam Inc. manufactures television sets. Bast month direct materials electronic com#onents% etc.5 costing@"++%+++ were #ut into #roduction. )irect labor of @(++%+++ was incurred% overhead e/ualed @"+%+++% and

selling and administrative costs totaled @3$+%+++. The com#any manufactured (%+++ television sets during themonth. Assume that there were no beginning or ending wor! in #rocess balances.

efer to Figure 271. The #er7unit conversion cost was=A. @21(.&"9. @1"$.2"'. @1$2."+). @1++.++



1+$. Figure 2-1.

'oncam Inc. manufactures television sets. Bast month direct materials electronic com#onents% etc.5 costing@"++%+++ were #ut into #roduction. )irect labor of @(++%+++ was incurred% overhead e/ualed @"+%+++% andselling and administrative costs totaled @3$+%+++. The com#any manufactured (%+++ television sets during themonth. Assume that there were no beginning or ending wor! in #rocess balances.

efer to Figure 271. The total #roduct costs for last month were=A. @1%&"+%+++

9. @2%11+%+++'. @1%3++%+++). @1%2"+%+++

1+&. Figure 2-1.


efer to Figure 271. The total #er unit #rime cost was=A. @2$3.&"9. @$2."+'. @1$2."+). @1"$.2"

1+(. Figure 2-1.

'oncam Inc. manufactures television sets. Bast month direct materials electronic com#onents% etc.5 costing

@"++%+++ were #ut into #roduction. )irect labor of @(++%+++ was incurred% overhead e/ualed @"+%+++% andselling and administrative costs totaled @3$+%+++. The com#any manufactured (%+++ television sets during themonth. Assume that there were no beginning or ending wor! in #rocess balances.

efer to Figure 271. :hat was the amount of cost of goods manufactured last month?A. @1%&"+%+++9. @1%2"+%+++'. @1%3++%+++). @2%11+%+++

1+*. Figure 2-5.

In Culy% -cono 'om#any #urchased materials costing @21%+++ and incurred direct labor cost of @1(%+++.;verhead totaled @32%+++ for the month. Information on inventories was as follows=

Culy 1 Culy 31aterials @$%2++ @&%1++:or! in #rocess @ &++ @1%2++Finished goods @3%3++ @2%&++



efer to Figure 27". :hat was the cost of direct materials used in Culy? A. @21%+++9. @2+%1++'. @21%*++). @2+%"++

11+. Figure 2-5.



efer to Figure 27". :hat were the total manufacturing costs in Culy? A. @&1%+++9. @"+%+++'. @$*%$++). @&+%1++

111. Figure 2-5.



efer to Figure 27". :hat was the cost of goods manufactured for Culy? A. @&+%"++9. @&+%&++'. @$*%$++). @$*%1++



112. Figure 2-5.



efer to Figure 27". :hat was the cost of goods sold for Culy? A. @&+%2++9. @$*%$++'. @&1%3++). @&1%1++

113. Figure 2-5.



efer to Figure 27". If -cono 'om#any sold 1+%+++ units during Culy and gross margin totaled @2*%(++% what was the sales #rice #er unit? A. @*.*

9. @1+.++'. @1+.+*). @1+.11

11. Figure 2-7.

0ateway 'om#any #roduces a #roduct with the following #er7unit costs=

)irect materials @11)irect labor (;verhead 1"

Bast year% 0ateway #roduced and sold &"+ units at a sales #rice of @$( each. Total selling and administrative e,#ense was @22%+++.

efer to Figure 27&. Prime cost #er7unit was? A. @1*9. @23'. @3). @11



11". Figure 2-7.




efer to Figure 27&. 'ost of goods sold last year was? A. @&%"++9. @2"%"++'. @1%2"+). @"1%+++

11$. Figure 2-7.




efer to Figure 27&. Total o#erating income last year was? A. @2*%+++9. @"1%+++'. @2"%"++

). @3%"++

11&. Figure 2-8.

Bast year Duest 'om#any incurred the following costs=

)irect materials= @+%+++)irect labor= $+%+++;verhead *+%+++elling e,#enses 2%+++Administrative e,#enses 22%+++

Duest #roduced and sold 2%+++ units at a sales #rice of @12" each. Assume that beginning and ending inventories of materials% wor! in #rocess% andfinished goods were <ero.

efer to Figure 27(. Total #eriod e,#ense was? A. @2%+++9. @1*+%+++'. @$%+++). @2"+%+++



11(. Figure 2-8.




efer to Figure 27(. 0ross margin #er7unit was? A. @12"9. @&'. @*"). @3+

11*. Figure 2-8.Bast year Duest 'om#any incurred the following costs=



efer to Figure 27(. Total #roduct costs were? A. @1*+%+++9. @1++%+++'. @1"+%+++). @23$%+++

12+. Figure 2-8.






efer to Figure 27(. 'onversion cost #er unit was? A. @"+9. @&"'. @*"). @12"

121. 'ost of goods soldA. re#resents all costs associated with research% develo#ment% and general administration of the organi<ation.9. is found on the 9alance heet.'. is the cost of the #artially com#leted goods that are still on the factory floor at the end of the #eriod.). is the total #roduct cost for the units sold during a #eriod.

122. :hich of the following would not be found on the income statement of a manufacturer?

A. cost of goods sold9. wor! in #rocess'. sales revenue). o#erating income

123. :hich of the following would be found on the balance sheet of a manufacturer?A. wor! in #rocess9. raw materials'. finished goods

). All of the these are correct

12. :hich of the following would be found on the balance sheet of a manufacturer?A. sales revenue9. selling e,#enses'. factory e/ui#ment). all of these are correct

12". 0ross margin e/ualsA. cost of goods sold 7 selling and administrative e,#enses.9. direct materials 4 direct labor 4 manufacturing overhead.'. sales revenue 7 cost of goods sold.). cost of goods manufactured 4 selling and administrative e,#enses.



12$. ;#erating income e/ualsA. sales revenue 7 cost of goods sold 7 selling and administrative e,#ense9. gross margin 7 selling e,#enses'. sales revenue 7 cost of goods sold). sales revenue 7 selling and administrative e,#enses

12&. 0ross margin #ercent e/ualsA. gross margin6cost of goods sold.9. o#erating income6sales revenue.'. gross margin6sales revenue.). sales revenue6gross margin.

12(. :hich of the following would not be found on an income statement of a service organi<ation?A. selling e,#enses9. cost of goods sold

'. o#erating income). sales revenue

12*. :hich of the following can be found on the income statements of both a manufacturing and serviceorgani<ation?A. revenues9. o#erating income'. administrative e,#enses). all of these can be found on both.

13+. A manufacturer normally hasA. one inventory account.9. four inventory accounts.'. three inventory accounts.). none of these are correct.

131. An income statement of a manufacturerA. will show the ending balance of wor! in #rocess.9. contains only manufacturing costs.'. will show the ending balance of materials inventory.). covers a certain #eriod of time.



132. ;n a manufacturerEs income statement e,#enses are se#arated into the following three categories=A. #roduction% #eriod% and indirect9. materials% wor! in #rocess% and finished goods'. #roduction% selling% and administrative). variable% fi,ed% and direct

133. Figure 2-2.Bonborg 'o. had the following beginning and ending inventory balances for the year ended )ecember 31% 2+11=

Canuary 1% 2+11 )ecember 31% 2+11aterials @1+%+++ @ (%+++:or! in Process @1(%+++ @1&%+++Finished 0oods @21%+++ @1$%"++

In addition% direct labor costs of @3+%+++ were incurred% overhead e/ualed @2%+++% materials #urchased were @2&%+++ and selling and administrativecosts were @22%+++. Bonborg 'o. sold 2"%+++ units of #roduct during the year at a sales #rice of @".++ #er unit.

efer to Figure 272. :hat was the amount of cost of goods manufactured for the year? A. @1+1%+++9. @12%+++'. @1++%+++). @1+2%+++

13. Figure 2-2.

Bonborg 'o. had the following beginning and ending inventory balances for the year ended )ecember 31% 2+11=



efer to Figure 272. :hat was the amount of cost of goods sold for the year? A. @1+2%+++9. @*&%"++'. @1+$%"++

). @12(%"++



13". Figure 2-2.




efer to Figure 272. :hat were the total manufacturing costs for the year? A. @1+1%+++9. @1+2%+++'. @123%+++). @1+$%"++

13$. Figure 2-2.




efer to Figure 272. :hat was BonborgEs o#erating income lossG for the year?

A. @1(%"++9. @12"%+++'. @3%"++G). @"%"++

13&. )uring the month of Cune% Telecom Inc. had cost of goods manufactured of @112%+++% direct materials costof @"2%+++% direct labor cost of @3&%+++ and overhead cost of @2$%+++. The wor! in #rocess balance at Cune 3+e/ualed @1+%+++. :hat was the wor! in #rocess balance on Cune 1?A. @&%+++9. @13%+++

'. @1+%+++). @11"%+++



13(. Talcum Inc. had materials inventory at Culy 1 of @12%+++. The materials inventory at Culy 31 was @1"%+++and the cost of direct materials used in #roduction was @2+%+++. :hat was the cost of materials #urchasedduring the month?A. @23%+++9. @1&%+++'. @3"%+++). @2+%+++

13*. Hutlow Inc. had cost of goods sold of @112%+++ for the year ended )ecember 31% 2+11. The finished goodsinventory on Canuary 1% 2+11 was @2(%+++ and the finished goods inventory on )ecember 31% 2+11 was@1&%+++. :hat was the amount of cost of goods manufactured for the year?A. @12*%+++9. @1+1%+++'. @$&%+++). @113%+++

1+. Andover Inc. had a gross margin for the month of February totaling @2%+++. They sold "%+++ units duringthe month at a sales #rice of @2+ #er unit. :hat was the amount of cost of goods sold for the month?A. @1++%+++9. @2%+++'. @"(%+++). none of these are correct

11. Figure 2-3.

9artlow% Inc. had the following income statement for the month of ay.

alesrevenue

@2(%+++

'ost of goodssold

2+"%+

0rossmargin

222%"$+

Bess=

elling e,#enses (1%32+ Administrative e,#enses &2%&$+;#eratingincome

@ $(%(+



efer to Figure 273. :hat was the sales revenue #ercent? A. 1++9. ('. "2). 1$

12. Figure 2-3.


alesrevenue

@2(%+++

'ost of goodssold

2+"%+

0rossmargin

222%"$+

Bess=


@ $(%(+

efer to Figure 273. :hat was the cost of goods sold #ercent? A. 1++9. 1*'. "2

). (

13. Figure 2-3.


alesrevenue

@2(%+++

'ost of goods

sold

2+"%+

0rossmargin

222%"$+

Bess=


@ $(%(+



efer to Figure 273. :hat was the gross margin #ercent? A. "29. ('. 1&). 1*

1. Figure 2-3.


alesrevenue

@2(%+++

'ost of goodssold

2+"%+

0rossmargin

222%"$+

Bess=


@ $(%(+

efer to Figure 273. :hat was the selling e,#ense #ercent? A. 1&9. 1*'. 1$

). no correct answer

1". Figure 2-3.


alesrevenue

@2(%+++

'ost of goods

sold

2+"%+

0rossmargin

222%"$+

Bess=


@ $(%(+



efer to Figure 273. :hat was the administrative e,#ense #ercent? A. 1&9. 1*'. 1$). 1"

1$. Figure 2-3.


alesrevenue

@2(%+++

'ost of goodssold

2+"%+

0rossmargin

222%"$+

Bess=


@ $(%(+

efer to Figure 273. :hat was the o#erating income #ercent? A. 1"9. 1*'. 1&

). 1$

1&. Figure 2-4.

Cun!o 'om#any ma!es financial calculators. )uring the year Cun!o manufactured *&%+++ financial calculators.Finished goods inventory had the following units on hand=

Canuary 1 1%2$+)ecember 31 1%++

efer to Figure 27. ow many financial calculators did Cun!o sell during the year? A. *$%&(+9. *&%22+'. *&%+++). *(%2$+



1(. Figure 2-4.



efer to Figure 27. If each financial calculator had a #er7unit #roduct cost of @112% what was the cost of Finished goods inventory on )ecember

31? A. @11$%(+9. @11%12+'. @2%$+). none of these are correct

1*. Figure 2-4.

Cun!o 'om#any ma!es financial calculators. )uring the year Cun!o manufactured *&%+++ financial calculators.

Finished goods inventory had the following units on hand=


efer to Figure 27. If each financial calculator has a #er7unit #roduct cost of @112% what was the cost of goods sold last year? A. @1+%($%+++9. @1+%(3*%3$+'. @11%++"%12+

). @1+%(((%$+

1"+. Figure 2-6.

eaview 'om#any too! the following data from their income statement at the end of the current year.

Per7unit #roduct cost= @3+0ross margin #ercentage= +elling and administrative e,#enses @3+%+++;#erating income @1+%+++

efer to Figure 27$. :hat was gross margin for the year? A. @$+%+++9. @1++%+++'. @+%+++). none of these



1"1. Figure 2-6.



efer to Figure 27$. :hat was cost of goods sold for the year? A. @$+%+++9. @+%+++'. @1++%+++). none of these

1"2. Figure 2-6.



efer to Figure 27$. ow many units were sold during the year? A. 3%3339. 1%+++'. 1%"++

). 2%+++

1"3. Figure 2-6.



efer to Figure 27$. :hat was the sales #rice #er unit? A. @"+9. @3+'. @2+). @1+



1". If beginning wor!7in7#rocess inventory is @12+%+++% ending wor!7in7#rocess inventory is @1$+%+++% cost ofgoods manufactured is @++%+++ and direct materials used are @1++%+++% what are the conversion costs?A. @1+%+++9. @2(+%+++'. @3++%+++). @3+%+++

1"". Information from the records of Place% Inc.% for )ecember 2+11 is as follows=

ales @(2+%+++elling and administrative e,#enses 1+%+++)irect materials #urchases 1&$%+++)irect labor 2++%+++Factory overhead 2&+%+++)irect materials% )ecember 1 2%+++:or! in #rocess% )ecember 1 "+%+++Finished goods% )ecember 1 $%+++)irect materials% )ecember 31 2(%+++

:or! in #rocess% )ecember 31 "$%+++Finished goods% )ecember 31 3(%+++

>et income for the month of )ecember is= A. @$%+++.9. @3$%+++.'. @$3$%+++.). @1(+%+++.

1"$. elected data concerning the #ast yearEs o#erations of the 9urner 'or#oration are as follows=

elling and administrative e,#enses @22"%+++

)irect materials used 3*&%"++

)irect labor "+%+++

Inventories

)ec. 1% 2+11 )ec. 31%2+11


:or! in #rocess &"%+++ (%+++


The cost of direct materials #urchased is= A. @3*&%"++.9. @+3%"++.'. @3$&%"++.). @+"%+++.



1"&. tone 'om#any% ma!er of com#uters% incurred the following costs during the year=

Reuire!" 'lassify each cost as either fi,ed or variable cost.

Fi#e! $aria%le

1. alary of the factory su#ervisor

2. aterials needed to assemble the com#uters

3. :ages #aid to an assembly line wor!er

. )e#reciation on the factory

". Jtility bill for the factory

$. 0rease used to lubricate the machine

&. ent #aid for the factory

(. Pro#erty ta,es on the factory and cor#orate office

*. 9o,es used to #ac!age the com#leted com#uters

1+. Advertising in a news#a#er monthly

1"(. Ashland 'om#any% ma!er of !itchen cabinets% incurred the following costs during the current year=

Reuire!" 'lassify each cost as either a #roduct or #eriod cost.

Product Period

1. )e#reciation on automobiles used by the sales staff.

2. alary of AshlandEs chief e,ecutive officer

3. 0lue used in the #roduction #rocess

. u##lies for factory washroom

". esearch and develo#ment costs

$. Pro#erty ta,es on factory building

&. alary of com#any controller

(. )e#reciation on furniture in factory lunchroom

*. 'ost of lubricating machinery

1+. :ood used in #roduction #rocess



1"*. Arcadia 'om#any manufactures recreational vehicles and incurred the following costs during the currentyear.

Reuire!" 'lassify each cost using the table format given below=

Product 'ost Period 'ost

)irectaterials

)irectBabor ;verhead

elling-,#ense

Administrative-,#ense

1. :ages of general office #ersonnel

2. 'ost of tires

3. Factory su#ervisorEs salary

. 'onference for mar!eting #ersonnel

". Factory security guards

$. esearch and develo#ment

&. Assembly line wor!ers

(. 'om#any rece#tionist

*. Advertising cost

1+. 'ost of shi##ing vehicles to customers



1$+. The 9ayou 'om#any ma!es crab #ots. )uring the current month% direct materials costing @12$%+++ were #ut into #roduction. )irect labor of @&(%+++ was incurred and overhead e/ualed @(%+++. elling andadministrative e,#enses totaled @$$%+++ for the month and the com#any manufactured 3%+++ crab #ots. Assumethere was no beginning inventory and that 2%(++ crab #ots were sold.

Reuire!"

A. 'om#ute the #er7unit #roduct cost

9. 'om#ute the #er7unit #rime cost'. 'om#ute the #er7unit conversion cost). :hat is cost of goods sold for the month?-. :hat is the cost of ending finished goods for the month?

1$1. oss 'om#any ma!es handbags. Bast month direct materials leather% thread% <i##ers% decorative accents5costing @&$%+++ were #ut into #roduction. oss had 3+ wor!ers% each wor!ed 1$+ hours this month and eachare #aid @12 #er hour. ;verhead e/ualed @(+%+++ for the #eriod. oss 'om#any #roduced +%+++ handbags asof the end of the month.

Reuire!" 'alculate the total #roduct cost for the month and calculate the cost of one handbag that was #roduced.



1$2. oom :ith A Kiew 'om#any manufactures curtains. Bast wee!% direct materials costing @2%+++ were #utinto #roduction. )irect labor of @22%+++ was incurred and overhead totaled @"+%+++. 9y the end of the wee!%the com#any had #roduced 12%+++ curtains.

Reuire!"

1. 'alculate the total #rime cost for the wee!.2. 'alculate the #er7unit #rime cost.3. 'alculate the total conversion cost for the wee!.

. 'alculate the #er7unit conversion cost.

1$3. The 9lanchett 'om#any manufactures fishing rods. Bast year% direct materials costing @"1$%+++ were #utinto #roduction. )irect labor of @3+%+++ was incurred and overhead e/ualed @$"%+++. The com#any hado#erating income for the year of @"(%+++ and manufactured and sold ($%+++ fishing rods at a sales #rice of @21 #er unit. Assume that there were no beginning or ending inventory balances in the wor! in #rocess and finishedgoods inventory accounts.

Reuire!"

A. 'om#ute the #er7unit #roduct cost9. 'om#ute the #er7unit #rime cost'. 'om#ute the #er7unit conversion cost). 'om#ute the gross margin for the year -. 'om#ute the selling and administrative e,#enses for the year F. Assume #roduction amounted to ($%+++ fishing rods and (+%+++ were sold. 'om#ute cost of goods sold.0. Assume #roduction amounted to ($%+++ fishing rods and (+%+++ were sold. 'om#ute the balance in ending finished goods inventory.



1$. The 9utchart 'om#any manufactures microwave ovens. Bast year% the #er7unit #roduct cost was @"$% the #er7unit #rime cost was @3% and the #er7unit conversion cost was @2. 'ost of goods sold for the year was@"$+%+++ and the sale #rice #er unit was @1++. In addition% direct labor costs of @2++%+++ and selling andadministrative e,#enses of @2+%+++ were incurred.

Reuire!"

A. 'alculate how many units were sold last year

9. 'om#ute the cost of direct materials used'. 'om#ute the cost of overhead). 'om#ute the gross margin for the year -. 'alculate o#erating income

1$". Picture It Inc. manufactures customi<ed wooden frames. The direct materials needed to construct theframes are wood% glass and cardboard. Picture It has 22 em#loyees who wor! a + hour wor! wee! and areeach #aid @1& #er hour. The com#any #roduced and sold *++ frames in the month of e#tember.

)uring the month of e#tember the following #urchases were made to #roduce the *++ frames=:ood7 +++ ft. at @1.2+6ft.0lass7 ++ #ieces at @".$+6#iece'ardboard7 "++ #ieces at @."+6#iece

Reuire!"

1. 'alculate the total #roduct cost for the month. Assume that all em#loyees wor!ed four full wee!s ine#tember and that the com#any incurred @""%+++ in overhead costs.

2. 'alculate the #er unit cost.

3. 'alculate the gross margin for the month of e#tember assuming that the com#any sells each frame for @2"+.



1$$. Tuc!er 'om#any% a manufacturing firm% has su##lied the following information from its accountingrecords for the month of A#ril.

)irect labor cost @12%+++Purchases of raw materials 1&%+++Factory insurance %+++esearch and develo#ment &%"++Factory #ro#erty ta,es 3%+++

ales commissions #aid %"++:or! in #rocess% A#ril 1 2%+++:or! in #rocess% A#ril 3+ 2%(++aterials inventory% A#ril 1 1%&"aterials inventory% A#ril 3+ 1%2++Finished goods inventory% A#ril 1 2%2"+Finished goods inventory% A#ril 3+ &"+

Reuire!" Pre#are a tatement of 'ost of 0oods anufactured

1$&. In Cune% ;lym#ic 'om#any #urchased materials costing @3(%+++% and incurred direct labor cost of @2%+++;verhead totaled @2&%+++ for the month. Information on inventories was as follows.

Cune 1 Cune 3+

aterials @3%+++ @2%&++:or! in #rocess 1%+++ 1%2&"Finished goods 2%"++ 1%&&"

Reuire!"

A. 'alculate the cost of direct materials used during Cune.9. 'alculate the total manufacturing cost for Cune.'. 'alculate the cost of goods manufactured for Cune.). 'alculate cost of goods sold for Cune.



1$(. Tem#lar 'om#any% a manufacturing firm% has su##lied the following information from its accountingrecords for the month of >ovember=

Factory su##lies used @1(%+++)e#reciation on factory building 1&%+++alary of com#any controller $%+++Factory janitorial costs "%+++ar!eting and #romotion %"++

)irect labor cost 22%+++Purchases of raw materials 1+%+++Finished goods inventory% >ov. 1 2%2"+Finished goods inventory% >ov. 3+ 3%&"+:or!7in7#rocess inventory% >ov. 1 %2++:or!7in7#rocess inventory% >ov. 3+ 2%&"+aterials inventory% >ov. 1 3%"++aterials inventory% >ov. 3+ "%1++

Reuire!"

A. Pre#are a tatement of 'ost of 0oods anufactured9. Pre#are a tatement of 'ost of 0oods old

1$*. Fidalgo 'om#any ma!es stereos. )uring the year% Fidalgo manufactured and sold &"%+++ stereos at a sales

#rice of @"&" #er unit. FidalgoEs #er7unit #roduct cost was @"+ and selling and administrative e,#enses totaled@2%+++%+++.

Reuire!"

A. 'om#ute the total sales revenue9. 'om#ute the gross margin'. 'om#ute the o#erating income). 'om#ute the o#erating income if &"%+++ stereos were #roduced and $*%+++ were sold.



1&+. 9aleen 'om#any su##lied the following data at the end of the current year=

ales commissions @ 12%+++ales revenue 12+%+++esearch and develo#ment 1&%+++Finished goods inventory% Can. 1 &%"++:or! in #rocess inventory% Can 1 *%+++Finished goods inventory% )ec. 31 $%+++:or! in #rocess inventory% )ec. 31 11%+++'ost of goods manufactured "2%+++

Reuire!" Pre#are an income statement for 9aleen 'om#any.

1&1. acon 'om#any su##lied the following data and information on inventories at the end of the current year.

Canuary 1% 2+11 )ecember 31%2+11aterials @21%+++ @23%"++:or! in #rocess 1&%"++ (%"++Finished goods 2$%+++ 2&%+++

)irect labor @ +%+++elling e,#enses 31%+++ales revenue ++%+++Administrative e,#enses 1%"++Purchases of raw materials $2%+++Factory su#ervision "+%+++Factory su##lies used 2"%+++

Reuire!" Pre#are an income statement of acon 'om#any for the current year.



1&2. 9artlow 'om#any has su##lied the following information from its accounting records for the month ofay.

)irect labor cost @11%"++Purchases of raw materials 2+%+++Factory de#reciation &%"++Advertising 1+%+++Factory #ro#erty ta,es $%"++

aterials inventory% "61 1%2"+aterials inventory% "631 2%"++:or! in #rocess Inventory% "61 ?:or! in #rocess Inventory% "631 1%"++'ost of goods manufactured "%("+ales revenue ?-,ecutive salary cost 2"%+++Finished goods inventory% "61 "%"++Finished goods inventory% "631 %2"+;#erating income $&%*++0ross margin ?

Reuire!" olve for the missing amounts ?5

1&3. ee the following se#arate cases.

'ase L1 'ase L2ales @1%+++ @1%3++'ost of goods manufactured A "++Finished goods inventory beginning balance5 1++ )Finished goods inventory ending balance5 1"+ 2++'ost of goods sold 9 $++0ross margin 3++ -elling e,#enses ' &"Administrative e,#enses "+ +;#erating income 2++ F

Reuire!" olve for the missing amounts A%9%'%)%-%F5



1&. ee the following se#arate cases.

'ase L1 'ase L2Purchase of materials @ "%+++ 'aterials inventory beginning balance5 A 22+aterials inventory ending balance5 1%+++ 3"+)irect labor &%+++ %2"+Factory su#ervision 1%"++ 1%1++Factory su##lies 1%2"+ *++Total manufacturing costs 1%"++ ):or! in #rocess inventory beginning balance5 1%2++ 1%23+:or! in #rocess inventory ending balance5 9 $"+'ost of goods manufactured 1%$++ 1+%2++

Reuire!" olve for the missing amounts A%9%'%)5.

1&". ancor 'om#anyEs accountant #re#ared the following income statement for the month of August.

ancor 'om#anyIncome tatementFor the onth of August

ales revenue @*12%2++

'ost of goods sold $+1%*2+

0ross margin 31+%2(+

Bess=

elling e,#ense 1$%1$+

Administrative e,#ense $3%(+

;#erating income @ (2%2(+

Reuire!"

A. 'alculate the sales revenue #ercent9. 'alculate the cost of goods sold #ercent'. 'alculate the gross margin #ercent). 'alculate the selling e,#ense #ercent-. 'alculate the administrative e,#ense #ercent

F. 'alculate the o#erating income #ercent



1&$. -,trema 'om#any su##lied the following data at the end of the current year.

Finished goods inventory% Can 1. @ 12%+++Finished goods inventory% )ec. 31 &%"++'ost of goods manufactured 1"2%3(+ales revenue 212%+++ales commissions 1*%+(+esearch and develo#ment costs 1"%*++

Reuire!"

A. 'alculate the cost of goods sold #ercent9. 'alculate the gross margin #ercent'. 'alculate the selling e,#ense #ercent). 'alculate the administrative e,#ense #ercent-. 'alculate the o#erating income #ercent

1&&. i<<uto 'om#any su##lied the following information for the month of Canuary.

'ost of 0oods old #ercent $2elling -,#ense #ercent $Administrative e,#ense 13

Reuire!" econstruct i<<utoEs income statement for Canuary assuming that their total sales revenue for the month e/ualed @"++%+++.

1&(. 'ashman 'om#any su##lied the following information for the month of )ecember.

;#erating income #ercent 1+."0ross margin #ercent 3+



Reuire!" olve for the following amounts assuming that 'ashman 'om#anyEs o#erating income in )ecember was @%1++.A. ales revenue9. 'ost of good sold'. Total elling and administrative e,#enses

1&*. :a#ato 'om#any #roduces a #roduct with the following #er unit costs.

)irect materials @1&

)irect labor 11;verhead 12

Bast year% :a#ato #roduced and sold 3%+++ units at a sales #rice of @(+ each. Total selling and administrative e,#enses were @2"%+++.

Reuire!" olve for the following=A. Total cost of goods sold for last year 9. ;#erating income for last year '. Total gross margin for last year ). Prime cost #er unit

1(+. Tesco 'om#any showed the following costs for last month=

)irect materials @+%+++)irect labor 3"%+++;verhead "2%+++elling e,#ense 1&%+++Administrative e,#ense 12%+++



Bast month% Tesco #roduced and sold 2+%+++ units at a sales #rice #er unit of @1(. Assume no beginning or ending inventory balances for wor! in #rocess and finished goods inventory.

Reuire!" olve for the following amounts.A. Total #roduct cost for last month9. Jnit #roduct cost for last month'. Total #eriod costs). 0ross margin for last month-. ;#erating income for last month

1(1. tabler 'om#any% a manufacturing firm% has #rovided the following information for the month of ay=

Factory su##lies used 22%+++

)e#reciation on factory building 1+%+++

'ommissions for sales #ersonnel 32%+++

alary of com#any 'F; *%+++

Factory janitorial costs 3%+++

esearch and develo#ment "%+++

)e#reciation on cor#orate office (%"++

Advertising costs 2%"++

)irect labor cost +%+++

Purchases of raw materials 1"%+++

Finished goods inventory% ay 1 %+++Finished goods inventory% ay 31 $%"++

:or! in #rocess inventory% ay 1 &%"++

:or! in #rocess inventory% ay 31 3%3++

aterials inventory% ay 1 2%1++

aterials inventory% ay 31 %2++

Reuire!"

A. Pre#are a tatement of 'ost of 0oods anufactured.9. 'alculate the cost of one unit assuming 1+%+++ units were com#leted during ay.'. Pre#are a tatement of 'ost of 0oods old.). 'alculate the number of units that were sold during ay.

-. Pre#are an Income tatement assuming the sales #rice #er unit is @3".



1(2. :hat is the difference between a #eriod cost and a #roduct cost?

1(3. Bist and describe the three categories of manufacturing costs.

1(. -,#lain the difference between a cost that is included in valuing inventory and a cost that is not included invaluing inventory.



1(". )escribe the #ur#ose of the three inventory accounts used by a manufacturer.

1($. :hat is the difference between total manufacturing costs and cost of goods manufactured?

1(&. Mou )ecide

Mou are the accounting manager at Falcon Inc. Mou just hired a new staff accountant to assist you in brea!ingout costs into their a##ro#riate classifications. The staff accountant as!s you why cost classification isim#ortant.

ow would you res#ond?



'ha#ter 2779asic anagerial Accounting 'once#ts Hey

1. It is beneficial to assign indirect costs to cost objects.

&R'(

2. Price must be greater than cost in order for the firm to generate revenue.FA)*(

3. Accumulating costs is the way that costs are measured and recorded.&R'(

. Assigning costs involves the way that a cost is lin!ed to some cost object.&R'(

". Assigning costs tells the accountant who s#ent the money.FA)*(

$. A cost object is any item such as #roducts% customers% de#artments% regions% and so on% for which costs aremeasured and assigned.&R'(

&. 'osts are directly% not indirectly% associated with cost objects.FA)*(

(. )irect costs are those costs that cannot be easily and accurately traced to a cost object.FA)*(



*. Indirect costs are costs that are not easily and accurately traced to a cost object.&R'(

1+. Allocation means that an indirect cost is assigned to a cost object using a reasonable and convenientmethod.&R'(

11. A variable cost is one that does not increase in total as out#ut increase and does not decrease in total asout#ut decreases.FA)*(

12. A fi,ed cost is a cost that does not increase in total as out#ut increases and does not decrease in total asout#ut decreases.

&R'(

13. An o##ortunity cost is the benefit given u# or sacrificed when one alternative is chosen over another.&R'(

1. 'ost is a dollar measure of the resources used to achieve a given benefit.&R'(

1". A cost object is something for which a com#any wants to !now the cost.&R'(

1$. The revenue #er unit is called cost.FA)*(

1&. As costs are used u# in the #roduction of revenues% they are said to e,#ire. -,#ired costs are callede,#enses.&R'(



1(. 'osts are incurred to #roduce future benefits.&R'(

1*. -,#ired costs are called assets.FA)*(

2+. educing the cost re/uired to achieve a given benefit means that a com#any is becoming less efficient.FA)*(

21. 'osts can be assigned to cost objects in only one way.FA)*(

22. Pro#erty ta,es on a factory building would normally be classified as a fi,ed cost.&R'(

23. 0lue used in the manufacture of cabinets would be an e,am#le of a fi,ed cost.FA)*(

2. Industries that #rovide intangible services do not normally have direct contact with their customers.FA)*(

2". esearch and develo#ment costs would be classified as #roduct cost.FA)*(

2$. Product costs include direct materials% direct labor% and selling costs.FA)*(

2&. All #roduct costs other than direct materials and indirect labor are called overhead.FA)*(



2(. )irect materials can be directly traced to the goods or services being #roduced.&R'(

2*. Any costs associated with storing% selling% and delivering the #roduct are classified as #roduct costs.FA)*(

3+. Prime cost is the sum of direct materials cost and direct labor cost.&R'(

31. Product costs are carried in inventory until the goods are finished.FA)*(

32. ar!eting costs would be classified as #eriod costs.&R'(

33. The cost of janitorial services for a factory building would be classified as indirect labor.&R'(

3. Period costs are all costs that are not #roduct costs% such as office su##lies.&R'(

3". -m#loyees who convert direct materials into a #roduct or who #rovide a service to customers are classifiedas indirect labor.FA)*(

3$. All manufacturing costs are classified as overhead.FA)*(

3&. For e,ternal re#orting #ur#oses% costs must be classified into only three categories.&R'(



3(. 'ost of goods manufactured re#resents the cost of direct materials% direct labor% and overhead incurredduring the current accounting #eriod.FA)*(

3*. 'ost of goods sold is the total #roduct cost of the units sold during a #eriod.&R'(

+. ales revenue e/uals the #roduct cost #er unit times the number of units sold.FA)*(

1. 0ross margin is the difference between sales revenue and cost of goods sold.&R'(


1. direct labor 4 overhead56units #roduced #er7unit conversion

cost 1

2. direct materials 4 direct labor56units #roduced #er7unit cost of goods

manufactured 3 3. total manufacturing costs 4 wor! in #rocess beginning 7 wor! in #rocess ending56units #roduced #er7unit #rime cost 2


1. A cost that increases in total as out#ut increaseso##ortunity

cost 4 2. A cost that stays the same in total regardless of changesin out#ut fi,ed cost 2 3. A cost that can be easily traced to a cost object indirect cost 6 . A benefit given u# when one alternative is chosen overanother #roduct cost 5 ". A manufacturing cost #eriod cost 7 $. A cost that is difficult to trace to a cost object direct cost 3 &. A cost that is not inventoried variable cost 1



. Select the appropriate definition for each of the items listed below.

1. 9eginning finished goods inventory 4 'ost of goodsmanufactured 7 -nding finished goods inventory

Finished goodsinventory 5

2. The cost of units unfinished at the end of the current #eriod

Totalmanufacturing costs 4

3. direct materials 4 direct labor 4 overhead5 467 thechange in wor! in #rocess inventory from the beginning to

the end of the current #eriod

:or! in #rocess

inventory 2

. )irect materials 4 direct labor 4 overhead'ost of goods

sold 1 ". The cost of units finished but not sold at the end of thecurrent #eriod


". Select the appropriate item for each of the definitions listed below.

1. #rice , units soldo#erating

income 2

2. gross margin 7 selling and administrative e,#ensesselling

e,#enses 5 3. sales revenue 7 cost of goods sold sales revenue 1 . 9eginning finished goods inventory 4 'ost of goodsmanufactured 7 -nding finished goods inventory gross margin 3

". mar!eting and distributing costscost of goods

sold 4

$. Select the appropriate definition of each of the items listed below.

1. 'ost of #artially com#leted goods ;#erating income 3 2. The total cost of goods com#leted during thecurrent #eriod 0ross margin 4 3. 0ross margin 7 selling and administrativee,#enses


. The difference between sales revenue and cost of goods sold Income tatement 5 ". 'overs a #articular #eriod of time :or! in #rocess 1

&. -,#ired costs are called 888888888888.

e#penses

(. 88888888888888is the amount of cash or cash e/uivalent sacrificed for goods and6or services that aree,#ected to bring a current or future benefit to the organi<ation.Cost



*. 888888888888888888888 is the way that a cost is lin!ed to some cost object.Assigning costs

"+. A 888888888888888888 is any item such as a #roduct% customer% de#artment% #roject% geogra#hic region% #lan and so on% for which costs are measured and assigned.cost o%+ect

"1. 'osts that can be easily and accurately traced to a cost object are called 8888888888.!irect costs

"2. The #rocess of assigning an indirect cost to a cost object by using a reasonable and convenient method iscalled 8888888888888.allocation.

"3. An588888888888888888 is the benefit given u# or sacrificed when one alternative is chosen over another.opportunit, cost

". An5 8888888888888888 is a cost that does not increase in total as out#ut increase and does not decrease intotal as out#ut decreases.i#e! cost

"". ;rgani<ations that #roduce #roducts are called 88888888888888888888888.anuacturing organi/ations

"$. 8888888888888888 are those costs% both direct and indirect% of #roducing a #roduct in a manufacturing firmor of ac/uiring a #roduct in a merchandising firm and #re#aring it for sale.0ro!uct costs

"&. aterials that become #art of a #roduct usually are classified as 888888888888888.!irect aterials.



"(. Insurance coverage% medical care% and accounting are e,am#les of 88888888888888888 #erformed forcustomers.serice actiities

"*. 88888888888888888 e/uals the sum of direct materials% direct labor% and manufacturing overhead.&otal pro!uct cost

$+. All #roduct costs other than direct materials and direct labor are #ut into a category called 8888888888888888888888888.anuacturing oerhea!.

$1. 8888888888888888888888 is the sum of direct labor cost and manufacturing overhead cost.Conersion cost

$2. 8888888888888888 and 88888888888888888 costs are considered #eriod costs.*elling an! a!inistratie

$3. -m#loyees who convert direct materials into a #roduct are classified as 8888888888888.!irect la%or.

$. 8888888888888888888 is the cost of the #artially com#leted goods that are still on the factory floor at theend of a time #eriod.or in process

$". The difference between sales revenue and cost of goods sold is !nown as the 88888888888888.gross argin

$$. The 8888888888888888888888888888 re#resents that total #roduct cost of goods com#leted during thecurrent #eriod and transferred to finished goods inventory.cost o goo!s anuacture!



$&. -,#ired costs are calledA. fi,ed.9. costs.C. e,#enses.). #rofit.

$(. Assigning costs to cost objectsA. #rovides information for decision ma!ing.9. can be accom#lished in a number of ways.'. can be a sim#le or com#le, #rocess.. do all of these.

$*. An indirect costA. can be easily and accurately traced to a cost object.B. is hard to trace.

'. should never be assigned to a cost object.). do none of these.

&+. A variable cost in totalA. increases as out#ut increases and decreases as out#ut decreases.9. increases as out#ut increases and6or decreases.'. remains constant no matter the level of out#ut.). increases as out#ut decreases and decreases as out#ut increases.

&1. 'ost is=A. the difference between sales revenue and cost of goods sold.9. the benefit given u# or sacrificed when on alternative is chosen over another.C. the amount of cash or cash e/uivalent sacrificed for goods and6or services that are e,#ected to bring a currentor future benefit to the organi<ation.). the revenue #er unit.

&2. Price is not =A. the revenue #er unit.9. greater than cost in order for the firm to earn income.C. the same as cost.). the same as cost #er unit #lus the income #er unit.



&3. Assigning costsA. involves the way that a cost is lin!ed to some cost object.9. tells the com#any why the money was s#ent.'. to a cost object using a reasonable and convenient method is allocation.. all of these.

&. An o##ortunity cost is=A. the benefit given u# or sacrificed when one alternative is chosen over another.9. the cost to mar!et% distribute% and service a #roduct or service.'. the total #roduct cost of goods com#leted during the current #eriod and transferred to finished goodsinventory.). the difference between sales revenue and cost of goods sold.

&". >on7manufacturing costs includeA. mar!eting and administration.

9. direct materials.'. indirect materials.). overhead.

&$. :hich of the following is an e,am#le of an intangible #roduct?A. motorcycleB. eye e,am'. stereo). television

&&. :hich of the following is an e,am#le of a tangible #roduct?A. lawn care9. accounting services'. customer service. com#uter

&(. 'osts are subdivided into what two major functional categories?A. o##ortunity and allocation9. fi,ed and variableC. #roduct and non7#roduction). direct and indirect



&*. Product costsA. are costs that are included in the determining the value of the inventory.9. are manufacturing costs.'. include direct materials% direct labor% and overhead.. are all of these.

(+. :hich of the following would not be a #eriod cost?A. research and develo#mentB. direct materials'. advertising costs). office su##lies

(1. :hich of the following would be an e,am#le of a direct materials cost?A. engine on an air#lane9. screws used to manufacture a lighting fi,ture

'. glue used to build cabinets). nails used to manufacture a table

(2. Product costs consist ofA. #eriod costs.9. indirect materials% indirect labor% and administrative costs.'. direct materials% direct labor% and selling costs.. direct materials% direct labor% and overhead.

(3. :hich of the following is not an e,am#le of a direct materials cost?A. shelves on a boo!case9. engine in a car '. tires on a bicycle. nail used to manufacture a des!

(. aterials in the raw materials account do not become direct materials

A. until they are withdrawn from inventory for use in #roduction.9. until the finished #roduct is sold.'. until they are #urchased from a vendor.). none of these are correct.



(". :hich of the following is an e,am#le of direct labor?A. vice #resident of mar!etingB. assembly line wor!er for televisions'. staff accountant). su#ervisor at a manufacturing #lant

($. )irect labor is an5A. #roduct cost.9. o##ortunity cost.'. administrative cost.). fi,ed cost.

(&. ;verhead includesA. indirect labor.9. indirect materials.

'. su##lies.. all of these.

((. :hich of the following would not be included in overhead?A. mar!eting costs9. #ro#erty ta,es on the factory'. factory utility costs). de#recation on factory machinery

(*. Indirect labor would includeA. salary of the vice7#resident of mar!eting.9. salary of '-;.C. salary of factory su#ervisor.). none of these are correct.

*+. The unit cost

A. is the total #roduct costs divided by the number of units #roduced.9. includes #eriod costs.'. is the total #rime costs divided by the number of units #roduced.). is the total conversion costs divided by the number of units #roduced.



*1. Prime cost isA. indirect materials cost and direct labor cost.B. direct materials cost and direct labor cost.'. direct labor cost and indirect labor cost.). direct materials cost and indirect labor cost.

*2. 'onversion cost is the sum ofA. #roduct costs and #eriod costs.9. selling cost and administrative costs.'. direct labor cost and direct materials costs.. direct labor cost and overhead costs.

*3. Period costsA. are selling costs and administrative costs.9. are used to com#ute #roduct cost.

'. can be included in overhead costs.). are carried in inventory until the goods are sold.

*. :hich of the following is an e,am#le of a #eriod cost?A. research and develo#ment9. selling and mar!eting'. general accounting. all of these

*". 'ost of goods manufactured e/ualsA. the cost of indirect materials used in #roduction.B. the #roduct cost of goods com#leted during the current #eriod.'. the #eriod costs for the current #eriod.). the cost of direct materials and direct labor used during the current #eriod.

*$. 'ost of goods manufactured e/uals

A. total #roduct costs incurred during the current #eriod 4 beginning wor! in #rocess 7 ending wor! in #rocess.9. direct materials cost 4 direct labor cost 4 overhead cost.'. sales 7 cost of goods sold.). none of these are correct.



*&. The cost of the #artially com#leted goods at the end of the #eriod would beA. ending wor! in #rocess inventory.9. cost of goods sold.'. beginning finished goods inventory.). beginning wor! in #rocess inventory.

*(. Product costs are e,#ensedA. when the #roduct is finished.9. when the #roduct unit cost is calculated.C. when the #roduct is sold.). all of these are correct.

**. ancor Inc. had a #er7unit conversion cost of @2."+ during A#ril and incurred direct materials cost of@1++%+++% direct labor costs of @&"%+++% and overhead costs of @"%+++ during the month. ow many units didthey manufacture during the month?

A. &+%+++9. 1(%+++C. (%+++). 3+%+++

1++. Ba!eland Inc. manufactured "%+++ units during the month of arch. They incurred direct materials cost of@1++%+++ and overhead cost of @+%+++. If their #er7unit #rime cost was @2$.++ #er unit how much direct laborcost did they incur during arch?A. @2+%+++

9. @3"%+++'. @*+%+++. @3+%+++

1+1. )uring the month of Canuary% -nter#rise Inc. had total manufacturing costs of @11+%+++. They incurred@+%+++ of direct labor cost and @3+%+++ of overhead cost during the month. If the materials inventory onCanuary 1 was @3%+++ less that the materials inventory on Canuary 31% what was the cost of materials #urchasedduring the month?A. @3&%+++

B. @3%+++'. @+%+++). none of these



1+2. Production costs that are not attached to units that are sold are re#orted as=A. selling e,#enses.9. cost of goods sold.'. administrative costs.. inventory.

1+3. Information from the records of 'ain 'or#oration for )ecember 2+11 are as follows=

ales @1%23+%+++





Inventories

)ec. 1% 2+11 )ec. 31%2+11


:or! in #rocess &"%+++ (%+++


The conversion costs are= A. @*$+%+++.

9. @1%1&*%+++.C. @&+"%+++.). @"$%+++.



1+. Information from the records of 'ain 'or#oration for )ecember 2+11 are as follows=

ales @1%23+%+++





Inventories

)ec. 1% 2+11 )ec. 31%2+11


:or! in #rocess &"%+++ (%+++


The #rime costs are= A. @*$+%+++.B. @"$%+++.'. @&+"%+++.). @*$*%+++.

1+". Figure 2-1.

'oncam Inc. manufactures television sets. Bast month direct materials electronic com#onents% etc.5 costing@"++%+++ were #ut into #roduction. )irect labor of @(++%+++ was incurred% overhead e/ualed @"+%+++% and

selling and administrative costs totaled @3$+%+++. The com#any manufactured (%+++ television sets during themonth. Assume that there were no beginning or ending wor! in #rocess balances.

efer to Figure 271. The #er7unit conversion cost was=A. @21(.&"B. @1"$.2"'. @1$2."+). @1++.++



1+$. Figure 2-1.


efer to Figure 271. The total #roduct costs for last month were=A. @1%&"+%+++

9. @2%11+%+++'. @1%3++%+++). @1%2"+%+++

1+&. Figure 2-1.


efer to Figure 271. The total #er unit #rime cost was=A. @2$3.&"9. @$2."+C. @1$2."+). @1"$.2"

1+(. Figure 2-1.

'oncam Inc. manufactures television sets. Bast month direct materials electronic com#onents% etc.5 costing

@"++%+++ were #ut into #roduction. )irect labor of @(++%+++ was incurred% overhead e/ualed @"+%+++% andselling and administrative costs totaled @3$+%+++. The com#any manufactured (%+++ television sets during themonth. Assume that there were no beginning or ending wor! in #rocess balances.

efer to Figure 271. :hat was the amount of cost of goods manufactured last month?A. @1%&"+%+++9. @1%2"+%+++'. @1%3++%+++). @2%11+%+++

1+*. Figure 2-5.





efer to Figure 27". :hat was the cost of direct materials used in Culy? A. @21%+++B. @2+%1++'. @21%*++). @2+%"++

11+. Figure 2-5.



efer to Figure 27". :hat were the total manufacturing costs in Culy? A. @&1%+++9. @"+%+++'. @$*%$++. @&+%1++

111. Figure 2-5.



efer to Figure 27". :hat was the cost of goods manufactured for Culy? A. @&+%"++9. @&+%&++C. @$*%$++). @$*%1++



112. Figure 2-5.



efer to Figure 27". :hat was the cost of goods sold for Culy? A. @&+%2++9. @$*%$++'. @&1%3++). @&1%1++

113. Figure 2-5.



efer to Figure 27". If -cono 'om#any sold 1+%+++ units during Culy and gross margin totaled @2*%(++% what was the sales #rice #er unit? A. @*.*

B. @1+.++'. @1+.+*). @1+.11

11. Figure 2-7.




efer to Figure 27&. Prime cost #er7unit was? A. @1*9. @23'. @3). @11



11". Figure 2-7.




efer to Figure 27&. 'ost of goods sold last year was? A. @&%"++B. @2"%"++'. @1%2"+). @"1%+++

11$. Figure 2-7.




efer to Figure 27&. Total o#erating income last year was? A. @2*%+++9. @"1%+++'. @2"%"++

. @3%"++

11&. Figure 2-8.




efer to Figure 27(. Total #eriod e,#ense was? A. @2%+++9. @1*+%+++C. @$%+++). @2"+%+++



11(. Figure 2-8.




efer to Figure 27(. 0ross margin #er7unit was? A. @12"9. @&'. @*". @3+

11*. Figure 2-8.Bast year Duest 'om#any incurred the following costs=



efer to Figure 27(. Total #roduct costs were? A. @1*+%+++9. @1++%+++'. @1"+%+++). @23$%+++

12+. Figure 2-8.






efer to Figure 27(. 'onversion cost #er unit was? A. @"+B. @&"'. @*"). @12"

121. 'ost of goods soldA. re#resents all costs associated with research% develo#ment% and general administration of the organi<ation.9. is found on the 9alance heet.'. is the cost of the #artially com#leted goods that are still on the factory floor at the end of the #eriod.. is the total #roduct cost for the units sold during a #eriod.

122. :hich of the following would not be found on the income statement of a manufacturer?

A. cost of goods soldB. wor! in #rocess'. sales revenue). o#erating income

123. :hich of the following would be found on the balance sheet of a manufacturer?A. wor! in #rocess9. raw materials'. finished goods

. All of the these are correct

12. :hich of the following would be found on the balance sheet of a manufacturer?A. sales revenue9. selling e,#ensesC. factory e/ui#ment). all of these are correct

12". 0ross margin e/ualsA. cost of goods sold 7 selling and administrative e,#enses.9. direct materials 4 direct labor 4 manufacturing overhead.C. sales revenue 7 cost of goods sold.). cost of goods manufactured 4 selling and administrative e,#enses.



12$. ;#erating income e/ualsA. sales revenue 7 cost of goods sold 7 selling and administrative e,#ense9. gross margin 7 selling e,#enses'. sales revenue 7 cost of goods sold). sales revenue 7 selling and administrative e,#enses

12&. 0ross margin #ercent e/ualsA. gross margin6cost of goods sold.9. o#erating income6sales revenue.C. gross margin6sales revenue.). sales revenue6gross margin.

12(. :hich of the following would not be found on an income statement of a service organi<ation?A. selling e,#ensesB. cost of goods sold

'. o#erating income). sales revenue

12*. :hich of the following can be found on the income statements of both a manufacturing and serviceorgani<ation?A. revenues9. o#erating income'. administrative e,#enses. all of these can be found on both.

13+. A manufacturer normally hasA. one inventory account.9. four inventory accounts.C. three inventory accounts.). none of these are correct.

131. An income statement of a manufacturerA. will show the ending balance of wor! in #rocess.9. contains only manufacturing costs.'. will show the ending balance of materials inventory.. covers a certain #eriod of time.



132. ;n a manufacturerEs income statement e,#enses are se#arated into the following three categories=A. #roduction% #eriod% and indirect9. materials% wor! in #rocess% and finished goodsC. #roduction% selling% and administrative). variable% fi,ed% and direct

133. Figure 2-2.Bonborg 'o. had the following beginning and ending inventory balances for the year ended )ecember 31% 2+11=



efer to Figure 272. :hat was the amount of cost of goods manufactured for the year? A. @1+1%+++9. @12%+++'. @1++%+++. @1+2%+++

13. Figure 2-2.




efer to Figure 272. :hat was the amount of cost of goods sold for the year? A. @1+2%+++9. @*&%"++C. @1+$%"++

). @12(%"++



13". Figure 2-2.




efer to Figure 272. :hat were the total manufacturing costs for the year? A. @1+1%+++9. @1+2%+++'. @123%+++). @1+$%"++

13$. Figure 2-2.




efer to Figure 272. :hat was BonborgEs o#erating income lossG for the year?

A. @1(%"++9. @12"%+++C. @3%"++G). @"%"++

13&. )uring the month of Cune% Telecom Inc. had cost of goods manufactured of @112%+++% direct materials costof @"2%+++% direct labor cost of @3&%+++ and overhead cost of @2$%+++. The wor! in #rocess balance at Cune 3+e/ualed @1+%+++. :hat was the wor! in #rocess balance on Cune 1?A. @&%+++9. @13%+++

'. @1+%+++). @11"%+++



13(. Talcum Inc. had materials inventory at Culy 1 of @12%+++. The materials inventory at Culy 31 was @1"%+++and the cost of direct materials used in #roduction was @2+%+++. :hat was the cost of materials #urchasedduring the month?A. @23%+++9. @1&%+++'. @3"%+++). @2+%+++

13*. Hutlow Inc. had cost of goods sold of @112%+++ for the year ended )ecember 31% 2+11. The finished goodsinventory on Canuary 1% 2+11 was @2(%+++ and the finished goods inventory on )ecember 31% 2+11 was@1&%+++. :hat was the amount of cost of goods manufactured for the year?A. @12*%+++B. @1+1%+++'. @$&%+++). @113%+++

1+. Andover Inc. had a gross margin for the month of February totaling @2%+++. They sold "%+++ units duringthe month at a sales #rice of @2+ #er unit. :hat was the amount of cost of goods sold for the month?A. @1++%+++9. @2%+++C. @"(%+++). none of these are correct

11. Figure 2-3.


alesrevenue

@2(%+++

'ost of goodssold

2+"%+

0rossmargin

222%"$+

Bess=


@ $(%(+



efer to Figure 273. :hat was the sales revenue #ercent? A. 1++9. ('. "2). 1$

12. Figure 2-3.


alesrevenue

@2(%+++

'ost of goodssold

2+"%+

0rossmargin

222%"$+

Bess=


@ $(%(+

efer to Figure 273. :hat was the cost of goods sold #ercent? A. 1++9. 1*'. "2

. (

13. Figure 2-3.


alesrevenue

@2(%+++

'ost of goods

sold

2+"%+

0rossmargin

222%"$+

Bess=


@ $(%(+



efer to Figure 273. :hat was the gross margin #ercent? A. "29. ('. 1&). 1*

1. Figure 2-3.


alesrevenue

@2(%+++

'ost of goodssold

2+"%+

0rossmargin

222%"$+

Bess=


@ $(%(+

efer to Figure 273. :hat was the selling e,#ense #ercent? A. 1&B. 1*'. 1$

). no correct answer

1". Figure 2-3.


alesrevenue

@2(%+++

'ost of goods

sold

2+"%+

0rossmargin

222%"$+

Bess=


@ $(%(+



efer to Figure 273. :hat was the administrative e,#ense #ercent? A. 1&9. 1*'. 1$). 1"

1$. Figure 2-3.


alesrevenue

@2(%+++

'ost of goodssold

2+"%+

0rossmargin

222%"$+

Bess=


@ $(%(+

efer to Figure 273. :hat was the o#erating income #ercent? A. 1"9. 1*'. 1&

. 1$

1&. Figure 2-4.



efer to Figure 27. ow many financial calculators did Cun!o sell during the year? A. *$%&(+B. *&%22+'. *&%+++). *(%2$+



1(. Figure 2-4.



efer to Figure 27. If each financial calculator had a #er7unit #roduct cost of @112% what was the cost of Finished goods inventory on )ecember

31? A. @11$%(+9. @11%12+'. @2%$+). none of these are correct

1*. Figure 2-4.

Cun!o 'om#any ma!es financial calculators. )uring the year Cun!o manufactured *&%+++ financial calculators.

Finished goods inventory had the following units on hand=


efer to Figure 27. If each financial calculator has a #er7unit #roduct cost of @112% what was the cost of goods sold last year? A. @1+%($%+++9. @1+%(3*%3$+'. @11%++"%12+

. @1+%(((%$+

1"+. Figure 2-6.



efer to Figure 27$. :hat was gross margin for the year? A. @$+%+++9. @1++%+++C. @+%+++). none of these



1"1. Figure 2-6.



efer to Figure 27$. :hat was cost of goods sold for the year? A. @$+%+++9. @+%+++'. @1++%+++). none of these

1"2. Figure 2-6.



efer to Figure 27$. ow many units were sold during the year? A. 3%3339. 1%+++'. 1%"++

. 2%+++

1"3. Figure 2-6.



efer to Figure 27$. :hat was the sales #rice #er unit? A. @"+9. @3+'. @2+). @1+



1". If beginning wor!7in7#rocess inventory is @12+%+++% ending wor!7in7#rocess inventory is @1$+%+++% cost ofgoods manufactured is @++%+++ and direct materials used are @1++%+++% what are the conversion costs?A. @1+%+++9. @2(+%+++'. @3++%+++. @3+%+++

1"". Information from the records of Place% Inc.% for )ecember 2+11 is as follows=

ales @(2+%+++elling and administrative e,#enses 1+%+++)irect materials #urchases 1&$%+++)irect labor 2++%+++Factory overhead 2&+%+++)irect materials% )ecember 1 2%+++:or! in #rocess% )ecember 1 "+%+++Finished goods% )ecember 1 $%+++)irect materials% )ecember 31 2(%+++

:or! in #rocess% )ecember 31 "$%+++Finished goods% )ecember 31 3(%+++

>et income for the month of )ecember is= A. @$%+++.B. @3$%+++.'. @$3$%+++.). @1(+%+++.

1"$. elected data concerning the #ast yearEs o#erations of the 9urner 'or#oration are as follows=

elling and administrative e,#enses @22"%+++

)irect materials used 3*&%"++

)irect labor "+%+++

Inventories

)ec. 1% 2+11 )ec. 31%2+11


:or! in #rocess &"%+++ (%+++


The cost of direct materials #urchased is= A. @3*&%"++.B. @+3%"++.'. @3$&%"++.). @+"%+++.



1"&. tone 'om#any% ma!er of com#uters% incurred the following costs during the year=

Reuire!" 'lassify each cost as either fi,ed or variable cost.

Fi#e! $aria%le

1. alary of the factory su#ervisor

2. aterials needed to assemble the com#uters

3. :ages #aid to an assembly line wor!er

. )e#reciation on the factory

". Jtility bill for the factory

$. 0rease used to lubricate the machine

&. ent #aid for the factory

(. Pro#erty ta,es on the factory and cor#orate office

*. 9o,es used to #ac!age the com#leted com#uters

1+. Advertising in a news#a#er monthly

1. Fi,ed2. Kariable3. Kariable. Fi,ed". Kariable$. Kariable&. Fi,ed(. Fi,ed*. Kariable1+. Fi,ed

1"(. Ashland 'om#any% ma!er of !itchen cabinets% incurred the following costs during the current year=

Reuire!" 'lassify each cost as either a #roduct or #eriod cost.

Product Period 1. )e#reciation on automobiles used by the sales staff.

2. alary of AshlandEs chief e,ecutive officer

3. 0lue used in the #roduction #rocess

. u##lies for factory washroom

". esearch and develo#ment costs

$. Pro#erty ta,es on factory building

&. alary of com#any controller

(. )e#reciation on furniture in factory lunchroom

*. 'ost of lubricating machinery

1+. :ood used in #roduction #rocess



Product Period 1. )e#reciation on automobiles used by the sales staff. N 2. alary of AshlandEs chief e,ecutive officer N 3. 0lue used in the #roduction #rocess N

. u##lies for factory washroom N

". esearch and develo#ment costs N $. Pro#erty ta,es on factory building N

&. alary of com#any controller N (. )e#reciation on furniture in factory lunchroom N

*. 'ost of lubricating machinery N

1+. :ood used in #roduction #rocess N

1"*. Arcadia 'om#any manufactures recreational vehicles and incurred the following costs during the currentyear.

Reuire!" 'lassify each cost using the table format given below=


)irectaterials


elling-,#ense


1. :ages of general office #ersonnel

2. 'ost of tires

3. Factory su#ervisorEs salary

. 'onference for mar!eting #ersonnel

". Factory security guards

$. esearch and develo#ment

&. Assembly line wor!ers

(. 'om#any rece#tionist

*. Advertising cost

1+. 'ost of shi##ing vehicles to customers




)irectaterials


elling-,#ense


1. :ages of general office #ersonnel N 2. 'ost of tires N

3. Factory su#ervisorEs salary N

. 'onference for mar!eting #ersonnel N

". Factory security guards N

$. esearch and develo#ment N &. Assembly line wor!ers N

(. 'om#any rece#tionist N *. Advertising cost N

1+. 'ost of shi##ing vehicles to customers N

1$+. The 9ayou 'om#any ma!es crab #ots. )uring the current month% direct materials costing @12$%+++ were #ut into #roduction. )irect labor of @&(%+++ was incurred and overhead e/ualed @(%+++. elling andadministrative e,#enses totaled @$$%+++ for the month and the com#any manufactured 3%+++ crab #ots. Assumethere was no beginning inventory and that 2%(++ crab #ots were sold.

Reuire!"

A. 'om#ute the #er7unit #roduct cost

9. 'om#ute the #er7unit #rime cost'. 'om#ute the #er7unit conversion cost). :hat is cost of goods sold for the month?-. :hat is the cost of ending finished goods for the month?

A. @12$%+++ 4 @&(%+++ 4 @(%+++563%+++ O @*$ 9. @12$%+++ 4 @&(%+++563%+++ O @$( '. @&(%+++ 4 @(%+++563%+++ O @" ). @*$ 2%(++5 O @2$(%(++

-. @*$ 2++5 O @1*%2++



1$1. oss 'om#any ma!es handbags. Bast month direct materials leather% thread% <i##ers% decorative accents5costing @&$%+++ were #ut into #roduction. oss had 3+ wor!ers% each wor!ed 1$+ hours this month and eachare #aid @12 #er hour. ;verhead e/ualed @(+%+++ for the #eriod. oss 'om#any #roduced +%+++ handbags asof the end of the month.

Reuire!" 'alculate the total #roduct cost for the month and calculate the cost of one handbag that was #roduced.

)irect materials O &$%+++)irect labor O "&%$++ 3+ em#loyees , 1$+ hrs. , @12 #er hour5;verhead O (+%+++Total cost 213%$++

'ost of one handbag= 213%$++6+%+++ O @".3

1$2. oom :ith A Kiew 'om#any manufactures curtains. Bast wee!% direct materials costing @2%+++ were #utinto #roduction. )irect labor of @22%+++ was incurred and overhead totaled @"+%+++. 9y the end of the wee!%

the com#any had #roduced 12%+++ curtains.

Reuire!"

1. 'alculate the total #rime cost for the wee!.2. 'alculate the #er7unit #rime cost.3. 'alculate the total conversion cost for the wee!.. 'alculate the #er7unit conversion cost.

1. @$%+++ 2%+++ 4 22%+++52. @".33 $%+++612%+++53. @&2%+++ 22%+++ 4 "+%+++5

. @$.++ &2%+++612%+++5

1$3. The 9lanchett 'om#any manufactures fishing rods. Bast year% direct materials costing @"1$%+++ were #utinto #roduction. )irect labor of @3+%+++ was incurred and overhead e/ualed @$"%+++. The com#any hado#erating income for the year of @"(%+++ and manufactured and sold ($%+++ fishing rods at a sales #rice of @21 #er unit. Assume that there were no beginning or ending inventory balances in the wor! in #rocess and finishedgoods inventory accounts.

Reuire!"

A. 'om#ute the #er7unit #roduct cost9. 'om#ute the #er7unit #rime cost'. 'om#ute the #er7unit conversion cost). 'om#ute the gross margin for the year -. 'om#ute the selling and administrative e,#enses for the year F. Assume #roduction amounted to ($%+++ fishing rods and (+%+++ were sold. 'om#ute cost of goods sold.0. Assume #roduction amounted to ($%+++ fishing rods and (+%+++ were sold. 'om#ute the balance in ending finished goods inventory.



A. @"1$%++

+ 4 @3+%+++ 4

@$"%+++56($%+

++ O @1(."+



9. @"1$%+++ 4

@3+%+++56($%

+++ O @11.++



'. @3+%+++ 4

@$"%+++56($%

+++ O @12."+

).

ales ($%+++

@215

@1%(+$%+++



';0 ($%++

+ @1(."+5

1%"*1%+++

0r o

ss ar gin

21"%+++

-. 0r os

s ar gin

@ 21"%+++



Bess= ell.

and admin.

1"&%+++

; #e

r ating Income

"(%+++

F.(+%+++ @1(."+5 O@1%(+%+++

0.

$%+++ @1(."+5 O@111%+++

1$. The 9utchart 'om#any manufactures microwave ovens. Bast year% the #er7unit #roduct cost was @"$% the #er7unit #rime cost was @3% and the #er7unit conversion cost was @2. 'ost of goods sold for the year was

@"$+%+++ and the sale #rice #er unit was @1++. In addition% direct labor costs of @2++%+++ and selling andadministrative e,#enses of @2+%+++ were incurred.

Reuire!"

A. 'alculate how many units were sold last year 9. 'om#ute the cost of direct materials used'. 'om#ute the cost of overhead). 'om#ute the gross margin for the year -. 'alculate o#erating income



A. 'ost of goods sold @"$+%+++6@"$ O 1+%+++ units

9. 1+%+++ @3 7 @2++%+++ of direct labor cost5 O@1+%+++

'. 1+%+++ @2 7 @2++%+++ of direct labor cost5 O@22+%+++

). ales revenue 1+%+++ @1++5 @1%+++%+++

'ost of goods sold "$+%+++

0ross margin +%+++

-. 0ross margin @ +%+++

Bess= ell. and admin. 2+%+++

;#erating income 2++%+++



1$". Picture It Inc. manufactures customi<ed wooden frames. The direct materials needed to construct theframes are wood% glass and cardboard. Picture It has 22 em#loyees who wor! a + hour wor! wee! and areeach #aid @1& #er hour. The com#any #roduced and sold *++ frames in the month of e#tember.

)uring the month of e#tember the following #urchases were made to #roduce the *++ frames=:ood7 +++ ft. at @1.2+6ft.0lass7 ++ #ieces at @".$+6#iece'ardboard7 "++ #ieces at @."+6#iece

Reuire!"

1. 'alculate the total #roduct cost for the month. Assume that all em#loyees wor!ed four full wee!s ine#tember and that the com#any incurred @""%+++ in overhead costs.

2. 'alculate the #er unit cost.

3. 'alculate the gross margin for the month of e#tember assuming that the com#any sells each frame for @2"+.

1. )irect materials=

:ood O @%(++ %+++ , 1.2+5 0lass O 2%2+ ++ , ".$"5 'ardboard O 2"+ "++ , ."+5

@&%2*+

)irect labor= "*%(+ 22 , 1$+ , 1&5;verhead ""%+++Total cost 122%13+

2. 122%13+6*++ O @13".&+

3. 0ross margin O sales revenue7cost of goods sold 0ross margin O 22"%+++ 2"+ , *++5 7 122%13+ O @1+2%(&+

1$$. Tuc!er 'om#any% a manufacturing firm% has su##lied the following information from its accountingrecords for the month of A#ril.

)irect labor cost @12%+++Purchases of raw materials 1&%+++Factory insurance %+++esearch and develo#ment &%"++Factory #ro#erty ta,es 3%+++ales commissions #aid %"++:or! in #rocess% A#ril 1 2%+++:or! in #rocess% A#ril 3+ 2%(++aterials inventory% A#ril 1 1%&"aterials inventory% A#ril 3+ 1%2++Finished goods inventory% A#ril 1 2%2"+Finished goods inventory% A#ril 3+ &"+



Reuire!" Pre#are a tatement of 'ost of 0oods anufactured

Tuc!er 'om#any

tatement of 'ost of 0oods anufactured

For the onth of A#ril

aterials inventory% A#ril 1 @ 1%&"

aterials #urchased 1&%+++

aterials available for use 1(%&"

aterials inventory% A#ril 3+ 1%2++

aterials used @1&%2&"

)irect labor 12%+++

;verhead &%+++

Total manufacturing costs 3$%2&"

:or! in #rocess% A#ril 1 2%+++

:or! in #rocess% A#ril 3+ 2%(++5

'ost of goods manufactured @3"%&"

1$&. In Cune% ;lym#ic 'om#any #urchased materials costing @3(%+++% and incurred direct labor cost of @2%+++;verhead totaled @2&%+++ for the month. Information on inventories was as follows.

Cune 1 Cune 3+aterials @3%+++ @2%&++:or! in #rocess 1%+++ 1%2&"Finished goods 2%"++ 1%&&"

Reuire!"

A. 'alculate the cost of direct materials used during Cune.

9. 'alculate the total manufacturing cost for Cune.'. 'alculate the cost of goods manufactured for Cune.). 'alculate cost of goods sold for Cune.

A. aterials% $61 @ 3%+++Purchases 3(%+++aterials% $63+ 2%&++5

aterials used @ 3(%3++

9. @3(%3++ 4 @2%+++ 4 @2&%+++5 O @1+&%3++

'. Total manufacturing costs @1+&%3++

:or! in #rocess% $61 1%+++:or! in #rocess% $63+ 1%2&"5

'ost of goods manufactured @1+&%+2"

). 'ost of goods manufactured @1+&%+2"Finished goods% $61 2%"++Finished goods% $63+ 1%&&"5

'ost of goods sold @1+&%&"+



1$(. Tem#lar 'om#any% a manufacturing firm% has su##lied the following information from its accountingrecords for the month of >ovember=

Factory su##lies used @1(%+++)e#reciation on factory building 1&%+++alary of com#any controller $%+++Factory janitorial costs "%+++ar!eting and #romotion %"++

)irect labor cost 22%+++Purchases of raw materials 1+%+++Finished goods inventory% >ov. 1 2%2"+Finished goods inventory% >ov. 3+ 3%&"+:or!7in7#rocess inventory% >ov. 1 %2++:or!7in7#rocess inventory% >ov. 3+ 2%&"+aterials inventory% >ov. 1 3%"++aterials inventory% >ov. 3+ "%1++

Reuire!"

A. Pre#are a tatement of 'ost of 0oods anufactured9. Pre#are a tatement of 'ost of 0oods old

Tem#lar 'om#anytatement of 'ost of 0oods anufacturedFor the onth of >ovember

aterials inventory% >ov. 1 @ 3%"++

Purchases of materials 1+%+++

aterials inventory% >ov. 3+ "%1++5

aterials used @ (%++

)irect labor 22%+++

;verhead +%+++

Total manufacturing costs &+%++

:or!7in7#rocess inventory% >ov. 1 %2++

:or!7in7#rocess inventory% >ov. 3+ 2%&"+5'ost of goods manufactured @&1%("+

Tem#lar 'om#anytatement of 'ost of 0oods oldFor the onth of >ovember

'ost of goods manufactured @&1%("+

Finished goods inventory% >ov. 1 2%2"+

Finished goods inventory% >ov. 3+ 3%&"+5

'ost of goods sold @&+%3"+



1$*. Fidalgo 'om#any ma!es stereos. )uring the year% Fidalgo manufactured and sold &"%+++ stereos at a sales #rice of @"&" #er unit. FidalgoEs #er7unit #roduct cost was @"+ and selling and administrative e,#enses totaled@2%+++%+++.

Reuire!"

A. 'om#ute the total sales revenue9. 'om#ute the gross margin'. 'om#ute the o#erating income). 'om#ute the o#erating income if &"%+++ stereos were #roduced and $*%+++ were sold.

A. &"%+++ @"&" O @3%12"%+++

9. ales revenue @3%12"%+++ 'ost of goods sold

&"%+++ @"+5 +%"++%+++ 0ross margin 2%$2"%+++ '. 0ross margin @ 2%$2"%+++ elling and admin. e,#enses 2%+++%+++

;#erating income $2"%+++ ). ales revenue @3*%$&"%+++ 'ost of goods sold

$*%+++ @"+5 3&%2$+%+++ 0ross margin 2%1"%+++ elling and admin. e,#enses 2%+++%+++ ;#erating income 1"%+++

1&+. 9aleen 'om#any su##lied the following data at the end of the current year=

ales commissions @ 12%+++ales revenue 12+%+++esearch and develo#ment 1&%+++Finished goods inventory% Can. 1 &%"++:or! in #rocess inventory% Can 1 *%+++Finished goods inventory% )ec. 31 $%+++:or! in #rocess inventory% )ec. 31 11%+++'ost of goods manufactured "2%+++



Reuire!" Pre#are an income statement for 9aleen 'om#any.

9aleen 'om#anyIncome tatementFor the Mear -nded )ecember 31% 2+11

ales revenue @12+%+++

'ost of goods soldQ "3%"++

0ross margin $$%"++

Bess=

elling e,#ense 12%+++

Administrative e,#ense 1&%+++

;#erating income @ 3&%"++

Q'ost of goods manufactured @ "2%+++

Finished goods inventory% Can. 1 &%"++

Finished goods inventory% )ec. 31 $%+++5

1&1. acon 'om#any su##lied the following data and information on inventories at the end of the current year.

Canuary 1% 2+11 )ecember 31%2+11aterials @21%+++ @23%"++:or! in #rocess 1&%"++ (%"++Finished goods 2$%+++ 2&%+++

)irect labor @ +%+++elling e,#enses 31%+++ales revenue ++%+++Administrative e,#enses 1%"++Purchases of raw materials $2%+++Factory su#ervision "+%+++Factory su##lies used 2"%+++



Reuire!" Pre#are an income statement of acon 'om#any for the current year.

acon 'om#any

Income tatement

For the Mear -nded )ecember 31% 2+11

ales revenue @ ++%+++

'ost of goods soldQ 1(2%"++

0ross margin 21&%"++

Bess=

elling e,#enses 31%+++

Administrative e,#enses 1%"++

;#erating income @1&2%+++

Q'ost of goods manufacturedQQ @1(3%"++

Finished goods inventory% Can. 1 2$%+++

Finished goods inventory% )ec. 31 2&%+++5

'ost of goods sold 1(2%"++

QQPurchases of raw materials @ $2%+++

aterials inventory% 161 21%+++aterials inventory% 12631 23%"++5

aterials used "*%"++

)irect labor +%+++

;verhead @"+%+++ 4 @2"%+++5 &"%+++

Total manufacturing costs 1&%"++

:or! in #rocess inventory% Can. 1 1&%"++

:or! in #rocess inventory% )ec. 31 (%"++5

'ost of goods manufactured @1(3%"++

1&2. 9artlow 'om#any has su##lied the following information from its accounting records for the month of

ay.

)irect labor cost @11%"++Purchases of raw materials 2+%+++Factory de#reciation &%"++Advertising 1+%+++Factory #ro#erty ta,es $%"++aterials inventory% "61 1%2"+aterials inventory% "631 2%"++:or! in #rocess Inventory% "61 ?:or! in #rocess Inventory% "631 1%"++'ost of goods manufactured "%("+

ales revenue ?-,ecutive salary cost 2"%+++Finished goods inventory% "61 "%"++Finished goods inventory% "631 %2"+;#erating income $&%*++0ross margin ?



Reuire!" olve for the missing amounts ?5

9artlow 'om#anychedule of 'ost of 0oods anufacturedFor the onth of ay

aterials inventory% "61 @ 1%2"+

Purchases of materials 2+%+++

aterials inventory% "631 2%"++5

aterials used @1(%&"+

)irect labor 11%"++

;verhead &%"++ 4 $%"++5 1%+++

Total manufacturing costs %2"+

:or! in #rocess% "61 3%1++

:or! in #rocess% "631 1%"++5

'ost of goods manufactured @"%("+

9artlow 'om#anyIncome tatementFor the onth of ay

ales revenue @1"+%+++

'ost of goods soldQ &%1++

0ross margin 1+2%*++Bess=

elling e,#ense 1+%+++

Administrative e,#ense 2"%+++

;#erating income @ $&%*++

Q'ost of goods manufactured @ "%("+

Finished goods inventory% "61 "%"++

Finished goods inventory% "631 %2"+5

'ost of goods sold @ &%1++

1&3. ee the following se#arate cases.

'ase L1 'ase L2ales @1%+++ @1%3++'ost of goods manufactured A "++Finished goods inventory beginning balance5 1++ )Finished goods inventory ending balance5 1"+ 2++'ost of goods sold 9 $++0ross margin 3++ -elling e,#enses ' &"Administrative e,#enses "+ +;#erating income 2++ F



Reuire!" olve for the missing amounts A%9%'%)%-%F5

'ase L1 'ase L2ales @1%+++ @1%3++'ost of goods manufactured &"+ "++Finished goods inventory beginning balance5 1++ 3++Finished goods inventory ending balance5 1"+5 2++5'ost of goods sold &++ $++0ross margin 3++ &++

elling e,#enses "+ &"Administrative e,#enses "+ +;#erating income 2++ "("

1&. ee the following se#arate cases.

'ase L1 'ase L2Purchase of materials @ "%+++ 'aterials inventory beginning balance5 A 22+aterials inventory ending balance5 1%+++ 3"+

)irect labor &%+++ %2"+Factory su#ervision 1%"++ 1%1++Factory su##lies 1%2"+ *++Total manufacturing costs 1%"++ ):or! in #rocess inventory beginning balance5 1%2++ 1%23+:or! in #rocess inventory ending balance5 9 $"+'ost of goods manufactured 1%$++ 1+%2++

Reuire!" olve for the missing amounts A%9%'%)5.

'ase L1 'ase L2Purchases of materials @ "%+++ @ 3%"++

aterials inventory beginning balance5 &"+ 22+aterials inventory ending balance5 1%+++5 3"+5aterials used %&"+ 3%3&+)irect labor &%+++ %2"+;verhead 2%&"+ 2%+++Total manufacturing costs 1%"++ *%$2+:or! in #rocess inventory% beginning balance5 1%2++ 1%23+:or! in #rocess inventory% ending balance5 1%1++5 $"+5'ost of goods manufactured @1%$++ @1+%2++

1&". ancor 'om#anyEs accountant #re#ared the following income statement for the month of August.

ancor 'om#anyIncome tatementFor the onth of August

ales revenue @*12%2++

'ost of goods sold $+1%*2+

0ross margin 31+%2(+

Bess=

elling e,#ense 1$%1$+

Administrative e,#ense $3%(+

;#erating income @ (2%2(+



Reuire!"

A. 'alculate the sales revenue #ercent9. 'alculate the cost of goods sold #ercent'. 'alculate the gross margin #ercent). 'alculate the selling e,#ense #ercent-. 'alculate the administrative e,#ense #ercentF. 'alculate the o#erating income #ercent

A. *12%+++6*12%+++ O 1++9. $+1%*2+6*12%+++ O $$'. 31+%2(+6*12%+++ O 3). 1$%1$+6*12%+++ O 1(-. $3%(+6*12%+++ O &F. (2%2(+6*12%+++ O *

1&$. -,trema 'om#any su##lied the following data at the end of the current year.

Finished goods inventory% Can 1. @ 12%+++Finished goods inventory% )ec. 31 &%"++'ost of goods manufactured 1"2%3(+ales revenue 212%+++ales commissions 1*%+(+esearch and develo#ment costs 1"%*++

Reuire!"

A. 'alculate the cost of goods sold #ercent9. 'alculate the gross margin #ercent'. 'alculate the selling e,#ense #ercent). 'alculate the administrative e,#ense #ercent-. 'alculate the o#erating income #ercent

A. 'ost of goods manufactured @1"2%3(+Finished goods inventory% 161 12%+++Finished goods inventory% 12631 &%"++5

'ost of goods sold 1"$%((+

ales revenue @212%+++'ost of goods sold 1"$%((+0ross margin ""%12+Bess=elling e,#ense 1*%+(+

Administrative e,#ense 1"%*++;#erating income @ 2+%1+

A. 1"$%((+6212%+++ O &9. ""%12+6212%+++ O 2$'. 1*%+(+6212%+++ O *). 1"%*++6212%+++ O &."-. 2+%1+6212%+++ O *."



1&&. i<<uto 'om#any su##lied the following information for the month of Canuary.

'ost of 0oods old #ercent $2elling -,#ense #ercent $Administrative e,#ense 13

Reuire!" econstruct i<<utoEs income statement for Canuary assuming that their total sales revenue for the month e/ualed @"++%+++.

i<<uto 'om#anyIncome tatementFor the onth of Canuary

ales revenue @"++%+++

'ost of goods sold "++%+++ $25 31+%+++

0ross margin "++%+++ 3(5 1*+%+++

Bess=

elling e,#ense "++%+++ $5 3+%+++

Administrative e,#ense "++%+++ 135 $"%+++

;#erating income *".+++

1&(. 'ashman 'om#any su##lied the following information for the month of )ecember.

;#erating income #ercent 1+."0ross margin #ercent 3+

Reuire!" olve for the following amounts assuming that 'ashman 'om#anyEs o#erating income in )ecember was @%1++.A. ales revenue9. 'ost of good sold'. Total elling and administrative e,#enses

A. ales evenue O @%1++6.1+" O 2+%+++9. 'ost of goods sold O 2+%+++ .&+ O @2*%+++'. 0ross margin 2+%+++ .3+5 12$%+++ Bess= elling and administrative e,#ense (1%*++ ;#erating income %1++

1&*. :a#ato 'om#any #roduces a #roduct with the following #er unit costs.

)irect materials @1&)irect labor 11;verhead 12



Bast year% :a#ato #roduced and sold 3%+++ units at a sales #rice of @(+ each. Total selling and administrative e,#enses were @2"%+++.

Reuire!" olve for the following=A. Total cost of goods sold for last year 9. ;#erating income for last year '. Total gross margin for last year ). Prime cost #er unit

A. 1& 4 11 4 125 3%+++ O @12+%+++

9. R '. ales revenue 3%+++ (+5 @2+%+++ 'ost of goods sold 12+%+++ 0ross margin 12+%+++ Bess=

elling and administrative e,#enses 2"%+++ ;#erating income @ *"%+++ ). 1& 4 11 O @2(

1(+. Tesco 'om#any showed the following costs for last month=

)irect materials @+%+++)irect labor 3"%+++;verhead "2%+++elling e,#ense 1&%+++Administrative e,#ense 12%+++

Bast month% Tesco #roduced and sold 2+%+++ units at a sales #rice #er unit of @1(. Assume no beginning or ending inventory balances for wor! in #rocess and finished goods inventory.

Reuire!" olve for the following amounts.A. Total #roduct cost for last month9. Jnit #roduct cost for last month'. Total #eriod costs). 0ross margin for last month-. ;#erating income for last month

A. +%+++ 4 3"%+++ 4 "2%+++ O @12&%+++

9. 12&%+++62+%+++ O @$.3"

'. 1&%+++ 4 12%+++ O @2*%+++

) R -. ales revenue 2+%+++ @1(5 3$+%+++ 'ost of goods sold 12&%+++ 0ross margin 233%+++ Bess=

elling e,#ense 1&%+++ Administrative e,#ense 12%+++ ;#erating income @2+%+++



1(1. tabler 'om#any% a manufacturing firm% has #rovided the following information for the month of ay=

Factory su##lies used 22%+++

)e#reciation on factory building 1+%+++

'ommissions for sales #ersonnel 32%+++

alary of com#any 'F; *%+++

Factory janitorial costs 3%+++

esearch and develo#ment "%+++

)e#reciation on cor#orate office (%"++Advertising costs 2%"++

)irect labor cost +%+++

Purchases of raw materials 1"%+++

Finished goods inventory% ay 1 %+++

Finished goods inventory% ay 31 $%"++

:or! in #rocess inventory% ay 1 &%"++

:or! in #rocess inventory% ay 31 3%3++

aterials inventory% ay 1 2%1++

aterials inventory% ay 31 %2++

Reuire!"A. Pre#are a tatement of 'ost of 0oods anufactured.9. 'alculate the cost of one unit assuming 1+%+++ units were com#leted during ay.'. Pre#are a tatement of 'ost of 0oods old.). 'alculate the number of units that were sold during ay.-. Pre#are an Income tatement assuming the sales #rice #er unit is @3".

A.

tabler 'om#anytatement of 'ost of 0oods anufactured

For the onth of ayaterials Inventory% ay 1 @ 2%1++

Purchases of materials 1"%+++

aterials Inventory% ay 31 %2++5

aterials used @ 12%*++

)irect Babor +%+++

;verhead 3"%+++

Total manufacturing costs (&%*++

:or! in Process Inventory% ay 1 &%"++

:or! in Process Inventory% ay 31 3%3++5

'ost of 0oods anufactured @*2%1++

9. *2%1++61+%+++ O @*.21

'.

tabler 'om#anytatement of 'ost of 0oods oldFor the onth of ay

'ost of 0oods anufactured @*2%1++

Finished 0oods Inventory% ay 1 %+++

Finished 0oods Inventory% ay 31 $%"++5

'ost of 0oods old @(*%$++



). >umber of units sold= Finished goods inventory% ay 1 %+++ Jnits finished during ay 1+%+++ Finished goods inventory% ay 31 $%"++5 Jnits sold during ay &%"++

-.tabler 'om#any

Income tatement

For the onth of ay

ales revenue &%"++ , 3"5 2$2%"++'ost of goods sold (*%$++0ross margin 1&2%*++Bess=elling e,#ense

'ommissions 32%+++Advertising 2%"++ 3%"++

Administrative e,#ensealary of 'F; *%+++esearch and develo#ment "%+++)e#reciation on cor#orate office (%"++ 22%"++

;#erating income 11"%*++

1(2. :hat is the difference between a #eriod cost and a #roduct cost?

A #eriod cost is a cost that is not a #roduct cost. It is e,#ensed during the current #eriod rather than inventoried-,am#les of #eriod costs are selling and administrative costs. A #roduct cost is a manufacturing cost that isinventoried and e,#ensed as 'ost of 0oods old only when the goods have been sold. Product costs areclassified as direct materials% direct labor% or overhead.

1(3. Bist and describe the three categories of manufacturing costs.

)irect materials consists of the cost of materials re/uisitioned and used in #roduction during the current #eriod.)irect materials are materials that can be accurately and conveniently traced to the #roduct. )irect laborconsists of labor costs of wor!ers directly involved in the manufacture of the #roduct. ;verhead consists of allthe manufacturing costs that do not fall into the direct material or direct labor category. -,am#les of overheadcosts includeS insurance on the factory% machinery de#recation% indirect labor% indirect materials% factorysu##lies% etc.



1(. -,#lain the difference between a cost that is included in valuing inventory and a cost that is not included invaluing inventory.

A cost that is included in valuing inventory is a cost of manufacturing the #roduct. These costs are also referredto as #roduct costs and manufacturing costs. They include direct materials% direct labor% and overhead. Thesecosts are not e,#ensed until the goods are sold. A cost that is not included in valuing inventory is a selling oradministrative cost that is e,#ensed immediately in the accounting #eriod that it is incurred. These costs are alsoreferred to as #eriod costs or non7manufacturing costs.

1(". )escribe the #ur#ose of the three inventory accounts used by a manufacturer.

The materials inventory is used to !ee# trac! of materials that have not yet been used in #roduction. The wor!in #rocess inventory is used to account for the costs of goods that were #artially com#leted at the end of theaccounting #eriod and is used to accumulate current #roduction costs. The finished goods inventory is used toaccount for the cost of goods that were finished at the end of the current #eriod but have not yet been sold.

1($. :hat is the difference between total manufacturing costs and cost of goods manufactured?

Total manufacturing costs would consist of the cost of materials used% the direct labor costs incurred and theoverhead costs incurred during the current #eriod. 'ost of goods manufactured would be com#uted by addingthe beginning balance of wor! in #rocess to and subtracting the ending balance of wor! in #rocess from the totalmanufacturing costs.

1(&. Mou )ecide

Mou are the accounting manager at Falcon Inc. Mou just hired a new staff accountant to assist you in brea!ingout costs into their a##ro#riate classifications. The staff accountant as!s you why cost classification isim#ortant.

ow would you res#ond?

Documents

Chapter 2 Basic Managerial