283) A partial listing of costs incurred at Boylen Corporation during March appears below:
$
181,000
$
10,000
$
69,000
$
99,000
$
32,000
$
75,000
$
28,000
$
120,000
$
49,000
Required:
a. What is the total amount of product cost listed above? Show your work.
b. What is the total amount of period cost listed above? Show your work.
Direct materials
181,000
Direct labor
120,000
Manufacturing overhead:
Utilities, factory
$
10,000
Indirect labor
32,000
Depreciation of production equipment
28,000
Total product cost
371,000
Sales commissions
$
69,000
Administrative salaries
99,000
Advertising
75,000
Depreciation of administrative equipment
49,000
Total period cost
$
292,000
223
284) Mary Tappin, an assistant Vice President at Galaxy Toys, was disturbed to find on her desk a
memo from her boss, Gary Resnick, to the controller of the company. The memo appears below:
GALAXY TOYS INTERNAL MEMO
Sept 15
To: Harry Wilson, Controller
Fm: Gary Resnick, Executive Vice President
As you know, we won’t start recording many sales until October when stores start accepting
shipments from us for the Christmas season. Meanwhile, we are producing flat-out and are
building up our finished goods inventories so that we will be ready to ship next month.
Unfortunately, we are in a bind right now since it looks like the net income for the quarter ending
on Sept 30 is going to be pretty awful. This may get us in trouble with the bank since they always
review the quarterly financial reports and may call in our loan if they don’t like what they see. Is
there any possibility that we could change the classification of some of our period costs to product
costs—such as the rent on the finished goods warehouse?
Please let me know as soon as possible. The President is pushing for results.
Mary didn’t know what to do about the memo. It wasn’t intended for her, but its contents were
alarming.
Required:
a. Why has Gary Resnick suggested reclassifying some period costs as product costs?
b. Why do you think Mary was alarmed about the memo?
225
285) Marquess Corporation has provided the following partial listing of costs incurred during
May:
$
39,000
$
8,000
$
102,000
$
73,000
$
31,000
$
197,000
$
145,000
$
39,000
$
78,000
Required:
a. What is the total amount of product cost listed above? Show your work.
b. What is the total amount of period cost listed above? Show your work.
227
286) Classify the following costs for an auto manufacturer as either direct materials, direct labor,
manufacturing overhead, or period costs.
Direct
Materials
Direct
Labor
Manufacturing
Overhead
Period
Cost
a.
Steel used in automobiles
b.
Assembly department employee
wages
c.
Utility costs used in executive
building
d.
Travel costs of sales personnel
e.
Cost of shipping goods to customers
f.
Property taxes on assembly plant
g.
Glass used in automobiles
h.
Factory maintenance supplies
i.
Depreciation on assembly plant
j.
Plant manager’s salary
k.
CEO’s salary
l.
Depreciation on executive building
m.
Salary of marketing executive
n.
Tires installed on automobiles
o.
Advertising
Required:
Complete the answer sheet above by placing an “X” under each heading that identifies the cost
involved.
229
287) Asplund Corporation has provided the following information:
Cost per Unit
Cost per Period
Direct materials
$6.25
Direct labor
$2.90
Variable manufacturing overhead
$1.30
Fixed manufacturing overhead
$18,000
Sales commissions
$1.50
Variable administrative expense
$0.45
Fixed selling and administrative expense
$7,500
Required:
a. For financial reporting purposes, what is the total amount of product costs incurred to make
5,000 units?
b. For financial reporting purposes, what is the total amount of period costs incurred to sell 5,000
units?
231
288) Balerio Corporation’s relevant range of activity is 7,000 units to 11,000 units. When it
produces and sells 9,000 units, its average costs per unit are as follows:
Average Cost
per Unit
Direct materials
$6.80
Direct labor
$3.20
Variable manufacturing overhead
$1.60
Fixed manufacturing overhead
$13.50
Fixed selling expense
$2.25
Fixed administrative expense
$1.80
Sales commissions
$0.50
Variable administrative expense
$0.40
Required:
a. For financial reporting purposes, what is the total amount of product costs incurred to make
9,000 units?
b. If 10,000 units are sold, what is the variable cost per unit sold?
c. If 10,000 units are sold, what is the total amount of variable costs related to the units sold?
d. If the selling price is $18.20 per unit, what is the contribution margin per unit sold?
e. What incremental manufacturing cost will the company incur if it increases production from
9,000 to 9,001 units?
234
289) Glisan Corporation’s relevant range of activity is 4,000 units to 8,000 units. When it produces
and sells 6,000 units, its average costs per unit are as follows:
Average Cost
per Unit
Direct materials
$5.75
Direct labor
$3.00
Variable manufacturing overhead
$1.60
Fixed manufacturing overhead
$4.50
Fixed selling expense
$0.75
Fixed administrative expense
$0.60
Sales commissions
$1.50
Variable administrative expense
$0.55
Required:
a. For financial reporting purposes, what is the total amount of product costs incurred to make
6,000 units?
b. For financial reporting purposes, what is the total amount of period costs incurred to sell 6,000
units?
c. If 5,000 units are sold, what is the total amount of variable costs related to the units sold?
d. If the selling price is $19.10 per unit, what is the contribution margin per unit sold?
e. What incremental manufacturing cost will the company incur if it increases production from
6,000 to 6,001 units?