141. There are many differences between financial and managerial accounting. Identify and
explain at least three of these differences.
142. Explain what is meant by the “lean business model” and why many businesses have adopted
it.
143. An employer is unsure if an act by an employee constitutes fraud. What are some of the
indications that an employee is involved in a fraud scheme?
144. List the four goals of an internal control system.
145. An employee devises a payroll scheme that costs the employer $150. The employer
discovers the fraud but decides not to confront the employee since the amount of the fraud is
small. Discuss why this course of action is not advisable.
146. A company manufactures coats in a large facility. One area in the production facility is an
underused storage space. The company has twice turned down offers to lease out this facility.
This situation is an example of what costing concept? How should the company handle the
costing for this situation?
147. Define and contrast period costs and product costs. How are they reported in the financial
statements of a manufacturing company?
148. What are the three types of inventories that are carried by manufacturers? Describe each
type of inventory.
149. What is the main difference between the income statement of a manufacturer and that of a
merchandiser?
150. What does the days’ sales in raw materials inventory ratio reveal?
151. What are prime costs? What are conversion costs?
152. What are the components of the manufacturing statement? Describe each component.
Problems
153. The following cost items relate to the Brock Company. Classify each cost as a variable cost,
a fixed cost, or a mixed cost by placing an X in the appropriate column. Each cost should be
evaluated in terms of the volume of units of finished products produced. Also indicate with an X
for each item if it is a product cost or a period cost.
Variable, fixed, or mixed cost? Product or period
cost?
Cost item Variable Fixed Mixed Product Period
Executive salary
Direct labor
Direct materials
Depreciation of
manufacturing equipment
Indirect labor
Factory utilities
Delivery expense
Television advertising
Indirect materials
154. For each item shown below, classify it as a product cost or a period cost, by placing an X in
the appropriate column. For each item that is a product cost, also indicate whether it is a direct
cost or an indirect cost with respect to a unit of finished product.
Product or period cost? Direct or indirect cost?
Cost item Product Period Direct Indirect
Administrative salaries
Direct labor
Advertising
Property tax on the factory
Factory maintenance
Direct materials
Depreciation on factory
equipment
Interest expense
Factory supplies
155. Harv’s Sound Systems produces speakers for movie theaters that sell for $1,200 each. Listed
below are selected cost items for the production of 600 units. Classify each cost as either fixed or
variable, and either a product or a period cost.
Cost by behavior Cost by function
Variable Fixed Product Period
Plastic for speaker casings………… $150,000
Assembly labor…………………………… 200,000
Factory property taxes …………….. 22,000
Accounting staff salaries………….. 75,000
Sales office rent…………………… 10,000
Sales manager’s salary…………….. 60,000
Depreciation on factory
equipment…………………………. 23,000
Sales commissions………………… 36,000
156. Ringle Company is a manufacturer of compact disks (CDs). Place each of the following
costs in the appropriate column.
Product cost
Cost item Period cost Direct materials
Direct labor Factory overhead
a. Factory maintenance salary, $40,000
b. Salary of factory supervisor, $70,000
c. Salary of production worker, $42,000
d. Salary of the company’s president, $100,000
e. Television advertising, $25,000
f. Property tax on factory, $15,000
g. Sales commissions, $65,000
h. Depreciation on factory equipment, $17,000
i. Plastic used in the manufacture of the CDs, $14,000
18-69
157. The following costs are incurred by Estes Manufacturing Co. Classify each cost item as
either a period cost or a product cost. If the cost is a product cost, identify it as a prime and/or
conversion cost.
Period Cost Product Cost
Prime Cost Conversion
Cost
Factory property taxes ……….
Payroll taxes for assembly labor ………..
Depreciation of factory equipment ………..
Insurance on delivery vehicles ……….
Indirect materials used ……….
Wages of production workers ……….
Production supervisor‘s salary ……….
Advertising ………..
Direct materials used ……….
Sales salaries ……….
158. Whitman Products and Rockland Industries report the following information at December
31:
WHITMAN ROCKLAND
Accounts Receivable $41,000 $68,000
Cash 6,000 7,000
Finished Goods Inventory 25,000
Goods in Process Inventory 40,000
Merchandise Inventory 48,000
Prepaid Expenses 1,000 2,000
Raw Materials Inventory 21,000
Required:
(a) Which company is a manufacturer? Explain.
(b) Prepare the Current Asset Section of the Balance Sheet for the manufacturer.
159. Horton Foods bakes and sells 1,000 dozen bagels each week to food service operations.
Among the costs are bakers’ salaries, $24,000; production management salaries, $16,000;
production equipment operating costs, $32,000; and flour and ingredient costs, $15,000. Using
this information, compute: (a) prime costs and (b) conversion costs.
18-71
160. A manufacturing company’s finished goods inventory on January 1 was $68,000; cost of
goods manufactured was $147,000; and the December 31 finished goods inventory was $77,000.
What is the cost of goods sold for that year?
161. Calculate Cost of Goods Sold for the following two companies:
Beginning Inventory: CARVER LTD. PEMBROKE, INC.
Merchandise $250,000
Finished Goods $550,000
Cost of Goods Purchased 460,000
Cost of Goods Manufactured 688,000
Ending Inventory:
Merchandise 128,000
Finished Goods 350,000
162. The Ticky Company manufactures tacks. Costs for September were direct labor, $84,000;
indirect labor, $36,700; direct materials, $55,900; factory maintenance, $4,800; factory utilities,
$3,200; and insurance on plant and equipment, $700. What is Ticky Company’s factory overhead
for September?
18-73
163. Information for Reedy Manufacturing is presented below. Compute both the cost of goods
manufactured and the cost of goods sold for Reedy Manufacturing.
Beginning raw materials inventory $46,800
Beginning goods in process inventory 21,200
Direct labor 81,000
Beginning finished goods inventory 64,000
Total factory overhead 106,000
Raw materials purchased 21,500
Ending raw materials inventory 40,000
Ending goods in process inventory 20,000
Ending finished goods inventory 46,000
164. Use the following information to prepare the manufacturing statement for Forsythe
Company for the month ended June 30.
Goods in process inventory, May 31 $12,600
Goods in process inventory, June 30 16,500
Direct materials used during June 21,000
Direct labor used during June 31,000
Factory overhead:
Indirect material 6,400
Indirect labor 9,200
Factory rent 12,000
Factory depreciation 15,000
Factory utilities 18,400
18-75
165. Bourne Crafts manufactures specialty key chains for tourist attractions. On January 1, the
firm had 200 souvenir attraction disks used in the production of the chains that cost $3 each; and
600 completed key chains that cost $6 each. During the year Bourne Crafts purchased 1,500
souvenir disks costing $3 each and produced 1,100 key chains. Compute the total cost of raw
materials inventory at December 31.
166. The following items for Titus Company are used to compute the cost of goods
manufactured and the cost of goods sold. Indicate how each item should be used in the
calculations by filling in the blanks with “+” if the item is to be added, “-” if the item is to be
subtracted, or “0” if the item is not used in the calculation. The first item is completed as an
example.
Cost of Goods Cost of Goods
Manufactured Sold
Beginning finished goods inventory ___0___ __+__
Ending finished goods inventory _______ ______
Direct labor _______ ______
Indirect labor _______ ______
Beginning goods in process inventory _______ ______
Ending goods in process inventory _______ ______
General and administrative expenses _______ ______
Indirect materials _______ ______