103.
Beginning inventory in units
0
Units produced
4,800
Units sold
4,000
Sales
$400,000
Material cost (unit level or variable)
$96,000
Variable conversion cost used
(Committed)
$48,000
Facility-level or fixed manufacturing
cost
$72,000
Indirect operating costs (fixed)
$80,000
104.
Beginning inventory in units
0
Units produced
4,800
Units sold
4,000
Sales
$400,000
Material cost (unit level or variable)
$96,000
Variable conversion cost used
(Committed)
$48,000
Facility-level or fixed manufacturing
cost
$72,000
Indirect operating costs (fixed)
$80,000
105.
Absorption costing measures contribution to profit as:
106.
Inventoriable costs:
Essay Questions
107.
The following information is available for the Weston Consulting Company for the fiscal
year ended December 31.
Gross margin
$170,000
Operating profit
$65,500
Revenues
$809,000
Income tax rate
34%
108.
The following information is available for the Cherryville Enterprises, Inc. for the fiscal year
ended December 31.
Revenues
$900,000
Gross margin
$315,000
Operating profit
85,000
Income tax rate
32%
2-86
109.
The following information is available for the Tenor Music Store for the fiscal year ended
December 31.
Ending inventory
$100,100
Transportation-in costs
$8,900
Purchase discounts
$15,000
Beginning inventory
$79,000
Merchandise cost
$450,000
Purchase returns and allowances
$6,200
Sales revenue
$800,000
Sales discounts
$12,500
Beginning inventory
Cost of goods purchased:
Merchandise (cost)
Purchase returns
Purchase discounts
Transportation-in costs
2-88
110.
Required:
For each of the following costs incurred in a manufacturing company, indicate whether
the costs are (a) fixed or variable and (b) product costs or period costs.
Cost Item
Fixed
Variable
Product
Period
0
Annual audit
and tax return
fees
X
X
1
Costs (other
than food) of
running the
cafeteria for
factory
personnel
2
Direct
materials used
3
Clerical staff in
administrative
offices
4
Depreciation of
factory
machinery*
5
Property taxes
on the factory
6
Insurance
premiums on
delivery vans
7
Factory
custodian pay
8
Sales
commissions
9
Rent paid for
corporate jet
2-89
10
Transportation-
in costs for
indirect
material
Depreciation of
2-91
111.
The Torchdown Company began operations several years ago. The company purchased a
building and, since only half of the space was needed for operations, the remaining space
was rented to another firm for rental revenue of $20,000 per year. The success of
Torchdown Company’s product has resulted in the company needing more space. The
renter’s lease will expire next month and Torchdown will not renew the lease in order to
use the space to expand operations and meet demand.
The company’s product requires direct materials that cost $25 per unit. The company
employs a production supervisor whose salary is $2,000 per month. Production line
workers are paid $15 per hour to manufacture and assemble the product. The company
rents the equipment needed to produce the product at a rental cost of $1,500 per month.
Additional equipment will be needed as production is expanded and the monthly rental
charge for this equipment will be $900 per month. The building is depreciated on a
straight-line basis at $9,000 per year.
The company spends $40,000 per year to market the product. Shipping costs for each unit
are $20 per unit. The cost of electricity and other utilities used for product is $2 per unit.
The company plans to liquidate several investments in order to expand production. These
investments currently earn a return of $8,000 per year.
Required:
Complete the answer sheet that follows by placing an “X” under each heading that
identifies the cost involved. The “X’s” can be placed under
more
than
one
heading
for a
single cost, e.g., a cost might be a variable cost, and an overhead cost.
Name of
cost
Variable
cost
Fixed
cost
Direct
materials
Direct
labor
Mfg
overhead
Period
cost
Opportunity
cost
1
Amount that
can be
earned
renting
building
2
Cost of
2-92
direct
materials
3
Salary of
production
supervisor
4
Cost of
direct labor
5
Equipment
rental cost
6
Depreciation
on building
7
Marketing
costs
8
Shipping
costs
9
Electrical
costs
10
Foregone
investment
income
2-94
112.
The following cost and inventory data were taken from the records of the Flagstaff
Company for the year:
Costs incurred:
Depreciation, factory equipment
$30,000
Depreciation, office equipment
7,000
Supplies, factory
1,500
Maintenance, factory equipment
20,000
Utilities, factory
8,000
Sales commissions
30,000
Indirect labor
54,500
Rent, factory building
70,000
Purchases of direct materials (net)
124,000
Direct labor
80,000
Advertising expense
90,000
Inventories:
January 1
December 31
Direct materials
$9,000
$11,000
Work in process
6,000
21,000
Finished goods
69,000
24,000
Required:
(a) Compute the cost of goods manufactured.
(b) Prepare a cost of goods sold statement.
(a)
113.
The Foxboro Manufacturing Company provided you with the following information for the
fiscal year ended December 31.
Work-in-process inventory, 12/31
$57,900
Finished goods inventory, 1/1
307,400
Direct labor costs incurred
1,004,300
Manufacturing overhead costs
2,693,400
Direct materials inventory, 1/1
250,800
Finished goods inventory, 12/31
511,000
Direct materials purchased
1,750,200
Work-in-process inventory, 1/1
101,000
Direct materials inventory, 12/31
169,400
114.
The cost accountant for the Corner Manufacturing Company has provided you with the
following information for the month of July:
2-98
Variable
costs
Per unit
Total
Fixed
Costs
Direct labor
$27.50
Direct materials
84.75
Manufacturing
overhead
14.25
$120,000
Marketing costs
5.30
50,000
Administrative costs
2.90
75,000
2-99
115.
The cost accountant for the Friendly Manufacturing Company has provided you with the
following information for the month of July:
Variable
costs
Per unit
Total
Fixed
Costs
Direct labor
$27.50
Direct materials
84.75
Manufacturing
overhead
14.25
$120,000
Marketing costs
5.30
50,000
Administrative costs
2.90
75,000
Selling price
210.00
Variable costs:
Direct materials
