Chapter 2
147. Knowles & Foreman Company took the following data from its income statement at the end of the current year:
Per-unit product cost $35
Gross margin percentage 41.20%
Selling and administrative expenses $30,900
Operating income $10,300
How many units were sold during the year?
a. 3,333 units
b. 1,000 units
c. 1,500 units
d. 1,680 units
148. Seaview Company took the following data from their income statement at the end of the current year.
Per-unit product cost $30
Gross margin percentage 40%
Selling and administrative expenses $30,000
Operating income $10,000
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What was the sales price per unit?
a. $50
b. $30
c. $20
d. $10
149. If beginning work-in–process inventory is $120,000, ending work-in-process inventory is $160,000, cost of goods
manufactured is $400,000 and direct materials used are $100,000, what are the conversion costs?
a. $140,000
b. $280,000
c. $300,000
d. $340,000
Chapter 2
150. Information from the records of Place, Inc., for December is as follows:
Sales $820,000
Selling and administrative expenses 140,000
Direct materials purchases 176,000
Direct labor 200,000
Factory overhead 270,000
Direct materials, December 1 24,000
Work in process, December 1 50,000
Finished goods, December 1 46,000
Direct materials, December 31 28,000
Work in process, December 31 56,000
Finished goods, December 31 38,000
Net income for the month of December is:
a. $644,000.
b. $36,000.
c. $636,000.
d. $180,000.
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151. Selected data concerning the past year’s operations of the Burner Corporation are as follows:
Selling and administrative expenses $225,000
Direct materials used 397,500
Direct labor 450,000
Inventories
Dec. 1 Dec. 31
Direct materials $36,000 $42,000
Work in process 75,000 84,000
Finished goods 69,000 57,000
The cost of direct materials purchased is:
a. $397,500.
b. $403,500.
c. $367,500.
d. $405,000.
Chapter 2
152. Stone Company, maker of computers, incurred the following costs during the year:
Required: Classify each cost as either fixed or variable cost.
Fixed Variable
1. Salary of the factory supervisor
2. Materials needed to assemble the computers
3. Wages paid to an assembly line worker
4. Depreciation on the factory
5. Utility bill for the factory
6. Grease used to lubricate the machine
7. Rent paid for the factory
8. Property taxes on the factory and corporate office
9. Boxes used to package the completed computers
10. Advertising in a newspaper monthly
153. Ashland Company, maker of kitchen cabinets, incurred the following costs during the current year:
Required: Classify each cost as either a product or period cost.
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Product Period
1. Depreciation on automobiles used by the sales staff.
2. Salary of Ashland’s chief executive officer
3. Glue used in the production process
4. Supplies for factory washroom
5. Research and development costs
6. Property taxes on factory building
7. Salary of company controller
8. Depreciation on furniture in factory lunchroom
9. Cost of lubricating machinery
10. Wood used in production process
ANSWER:
154. The Bayou Company makes crab pots. During the current month, direct materials costing $126,000 were put into
production. Direct labor of $78,000 was incurred and overhead equaled $84,000. Selling and administrative expenses
totaled $66,000 for the month and the company manufactured 3,000 crab pots. Assume there was no beginning inventory
and that 2,800 crab pots were sold.
Required:
A. Compute the per-unit product cost
B. Compute the per-unit prime cost
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C. Compute the per-unit conversion cost
D. What is cost of goods sold for the month?
E. What is the cost of ending finished goods for the month?
155. Ross Company makes handbags. Last month direct materials (leather, thread, zippers, decorative accents) costing
$76,000 were put into production. Ross had 30 workers, each worked 160 hours this month and each are paid $12 per
hour. Overhead equaled $80,000 for the period. Ross Company produced 40,000 handbags as of the end of the month.
Required: Calculate the total product cost for the month and calculate the cost of one handbag that was produced.
Chapter 2
156. Arcadia Company manufactures recreational vehicles and incurred the following costs during the current year.
Required: Classify each cost using the table format given below:
Product Cost Period Cost
Direct
Materials Direct
Labor
Overhead Selling
Expense Administrative
Expense
1. Wages of general office personnel
2. Cost of tires
3. Factory supervisor’s salary
4. Conference for marketing personnel
5. Factory security guards
6. Research and development
7. Assembly line workers
8. Company receptionist
9. Advertising cost
10. Cost of shipping vehicles to customers
ANSWER:
Chapter 2
157. Room With A View Company manufactures curtains. Last week, direct materials costing $42,000 were put into
production. Direct labor of $22,000 was incurred and overhead totaled $50,000. By the end of the week, the company had
produced 12,000 curtains.
Required:
1. Calculate the total prime cost for the week.
2. Calculate the per-unit prime cost.
3. Calculate the total conversion cost for the week.
4. Calculate the per-unit conversion cost.
Chapter 2
158. The Blanchett Company manufactures fishing rods. Last year, direct materials costing $516,000 were put into
production. Direct labor of $430,000 was incurred and overhead equaled $645,000. The company had operating income
for the year of $58,000 and manufactured and sold 86,000 fishing rods at a sales price of $21 per unit. Assume that there
were no beginning or ending inventory balances in the work in process and finished goods inventory accounts.
Required:
A. Compute the per-unit product cost
B. Compute the per-unit prime cost
C. Compute the per-unit conversion cost
D. Compute the gross margin for the year
E. Compute the selling and administrative expenses for the year
F. Assume production amounted to 86,000 fishing rods and 80,000 were sold. Compute cost of goods sold.
G. Assume production amounted to 86,000 fishing rods and 80,000 were sold. Compute the balance in ending
finished goods inventory.
Chapter 2
159. The Butchart Company manufactures microwave ovens. Last year, the per-unit product cost was $56, the per-unit
prime cost was $34, and the per-unit conversion cost was $42. Cost of goods sold for the year was $560,000 and the sale
price per unit was $100. In addition, direct labor costs of $200,000 and selling and administrative expenses of $240,000
were incurred.
Required:
A. Calculate how many units were sold last year
B. Compute the cost of direct materials used
C. Compute the cost of overhead
D. Compute the gross margin for the year
E. Calculate operating income
Chapter 2
160. Picture It Inc. manufactures customized wooden frames. The direct materials needed to construct the frames are
wood, glass and cardboard. Picture It has 22 employees who work a 40-hour work week and are each paid $17 per hour.
The company produced and sold 900 frames in the month of September.
During the month of September the following purchases were made to produce the 900 frames:
Wood—4000 ft. at $1.20/ft.
Glass—400 pieces at $5.60/piece
Cardboard—500 pieces at $0.50/piece
Required:
1. Calculate the total product cost for the month. Assume that all employees worked four full weeks in September and that
the company incurred $55,000 in overhead costs.
2. Calculate the per-unit cost.
3. Calculate the gross margin for the month of September assuming that the company sells each frame for $250.
ANSWER:
Chapter 2
161. Tucker Company, a manufacturing firm, has supplied the following information from its accounting records for the
month of April.
Direct labor cost $12,000
Purchases of raw materials 17,000
Factory insurance 4,000
Research and development 7,500
Factory property taxes 3,000
Sales commissions paid 4,500
Work in process, April 1 2,000
Work in process, April 30 2,800
Materials inventory, April 1 1,475
Materials inventory, April 30 1,200
Finished goods inventory, April 1 2,250
Finished goods inventory, April 30 750
Required: Prepare a Statement of Cost of Goods Manufactured.
Chapter 2
162. In June, Olympic Company purchased materials costing $38,000, and incurred direct labor cost of $42,000.
Overhead totaled $27,000 for the month. Information on inventories was as follows:
June 1 June 30
Materials $3,000 $2,700
Work in process 1,000 1,275
Finished goods 2,500 1,775
Required:
A. Calculate the cost of direct materials used during June.
B. Calculate the total manufacturing cost for June.
C. Calculate the cost of goods manufactured for June.
D. Calculate cost of goods sold for June.
Chapter 2
163. Templar Company, a manufacturing firm, has supplied the following information from its accounting records for the
month of November:
Factory supplies used $18,000
Depreciation on factory building 17,000
Salary of company controller 6,000
Factory janitorial costs 5,000
Marketing and promotion 4,500
Direct labor cost 22,000
Purchases of raw materials 10,000
Finished goods inventory, Nov. 1 2,250
Finished goods inventory, Nov. 30 3,750
Work-in-process inventory, Nov. 1 4,200
Work-in-process inventory, Nov. 30 2,750
Materials inventory, Nov. 1 3,500
Materials inventory, Nov. 30 5,100
Required:
A. Prepare a Statement of Cost of Goods Manufactured
B. Prepare a Statement of Cost of Goods Sold
Chapter 2
164. Fidalgo Company makes stereos. During the year, Fidalgo manufactured and sold 75,000 stereos at a sales price of
$575 per unit. Fidalgo’s per-unit product cost was $540 and selling and administrative expenses totaled $2,000,000.
Required:
A. Compute the total sales revenue
B. Compute the gross margin
C. Compute the operating income
D. Compute the operating income if 75,000 stereos were produced and 69,000 were sold.
Chapter 2
165. Baleen Company supplied the following data at the end of the current year:
Sales commissions $ 12,000
Sales revenue 120,000
Research and development 17,000
Finished goods inventory, Jan. 1 7,500
Work in process inventory, Jan 1 9,000
Finished goods inventory, Dec. 31 6,000
Work in process inventory, Dec. 31 11,000
Cost of goods manufactured 52,000
Required: Prepare an income statement for Baleen Company.
Chapter 2
166. Macon Company supplied the following data and information on inventories at the end of the current year.
January 1 December 31
Materials $21,000 $23,500
Work in process 17,500 8,500
Finished goods 26,000 27,000
Direct labor $ 40,000
Selling expenses 31,000
Sales revenue 400,000
Administrative expenses 14,500
Purchases of raw materials 62,000
Factory supervision 50,000
Factory supplies used 25,000
Required: Prepare an income statement of Macon Company for the current year.
Chapter 2
167. Bartlow Company has supplied the following information from its accounting records for the month of May.
Direct labor cost $11,500
Purchases of raw materials 20,000
Factory depreciation 7,500
Advertising 10,000
Factory property taxes 6,500
Materials inventory, 5/1 1,250
Materials inventory, 5/31 2,500
Work in process inventory, 5/1 ?
Work in process inventory, 5/31 1,500
Cost of goods manufactured 45,850
Sales revenue ?
Executive salary cost 25,000
Finished goods inventory, 5/1 5,500
Finished goods inventory, 5/31 4,250
Operating income 67,900
Gross margin ?
Required: Solve for the missing amounts (?). (Solve for WIP at 5/1 first, then Gross Margin, then Sales Revenue.)
Chapter 2
168. See the following separate cases.
Case #1 Case #2
Sales $1,000 $1,300
Cost of goods manufactured A 500
Finished goods inventory (beginning balance) 100 D
Finished goods inventory (ending balance) 150 200
Cost of goods sold B 600
Gross margin 300 E
Selling expenses C 75
Administrative expenses 50 40
Operating income 200 F
Required: Solve for the missing amounts (A,B,C,D,E,F)