2-101
116.
Shuster Industries manufactures baseballs and identified the following costs associated
with their manufacturing activity (V = Variable; F = Fixed). The following information is
available for the month of June when 25,000 baseballs were produced, but only 23,500
baseballs were sold.
Power to run plant equipment (V)
$25,000
Other selling costs (V)
$149,150
Indirect labor (F)
$50,000
Property taxes on building (F)
$12,500
Marketing costs (V)
$30,000
Factory Supervisor salaries (F)
$125,000
Direct materials used (V)
$500,000
Depreciation on plant equipment (F)
$68,000
Shipping costs to customer (V)
$48,800
Indirect material and supplies (V)
$37,500
Direct labor (V)
$250,000
Administrative salaries (F)
$300,000
Insurance on factory building (F)
$62,500
Utilities, factory (V)
$50,000
General office costs (F)
$48,000
Required:
Compute the following amounts for July, assuming 30,000 baseballs were produced and
sold: (Assume normal production ranges from 15,000 to 40,000 baseballs)
(a) Total manufacturing costs.
(b) Total conversion costs.
(c) Period costs per unit.
(d) Full costs per unit.
2-103
117.
Each column below is independent and for a different company. Use the data given, which
refer to one year for each example, to find the unknown account balances.
Company
Southeast
Northwest
Direct materials
inventory,
January 1
(a)
$16,640
Direct materials
inventory,
December 31
$4,850
14,664
Work-in-process
inventory,
January 1
2,700
85,696
Work-in-process
inventory,
December 31
3,800
79,800
Finished goods
inventory,
January 1
1,900
17,888
Finished goods
inventory,
December 31
300
29,536
Purchases of
direct materials
16,100
66,768
Cost of goods
manufactured
during this year
(b)
326,320
Total
manufacturing
costs
55,550
320,424
Cost of goods
sold
56,050
314,673
Gross margin
(c)
666,931
Direct labor
26,450
129,688
Direct materials
used
15,300
68,744
Manufacturing
overhead
13,800
(g)
Sales revenue
103,300
981,604
2-105
118.
The following data appeared in Moline Company’s records on December 31:
Direct Materials Inventory, Dec. 31
$535,500
Direct Materials purchased during the
year
2,268,000
Finished Goods Inventory, Dec. 31
567,000
Indirect labor
201,600
Direct labor
2,520,000
Factory heat, light, and power
234,360
Factory depreciation
396,900
Administrative salaries
323,820
Miscellaneous factory cost
200,970
Marketing costs
233,100
Other administrative costs
113,400
Maintenance on factory equipment
76,230
Insurance on factory equipment
119,700
Distribution costs
10,080
Taxes on manufacturing property
82,530
Legal fees on customer complaint
51,660
Direct materials put into production
2,407,230
Work-in-process inventory, Dec. 31
154,980
2-109
119.
The information below has been taken from the cost records of Gator Corp. for the past
year:
Raw materials used in
production
$326
Total manufacturing costs
charged to production during the
year (includes $135 of factory
overhead)
686
Cost of goods available for sale
826
Selling & administrative
expenses
25
Inventories:
Beginning
Ending
Direct materials
75
85
Work in process
80
30
Finished goods
90
110
120.
Information from the records of the Shawnee Production Company for the month of
January is as follows:
2-110
Purchases of direct materials
$18,000
Indirect labor
5,000
Direct labor
10,400
Depreciation on factory
machinery
3,000
Sales
55,300
Selling and administrative
expenses
6,300
Rent on factory building
7,000
Inventories:
January 1
January 31
Direct materials
$8,000
$8,700
Work-in–
process
2,100
3,200
Finished goods
5,000
5,700
Beginning direct materials
Purchases of direct materials
Less ending direct materials
Direct materials used
Direct labor
2-112
121.
The information below has been taken from the cost records of Toro Corp. for the past
year:
Raw materials used in
production
$572
Total manufacturing costs
charged to production during the
year (includes $255 of factory
overhead)
1,095
Cost of goods available for sale
1,415
Selling & administrative
expenses
255
Inventories:
Beginning
Ending
Direct materials
175
155
Work in process
220
190
Finished goods
290
310
122.
Information from the records of the Navaho Industries for the month of July is as follows:
2-113
Purchases of direct materials
$24,000
Indirect labor
6,500
Direct labor
13,200
Depreciation on factory
machinery
3,600
Sales
75,300
Selling and administrative
expenses
8,900
Rent on factory building
8,400
Inventories:
January 1
January 31
Direct materials
$8,000
$6,700
Work-in–
process
1,100
1,600
Finished goods
9,000
6,800
Beginning direct materials
Purchases of direct materials
Less ending direct materials
Direct materials used
Direct labor
Overhead:
Indirect labor
Depreciation on machinery
Rent on building
2-115
123.
The Yellville Company provided you with the following information for the fiscal year
ended December 31.
Work-in-process inventory, 12/31
$115,800
Finished goods inventory, 1/1
614,800
Direct labor costs incurred
2,008,600
Manufacturing overhead costs
5,368,800
Direct materials inventory, 1/1
501,600
Finished goods inventory, 12/31
1,022,000
Direct materials purchased
3,500,400
Work-in-process inventory, 1/1
202,000
Direct materials inventory, 12/31
338,800
124.
The Younce Equipment Company provided you with the following information for the fiscal
2-116
year ended December 31.
Work-in-process inventory,12/31
$28,950
Finished goods inventory, 1/1
153,700
Direct labor costs incurred
502,150
Manufacturing overhead costs
1,364,700
Direct materials inventory, 1/1
125,400
Finished goods inventory, 12/31
225,500
Direct materials purchased
875,100
Work-in-process inventory, 1/1
50,500
Direct materials inventory, 12/31
84,700
125.
Mobile Device Retail has collected the following information for May:
Sales revenue
$1,650,000
Store rent
84,000
Utilities
57,200
Sales commissions
247,500
2-117
Merchandise inventory, May 1
118,200
Merchandise inventory, May 31
124,600
Freight-in
54,600
Administrative costs
115,100
Merchandise purchases
1,091,000
Required:
Prepare an income statement for the month of May.
Sales revenue
Merchandise inv 5/1
Purchases
Freight-in
Goods available for sale
Less merchandise inv 5/31
Cost of goods sold
Gross margin
Sales commissions
247,500
Store rent
Total expenses
503,800
Operating profit
126.
Fowler Retail has collected the following information for August:
2-118
Sales revenue
$1,155,000
Store rent
58,800
Utilities
40,400
Sales commissions
173,300
Merchandise inventory, 8/1
87,220
Merchandise inventory, 8/31
82,740
Freight-in
30,300
Administrative costs
80,600
Merchandise purchases
763,700
Required:
Prepare an income statement for the month of August.
Sales revenue
Merchandise inv 8/1
Purchases
Freight-in
Goods available for sale
Less merchandise inv 5/31
Cost of goods sold
Gross margin
Sales commissions
Store rent
2-120
127
.
Zach Hartman has developed a new electronic device that he has decided to produce and
market. The production facility will be in a nearby industrial park which Zach will rent for
$4,000 per month. Utilities will cost about $500 per month. He will use his personal
computer, which he purchased for $2,000 last year, to monitor the production process. The
computer will become obsolete before it wears out from use. The computer will be
depreciated at the rate of $1,000 per year. He will rent production equipment at a monthly
cost of $8,000. Zach estimates the material cost per finished unit of product to be $50, and
the labor cost to be $10. He will hire workers, and spend his time promoting the product. To
do this he will quit his job which pays $4,500 per month. Advertising will cost $2,000 per
month. Zach will not draw a salary from the new company until it gets well established.
Required:
Complete the chart below by placing an “X” under each heading that helps to identify the
cost involved. There can be “Xs” placed under more than one heading for a single cost; e.g., a
cost might be a sunk cost, an overhead cost, and a product cost. There would be an “X”
placed under each of these headings opposite the cost.
Product Cost
Opportunit
y Cost
Sun
k
Cost
Variabl
e Cost
Fixe
d
Cost
Direct
Material
s
Direc
t
Labor
Manufacturin
g Overhead
Sellin
g Cost
Differentia
l Cost
Facility rent
Utilities
Personal
computer
depreciatio
n
Equipment
rent
Material
cost
Labor cost
Present