Accounting Chapter 2 What The Amount Direct Materials Used During

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subject Authors Charles T. Horngren, Madhav Rajan, Srikant M. Datar

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66) What are the three types of manufacturing cost?
67) Explain the difference between an inventoriable cost and a period cost. What potential problems does
an inaccurate classification of product and period costs cause?
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Objective 2.6
1) Which of the following formulas determine cost of goods sold in a merchandising entity?
A) Beginning inventory + Purchases + Ending inventory = Cost of goods sold
B) Beginning inventory + Purchases - Ending inventory = Costs of goods sold
C) Beginning inventory - Purchases + Ending inventory = Cost of goods sold
D) Beginning inventory - Ending inventory - Purchases = Cost of goods sold
2) Which of the following formulas determine cost of goods sold in a manufacturing entity?
A) Beginning work-in-process inventory + Cost of goods manufactured - Ending work-in-process
inventory = Cost of goods sold
B) Beginning work-in-process inventory + Cost of goods manufactured + Ending work-in-process
inventory = Cost of goods sold
C) Cost of goods manufactured - Beginning finished goods inventory - Ending finished goods inventory =
Cost of goods sold
D) Cost of goods manufactured + Beginning finished goods inventory - Ending finished goods inventory
= Cost of goods sold
3) A company reported revenues of $375,000, cost of goods sold of $118,000, selling expenses of $11,000,
and total operating costs of $70,000. Gross margin for the year is ________.
A) $257,000
B) $246,000
C) $176,000
D) $252,000
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Answer the following questions using the information below:
Leslie Manufacturing reported the following:
Revenue
$450,000
Beginning inventory of direct materials, January 1, 2015
20,000
Purchases of direct materials
156,000
Ending inventory of direct materials, December 31, 2015
18,000
Direct manufacturing labor
21,000
Indirect manufacturing costs
42,000
Beginning inventory of finished goods, January 1, 2015
40,000
Cost of goods manufactured
114,000
Ending inventory of finished goods, December 31, 2015
45,000
Operating costs
150,000
4) What is Leslie's cost of goods sold?
A) $103,000
B) $109,000
C) $112,000
D) $118,000
5) What is Leslie's gross margin (or gross profit)?
A) $103,000
B) $152,000
C) $341,000
D) $317,000
6) Inventoriable costs and period costs flow through the income statement at a merchandising company
similar to the way costs flow at a manufacturing company.
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7) Cost of goods sold refers to the products brought to completion, whether they were started before or
during the current accounting period.
8) Springfield Manufacturing produces electronic storage devices, and uses the following three-part
classification for its manufacturing costs: direct materials, direct manufacturing labor, and indirect
manufacturing costs. Total indirect manufacturing costs for January were $300 million, and were
allocated to each product on the basis of direct manufacturing labor costs of each line. Summary data (in
millions) for January for the most popular electronic storage device, the Big Bertha, was:
Big Bertha
Direct manufacturing costs
$4,500,000
Direct manufacturing labor costs
$1,500,000
Indirect manufacturing costs
$4,250,000
Units produced
40,000
Required:
a. Compute the manufacturing cost per unit for each product produced in January.
b. Suppose production will be reduced to 30,000 units in February. Speculate as to whether the unit
costs in February will most likely be higher or lower than unit costs in January; it is not necessary to
calculate the exact February unit cost. Briefly explain your reasoning.
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9) Helmer Sporting Goods Company manufactured 100,000 units in 2015 and reported the following
costs:
Sandpaper $ 32,000 Leasing costs-plant $ 384,000
Materials handling 320,000 Depreciation-equipment 224,000
Coolants & lubricants 22,400 Property taxes-equipment 32,000
Indirect manufacturing labor 275,200 Fire insurance-equipment 16,000
Direct manufacturing labor 2,176,000 Direct material purchases 3,136,000
Direct materials, 1/1/15 384,000 Direct materials, 12/31/15 275,200
Finished goods, 1/1/15 672,000 Sales revenue 12,800,000
Finished goods, 12/31/15 1,280,000 Sales commissions 640,000
Work-in-process, 1/1/15 96,000 Sales salaries 576,000
Work-in-process, 12/31/15 64,000 Advertising costs 480,000
Administration costs 800,000
Required:
a. What is the amount of direct materials used during 2015?
b. What manufacturing costs were added to WIP during 2015?
c. What is cost of goods manufactured for 2015?
d. What is cost of goods sold for 2015?
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10) Messinger Manufacturing Company had the following account balances for the quarter ending March
31, unless otherwise noted:
Work-in-process inventory (January 1) $ 140,400
Work-in-process inventory (March 31) 171,000
Finished goods inventory (January 1) 540,000
Finished goods inventory (March 31) 510,000
Direct materials used 378,000
Indirect materials used 84,000
Direct manufacturing labor 480,000
Indirect manufacturing labor 186,000
Property taxes on manufacturing plant building 28,800
Salespersons' company vehicle costs 12,000
Depreciation of manufacturing equipment 264,000
Depreciation of office equipment 123,600
Miscellaneous plant overhead 135,000
Plant utilities 92,400
General office expenses 305,400
Marketing distribution costs 30,000
Required:
a. Prepare a cost of goods manufactured schedule for the quarter.
b. Prepare a cost of goods sold schedule for the quarter.
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11) Using the following information find the unknown amounts. Assume each set of information is an
independent case.
a. Merchandise Inventory Purchases $210,000
Cost of goods sold 223,000
Beginning balance 41,000
Ending balance ?
b. Direct Materials Beginning balance $ 7,000
Ending balance 14,000
Purchases 48,000
Direct materials used ?
c. Work-in-process Inventory Ending balance $ 22,000
Cost of goods manufactured 21,000
Beginning balance 8,000
Current manufacturing costs ?
d. Finished Goods Inventory Cost of goods manufactured $62,000
Ending balance 20,000
Cost of goods sold 61,000
Beginning balance ?
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12) Each of the following items pertains to one of these companies: Bedell Electronics (a manufacturing
company), Gregory Food Retailers (a merchandising company), and Larson Real Estate (a service sector
company). Classify each item as either inventoriable (I) costs or period (P) costs.
inventoriable (I) costs or
period (P) costs
a.
Salary of Bedell Electronics president
b.
Depreciation on Bedell Electronics assembly
equipment
c.
Salaries of Bedell's assembly line workers
d.
Purchase of frozen food for sale to customers by
Gregory Food Retailers
e.
Salaries of frozen food personnel at Gregory Food
Retailing
f.
Depreciation on freezers at Gregory Food Retailing
g.
Salary of a receptionist at Larson Real Estate
h.
Depreciation on a computer at Larson Real Estate
i.
Salary of a real estate agent at Larson Real Estate
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13) For last year, Wampum Enterprises reported revenues of $420,000, cost of goods sold of $108,000, cost
of goods manufactured of $101,000, and total operating costs of $70,000. Operating income for that year
was ________.
A) $319,000
B) $312,000
C) $249,000
D) $242,000
14) Prime costs include ________.
A) direct materials and direct manufacturing labor costs
B) direct manufacturing labor and manufacturing overhead costs
C) direct materials and manufacturing overhead costs
D) only direct materials
15) Leslie Manufacturing reported the following:
Revenue
$450,000
Beginning inventory of direct materials, January 1, 2015
20,000
Purchases of direct materials
156,000
Ending inventory of direct materials, December 31, 2015
18,000
Direct manufacturing labor
21,000
Indirect manufacturing costs
42,000
Beginning inventory of finished goods, January 1, 2015
40,000
Cost of goods manufactured
114,000
Ending inventory of finished goods, December 31, 2015
45,000
Operating costs
150,000
What is Leslie's operating income?
A) $186,000
B) $128,000
C) $177,000
D) $191,000
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16) Conversion costs include ________.
A) direct materials and direct manufacturing labor costs
B) direct manufacturing labor and manufacturing overhead costs
C) direct materials and manufacturing overhead costs
D) only direct materials
17) Total manufacturing costs equal ________.
A) direct materials plus prime costs
B) direct materials plus conversion costs
C) direct manufacturing labor costs plus sunk costs
D) direct manufacturing labor costs plus conversion costs
18) The following information pertains to the Emerald Corp:
Beginning work-in-process inventory $ 75,000
Ending work-in-process inventory 85,000
Beginning finished goods inventory 175,000
Ending finished goods inventory 200,000
Cost of goods manufactured 1,200,000
What is cost of goods sold?
A) $1,210,000
B) $1,175,000
C) $1,185,000
D) $1,225,000
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19) The following information pertains to Max Corporation:
Beginning work-in-process inventory $ 20,000
Ending work-in-process inventory 23,000
Beginning finished goods inventory 36,000
Ending finished goods inventory 34,000
Cost of goods manufactured 246,000
Sales 300,000
What is the gross profit margin earned by the company?
A) $52,000
B) $50,000
C) $48,500
D) $53,500
Answer the following questions using the information below:
Beginning finished goods, 1/1/2015 $ 92,000
Ending finished goods, 12/31/2015 75,000
Cost of goods sold 300,000
Sales revenue 450,000
Operating expenses 95,000
20) What is the cost of goods manufactured for 2015?
A) $285,000
B) $277,000
C) $283,000
D) $350,000

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