Chapter 2 – Basic Managerial Accounting Concepts
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.
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
Chapter 2 – Basic Managerial Accounting Concepts
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.)
Materials inventory, 5/1
Purchases of materials
20,000
Materials inventory, 5/31
(2,500)
Materials used
Direct labor
11,500
Overhead (7,500 + 6,500)
Total manufacturing costs
Work in process, 5/1
3,100
Work in process, 5/31
Cost of goods manufactured
Sales revenue
Cost of goods sold*
Gross margin
Less:
Selling expense
Administrative expense
Operating income
*Cost of goods manufactured
Finished goods inventory, 5/1
5,500
Finished goods inventory, 5/31
Cost of goods sold
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
Chapter 2 – Basic Managerial Accounting Concepts
Administrative expenses
50
40
Operating income
200
F
Required: Solve for the missing amounts (A,B,C,D,E,F)
Case #1
Case #2
Sales
$1,000
$1,300
Cost of goods manufactured
$ 750
$ 500
Finished goods inventory (beginning balance)
100
300
Finished goods inventory (ending balance)
Cost of goods sold
$ 700
$ 600
Gross margin
300
700
Selling expenses
50
75
Administrative expenses
50
40
Operating income
$ 200
$ 585
169. See the following separate cases.
Case #1
Case #2
Purchase of materials
$ 5,000
C
Materials inventory (beginning balance)
A
$ 220
Materials inventory (ending balance)
1,000
350
Direct labor
7,000
4,250
Factory supervision
1,500
1,100
Factory supplies
1,250
900
Total manufacturing costs
14,500
D
Work in process inventory (beginning balance)
1,200
1,230
Work in process inventory (ending balance)
B
650
Cost of goods manufactured
14,600
10,200
Required: Solve for the missing amounts (A,B,C,D).
Case #1
Case #2
Purchases of materials
Materials inventory (beginning balance)
750
220
Materials inventory (ending balance)
(1,000)
(350)
Materials used
Direct labor
7,000
4,250
Overhead
Total manufacturing costs
Work in process inventory, (beginning balance)
1,200
1,230
Work in process inventory, (ending balance)
(650)
Cost of goods manufactured
170. Rancor Company’s accountant prepared the following income statement for the month of August.
Rancor Company
Income Statement
For the Month of August
Sales revenue
$912,200
Cost of goods sold
601,920
Gross margin
$310,280
Less:
Chapter 2 – Basic Managerial Accounting Concepts
Selling expense
164,160
Administrative expense
63,840
Operating income
$ 82,280
Required: (Round to the nearest whole percent)
A.
Calculate the sales revenue percent
B.
Calculate the cost of goods sold percent
C.
Calculate the gross margin percent
D.
Calculate the selling expense percent
E.
Calculate the administrative expense percent
F.
Calculate the operating income percent
A.
$912,000 / $912,200 = 100%
B.
$601,920 / $912,200 = 66%
C.
$310,280 / $912,200 = 34%
D.
$164,160 / $912,200 = 18%
E.
$63,840 / $912,200 = 7%
$82,280 / $912,200 = 9%
171. Extrema Company supplied the following data at the end of the current year.
Finished goods inventory, Jan 1.
$ 12,000
Finished goods inventory, Dec. 31
7,500
Cost of goods manufactured
152,380
Sales revenue
212,000
Sales commissions
19,080
Research and development costs
15,900
Required:
A.
Calculate the cost of goods sold percent
B.
Calculate the gross margin percent
C.
Calculate the selling expense percent
D.
Calculate the administrative expense percent
E.
Calculate the operating income percent
A.
Cost of goods manufactured
Finished goods inventory, 1/1
12,000
Finished goods inventory, 12/31
Cost of goods sold
Sales revenue
Cost of goods sold
156,880
Gross margin
$ 55,120
Selling expense
19,080
Administrative expense
15,900
Operating income
$ 20,140
A.
156,880 / 212,000 = 74%
B.
55,120 / 212,000 = 26%
C.
19,080 / 212,000 = 9%
Chapter 2 – Basic Managerial Accounting Concepts
172. Rizzuto Company supplied the following information for the month of January.
Cost of Goods Sold percent
62%
Selling Expense percent
6%
Administrative Expense percent
13%
Required: Reconstruct Rizzuto’s income statement for January assuming that their total sales revenue for the month
equaled $500,000.
Sales revenue
Cost of goods sold (500,000 × 62%)
Gross margin (500,000 × 38%)
Less:
Selling expense (500,000 × 6%)
Administrative expense (500,000 × 13%)
Operating income
173. Cashman Company supplied the following information for the month of December.
Operating income percent
10.5%
Gross margin percent
30%
Required: Solve for the following amounts assuming that Cashman Company’s operating income in December was
$44,100.
A.
Sales revenue
B.
Cost of goods sold
C.
Total selling and administrative expenses
A.
Sales Revenue = $44,100 / 0.105 = $420,000
B.
Cost of goods sold = $420,000 × 0.70 = $294,000
C.
Gross margin ($420,000 × 0.30)
Less: Selling and administrative expense
Operating income
174. Wapato Company produces a product with the following per unit costs.
Direct materials
$17
Direct labor
11
Overhead
12
Last year, Wapato produced and sold 3,000 units at a sales price of $80 each. Total selling and administrative expenses
were $25,000.
Required: Solve for the following:
A.
Total cost of goods sold for last year
B.
Operating income for last year
C.
Total gross margin for last year
D.
15,900 / 212,000 = 7.5%
20,140 / 212,000 = 9.5%
Chapter 2 – Basic Managerial Accounting Concepts
D.
Prime cost per unit
A.
($17 + $11 + $12) × 3,000 = $120,000
B. & C.
Sales revenue (3,000 × $80)
Cost of goods sold
Gross margin
Less:
Selling and administrative expenses
Operating income
D.
175. Tesco Company showed the following costs for last month:
Direct materials
$40,000
Direct labor
35,000
Overhead
52,000
Selling expense
17,000
Administrative expense
12,000
Last month, Tesco produced and sold 20,000 units at a sales price per unit of $18. Assume no beginning or ending
inventory balances for work in process and finished goods inventories.
Required: Solve for the following amounts.
A.
Total product cost for last month
B.
Unit product cost for last month
C.
Total period costs
D.
Gross margin for last month
E.
Operating income for last month
A.
$40,000 + $35,000 + $52,000 = $127,000
B.
$127,000 / 20,000 = $6.35
C.
$17,000 + $12,000 = $29,000
D & E.
Sales revenue (20,000 × $18)
Cost of goods sold
Gross margin
Less:
Selling expense
17,000
Administrative expense
Operating income
176. Stabler Company, a manufacturing firm, has provided the following information for the month of May:
Factory supplies used
$22,000
Depreciation on factory building
10,000
Commissions for sales personnel
32,000
Salary of company CFO
9,000
Chapter 2 – Basic Managerial Accounting Concepts
Factory janitorial costs
3,000
Research and development
5,000
Depreciation on corporate office
8,500
Advertising costs
2,500
Direct labor cost
40,000
Purchases of raw materials
15,000
Finished goods inventory units, May 1
4,000
Finished goods inventory units, May 31
6,500
Finished goods inventory, May 1
36,000
Finished goods inventory, May 31
59,865
Work in process inventory, May 1
7,500
Work in process inventory, May 31
3,300
Materials inventory, May 1
2,100
Materials inventory, May 31
4,200
Required:
A.
Prepare a Statement of Cost of Goods Manufactured.
B.
Calculate the cost of one unit assuming 10,000 units were completed during May.
C.
Prepare a Statement of Cost of Goods Sold.
D.
Calculate the number of units that were sold during May.
E.
Prepare an Income Statement assuming the sales price per unit is $35.
Materials Inventory, May 1
Purchases of materials
15,000
Materials Inventory, May 31
Materials used
Direct Labor
40,000
Total manufacturing costs
Work in Process Inventory, May 1
7,500
Work in Process Inventory, May 31
Cost of Goods Manufactured
Cost of Goods Manufactured
Finished Goods Inventory, May 1
36,000
Finished Goods Inventory, May 31
Cost of Goods Sold
Units sold during May $ 9,728
Chapter 2 – Basic Managerial Accounting Concepts
177. What is the difference between a period cost and a product cost?
178. List and describe the three categories of manufacturing costs.
179. Explain the difference between a cost that is included in valuing inventory and a cost that is not included in valuing
inventory.
180. Describe the purpose of the three inventory accounts used by a manufacturer.
181. What is the difference between total manufacturing costs and cost of goods manufactured?
Chapter 2 – Basic Managerial Accounting Concepts
182. You are the accounting manager at Falcon Inc. You just hired a new staff accountant to assist you in breaking out
costs into their appropriate classifications. The staff accountant asks you why cost classification is important.
How would you respond?
Select the appropriate classification for each of the following costs.
a.
Period
b.
Product
183. Advertising costs
a
184. Cost accountant’s salary
a
185. Factory supervisor’s salary
186. Research and development costs
a
187. Marketing costs
a
188. Cost of shipping products to customers
a
189. Supplies for factory washroom
190. Assembly line worker’s wages
Select the appropriate classification for each of the costs incurred by a manufacturer of automobiles.
a.
direct materials
ending balance of work in process from the total manufacturing costs.
You Decide
Chapter 2 – Basic Managerial Accounting Concepts
b.
direct labor
c.
overhead
d.
selling expense
e.
administrative expense
191. cost of tires
a
192. factory supplies
c
193. general accounting costs
e
194. factory security costs
c
195. factory janitorial costs
c
196. salary of chief executive officer
e
197. depreciation of vehicles used by sales personnel
198. cost of windshields used in the production process
a
Select the appropriate classification for each of the items listed below.
a.
Product cost
b.
Period cost
199. Cost of nails used by a home builder
a
200. Fees paid to an advertising firm
201. Sugar used in soft drink production
a
202. Rental cost of executive Lear jet
203. Cost of conference for sales team
204. Factory supervisor’s salary
Chapter 2 – Basic Managerial Accounting Concepts
205. Fees paid to outside auditing firm
206. Factory security costs
Select the appropriate definition for each of the items listed below.
a.
per-unit prime cost
b.
per-unit conversion cost
c.
per-unit cost of goods manufactured
207. (direct labor + overhead)/units produced
208. (total manufacturing costs + work in process beginning − work in process ending)/units produced
209. (direct materials + direct labor)/units produced
Select the appropriate definition for each of the items listed below.
a.
period cost
b.
direct cost
c.
opportunity cost
d.
variable cost
e.
indirect cost
f.
fixed cost
g.
product cost
210. A benefit given up when one alternative is chosen over another
211. A cost that stays the same in total regardless of changes in output
212. A cost that is difficult to trace to a cost object
213. A manufacturing cost
214. A cost that is not inventoried
215. A cost that can be easily traced to a cost object
Chapter 2 – Basic Managerial Accounting Concepts
216. A cost that increases in total as output increases
Select the appropriate classification of the items listed below.
a.
selling expense
b.
administrative expense
c.
direct materials
d.
direct labor
e.
overhead
217. Chief of surgery’s salary at a hospital
218. Wages of assembly line workers in an automobile plant
219. Cost of lubricating factory machinery
e
220. Cost of shipping goods to customers
a
221. Glue used in the manufacture of furniture
e
222. Cost of engines in the manufacture of airplanes
c
223. Salary of chief executive officer
224. A professor’s salary at a university
Select the appropriate classification of the output generated by each of the following industries.
a.
Tangible
b.
Intangible
225. CPA firm
226. Car manufacturer
a
227. Law firm
228. Medical clinic
Chapter 2 – Basic Managerial Accounting Concepts
229. Bowling alley
230. Fast food restaurant
231. Video rental
232. Professional sports franchise
Select the appropriate definition for each of the items listed below.
a.
Work in process inventory
b.
Finished goods inventory
c.
Cost of goods sold
d.
Cost of goods manufactured
e.
Total manufacturing costs
233. The cost of units finished but not sold at the end of the current period
234. Direct materials + direct labor + overhead
235. The cost of units unfinished at the end of the current period
236. Beginning finished goods inventory + Cost of goods manufactured – Ending finished goods inventory
237. (direct materials + direct labor + overhead) +/− the change in work in process inventory from the beginning to the
end of the current period
Select the appropriate item for each of the definitions listed below.
a.
gross margin
b.
selling expenses
c.
sales revenue
d.
cost of goods sold
e.
operating income
238. gross margin − selling and administrative expenses
239. marketing and distributing costs
Chapter 2 – Basic Managerial Accounting Concepts
240. price x units sold
241. sales revenue − cost of goods sold
242. Beginning finished goods inventory + Cost of goods manufactured – Ending finished goods inventory
Select the appropriate definition of each of the items listed below.
a.
Income Statement
b.
Cost of goods manufactured
c.
Work in process
d.
Gross margin
e.
Operating income
243. Gross margin − selling and administrative expenses
244. The difference between sales revenue and cost of goods sold
245. The total cost of goods completed during the current period
246. Covers a particular period of time
247. Cost of partially completed goods