EXERCISES
Exercise 18-1 (10 minutes)
Exercise 18-2 (20 minutes)
Most fixed costs are indirect. Fixed costs normally are resources acquired to
For example, as production increases, the total cost of the laces consumed in
production increases. These laces might be classified as direct materials.
In addition, the direct costs—direct materials and direct labor—are variable.
Exercise 18-3 (10 minutes)
1. Fixed, indirect
Exercise 18-4 (20 minutes)
Cost Variable Fixed Direct Indirect
1. Advertising……………………………………. X X
2. Beverages and snacks……………………. X X
Exercise 18-5 (15 minutes)
1. Direct material
2. Factory overhead
3. Direct labor
Exercise 18-6 (20 minutes)
Exercise 18-7 (20 minutes)
Part 1
Company 1, Sunrise Foods, is a merchandising firm with only one
Exercise 18-7 (concluded)
Part 2
Company 1
Sunrise Foods
Balance Sheet–Current Asset Section
December 31, 2015
Cash………………………………………………………………………………………………$ 7,000
Accounts receivable………………………………………………………………………. 62,000
Company 2
Rayzer Skis Mfg.
Balance Sheet–Current Asset Section
December 31, 2015
Cash………………………………………………………………………………………………$ 5,000
Accounts receivable………………………………………………………………………. 75,000
Discussion: The current asset section of the balance sheet for these two
companies differs because one is a merchandiser and one is a
Exercise 18-8 (30 minutes)
Garcon
Company
Pepper
Company
1. COST OF GOODS MANUFACTURED
Direct materials
Beginning raw materials inventory…………….. $ 7,250 $ 9,000
Direct labor…………………………………………………. 19,000 35,000
Factory overhead
Total manufacturing costs……………………………. 104,180 135,910
2. COST OF GOODS SOLD
Beginning finished goods inventory…………….. $ 12,000 $ 16,450
E EExercise 18-9 (30 minutes)
GARCON COMPANY
Income Statement
For Year Ended December 31, 2015
Sales………………………………………………………………………………. $ 195,030
Cost of goods sold (from Ex. 18-8)……………………………………. 91,030
PEPPER COMPANY
Income Statement
For Year Ended December 31, 2015
Sales………………………………………………………………………………. $ 290,010
Cost of goods sold (from Ex. 18-8)……………………………………. 143,010
Exercise 18-9 (continued)
GARCON COMPANY
Partial Balance Sheet
As of December 31, 2015
Cash……………………………………………………………………………. $20,000
Accounts receivable, net………………………………………………. 13,200
Inventories
PEPPER COMPANY
Partial Balance Sheet
As of December 31, 2015
Cash……………………………………………………………………………. $15,700
Accounts receivable, net………………………………………………. 19,450
Inventories