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PROBLEM SET A
Problem 18-1A (45 minutes)
Part 1 Cost classification and amounts
Costs Variable Fixed Product Period
1. Plastic for casing—$17,000.................. $17,000 $17,000
2. Wages of assembly workers—$82,000.... 82,000 82,000
3. Property taxes on factory—$5,000....... $ 5,000 5,000
Part 2
TrueBeat
Calculation of Manufacturing Cost per Drum Set
For Year Ended December 31, 2015
Item
Total cost
(at 1,000 units)
Per unit cost
(Total / 1,000)
Variable production costs
Plastic for casing $ 17,000 $ 17
Problem 18-1A (continued)
Part 3
If 1,200 drum sets are produced, we would expect the cost of the plastic for
Part 4
If 1,200 drum sets are produced, we would expect the cost of the property
Problem 18-2A (30 minutes)
Costs Product
Cost
Dir.
Mtls.
Dir.
Labo
r
Over-
head
Period
Cost Sellin
g
Gen. &
Admin
Advertising expense X X
Depr. expense-Office equip. X X
Depr. expense-Selling equip. X X
Problem 18-3A (75 minutes)
Part 1
LEONE COMPANY
Schedule of Cost of Goods Manufactured
For Year Ended December 31, 2015
Direct materials
Raw materials inventory, December 31, 2014..........$ 166,850
Raw materials purchases.......................................... 925,000
Raw materials available for use................................1,091,850
Less raw materials inventory, December 31, 2015..... 182,000
Direct materials used................................................ $ 909,850
Problem 18-3A (Continued)
Part 2
LEONE COMPANY
Income Statement
For Year Ended December 31, 2015
Sales.............................................................................. $4,462,500
Cost of goods sold
Finished goods inventory, December 31, 2014.........$ 167,350
Cost of goods manufactured.....................................1,935,650
Problem 18-3A (Continued)
Part 3
Raw
Materials
Finished
Goods
Cost of raw materials used....................................................$909,850
Cost of goods sold................................................................. $1,966,510
Beginning inventory...............................................................$166,850 $ 167,350
* To calculate the turnover and days’ sales in inventory for raw materials, use raw materials used
rather than cost of goods sold.
Discussion: The inventory turnover ratio for the raw materials inventory is
significantly lower than the turnover ratio for finished goods.
One reason for the difference could be that source of supply for raw materials
is relatively undependable, so that management believes it is necessary to
carry a larger inventory to sustain operations through periods when the
Similar inferences are drawn from the days’ sales in inventory ratio results. In
Problem 18-4A (40 minutes)
Part 1
Units and dollar amounts of raw materials inventory in heels
Note: 16,600 pairs of boots manufactured require 33,200 heels.
Part 2 Analysis Component
Topics of discussion for this memorandum include:
Description (general) of the JIT inventory system and how it operates.
Problem 18-5A (40 minutes)
Part 1
MERCHANDISING BUSINESS
MUSIC WORLD RETAIL
Partial Income Statement
For Year Ended December 31, 2015
Cost of goods sold
Merchandise inventory, December 31, 2014................................ $ 200,000
MANUFACTURING BUSINESS
WAVE-BOARD MFG.
Partial Income Statement
For Year Ended December 31, 2015
Cost of goods sold
Finished goods inventory, December 31, 2014...........................$ 500,000
Part 2
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
The answers will vary but should include:
The Merchandise Inventory account on December 31 for Music World and
The inventory accounts must also be included in the current asset section
PROBLEM SET B
Problem 18-1B (45 minutes)
Part 1 Cost classification and amounts
Cost by Behavior Cost by Function
Costs Variable Fixed Product Period
1. Plastic for BDs—$1,500......................
$ 1,500 $ 1,500
2. Wages of assembly workers
—$30,000......................................
30,000 30,000
