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Part 2
DE LEON COMPANY
Income Statement
For Year Ended December 31, 2013
Sales................................................................................ $4,525,000
167,350
Cost of goods manufactured.......................................... 1,935,65
0
0
Cost of goods sold......................................................... 1,966,510
Gross profit from sales..................................................... 2,495,990
Operating expenses
Selling expenses
Part 3
Raw
Materials
Finished
Goods
Cost of raw materials used.........................................................$909,850
Cost of finished goods sold........................................................ $1,966,510
* 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 supply might be
Similar inferences are drawn from the days’ sales in inventory ratio results. In
Title: Problem 18-8A
QA_Ori:
1. C 6. B
Q
Title: Problem 18-1B
QA_Ori:
The managerial accounting professional must do more than assign value to
ending inventory and cost of goods sold. S/he must understand the industry and
Specifically for the home electronics industry, the managerial accountant must
Title: Problem 18-2B
QA_Ori:
Instructor note: There can be more than one right answer to this problem. Students can experience some
A good answer to this problem should show estimates for:
(b) the added costs associated with both re-work and lost production.
A good answer would also show that purchasing a higher-quality product
(2) Estimates must be made of opportunity costs (and revenues):
(3) Recommend to buy from Supplier (B) based on the following:
Title: Problem 18-3B
QA_Ori:
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
3. Cost of factory rent—$6,750.................. $ 6,750 6,750
Part 2
Nextgen
Calculation of Manufacturing Cost per BD
For Year Ended December 31, 2013
Item
Total cost
(at 15,000 units) Per unit cost *
Variable production costs
Plastic for BDs.......................................... $ 1,500 $ 0.10
* Total cost / 15,000 BDs.
Part 3
If 10,000 BDs are produced, we would expect the cost of the plastic for the BDs to
Part 4
If 10,000 BDs are produced, we would expect the cost of the factory rent to remain at
QA_Edit:
Part 1: Cost classification and amounts
Part 2
Part 3
Title: Problem 18-4B
QA_Ori:
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
The memorandum content should include the following points:
The memorandum should begin with a clarification between prime and
conversion costs. Prime costs are resources consumed with direct production
QA_Edit:
Title: Problem 18-5B
QA_Ori:
Part 1
Unit and dollar amounts of raw materials inventory in blades
Beginning inventory, December 31, 2012 (2,500 x $20) ...............................
$ 50,000
Part 2
Topics of discussion for the memorandum include:
General description of the JIT inventory system and how it operates.
Cutting the blade inventory in half would free up $60,000 of working capital
(6,000 units x ½ x $20).
Title: Problem 18-6B
QA_Ori:
Part 1
MERCHANDISING BUSINESS
BADGER RETAIL
Partial Income Statement
For Year Ended December 31, 2013
Cost of goods sold
Merchandise inventory, December 31, 2012....................................$100,000
MANUFACTURING BUSINESS
NAIMA MFG
Partial Income Statement
For Year Ended December 31, 2013
Cost of goods sold
Finished goods inventory, December 31, 2012.................................$300,000
Cost of goods manufactured............................................................. 586,000
Part 2
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
The answers will vary slightly but should include:
The Merchandise Inventory account on December 31 for Badger and the Finished
Goods Inventory account on December 31 for Naima are computed and reported on
The inventory accounts must also be included in the current asset section of the
