2-26 (20 min.) Total costs and unit costs
1.
Number of attendees 0 100 200 300 400 500 600
Variable cost per person
($9 caterer charge –
$5 student door fee) $4 $4 $4 $4 $4 $4 $4
Fixed Costs $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600
Variable costs (number of
attendees × variable cost per
person) 0 400 800 1,200 1,600 2,000 2,400
Total costs (fixed + variable) $1,600 $2,000 $2,400 $2,800 $3,200 $3,600 $4,000
2-12
4. Using the calculations shown in the table in requirement 2, we can construct the cost-per-
attendee graph shown below:
0
5
10
15
20
25
0100 200 300 400 500 600 700
Number of Attendees
Cost per Attendee ($)
1.
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
0
5,000
10,000
Total Manufacturing Costs
Number of Flanges
Fixed Costs
Variable Costs
Total
Manufacturing
Costs
Note that the production costs include the $28,000 of fixed manufacturing costs but not the
$10,000 of period costs. The variable cost is $1 per flange for materials, and $2.80 per flange
($28 per hour divided by 10 flanges per hour) for direct manufacturing labor for a total of $3.80
per flange.
2-13
$3.80 × 5,000 + $28,000 = $47,000
Average (unit) cost = $47,000 ÷ 5,000 units = $9.40 per unit.
This is below Flora’s selling price of $10 per flange. However, in order to make a profit,
Gayle’s Glassworks also needs to cover the period (non-manufacturing) costs of $10,000, or
3. If Gayle’s Glassworks produces 10,000 units, then total inventoriable cost will be:
Variable cost ($3.80 × 10,000) + fixed manufacturing costs, $28,000 = total manufacturing
costs, $66,000.
Average (unit) inventoriable (manufacturing) cost will be $66,000 ÷ 10,000 units = $6.60 per flange
Unit total cost including both inventoriable and period costs will be
2-14
1. Manufacturing–sector companies purchase materials and components and convert them
into different finished goods.
2. Inventoriable costs are all costs of a product that are regarded as an asset when they are
incurred and then become cost of goods sold when the product is sold. These costs for a
3. (a) Perrier mineral water purchased for resale by Safeway—inventoriable cost of a
merchandising company. It becomes part of cost of goods sold when the mineral water is sold.
(b) Electricity used for lighting at GE refrigerator assembly plant—inventoriable cost of
a manufacturing company. It is part of the manufacturing overhead that is included in the
manufacturing cost of a refrigerator finished good.
2-29 (20 min.) Computing cost of goods purchased and cost of goods sold.
1a. Marvin Department Store
Schedule of Cost of Goods Purchased
For the Year Ended December 31, 2011
2-30 (20 min.) Cost of goods purchased, cost of goods sold, and income statement.
1a. Montgomery Retail Outlet Stores
Schedule of Cost of Goods Purchased
For the Year Ended December 31, 2011
2-17
1.
Direct materials inventory 10/1/2011 $ 105
Direct materials purchased 365
2.
Total manufacturing overhead costs $ 450
3.
Total manufacturing costs $ 1,610
4.
Work–in–process inventory 10/1/2011 $ 230
Total manufacturing costs 1,610
5.
Finished goods inventory 10/1/2011 $ 130
6.
Finished goods available for sale in October 2011
2-18
1. Canseco Company
Schedule of Cost of Goods Manufactured
Year Ended December 31, 2011
(in thousands)
Direct materials cost
2. Canseco Company
Income Statement
Year Ended December 31, 2011
(in thousands)
2-19
2-33 (30–40 min.) Cost of goods manufactured, income statement, manufacturing
company.
Piedmont Corporation
Schedule of Cost of Goods Manufactured
Year Ended December 31, 2011
(in thousands)
Plant insurance 2,000
Depreciation—plant building & equipment 21,000
Plant utilities 12,000
Repairs and maintenance—plant 8,000
Equipment lease costs 32,000
Revenues $600,000
Cost of goods sold:
Beginning finished goods, January 1, 2011 $123,000
Cost of goods manufactured 413,000
Cost of goods available for sale 536,000
2-20
2-34 (25–30 min.) Income statement and schedule of cost of goods manufactured.
Howell Corporation
Income Statement for the Year Ended December 31, 2011
(in millions)
Revenues $950
for the Year Ended December 31, 2011
(in millions)
Direct materials costs
Beginning inventory, Jan. 1, 2011 $ 15
Purchases of direct materials 325
Miscellaneous plant overhead 35 220
Manufacturing costs incurred during 2011 640
Add beginning work–in–process inventory, Jan. 1, 2011 10
Total manufacturing costs to account for 650
Deduct ending work-in-process, Dec. 31, 2011 5