CHAPTER 1
SOLUTIONS TO EXERCISES—SET B
EXERCISE 1-1B
(a) Factory utilities …………………………………………………………….. $ 18,600
Depreciation on factory equipment ………………………………… 14,445
Indirect factory labor …………………………………………………….. 48,900
Indirect materials ………………………………………………………….. 80,800
EXERCISE 1-2B
(a) Delivery service (product) costs:
Indirect materials ……………………………………………………
$ 8,775
Depreciation on delivery equipment ………………………..
11,200
Dispatcher’s salary …………………………..…………………….
7,000
Gas and oil for delivery trucks…………………………………
2,200
Delivery equipment repairs ……………………………………..
300
Total ………………………………………………………………
EXERCISE 1-2B (Continued)
(b) Period costs:
Property taxes on office building …………………………….
$ 3,625
CEO’s salary ………………………………………………………….
22,000
EXERCISE 1-3B
(a) Work-in-process, 1/1 …………………………. $ 17,500
Direct materials used ………………………… $135,000
Direct labor ………………………………………. 110,000
Manufacturing overhead
(b) Finished goods, 1/1 …………………………... $ 60,500
Cost of goods manufactured …………….. 352,500
EXERCISE 1-4B
Total raw materials available for use:
Direct materials used ……………………………………………….. $190,000
Add: Raw materials inventory (12/31) ……………………….. 17,500
Total raw materials available for use …………………………. $207,500
Advertising ……………………………………………………………
Office supplies……………………………………………………….
Office utilities ………………………………………………………..
Repairs on office equipment …………………………………..
745
Total ……………………………………………………………..
EXERCISE 1-4B (Continued)
Total cost of work in process:
Cost of goods manufactured ……………………………………….. $550,000
Total manufacturing costs:
Total cost of work in process ………………………………………. $617,000
Direct labor:
Total manufacturing costs …………………………………………… $409,500
Less: Total overhead …………………………………………………. 119,000
EXERCISE 1-5B
A + $63,200 + $46,500 = $175,650 $256,030 – $11,000 = F
A = $65,950 F = $245,030
EXERCISE 1-5B (Continued)
Additional explanation to EXERCISE 1-5B solution:
Case A
(a) Total manufacturing costs …………………………………………… $175,650
Less: Manufacturing overhead …………………………………….. 46,500
Direct labor ……………………………………………………….. 63,200
Direct materials used …………………………………………………… $ 65,950
Case B
(d) Direct materials used …………………………………………………… $ 72,330
Direct labor …………………………..…………………………………….. 86,500
Manufacturing overhead ……………………………………………… 81,600
Total manufacturing costs …………………………………………… $240,430
Case C
(g) Total manufacturing costs …………………………..………………. $273,700
Less: Manufacturing overhead ……………………………………. 102,000
Direct materials used ………………………………………… 137,060
Direct labor …………………………..…………………………………….. $ 34,640
EXERCISE 1-5B (Continued)
EXERCISE 1-6B
(a) (a) $127,000 + $140,000 + $83,000 = $350,000
(b) $350,000 + $33,000 – $360,000 = $23,000
(b) HEINTZ COMPANY
Cost of Goods Manufactured Schedule
For the Year Ended December 31, 2017
Work in process, January 1 ………………………….. $ 33,000
Direct materials …………………………………………… $127,000
Direct labor …………………………………………………. 140,000
EXERCISE 1-7B
(a) TART CORPORATION
Cost of Goods Manufactured Schedule
For the Month Ended June 30, 2017
Work in process, June 1 ……………………….. $ 4,800
Direct materials used ……………………………. $25,000
Direct labor …………………………..……………… 30,000
Manufacturing overhead
Indirect labor ………………………………… $4,000
Factory manager’s salary ………………. 4,500
(b) TART CORPORATION
Income Statement (Partial)
For the Month Ended June 30, 2017
Net sales ………………………………………………………. $85,100
Cost of goods sold
Finished goods inventory, June 1 ……………. $ 5,000
EXERCISE 1-8B
(a) PARE, ASH, AND TOCY
Schedule of Cost of Contract Services Provided
For the Month Ended August 31, 2017
$ 3,700
15,600
(b) The costs not included in the cost of contract services provided would all
be classified as period costs. As such, they would be reported on the
income statement under administrative expenses.
EXERCISE 1-9B
(a) Work-in-process, 1/1 ………………………… $ 20,300
Direct materials
Materials inventory, 1/1 ……………… $ 22,000
Materials purchased ………………….. 170,000
Materials available for use …………. 192,000
(b) Sales revenue………………………………….. $875,000
Cost of goods sold
Finished goods, 1/1 …………………… $ 27,000
Cost of goods manufactured …….. 548,100
Utilities for contract operations …………………………
Contract equipment depreciation ………………………
Insurance on contract operations ………………………
Janitorial services for professional offices …………
Total overhead …………………………………………….
EXERCISE 1-9B (Continued)
(c) Current assets
Inventories
Finished goods ……………………………………….. $29,000
(d) In a merchandising company’s income statement, the only difference would be
in the computation of cost of goods sold. Beginning and ending finished
EXERCISE 1-10B
(a) MARKUS MANUFACTURING
Cost of Goods Manufactured Schedule
For the Month Ended June 30, 2017
Work in process inventory, June 1 …………… $ 6,500
Direct materials
Raw materials inventory, June 1 ……….. $10,000
Raw materials purchases …………………. 64,000
Total raw materials available for use ……. 74,000
EXERCISE 1-10B (Continued)
(b) MARKUS MANUFACTURING
(Partial) Balance Sheet
June 30, 2017
Current assets
Inventories
Finished goods ………………………………….. $ 6,000
EXERCISE 1-11B
(a) Raw Materials account: (5,200 – 4,650) X $8 = $4,400
Work in Process account: (4,550 X 10%) X $8 = $3,640
(b) To: Chief Accountant
From: Student
Subject: Statement Presentation of Accounts
Two accounts will appear in the income statement. Cost of Goods Sold
will be deducted from net sales in determining gross profit. Selling ex–
penses will be shown under operating expenses and will be deducted
(a)
Product Costs
Cost Item
Direct
Materials
Direct
Labor
Manufacturing
Overhead
Period
Costs
Raw materials (1)
Wages for workers (2)
Rent on equipment
Indirect materials (3)
$65,000
$70,000
$ 1,500
10,875
Property taxes on factory building (5)
(4) $9,600/12 = $800.
(5) $7,200/12 = $600.
Production cost per racket = $153,675/2,500 = $61.47
PROBLEM 1-3C
(a) Case A
A = $6,025 + $3,000 + $6,000 = $15,025
$15,025 + $1,000 – B = $14,600
B = $15,025 + $1,000 – $14,600 = $1,425
Case B
G + $3,800 + $5,000 = $16,000
G = $16,000 – $3,800 – $5,000 = $7,200
$16,000 + H – $2,000 = $20,000
H = $20,000 + $2,000 – $16,000 = $6,000
PROBLEM 1-3C (Continued)
(b) CASE A
Cost of Goods Manufactured Schedule
Work in process, beginning ………………………….. $ 1,000
Direct materials ……………………………………………. $6,025
Direct labor ………………………………………………….. 3,000
(c) CASE A
Income Statement
Sales revenue ………………………………………………. $22,500
Less: Sales discounts ………………………………….. 1,770
Net sales ……………………………………………………… $20,730
Cost of goods sold
Finished goods inventory, beginning ……… $ 3,700
CASE A
(Partial) Balance Sheet
Current assets
Cash ……………………………………………………… $ 4,200
Receivables (net) …………………………………… 11,000
Inventories
PROBLEM 1-4C
(a) FALCON MANUFACTURING COMPANY
Cost of Goods Manufactured Schedule
For the Year Ended December 31, 2017
Work in process inventory,
January 1 …………………………... $ 9,650
Direct materials
Raw materials inventory,
January 1 ……………………. $ 48,500
Manufacturing overhead
Plant manager’s salary ……. 42,000
Indirect labor ………………….. 18,100
Factory utilities ……………….. 12,900
Factory machinery
PROBLEM 1-4C (Continued)
(b) FALCON MANUFACTURING COMPANY
(Partial) Income Statement
For the Year Ended December 31, 2017
Sales revenues
Sales revenue …………………………………….. $477,000
Less: Sales discounts ………………………… 2,500
Net sales …………………………………………….. $474,500
(c) FALCON MANUFACTURING COMPANY
(Partial) Balance Sheet
December 31, 2017
Assets
Current assets
Cash …………………………………………………… $ 33,500
Accounts receivable ………………………….... 27,000
Inventories
PROBLEM 1-5C
(a) FATHOM COMPANY
Cost of Goods Manufactured Schedule
For the Month Ended August 31, 2017
Work in process, August 1 ……………… $ 18,975
Direct materials
Raw materials inventory,
August 1 ……………………………… $ 19,500
Manufacturing overhead
Factory facility rent …………………. $ 60,000
Depreciation on factory
equipment …………………………... 35,000
Indirect labor ………………………….. 15,000
PROBLEM 1-5C (Continued)
(b) FATHOM COMPANY
Income Statement
For the Month Ended August 31, 2017
Sales (revenue) …………………………………………… $675,000
Cost of goods sold
Finished goods inventory, August 1 ……… $ 40,000
Cost of goods manufactured ………………… 475,375