Accounting Chapter 1 Homework Option A results in the lowest cost of goods manufactured by

Chapter 1 – Weygandt Managerial 7e

Challenge Exercises Solutions

Solution

CE 1-1

(a) Option A:

(a) Direct materials used = $175,575 – 46,500 – 47,000 = $82,075

(b) Work in process 1/1/17 = $197,075 – 175,575 = $21,500

(b) Option A results in the lowest cost of goods manufactured by using moderately priced

materials and reasonable labor and manufacturing overhead charges. However, the

materials’ supplier does not guarantee that the materials will always be available in the

quantities needed by Banta Company. This could result in slowdowns in production and

missed deadlines nullifying any savings.

CE 1-2

Part a:

Williams Co.

Cost of Goods Manufacturing Schedule

For Month Ending September 30, 2017

Work in Process 9/1/17 $7,500

Direct Materials

Raw Materials Inventory 9/1/177 $12,000

Add: Raw Materials purchases 62,500

Total Raw materials available for use 74,500

Part b:

Williams Co.

Balance Sheet Presentation (partial)

September 30, 2017

Inventories:

Finished Goods $ 12,000

CE 1-2 (cont.)

Part c:

Williams Co.

Cost of Goods Manufacturing Schedule

For Month Ending September 30, 2017

Work in Process 9/1/17 $7,500

Direct Materials

Raw Materials Inventory 9/1/17 $12,000

Add: Raw Materials purchases 62,500

The purchase of the new automated assembly line lowers cost of goods manufactured by

$17,300. The purchase appears to be worth the investment based on the cost of goods