Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
835
Exercise 14–11 (concluded)
Manufacturing Business
PRECISION MANUFACTURING
Computation of Cost of Goods Sold
Cost of goods sold
Finished goods inventory, beginning …………………………..
$ 450,000
Cost of goods manufactured ………………………………………….
Goods available for sale ………………………………………………..
Less finished goods inventory, ending …………………………..
Beginning Inventory 450,000
Finished Goods Inventory
836
Exercise 14-12 (25 minutes)
Account
Balance
Sheet
Schedule of
COGM
Accounts receivable ……………………….
✓
Beginning finished goods inventory
Computer supplies used in office …….
Wages for assembly workers …………..
Ending work in process inventory ……
✓
Factory maintenance wages …………….
Property taxes on factory building …..
Raw materials purchases ………………..
Sales ………………………………………………
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
837
Exercise 14-13 (25 minutes)
DELRAY MFG.
Schedule of Cost of Goods Manufactured
For Year Ended December 31
Direct materials
Raw materials inventory, beginning …………………………..
$ 37,000
Raw materials purchases …………………………………………….
175,600
Raw materials available for use …………………………………..
Less raw materials inventory, ending …………………………..
42,700
Direct materials used ………………………………………………….
Factory overhead
Factory supplies used ………………………………………………….
17,840
Indirect labor ……………………………………………………………….
47,000
Repairs—Factory equipment ………………………………………..
5,250
Rent cost of factory building ………………………………………..
57,000
Total factory overhead costs ……………………………………….
Total manufacturing costs ……………………………………………..
Total cost of work in process …………………………………………
Less work in process inventory, ending ………………………….
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
838
Exercise 14-14 (20 minutes)
DELRAY MFG.
Income Statement
For Year Ended December 31
Sales ………………………………………………………………………………
$1,250,000
Cost of goods sold
Finished goods inventory, beginning …………………………..
$ 62,750
Cost of goods manufactured ………………………………………..
534,390
Cost of goods available for sale ……………………………………
Less finished goods inventory, ending …………………………..
Cost of goods sold ………………………………………………………
529,840
Gross profit ……………………………………………………………………
Operating expenses
Advertising expense …………………………………………………….
General and administrative expenses …………………………..
129,300
Total operating expenses …………………………………………….
223,300
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
839
Exercise 14-15 (25 minutes)
Beck Manufacturing
Schedule of Cost of Goods Manufactured
For Year Ended December 31, 2019
Direct materials ………………………………………………………………………….
$ 46,500
Direct labor ……………………………………………………………………………….
27,500
Total manufacturing costs ……………………………………………………….
Add work in process, beginning ………………………………………………….
Beck Manufacturing
Partial Income Statement
For Year Ended December 31, 2019
Cost of goods sold
Finished goods inventory, beginning …………………………..……………
$ 16,000
Cost of goods manufactured …………………………………………………….
Goods available for sale ……………………………………………………….
Less finished goods inventory, ending ……………………………………..
Cost of goods sold ……………………………………………………………………
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
840
Exercise 14-16 (15 minutes)
Direct materials used
in production
$502,500
Factory overhead
used in production
$750,000
materials inventory
Beginning raw
materials inventory
Raw materials
purchases
$532,000
Production
Activity
process inventory
Beginning work in
process inventory
Ending finished
goods inventory
Finished goods sold
Beginning finished
goods inventory
Finished goods
available for sale
$1,740,250
$1,593,500
Materials
Activity
Direct labor used
in production
$350,000
Total work in
process
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
Exercise 14–17 (10 minutes)
1. C 4. A
Exercise 14-18 (10 minutes)
1. Sales revenue
Profit
2. Coffee purchases from ethical growers
People
Planet
Profit
5. Increased energy from renewable sources
Planet
6. Discontinued working with some factories
People
Exercise 14-19 (10 minutes)
1. Sales revenue
Profit
2. Women in management positions
People
3. Invested in career programs
People
4. Operating cash flows
Profit
5. Awards for LGBT workforce
People
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
842
PROBLEM SET A
Problem 14-1A (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.
Drum stands (1,000 stands
purchased)—$26,000 …………………..
26,000
6.
Rent cost of equipment for sales
staff—$10,000 …………………………….
10,000
10,000
7.
Upper mgmt. salaries—$125,000 ……….
125,000
125,000
8.
Annual flat fee paid for factory
10,000
10,000
Part 2
TrueBeat
Calculation of Manufacturing Cost per Drum Set
Item
Total cost
(at 1,000 units)
Per unit cost
(Total / 1,000)
Variable production costs
Plastic for casing
$ 17,000
$ 17
Wages of assembly workers
82,000
82
Drum stands
Total variable production costs
Property taxes on factory
Annual fee for maintenance service
Machinery depreciation
Total fixed production costs
$180,000
$180
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
843
Problem 14-1A (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
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
844
Problem 14-2A (30 minutes)
Costs
Product
Cost
Dir.
Mtls.
Dir.
Labor
Over-
head
Period
Cost
Selling
Gen. &
Admin
Advertising expense
X
X
Depr. expense-Office equip.
X
X
Depr. expense-Selling equip.
X
X
Depr. expense-Factory equip.
X
X
Factory supervision
X
X
Factory supplies used (indirect mtls)
X
X
Direct labor
X
X
Indirect labor
X
X
Misc. production costs
X
X
Office salaries expense
X
X
Raw materials purchases (direct mtls)
X
Rent expense-Office space
X
X
Rent expense-Selling space
X
X
Rent expense-Factory bldg.
X
X
Maint. expense-Factory equip.
X
X
Sales salaries expense
X
X
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
845
Problem 14-3A (75 minutes)
Part 1
LEONE COMPANY
Schedule of Cost of Goods Manufactured
For Year Ended December 31, 2019
Direct materials
Raw materials inventory, December 31, 2018 ……….
$ 166,850
Raw materials purchases …………………………………….
925,000
Raw materials available for use …………………………..
Less raw materials inventory, December 31, 2019 …..
Direct materials used ………………………………………….
Depreciation expense—Factory equipment ………….
33,550
Factory supervision …………………………………………….
102,600
Factory supplies used …………………………………………
7,350
Factory utilities …………………………………………………..
33,000
Indirect labor ………………………………………………………
56,875
Miscellaneous production costs ………………………….
8,425
Rent expense—Factory building ………………………….
76,800
Maintenance expense—Factory equipment ………….
Total factory overhead costs ……………………………….
Total manufacturing costs ……………………………………..
Total cost of work in process …………………………………
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
Problem 14-3A (Continued)
Part 2
LEONE COMPANY
Income Statement
For Year Ended December 31, 2019
Sales ……………………………………………………………………..
$4,462,500
Cost of goods sold
Finished goods inventory, December 31, 2018………
$ 167,350
Cost of goods manufactured ………………………………..
1,935,650
Goods available for sale ………………………………………
2,103,000
Less finished goods inventory, December 31, 2019 …….
136,490
Cost of goods sold ………………………………………………
Gross profit from sales ………………………………………….
Operating expenses
Selling expenses
Advertising expense …………………………………………..
28,750
Depreciation expense—Selling equipment ………….
8,600
Rent expense—Selling space …………………………..
26,100
Sales salaries expense ……………………………………….
392,560
Total selling expenses ……………………………………….
456,010
General and administrative expenses
Depreciation expense—Office equipment ……………
7,250
Office salaries expense ………………………………………
63,000
Rent expense—Office space ………………………………
22,000
Total general and administrative expenses …………
Total operating expenses …………………………………….
Income taxes expense ……………………………………………
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
Problem 14-3A (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
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 interrupted. Another possible reason is that significant
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
Problem 14-4A (20 minutes)
1.
Units and dollar amounts of raw materials inventory in heels
Units
$/unit Total
Beginning inventory 1,200 $8 $9,600
2. Cutting the heel inventory in half would free up $12,000 of working
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
849
Problem 14-5A (30 minutes)
Part 1
MERCHANDISING BUSINESS
MUSIC WORLD RETAIL
Cost of Goods Sold For The Year
Cost of goods sold
MANUFACTURING BUSINESS
WAVE–BOARD MFG.
Cost of Goods Sold For The Year
Cost of goods sold
Part 2
• The Merchandise Inventory account on December 31 for Music World and
the Finished Goods Inventory account on December 31 for Wave-Board are
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 14
850
PROBLEM SET B
Problem 14-1B (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
3.
Cost of factory rent—$6,750 ……………
4.
Systems staff salary—
6.
Cost of office equipment
rent—$1,050 …………………………..
1,050
7.
Upper management
salaries—$120,000 …………………….
120,000
Annual fees for cleaning
service—$4,520 ………………………..
4,520
9.
Sales commissions—$0.50
10.
Machinery depreciation,
straight-line—$18,000 ………………..