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PROBLEM 16.5B
VALLEYVIEW MANUFACTURING (concluded)
b.
Work in process inventory, beginning of year 8,000$
Add: Manufacturing costs assigned to production:
Direct materials used [part a(2)] 235,000$
VALLEYVIEW MANUFACTURING CORP.
Schedule of the Cost of Finished Goods Manufactured
For the Year Ended December 31
35 Minutes, Strong
PROBLEM 16.6B
COLUMBUS TOY CO.
a.
Work in process inventory, Jan. 1 5,000$
Add: Manufacturing costs assigned to production:
Direct materials used 402,000$
Direct labor assigned to production 220,000
b. Unit cost of goods finished:
Cost of finished goods manufactured (part a)951,000$
Units manufactured 50,000
Unit cost ($951,000 ÷ 50,000 units) 19.02$
d. Inventory at December 31:
Materials:
Inventory at Jan. 1 15,000$
Add: Purchases of direct materials 400,000
Total direct materials available during the year 415,000$
Less: Direct materials used 402,000
Materials inventory at Dec. 31 13,000$
Work in process inventory, Dec. 31 (given) 6,000
COLUMBUS TOY CO.
Schedule of the Cost of Finished Goods Manufactured—Old Joe
For the Year Ended December 31
PROBLEM 16.6B
COLUMBUS TOY CO. (concluded)
e.
Direct labor is a product cost, and therefore, it becomes “attached” to the products
manufactured. To the extent that units manufactured during the year were sold in that
25 Minutes, Medium
PROBLEM 16.7B
CEDAR COMPANY
a.
Work in process inventory, January 1 49,000$
Add: Manufacturing costs assigned to production:
Direct materials used (1)328,000$
(1)
Cost of direct materials used:
Materials inventory, January 1 40,000$
Purchases of direct materials 310,000
Cost of direct materials available for use 350,000$
Less: Materials inventory, December 31 22,000
Cost of direct materials used 328,000$
b. Average unit costs:
Cost of finished goods manufactured (part a)1,320,000$
c. Cost of goods sold (FIFO basis):
8,000 units @ $21.50 (beginning inventory of finished goods) 172,000$
42,000 units @ $22
CEDAR COMPANY
Schedule of the Cost of Finished Goods Manufactured
For the Year Ended December 31
40 Minutes, Strong
PROBLEM 16.8B
JACKSON ENGINEERING CO.
a.
Manufacturing costs assigned to production:
Direct materials used (1) 137,000$
Direct labor 113,000
(1)
Computation of cost of direct materials used:
Purchases of direct materials 188,000$
Less: Materials inventory, end of year 51,000
Direct materials used 137,000$
c.
Net sales 625,000$
Add: Cost of goods sold:
Cost of finished goods manufactured (part a)378,000$
JACKSON ENGINEERING CO.
Income Statement
For the Year Ended December 31
JACKSON ENGINEERING CO.
Schedule of the Cost of Finished Goods Manufactured
For the Year Ended December 31
PROBLEM 16.8B
JACKSON ENGINEERING CO. (concluded)
d.
(46,000)$
191,000
Evaluation of Jackson’s conclusions:
Jackson is in error about the $67.10 unit cost of production and the overall unprofitability
of the business. In concluding that the business sustained a net loss, Jackson treated
product costs as if they were period costs to be offset against the revenue of the year.
Net loss calculated by Jackson
Jackson has made three errors in computing the cost of production. First, he included
selling and administrative expenses in his calculations. These costs do not relate to the
Add: Product costs erroneously deducted as expense
40 Minutes, Strong CASE 16.1
WEST TEXAS GUITAR COMPANY
a.
(2)
(3)
b. (1) Cost of direct materials used:
Purchases of direct materials 460,000$
The errors and shortcomings in the illustrated income statement include the following:
Dividends declared on common stock have been offset against revenue in measuring
As a result of deduction from revenue of dividends declared and of manufacturing costs
relating to ending inventories of raw materials, goods in process, and finished goods, it is
reasonable to conclude that the company’s actual net income is higher than the amount
shown in the income statement.
Period expenses are improperly included in the cost of goods sold. As a result, the
CASE 16.1
WEST TEXAS GUITAR COMPANY (concluded)
c.
Manufacturing costs assigned to production:
Direct materials used [part b (1)] 422,000$
d.
Net sales 1,300,000$
Add: Cost of goods sold:
Cost of finished goods manufactured 924,400$
WEST TEXAS GUITAR COMPANY
Income Statement
For the Year Ended December 31
WEST TEXAS GUITAR COMPANY
Schedule of the Cost of Finished Goods Manufactured
For the Year Ended December 31
40 Minutes, Strong
CASE 16.2
PRESCOTT MANUFACTURING
Current Last
Year Year
a. (1)
Inventory of finished goods, beginning of year 255,000$ 85,000$
Add: Cost of finished goods manufactured 909,000 1,020,000
(2)
Number of units in inventory at year-end 20,000 30,000
Add: Number of units sold during the year 100,000 100,000
(3)
Cost of finished goods manufactured (given) 909,000$ 1,020,000$
Add: Number of finished goods manufactured (2) 90,000 120,000
(4)
Note to instructor: The average cost per unit sold during the current year ($9.62) is less than the
Cost of goods sold:
Average cost of goods manufactured:
Average cost per unit sold:
Number of finished units manufactured:
CASE 16.2
PRESCOTT MANUFACTURING (concluded)
b.
Note to instructor: The increase in the unit cost of finished goods manufactured (from $8.50 to
$10.10—an increase of approximately 19%) does not necessarily indicate poor performance. In
Evaluation of Walker’s statements:
Walker’s statements are misleading. He claims that his plant “has made real gains” in
Walker improperly computed the “manufacturing cost per unit sold.” He divided the cost of
CASE 16.3
PFIZER, INC.
INTERNET
a.
b.
c.
There are usually very few details regarding overhead contained in an annual report. One
of the more consistently reported overhead items is depreciation. Other overhead items
15 Minutes, Easy
Pfizer’s Inventories footnote shows the three typical categories of inventory—finished
By using the current and previous years’ Finished Goods balance sheet data and the
calculate the cost of finished goods manufactured:
CASE 16.4
CODE OF CONDUCT AT COCA-COLA
ETHICS, FRAUD & CORPORATE GOVERNANCE
a. T
b.
c. Th
45 Minutes, Medium
Potential concerns identified by the company that pertain to human rights violations
Potential concerns identified by the company that pertain to conflicts of interest include:
Potential concerns identified by the company that pertain to auditing, accounting, and
