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    Acctba3 E2-1, E2-2, E2-3

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    The document provides examples of costs incurred by a computer assembly company and asks the reader to classify each cost as either direct labor, direct materials, manufacturing overhead, selling, or administrative. It then provides additional exercises asking the reader to classify costs for another manufacturer as either product costs or period costs and calculate various subtotals of cost types.

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    Acctba3 E2-1, E2-2, E2-3

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    DennyseOrlido
    1K views13 pages
    The document provides examples of costs incurred by a computer assembly company and asks the reader to classify each cost as either direct labor, direct materials, manufacturing overhead, selling, or administrative. It then provides additional exercises asking the reader to classify costs for another manufacturer as either product costs or period costs and calculate various subtotals of cost types.

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    ACCTBA3 E2-1, E2-2, E2-3

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    The document provides examples of costs incurred by a computer assembly company and asks the reader to classify each cost as either direct labor, direct materials, manufacturing overhead, selling, or administrative. It then provides additional exercises asking the reader to classify costs for another manufacturer as either product costs or period costs and calculate various subtotals of cost types.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    1K views13 pages

    Acctba3 E2-1, E2-2, E2-3

    Uploaded by

    DennyseOrlido
    The document provides examples of costs incurred by a computer assembly company and asks the reader to classify each cost as either direct labor, direct materials, manufacturing overhead, selling, or administrative. It then provides additional exercises asking the reader to classify costs for another manufacturer as either product costs or period costs and calculate various subtotals of cost types.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    Exercise 2-1

    Classifying Manufacturing Costs


    The PC Works assembles custom computers from
    components supplied by various manufacturers.
    The company is very small and its assembly shop
    and retail sales store are housed in a single
    facility in a Redmond, Washington, industrial
    park. Listed (in the next slide) are some of the
    costs that are incurred at the company.
    Required:
    For each cost, indicate whether it mostly would be
    classified as direct labor, direct materials, manufacturing
    overhead, selling, or administrative cost.

    Exercise 2-1
    Classifying Manufacturing Costs
    Direct 1. Cost of hard
    Material
    computer.

    drive

    installed

    in

    Selling Cost 2. The cost of advertising in the Puget


    Sound Computer User newspaper.
    Direct Labor 3. The wages of employees who
    assemble
    computers
    from
    components.
    Selling Cost
    4. Sales commissions paid to the
    companys sales people.

    Exercise 2-1
    Classifying Manufacturing Costs
    MOH 5. The wages of the assembly shops
    supervisor.
    Administrative
    Cost

    6. The wages
    accountant.

    of

    the

    companys

    MOH 7. Depreciation on equipment used to


    test assembled computers before
    release to customers.
    MOH 8. Rent on the facility in the industrial
    park.

    Exercise 2-2
    Cost terminology for manufacturers
    Arden Company reported the following costs
    and expenses for the most recent month:
    Direct Materials
    Direct Labor
    Manufacturing Overhead
    Selling Expenses
    Administrative Expenses

    $
    80,000
    $
    42,000
    $
    19,000
    $
    22,000
    $

    Exercise 2-2
    Cost terminology for manufacturers
    1. What is the total amount of product
    costs?
    Direct Materials
    Direct Labor
    Manufacturing Overhead
    Total Product Costs

    $
    80,000
    42,000
    19,000
    $141,00
    0

    Exercise 2-2
    Cost terminology for manufacturers
    2. What is the total amount of period
    costs?
    Selling Expense
    Administrative Expenses
    Total Period Costs

    $
    22,000
    35,000
    $
    57,000

    Exercise 2-2
    Cost terminology for manufacturers
    3. What is the
    conversion costs?

    total

    amount

    Direct Labor
    Manufacturing Overhead
    Total Conversion Costs

    of
    $
    42,000
    19,000
    $
    61,000

    Exercise 2-2
    Cost terminology for manufacturers
    4. What is the total amount of prime
    costs?
    Direct Materials
    Direct Labor
    Total Prime Costs

    $
    80,000
    42,000
    $
    122,000

    Exercise 2-3
    Classification of costs as Period or product cost

    Suppose that you have been given a summer job as an


    intern at Isaac Aircams, a company that manufactures
    sophisticated spy cameras for remote-controlled
    military reconnaissance aircraft. The company, which is
    privately owned, has approached a bank for a loan to
    help finance its growth. The bank requires financial
    statements before approving such a loan. You have
    been asked to help prepare the financial statements
    and were given the following list of costs (in the next
    slide):
    Required:
    Classify the costs as either product costs or period costs for
    the purpose of preparing the financial statements for the

    Exercise 2-3
    Classification of costs as Period or product cost

    Period Cost 1. Depreciation on salespersons cars


    Product Cost 2. Rent on equipment used in factory.
    Product Cost 3. Lubricants
    for
    machine
    maintenance.
    Period Cost
    4. Salaries of personnel who work in
    the finished goods warehouse.
    Product Cost
    5. Soap and paper towels used by
    factory workers at the end of the

    Exercise 2-3
    Classification of costs as Period or product cost

    Product Cost 6. Factory supervisors salaries.


    Product Cost 7. Heat, water, and power consumed in
    the factory.
    Period Cost 8. Materials used for boxing products
    for shipment overseas. (Units are not
    normally boxed.)

    Period Cost
    Product Cost

    9. Advertising costs.
    10.Workers compensation insurance

    Exercise 2-3
    Classification of costs as Period or product cost

    Product Cost 11.Depreciation on chairs and tables in


    the factory.
    Period Cost 12.The wages of the receptionist in the
    administrative office.
    Period Cost 13.The cost of leasing the corporate jet
    used by the companys executives.
    Period Cost 14.The cost of renting rooms at a
    Florida resort for the annual sales
    conference.

    Exercise 2-3
    Classification of costs as Period or product cost

    Product Cost 15.The


    cost
    of
    packaging
    companys product.

    the

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