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    Problem: Cost Term

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    Aiman Israr
    1. The document discusses classifying various costs for Porter Company according to cost terms like variable and fixed costs. It provides 9 example costs and asks the reader to classify each one. 2. The second document provides financial information for Klear-Seal Corporation and asks the reader to prepare a schedule of cost of goods manufactured and income statement. It gives direct materials, direct labor, manufacturing overhead, work in process inventory, finished goods inventory and other amounts. 3. The summary schedules the costs of raw materials used, direct labor, and manufacturing overhead to calculate a total cost of goods manufactured of $1,650,000. It uses the provided beginning and ending inventory amounts to adjust the costs.

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    Problem: Cost Term

    Uploaded by

    Aiman Israr
    49 views4 pages
    1. The document discusses classifying various costs for Porter Company according to cost terms like variable and fixed costs. It provides 9 example costs and asks the reader to classify each one. 2. The second document provides financial information for Klear-Seal Corporation and asks the reader to prepare a schedule of cost of goods manufactured and income statement. It gives direct materials, direct labor, manufacturing overhead, work in process inventory, finished goods inventory and other amounts. 3. The summary schedules the costs of raw materials used, direct labor, and manufacturing overhead to calculate a total cost of goods manufactured of $1,650,000. It uses the provided beginning and ending inventory amounts to adjust the costs.

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    1. The document discusses classifying various costs for Porter Company according to cost terms like variable and fixed costs. It provides 9 example costs and asks the reader to classify each one. 2. The second document provides financial information for Klear-Seal Corporation and asks the reader to prepare a schedule of cost of goods manufactured and income statement. It gives direct materials, direct labor, manufacturing overhead, work in process inventory, finished goods inventory and other amounts. 3. The summary schedules the costs of raw materials used, direct labor, and manufacturing overhead to calculate a total cost of goods manufactured of $1,650,000. It uses the provided beginning and ending inventory amounts to adjust the costs.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    49 views4 pages

    Problem: Cost Term

    Uploaded by

    Aiman Israr
    1. The document discusses classifying various costs for Porter Company according to cost terms like variable and fixed costs. It provides 9 example costs and asks the reader to classify each one. 2. The second document provides financial information for Klear-Seal Corporation and asks the reader to prepare a schedule of cost of goods manufactured and income statement. It gives direct materials, direct labor, manufacturing overhead, work in process inventory, finished goods inventory and other amounts. 3. The summary schedules the costs of raw materials used, direct labor, and manufacturing overhead to calculate a total cost of goods manufactured of $1,650,000. It uses the provided beginning and ending inventory amounts to adjust the costs.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    Problem : Cost Term

    Many new cost terms have been introduced in this chapter. It will take you some time to
    learn what each term means and how to properly classify costs in an organization. Consider
    the following
    example: Porter Company manufactures furniture, including tables. Selected costs are given
    below:
    1. The tables are made of wood that costs $100 per table.
    2. The tables are assembled by workers, at a wage cost of $40 per table.
    3. Workers assembling the tables are supervised by a factory supervisor who is paid $38,000
    per year.
    4. Electrical costs are $2 per machine-hour. Four machine-hours are required to produce a
    table.
    5. The depreciation on the machines used to make the tables totals $10,000 per year. The
    machines have no resale value and do not wear out through use.
    6. The salary of the president of the company is $100,000 per year.
    7. The company spends $250,000 per year to advertise its products.
    8. Salespersons are paid a commission of $30 for each table sold.
    9. Instead of producing the tables, the company could rent its factory space for $50,000 per
    year.
    Required:
    Classify these costs according to the various cost terms used in the chapter. Carefully study
    the classification of each cost. If you don’t understand why a particular cost is classified the
    way it is, reread the section of the chapter discussing the particular cost term. The terms
    variable cost and fixed cost refer to how costs behave with respect to the number of tables
    produced in a year.

    Problem : Schedule Of Cost of Goods Manufactured & Income Statement


    The following information has been taken from the accounting records of Klear-Seal
    Corporation for last year:
    Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . $140,000
    Raw materials inventory, January 1 . . . . . . . . . . . $90,000
    Raw materials inventory, December 31 . . . . . . . . $60,000
    Direct labor cost. . . . . . . . . . . . . . . . . . . . . . . . . . $150,000
    Purchases of raw materials . . . . . . . . . . . . . . . . . $750,000
    Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,500,000
    Administrative expenses . . . . . . . . . . . . . . . . . . . $270,000
    Manufacturing overhead . . . . . . . . . . . . . . . . . . . $640,000
    Work in process inventory, January 1 . . . . . . . . . $180,000
    Work in process inventory, December 31 . . . . . . $100,000
    Finished goods inventory, January 1 . . . . . . . . . . $260,000
    Finished goods inventory, December 31 . . . . . . . $210,000

    Management wants these data organized in a better format so that financial statements can
    be prepared for the year.
    Required:
    1. Prepare a schedule of cost of goods manufactured . Assume raw materials consists
    entirely of direct materials.
    2. Compute the cost of goods sold .
    3. Prepare an income statement.

    Direct materials:
    Raw materials inventory, January 1 . . . . . . . . . . . . . . . . . . . . . . $ 90,000
    Add: Purchases of raw materials . . . . . . . . . . . . . . . . . . . . . . . . 750,000
    Raw materials available for use . . . . . . . . . . . . . . . . . . . . . . . . . 840,000
    Deduct: Raw materials inventory, December 31. . . . . . . . . . . . . 60,000
    Raw materials used in production . . . . . . . . . . . . . . . . . . . . . . . $ 780,000
    Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
    Manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640,000
    Total manufacturing cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,570,000
    Add: Work in process inventory, January 1 . . . . . . . . . . . . . . . . . . 180,000
    1,750,000
    Deduct: Work in process inventory, December 31 . . . . . . . . . . . . . ( 100,000)
    Cost of goods manufactured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,650,000
    Solution to Review Problem 2
    Klear-Seal Corporation Schedule of Cost of Goods Manufactured For the Year Ended
    December 31
    Direct materials: Raw materials inventory, January 1 . . . . . . . . . . . . . . . . . . . . . . $ 90,000
    Add: Purchases of raw materials . . . . . . . . . . . . . . . . . . . . . . . . 750,000
    Raw materials available for use . . . . . . . . . . . . . . . . . . . . . . . . . 840,000 Deduct: Raw
    materials inventory, December 31. . . . . . . . . . . . . 60,000
    Raw materials used in production . . . . . . . . . . . . . . . . . . . . . . . $ 780,000 Direct
    labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 Manufacturing
    overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640,000
    Total manufacturing cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,570,000
    Add: Work in process inventory, January 1 . . . . . . . . . . . . . . . . . . 180,000

    1,750,000
    Deduct: Work in process inventory, December 31 . . . . . . . . . . . . . 100,000
    Cost of goods manufactured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,650,000

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