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Exercises Chapter 02

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22 views2 pages

Exercises Chapter 02

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zaadasyed5121472
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We take content rights seriously. If you suspect this is your content, claim it here.
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EXERCISES CHAPTER 02

2-1 Classifying Manufacturing Costs


Your Boat, Inc., assembles custom sailboats from components supplied by various
manufacturers. The company is very small and its assembly shop and retail sales store are housed
in a Gig Harbor, Washington, boathouse. Below are listed some of the costs that are incurred at
the company.
Required: For each cost, indicate whether it would most likely be classified as direct labor, direct
materials, manufacturing overhead, selling, or an administrative cost.
1. The wages of employees who build the sailboats.
2. The cost of advertising in the local newspapers.
3. The cost of an aluminum mast installed in a sailboat.
4. The wages of the assembly shop’s supervisor.
5. Rent on the boathouse.
6. The wages of the company’s bookkeeper.
7. Sales commissions paid to the company’s salespeople.
8. Depreciation on power tools.
2-2 Classification of Costs as Period or Product Costs
Suppose that you have been given a summer job at Fair Wings Avionics, a company that
manufactures sophisticated radar sets for commercial aircraft. The company, which is privately
owned, has approached a bank for a loan to help finance its tremendous 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:
1. The cost of the memory chips used in a radar set. 2. Factory heating costs.
3. Factory equipment maintenance costs. 4. Training costs for new administrative employees.
5. The cost of the solder that is used in assembling the radar sets.
6. The travel costs of the company’s salespersons
7. Wages and salaries of factory security personnel. 8. The cost of air-conditioning executive
offices. 9. Wages and salaries in the department that handles billing customers.
10. Depreciation on the equipment in the fitness room used by factory workers.
11. Telephone expenses incurred by factory management.
12. The costs of shipping completed radar sets to customers.
Required: Classify the above costs as either product (inventorial) costs or period (noninventory)
costs for purposes of preparing the financial statements for the bank.
2-3 Constructing an Income Statement
Last month Mountain High, a mountain sporting goods retailer, had total sales of $3,200,000,
selling expenses of $110,000, and administrative expenses of $470,000. The company had
beginning merchandise inventory of $140,000, purchased additional merchandise inventory for
$2,550,000, and had ending merchandise inventory of $180,000. Required: Prepare an income
statement for the company for the month.
2-4 Prepare a Schedule of Cost of Goods Manufactured
Manner man Fabrication manufactures a variety of products in its factory. Data for the most
recent month’s operations appear below:
Required: Prepare a schedule of cost of goods manufactured for the company for the month.
Beginning raw materials inventory $55,000 Purchases of raw materials $440,000
Ending raw materials inventory $65,000 Direct labor $215,000
Manufacturing overhead $380,000 Ending work in process inventory $220,000
Beginning work in process inventory $190,000
2-5 The following cost and inventory data for the just completed year are taken from the
accounting records of Eccles Company:
Costs incurred:
Advertising expense $100,000 Purchases of raw materials $132,000

Direct labor cost $90,000 Rent, factory building $80,000


Indirect labor $56,300 Sales commissions $35,000
Utilities, factory $9,000 Supplies, factory $700
Maintenance, factory $24,000 Depreciation, office $8,000
equipment equipment
Depreciation, factory $40,000
equipment
Beginning of the year End of Year of Year
Raw materials $8,000 $10,000
Work in process $5,000 $20,000
Finished goods $70,000 $25,000
Required: 1. Prepare a schedule of cost of goods manufactured. 2. Prepare the cost of goods sold
section of Eccles Company’s income statement for the year.

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