1. Product costs and period costs
The costs that follow were extracted from the accounting records of several different manufacturers:
1. Weekly wages of an equipment maintenance worker
2. Marketing costs of a soft drink bottler
3. Cost of sheet metal in a Honda automobile
4. Cost of president's subscription to Fortune magazine
5. Monthly operating costs of pollution control equipment used in a steel mill
6. Weekly wages of a seamstress employed by a jeans maker
7. Cost of compact discs (CDs) for newly recorded releases of Rush, Billy Joel, and Bryan Adams
a. Determine which of these costs are product costs and which are period costs.
b. For the product costs only, determine those that are easily traced to the finished product and those that are not.
2. Definitions of manufacturing concepts
Interstate Manufacturing produces brass fasteners and incurred the following costs for the year just ended:
Materials and supplies used
Brass $75,000
Repair parts 16,000
Machine lubricants 9,000
Wages and salaries Machine operators 128,000
Production supervisors 64,000
Maintenance personnel 41,000
Other factory overhead Variable 35,000
Fixed 46,000
Sales commissions 20,000
Compute:
a. Total direct materials consumed
b. Total direct labor
c. Total prime cost
d. Total conversion cost
3. Schedule of cost of goods manufactured, income statement
The following information was taken from the ledger of Jefferson Industries, Inc.:
|
Direct labor
|
$85,000
|
|
Administrative expenses
|
$59,000
|
|
Selling expenses
|
34,000
|
|
Work in. process
|
|
|
Sales
|
300,000
|
|
Jan. 1
|
29,000
|
|
Finished goods
|
|
|
Dec. 31
|
21,000
|
|
Jan. 1
|
115,000
|
|
Direct material purchases
|
88,000
|
|
Dec. 31
|
131,000
|
|
Depreciation: factory
|
18,000
|
|
Raw (direct) materials on hand
|
Indirect materials used
|
10,000
|
|
Jan. 1
|
31,000
|
|
Indirect labor
|
24,000
|
|
Dec. 31
|
40,000
|
|
Factory taxes
|
8,000
|
|
|
|
Factory utilities
|
11,000
|
Prepare the following:
a. A schedule of cost of goods manufactured for the year ended December 31.
b. An income statement for the year ended December 31.
3. Manufacturing statements and cost behavior
Tampa Foundry began operations during the current year, manufacturing various products for industrial use. One such product is light-gauge aluminum, which the company sells for $36 per roll. Cost information for the year just ended follows.
|
Per Unit
|
Variable Cost
|
Fixed Cost
|
|
Direct materials
|
$4.50
|
$ -
|
|
Direct labor
|
6.5
|
-
|
|
Factory overhead
|
9
|
50,000
|
|
Selling
|
-
|
70,000
|
|
Administrative
|
-
|
135,000
|
Production and sales totaled 20,000 rolls and 17,000 rolls, respectively There is no work in process. Tampa carries its finished goods inventory at the average unit cost of production.
Instructions:
a. Determine the cost of the finished goods inventory of light-gauge aluminum.
b. Prepare an income statement for the current year ended December 31
c. On the basis of the information presented:
1. Does it appear that the company pays commissions to its sales staff? Explain.
2. What is the likely effect on the $4.50 unit cost of direct materials if next year's production increases? Why?