Chapter 14: Q12DQ (page 655)
Explain how business activities and inventories for a manufacturing company, a merchandising company, and a service company differ.
A manufacturing business produces a product, which is not the case in merchandising or service businesses.
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Compute the total manufacturing cost for a manufacturer with the following information for the month.
Raw materials purchased . . . . . . . . . . . . . . . \(32,400
Direct materials used . . . . . . . . . . . . . . . . . . 53,750
Direct labor used . . . . . . . . . . . . . . . . . . . . . . 12,000
Factory supervisor salary . . . . . . . . . . . . . . . 8,000
Salesperson commissions . . . . . . . . . . . . . . . . . . . . . . . . \)6,200
Depreciation expense—Factory building . . . . . . . . . . . . 3,500
Depreciation expense—Delivery equipment . . . . . . . . . 2,200
Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,250
Compute cost of goods sold for 2017 using the following information.
Finished goods inventory, Dec. 31, 2016 . . . . . . . . . . . . . . . . . $345,000
Work in process inventory, Dec. 31, 2016 . . . . . . . . . . . . . . . . 83,500
Work in process inventory, Dec. 31, 2017 . . . . . . . . . . . . . . . . 72,300
Cost of goods manufactured, 2017 . . . . . . . . . . . . . . . . . . . . . . 918,700
Finished goods inventory, Dec. 31, 2017 . . . . . . . . . . . . . . . . . 283,600
Identify each of the following costs as either direct materials (DM), direct labor (DL), or factory overhead (FO). The company manufactures tennis balls.
__1. Rubber used to form the cores
__2. Factory maintenance
__3. Wages paid to assembly workers
__4. Glue used in binding rubber cores to felt covers
__5. Depreciation—Factory equipment
__6. Cans to package the balls
TechPro offers instructional courses in e-commerce website design. The company holds classes in a building that it owns. Classify each of TechPro’s costs below as (a) variable (V) or fixed (F), and (b) direct (D) or indirect (I). Assume the cost object is an individual class.
a. | b. | a. | b. | ||
1. Depreciation of the classroom building | 4. Travel expenses for salesperson | ||||
2. Monthly Internet connection cost | 5. Depreciation on computers used for classes | ||||
3. Instructional manuals for students | 6. Instructor wage (per class) |
Match each concept with its best description by entering its letter A through E in the blank.
1. Just-in-time manufacturing | A. Focuses on quality throughout the production process. |
2. Continuous improvement | B. Flexible product design can be modified to accommodate customer choices. |
3. Customer orientation | C. Every manager and employee constantly looks for ways to improve company operations |
4. Total quality management | D. Reports on financial, social, and environmental performance. |
5. Triple bottom line | E. Inventory is acquired or produced only as needed. |
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