Chapter 14: Q16DQ (page 655)
Why does a manufacturing company require three different inventory categories?
Since manufacturers calculate their costs differently, their inventories are divided into categories.
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Distinguish between (a) factory overhead and (b) selling and administrative overhead.
List the four components of a schedule of cost of goods manufactured and provide specific examples of each for Apple.
List several examples of factory overhead.
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
Question: The following calendar year-end information is taken from the December 31, 2017, adjusted trial balance and other records of Best Bikes.
Advertising expenses | $20,250 | Miscellaneous production costs | 8,440 |
Depreciation expenses – office equipment | 8,440 | Office salaries expenses | 70,875 |
Depreciation expenses – selling equipment | 10,125 | Raw material purchases | 894,375 |
Depreciation – Factory equipment | 35,400 | Rent expenses – office space | 23,625 |
Factory supervision | 121,500 | Rent expenses – selling space | 27,000 |
Factory supplies used | 6,060 | Rent expenses – Factory building | 93,500 |
Factory Utilities | 37,500 | Maintenance expenses – factory equipment | 30,375 |
Direct labor | 562,500 | Sales | 4,942,625 |
Indirect labor | 59,000 | Sales salaries expenses | 295,300 |
Required
1. Classify each cost as either a product or period cost.
2. Classify each product cost as either direct materials, direct labor, or factory overhead.
3. Classify each period cost as either selling expenses or general and administrative expenses.
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