Chapter 14: Q18DQ (page 655)
What are the three categories of manufacturing costs?
Material, labor,and overhead.
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Nazaro’s Boot Company makes specialty boots for the rodeo circuit. On December 31, 2016, the company had (a) 300 pairs of boots in finished goods inventory and (b) 1,200 heels at a cost of \(8 each in raw materials inventory. During 2017, the company purchased 35,000 additional heels at \)8 each and manufactured 16,600 pairs of boots.
Required
1. Determine the unit and dollar amounts of raw materials inventory in heels at December 31, 2017.
Analysis Component
2. Write a half-page memorandum to the production manager explaining why a just-in-time inventory system for heels should be considered. Include the amount of working capital that can be reduced at December 31, 2017, if the ending heel raw material inventory is cut by half.
Describe the relations among the income statement, the schedule of cost of goods manufactured, and a detailed listing of factory overhead costs.
3M Co. reports beginning raw materials inventory of \(902 million and an ending raw materials inventory of \)855 million. If 3M purchased $3,646 million of raw materials during the year, what is the amount of raw materials it used during the year?
Manufacturing activities of a company are described in the . This schedule summarizes the types and amounts of costs incurred in its manufacturing.
Question: Using the information from Problem 14-2B and the following additional inventory information for Best Bikes, complete the requirements below. Assume income tax expense is $136,700 for the year.
Inventories | |
Raw material, December 31, 2016 | 40,375 |
Raw material, December 31, 2017 | 70,430 |
Work-in-process, December 31, 2016 | 12,500 |
Work-in-process, December 31, 2017 | 14,100 |
Finished goods, December 31, 2016 | 177,200 |
Finished goods, December 31, 2017 | 141,750 |
Required
1. Prepare the company’s 2017 schedule of cost of goods manufactured.
2. Prepare the company’s 2017 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.
Analysis Component
3. Compute the (a) inventory turnover, defined as cost of goods sold divided by average inventory, and (b) days’ sales in inventory, defined as 365 times ending inventory divided by cost of goods sold, for both its raw materials inventory and its finished goods inventory. (To compute turnover and days’ sales in inventory for raw materials, use raw materials used rather than cost of goods sold.) Discuss some possible reasons for differences between these ratios for the two types of inventories. Round answers to one decimal place
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