Chapter 14: Q19DQ (page 655)
List several examples of factory overhead.
Factory rent, factory utilities, depreciation, etc.
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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
Diez Company produces sporting equipment, including leather footballs. Identify each of the following costs as direct (D) or indirect (I). The cost object is a football produced by Diez.
What product cost is both a prime cost and a conversion cost?
The following calendar year-end information is taken from the December 31, 2017, adjusted trial balance and other records of Leone Company.
Advertising expenses | \(28,750 | Miscellaneous production costs | \)8,425 |
Depreciation expenses – office equipment | 7,250 | Office salaries expense | 63,000 |
Depreciation expenses – selling equipment | 8,600 | Raw material purchases | 925,000 |
Depreciation expenses – factory equipment | 33,550 | Rent expenses – office space | 22,000 |
Factory supervision | 102,600 | Rent expenses – selling space | 26,100 |
Factory supplies used | 7,350 | Rent expenses – factory building | 76,800 |
Factory utilities | 33,000 | Maintenance expenses – factory equipment | 35,400 |
Direct labor | 675,480 | Sales | 4,462,500 |
Indirect labor | 56,875 | Sales salaries expenses | 392,560 |
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.
Explain why product costs are capitalized but period costs are expensed in the current accounting period.
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