Chapter 14: Q23DQ (page 655)
Define and describe two measures to assess raw materials inventory management.
Raw materials inventory turnover and days' sales in raw materials inventory is to be used to assess raw materials inventory management.
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Question: Listed here are the total costs associated with the 2017 production of 15,000 Blu-ray Discs (BDs) manufactured by Maxwell. The BDs sell for \(18 each.
| Costs | Variable or fixed | Product or period | ||
| Variable | Fixed | Product | period | |
1. Plastic for BDs - \)1,500 | \(1,500 | \)1,500 | ||
2. Wages of assembly workers - \(30,000 | ||||
3. Cost of factory rent - \)6,750 | ||||
4. System staff salaries - \(15,000 | ||||
5. Labelling - \)0.25 Per BD | ||||
6. Cost of office equipment rent - \(1,050 | ||||
7. Upper management salaries - \)120,000 | ||||
8. Annual fixed fees for cleaning service - \(4,250 | ||||
9. Sales commission - \)0.50 per BD | ||||
10. Machinery depreciation, straight-line - $18,000 | ||||
Required
1. Classify each cost and its amount as (a) either variable or fixed and (b) either product or period. (The first cost is completed as an example.)
2. Compute the manufacturing cost per BD.
Analysis Component
3. Assume that 10,000 BDs are produced in the next year. What do you predict will be the total cost of plastic for the BDs and the per unit cost of the plastic for the BDs? Explain.
4. Assume that 10,000 BDs are produced in the next year. What do you predict will be the total cost of factory rent and the per unit cost of the factory rent? Explain.
Why does managerial accounting often involve working with numerous predictions and estimates?
Question: Identify whether each description most likely applies to managerial (M) or financial (F) accounting.
The following chart shows how costs flow through a business as a product is manufactured. Not all boxes in the chart show cost amounts. Compute the cost amounts for the boxes that contain question marks.
Raw materials purchases \(532,000 Beginning raw materials inventory \)145,500 Direct labor used in production \(350,000 Beginning work in process inventory \)84,500 Finished goods manufactured \(1,593,500 Factory overhead used in production \)750,000 Ending raw materials inventory \(175,000 Finished goods available for sale \)1,740,250 Ending finished goods inventory $139,950 Materials Activity Production Activity Sales Activity Raw materials available for use in production
Listed here are product costs for the production of soccer balls. Classify each cost (a) as either variable (V) or fixed (F) and (b) as either direct (D) or indirect (I). What patterns do you see regarding the relation between costs classified in these two ways?
Product cost | a. Variable or fixed | b. Direct or indirect |
1. Leather cover for soccer balls | ||
2. Annual flat fee paid for office security | ||
3. Coolants for machinery | ||
4. Wages of assembly workers | ||
5. Lace to hold leather together | ||
6. Taxes on factory | ||
7. Machinery depreciation (Straight-line) |
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