Chapter 14: Q3DQ (page 654)
Identify the usual changes that a company must make when it adopts a customer orientation.
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Should we evaluate a production manager’s performance on the basis of operating expenses? Why?
Indicate in the following chart the most likely source of information for each business decision. Use M for managerial accounting information and F for financial accounting information.
Business Decision | Primary Information Source |
1. Determine whether to lend to a company. | |
2. Evaluate a purchasing department’s performance. | |
3. Report financial performance to board of directors. | |
4. Estimate product cost for a new line of shoes. | |
5. Plan the budget for next quarter. | |
6. Measure the profitability of an individual store. | |
7. Prepare financial reports according to GAAP | |
8. Determine location and size for a new plant. |
Using the data from Problem 14-2A and the following additional inventory information for Leone Company, complete the requirements below. Assume income tax expense is \(233,725 for the year.
Inventories | |
Raw material, December 31, 2016 | \)166,850 |
Raw materials, December 31, 2017 | 182,000 |
Work in process, December 31, 2016 | 15,700 |
Work in process, December 31, 2017 | 19,380 |
Finished goods, December 31, 2016 | 167,350 |
Finished goods, December 31, 2017 | 136,490 |
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.
Nestlé reports beginning raw materials inventory of 3,815 and ending raw materials inventory of 3,499 (both numbers in millions of Swiss francs). If Nestlé purchased 13,860 (in millions of Swiss francs) of raw materials during the year, what is the amount of raw materials it used during the year?
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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