Chapter 16: 112RQ (page 885)
Give five examples of manufacturing overhead.
Examples of manufacturing overhead are indirect labor, indirect materials, repair, and maintenance cost, property tax, and rent.
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In 100 words or fewer, explain the difference between product costs and period costs. In your explanation, explain the inventory accounts of a manufacturer.
List six differences between financial accounting and managerial accounting.
Describe a service company, and give an example.
Determining the flow of costs through a manufacturer’s inventory accounts
True Fit Shoe Company makes loafers. During the most recent year, True Fit incurred total manufacturing costs of \(21,900,000. Of this amount, \)2,600,000 was direct materials used and \(14,800,000 was direct labor. Beginning balances for the year were Direct Materials, \)700,000; Work-in-Process Inventory, \(1,500,000; and Finished Goods Inventory, \)1,100,000. At the end of the year, balances were Direct Materials, \(800,000; Work-in-Process Inventory, \)2,000,000; and Finished Goods Inventory, $1,080,000.
Requirements Analyze the inventory accounts to determine:
1. Cost of direct materials purchased during the year.
2. Cost of goods manufactured for the year.
3. Cost of goods sold for the year.
Computing cost of goods sold and operating income, merchandising company
Consider the following partially completed income statements for merchandising companies and compute the missing amounts:
Smith, Inc. Allen, Inc.
Net Sales Revenue \( 101,000 \) (d )
Cost of Goods Sold:
Beginning Merchandise Inventory (a) 29,000
Purchases and Freight In 50,000 (e)
Cost of Goods Available for Sale (b) 89,000
Ending Merchandise Inventory (2,200) (2,200)
Cost of Goods Sold 61,000 (f)
Gross Profit 40,000 114,000
Selling and Administrative Expenses (c ) 84,000
Operating Income \( 12,000 \) (g)
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