Chapter 16: 7RQ (page 884)
Describe a merchandising company, and give an example.
The merchandising company sells products that are not produced by them and the examples are Walmart and Aptos.
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How does a manufacturing company calculate unit product cost?
Computing cost of goods manufactured and cost of goods sold
Use the following information for a manufacturer to compute cost of goods manufactured and cost of goods sold:
Balances: Beginning Ending
Direct Materials \( 27,000 \) 28,000
Work-in-Process Inventory 40,000 32,000
Finished Goods Inventory 18,000 25,000
Other information:
Purchases of direct materials $ 73,000
Direct labor 88,000
Manufacturing overhead 43,000
Computing cost of goods manufactured
Consider the following partially completed schedules of cost of goods manufactured. Compute the missing amounts.
Banner, Inc. Larry’s Bakery Sports Gear
Beginning Work-in-Process Inventory \( (a) \) 40,800 \( 2,200
Direct Materials Used 14,400 35,900 (g)
Direct Labor 10,300 20,100 1,900
Manufacturing Overhead (b) 10,000 900
Total Manufacturing Costs Incurred during the Year 45,200 (d) (h)
Total Manufacturing Costs to Account for 55,400 (e) 8,300
Ending Work-in-Process Inventory (c) (25,500) (2,600)
Cost of Goods Manufactured \) 50,500 \( (f) \) (i)
Selected data for three companies are given below. All inventory amounts are ending balances and all amounts are in millions.
Company A Company B Company C
Cash \( 6 Wages Expense \) 12 Administrative Expenses $ 4
Net Sales Revenue 48 Equipment 32 Cash 25
Finished Goods Inventory 10 Accounts Receivable 8 Net Sales Revenue 75
Cost of Goods Sold 23 Service Revenue 65 Selling Expenses 8
Selling Expenses 4 Cash 34 Merchandise Inventory 12
Equipment 67 Rent Expense 12 Equipment 55
Work-in-Process Inventory 9 Accounts Receivable 19
Accounts Receivable 14 Cost of Goods Sold 25
Cost of Goods Manufactured 23
Administrative Expenses 7
Raw Materials Inventory 6
Identifying differences between service, merchandising, and manufacturing companies Using the data on the previous page, calculate operating income for each company.
Classifying costs Wheels, Inc. manufactures wheels for bicycles, tricycles, and scooters. For each cost given below, determine if the cost is a product cost or a period cost. If the cost is a product cost, further determine if the cost is direct materials (DM), direct labor (DL), or manufacturing overhead (MOH) and then determine if the product cost is a prime cost, conversion cost, or both. If the cost is a period cost, further determine if the cost is a selling expense or administrative expense (Admin). Cost (a) is answered as a guide
Cost Product Period
DM DL MOH Prime Conversion Selling Admin.
a. Metal used for rims
b. Sales salaries
c. Rent on factory
d. Wages of assembly workers
e. Salary of production supervisor
f. Depreciation on office equipment
g. Salary of CEO
h. Delivery expense
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