Chapter 16: 8RQ (page 884)
How do manufacturing companies differ from merchandising companies?
The manufacturing company sells the product made by themselves and merchandising company sells the product purchased from suppliers.
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Computing cost of goods sold, manufacturing company
Use the following information to calculate the cost of goods sold for The Ellis Company for the month of June:
Finished Goods Inventory:
Beginning Balance $ 30,000
Ending Balance 10,000
Cost of Goods Manufactured 165,000
How does a manufacturing company calculate unit product cost?
Question:Determining flow of costs through a manufacturer’s inventory accounts
Root Shoe Company makes loafers. During the most recent year, Root incurred total manufacturing costs of \(26,300,000. Of this amount, \)2,000,000 was direct materials used and \(19,800,000 was direct labor. Beginning balances for the year were Direct Materials, \)700,000; Work-in-Process Inventory, \(1,500,000; and Finished Goods Inventory, \)400,000. At the end of the year, balances were Direct Materials, \(800,000; Work-in-Process Inventory, \)1,200,000; and Finished Goods Inventory, $600,000.
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.
Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:
h. Cost to purchase wood pulp.
Making ethical decisions
Sue Peters is the controller at Vroom, a car dealership. Dale Miller recently has been hired as the bookkeeper. Dale wanted to attend a class in Excel spreadsheets, so Sue temporarily took over Dale’s duties, including overseeing a fund used for gas purchases before test drives. Sue found a shortage in the fund and confronted Dale when he returned to work. Dale admitted that he occasionally uses the fund to pay for his own gas. Sue estimated the shortage at $450.
Requirements 2. Would you change your answer if Sue Peters was the one recently hired as controller and Dale Miller was a well-liked, long time employee who indicated he always eventually repaid the fund?
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