Chapter 16: Q16-5SE-b (page 885)
Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:
b. Cost of computer software to track WIP Inventory
The cost of the computer software to track WIP inventory will come under the product cost.
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Becky Knauer recently resigned from her position as controller for Shamalay Automotive, a small, struggling foreign car dealer in Upper Saddle River, New Jersey. Becky has just started a new job as controller for Mueller Imports, a much larger dealer for the same car manufacturer. Demand for this particular make of car is exploding, and the manufacturer cannot produce enough to satisfy demand. The manufacturer’s regional sales managers are each given a certain number of cars. Each sales manager then decides how to divide the cars among the independently owned dealerships in the region. Because of high demand for these cars, dealerships all want to receive as many cars as they can from the regional sales manager.
Becky’s former employer, Shamalay Automotive, receives only about 25 cars each month. Consequently, Shamalay is not very profitable.
Becky is surprised to learn that her new employer, Mueller Imports, receives more than 200 cars each month. Becky soon gets another surprise. Every couple of months, a local jeweler bills the dealer $5,000 for “miscellaneous services.” Franz Mueller, the owner of the dealership, personally approves payment of these invoices, noting that each invoice is a “selling expense.” From casual conversations with a salesperson, Becky learns that Mueller frequently gives Rolex watches to the manufacturer’s regional sales manager and other sales executives. Before talking to anyone about this, Becky decides to work through her ethical dilemma. Put yourself in Becky’s place.
Requirements
1. What is the ethical issue?
2. What are your options?
3. What are the possible consequences?
4. What should you do?
Question:Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company
Gourmet Bones manufactures its own brand of pet chew bones. At the end of December 2018, the accounting records showed the following:
Balances: Beginning Ending
Direct Materials \( 13,500 \) 7,500
Work-in-Process Inventory 0 3,500
Finished Goods Inventory 0 5,200
Other information:
Direct materials purchases$ 36,000
Plant janitorial services 700
Sales salaries 6,000
Delivery costs1,300
Net sales revenue 107,000
Utilities for plant 1,300
Rent on plant 17,000
Customer service hotline costs 1,200
Direct labor23,000
Requirements
1. Prepare a schedule of cost of goods manufactured for Gourmet Bones for the year ended December 31, 2018.
2. Prepare an income statement for Gourmet Bones for the year ended December 31, 2018.
3. How does the format of the income statement for Gourmet Bones differ from the income statement of a merchandiser?
4. Gourmet Bones manufactured 17,900 units of its product in 2018. Compute the company’s unit product cost for the year, rounded to the nearest cent.
Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA): 1. Helps creditors make lending decisions
Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost.
6. Wages of assembly line workers for a factory
Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost.
10.Salary of the factory maintenance supervisor
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