Chapter 16: Q16-5SE-i (page 886)
Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:
i. Life insurance on the CEO.
The life insurance for the CEO will come under the period cost.
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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
Computing manufacturing overhead
Sunglasses Unlimited Company manufactures sunglasses. Following is a list of costs the company incurred during May. Use the list to calculate the total manufacturing overhead costs for the month.
Glue for frames $ 250
Depreciation on company cars used by sales force 4,000
Plant depreciation 7,500
Interest Expense 1,500
Lenses 52,000
Company president’s salary 24,500
Plant foreman’s salary 3,500
Plant janitor’s wages 1,300
Oil for manufacturing equipment 150
Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):
4. Has a focus on the future.
What are the three manufacturing costs for a manufacturing company? Describe each.
Preparing an income statement and calculating unit cost for a merchandising company
Clyde Conway owns Clyde’s Pets, a small retail shop selling pet supplies. On December 31, 2018, the accounting records of Clyde’s Pets showed the following:
Merchandise Inventory on December 31, 2018 $ 10,100
Merchandise Inventory on January 1, 2018 15,900
Net Sales Revenue 56,000
Utilities Expense for the shop 3,300
Rent for the shop 4,100
Sales Commissions 2,650
Purchases of Merchandise Inventory 25,000
Requirements
1. Prepare an income statement for Clyde’s Pets for the year ended December 31, 2018.
2. Clyde’s Pets sold 3,850 units. Determine the unit cost of the merchandise sold, rounded to the nearest cent
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