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Chapter 16: Q2TI_4 (page 869)

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.

9. Sugar and flour used to make cookies

Short Answer

Expert verified

It is a product cost, direct material and the prime cost

Step by step solution

01

Definition of the direct material

Direct materials are defined as the raw material which is directly related to the production process of the business.

02

Identification of costs

The salary and flour used to make cookies will be considered as the product cost as it is directly related to the making of the product.

It will also be considered as the direct material.

It is a prime cost, as it is a combination of direct materials and direct labor.

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Most popular questions from this chapter

Comparing managerial accounting and financial accounting For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA):

b. Provides detailed reports on parts of the company.

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

3. Is not required to follow GAAP.

Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company

Chewy 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 \( 13,400 \) 10,500

Work-in-Process Inventory 0 1,500

Finished Goods Inventory 0 5,400

Other information:

Direct materials purchases $ 39,000

Plant janitorial services 900

Sales salaries 5,100

Delivery costs 1,700

Net sales revenue 115,000

Utilities for plant 1,200

Rent on plant 9,000

Customer service hotline costs 1,600

Direct labor 16,000

Requirements

1. Prepare a schedule of cost of goods manufactured for Chewy Bones for the year ended December 31, 2018.

2. Prepare an income statement for Chewy Bones for the year ended December 31, 2018.

3. How does the format of the income statement for Chewy Bones differ from the income statement of a merchandiser?

4. Chewy Bones manufactured 17,500 units of its product in 2018. Compute the company’s unit product cost for the year, rounded to the nearest cent.

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.

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?
See all solutions

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