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Chapter 16: Q2TI_6 (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.

11.Salary of the sales manager

Short Answer

Expert verified

The salary of the sales manager is period cost.

Step by step solution

01

Definition of direct labor

Directlabor is defined as the cost incurred by the business to pay for the labor which is directly associated with the production process.

02

Identification of costs

The salary of the sales manager will be considered period cost as it does not involve any purchase of goods or production of goods. It is an administrative expense incurred by the company.

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Most popular questions from this chapter

What are prime costs? Conversion costs?

How does a merchandising company calculate unit cost per item?

Computing cost of goods sold and operating income, merchandising company

Consider the following partially completed income statements for merchandising companies and compute the missing amounts:

Smith, Inc. Allen, Inc.

Net Sales Revenue \( 101,000 \) (d )

Cost of Goods Sold:

Beginning Merchandise Inventory (a) 29,000

Purchases and Freight In 50,000 (e)

Cost of Goods Available for Sale (b) 89,000

Ending Merchandise Inventory (2,200) (2,200)

Cost of Goods Sold 61,000 (f)

Gross Profit 40,000 114,000

Selling and Administrative Expenses (c ) 84,000

Operating Income \( 12,000 \) (g)

Determining the flow of costs through a manufacturer’s inventory accounts

True Fit Shoe Company makes loafers. During the most recent year, True Fit incurred total manufacturing costs of \(21,900,000. Of this amount, \)2,600,000 was direct materials used and \(14,800,000 was direct labor. Beginning balances for the year were Direct Materials, \)700,000; Work-in-Process Inventory, \(1,500,000; and Finished Goods Inventory, \)1,100,000. At the end of the year, balances were Direct Materials, \(800,000; Work-in-Process Inventory, \)2,000,000; and Finished Goods Inventory, $1,080,000.

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.

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

Certain item descriptions and amounts are missing from the monthly schedule of cost of goods manufactured and income statement of Charlie Manufacturing Company. Fill in the blanks with the missing words, and replace the Xs with the correct amounts.

ing Direct Ending Direct Direct Manufacturing Overhead Total Costs Total Costs Ending Direct Materials Beginning Direct Materials Purchases of Direct Materials \( 26,000 \) X \( X X X (29,000) 177,000 50,000 \) X 51,000 81,000 (26,000) C

Net Sales Revenue Cost of Goods Sold Total Income Cost of Goods Sold: Gross Profit Expenses: Selling Expenses Administrative Expenses Cost of Goods Ending Beginning \( X 232,000 268,000 X 150,000 90,000 \) 118,000 X X X $ X CHARLIE MANUFACTURING COMPANY June 30
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