Add: Work in process, beginning Deduct: Work in process, ending Cost of goods manufactured The cost of goods sold section would be: Finished goods inventory, beginning Add: Cost of goods manufactured Deduct: Finished goods inventory, ending Cost of goods sold Cost Item 1.
The costs of turn signal switches used at a General Motors plant Salary of production manager at Blackberry The costs of shipping brass fittings to customers in California Depreciation on the bookshelves at Reston Bookstore The cost of leasing a toll-free telephone number at Staples Canada The cost of the mozzarella cheese used at a Pizza Hut outlet Problem continued 2. Problem 30 minutes 1. Total wages Problem continued 4. Depreciation, executive jet Costs of shipping finished goods to customers Wood used in manufacturing furniture Electricity used in manufacturing furniture Salary of secretary to the company president Aerosol attachment placed on a spray can produced by the company Billing costs Packing supplies for shipping products overseas Sand used in manufacturing concrete Executive life insurance Employee benefits, assembly line workers Property taxes on finished goods warehouses Lubricants for production equipment Since fixed costs do not change in total as the activity level changes, they will decrease on a unit basis as the activity level rises.
Problem 15 minutes 1. The controller is correct that the salary cost should be classified as a selling marketing cost. The duties described in the problem have nothing to do with manufacturing the product, but rather deal with ordertaking and shipping finished goods to customers. As stated in the text, selling costs include all costs necessary to secure customer orders and get the finished product into the hands of customers.
No, the president is not correct; how the salary cost is classified can affect the reported operating income for the year. If the salary cost is classified as a selling expense all of it will appear on the income statement as a period cost. However, if the salary cost is classified as a manufacturing product cost, then it will be added to Work in Process Inventory along with other manufacturing costs for the period. To the extent that goods are still in process at the end of the period, part of the salary cost will remain with these goods in the Work in Process Inventory account.
Only that portion of the salary cost that has been assigned to finished units will leave the Work in Process Inventory account and be transferred into the Finished Goods Inventory account. In like manner, to the extent that goods are unsold at the end of the period, part of the salary cost will remain with these goods in the Finished Goods Inventory account.
Only that portion of the salary that has been assigned to finished units that are sold during the period will appear on the income statement as an expense part of Cost of Goods Sold for the period. These legal and filing fees have already been paid and are a sunk cost. Sunk costs are never differential costs.
Thus, the cost will not differ depending on whether Todd decides to produce brooms or to stay with the janitorial service. All other costs listed above are differential costs since they will be incurred only if Todd leaves the janitorial service and produces the brooms. Factory supervision Property taxes, factory building.. Insurance, factory Depreciation, administrative office equipment Lease cost, factory equipment Indirect materials, factory Depreciation, factory building Administrative office supplies Direct materials used Utilities, factory Total costs Only the product costs will be included in the cost of a patio set.
The cost per set will be: Direct product costs The cost per set would increase. This is because the fixed costs would be spread over fewer units, causing the cost per unit to rise. Yes, there probably would be a disagreement. He may expect an even higher price than this to cover a portion of the administrative costs as well. His sister will probably be thinking of cost as including only materials used, or perhaps materials and direct labour. The term is opportunity cost.
Since the company is operating at full capacity, the president must give up the full, regular price of a set to sell a patio set to his sister.
Description The cost of leasing the Meals-On-Wheels van The cost of incidental supplies such as salt, pepper, napkins, and so on The cost of gasoline consumed by the Meals-OnWheels van The salary of the part-time manager of the Meals-On-Wheels program Depreciation on the kitchen equipment used in the Meals-On-Wheels program The hourly wages of the caregiver who drives the van and delivers the meals The costs of complying with health safety regulations in the kitchen The costs of mailing letters soliciting donations to the Meals-On-Wheels program Add: Work in process inventory, June Deduct: Work in process inventory, June Cost of goods sold: Finished goods inventory, June Deduct: Finished goods inventory, June Selling and administrative expenses: Selling and administrative salaries Depreciation, sales equipment Problem continued 3.
In preparing the income statement shown in the text, the accountant failed to distinguish between product costs and period costs, and also failed to recognize the change in inventories between the beginning and end of the month.
Once these errors have been corrected, the financial condition of the company looks much better and continuing operations appears more attractive. By delaying expenditures, the company can keep its cash a bit longer and thereby earn a bit more interest. There is nothing unethical about such an action. The second action was to ask that the order for the parts be cancelled. The third action was to ask the accounting department to delay recognition of the delivery until the bill is paid in January.
This action is dubious. Asking the accounting department to ignore transactions strikes at the heart of the integrity of the accounting system. If the accounting system cannot be trusted, it is very difficult to run a business or obtain funds from outsiders. However, in Mr. Raw materials should be recorded as an asset when delivered rather than as an expense. If the correct accounting policy were followed, there would be no reason for Mr.
Richart to ask the accounting department to delay recognition of the delivery of the raw materials. This flawed accounting policy creates incentives for managers to delay deliveries of raw materials until after the end of the fiscal year.
This could lead to raw materials shortages and poor relations with suppliers who would like to record their sales before the end of the year. Direct materials: Raw materials inventory, beginning Problem continued The cost of goods sold section of the income statement follows: Finished goods inventory, beginning An effective way of doing this is to place the form and known balances on the paper, and then work toward the unknown figures.
Since fixed costs do not change in total as the activity level changes, the average unit cost will decrease as the activity level rises. Problem 60 minutes Direct materials Direct labour Manufacturing overhead Total manufacturing costs Beginning work in process inventory Ending work in process inventory Cost of goods manufactured Sales Beginning finished goods inventory Cost of goods manufactured Goods available for sale Ending finished goods inventory Cost of goods sold Gross margin Selling and administrative expenses Operating income.
Problem 45 minutes 1. Deduct: Raw materials inventory, December Depreciation, factory Supplies, factory Indirect labour Maintenance, factory Total overhead costs Add: Work in process inventory, January 1. Deduct: Work in process inventory, December Finished goods inventory, January Deduct: Finished goods inventory, December Less cost of goods sold above Less selling and administrative expenses Selling expenses Total cost Case 30 minutes 1.
The error made by Ranton when calculating the expected operating income was to treat all expenses as if they were variable. This is incorrect since the case indicates that advertising and the salaries of the website administrator and the bookkeeper are fixed costs.
By including these costs in the calculation of operating expenses on a per unit basis, Ranton is effectively treating them as if they will vary in direct proportion with unit activity. This will lead to an overstatement of the expected amount of these expenses because they will not increase proportionately with sales activity. The expected results for , along with the actual results for comparison, are shown below. Actual Sales units Case continued 3. Comparison of expected and actual operating expenses in Expected expenses per part 2 above Actual expenses Difference.
Perhaps a mistake was made in calculating the amount of the sales commissions but Ranton will want to get an answer. Only process time is value-added time; therefore the manufacturing cycle efficiency. Explain the distinguishing features of managerial accounting. Identify the three broad functions of management.
Define the three classes of manufacturing costs. Distinguish between product and period costs. Explain the difference between a merchandising and a manufacturing income statement. Indicate how cost of goods manufactured is determined. Explain the difference. Current liability if current assets are used to satisfy the debt. Current liability. HOME Managerial solutions manual managerial accounting 11th edition by garrison noreen. Page 1 of 50 - About Essays.
Chapter 4 Solutions Managerial Accounting 12e Garrison Noreen Brewer Chapter 4 Systems Design: Process Costing Solutions to Questions A process costing system should be used in situations where a homogeneous product is produced on a continuous basis. Managerial accounting solutions Exercise 10 minutes 1.
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