Chapter 2 Homework

1. Hamburger buns in a Wendy's outlet. 2. Advertising by a dental office. 3. Apples processed and canned by Del Monte. 4. Shipping canned apples from a Del Monte plant to customers. 5. Insurance on a Bausch & Lomb factory producing contact lenses. 6. Insurance on IBM's corporate headquarters. 7. Salary of a supervisor overseeing production of printers at Hewlett-Packard. 8. Commissions paid to Encyclopedia Britannica salespersons. 9. Depreciation of factory lunchroom facilities at a General Electric plant. 10. Steering wheels installed in BMWs. Fixed Variable Product cost Product cost Variable Selling and administrative cost Fixed Product cost Fixed Fixed Product cost Selling and administrative cost Variable Selling and administrative cost Variable Fixed Variable Product cost Selling and administrative cost Product cost

2
1.Electricity to run production equipment. 2.Rent on a factory building. 3.Cloth used to make drapes. 4.Production superintendent's salary. 5.Wages of laborers assembling a product. 6.Depreciation of air purification equipment used to make furniture. 7.Janitorial salaries. 8.Peaches used in canning fruit. Yes No Yes No Yes No No Yes No Yes No Yes No Yes Yes No No No Yes No Yes No No Yes

9.Lubricants for production equipment. 10 Sugar used in soft-drink production. . 11 Property taxes on the factory. . 12 Wages of workers painting a product. . 13 Depreciation on cafeteria equipment. . 14 Insurance on a building used in producing helicopters. . 15 Cost of rotor blades used in producing helicopters. .

Yes Yes No Yes No No Yes

No No Yes No Yes Yes No

No Yes No Yes No No Yes

3 Direct materials: Raw materials inventory, beginning Add : Purchase of raw materials $9,000 125,000 134,000 6,000 $128,000 70,000 105,000 303,000 17,000 320,000 Deduct : Work in process inventory, ending 30,000 $290,000

Raw materials available for use Deduct : Raw materials inventory, ending

Raw materials used in production Direct labor Manufacturing overhead Total manufacturing costs Add : Work in process inventory, beginning

Cost of goods manufactured

4 Sales Cost of goods sold: Finished goods inventory, beginning Add : Cost of goods manufactured $20,000 290,000 310,000 40,000 270,000 230,000 80,000 110,000 190,000 $40,000 $500,000

Goods available for sale Deduct : Finished goods inventory, ending

Gross margin Selling and administrative Expenses: Selling expenses Administrative expenses Net operating income

5
Direct materials Fixed manufacturing overhead $12.80 $9.00 per unit per unit

6
Direct materials Fixed manufacturing overhead $12.80 $6.00 per unit per unit $192,000 $90,000

Chapter 2 Quiz

Green Company's costs for the month of August were as follows: direct materials, $27,100; direct labor, $34,900; selling, $12,600; administrative, $11,300; and manufacturing overhead, $42,100. The beginning work in process inventory was $14,500 and the ending work in process inventory was $7,900. What was the cost of goods manufactured for the month?
-2-2

$130,700

$136,700

$104,100

$110,700

Consider the following costs incurred in a recent period:

Direct materials Depreciation on factory equipment Factory janitors salary Direct labor Utilities for factory Selling expenses Production supervisors salary Administrative expenses
-2-2

$33,200 $12,000 $23,400 $29,900 $10,300 $18,000 $35,400 $21,100

What was the total amount of the period costs listed above for the period?

$81,100

$39,100

$49,400

$66,800 The Lyons Company's cost of goods manufactured was $115,000 when its sales were $379,000 and its gross margin was $206,000. If the ending inventory of finished goods was $16,000, the beginning inventory of finished goods must have been:
-2-2

$84,000

$58,000

$74,000

$131,000 Gabrisch Inc. is a merchandising company. Last month the company's merchandise purchases totaled $91,200. The company's beginning merchandise inventory was $12,000 and its ending merchandise inventory was $20,300. What was the company's cost of goods sold for the month?
-2-2

$82,900

$123,500

$99,500

$91,200 How much opportunity cost is represented in the following information concerning a machine?

Annual operating cost Fixed operating costs other than depreciation Resale value, if sold now Original cost of machine
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$81,800 $15,800 $26,000 $69,100

$15,800

$81,800

$69,100

$26,000 A partial listing of costs incurred at Peggs Corporation during September appears below:

Direct materials Utilities, factory Administrative salaries Indirect labor Sales commissions

$200,200 $12,700 $84,500 $30,000 $38,200

Depreciation of production equipment Depreciation of administrative equipment Direct labor Advertising

-2-2

$32,100 $44,200 $81,800 $154,200

The total of the period costs listed above for September is:

$321,100

$241,700

$69,700

$166,300 If the finished goods inventory increases between the beginning and the end of a period, then the cost of goods manufactured for the period is larger than the cost of goods sold.
-2-2

True

False Which terms below correctly describe the cost of the black paint used to paint the dots on a pair of dice?

-2-2

Option A

Option B

Option C

Option D

Which two terms below describe the wages paid to security guards that monitor a factory 24 hours a day?
-2-2

variable cost and direct cost

fixed cost and direct cost

variable cost and indirect cost

fixed cost and indirect cost The following costs were incurred in August:

Prime costs during the month totaled:

-2-2

$39,000

$59,000

$96,000

$38,000