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Exam 2: Cost Terms, Concepts, and Classifications

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Question 31

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For the majority of manufacturing companies,the distinction between period costs and product costs is essential because of its effect on net income for a period.Failure to make the distinction can affect the cost of goods manufactured and cost of goods sold. Required: Would the need to make the distinction between product costs and period costs still be essential if a manufacturing company were to adopt the just-in-time technique in the lean thinking model? Explain.

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The need for the distinction would not b...

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Question 32

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In external financial reports,factory utilities costs may be included in an asset account on the balance sheet at the end of the period.

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Question 33

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Advertising costs are considered product costs for external financial reports since they are incurred in order to promote specific products.

During the month of May,Bennett Manufacturing Company purchases $43,000 of raw materials.The manufacturing overhead totals $27,000 and the total manufacturing costs are $106,000.Assuming a beginning inventory of raw materials of $8,000 and an ending inventory of raw materials of $6,000,what must be the total for direct labour?

What would be the classification of corporate controller's salary?

Which of the following would be considered a product cost for external financial reporting purposes?

In a manufacturing firm,depreciation is always considered a product cost for external financial reporting purposes.

Robert Smith earns $16 per hour assembling products.For each hour over 40 he works in a week,he is paid time-and-a-half.During a given week,he worked 45 hours and had no idle time.How much of his weekly wages would be charged to the manufacturing overhead account?

Which one of the following costs should NOT be considered a direct cost of serving a particular customer who orders a customized personal computer by phone directly from the manufacturer?

The following inventory valuation errors were discovered by Knox Corporation's new controller just after the annual financial statements were published at the end of Year 3. The Year 3 ending inventory was understated by $\$ 17,000$ . The Year 2 ending inventory was understated by $\$ 61,000$ . The Year 1 ending inventory was overstated by $\$ 23,000$ . The net income for Knox in each of these years was: $\text { Net income } \quad \frac { \text { Year } 3 } { \$ 168,000 } \quad \frac { \text { Year } 2 } { \$ 254,000 } \quad \frac { \text { Year 1 } } { \$ 138,000 }$ Assuming there were no income taxes, what was the adjusted net income in each year? $\begin{array}{rrrr}\text { Year 3} & \text { Year } 2 & \text { Year } 1 \\A.\$ 212,000 & \$ 170,000 & \$ 161,000 \\B.\$ 124,000 & \$ 338,000 & \$ 115,000 \\C. \$ 90,000 & \$ 338,000 & \$ 161,000 \\D. \$ 124,000 & \$ 170,000 & \$ 115,000\end{array}$

Boardman Company reported the following data for the month of January: $\begin{array} { l r r } \text { Inventories: } & \underline { 1 / 1 } & \underline { 1 / 31 } \\\text { Raw materials } & \$ 32,000 & \$ 31,000 \\\text { Work in process } & \$ 18,000 & \$ 12,000 \\\text { Finished goods } & \$ 30,000 & \$ 35,000\end{array}$ $\begin{array}{l}\text { Additional information: }\\\begin{array} { l r } \text { Sales revenue } & \$ 210,000 \\\text { Direct labour costs } & \$ 40,000 \\\text { Manufacturing overhead costs } & \$ 70,000 \\\text { Selling expenses } & \$ 25,000 \\\text { Administrative expenses } & \$ 35,000\end{array}\end{array}$ -If raw materials costing $35,000 were purchased during January,what were the total manufacturing costs for the month?

If the ending inventory of finished goods is understated,net income will be overstated.

At a sales volume of 32,000 units, CD Company's total fixed costs are $64,000 and total variable costs are $60,000. The relevant range is 30,000 to 55,000 units. -If CD Company sells 50,000 units,what is the total expected cost per unit (rounded to the nearest cent) ?

Gabel Inc.is a merchandising company.Last month,the company's merchandise purchases totalled $63,000.The company's beginning merchandise inventory was $13,000,and its ending merchandise inventory was $15,000.What was the company's cost of goods sold for the month?

The following data (in thousands of dollars) have been taken from the accounting records of Karlist Corporation for the just completed year. $\begin{array} { l r } \text { Sales } & \$ 800 \\\text { Raw materials inventory, beginning } & \$ 60 \\\text { Raw materials inventory, ending } & \$ 70 \\\text { Purchases of raw materials } & \$ 180 \\\text { Direct labour } & \$ 100 \\\text { Manufacturing overhead } & \$ 190 \\\text { Administrative expenses } & \$ 110 \\\text { Selling expenses } & \$ 150 \\\text { Work-in-process inventory, beginning } & \$ 70 \\\text { Work-in-process inventory, ending } & \$ 80 \\\text { Finished goods inventory, beginning } & \$ 120 \\\text { Finished goods inventory, ending } & \$ 160\end{array}$ -What was the cost of goods sold (in thousands of dollars) for the year?

The following data (in thousands of dollars) have been taken from the accounting records of Karling Corporation for the year just ended. $\begin{array} { l r } \text { Sales } & \$ 990 \\\text { Raw materials inventory, beginning } & \$ 40 \\\text { Raw materials inventory, ending } & \$ 70 \\\text { Purchases of raw materials } & \$ 120 \\\text { Direct labour } & \$ 200 \\\text { Manufacturing overhead } & \$ 230 \\\text { Administrative expenses } & \$ 150 \\\text { Selling expenses } & \$ 140 \\\text { Work-in-process inventory, beginning } & \$ 70 \\\text { Work-in-process inventory, ending } & \$ 50 \\\text { Finished goods inventory, beginning } & \$ 120 \\\text { Finished goods inventory, ending } & \$ 160\end{array}$ -What was the cost of goods manufactured (finished) for the year (in thousands of dollars) ?

Sally Smith is employed in the production of various electronic products,and she earns $8 per hour.She is paid time-and-a-half for work in excess of 40 hours per week.During a given week,she worked 45 hours and had no idle time.How much of her week's wages would be charged to manufacturing overhead?

Geneva Steel Corporation produces large sheets of heavy gauge steel. The company showed the following amounts relating to its production for the year just completed: $\begin{array} { l r } \text { Direct materials used in production } & \$ 110,000 \\\text { Direct labour costs for the year } & \$ 55,000 \\\text { Work in process, beginning } & \$ 22,000 \\\text { Finished goods, beginning } & \$ 45,000 \\\text { Cost of goods available for sale } & \$ 288,000 \\\text { Cost of goods sold } & \$ 238,000 \\\text { Work in process, ending } & \$ 16,000\end{array}$ -What was the manufacturing overhead cost for the year?

The following information was provided by Wilson Company for the year just ended: $\begin{array} { l l } \text { Beginning finished goods inventory } & \$ 150,750 \\\text { Ending finished goods inventory } & \$ 140,475 \\\text { Sales } & \$ 475,000 \\\text { Gross margin } & \$ 150,000\end{array}$ What was the cost of goods manufactured for the year?

Last month,when 10,000 units of a product were manufactured,the cost per unit was $60.At this level of activity,variable costs were 50% of total unit costs.If 10,500 units are manufactured next month and cost behaviour patterns remain unchanged,how will costs be affected?