Accounting

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Chapter 2
Cost Terms, Concepts, and Classifications

Exercise 2-2 (15 minutes)

1. 2. 3. 4. 5. 6. 7. 8. 9. 10 . 11 . 12 . 13 . 14 . 15 .

Depreciation on salespersons’ cars ................ Rent on equipment used in the factory .......... Lubricants used for machine maintenance ..... Salaries of personnel who work in the finished goods warehouse.............................. Soap and paper towels used by factory workers at the end of a shift ...................... Factory supervisors’ salaries.......................... Heat, water, and power consumed in the factory ...................................................... Materials used for boxing products for shipment overseas (units are not normally boxed) ...................................................... Advertising costs .......................................... Workers’ compensation insurance for factory employees ................................................ Depreciation on chairs and tables in the factory lunchroom .......................................... The wages of the receptionist in the administrative offices .......................................... Cost of leasing the corporate jet used by the company's executives ................................ The cost of renting rooms at a British Columbia resort for the annual sales conference ......................................................... The cost of packaging the company’s product............................................................

Product (Inventoriable) Cost
X X X X X

Period Cost
X X

X X

X X

X X X X

© McGraw-Hill Ryerson Ltd. 2012. All rights reserved. Solutions Manual, Chapter 2 1

Exercise 2-3 (15 minutes) Mountain High Income Statement For the month ended xxx Sales ............................................................. Cost of goods sold: Beginning merchandise inventory ................. Add: Purchases ........................................... Goods available for sale ............................... Deduct: Ending merchandise inventory ......... Gross margin ................................................. Selling and administrative expenses: Selling expense ........................................... Administrative expense ................................ Operating income .......................................... $3,200,000 $ 140,000 2,550,000 2,690,000 180,000 110,000 470,000

2,510,000 690,000 580,000 $ 110,000

© McGraw-Hill Ryerson Ltd. 2012. All rights reserved. 2 Managerial Accounting, 9th Canadian Edition

© McGraw-Hill Ryerson Ltd. 2012. All rights reserved. Solutions Manual, Chapter 2 3

Exercise 2-9 (30 minutes) 1. a. USB flash drives purchased USB flash drives drawn from inventory USB flash drives remaining in inventory Cost per USB flash drive Cost in Raw Materials Inventory at May 31 b. USB flash drives used in production (19,500 – 500) Units completed and transferred to Finished Goods (95% × 19,000) Units still in Work in Process at May 31 Cost per flash drive Cost in Work in Process Inventory at May 31 c. Units completed and transferred to Finished Goods (above) Units sold during the month (80% × 18,050) Units still in Finished Goods at May 31 Cost per USB flash drive Cost in Finished Goods Inventory at May 31 d. Units sold during the month (above) Cost per USB flash drive Cost in Cost of Goods Sold at May 31 e. USB flash drives used in advertising Cost per USB flash drive Cost in Advertising Expense at May 31 2. Raw Materials Inventory—balance sheet Work in Process Inventory—balance sheet Finished Goods Inventory—balance sheet Cost of Goods Sold—income statement Advertising Expense—income statement $15,000 5,700 21,660 86,640 3,000 $132,000 22,000 19,500 2,500 × $6 $15,000 19,000 18,050 950 × $6 $ 5,700 18,050 14,440 3,610 × $6 $21,660 14,440 × $6 $86,640 500 × $6 $ 3,000

Note: the $132,000 above reconciles to the total amount spent on the flash drives on May 1: 22,000 x $6 per unit = $132,000. © McGraw-Hill Ryerson...
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