Distinguish between direct and indirect costs.
Distinguish between prime cost and conversion costs.
3. The current assets sections of the balance sheets of three companies follow. Which company is a service company? Which is a merchandiser? Which is a manufacturer? How can you tell?
Accounts Receivable 6,000 Accounts Receivable……
500 Materials Inventory……..
$9,500 Work in process inventory
Finished goods inventory
4. Francis manufacturers, a manufacturer of wood doors and windows, has prepared the following list of accounts
Production supervisor’s salary
Depreciation of machinery
Lathe (machine for shaping wood) Operators wages
Purchase of glue
Purchase of screws and nails
Purchase of pine
Purchase of oak
There is no beginning or ending inventory.
Calculate the following:
Direct material used
(b) Direct labour cost
5. Compute cost of goods manufactured and cost of goods sold from the following amounts
Direct materials inventory
Work in process inventory
Finished goods inventory
Purchases of direct materials
End of Year
6. Clyde’s Pets manufactures chewing bones for puppies. At the end of December 2008, his accounting records showed the following:
Work in process
Direct material purchases
Plant janitorial service
Sales salaries expense
Utilities for plant
Rent on plant
Customer service hotline expense
Prepare a schedule of cost of goods manufactured for the year ended December 31, 2008
Prepare an income statement for Clyde’s Pets for the year ended December 31, 2008
Given that the company manufactured 17,500 units, of its product in 2008, compute the company’s unit product cost for the year.
Online Discussion Questions
(Kindly prepare these questions before each online session)
1. Papermaking Ltd. makes paper, which is cut and packed, before being transferred into the finished goods store. The paper is moved from department to department by forklift truck. Each pack of finished product contains one ream of paper. The paper is loaded onto wooden pallets before delivery to customers. The following cost information relates to Papermaking Ltd. for the period ended March 31, 2002.
Wrapping paper (used in packing department)
Spare knives for cutting machine
Cleaning rags for machines
Making department wages to machine crew
Cutting department wages to machine crew
Packing department wages to packers
Fork truck driver wages
Factory foreman’s salary
Dispatch department wages
Delivery vehicle drivers wages
Sales manager’s salary
Sales office staff wages
General manager’s salary
Production manager’s salary
Maintenance costs 1
Electricity cost 2
Administrative office machine rental cost
Sundry other costs: