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Exercise 2-2
1.The cost of a hard-drive installed in a computer: direct materials cost.

2.The cost of advertising in the Puget Sound Computer User newspaper: Selling and Administrative cost.

3.The wages of employees who assemble computers from components: direct labor cost.

4.Sales commissions paid to the company’s salespeople: Selling and Administrative cost.

5.The wages of the assembly shop’s supervisor: manufacturing overhead cost.

6.The wages of the company’s accountant: administrative cost.

7.Depreciation on equipment used to test assembled computers before release to customers: manufacturing overhead cost.

8.Rent on the facility in the industrial park: Manufacturing overhead

Exercise 2-3
Product CostPeriod Cost
1.Depreciation on salespersons’ carsX
2.Rent on equipment used in the factoryX
3.Lubricants used for maintenance of machinesX
4.Salaries of finished goods warehouse personnelX
5.Soap and paper towels used by factory workers at the end of a shiftX 6.Factory supervisors’ salariesX
7.Heat, water, and power consumed in the factoryX
8.Materials used for boxing products for shipment overseas (units are not normally boxed)X 9.Advertising costsX
10.Workers’ compensation insurance on factory employeesX 11.Depreciation on chairs and tables in the factory lunchroomX 12.The wages of the receptionist in the administrative officesX 13.Lease cost of the corporate jet used by the company's executivesX 14.Rent on rooms at a Florida resort for holding the annual sales conferenceX 15.Attractively designed box for packaging the company’s product—breakfast cerealX

Exercise 2-5
Lompac Products
Schedule of Cost of Goods Manufactured

Direct materials:
Beginning raw materials inventory$ 60,000
Add: Purchases of raw materials 690,000
Raw materials available for use750,000
Deduct: Ending raw materials inventory 45,000
Raw materials used in production$ 705,000
Direct labor 135,000
Manufacturing overhead 370,000
Total manufacturing costs 1,210,000
Add: Beginning work in process inventory 120,000
1,330,000
Deduct: Ending work in process inventory 130,000
Cost of goods manufactured$1,200,000

Exercise 2-6
A few of these costs may generate debate. For example, some may argue that the cost of advertising a rock concert is a variable cost since the number of people who come to the rock concert depends on the amount of advertising. However, one can argue that if the price is within reason, any rock concert in New York City will be sold out and the function of advertising is simply to let people know the event will be happening. Moreover, while advertising may affect the number of persons who ultimately buy tickets, the causation is in one direction. If more people buy tickets, the advertising costs don’t go up.

Cost Behavior
VariableFixed
1.X-ray film used in the radiology lab at Virginia Mason Hospital in SeattleX 2.The costs of advertising a rock concert in New York CityX 3.The cost of renting retail space for a McDonald’s restaurant in Hong KongX 4.The electrical costs of running a roller coaster at Magic MountainX 5.Property taxes on your local cinemaX

6.Commissions paid to salespersons at NordstromX
7.Property insurance on a Coca-Cola bottling plantX
8.The costs of synthetic materials used to make a particular model of running shoesX 9.The costs of shipping Panasonic televisions to retail storesX 10.The cost of leasing an ultra-scan diagnostic machine at the American Hospital in ParisX

Exercise 2-7

CostCosting objectDirect CostIndirect Cost
1.The wages of pediatric nursesThe pediatric departmentX 2.Prescription drugsA particular patientX
3.Heating the hospitalThe pediatric departmentX
4.The salary of the head of pediatricsThe pediatric departmentX 5.The salary of the head of pediatricsA...
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