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This 10 page Class Notes was uploaded by Gerda Pacocha on Saturday October 3, 2015. The Class Notes belongs to ACC208 at California State Polytechnic University taught by WilliamFoley in Fall. Since its upload, it has received 28 views. For similar materials see /class/218397/acc208-california-state-polytechnic-university in Accounting at California State Polytechnic University.
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Date Created: 10/03/15
CHAPTER 1 SOLUTIONS Page 1 Brief Exercise 14 Lompac Products Schedule of Cost of Goods Manufactured Direct materials Beginning raw materials inventory 60000 Add Purchases of raw materials 690000 Raw materials available for use 750000 Deduct Ending raw materials inventory 45000 Raw materials used in production 705000 Direct labor 135000 Manufacturing overhead 370000 Total manufacturing costs 1210000 Add Beginning work in process inventory 120000 1330000 Deduct Ending work in process inventory 130000 Cost of goods manufactured 1200000 CHAPTER 1 SOLUTIONS Page 2 Brief Exercise 15 Some may argue that the cost of advertising a Madonna 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 Madonna 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 C ost Beha Vior Variable Fixed H Xray film used in the radiology lab at Virginia Mason Hospital in Seattle X The costs of advertising a Madonna rock concert in New York City X Rental cost of the space occupied by a McDonald s restaurant in Hong Kong X The electrical costs of running a roller coaster at Magic Mountain X Property taxes on your local cinema X Commissions paid to salespersons at Nordstrom X Property insurance on a CocaCola bottling plant X The costs of synthetic materials used to make Nike running shoes The costs of shipping Panasonic televisions to l O AU39I A m N 00 co gtltgtlt CHAPTER 1 SOLUTIONS Page 3 retail stores 10 The cost of leasing an ultrascan diagnostic machine at the American Hospital in Paris X Brief Exercise 16 Direct Indirect Cost C osting object Cast Cast 1 The wages of pediatric nurses The pediatric department X 2 Prescription drugs A particular patient X 3 Heating the hospital The pediatric department X 4 The salary of the head of pediatrics The pediatric department X 5 The salary of the head of pediatrics A particular pediatric patient X 6 Hospital chaplain s salary A particular patient X 7 Lab tests by outside contractor A particular patient X 8 Lab tests by outside contractor A particular department X Exercise 19 H N w b U39l 0393 l 00 C ost Item Hamburger buns in a Wendy s outlet Advertising by a dental office Apples processed and canned by Del Monte Shipping canned apples from a Del Monte plant to customers Insurance on a Bausch amp Lomb factory producing contact lenses Insurance on IBM s corporate headquarters Salary of a supervisor overseeing production of printers at Hewlett Packard Commissions paid to CHAPTER 1 SOLUTIONS Page 4 Selling and Admin C ost Behavior strative Product Variable Fixed Cast Cast X X X X X X X X X X X X X X X X CHAPTER 1 SOLUTIONS Page 5 pharmaceutical sales representatives 9 Depreciation of factory lunchroom facilities at a General Electric plant X 10 Steering wheels installed in BMWs X Exercise 110 Product cost variable cost Conversion cost Opportunity cost Prime cost Sunk cost Period cost variable cost Product cost period cost fixed cost Product cost Period cost Fixed cost product cost conversion cost OkOOONO AU39lhUONI I H CHAPTER 1 SOLUTIONS Page 6 Exercise 111 1 Mason Company Schedule of Cost of Goods Manufactured Direct materials Raw materials inventory beginning 7000 Add Purchases of raw materials 118000 Raw materials available for use 125000 Deduct Raw materials inventory ending 15000 Raw materials used in production 110000 Direct labor 70000 Manufacturing overhead Indirect labor 30000 Maintenance factory equipment 6000 Insurance factory equipment 800 Rent factory facilities 20000 Supplies 4200 Depreciation factory equipment 19000 Total overhead costs 80000 Total manufacturing costs 260000 Add Work in process beginning 10000 270000 Deduct Work in process ending 5000 Cost of goods manufactured 265000 CHAPTER 1 SOLUTIONS Page 7 2 The cost of goods sold section of Mason Company s income statement Finished goods inventory beginning 20000 Add Cost of goods manufactured 265l000 Goods available for sale 285000 Deduct Finished goods inventory ending 35000 Cost of goods sold 250900 CHAPTER 1 SOLUTIONS Page 8 Problem 116A 1 Selling or Cost Behavior Admim39strative Product Cost Cost Item Variable Fixed Cost Direct Indirect Factory labor direct 118000 118000 Advertising 50000 50000 Factory supervision 40000 40000 Property taxes factory building 3500 3500 Sales commissions 80000 80000 Insurance factory 2500 2500 Depreciation office equipment 4000 4000 Lease cost factory equipment 12000 12000 Indirect materials factory 6000 6000 Depreciation factory building 10000 10000 General office supplies 3000 3000 General office salaries 60000 60000 Direct materials used 94000 94000 Utilities factory 20000 20000 Total costs 321000 182000 197000 212000 94000 CHAPTER 1 SOLUTIONS Page 9 Problem 116A continued 2 Direct 212000 Indirect 94000 Total 306000 306000 2000 sets 153 per set w The average product cost per set would increase This is because the fixed costs would be spread over fewer units causing the cost per unit to rise 39b m Yes the president may expect a minimum price of 153 which is the average cost to manufacture one set He might expect a figure even higher than this to cover a portion of the administrative costs as well The brotherinlaw probably will be thinking of cost as including only direct materials used or at most direct materials and direct labor Direct materials alone would be only 47 per set and direct materials and direct labor would be only 106 939 The term is opportunity cost The full regular price of a set might be appropriate here since the company is operating at full capacity and this is the amount that must be given up benefit forgone in order to sell a set to the brotherinlaw CHAPTER 1 SOLUTIONS Page 10 Problem 118A 1 Product Cost Per0c Selln and Variable Fixed Direct Direct Mfg Admin Name of the Cast Cast Cast Materias Labor Overhead Cost Staci39s present salary 3800month X Building rent 500 month X X Clay and glaze 2pot X X Wages of production workers 8pot X X Advertising 600month X X Sales commission 4pot X X Rent of production equipment 300month X X Legal and ling fees 500 X X Rent of sales office 250month X X Phone for taking orders 40month X X Interest lost on savings account 1200year X 2 The 500 cost of incorporating the business is not a differential cost Even though the cost was incurred to start the business it is a sunk cost Whether Staci produces pottery or stays in her present job she will have incurred this cost
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