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Chapter 1 Exercises - Cost Terms and Purposes

1. Messenger Manufacturing Company's account balances for the quarter ending March 31 are provided, including inventory, materials used, labor costs, expenses, and revenues. Cost of goods manufactured and income statements are required to be prepared. 2. Cost data for 2015 is provided for Helmer Sporting Goods Company, including beginning and ending inventory amounts, materials used, labor costs, expenses, and revenues. Cost of goods manufactured and various cost calculations are required. 3. Cost data for January production of Big Bertha electronic storage devices at Springfield Manufacturing is provided, including direct materials, direct labor, indirect costs, and units produced. Unit manufacturing costs are to be calculated. Potential impacts on unit costs if production

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37 views3 pages

Chapter 1 Exercises - Cost Terms and Purposes

1. Messenger Manufacturing Company's account balances for the quarter ending March 31 are provided, including inventory, materials used, labor costs, expenses, and revenues. Cost of goods manufactured and income statements are required to be prepared. 2. Cost data for 2015 is provided for Helmer Sporting Goods Company, including beginning and ending inventory amounts, materials used, labor costs, expenses, and revenues. Cost of goods manufactured and various cost calculations are required. 3. Cost data for January production of Big Bertha electronic storage devices at Springfield Manufacturing is provided, including direct materials, direct labor, indirect costs, and units produced. Unit manufacturing costs are to be calculated. Potential impacts on unit costs if production

Uploaded by

Mandy Khoury
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

Messenger Manufacturing Company had the following account balances for the quarter ending
March 31, unless otherwise noted:

Work-in-process inventory (January 1) $ 140,400


Work-in-process inventory (March 31) 171,000
Finished goods inventory (January 1) 540,000
Finished goods inventory (March 31) 510,000
Direct materials used 378,000
Indirect materials used 84,000
Direct manufacturing labor 480,000
Indirect manufacturing labor 186,000
Property taxes on manufacturing plant building 28,800
Salespersons' company vehicle costs 12,000
Depreciation of manufacturing equipment 264,000
Depreciation of office equipment 123,600
Miscellaneous plant overhead 135,000
Plant utilities 92,400
General office expenses 305,400
Marketing distribution costs 30,000

Required:
a. Prepare a cost of goods manufactured schedule for the quarter.
b. Prepare an income statement for the quarter if the company generated a revenue of
$3,800,000

2. Helmer Sporting Goods Company manufactured 100,000 units in 2015 and reported the
following costs:

Sandpaper $ 32,000 Leasing costs-plant $ 384,000


Materials handling 320,000 Depreciation-plant equipment 224,000
Coolants & lubricants 22,400 Property taxes-plant equipment 32,000
Indirect manufacturing labor 275,200 Fire insurance-plant equipment 16,000
Direct manufacturing labor 2,176,000 Direct material purchases 3,136,000
Direct materials, 1/1/15 384,000 Direct materials, 12/31/15 275,200
Finished goods, 1/1/15 672,000 Sales revenue 12,800,000
Finished goods, 12/31/15 1,280,000 Sales commissions 640,000
Work-in-process, 1/1/15 96,000 Sales salaries 576,000
Work-in-process, 12/31/15 64,000 Advertising costs 480,000
Administration costs 800,000

Required:
a. Prepare the cost of goods manufactured schedule.
b. What is the amount of direct materials used during 2015?
c. What manufacturing costs were added to WIP during 2015?
d. What is cost of goods manufactured for 2015?
e. What is cost of goods sold for 2015?
3. Springfield Manufacturing produces electronic storage devices, and uses the following three-
part classification for its manufacturing costs: direct materials, direct manufacturing labor, and
indirect manufacturing costs. Summary data (in millions) for January for the most popular
electronic storage device, the Big Bertha, was:

Big Bertha
Direct materials costs $4,500,000
Direct manufacturing labor costs $1,500,000
Indirect manufacturing costs $4,250,000
Units produced 40,000

Required:
a. Compute the manufacturing cost per unit for each product produced in January.
b. Suppose production will be reduced to 30,000 units in February. Speculate as to whether the
unit costs in February will most likely be higher or lower than unit costs in January; it is not
necessary to calculate the exact February unit cost. Briefly explain your reasoning.

4. Leslie Manufacturing reported the following:

Revenue $450,000
Beginning inventory of direct materials, January 1, 2015 20,000
Purchases of direct materials 156,000
Ending inventory of direct materials, December 31, 2015 18,000
Direct manufacturing labor 21,000
Indirect manufacturing costs 42,000
Beginning inventory of finished goods, January 1, 2015 40,000
Cost of goods manufactured 114,000
Ending inventory of finished goods, December 31, 2015 45,000
Operating costs 150,000

A. What is Leslie's cost of goods sold?


B. What is Leslie's gross margin (or gross profit)?

5. A distraught employee, Jeffrey Hills, put a torch to a manufacturing plant on a blustery


February 18. The resulting blaze destroyed the plant and its contents. Fortunately, certain
accounting records were kept in another building. They reveal the following from January 1,
2009 to February 18, 2009:

Raw Materials purchased $175,000

Work in process 1/1/2009 49,000

Raw Materials inventory 1/1/2009 31,000

Finished goods inventory 1/1/2009 45,000


Manufacturing overheads 35% of conversion costs

Revenues 515,000

Direct Manufacturing labor 195,000

Direct Materials used 114,000

Gross Profit 128,750

Cost of goods available for sale 465,000

You are required to calculate the following costs:


a. Raw Materials inventory 2/18/2009
b. Finished Goods inventory 2/18/2009
c. Work in process inventory 2/18/2009

N.B. show your work in the form of a COGM schedule

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