Cost and Managerial Accounting I, worksheet on chapter 2 By: Tsegazeab T.

1. Classify the following costs as direct (D) or indirect (ID) costs.

(a) The foreman’s salary ( f ) Fringe benefits
(b) Supplies (g) Wood in making furniture
(c) Depreciation of factory equipment (h) Glue in tube making
( d ) Leather used in the manufacture of shoes ( i ) FICA tax
(e) Lubricants for machines ( j ) Janitorial supplies
2. Classify the following costs as variable (V), fixed (F), or semi variable (S) in terms of their behavior
with respect to volume or level of activity.
(a) Property taxes (f) Insurance
(b) Maintenance and repair (g) Depreciation by straight-line
(c) Utilities (h) Sales agent’s commission
( d ) Sales agent’s salary (i) Depreciation by mileage -automobile
(e) Direct materials ( j ) Rent
3. Classify the following costs as manufacturing (M), selling (S), or administrative (A) expenses in terms
of their functions.
a. Factory supplies j. Freight-in
b. Advertising k. Employer’s payroll taxes -factory
c. Auditing expenses l. Employer’s payroll taxes -sales office
d. Rent on general office building m. President’s salary
e. Legal expenses n. Samples
f. Cost of idle time o. Small tools
g. Entertainment and travel p. Sanding materials used in furniture making
h. Freight-out q. Cost of machine breakdown
i. Bad debts
4. Classify the following costs as product costs (PC) or period expenses (PE).
(a) Pears in a fruit cocktail (f) Fringe benefits -general office
(b) Overtime premium ( g ) Workers’ compensation
(c) Legal fees (h) Social Security taxes-direct labor
( d ) Insurance on office equipment (i) Travel e.xpenses
(e) Advertising expenses ( j ) Rework on defective products
5. Which of the following costs are likely to be fully controllable, partially controllable, or not
controllable by the chief of the production department?
(a) Wages paid to direct labor (f) Supplies
(b) Rent on factory building (g) Insurance on factory equipment
(c) Chiefs salary (h) Advertising
( d ) Utilities (i) Price paid for materials and supplies
(e) Direct materials used ( j ) Idle time due to machine breakdown
6. Discuss the following terms

1) actual cost 5) cost 9) cost driver

2) average cost 6) cost accumulation 10) cost object
3) budgeted cost 7) cost allocation 11) cost of goods manufactured
4) conversion costs 8) cost assignment 12) cost tracing
Cost and Managerial Accounting I, worksheet on chapter 2 By: Tsegazeab T.

13) direct costs of a cost object 22) indirect manufacturing costs 30) prime costs
14) direct manufacturing labor 23) inventoriable costs 31) product cost
costs 24) manufacturing overhead 32) relevant range
15) direct material costs costs 33) revenues
16) direct materials inventory 25) manufacturing-sector 34) service-sector companies
17) factory overhead costs companies 35) unit cost
18) finished goods inventory 26) merchandising-sector 36) variable cost
19) fixed cost companies 37) work-in-process inventory
20) idle time 27) operating income 38) work in progress
21) indirect costs of a cost 28) overtime premium
object 29) period costs
Calculation part

1. Foxwood Company is a metal- and woodcutting manufacturer, selling products to the home
construction market. Consider the following data for 2011:
Problem for Self-Study
Sandpaper $ 2,000
Materials-handling costs 70,000
Lubricants and coolants 5,000
Miscellaneous indirect manufacturing labor 40,000
Direct manufacturing labor 300,000
Direct materials inventory Jan. 1, 2011 40,000
Direct materials inventory Dec. 31, 2011 50,000
Finished goods inventory Jan. 1, 2011 100,000
Finished goods inventory Dec. 31, 2011 150,000
Work-in-process inventory Jan. 1, 2011 10,000
Work-in-process inventory Dec. 31, 2011 14,000
Plant-leasing costs 54,000
Depreciation—plant equipment 36,000
Property taxes on plant equipment 4,000
Fire insurance on plant equipment 3,000
Direct materials purchased 460,000
Revenues 1,360,000
Marketing promotions 60,000
Marketing salaries 100,000
Distribution costs 70,000
Customer-service costs 100,000

A. Prepare an income statement with a separate supporting schedule of cost of goods manufactured. For
all manufacturing items, classify costs as direct costs or indirect costs and indicate by V or F whether
each is basically a variable cost or a fixed cost (when the cost object is a product unit). If in doubt,
decide on the basis of whether the total cost will change substantially over a wide range of units
produced.#
B. Suppose that both the direct material costs and the plant-leasing costs are for the production of
900,000 units. What is the direct material cost of each unit produced? What is the plant-leasing cost
per unit? Assume that the plant-leasing cost is a fixed cost.
Cost and Managerial Accounting I, worksheet on chapter 2 By: Tsegazeab T.

C. Suppose Foxwood Company manufactures 1,000,000 units next year. Repeat the computation in
requirement 2 for direct materials and plant-leasing costs. Assume the implied cost-behavior patterns
persist.
D. As a management consultant, explain concisely to the company president why the unit cost for direct
materials did not change in requirements 2 and 3 but the unit cost for plant-leasing costs did change.

2. A manufacturing company shows the following amounts in the income statement for 19B:
Materials Used $590,000
Cost of Goods Sold 750,000
Cost of Goods Manufactured 800,000
Total Manufacturing Costs 790,000
A. Determine the amounts of (a) and ( b )in the balance sheets of 12/31/19Aand 12/31/19B.
Inventories
12/31/19A 12/13/111 9B
Materials $100,000 $150,000
Work-in-process (a) 87,000
Finished goods 80,000 (b)
B. Compute the amount of materials purchased in 19B.
3. For each of the following cases, find the missing data. Each case is independent of the others.
Case 1 Case 2 Case 3
Beginning direct materials $ 5,000 $ 3,000 $ 3,000
Purchases of direct materials 17,000 45,000 10,000
Ending direct materials (a) 7,000 (m)
Direct materials used (b) (f) 6,000
Direct labor 16,000 (g) 4,000
Factory overhead 3,000 20,000 6,000
Total manufacturing costs (c) 85,000 (n)
Beginning work-in-process 6,000 6,000 5,000
Ending work-in-process 6,000 4,000 (o)
Cost of goods manufactured 23,000 (h) 10,000
Case 1 Case 2 Case 3
Sales 52,000 125,000 23,000
Beginning finished goods 8,000 7,000 7,000
Cost of goods manufactured 23,000 (i) 10,000
Ending finished goods (d) (j) 6,000
Cost of goods sold 27,000 (k) (P)
Gross profit (e) 60,000 (q)
Selling and administrative 5,000 8,500 4,000
expenses
Net income 20,000 ( l) 8,000
Cost and Managerial Accounting I, worksheet on chapter 2 By: Tsegazeab T.

5). Some selected sales and cost data for job order 515 are given below.
Direct materials used $100,000
Direct labor 150,000
Factory overhead (all indirect, 40% variable) 75,000
Selling and administrative expenses (50% direct, 60% variable) 120,000
Required: Compute the following: ( a ) prime cost, ( b )conversion cost, (c) direct cost, ( d )indirect cost,
(e) product cost, (f)period expense, (g) variable cost, and (h) fixed cost.
Cost and Managerial Accounting I, worksheet on chapter 2 By: Tsegazeab T.