Chapter 2 exercises - class 1
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Bow Valley College, Calgary *
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Accounting
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Apr 3, 2024
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Exercise 2-1
Required:
1. Depreciation, taxes and insurance on manufacturing facilities
2. Rent on office space used by non-manufacturing staff
3. Salaries paid to employees who produce audio equipment
4. Cost of glue used to fasten the company's logo to the grill used on all of its speakers
5. Cost of online advertising
6. Salaries paid to accounting employees
7. Salary paid to production manager who supervises manufacturing activities
8. Cost of plastic used for turntable dust covers
9. Bonuses paid to sales staff for meeting monthly sales goals
10. Salary paid to manager of HR department
Costs below all relate to Sounds Good, a company based in Alberta that manufactures high-
end audio equipment such as speakers, receivers, CD players, turntables, and home theatre systems. The company owns all of the manufacturing facilities (building and equipment) but rents the space used by the non-manufacturing employees (accounting, marketing, sales, human resources).
For each cost, indicate whether it would most likely be classified as direct labour, direct material, manufacturing OH, marketing and selling or an administrative cost.
Direct Labour
Direct Material
MOH
M&S
Admin
X
X
X
X
X
X
X
X
X
X
Problem 2-22
Schedule of Cost of Goods Manufactured; Income Statement
Costs and sales information for the most recent fiscal year are shown below:
Wallace River Company
Costs and Sales Information
For the Year Ended December 31
Purchase of raw materials
$ 90,000 Raw material inventory, beginning
10,000 Raw materials, ending
17,000 Depreciation, factory
42,000 Insurance, factory
5,000 Direct labour
60,000 Maintenance, factory
30,000 Administrative expense
70,000 Sales
450,000 Utilities, factory
27,000 Supplies, factory
1,000 Selling expense
80,000 Advertising expense
20,000 Indirect labour, factory
65,000 Work in process inventory, beginning
7,000 Work in process inventory, ending
30,000 Finished goods inventory, beginning
10,000 Finished good inventory, ending
40,000 Required:
1. Prepare a schedule of cost of goods manufactured.
2. Prepare an income statement.
3.
Total cost
Produced
Avg cost/unit
Direct Materials
83,000
10,000
8.3
Total Depreciation
42,000
10,000
4.2
Assume the company produced 10,000 units during the year. What was the average cost per unit for direct materials? What was the average cost per unit for factory depreciation?
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Related Questions
Required:
Classify the following costs as period or traceable costs.
Depreciation on office building
Insurance expense for factory building
Product liability insurance premium
Transportation charges for raw materials
Factory repairs and maintenance
Rent for inventory warehouse
Cost of raw materials
Factory wages
Salary to chief executive officer
Depreciation on factory
Bonus to factory workers
Salary to marketing staff
Administrative expenses
Bad debt expense
Advertising expense
Research and development
Warranty expense
Electricity for plant
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Question 4
Various cast associated with the operation of factories are given below:
Electricity to run production cost,
Rent on factory building
Cloth used to make drapes.
Production supervisor salary.
Wages of labourers assembling a product.
Depreciation on air purification equipment used to make furniture.
Factory janitorial salaries
Tomatoes used in canning fruits.
Lubricants for production equipment.
Sugar used in soft drink production.
Property tax on the factory.
Wages for workers painting cars.
Depreciation on canteen equipment.
Insurance on building used in bakıng bread for sale.
Cost of brakes used in manufacturing automobile.
3
6.
9
10
11
12
13
14
15
Required:
Classify each cost as either variable or fixed with respect to the number of units produced
and sold. Also indicate whether each cost is either product cost or period cost. (Fill X
in the table given in the answer sheet).
a)
" The variable cost per unit varies with output, whereas the fixed cost per unit in
constant".…
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Which of the following would most
likely be a period cost?
Depreciation on factory lunchroom
furniture.
Salary of telephone receptionist in the sales
office.
Salary of a security guard for the factory
parking lot.
Computer chips used by a computer
manufacturer.
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e. Entertainment expenses for sale representatives
f. Factory supplies
g. First-aid nurse for factory workersh. Health insurance premiums paid for factory workers
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j. Lumber used by furniture manufacturer
k. Maintenance costs for factory equipment
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m. Packing supplies for products sold, which are insignificant to the total cost of the product
n. Paper used by commercial printer
o. Paper used in processing various managerial reports
p. Protective glasses for factory machine operators
q. Salaries of quality control personnel
r. Sales commissions
s. Seed for gain farmer
t. Television advertisment
u. Prebuilt transmissions for an automobile manufacturer
v. Wages of a…
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Current Attempt in Progress
Bramble Corporation incurred the following costs while manufacturing its product.
Materials used in product
Depreciation on plant
Property taxes on store
Labor costs of assembly-line workers
Factory supplies used
(a)
Your answer is incorrect.
Compute cost of goods manufactured.
Cost of goods manufactured
LA
$100,800
$
50,400
6,300
92,400
19,400
Advertising expense
Property taxes on plant
Delivery expense
Sales commissions
Salaries paid to sales clerks
Work in process inventory was $10,100 at January 1 and $13,000 at December 31. Finished goods inventory w
1 and $38,300 at December 31.
$37,800
11,800
17,600
29,400
42,000
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1) Rent paid in advance to owners of building
2) Carriage expenses paid to suppliers
3)Purchases new supply trucks
4) Replacement of old machinery with new ones
5) Commission paid to marketing agents
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Which of the following is NOT a period cost?
Multiple Choice
O
Depreciation of photocopiers in the office.
Salary of the accounts payable clerk
Insurance on a company showroom where customers can view new products.
Salary of the plant supervisor.
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Complete the following table by placing each expense in the correct cost classification.
Reference Number
Types of expenses
1
Costs of opening a new facility
2
Costs of conducting business in a new location or with a new class of customer (including costs of staff training)
3
Costs of site preparation
4
Costs of testing whether the asset is functioning properly
5
Electrical installation costs
6
Costs of dismantling and removing the item and restoring the site on which it is located
7
Administration costs
8
Import duty of an imported machine
9
Purchase of a five-year maintenance contract with plant
10
Legal fees for sales and purchase agreement for acquisition of land
11
Interest on loan on a self constructed property after the asset is ready for use
12
Architect fees incurred for self constructed building
13
General overheads incurred for self…
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• Raw materials
• Salary of factory foreman
●
Heating cost for the factory
• Miscellaneous supplies used in production process
●
Salary of the CEO
• Costs to ship raw materials from the supplier to the factory
• Electricity cost for the factory
• Salaries of the sales team
Depreciation of factory machines
Property taxes on factory building
• Discounts for early payment of raw material purchases
• Salaries of the factory's janitorial staff
●
●
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Cost
Classification
a. Depreciation of robotic assembly line equipment
b. V8 automobile engine
c. Steering wheel
d. Wheels
e. Painting safety masks for employees working in the paint room
f. Salary of test driver
g. Glass used in the vehicle’s windshield
h. Wages of assembly line worker
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Electricity to run production cost,
Rent on factory building
Cloth used to make drapes.
Production supervisor salary.
Wages of labourers assembling a product.
Depreciation on air purification equipment used to make furniture.
Factory janitorial salaries
Tomatoes used in canning fruits.
Lubricants for production equipment.
Sugar used in soft drink production.
Property tax on the factory.
Wages for workers painting cars.
Depreciation on canteen equipment.
Insurance on building used in baking bread for sale.
Cost of brakes used in manufacturing automobile.
1
2
3
5
6.
7
8
9.
10
11
12
13
14
15
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Bicycle components
Depreciation on plant
Property taxes on store
Labor costs of assembly-line workers
Factory supplies used
$100,000
60,000
7,500
110,000
13,000
Advertising expense
Property taxes on plant
Delivery expense
Sales commissions
Salaries paid to sales clerks
$45,000
14,000
21,000
35,000
50,000
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labor and (c) manufacturing overhead.
Presented below is a list of costs and expenses usually incurred by Stensland Corporation, a
manufacturer of furniture, in its factory:
1. Salaries for assembly line inspectors
2. * Insurance on factory machines
3. Upholstery used in manufacturing fumiture
4. Wages paid to assembly line workers
5. Depreciation of factory machinery
6. Salaries of factory supervisors
7. Wood used in manufacturing fumiture
8. Glue, nails, paint, and other small parts used in production
9. Property taxes on factory building
10. Factory manager's salary
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a. Rent expense on factory building
b. Sales supplies used
c. Factory supplies used
d. Indirect materials used
e. Wages of assembly line personnel
f. Cost of primary material used to make product
g. Depreciation on office equipment
h. Rent on office facilities
i. Insurance expired on factory equipment
j. Utilities incurred in the office
k. Advertising expense
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