218) Use the appropriate letter(s) to indicate if the
following costs would be found on the income statement of a
A. service
company
B. merchandising
company
C. manufacturing
company
You may use more than one letter for each answer.
____ Revenue
____ Salaries expense
____ Customer service expense
____ Cost of goods manufactured
____ Cost of goods sold
Answer:
A, B, C Revenue
A, B, C Salaries expense
A, B, C Customer service expense
C Cost of goods manufactured
B, C Cost of goods sold
Diff: 2
LO: 2-5
EOC: E2-22A
AACSB: Analytical
Thinking
Learning Outcome:
Define and use cost-volume-profit analysis to analyze the effects of
changes
in costs and volume on a company's
profits
219) Compute the missing amounts.
|
|
Miami Company
|
Orlando Company
|
|
Sales
|
$ 300,000
|
(D)
|
|
Cost of Goods Sold
|
|
|
|
Beginning
Inventory
|
(A)
|
65,000
|
|
Purchases and
Freight-In
|
119,000
|
(E)
|
|
Cost of goods
available for sale
|
(B)
|
192,000
|
|
Ending inventory
|
5,000
|
3,000
|
|
Cost of goods
sold
|
115,000
|
(F)
|
|
Gross Margin
|
185,000
|
124,000
|
|
Selling and Administrative Expenses
|
(C)
|
90,000
|
|
Operating Income
|
32,000
|
(G)
|
Answer: A) 120,000
- 119,000 = 1,000
B) 115,000
+ 5,000 = 120,000
C) 185,000
- 32,000 = 153,000
D) 124,000
+ 189,000 = 313,000
E) 192,000
- 65,000 = 127,000
F) 192,000
- 3,000 = 189,000
G) 124,000
- 90,000 = 34,000
Diff: 3
LO: 2-5
EOC: E2-27A
AACSB: Analytical
Thinking
Learning Outcome:
Define and use cost-volume-profit analysis to analyze the effects of
changes
in costs and volume on a
company's profits
220) Kitch Company sells collectibles. The following
information summarizes Dino's operating activities for the most recent year:
|
Merchandise inventory, beginning
|
$ 12,000
|
|
Merchandise inventory, ending
|
6,000
|
|
Purchases
|
97,000
|
|
Operating expenses
|
62,000
|
|
Sales revenue
|
195,000
|
Required: Prepare an income statement for the most recent
year.
Answer:
Diff: 3
LO: 2-5
EOC: E2-26A
AACSB: Analytical
Thinking
Learning Outcome: Define
and use cost-volume-profit analysis to analyze the effects of changes
in costs and volume on a
company's profits
221) Eschenbach Company sells office supplies. The
following information summarizes Swirzoff's operating activities for the past
year:
|
Utilities for store
|
7,000
|
|
Rent for store
|
6,500
|
|
Sales commissions
|
2,500
|
|
Purchases of merchandise
|
65,000
|
|
Inventory, ending
|
21,500
|
|
Inventory, beginning
|
28,000
|
|
Sales revenue
|
120,000
|
Required: Prepare an income statement for Swirzoff Company,
a merchandiser, for the year ended December 31.
Answer:
Diff: 3
LO: 2-5
EOC: E2-27A
AACSB: Analytical
Thinking
Learning Outcome:
Define and use cost-volume-profit analysis to analyze the effects of
changes
in costs and volume on a
company's profits
222) North Pacific Company used $65,000 of direct materials
and incurred $43,000 of direct labor costs during 2011. Indirect labor amounted
to $1,700 while indirect materials used totaled $1,800. Other operating costs
pertaining to the factory included utilities of $4,300; maintenance of $6,800;
supplies of $1,500; depreciation expense of $8,900; and property taxes of
$2,400. There was no beginning or ending finished goods inventory, but work in
process inventory began the year with a $6,400 balance and ended the year with
a $7800 balance.
Required: Prepare a schedule of cost of goods manufactured
for South State Company for the year ended December 31.
Answer:
Diff: 3
LO: 2-5
EOC: E2-25A
AACSB: Analytical
Thinking
Learning Outcome:
Define and use cost-volume-profit analysis to analyze the effects of
changes
in costs and volume on a company's profits
223) The following information is available for the Bower
Corporation for last year:
∙ Raw
materials inventory decreased $4,000 from the beginning of the year to the end
of the year.
∙ Raw
materials inventory on December 31 (end of year) was 50% of raw materials
inventory on January 1 (beginning of year).
∙ Beginning
work in process inventory was $145,000.
∙ Ending
finished goods inventory was $65,000.
∙ Purchases
of direct materials were $154,700.
∙ Manufacturing
overhead was 50% of the cost of direct labor.
∙ Total
manufacturing costs incurred were $246,400, 80% of cost of goods manufactured
and $156,000 less than cost of goods sold.
Compute:
a) finished
goods inventory on January 1 (beginning of year)
b) work
in process inventory on December 31 (end of year)
c) direct
labor incurred
d) manufacturing
overhead incurred
e) direct
materials used
f) raw
materials inventory on January 1 (beginning of year)
g) raw
materials inventory on December 31 (end of year)
Note to students: The
solutions to this problem are not necessarily calculated in alphabetical order.
Answer:
a) cost of goods sold = $246,400 + $156,000 = $402,400
$402,400 + $65,000 - $308,000 = $159,400
b) cost of goods manufactured = $246,400/.80 = $308,000
$246,400 + $145,000 - $308,000 = $83,400
c) $158,700 + x + 0.5x = $246,400
1.5x = $877,700
x = $58,467
d) $58,467 × .5 = $29,233
e) $8,000 + $154,700 - $4,000 = $158,700
f) X = January 1 materials inventory
$4,000 = .5X
X = $8,000
g) $8,000 - $4,000 = $4,000
Diff: 3
LO: 2-5
EOC: E2-27A
AACSB: Analytical
Thinking
Learning Outcome:
Define and use cost-volume-profit analysis to analyze the effects of
changes
in costs and volume on a
company's profits
224) The following amounts were taken from the general
ledger of the Excellent Manufacturing Company. Compute the cost of goods
manufactured and the cost of goods sold for the company for the year.
|
Raw materials inventory — beg. of year
|
$52,000
|
Depreciation — plant & equipment
|
$28,000
|
|
Raw materials inventory — end of year
|
46,000
|
Repairs and maintenance — plant
|
4,000
|
|
Work in process inv. — beg. of year
|
110,000
|
Insurance on plant
|
12,000
|
|
Work in process inv. — end of year
|
85,000
|
General and administration exp.
|
29,000
|
|
Finished goods inv. — beg. of year
|
26,000
|
Indirect labor
|
27,000
|
|
Finished goods inv. — end of year
|
54,000
|
Direct labor
|
178,000
|
|
Purchase of direct materials
|
37,000
|
Marketing expenses
|
62,000
|
Answer:
Diff: 3
LO: 2-5
EOC: E2-24A
AACSB: Analytical
Thinking
Learning Outcome:
Define and use cost-volume-profit analysis to analyze the effects of
changes
in costs and volume on a company's profits
225) Over the long-term all costs are uncontrollable.
Answer: FALSE
Diff: 1
LO: 2-6
EOC: E2-29A
AACSB: Analytical
Thinking
Learning Outcome:
Define and use cost-volume-profit analysis to analyze the effects of
changes
in costs and volume on a
company's profits
226) Differential cost is the difference in cost between
two alternatives.
Answer: TRUE
Diff: 1
LO: 2-6
EOC: E2-29A
AACSB: Analytical
Thinking
Learning Outcome:
Define and use cost-volume-profit analysis to analyze the effects of
changes
in costs and volume on a company's profits
227) Decision making is guided only by differential costs.
Answer: FALSE
Diff: 2
LO: 2-6
EOC: E2-29A
AACSB: Analytical
Thinking
Learning Outcome:
Define and use cost-volume-profit analysis to analyze the effects of
changes
in costs and volume on a company's profits
228) Irrelevant factors should not be considered when
making decisions.
Answer: TRUE
Diff: 1
LO: 2-6
EOC: E2-29A
AACSB: Analytical
Thinking
Learning Outcome:
Define and use cost-volume-profit analysis to analyze the effects of
changes
in costs and volume on a company's profits
229) You are trying to decide whether or not to sell back
your accounting textbook at the end of the class. The cost you paid for the
book is not relevant to your decision.
Answer: TRUE
Diff: 2
LO: 2-6
EOC: E2-29A
AACSB: Analytical
Thinking
Learning Outcome:
Define and use cost-volume-profit analysis to analyze the effects of
changes
in costs and volume on a company's profits
230) Sunk costs are irrelevant to the decision making
process.
Answer: TRUE
Diff: 1
LO: 2-6
EOC: E2-29A
AACSB: Analytical
Thinking
Learning Outcome:
Define and use cost-volume-profit analysis to analyze the effects of
changes
in costs and volume on a
company's profits
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