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Chapter 16: 112RQ (page 885)
Give five examples of manufacturing overhead.
Examples of manufacturing overhead are indirect labor, indirect materials, repair, and maintenance cost, property tax, and rent.
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Match the term with the correct definition.
1. A philosophy designed to integrate all organizational areas in order to provide customers with superior products and services while meeting organizational objectives. Requires improving quality and eliminating defects and waste.
2. Use of the Internet for business functions such as sales and customer service. Enables companies to reach customers around the world.
3. Evaluating a company鈥檚 performance by its economic, social, and environmental impact.
4. Software system that integrates all of a company鈥檚 functions, departments, and data into a single system.
5. A system in which a company produces products just when they are needed to satisfy needs. Suppliers deliver materials when they are needed to begin production, and finished units are completed at the right time for delivery to customers.
a. ERP b. JIT c. E-commerce d. TQM e. Triple bottom line
Explain the difference between line positions and staff positions.
Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost.
7. Wages of the office receptionist in an administrative office
Power Switch, Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout North Carolina affected Power Switch鈥檚 facilities. Inventory was completely ruined, and the company鈥檚 computer system, including all accounting records, was destroyed.
Before the disaster recovery specialists clean the buildings, Stephen Plum, the company controller, is anxious to salvage whatever records he can to support an insurance claim for the destroyed inventory. He is standing in what is left of the accounting department with Paul Lopez, the cost accountant.
鈥淚 didn鈥檛 know mud could smell so bad,鈥� Paul says. 鈥淲hat should I be looking for?鈥�
鈥淒on鈥檛 worry about beginning inventory numbers,鈥� responds Stephen, 鈥渨e鈥檒l get them from last year鈥檚 annual report. We need first-quarter cost data.鈥�
鈥淚 was working on the first-quarter results just before the storm hit,鈥� Paul says. 鈥淟ook, my report is still in my desk drawer. All I can make out is that for the first quarter, direct material purchases were \(476,000 and direct labor, manufacturing overhead, and total manufacturing costs to account for were \)505,000, \(245,000, and \)1,425,000, respectively. Wait! Cost of goods available for sale was \(1,340,000.鈥�
鈥淕reat,鈥� says Stephen. 鈥淚 remember that sales for the period were approximately \)1,700,000. Given our gross profit of 30%, that鈥檚 all you should need.鈥�
Paul is not sure about that but decides to see what he can do with this information. The beginning inventory numbers were:
鈥� Direct Materials, \(113,000
鈥� Work-in-Process, \)229,000
鈥� Finished Goods, $154,000
Requirements
1. Prepare a schedule showing each inventory account and the increases and decreases to each account. Use it to determine the ending inventories of Direct Materials, Work-in-Process, and Finished Goods.
2. Itemize a list of the cost of inventory lost.
Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company
Chewy Bones manufactures its own brand of pet chew bones. At the end of December 2018, the accounting records showed the following:
Balances: Beginning Ending
Direct Materials \( 13,400 \) 10,500
Work-in-Process Inventory 0 1,500
Finished Goods Inventory 0 5,400
Other information:
Direct materials purchases $ 39,000
Plant janitorial services 900
Sales salaries 5,100
Delivery costs 1,700
Net sales revenue 115,000
Utilities for plant 1,200
Rent on plant 9,000
Customer service hotline costs 1,600
Direct labor 16,000
Requirements
1. Prepare a schedule of cost of goods manufactured for Chewy Bones for the year ended December 31, 2018.
2. Prepare an income statement for Chewy Bones for the year ended December 31, 2018.
3. How does the format of the income statement for Chewy Bones differ from the income statement of a merchandiser?
4. Chewy Bones manufactured 17,500 units of its product in 2018. Compute the company鈥檚 unit product cost for the year, rounded to the nearest cent.
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