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Chapter 16: 20RQ (page 885)

How does a merchandising company calculate unit cost per item?

Short Answer

Expert verified

The merchandising company calculates the unit cost per item by calculating the total number of items sold from the total cost of goods sold.

Step by step solution

01

Definition of merchandising company

A merchandising company is a company that sells the goods which are purchased from the suppliers.

02

Computation of cost per item

The cost per item for merchandising company is computed by using the formula in which the total cost of goods sold is divided by the total number of items sold.

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Most popular questions from this chapter

Question:Determining flow of costs through a manufacturer鈥檚 inventory accounts

Root Shoe Company makes loafers. During the most recent year, Root incurred total manufacturing costs of \(26,300,000. Of this amount, \)2,000,000 was direct materials used and \(19,800,000 was direct labor. Beginning balances for the year were Direct Materials, \)700,000; Work-in-Process Inventory, \(1,500,000; and Finished Goods Inventory, \)400,000. At the end of the year, balances were Direct Materials, \(800,000; Work-in-Process Inventory, \)1,200,000; and Finished Goods Inventory, $600,000.

Requirements Analyze the inventory accounts to determine:

1. Cost of direct materials purchased during the year.

2. Cost of goods manufactured for the year.

3. Cost of goods sold for the year.

Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:

d. Salaries of the company鈥檚 top executives.

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.

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

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

4. Has a focus on the future.

See all solutions

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