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Chapter 16: Q18RQ (page 885)
How does a manufacturing company calculate unit product cost?
The unit product cost is calculated using the formulae which is the cost of goods manufactured is divided by the total units produced
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Classifying period costs and product costs
Langley, Inc. is the manufacturer of lawn care equipment. The company incurs the following costs while manufacturing edgers:
鈥� Handle and shaft of edger
鈥� Motor of edger
鈥� Factory labor for workers assembling edgers
鈥� Lubricant used on bearings in the edger (not traced to the product)
鈥� Glue to hold the housing together
鈥� Plant janitorial wages
鈥� Depreciation on factory equipment
鈥� Rent on plant
鈥� Sales commissions
鈥� Administrative salaries
鈥� Plant utilities
鈥� Shipping costs to deliver finished edgers to customers
Requirements
1. Describe the difference between period costs and product costs.
2. Classify Langley鈥檚 costs as period costs or product costs. If the costs are product costs, further classify them as direct materials, direct labor, or manufacturing overhead.
Match the definition to the key term.
13. Triple bottom line
14. Value chain
15. Just-in-time management
16. Enterprise resource planning
17. Total quality management
a. A cost management system in which a company produces products just in time to satisfy needs.
b. A philosophy designed to integrate all organizational areas in order to provide customers with superior products and services, while meeting organizational goals throughout the value chain.
c. Software system that can integrate all of a company鈥檚 functions, departments, and data into a single system.
d. Evaluating a company鈥檚 performance by its economic (profits), social (people), and environmental (planet) impact.
e. Includes all activities that add value to a company鈥檚 products and services
Question:Preparing an income statement and calculating unit cost for a service company
The Windshield Doctors repair chips in car windshields. The company incurred the following operating costs for the month of March 2018:
Salaries and wages \( 12,000
Windshield repair materials 4,600
Depreciation on truck 300
Depreciation on building and equipment 1,200
Supplies used 300
Utilities 460
The Windshield Doctors earned \)23,000 in service revenues for the month of March by repairing 500 windshields. All costs shown are considered to be directly related to the repair service.
Requirements
1. Prepare an income statement for the month of March.
2. Compute the cost per unit of repairing one windshield.
3. The manager of Windshield Doctors must keep unit operating cost below $50 per windshield in order to get his bonus. Did he meet the goal?
Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company
Certain item descriptions and amounts are missing from the monthly schedule of cost of goods manufactured and income statement of Charlie Manufacturing Company. Fill in the blanks with the missing words, and replace the Xs with the correct amounts.
ing Direct Ending Direct Direct Manufacturing Overhead Total Costs Total Costs Ending Direct Materials Beginning Direct Materials Purchases of Direct Materials \( 26,000 \) X \( X X X (29,000) 177,000 50,000 \) X 51,000 81,000 (26,000) C
Net Sales Revenue Cost of Goods Sold Total Income Cost of Goods Sold: Gross Profit Expenses: Selling Expenses Administrative Expenses Cost of Goods Ending Beginning \( X 232,000 268,000 X 150,000 90,000 \) 118,000 X X X $ X CHARLIE MANUFACTURING COMPANY June 30
Winnebago Industries, Inc. is a leading manufacturer of recreational vehicles (RVs), including motorized and towable products. The company designs, develops, manufactures, and markets RVs as well as supporting products and services. The RVs are sold to consumers through a dealer network. On the August 29, 2015, balance sheet, Winnebago reported inventory of approximately \(112 million. Of this amount, approximately \)12 million, about 11%, was Finished Goods Inventory (Notes to Consolidated Financial Statements, Note 3). Suppose Winnebago motor homes have an average sales price of $96,000 and cost of goods sold is 89% of sales. Thor Industries, Inc., a major competitor, has an average cost of goods sold of 86% of sales. For year ending August 29, 2015, Winnebago sold 9,097 motor homes (Form 10-K, Item 1 Business).
Requirements
1. Why would the Finished Goods Inventory be such a relatively small portion of total inventory?
2. What is the average cost of goods sold (in dollars) for a Winnebago motor home? What is the average gross profit?
3. If Winnebago could reduce production costs so that the average cost of goods sold is equal to their competitor鈥檚 average cost of goods sold, how much more profit would Winnebago earn on each motor home sold?
4. Based on 2015 sales, how much would operating income increase if the company reduced the average cost of goods sold to equal their competitor鈥檚 average cost of goods sold?
5. How could managers at Winnebago use managerial accounting to reduce costs and increase profits?
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