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Chapter 16: Q1CA (page 906)
In 100 words or fewer, explain the difference between product costs and period costs. In your explanation, explain the inventory accounts of a manufacturer.
Period cost are the operating expenses and the products costs are which incurred for manufacturing the product.
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Comparing managerial accounting and financial accounting For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA):
b. Provides detailed reports on parts of the company.
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
Certain item descriptions and amounts are missing from the monthly schedule of cost of goods manufactured and income statement of Elly Manufacturing Company. Fill in the blanks with the missing words, and replace the Xs with the correct amounts.
Beginning Direct Ending Direct Direct Manufacturing Overhead Total Total Ending Direct Materials Beginning Direct Materials Purchases of Direct Materials \( 27,000 \) X \( X X X (25,000) 180,000 44,000 \) X 56,000 84,000 (20,000) ELLY MANUFACTURING COMPANY
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 \( X \) X 232,000 258,000 X 160,000 98,000 $ 110,000 X X X E
Preparing an income statement and calculating unit cost for a merchandising company
Clyde Conway owns Clyde鈥檚 Pets, a small retail shop selling pet supplies. On December 31, 2018, the accounting records of Clyde鈥檚 Pets showed the following:
Merchandise Inventory on December 31, 2018 $ 10,100
Merchandise Inventory on January 1, 2018 15,900
Net Sales Revenue 56,000
Utilities Expense for the shop 3,300
Rent for the shop 4,100
Sales Commissions 2,650
Purchases of Merchandise Inventory 25,000
Requirements
1. Prepare an income statement for Clyde鈥檚 Pets for the year ended December 31, 2018.
2. Clyde鈥檚 Pets sold 3,850 units. Determine the unit cost of the merchandise sold, rounded to the nearest cent
Question:Gateway produces electronic calculators. Suppose Gateway鈥檚 standard cost per calculator is \(25 for direct materials and \)68 for conversion costs. The following data applyto August activities:
Direct materials purchased (on account) \( 8,300
Conversion costs incurred 20,500
Number of calculators produced 300 calculators
Number of calculators sold (on account, at \)105 each) 295 calculators
Requirements
1. Prepare summary journal entries for August using JIT costing, including the entryto adjust the Conversion Costs account.
2. The beginning balance of Finished Goods Inventory was $1,300. Use a T-accountto find the ending balance of Finished Goods Inventory.
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