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Chapter 16: Q2TI_2 (page 869)

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

Short Answer

Expert verified

The wages of an office receptionist are a period cost.

Step by step solution

01

Definition of the product cost

The product cost is defined as the cost thatincludes all the costs of purchasing or making a product.

02

Identification of costs

The wages of an office receptionist are considered as the period cost. As the wages given in the administrative office are a non-manufacturing cost. Rather it is an administrative cost.

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Most popular questions from this chapter

Comparing managerial accounting and financial accounting

Match the following terms to the appropriate statement. Some terms may be used more than once, and some terms may not be used at all.

Directing Managerial

Creditors Managers

Controlling Planning

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a. Accounting systems that must follow GAAP.

b. External parties for whom financial accounting reports are prepared.

c. The role managers play when they are monitoring day-to-day operations and keeping the company on track.

d. Internal decision makers.

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Match the definition to the key term.

13. Triple bottom line

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a. A cost management system in which a company produces products just in time to satisfy needs.

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Question:Applying ethical standards

Natalia Wallace is the new controller for Smart Software, Inc. which develops and sells education software. Shortly before the December 31 fiscal year-end, James Cauvet, the company president, asks Wallace how things look for the year-end numbers. He is not happy to learn that earnings growth may be below 13% for the first time in the company鈥檚 five-year history. Cauvet explains that financial analysts have again predicted a 13% earnings growth for the company and that he does not intend to disappoint them. He suggests that Wallace talk to the assistant controller, who can explain how the previous controller dealt with such situations. The assistant controller suggests the following strategies:

a. Persuade suppliers to postpone billing \(13,000 in invoices until January 1.

b. Record as sales \)115,000 in certain software awaiting sale that is held in a public warehouse.

c. Delay the year-end closing a few days into January of the next year so that some of the next year鈥檚 sales are included in this year鈥檚 sales.

d. Reduce the estimated Bad Debts Expense from 5% of Sales Revenue to 3%, given the company鈥檚 continued strong performance.

e. Postpone routine monthly maintenance expenditures from December to January.

Requirements

1. Which of these suggested strategies are inconsistent with IMA standards?

2. How might these inconsistencies affect the company鈥檚 creditors and stockholders?

3. What should Wallace do if Cauvet insists that she follow all of these suggestions?

Computing cost of goods manufactured

Consider the following partially completed schedules of cost of goods manufactured. Compute the missing amounts.

Banner, Inc. Larry鈥檚 Bakery Sports Gear

Beginning Work-in-Process Inventory \( (a) \) 40,800 \( 2,200

Direct Materials Used 14,400 35,900 (g)

Direct Labor 10,300 20,100 1,900

Manufacturing Overhead (b) 10,000 900

Total Manufacturing Costs Incurred during the Year 45,200 (d) (h)

Total Manufacturing Costs to Account for 55,400 (e) 8,300

Ending Work-in-Process Inventory (c) (25,500) (2,600)

Cost of Goods Manufactured \) 50,500 \( (f) \) (i)

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

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