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Chapter 16: Q2TI_4 (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.

9. Sugar and flour used to make cookies

Short Answer

Expert verified

It is a product cost, direct material and the prime cost

Step by step solution

01

Definition of the direct material

Direct materials are defined as the raw material which is directly related to the production process of the business.

02

Identification of costs

The salary and flour used to make cookies will be considered as the product cost as it is directly related to the making of the product.

It will also be considered as the direct material.

It is a prime cost, as it is a combination of direct materials and direct labor.

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Most popular questions from this chapter

What are prime costs? Conversion costs?

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

b. Cost of computer software to track WIP Inventory

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

h. Cost to purchase wood pulp.

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

Selected data for three companies are given below. All inventory amounts are ending balances and all amounts are in millions.

Company A Company B Company C

Cash \( 6 Wages Expense \) 12 Administrative Expenses $ 4

Net Sales Revenue 48 Equipment 32 Cash 25

Finished Goods Inventory 10 Accounts Receivable 8 Net Sales Revenue 75

Cost of Goods Sold 23 Service Revenue 65 Selling Expenses 8

Selling Expenses 4 Cash 34 Merchandise Inventory 12

Equipment 67 Rent Expense 12 Equipment 55

Work-in-Process Inventory 9 Accounts Receivable 19

Accounts Receivable 14 Cost of Goods Sold 25

Cost of Goods Manufactured 23

Administrative Expenses 7

Raw Materials Inventory 6

Identifying differences between service, merchandising, and manufacturing companies Using the data on the previous page, calculate operating income for each company.
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