Connect - Managerial Accounting Chapter 1

1.

Georgia Pacific, a manufacturer, incurs the following costs.

1.

Indicate each cost as either a product or a period cost. If a product cost, identify it as direct materials, direct labor, or factory overhead. If a product cost, classify it as prime or conversion. Select "None" if none of the categories and "both" if both the categories applied for the particular item, For period cost select "Applicable" if a category applies and "Not applicable" if it does not apply. Leave no cells blank.

Product Cost Period Cost Cost Prime Conversion 1. Factory utilities None Factory overhead Not applicable 2. Advertising None None Applicable 3. Amortization of patents on factory machine None Factory overhead Not applicable 4. State and federal income taxes None None Applicable 5. Office supplies used None None Applicable 6. Bad debts expense None None Applicable 7. Small tools used None Factory overhead Not applicable 8. Payroll taxes for production supervisor None Factory overhead Not applicable 9. Accident insurance on factory workers None Factory overhead Not applicable 10. Depreciation — Factory building None Factory overhead Not applicable 11. Wages to assembly workers Direct labor Direct labor Not applicable 12. Direct materials used Direct materials None Not applicable NEW VERSION 2. Indicate each product cost as either a direct cost or an indirect cost using the product as the cost object. (Select "None" if none of the categories and "both" if both the categories applied for the particular item.) Cost 1. Factory utilities Indirect Cost 2. Advertising None 3. Amortization of patents on factory machine Indirect Cost 4. State and federal income taxes None 5. Office supplies used None 6. Bad debts expense None 7. Small tools used Indirect Cost 8. Payroll taxes for production supervisor Indirect Cost 9. Accident insurance on factory workers Indirect Cost 10. Depreciation — Factory building Indirect Cost 11. Wages to assembly workers Direct Cost 12. Direct materials used Direct Cost ======================================================================= Questions 2-3 [The following information applies to the questions displayed below.] Using the following data Garcia Company Culpepper Company   Beginning finished goods inventory $ 12,000 $ 16,450   Beginning goods in process inventory 14,500 19,950   Beginning raw materials inventory 7,250 9,000   Rental cost on factory equipment 27,000 22,750   Direct labor 19,000 35,000   Ending finished goods inventory 17,650 13,300   Ending goods in process inventory 22,000 16,000   Ending raw materials inventory 5,300 7,200   Factory utilities 9,000 12,000   Factory supplies used 8,200 3,200   General and administrative expenses 21,000 43,000   Indirect labor 1,250 7,660   Repairs—Factory equipment 4,780 1,500   Raw materials purchases 33,000 52,000   Sales salaries 50,000 46,000 2. 1. Complete the table to find the cost of goods manufactured for both Garcia Company and Culpepper Company. Garcia Company Culpepper Company Direct materials Beginning raw materials inventory $7,250 $9,000 Add: Raw materials purchases 33,000 52,000 Raw materials available for use 40,250 61,000 Less: Ending raw materials inventory 5,300 7,200 Direct materials used 34,950 53,800 Direct labor 19,000 35,000 Factory overhead Rental cost on factory equipment 27,000 22,750 Factory utilities 9,000 12,000 Factory supplies used 8,200 3,200 Indirect labor 1,250 7,660 Repairs—Factory equipment 4,780 1,500 Total factory overhead 50,230 47,110 Total manufacturing costs 104,180 135,910 Add: Beginning goods in process inventory 14,500 19,950 Total cost of goods in process 118,680 155,860 Less: Ending goods in process inventory 22,000 16,000 Cost of goods manufactured $96,680 $139,860 3. 2. Complete the table to calculate the cost of goods sold for both Garcia Company and Culpepper Company. Garcia Company Culpepper Company Beginning finished goods inventory $12,000 $16,450 Add: Cost of goods manufactured 96,680 139,860 Cost of goods available for sale 108,680 156,310 Less: Ending finished goods inventory 17,650 13,300 Cost of goods sold $91,030 $143,010 ======================================================================= 4. Given the following selected account balances of Shanta Company.          Sales $ 1,250,000     Raw materials inventory, Dec. 31, 2012 37,000     Goods in process inventory, Dec. 31, 2012 53,900     Finished goods inventory, Dec. 31, 2012 62,750     Raw materials purchases 175,600     Direct labor 225,000     Factory computer supplies used 17,840     Indirect labor 47,000     Repairs—Factory equipment 5,250     Rent cost of factory building 57,000     Advertising expense 94,000     General and administrative expenses 129,300     Raw materials inventory, Dec. 31, 2013 42,700     Goods in process inventory, Dec. 31, 2013 41,500     Finished goods inventory, Dec. 31, 2013 67,300   Prepare its manufacturing statement for the year ended on December 31, 2013. SHANTA COMPANY Manufacturing Statement For Year Ended December 31, 2013 Direct materials: Raw materials inventory, Dec. 31, 2012 $37,000 Add: Raw materials purchases 175,600 Raw materials available for use $212,600 Less: Raw materials inventory, Dec. 31, 2013 42,700 Direct materials used $169,900 Direct labor 225,000 Factory overhead: Factory computer supplies used 17,840 Indirect labor 47,000 Repairs—Factory equipment 5,250 Rent cost of factory building 57,000 Total factory overhead costs $127,090 Total manufacturing costs 521,990 Add: Goods in process inventory, Dec. 31, 2012 53,900 Total cost of goods in process 575,890 Less: Goods in process inventory, Dec. 31, 2013 41,500 Cost of goods manufactured 534,390 ======================================================================== 5. Notaro's Boot Company makes specialty boots for the rodeo circuit. On December 31, 2012, the company had (a) 300 pairs of boots in finished goods inventory and (b) 1,200 heels at a cost of $8 each in raw materials inventory. During 2013, the company purchased 35,000 additional heels at $8 each and manufactured 16,600 pairs of boots. Required: 1. Determine the unit and dollar amounts of raw materials inventory in heels at December 31, 2013. #Units Cost per unit Total cost Beginning inventory, December 31, 2012 1,200 $8 $9,600 Purchases during 2013 35,000 $8 280,000 Inventory available for production 36,200 $8 289,600 Less: Inventory transferred into production 33,200 $8 265,600 Ending inventory, December 31, 2013 3,000 $8 $24,000 ======================================================================== Questions 6-7 [The following information applies to the questions displayed below.]    The following calendar year-end information is taken from the December 31, 2013, adjusted trial balance and other records of DeLeon Company.   Advertising expense $ 28,750   Direct labor $ 675,480   Depreciation expense—Office equipment 7,250   Income taxes expense 233,725   Depreciation expense—Selling equipment 8,600   Indirect labor 56,875   Depreciation expense—Factory equipment 33,550   Miscellaneous production costs 8,425   Factory supervision 102,600   Office salaries expense 63,000   Factory supplies used 7,350   Raw materials purchases 925,000   Factory utilities 33,000   Rent expense—Office space 22,000   Inventories   Rent expense—Selling space 26,100    Raw materials, December 31, 2012 166,850   Rent expense—Factory building 76,800    Raw materials, December 31, 2013 182,000   Maintenance expense—Factory equipment 35,400    Goods in process, December 31, 2012 15,700   Sales 4,525,000    Goods in process, December 31, 2013 19,380   Sales discounts 62,500    Finished goods, December 31, 2012 167,350   Sales salaries expense 392,560    Finished goods, December 31, 2013 136,490 6. Required: 1. Prepare the company’s 2013 manufacturing statement. DE LEON COMPANY Manufacturing Statement For Year Ended December 31, 2013 Direct materials Raw materials inventory, December 31, 2012 $166,850 Raw materials purchases 925,000 Raw materials available for use 1,091,850 Less: Raw materials inventory, December 31, 2013 182,000 Direct materials used $909,850 Direct labor 675,480 Factory overhead Factory supervision 102,600 Factory supplies used 7,350 Factory utilities 33,000 Maintenance expense—Factory equipment 35,400 Rent expense—Factory building 76,800 Depreciation expense—Factory equipment 33,550 Indirect labor 56,875 Miscellaneous production costs 8,425 Total factory overhead costs 354,000 Total manufacturing costs 1,939,330 Add: Goods in process inventory, December 31, 2012 15,700 Total cost of goods in process 1,955,030 Less: Goods in process inventory, December 31, 2013 19,380 Cost of goods manufactured $1,935,650 7. 2. Prepare the company’s 2013 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses. DE LEON COMPANY Income Statement For Year Ended December 31, 2013 Sales $4,525,000 Less: Sales discounts 62,500 Net sales 4,462,500 Cost of goods sold Cost of goods manufactured $1,935,650 Finished goods inventory, December 31, 2012 167,350 Goods available for sale 2,103,000 Less: Finished goods inventory, December 31, 2013 136,490 Cost of goods sold 1,966,510 Gross profit from sales 2,495,990 Operating expenses Selling expenses Depreciation expense—Selling equipment 8,600 Rent expense—Selling space 26,100 Sales salaries expense 392,560 Advertising expense 28,750 Total selling expenses 456,010 General and administrative expenses Rent expense—Office space 22,000 Office salaries expense 63,000 Depreciation expense—Office equipment 7,250 Total general and administrative expenses 92,250 Total operating expenses 548,260 Income before state and federal taxes 1,947,730 Income taxes expense 233,725 Net income $1,714,005 -------------------------------------------------------------- Which of the following costs is not included in factory overhead? Direct materials. Although direct labor and raw materials costs are treated as manufacturing costs and therefore make up part of the finished goods inventory cost, factory overhead is charged to expense as it is incurred because it is a period cost. False Another title for work in process inventory is: Goods in process inventory. Product costs are capitalized as inventory on the balance sheet and period costs are expenses on the income statement. True Factory overhead costs may include all of the following except: Selling costs. The concept of total quality management focuses on continuous improvement. True Flexibility of practice when applied to managerial accounting means that Managerial accounting system differ across companies depending on the nature of the business and the arrangement of its internal operations. Direct materials are not usually easily traced to a product. False Costs that flow directly to the income statement as expenses are called: Period costs Control is the process of setting goals and determining ways to achieve them. False An attitude of constantly seeking ways to improve company operations, including customer service, product quality, product features, the production process, and employee interactions, is called: Continuous improvement. Newly completed units are combined with beginning finished goods inventory to make up total ending work in process inventory. False Managerial accounting information can be forwarded to the managers of a company quickly since external auditors do not have to review it, and estimates and projections are acceptable. True Products that have been completed and are ready to be sold by the manufacturer are called: Finished goods inventory. Both financial and managerial accounting rely on accepted principles that are enforced through an extensive set of rules and guidelines. False Product costs can refer to expenditures necessary to finish products and to the administrative support during the time period. False Which of the following items does not represent a difference between financial and managerial accounting? Managerial accounting does not use the financial information from the financial accounting system. The balanced scorecard aids in continuous improvement by augmenting financial measures with information on the drivers or indicators of future financial performance. True The schedule of cost of goods manufactured must be prepared monthly as it is a required general-purpose financial statement. False The model whose goal is to eliminate waste while satisfying the customer and providing a positive return to the company is: Lean business model. A manufacturer's cost of goods manufactured is the sum of direct materials, direct labor, and factory overhead costs incurred in producing products. True Which of the following accounts would appear on a schedule of cost of goods manufactured? Raw materials, factory insurance expired, indirect labor.