Questions on Chapter 2-Topic One
2-31 (20 min.) Flow of Inventoriable Costs.
Renka’s Heaters selected data for October 2014 are presented here (in millions):
Direct materials inventory 10/1/2014 $ 105
Direct materials purchased 365
Direct materials used 385
Total manufacturing overhead costs 450
Variable manufacturing overhead costs 265
Total manufacturing costs incurred during October 2014 1,610
Work-in-process inventory 10/1/2014 230
Cost of goods manufactured 1,660
Finished goods inventory 10/1/2014 130
Cost of goods sold 1,770
Required: Calculate the following costs:
1. Direct materials inventory 10/31/2014
2. Fixed manufacturing overhead costs for October 2014
3. Direct manufacturing labor costs for October 2014
4. Work-in-process inventory 10/31/2014
5. Cost of finished goods available for sale in October 2014
6. Finished goods inventory 10/31/2014
SOLUTION
(All numbers below are in millions).
1.
Direct materials inventory 10/1/2014 $ 105
Direct materials purchased 365
Direct materials available for production 470
Direct materials used (385)
Direct materials inventory 10/31/2014 $ 85
2.
Total manufacturing overhead costs $ 450
Subtract: Variable manufacturing overhead costs (265)
Fixed manufacturing overhead costs for October 2014 $ 185
3.
Total manufacturing costs $ 1,610
Subtract: Direct materials used (from requirement 1) (385)
Total manufacturing overhead costs (450)
Direct manufacturing labor costs for October 2014 $ 775
4.
Work-in-process inventory 10/1/2014 $ 230
Total manufacturing costs 1,610
Work-in-process available for production 1,840
Subtract: Cost of goods manufactured (moved into FG) (1,660)
Work-in-process inventory 10/31/2014 $ 180
5.
Finished goods inventory 10/1/2014 $ 130
Cost of goods manufactured (moved from WIP) 1,660
Cost of finished goods available for sale in October 2014 $ 1,790
6.
Finished goods available for sale in October 2014
(from requirement 5) $ 1,790
Subtract: Cost of goods sold (1,770)
Finished goods inventory 10/31/2014 $ 20
2-32 (30–40 min.) Cost of goods manufactured, income statement, manufacturing
company.
Consider the following account balances (in thousands) for the Peterson Company:
Beginning of End of
Peterson Company 2014 2014
Direct materials inventory 21,000 23,000
Work-in-process inventory 26,000 25,000
Finished goods inventory 13,000 20,000
Purchases of direct materials 74,000
Direct manufacturing labor 22,000
Indirect manufacturing labor 17,000
Plant insurance 7,000
Depreciation—plant, building, and equipment 11,000
Repairs and maintenance—plant 3,000
Marketing, distribution, and customer-service costs 91,000
General and administrative costs 24,000
Required:
1. Prepare a schedule for the cost of goods manufactured for 2014.
2. Revenues for 2014 were $310 million. Prepare the income statement for 2014.
3. Compute Ending Inventory at end of 2014
4. Compute Prime Cost and Conversion Cost
5. Compute Direct and Indirect Cost
6. Compute Variable and Fixed Cost
7. Compute Inventoriable and Period Cost
2-33 (30–40 min.) Cost of goods manufactured, income statement, manufacturing
company.
Consider the following account balances (in thousands) for the Shaler Corporation:
Beginning of End of
Shaler Corporation 2014 2014
Direct materials inventory 130,000 68,000
Work-in-process inventory 166,000 144,000
Finished goods inventory 246,000 204,000
Purchases of direct materials 256,000
Direct manufacturing labor 212,000
Indirect manufacturing labor 96,000
Indirect materials 28,000
Plant insurance 4,000
Depreciation—plant, building, and equipment 42,000
Plant utilities 24,000
Repairs and maintenance—plant 16,000
Equipment leasing costs 64,000
Marketing, distribution, and customer-service costs 124,000
General and administrative costs 68,000
Required:
1. Prepare a schedule for the cost of goods manufactured for 2014.
2. Revenues (in thousands) for 2014 were $1,200,000. Prepare the income statement for 2014.
SOLUTION
Shaler Corporation
Schedule of Cost of Goods Manufactured
Year Ended December 31, 2014
(in thousands)
Direct materials costs
Beginning inventory, January 1, 2014 $130,000
Purchases of direct materials 256,000
Cost of direct materials available for use 386,000
Ending inventory, December 31, 2014 68,000
Direct materials used $318,000
Direct manufacturing labor costs 212,000
Indirect manufacturing costs
Indirect manufacturing labor 96,000
Indirect materials 28,000
Plant insurance 4,000
Depreciation—plant building & equipment 42,000
Plant utilities 24,000
Repairs and maintenance—plant 16,000
Equipment lease costs 64,000
Total indirect manufacturing costs 274,000
Manufacturing costs incurred during 2014 804,000
Add beginning work-in-process inventory, January 1, 2014 166,000
Total manufacturing costs to account for 970,000
Deduct ending work-in-process inventory, December 31, 2014 144,000
Cost of goods manufactured (to Income Statement) $826,000
Shaler Corporation
Income Statement
Year Ended December 31, 2014
(in thousands)
Revenues $1,200,000
Cost of goods sold:
Beginning finished goods, January 1, 2014 $ 246,000
Cost of goods manufactured 826,000
Cost of goods available for sale 1,072,000
Ending finished goods, December 31, 2014 204,000
Cost of goods sold 868,000
Gross margin 332,000
Operating costs:
Marketing, distribution, and customer-service costs 124,000
General and administrative costs 68,000
Total operating costs 192,000
Operating income $ 140,000