Management Accounting

(See attached file for full problem description)

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BRIEF EXERCISE 1-1 Classifying manufacturing Costs (LO1)

Your required bout, INC., assembles custom built sailboats form components supplied by various manufacturers. The company is very small and its assembly shop and retail store are housed in a Gig Harbor, Washington, boat house. Below are listed some of the costs incurred at the company.

Required:
For each cost, indicate whether it would most likely be classified as direct labor, direct materials, manufacturing overhead, marketing and selling, or an administrative cost.

1. The wages of the employees who build the sailboats.
2. The cost of advertising in the local newspapers.
3. The cost of an aluminum mast installed in a sailboat.
4. the wages of the assembly shop's supervisor.
5. Rent on the boathouse.
6. The wages of the company's bookkeeper.
7. Sales commissions paid to the company's salespeople.
8. Depreciation on power tools.

BRIEF EXERCISE 1-2 Identifying Period and Product Costs (LO2)

Suppose that you have been given a summer job at the Fairwings Avionics, a company that manufactures sophisticated radar sets for commercial aircraft. The company, which is privately owned, has approached a bank for a loan to help finance its tremendous growth. The bank requires financial statements before approving such a loan. You have been asked to help prepare the financial statements and were given the following list of costs:
1. The cost of the memory chips used in the radar set.
2. Factory heating costs.
3. Factory equipment maintenance costs.
4. Training costs for new administrative employees.
5. The cost of the solder that is used in assembling the radar set
6. The travel costs of the company's salespersons.
7. Wages and salaries in the department that handles billing customers.
8. the cost of air-conditioning executive offices.
9. Depreciation on the equipment in the fitness room used by factory workers.
10. Telephone expenses incurred by factory management.
11. Telephone expenses incurred by factory management.
12. the costs of shipping completed radar sets to customers.
13. The wages of the workers who assemble the radar sets.
14. The president's salary.
15. Health insurance premiums for factory personnel.

Required:
Classify the above costs as either product (inventoriable) costs or period (noninventoriable) costs for purposes of preparing the financial statements for the bank.

BRIEF EXERCISE 1-5 Identifying Costs as Fixed or Variable (LO5)

Below are a number of costs that might be incurred in a variety of organizations. Copy the list of costs onto your answer sheet, and then place an X in the appropriate column for each cost to indicate whether the cost involved would be variable or fixed with respect to the goods and services produced by the organizations.

Cost Behavior____
Cost Variable Fixed
1. Small glass plates used for lab tests in a hospital ........
2. Straight-line depreciation of a building ...................
3. Top-management salaries ...................................
4. Electrical costs of running machines.......................
5. Advertising of products and services ......................
6. batteries used in manufacturing trucks ....................
7. Commisions to salespersons ................................
8. Insurance on a dentist's office ..............................
9. Leather used in manufacturing footballs ..................
rent on a medical center .....................................

BRIEF EXERCISE 1-4 Prepare a schedule of Cost of Goods Manufactures (LO4)

Mannerman Fabrication manufactures a variety of products in its factory. Data for the most recent month's operations appear below:

Beginning raw materials inventory ...................$55,000
Purchases of raw materials .............................$440,000
Ending raw materials inventory ........................$65,000
Direct Labor ..............................................$215,000
Manufacturing overhead ................................$380,000
Beginning work in process inventory .................$190,000
Ending work in process inventory .....................$220,000

Required:
Prepare in good form a schedule of cost of goods manufactures for the company for the month.

PROBLEM 1-23 Financial Statement; Cost Behavior (LO3, LO4, LO5)
Selected account balances for the year ended December 31 are provided below for Rolling Company:

Selling and administrative salaries .................$55,000
Insurance, factory .................................... $6,000
Utilities, factory .................................... $10,000
Purchases of raw materials ..........................$76,000
Indirect labor .......................................... $3,000
Direct labor ........................................... ?
Advertising expense .................................$26,000
Cleaning supplies, factory ............................$4,000
Sales commissions ................................. ..$33,000
Rent, factory building ................................$49,000
Maintenance, factory .................................$15,000

Inventory balances at the beginning and end of the year were as follows:

Beginning of the Year End of the Year
Raw materials ................................................... $3,000 $9,000
Work in process ................................................. ? $13,000
Finished goods ..................................................$25,000 ?

The total manufacturing costs for the year were $242,000; the goods available for sale totaled $269,000; and the cost of goods sold totaled $229,000.

Required:
1. Prepare a schedule of cost of goods manufactures in good form and the cost of goods sold section of the company's income statement for the year.
2. The company produced the equivalent of 7,000units during the year. Compute the average cost per unit fpr direct materials used and the average cost per unit for rent on the factory building.
3. In the following year the company ecpects to produce 5,000 units. What average cost per unit and total cost would you expect to be incurred for direct materials? For rent on the factory building? (In preparing your answer, assume the direct material is a variable cost and that rent is a fixed cost.)
4. Explain to the president the reason foe any difference in the average cost per unit between (2) and (3) above.