Acctba3 E2-1, E2-2, E2-3

 

Exercise 2-1 Classifying Classifyi ng Manufacturing Costs  The PC Works assembles custom computers from components supplied by arious manufacturers!  The company is ery small and its assembly shop and retail sales store are housed in a single facility in a "edmond# Washington# industrial park! $isted %in the next slide& are some of the costs that are incurred at the company! "e'uired( )or each cost# indicate *hether it mostly *ould be classi+ed as direct labor# direct materials# manufacturing oerhead# selling# or administratie cost!

 

Exercise 2-1 Classifying Classifyi ng Manufacturing Costs irect 1! Cost

of

hard hard

drie

installed installed

in

Material computer! ,elling Cost 2! The cost of adertising in the Puget Puget ,ound Computer ser ne*spaper! irect $abor .! The *ages *ages of employee employees s *ho assemble computers from components! ,elling Cost /! ,ales commis commission sions s paid to the company0s sales people!

 

Exercise 2-1 Classifying Classifyi ng Manufacturing Costs M67 ! The *ag *ages es of the ass assem embly bly sh shop0 op0s s superisor! 8dministratie 3! Th The e *ag *ages es Cost accountant!

of

the th e

compa com pany ny0s 0s

M67 4! epr epreci eciati ation on on on e'uip e'uipmen mentt used used to test assembled computers before release to customers! M67 5! "en entt on the the faci facilit lity y in the the indu indust stria riall park!

 

Exercise 2-2 Cost terminology for manufacturers 8rden Company reported the follo*ing costs and expenses for the most recent month( irect Materials irect irect $abor

9 5:#:::

Manufacturing 6erhead ,elling Expenses 8dministratie Expenses

9 /2#::: 9 1;#::: 9 22#:::

9

 

Exercise 2-2 Cost terminology for manufacturers 1! What is the total amount of product costs<

irect Materials irect irect $abor Manufacturing 6erhead  Total  T otal Product Product Costs

9 5:#:::   /2#:::   1;#::: 91/1#:: :

 

Exercise 2-2 Cost terminology for manufacturers 2! What is the total amount of period costs<

,elling Expense 8dministratie Expenses  Total  T otal Period Period Costs

9 22#:::   .#::: 9 4#:::

 

Exercise 2-2 Cost terminology for manufacturers .!

What

is

the

total

amount

conersion costs< irect $abor Manufacturing 6erhead  Total  T otal Conersion Costs Costs

of 9 /2#:::   1;#::: 9 31#:::

 

Exercise 2-2 Cost terminology for manufacturers /! What is the total amount of prime costs<

irect Materials irect irect $abor  Total  T otal Prime Costs Costs

9 5:#:::   /2#::: 9 122#:::

 

Exercise 2-. Classi+cation of costs as Period or product cost

,uppose that you hae been gien a summer =ob as an intern at >saac 8ircams# a company that manufactures sophisticated spy cameras remote-controlled military reconnaissance aircraft! for The company# *hich is priately o*ned# has approached a bank for a loan to help +nance its gro*th! The bank re'uires +nancial statements before approing such a loan! ?ou hae been asked to help prepare the +nancial statements and *ere gien the follo*ing list of costs %in the next slide&( "e'uired( Classify the costs as either product costs or period costs for the purpose of preparing the +nancial statements for the

 

Exercise 2-. Classi+cation of costs as Period or product cost

Period Cost 1! epre epreciation ciation on salesperso salespersons ns cars Product Cost 2! "ent on e'uipment used in factory! factory! Product Cost .! $u $ubrica bricants nts for machine machine maintenance! Period Cost /! ,alari ,alaries es of personne personnell *ho *ork in the +nished goods *arehouse! Product Cost ! ,oap and paper paper to*els to*els used by by factory *orkers at the end of the

 

Exercise 2-. Classi+cation of costs as Period or product cost

Product Cost 3! )act actory ory sup super eriso isors0 rs0 sal salari aries! es! Product Cost 4! 7eat# *ater# *ater# and po*er consum consumed ed in the fac factory tory!! Period Cost 5! Materials used for boxing boxing products products for shipment oerseas! %nits are not normally boxed!&

Period Cost Product Cost

;! 8d 8derti ertising sing costs! costs! 1:!Workers0 compensation insurance

 

Exercise 2-. Classi+cation of costs as Period or product cost

Product Cost 11!epr 11!epreciation eciation on chairs and tables in the factory! Period Cost 12!The *ages of the receptionist in the administratie o@ce! Period Cost 1.!The cost of leasing the corporate =et used by the company0s executies! Period Cost 1/!The cost of renting rooms at a )lorida resort for the annual sales conference!

 

Exercise 2-. Classi+cation of costs as Period or product cost

Product Cost 1!The

cost

of

packaging

company0s product!

the