Chapter 2

Assigned Problems

P2-14

Staci Valek began dabbling in pottery several years ago as a hobby.

Then she decided to quit her job and manufacture pottery full time.
The salary of Stacis job is $3.800 per month
Staci will rent a small building to use as manufacturing space for
$500 per month.
The cost of clay and glaze will be $2 each per pottery.
She will hire workers at a labor rate of $8 per pot.
Advertising will cost $600 per month.
Tracis brother will be the sales representative and be paid $4 for
each pot sold.
Manufacturing equipment will be rented at a monthly fee of $300
The costs of legal and similar fees for incorporating the business
has already been paid and is $500.
A sales office can be rented for $250 per month
The phone to be installed to take orders will cost $40 per month
Staci has some money in the bank account that earns $1.200 per
year. That money will be withdrawn if the pottery business is
activated.

Cost
Present Salary
Mfg. Building Rent
Cost of clay
Labor rate
Advertising
Sales commission
Equipment rent
Legal fees
Office rent
Phone cost
Interest income

Product Cost
Variable Fixed Direct Direct Mfg.
Period Opport. Sunk Differ.
Material Labor Overhead Cost Cost
Cost Cost

Product Cost
Cost
Variable Fixed Direct
Direct Mfg.
Period Opport. Sunk Differ.
Material Labor Overhead Cost Cost
Cost Cost
Present Salary
X
Mfg. Building Rent
X
X
X
Cost of clay
X
X
X
Labor rate
X
X
X
Advertising
X
X
X
Sales commission X
X
X
Equipment rent
X
X
X
Legal fees
X
X
X
Office rent
X
X
X
Phone cost
X
X
X
Interest income
X

P2-26
Cost and sales data for Meriwell is given below:
Finished goods, beginning inventory
Finished goods, ending inventory
Depreciation, factory
Administration expenses
Utilities, factory
Maintanance factory
Supplies, factory
Insurance, factory
Purchases of raw materials
Raw Materials, beginning inventory
Raw Materials, ending inventory
Direct Labor
Indirect Labor
Work-in process, beginning inventory
Work-in process, ending inventory
Sales
Selling Expenses

20.000
40.000
27.000
110.000
8.000
40.000
11.000
4.000
125.000
9.000
6.000
70.000
15.000
17.000
30.000
500.000
80.000

1.
2.
3.
4.

5.

6.

How much is the total manufacturing costs for the

period?
How much is the cost of goods manufactured?
How much is period expenses?
Assume that the company produced the equivalent of
10.000 units during the period, what was the average
cost for direct materials and factory depreciation
(assume straight line method) per units produced?
If 15.000 units are to be produced next year, how much
would the total direct materials and factory depreciation
be?
As the manager responsible for production costs, explain
to the president ant difference in the average costs per
unit between (4) and (5) above

Direct Materials
Raw Materials, beginning inventory
Purchases of raw materials
Raw Materials available for use
Raw Materials, ending inventory
Raw materials used in production
Direct Labor
Manufacturing Overhead
Total Manufacturing Costs
Work-in process, beginning inventory
Work-in process, ending inventory
Cost of Goods Manufactured

128.000
9.000
125.000
134.000
6.000
128.000
70.000
105.000
303.000
17.000
30.000
290.000

Finished goods, beginning inventory

Finished goods, ending inventory

20.000
40.000

Cost of Goods Sold

Selling and Administrative Costs

270.000
190.000

Direct Materials per Unit

Depreciation per Unit

Direct Materials per Unit

Depreciation per Unit

12,80
2,70

12,80
1,80

192.000
27.000

Problem 2-27
VISIC CORPORATION
Production in units
Sales in units
Ending finished goods inventory in units
Sales in dollars
Costs:
Advertising
Entertainment and travel
Direct labor
Indirect labor
Raw materials purchased
Building rent (production uses 80% of the space;
administrative and sales offices use the rest)
Utilities, factory
Royalty paid for use of production patent, $1.50
per unit produced
Maintenance, factory
Rent for special production equipment, $7,000 per
year plus $0.30 per unit produced
Selling and administrative salaries
Other factory overhead costs
Other selling and administrative expenses
Inventories:
Raw materials
Work in process
Finished goods
Selling price per unit

$29.000
?
?
$1.300.000
$105.000
$40.000
$90.000
$85.000
$480.000
$40.000
$108.000
?
$9.000
?
$210.000
$6.800
$17.000
Beginning
of the Year
$20.000
$50.000
$0
$50

End of
theYear
$30.000
$40.000
?

VISIC CORPORATION
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning
Add: Purchases of raw materials
Raw materials available for use
Deduct: Raw materials inventory, ending
Raw materials used in production
Direct labor
Manufacturing overhead:
Indirect labor
Building rent
Utilities, factory
Royalty on patent
Maintenance, factory
Rent on equipment
Other factory overhead costs
Total overhead costs
Total manufacturing costs
Add: Work in process inventory, beginning
Deduct: Work in process inventory, ending
Cost of goods manufactured

$20.000
480.000
500.000
30.000
$470.000
90.000
85.000
32.000
108.000
43.500
9.000
15.700
6.800
300.000
860.000
50.000
910.000
40.000
$870.000

VISIC CORPORATION
Computations
2.a. Units in finished goods inventory
Total sales
Unit selling price
Units sold
Units
Units
Units
Units
Units

in the finished goods inventory, beginning

produced during the year
available for sale
sold during the year
in the finished goods inventory, ending

2.b. Cost of units in finished goods inventory

COGM
Number of units produced
Cost per unit
Cost of units in finished goods inventory, ending

$1.300.000
$50
26.000
0
29.000
29.000
26.000
3.000

$870.000
29.000
$30
$90.000