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Questi on 1: Score 2/2
Exercise 2-1 Classifying Manufacturing Costs [LO1]
Your Boat, Inc., assembles customsailboats fromcomponents supplied by various manufacturers. The company is
very small and its assembly shop and retail sales store are housed in a Gig Harbor, Washington, boathouse.
Below are listed some of the costs that are incurred at the company.
Required:
For each cost, indicate whether it would most likely be classified as direct labor, direct materials, manufacturing
overhead, selling, or an administrative cost. (Select all that apply.)
1. The wages of employees who build the sailboats.
Choice Selected Points
Direct labor cost Yes +1
Direct materials cost No
Manufacturing overhead cost No
Selling cost No
Administrative cost No
Total correct answers: 1
Partial Grading Explained
2. The cost of advertising in the local newspapers.
Choice Selected Points
Direct labor cost No
Direct materials cost No
Manufacturing overhead cost No
Selling cost Yes +1
Administrative cost No
Total correct answers: 1
Partial Grading Explained
3. The cost of an aluminummast installed in a sailboat.
Choice Selected Points
Direct labor cost No
Direct materials cost Yes +1
Manufacturing overhead cost No
Selling cost No
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Administrative cost No
Total correct answers: 1
Partial Grading Explained
4. The wages of the assembly shop's supervisor.
Choice Selected Points
Direct labor cost No
Direct materials cost No
Manufacturing overhead cost Yes +1
Selling cost No
Administrative cost No
Total correct answers: 1
Partial Grading Explained
5. Rent on the boathouse.
Choice Selected Points
Direct labor cost No
Direct materials cost No
Manufacturing overhead cost Yes +1
Selling cost Yes +1
Administrative cost Yes +1
Total correct answers: 3
Partial Grading Explained
6. The wages of the company's bookkeeper.
Choice Selected Points
Direct labor cost No
Direct materials cost No
Manufacturing overhead cost No
Selling cost No
Administrative cost Yes +1
Total correct answers: 1
Partial Grading Explained
7. Sales commissions paid to the company's salespeople.
Choice Selected Points
Direct labor cost No
Direct materials cost No
Manufacturing overhead cost No
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Selling cost Yes +1
Administrative cost No
Total correct answers: 1
Partial Grading Explained
8. Depreciation on power tools.
Choice Selected Points
Direct labor cost No
Direct materials cost No
Manufacturing overhead cost Yes +1
Selling cost No
Administrative cost No
Total correct answers: 1
Partial Grading Explained
Questi on 2: Score 2/2
Your response Correct response
Exercise 2-2 Classification of Costs as Period or Product Costs [LO2]
Suppose that you have been given a summer job at 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.
Required:
Classify the below costs as either product (inventoriable) costs or period (noninventoriable) costs for purposes of
preparing the financial statements for the bank.
Costs Product/Period
1. The cost of the memory chips used in a radar set. Product cost (7%)
2. Factory heating costs. Product cost (7%)
3. Factory equipment maintenance costs. Product cost (7%)
4. Training costs for new administrative employees. Period cost (7%)
5. The cost of the solder that is used in assembling the radar sets. Product cost (7%)
6. The travel costs of the company's salespersons. Period cost (7%)
7. Wages and salaries of factory security personnel. Product cost (7%)
8. The cost of air-conditioning executive offices. Period cost (7%)
9. Wages and salaries in the department that handles billing customers. Period cost (7%)
10. Depreciation on the equipment in the fitness roomused by factory
workers.
Product cost (7%)
11. Telephone expenses incurred by factory management. Product cost (7%)
12. The costs of shipping completed radar sets to customers. Period cost (7%)
13. The wages of the workers who assemble the radar sets. Product cost (7%)
14. The president's salary. Period cost (7%)
15. Health insurance premiums for factory personnel. Product cost (7%)
Exercise 2-2 Classification of Costs as Period or Product Costs [LO2]
Suppose that you have been given a summer job at 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.
Required:
Classify the below costs as either product (inventoriable) costs or period (noninventoriable) costs for purposes of
preparing the financial statements for the bank.
Costs Product/Period
1. The cost of the memory chips used in a radar set. Product cost
2. Factory heating costs. Product cost
3. Factory equipment maintenance costs. Product cost
4. Training costs for new administrative employees. Period cost
5. The cost of the solder that is used in assembling the radar sets. Product cost
6. The travel costs of the company's salespersons. Period cost
7. Wages and salaries of factory security personnel. Product cost
8. The cost of air-conditioning executive offices. Period cost
9. Wages and salaries in the department that handles billing customers. Period cost
10. Depreciation on the equipment in the fitness roomused by factory
workers.
Product cost
11. Telephone expenses incurred by factory management. Product cost
12. The costs of shipping completed radar sets to customers. Period cost
13. The wages of the workers who assemble the radar sets. Product cost
14. The president's salary. Period cost
15. Health insurance premiums for factory personnel. Product cost
Questi on 3: Score 2/2
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Your response Correct response
Exercise 2-5 Classification of Costs as Fixed or Variable [LO5]
Classify each cost as variable or fixed with respect to the indicated measure of activity.
Cost Measure of Activity Cost Behavior
1. The cost of small glass plates used for lab
tests in a medical lab
Number of lab tests performed Variable (10%)
2. A boutique jewelry store's cost of leasing retail
space in a mall
Dollar sales Fixed (10%)
3. Top management salaries at FedEx Total sales Fixed (10%)
4. Electrical costs of running production
equipment at a Toyota factory
Number of vehicles produced Variable (10%)
5. The cost of insuring a dentist's office against
fire
Patient-visits Fixed (10%)
6. The cost of commissions paid to sales
persons at a Honda dealer
Total sales Variable (10%)
7. The cost of heating the intensive care unit at
Swedish Hospital
Patient-days Fixed (10%)
8. The cost of batteries installed in trucks
produced at a GM factory
Number of trucks produced Variable (10%)
9. The salary of a university professor Number of students taught by the
professor
Fixed (10%)
10. The costs of cleaning supplies used at a
fast-food restaurant to clean the kitchen and
dining areas at the end of the day
Number of customers served Fixed (10%)
Exercise 2-5 Classification of Costs as Fixed or Variable [LO5]
Classify each cost as variable or fixed with respect to the indicated measure of activity.
Cost Measure of Activity
Cost
Behavior
1. The cost of small glass plates used for lab tests
in a medical lab
Number of lab tests performed Variable
2. A boutique jewelry store's cost of leasing retail
space in a mall
Dollar sales Fixed
3. Top management salaries at FedEx Total sales Fixed
4. Electrical costs of running production equipment
at a Toyota factory
Number of vehicles produced Variable
5. The cost of insuring a dentist's office against fire Patient-visits Fixed
6. The cost of commissions paid to sales persons
at a Honda dealer
Total sales Variable
7. The cost of heating the intensive care unit at
Swedish Hospital
Patient-days Fixed
8. The cost of batteries installed in trucks produced
at a GM factory
Number of trucks produced Variable
9. The salary of a university professor Number of students taught by the
professor
Fixed
10. The costs of cleaning supplies used at a
fast-food restaurant to clean the kitchen and
dining areas at the end of the day
Number of customers served Fixed
Questi on 4: Score 2/2
Your response Correct response
Exercise 2-7 Differential, Opportunity, and Sunk Costs [LO7]
The Sorrento Hotel is a four-star hotel located in downtown Seattle. The hotel's operations vice president would
like to replace the hotel's antiquated computer terminals at the registration desk with attractive state-of-the-art
flat-panel displays. The new displays would take less space, would consume less power than the old computer
terminals, and would provide additional security since they can only be viewed froma restrictive angle. The new
computer displays would not require any new wiring. The hotel's chef believes the funds would be better spent on
a new bulk freezer for the kitchen.
Required
Classify each items as differential cost, or an opportunity cost, or a sunk cost in the decision to replace the old
computer terminals with new flat-panel displays. If none of the categories apply for a particular itemselect none.
Item Cost
1. Cost of the new flat-panel displays Differential cost (13%)
2. Cost of the old computer terminals Sunk cost (13%)
3. Rent on the space occupied by the registration desk None (13%)
4. Wages of registration desk personnel None (13%)
5. Benefits froma new freezer Opportunity cost (13%)
6. Costs of maintaining the old computer terminals Differential cost (13%)
7. Cost of removing the old computer terminals Differential cost (13%)
8. Cost of existing registration desk wiring Sunk cost (13%)
Exercise 2-7 Differential, Opportunity, and Sunk Costs [LO7]
The Sorrento Hotel is a four-star hotel located in downtown Seattle. The hotel's operations vice president would
like to replace the hotel's antiquated computer terminals at the registration desk with attractive state-of-the-art
flat-panel displays. The new displays would take less space, would consume less power than the old computer
terminals, and would provide additional security since they can only be viewed froma restrictive angle. The new
computer displays would not require any new wiring. The hotel's chef believes the funds would be better spent on
a new bulk freezer for the kitchen.
Required
Classify each items as differential cost, or an opportunity cost, or a sunk cost in the decision to replace the old
computer terminals with new flat-panel displays. If none of the categories apply for a particular itemselect none.
Item Cost
1. Cost of the new flat-panel displays Differential cost
2. Cost of the old computer terminals Sunk cost
3. Rent on the space occupied by the registration desk None
4. Wages of registration desk personnel None
5. Benefits froma new freezer Opportunity cost
6. Costs of maintaining the old computer terminals Differential cost
7. Cost of removing the old computer terminals Differential cost
8. Cost of existing registration desk wiring Sunk cost
Feedback:
Note: The costs of the rent on the space occupied by the registration desk and the wages of registration desk
personnel are neither differential costs, opportunity costs, nor sunk costs. These are costs that do not differ
between the alternatives and are therefore irrelevant in the decision, but they are not sunk costs since they occur
in the future.
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Questi on 5: Score 2/2
Your response Correct response
Exercise 2-10 Product Cost Flows; Product versus Period Costs [LO2, LO3]
Ryser Company was organized on May 1. On that date the company purchased 35,000 plastic emblems, each
with a peel-off adhesive backing. The front of the emblems contained the company's name, accompanied by
an attractive logo. Each emblemcost Ryser Company $2.
During May, 31,000 emblems were drawn fromthe Raw Materials inventory account. Of these, 1,000 were
taken by the sales manager to an important sales meeting with prospective customers and handed out as an
advertising gimmick. The remaining emblems drawn from inventory were affixed to units of the company's
product that were being manufactured during May. Of the units of product having emblems affixed during May,
90% were completed and transferred fromWork in Process to Finished Goods. Of the units completed during
the month, 75% were sold and shipped to customers.
Requirement 1:
Determine the cost of emblems that would be in each of the following accounts at May 31 (Omit the " $" sign
in your response):
(a) Raw Materials
Cost in Raw Materials $8000 (100%)
Exercise 2-10 Product Cost Flows; Product versus Period Costs [LO2, LO3]
Ryser Company was organized on May 1. On that date the company purchased 35,000 plastic emblems, each
with a peel-off adhesive backing. The front of the emblems contained the company's name, accompanied by
an attractive logo. Each emblemcost Ryser Company $2.
During May, 31,000 emblems were drawn fromthe Raw Materials inventory account. Of these, 1,000 were
taken by the sales manager to an important sales meeting with prospective customers and handed out as an
advertising gimmick. The remaining emblems drawn from inventory were affixed to units of the company's
product that were being manufactured during May. Of the units of product having emblems affixed during May,
90% were completed and transferred fromWork in Process to Finished Goods. Of the units completed during
the month, 75% were sold and shipped to customers.
Requirement 1:
Determine the cost of emblems that would be in each of the following accounts at May 31 (Omit the " $" sign
in your response):
(a) Raw Materials
Cost in Raw Materials $ 8000
Feedback:

Emblems purchased 35,000
Emblems drawn frominventory 31,000
Emblems remaining in inventory 4,000
Cost per emblem $2
Cost in Raw Materials Inventory at May 31 $ 8,000
Your response Correct response
(b) Work in Process
Cost in Work in Process $6000 (100%)
(b) Work in Process
Cost in Work in Process $ 6000
Feedback:

Emblems used in production (31,000 1,000) 30,000
Units completed and transferred to Finished Goods
(90% 30,000) 27,000
Units still in Work in Process at May 31 3,000
Cost per emblem $2
Cost in Work in Process Inventory at May 31 $ 6000
Your response Correct response
(c) Finished Goods
Cost in Finished Goods $13500 (100%)
(c) Finished Goods
Cost in Finished Goods $13500
Feedback:
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Units completed and transferred to Finished Goods (above) 27,000
Units sold during the month (75% 27,000) 20,250
Units still in Finished Goods at May 31 6,750
Cost per emblem $2
Cost in Finished Goods Inventory at May 31 $13,500
Your response Correct response
(d) Cost of Goods Sold
Cost in cost of Goods Sold $40500 (100%)
(d) Cost of Goods Sold
Cost in cost of Goods Sold $40500
Feedback:

Units sold during the month (above) 20,250
Cost per emblem $2
Cost in Cost of Goods Sold at May 31 $40,500
Your response Correct response
(e) Advertising Expense
Cost in Advertising Expense $2000 (100%)
(e) Advertising Expense
Cost in Advertising Expense $ 2000
Feedback:

Emblems used in advertising 1,000
Cost per emblem $2
Cost in Advertising Expense at May 31 $2,000
Your response Correct response
Requirement 2:
Specify whether each of the above accounts would appear on the balance sheet or on the income statement
at May 31.
Raw Materials
Balance
Sheet (20%)
Work in Process
Balance
Sheet (20%)
Finished Goods
Balance
Sheet (20%)
Cost of Goods Sold
Income
Statement (20%)
Advertising Expense
Income
Statement (20%)
Requirement 2:
Specify whether each of the above accounts would appear on the balance sheet or on the income statement
at May 31.
Raw Materials
Balance
Sheet
Work in Process
Balance
Sheet
Finished Goods
Balance
Sheet
Cost of Goods Sold
Income
Statement
Advertising Expense
Income
Statement
Questi on 6: Score 2/2
Your response Correct response
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Problem 2-17 Classification of Costs as Variable or Fixed and Direct or Indirect [LO5, LO6]
Classify each cost associated with manufacturing operations as being either variable or fixed with respect to the
number of units produced and sold. Also indicate whether each cost would typically be treated as a direct cost or
an indirect cost with respect to units of product.
Cost Item Cost Behavior
To Units of
Product
1. Plastic washers used to assemble autos Variable (3%)
Indirect
cost (3%)
2. Production superintendent's salary. Fixed (3%)
Indirect
cost (3%)
3. Wages of workers who assemble a product.
Variable (3%)
Direct
cost (3%)
4. Electricity to run production equipment. Variable (3%)
Indirect
cost (3%)
5. J anitorial salaries. Fixed (3%)
Indirect
cost (3%)
6. Clay used to make bricks. Variable (3%)
Direct
cost (3%)
7. Rent on a factory building. Fixed (3%)
Indirect
cost (3%)
8. Wood used to make skis. Variable (3%)
Direct
cost (3%)
9. Screws used to make furniture. Variable (3%)
Indirect
cost (3%)
10. A supervisor's salary. Fixed (3%)
Indirect
cost (3%)
11. Cloth used to make shirts. Variable (3%)
Direct
cost (3%)
12. Depreciation of cafeteria equipment. Fixed (3%)
Indirect
cost (3%)
13. Glue used to make textbooks. Variable (3%)
Indirect
cost (3%)
14. Lubricants for production equipment. Variable (3%)
Indirect
cost (3%)
15. Paper used to make textbooks. Variable (3%)
Direct
cost (3%)
Problem 2-17 Classification of Costs as Variable or Fixed and Direct or Indirect [LO5, LO6]
Classify each cost associated with manufacturing operations as being either variable or fixed with respect to the
number of units produced and sold. Also indicate whether each cost would typically be treated as a direct cost or
an indirect cost with respect to units of product.
Cost Item
Cost
Behavior
To Units of
Product
1. Plastic washers used to assemble autos Variable
Indirect
cost
2. Production superintendent's salary. Fixed
Indirect
cost
3. Wages of workers who assemble a product.
Variable
Direct
cost
4. Electricity to run production equipment. Variable
Indirect
cost
5. J anitorial salaries. Fixed
Indirect
cost
6. Clay used to make bricks. Variable
Direct
cost
7. Rent on a factory building. Fixed
Indirect
cost
8. Wood used to make skis. Variable
Direct
cost
9. Screws used to make furniture. Variable
Indirect
cost
10. A supervisor's salary. Fixed
Indirect
cost
11. Cloth used to make shirts. Variable
Direct
cost
12. Depreciation of cafeteria equipment. Fixed
Indirect
cost
13. Glue used to make textbooks. Variable
Indirect
cost
14. Lubricants for production equipment. Variable
Indirect
cost
15. Paper used to make textbooks. Variable
Direct
cost
Feedback:
Plastic washers used to assemble autos, Screws used to make furniture, Glue used to make textbooks: These
materials would usually be considered indirect materials because their costs are relatively insignificant. It
would not be worth the effort to trace their costs to individual units of product and therefore they would usually
be classified as indirect materials.
Questi on 7: Score 4/4
Your response Correct response
Problem 2-23 Cost Classification and Cost Behavior [LO2, LO5, LO6]
Heritage Company manufactures a beautiful bookcase that enjoys widespread popularity. The company has a
backlog of orders that is large enough to keep production going indefinitely at the plant's full capacity of 3,800
bookcases per year. Annual cost data at full capacity follow:

Direct materials used (wood and glass) $ 431,000
General office salaries $ 112,000
Problem 2-23 Cost Classification and Cost Behavior [LO2, LO5, LO6]
Heritage Company manufactures a beautiful bookcase that enjoys widespread popularity. The company has a
backlog of orders that is large enough to keep production going indefinitely at the plant's full capacity of 3,800
bookcases per year. Annual cost data at full capacity follow:

Direct materials used (wood and glass) $ 431,000
General office salaries $ 112,000
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Factory supervision $ 68,000
Sales commissions $ 60,000
Depreciation, factory building $ 105,000
Depreciation, office equipment $ 2,000
Indirect materials, factory $ 21,000
Factory labor (cutting and assembly) $ 85,000
Advertising $ 98,000
Insurance, factory $ 6,000
General office supplies (billing) $ 4,000
Property taxes, factory $ 18,000
Utilities, factory $ 47,000
Requirement 1:
Enter each cost itemby placing the dollar amount under the appropriate headings. Note that each cost itemis
classified in two ways: first, as either variable or fixed with respect to the number of units produced and sold;
and second, as either a selling and administrative cost or a product cost. (If the itemis a product cost, it should
also be classified as either direct or indirect as shown.) (Leave no cells blank - be certain to enter " 0"
wherever required. Omit the " $" sign in your response.)
Cost behavior
Selling or
administrative
cost
Product cost
Cost item Variable Fixed Direct Indirect
Direct Materials used (wood, glass) $431,000 (1%) $ 0 (1%) $ 0 (1%) $431,000 (1%) $ 0 (1%)
General office salaries 0 (1%) 112,000 (1%) 112,000 (1%) 0 (1%) 0 (1%)
Factory supervision 0 (1%) 68,000 (1%) 0 (1%) 0 (1%) 68,000 (1%)
Sales commissions 60,000 (1%) 0 (1%) 60,000 (1%) 0 (1%) 0 (1%)
Depreciation, factory building 0 (1%) 105,000 (1%) 0 (1%) 0 (1%) 105,000 (1%)
Depreciation, office equipment 0 (1%) 2,000 (1%) 2,000 (1%) 0 (1%) 0 (1%)
Indirect materials, factory 21,000 (1%) 0 (1%) 0 (1%) 0 (1%) 21,000 (1%)
Factory labor (cutting and assembly) 85,000 (1%) 0 (1%) 0 (1%) 85,000 (1%) 0 (1%)
Advertising 0 (1%) 98,000 (1%) 98,000 (1%) 0 (1%) 0 (1%)
Insurance, factory 0 (1%) 6,000 (1%) 0 (1%) 0 (1%) 6,000 (1%)
General office supplies 4,000 (1%) 0 (1%) 4,000 (1%) 0 (1%) 0 (1%)
Property taxes, factory 0 (1%) 18,000 (1%) 0 (1%) 0 (1%) 18,000 (1%)
Utilities, factory 47,000 (1%) 0 (1%) 0 (1%) 0 (1%) 47,000 (1%)
Total costs $ 648000 (1%) $ 409000 (1%) $ 276000 (1%) $ 516000 (1%) $ 265000 (1%)
Factory supervision $ 68,000
Sales commissions $ 60,000
Depreciation, factory building $ 105,000
Depreciation, office equipment $ 2,000
Indirect materials, factory $ 21,000
Factory labor (cutting and assembly) $ 85,000
Advertising $ 98,000
Insurance, factory $ 6,000
General office supplies (billing) $ 4,000
Property taxes, factory $ 18,000
Utilities, factory $ 47,000
Requirement 1:
Enter each cost itemby placing the dollar amount under the appropriate headings. Note that each cost itemis
classified in two ways: first, as either variable or fixed with respect to the number of units produced and sold;
and second, as either a selling and administrative cost or a product cost. (If the itemis a product cost, it should
also be classified as either direct or indirect as shown.) (Leave no cells blank - be certain to enter " 0"
wherever required. Omit the " $" sign in your response.)
Cost behavior
Selling or
administrative
cost
Product cost
Cost item Variable Fixed Direct Indirect
Direct Materials used (wood, glass) $ 431,000 $ 0 $ 0 $ 431,000 $ 0
General office salaries 0 112,000 112,000 0 0
Factory supervision 0 68,000 0 0 68,000
Sales commissions 60,000 0 60,000 0 0
Depreciation, factory building 0 105,000 0 0 105,000
Depreciation, office equipment 0 2,000 2,000 0 0
Indirect materials, factory 21,000 0 0 0 21,000
Factory labor (cutting and assembly) 85,000 0 0 85,000 0
Advertising 0 98,000 98,000 0 0
Insurance, factory 0 6,000 0 0 6,000
General office supplies 4,000 0 4,000 0 0
Property taxes, factory 0 18,000 0 0 18,000
Utilities, factory 47,000 0 0 0 47,000
Total costs $ 648000 $ 409000 $ 276000 $ 516000 $ 265000
Your response Correct response
Requirement 2:
Compute the average product cost per bookcase. (Round your answer to the nearest dollar amount. Omit
the " $" sign in your response.)
Average product cost $206 (100%)per bookcase
Requirement 2:
Compute the average product cost per bookcase. (Round your answer to the nearest dollar amount. Omit
the " $" sign in your response.)
Average product cost $ 206per bookcase
Feedback:
Only the product costs will be included in the cost of a bookcase. The cost per bookcase will be:

Direct product costs $516,000
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Indirect product costs 265,000
Total product costs $781,000
$781,000 /3,800 bookcases =$206 per bookcase
Requirement 3:
Due to a recession, assume that production drops to only 2,000 bookcases per year. Would you expect the
average product cost per bookcase to increase, decrease, or remain unchanged?
Your Answer:
Choice Selected
Remain unchanged
Increase

Decrease
Feedback:
The cost per bookcase would increase. This is because the fixed costs would be spread over fewer units,
causing the cost per unit to rise.
Requirement 4:
Refer to the original data. The president's next-door neighbor has considered making himself a bookcase and
has priced the necessary materials at a building supply store. He has asked the president whether he could
purchase a bookcase fromthe Heritage Company "at cost," and the president has agreed to let himdo so.
(a) The cost as calculated by the president and his neighbor for the bookcase will be the same.
Your Answer:
Choice Selected
True
False

Feedback:
Yes, there probably would be a disagreement. The president is likely to want a price of at least $196, which is
the average cost per unit to manufacture 4,000 bookcases. He may expect an even higher price than this to
cover a portion of the administrative costs as well. The neighbor will probably be thinking of cost as including
only materials used, or perhaps materials and direct labor.
(b) Since the company is operating at full capacity, what cost termused in the chapter might be justification for
the president to charge the full, regular price to the neighbor and still be selling "at cost"?
Your Answer:
Choice Selected
Opportunity cost

Differential cost
Sunk cost
Feedback:
The termis opportunity cost. Since the company is operating at full capacity, the president must give up the
full, regular price of a set to sell a bookcase to the neighbor. Therefore, the president's cost is really the full,
regular price of a set.
Questi on 8: Score 2/2
Your response Correct response
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Problem 2-24 Variable and Fixed Costs; Subtleties of Direct and Indirect Costs [LO5, LO6]
The Central Area Well-Baby Clinic provides a variety of health services to newborn babies and their parents. The
clinic is organized into a number of departments, one of which is the Immunization Center.
Problem 2-24 Variable and Fixed Costs; Subtleties of Direct and Indirect Costs [LO5, LO6]
The Central Area Well-Baby Clinic provides a variety of health services to newborn babies and their parents. The
clinic is organized into a number of departments, one of which is the Immunization Center.
Feedback:
The wages of the nurses could be variable and a direct cost of serving particular patients.
Questi on 9: Score 4/4
Your response Correct response
Problem 2-28 Working with Incomplete Data from the Income Statement and Schedule of Cost of Goods
Manufactured [LO3, LO4]
Supply the missing data in the four cases below. Each case is independent of the others. (Input all amounts as
positive values. Omit the " $" sign in your response.)
Case
1 2 3 4
Schedule of Cost of Goods Manufactured
Direct materials $ 6,700 $ 9,100 $ 6,300 $ 8,100
Direct labor 2,000 4,300 4500 (4%) 2,900
Manufacturing overhead. 10,300 11500 (4%) 7,200 20,800
Total manufacturing costs 19000 (4%) 24,900 18,000 31800 (4%)
Beginning work in process inventory 2900 (4%) 1,100 1,900 2200 (4%)
Ending work in process inventory 4,200 3,200 3800 (4%) 2,300
Cost of goods manufactured $ 17,700 $ 22800 (4%) $ 16,100 $ 31,700
Income Statement
Sales $ 25,000 $ 39,700 $ 29,900 $ 49,900
Beginning finished goods inventory 5,900 8000 (4%) 6,800 9,000
Cost of goods manufactured 17,700 22800 (4%) 16,100 31,700
Goods available for sale 23600 (4%) 30800 (4%) 22900 (4%) 40700 (4%)
Ending finished goods inventory 9,000 4,200 4800 (4%) 7,200
Cost of goods sold 14600 (4%) 26,600 18,100 33500 (4%)
Gross margin 10400 (4%) 13100 (4%) 11800 (4%) 16400 (4%)
Selling and administrative expenses 5,700 7800 (4%) 9100 (4%) 9,800
Net operating income $ 4700 (4%) $ 5,300 $ 2,700 $ 6600 (4%)
Problem 2-28 Working with Incomplete Data from the Income Statement and Schedule of Cost of Goods
Manufactured [LO3, LO4]
Supply the missing data in the four cases below. Each case is independent of the others. (Input all amounts as
positive values. Omit the " $" sign in your response.)
Case
1 2 3 4
Schedule of Cost of Goods Manufactured
Direct materials $ 6,700 $ 9,100 $ 6,300 $ 8,100
Direct labor 2,000 4,300 4500 2,900
Manufacturing overhead. 10,300 11500 7,200 20,800
Total manufacturing costs 19000 24,900 18,000 31800
Beginning work in process inventory 2900 1,100 1,900 2200
Ending work in process inventory 4,200 3,200 3800 2,300
Cost of goods manufactured $ 17,700 $ 22800 $ 16,100 $ 31,700
Income Statement
Sales $ 25,000 $ 39,700 $ 29,900 $ 49,900
Beginning finished goods inventory 5,900 8000 6,800 9,000
Cost of goods manufactured 17,700 22800 16,100 31,700
Goods available for sale 23600 30800 22900 40700
Ending finished goods inventory 9,000 4,200 4800 7,200
Cost of goods sold 14600 26,600 18,100 33500
Gross margin 10400 13100 11800 16400
Selling and administrative expenses 5,700 7800 9100 9,800
Net operating income $ 4700 $ 5,300 $ 2,700 $ 6600
Questi on 10: Score 3.97/4
Your response Correct response
Problem 2-29 Income Statement; Schedule of Cost of Goods Manufactured [LO1, LO2, LO3, LO4]
Hickey Corporation is a manufacturer that produces a single product. The following information has been
taken fromthe company's production, sales, and cost records for the just completed year:

Production in units 30,700
Sales in units ?
Ending finished goods inventory in units ?
Problem 2-29 Income Statement; Schedule of Cost of Goods Manufactured [LO1, LO2, LO3, LO4]
Hickey Corporation is a manufacturer that produces a single product. The following information has been
taken fromthe company's production, sales, and cost records for the just completed year:

Production in units 30,700
Sales in units ?
Ending finished goods inventory in units ?
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Sales in dollars $650,000
Costs:
Advertising $ 49,200
Direct labor $ 79,800
Indirect labor $ 61,000
Raw materials purchased $159,900
Building rent (production uses 80% of the space; administrative and sales
offices use the rest)
$ 50,000
Utilities, factory $ 35,400
Royalty paid for use of production patent, $1 per unit produced ?
Maintenance, factory $ 24,500
Rent for special production equipment, $6,000 per year plus $0.10 per unit
produced.
?
Selling and administrative salaries $139,700
Other factory overhead costs $ 11,000
Other selling and administrative expenses $ 19,000

Beginning
of Year
End of
Year
Inventories:
Raw materials $19,000 $11,000
Work in process $29,000 $39,000
Finished goods $ 0 ?
The finished goods inventory is being carried at the average unit production cost for the year. The selling
price of the product is $25 per unit.
Requirement 1:
Prepare a schedule of cost of goods manufactured for the year. (Input all amounts as positive values.
Omit the " $" sign in your response.)
Hickey Corporation
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning (3%) $ 19000 (3%)
Add (3%):Purchases of raw materials (3%) 159900 (3%)
Raw materials available for use (3%) 178900 (3%)
Deduct (3%):Raw materials inventory, ending (3%) 11000 (3%)
Raw materials used in production (3%) $ 167900 (3%)
Direct labor (3%) 79800 (3%)
Manufacturing overhead:
Indirect labor (3%) 61000 (3%)
Building rent (3%) 40000 (3%)
Utilities, factory (3%) 35400 (3%)
Royalty on patent (3%) 30700 (3%)
Maintenance, factory (3%) 24500 (3%)
Rent on equipment (3%) 9070 (3%)
Other factory overhead costs (3%) 11000 (3%)
Sales in dollars $650,000
Costs:
Advertising $ 49,200
Direct labor $ 79,800
Indirect labor $ 61,000
Raw materials purchased $159,900
Building rent (production uses 80% of the space; administrative and sales
offices use the rest)
$ 50,000
Utilities, factory $ 35,400
Royalty paid for use of production patent, $1 per unit produced ?
Maintenance, factory $ 24,500
Rent for special production equipment, $6,000 per year plus $0.10 per unit
produced.
?
Selling and administrative salaries $139,700
Other factory overhead costs $ 11,000
Other selling and administrative expenses $ 19,000

Beginning
of Year
End of
Year
Inventories:
Raw materials $19,000 $11,000
Work in process $29,000 $39,000
Finished goods $ 0 ?
The finished goods inventory is being carried at the average unit production cost for the year. The selling
price of the product is $25 per unit.
Requirement 1:
Prepare a schedule of cost of goods manufactured for the year. (Input all amounts as positive values.
Omit the " $" sign in your response.)
Hickey Corporation
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning $ 19000
Add:Purchases of raw materials 159900
Raw materials available for use 178900
Deduct:Raw materials inventory, ending 11000
Raw materials used in production $ 167900
Direct labor 79800
Manufacturing overhead:
Indirect labor 61000
Building rent 40000
Utilities, factory 35400
Royalty on patent 30700
Maintenance, factory 24500
Rent on equipment 9070
Other factory overhead costs 11000
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Total overhead costs 2116700 (0%)
Total manufacturing costs 459370 (3%)
Add (3%):Work in process inventory,
beginning (3%)
29000 (3%)
488370 (3%)
Deduct (3%):Work in process inventory,
ending (3%)
39000 (3%)
Cost of goods manufactured $ 449370 (3%)
Total overhead costs 211,670
Total manufacturing costs 459370
Add:Work in process inventory, beginning 29000
488370
Deduct:Work in process inventory, ending 39000
Cost of goods manufactured $ 449370
Total grade: 1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +
1.01/38 +1.01/38 +1.01/38 +0.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 +1.01/38 =3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3% +3%
+3% +0% +3% +3% +3% +3% +3% +3% +3% +3% +3%
Feedback:

Building rent (80% 50,000) $ 40,000
Royalty on patent ($1 per unit 30,700 units) $ 30,700
Rent on equipment: $6,000 +($0.10 per unit 30,700 units) $ 9,070
Your response Correct response
Requirement 2:
Compute the following:
(a) The number of units in the finished goods inventory at the end of the year.
Finished goods inventory 4700 (100%) units
Requirement 2:
Compute the following:
(a) The number of units in the finished goods inventory at the end of the year.
Finished goods inventory 4700 units
Feedback:
To compute the number of units in the finished goods inventory at the end of the year, we must first compute
the number of units sold during the year.

Units in the finished goods inventory, beginning 0
Units produced during the year 30,700
Units available for sale 30,700
Units sold during the year (above) 26,000
Units in the finished goods inventory, ending 4,700
Your response Correct response
(b) The cost of the units in the finished goods inventory at the end of the year. (Do not round Average
production cost per unit and round final answer to the nearest whole dollar amount. Omit the " $"
sign in your response.)
Finished goods inventory $68796 (100%)
(b) The cost of the units in the finished goods inventory at the end of the year. (Do not round Average
production cost per unit and round final answer to the nearest whole dollar amount. Omit the " $"
sign in your response.)
Finished goods inventory $68796
Feedback:
The average production cost per unit during the year would be:
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Thus, the cost of the units in the finished goods inventory at the end of the year would be: 4,700 units
$14.64 per unit =$68,808.
Your response Correct response
Requirement 3:
Prepare an income statement for the year. (Leave no cells blank - be certain to enter " 0" wherever
required. Do not round Average production cost per unit and round final answers to the nearest
whole dollar amount. Input all amounts as positive values. Omit the " $" sign in your response.)
Hickey Corporation
Income Statement
Sales (4%) $ 650000 (4%)
Cost of goods sold:
Finished goods inventory beginning (4%) $ 0 (4%)
Add (4%):Cost of goods manufactured (4%) 449370 (4%)
Goods available for sale (4%) 449370 (4%)
Deduct (4%):Finished goods inventory, ending (4%) 68796 (4%) 380574 (4%)
Gross profit (4%) 269426 (4%)
Selling and administrative expenses:
Advertising (4%) 49200 (4%)
Building rent (4%) 10000 (4%)
Selling and administrative salaries (4%) 139700 (4%)
Other selling and administrative expense (4%) 19000 (4%) 217900 (4%)
Net operating income (4%) $ 51526 (4%)
Requirement 3:
Prepare an income statement for the year. (Leave no cells blank - be certain to enter " 0" wherever
required. Do not round Average production cost per unit and round final answers to the nearest
whole dollar amount. Input all amounts as positive values. Omit the " $" sign in your response.)
Hickey Corporation
Income Statement
Sales $ 650000
Cost of goods sold:
Finished goods inventory beginning $ 0
Add:Cost of goods manufactured 449370
Goods available for sale 449370
Deduct:Finished goods inventory, ending 68796 380574
Gross profit 269426
Selling and administrative expenses:
Advertising 49200
Building rent 10000
Selling and administrative salaries 139700
Other selling and administrative expense 19000 217900
Net operating income $ 51526
Feedback:
Building rent (20% $50,000) =$10,000
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