Connect 2-Semester Access Card for Fundamental Accounting Principles
Connect 2-Semester Access Card for Fundamental Accounting Principles
22nd Edition
ISBN: 9780077632755
Author: John Wild
Publisher: McGraw-Hill Education
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Chapter 18, Problem 18SP
Requirement 1

To determine

To classify:

The following manufacturing costs of Business Solutions as either (a) variable or fixed and (b) direct or indirect costs.

Requirement 1

Expert Solution
Check Mark

Answer to Problem 18SP

Solution:


    CostsVariable or FixedDirect or Indirect
    1
    Monthly flat fee to clean workshop
    Fixed
    Indirect
    2
    Laminate coverings for desktops
    Variable
    Direct
    3
    Taxes on assembly workshop
    Fixed
    Indirect
    4
    Glue to assemble workstation component parts
    Variable
    Indirect
    5
    Wages of desk assembler
    Variable
    Direct
    6
    Electricity for workshop
    Variable
    Indirect
    7
    Depreciation on tools
    Fixed
    Indirect

Explanation of Solution

  • Monthly flat fee to clean workshop − the monthly rent of a building or factory is fixed thus, it does not change with the level of output and this cannot be directly associated with the product, thus it will be a fixed and indirect cost.
  • Laminate coverings for desktops − this is a cost which will directly change with the level of output and it can be associated with the each unit of product, thus it will be a variable and direct cost.
  • Taxes on assembly workshop − the taxes on assembly workshop a building or factory is fixed thus, it does not change with the level of output and this cannot be directly associated with the product, thus it will be a fixed and indirect cost.
  • Glue to assemble workstation component parts − the glue to assemble workstation component parts will directly change with the level of output but it cannot be associated with the each unit of product, thus it will be a variable and indirect cost.
  • Wages of desk assembler − the wages of desk assembler will directly change with the level of output and it can be associated with the each unit of product, thus it will be a variable and direct cost.
  • Electricity for workshop − the use of electricity may depend on the time spent in the workshop thus related with the level of output but it cannot be associated with the each unit of product, thus it will be a variable and indirect cost
  • Depreciation on tools − the depreciation on tools is fixed and indirect cost in nature.
  • Conclusion

    Thus, the manufacturing costs of Business Solutions have been classified as either variable or fixed and direct or indirect costs.

    Requirement 2.

    To determine

    To prepare:

    Schedule of cost of goods manufactured for Business Solutions using the information given for the month ended January 31, 2016

    Requirement 2.

    Expert Solution
    Check Mark

    Answer to Problem 18SP

    Solution:

      Business Solutions
      Schedule of Cost of Goods manufactured
      Direct Material Used
      $ 2,200
      Direct Labor
      $ 900
      Total factory overheads
      $ 490


      Total manufacturing costs$ 3,590
      Add: Beginning Work in process inventory
      0
      Total costs of work in process inventory$ 3,590
      Less: Ending work in process inventory
      $ 540


      Cost of goods manufactured$ 3,050

    Explanation of Solution

    The preparation of schedule of cost of goods manufactured can be explained as under −

  • Total manufacturing costs
  • The information given to calculate total manufacturing costs is −
  • Direct Material Used = $ 2,200
  • Direct Labor = $ 900
  • Total factory overheads = $ 490

  •   Total manufacturing costs = Direct Material Used + Direct Labor + Total factory overheadsTotal manufacturing costs = $ 2,200 + $ 900 + $ 490Total manufacturing costs = $ 3,590

  • Total costs of work in process inventory −
  • The information given to calculate the total costs of work in process inventory is −
  • Total manufacturing costs = $ 3,590
  • Beginning work in process inventory = $ 0

  •    Total costs of work in process inventory =Total manufacturing costs                                                                     + Beginning work in process inventoryTotal costs of work in process inventory = $ 3,590 + 0Total costs of work in process inventory = $ 3,590

  • Cost of goods manufactured −
  • The information given to calculate the total cost of goods manufactured is −

  • Total costs of work in process inventory = $ 3,590
  • Ending work in process inventory = $ 540

  •    Cost of goods manufactured = Total costs of work in process inventory                                                    Ending work in process inventoryCost of goods manufactured = $ 3,590  $ 540Cost of goods manufactured = $ 3,050

    Conclusion

    Thus, the schedule of cost of goods manufactured for Business Solutions using the information given for the month ended January 31, 2016 has been prepared.

    Requirement 3

    To determine

    To prepare:

    Cost of goods sold section of a partial income statement for Business Solutions for the month ended January 31, 2016.

    Requirement 3

    Expert Solution
    Check Mark

    Answer to Problem 18SP

    Solution:

      Business Solutions
      Income statement
      For the month Ended January 31, 2016
      SalesXXX
      Less: Cost of goods sold

      Cost of good manufactured
      $ 3,050

      Add: Finished Goods Inventory - Beginning
      0

      Less: Finished Goods Inventory - Ending
      $ 350

      Cost of Goods sold$ 2,700

    Explanation of Solution

    The information given to prepare costs of goods sold section for partial income statement is −

    • Cost of Goods manufactured = $ 3,050
    • Finished Goods Inventory − Beginning = 0
    • Finished Goods Inventory − Ending = $ 350

    •   Cost of Goods sold =Cost of Goods manufactured +Finished Goods Inventory Beginning  Finished Goods Inventory Ending


      Cost of Goods sold = $ 3,050 + 0  $ 350Cost of Goods sold = $ 2,700

    Conclusion

    Thus, the cost of goods sold section of a partial income statement for Business Solutions for the month ended January 31, 2016 has been prepared.

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    Chapter 18 Solutions

    Connect 2-Semester Access Card for Fundamental Accounting Principles

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