Chapter 18

Indicate whether each of the following costs of an airplane manufacturer would be classified as direct materials cost, direct labor cost, or factory overhead cost: a. Controls for flight deck b. Aircraft engines c. Depreciation of welding equipment d. Welding machinery lubricants e. Salary of test pilot f. Steel used in landing gear g. Wages of assembly line worker h. Tires

Indicate whether the following costs of Colgate-Palmolive Company would be classified as direct materials cost, direct labor cost, or factory overhead cost: a. Wages paid to Packaging Department employees b. Maintenance supplies c. Plant manager salary for the Morristown, Tennessee, toothpaste plant d. Packaging materials e. Depreciation on production machinery f. Salary of process engineers g. Depreciation on the Clarksville, Indiana, soap plant h. Resins for soap and shampoo products i. Scents and fragrances j. Wages of production line employees

Which of the following items are properly classified as part of factory overhead for Caterpillar? a. Factory supplies used in the Morganton, North Carolina, engine parts plant b. Amortization of patents on new assembly process c. Steel plate d. Vice president of finance's salary e. Sales incentive fees to dealers f. Depreciation on Peoria, Illinois, headquarters building g. Interest expense on debt h. Plant manager's salary at Aurora, Illinois, manufacturing plant i. Consultant fees for a study of production line employee productivity j. Property taxes on the Danville, Kentucky, tractor tread plant

For apparel manufacturer Ann Taylor, Inc., classify each of the following costs as either a product cost or a period cost: a. Travel costs of salespersons b. Fabric used during production c. Salaries of distribution center personnel d. Factory janitorial supplies e. Repairs and maintenance costs for sewing machines f. Corporate controller's salary g. Depreciation on office equipment h. Advertising expenses i. Utility costs for office building j. Depreciation on sewing machines k. Property taxes on factory building and equipment 1\. Research and development costs \(\mathrm{m}\). Sales commissions n. Oil used to lubricate sewing machines o. Factory supervisors' salaries p. Wages of sewing machine operators q. Salary of production quality control supervisor

From the choices presented in parentheses, choose the appropriate term for completing each of the following sentences: a. Payments of cash or the commitment to pay cash in the future for the purpose of generating revenues are (costs, expenses). b. The implementation of automatic, robotic factory equipment normally (increases, decreases) the direct labor component of product costs. c. Feedback is often used to (improve, direct) operations. d. A product, sales territory, department, or activity to which costs are traced is called a (direct cost, cost object). e. The balance sheet of a manufacturer would include an account for (cost of goods sold, work in process inventory). f. Factory overhead costs combined with direct labor costs are called (prime, conversion) costs. g. Advertising costs are usually viewed as (period, product) costs.

From the choices presented in parentheses, choose the appropriate term for completing each of the following sentences: a. Short-term plans are called (strategic, operational) plans. b. The plant manager's salary would be considered (direct, indirect) to the product. c. The phase of the management process that uses process information to eliminate the source of problems in a process so that the process delivers the correct product in the correct quantities is called (directing, improving). d. The wages of an assembly worker are normally considered a (period, product) cost. e. Materials for use in production are called (supplies, materials inventory). f. Direct materials costs combined with direct labor costs are called (prime, conversion) costs. g. An example of factory overhead is (sales office depreciation, plant depreciation).

A partial list of the costs for Mountain Lakes Railroad, a short hauler of freight, is provided below. Classify each cost as either indirect or direct. For purposes of classifying each cost as direct or indirect, use the train as the cost object. a. Wages of switch and classification yard personnel b. Cost to lease (rent) railroad cars c. Depreciation of terminal facilities d. Payroll clerk salaries e. Salaries of dispatching and communications personnel f. Safety training costs g. Cost to lease (rent) train locomotives. h. Wages of train engineers i. Cost of track and bed (ballast) replacement j. Costs of accident cleanup k. Fuel costs l. Maintenance costs of right of way, bridges, and buildings

The following events took place for LAE Manufacturing Company during March, the first month of its operations as a producer of digital clocks: a. Purchased \(\$ 52,000\) of materials. b. Used \(\$ 40,000\) of direct materials in production. c. Incurred \(\$ 60,000\) of direct labor wages. d. Incurred \(\$ 84,000\) of factory overhead. e. Transferred \(\$ 140,000\) of work in process to finished goods. f. Sold goods with a cost of \(\$ 110,000\). g. Earned revenues of \(\$ 250,000\). h. Incurred \(\$ 64,000\) of selling expenses. i. Incurred \(\$ 28,000\) of administrative expenses. a. Prepare the March income statement for LAE Manufacturing Company. b. Determine the inventory balances at the end of the first month of operations.

Partial balance sheet data for Lawson Company at December 31, 2010, are as follows: \(\begin{array}{lrlr}\text { Finished goods inventory } & \$ 10,000 & \text { Supplies } & \$ 18,000 \\ \text { Prepaid insurance } & 10,000 & \text { Materials inventory } & 22,000 \\ \text { Accounts receivable } & 26,000 & \text { Cash } & 28,000 \\ \text { Work in process inventory } & 40,000 & & \end{array}\) Prepare the Current Assets section of Lawson Company's balance sheet at December 31, \(2010 .\)

Monterey Manufacturing Company reported the following materials data for the month ending October 31, 2010: \(\begin{array}{lr}\text { Materials purchased } & \$ 160,000 \\ \text { Materials inventory, October } 1 & 50,000 \\ \text { Materials inventory, October } 31 & 42,000\end{array}\) Determine the cost of direct materials used in production by Monterey during the month ended October 31, \(2010 .\)

Two items are omitted from each of the following three lists of cost of goods manufactured statement data. Determine the amounts of the missing items, identifying them by letter. \begin{tabular}{lllllc} Work in process inventory, December 1 & \(\$ 2,000\) & & \(\$ 12,000\) & (e) \\ Total manufacturing costs incurred during December & 14,000 & & (c) & & 70,000 \\\ Total manufacturing costs & (a) & & \(\$ 140,000\) & & \(\$ 76,000\) \\ Work in process inventory, December 31 & \(\frac{3,000}{\underline{\phantom{xx}}}\) & & 30,000 & & (f) \\\ Cost of goods manufactured & (b) & & (d) & \(\$ 62,000\) \\ \hline \hline \end{tabular}

The following information is available for O'Neal Manufacturing Company for the month ending January 31, 2010: \(\begin{array}{lr}\text { Cost of direct materials used in production } & \$ 132,000 \\ \text { Direct labor } & 158,000 \\ \text { Work in process inventory, January 1 } & 60,000 \\ \text { Work in process inventory, January 31 } & 80,000 \\ \text { Total factory overhead } & 72,000\end{array}\) Determine O'Neal's cost of goods manufactured for the month ended January 31,2010 .

The following information is available for the first month of operations of Zahorik Company, a manufacturer of mechanical pencils: \(\begin{array}{lr}\text { Sales } & \$ 360,000 \\ \text { Gross profit } & 210,000 \\ \text { Cost of goods manufactured } & 180,000 \\ \text { Indirect labor } & 78,000 \\ \text { Factory depreciation } & 12,000 \\\ \text { Materials purchased } & 111,000 \\ \text { Total manufacturing costs for the period } & 207,000 \\ \text { Materials inventory } & 15,000\end{array}\) Using the above information, determine the following missing amounts: a. Cost of goods sold b. Finished goods inventory c. Direct materials cost d. Direct labor cost e. Work in process inventory