UCF-ACG2071 Ch. 2 Bulding Blocks

UCF-ACG2071 Ch. 2 Bulding Blocks - Answers to Chapter 2...

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Answers to Chapter 2 Examples Example #1 X-Treme is a merchandiser , because it has a single inventory account. Y-Not? is a service company, because it has no inventory. Zesto is a manufacturer , because it has three kinds of inventory: Raw Materials Inventory, Work in Process Inventory, and Finished Goods Inventory. Example #2 Current assets: Cash $ 15,000 Accounts receivable 80,000 Inventories: Raw materials inventory $10,000 Work in process inventory 40,000 Finished goods inventory 63,000 Total inventories 113,000 Prepaid expenses 6,000 Total current assets $214,000 This company must be a manufacturer , because it has three kinds of inventory: raw materials, work in process, and finished goods.
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Example #3 R & D Design Purchases Marketing Distribution Customer Service Research on selling satellite radio service $ 400 Purchases of merchandise $30,000 Rearranging store layout $750 Newspaper advertisements $5,000 Depreciation expense on delivery trucks $1,000 Payment to consultant for advice on location of new store 2,500 Freight-in 3,000 Salespersons’ salaries 4,000 Customer complaint department $800 Total $2,900 $750 $33,000 $9,000 $1,000 $800 The total inventoriable product costs are the $30,000 of purchases plus the $3,000 freight-in = $33,000 .
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Example #4 Total inventoriable product costs: Direct materials……………………………………… $ 67 Direct labor…………………………………………… 10 Manufacturing overhead…………………………… 65 Total inventoriable product cost…………………. $142 The total prime cost is: Direct materials……………………………………… $ 67 Direct labor…………………………………………… 10 $ 77 The total conversion cost is: Direct labor…………………………………………… $ 10 Manufacturing overhead…………………………… 65 $ 75 Production R & D Design Direct Materials Direct Labor Manufacturing Overhead Marketing Distribution Customer Service Salaries of telephone salespeople $ 5 Depreciation on plant and equipment $65 Exterior case for phone $ 6 Scientists’ salaries $12 Delivery expense $ 7 Transmitters 61 Rearrange production process $ 2 Assembly-line workers’ wages $10 Technical support hotline $ 3 1-800 (toll-free) line for customer orders - 1 Total costs $12 $ 2 $67 $10 $65 $ 6 $ 7 $ 3
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Example #5 Cost Direct or Indirect cost? a. Salary of the manager of the dealership Indirect b. Sales commissions Direct c. Cost of new cars Direct d. Cost of car detailing Direct e. Salary of the receptionist for the dealership Indirect f. Depreciation on the building Indirect g. Advertising in the local newspaper
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