Chapter 3 Solutions

Chapter 3 Solutions - Chapter 3 Product Costing:...

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Chapter 3 Product Costing: Manufacturing Processes, Cost Terminology, and Cost Flows Multiple Choice 1. (LO 1 – Characteristics of traditional manufacturing environment) Answer: C 2. (LO 1 – Characteristics of traditional manufacturing environment) Answer: A 3. (LO 2 – JIT environment) Answer: C 4. (LO 2 – Lean manufacturing) Answer: F 5. (LO 2 – Lean production and JIT) Answer: D 6. (LO 2 – Manufacturing cells) Answer: B 7. (LO 3 – Manufacturing costs: indirect labor) Answer: B Indirect labor includes $100,000 for quality control supervisors and $18,000 for the factory janitor. 8. (LO 3 – Manufacturing costs) Answer: C 3 - 1
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Solutions Manual 9. (LO 3 – Product cost per unit) Answer: B Product costs include $31,000 of direct materials used, $18,000 of direct labor, and $14,000 of manufacturing overhead ($12,000 of rent and $2,000 of equipment depreciation in the factory). The product cost per unit is $1.80 ($63,000/35,000 units). 10. (LO 4 and 5 – Basic cost flows, income statement) Answer: C Sales (30,000 units x $3.50 per unit) $105,000 Less: Cost of goods sold (30,000 units x $1.80 per unit) 54,000 Gross Margin $ 51,000 Less: Marketing and administrative costs 43,250 Net income $ 7,750 11. (LO 4 – Basic cost flows: cost of goods manufactured) Answer: C 12. (LO 4 – Basic cost flows) Answer: A 13. (LO2 and 4 – Cost flows in a JIT environment) Answer: A With no WIP or finished goods inventory, the cost of goods sold is equal to the cost of goods manufactured (the sum of direct materials used, direct labor and factory overhead). Sales $800,000 - Cost of goods sold 420,000 Gross Margin 380,000 - Selling and Administrative expenses 120,000 Net operating Income $260,000 3 - 2
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14. (LO 4 – Basic cost flows: raw materials used) Answer: B Beginning inventory of raw materials $110,000 Plus: Raw materials purchased 121,000 Raw materials available for use 231,000 Less: Ending inventory of raw materials (115,000) Raw materials used in production $116,000 15. (LO 4 and 5 – Basic cost flows: cost of goods manufactured) Answer: A Beginning inventory of work-in-process $ 55,000 Plus: Total manufacturing costs 199,000 ($116,000 + $30,000 + $53,000) Subtotal 254,000 Less: Ending inventory work-in-process (58,000) Cost of goods manufactured $196,000 16. (LO 4 and 5 – Cost of goods sold) Answer: D Beginning inventory of finished goods $ 41,000 Plus: Cost of goods manufactured 196,000 Cost of goods available for sale 237,000 Less: Ending inventory of finished goods (37,000) Cost of goods sold $200,000 17. (LO 5 – Product vs. period costs) Answer: B Concept Questions 18. (LO1 – Inventory accounts – raw materials, WIP and finished goods) Raw materials inventory is the inventory of materials needed for the manufacturing process but not yet put into production. Work-in-process inventory is the inventory of unfinished (partially finished) products. Finished goods inventory is the inventory of goods that have been completed and are waiting to be sold. 3 - 3
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This note was uploaded on 03/18/2008 for the course ACIS 2116 taught by Professor Cmeasterwood during the Spring '08 term at Virginia Tech.

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Chapter 3 Solutions - Chapter 3 Product Costing:...

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