ch2 - SolutiontoChapter2...

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Solution to Chapter 2 E2‐24,2‐30,P2‐40, 2‐37 E2‐32,28 (1‐3 parts) P2‐43,2‐54 EXERCISE 2-24 (20 MINUTES) 1. Advertising costs: Period cost, fixed 2. Straight-line depreciation: Product cost, fixed, manufacturing overhead 3. Wages of assembly-line personnel: Product cost, variable, direct labor 4. Delivery costs on customer shipments: Period cost, variable 5. Newsprint consumed: Product cost, variable, direct material 6. Plant insurance: Product cost, fixed, manufacturing overhead 7. Glass costs: Product cost, variable, direct material 8. Tire costs: Product cost, variable, direct material 9. Sales commissions: Period cost, variable 10. Wood glue: Product cost, variable, either direct material or manufacturing overhead (i.e., indirect material) depending on how significant the cost is 11. Wages of security guards: Product cost, variable, manufacturing overhead 12. Salary of financial vice-president: Period cost, fixed EXERCISE 2-30 (15 MINUTES) Number of Muffler Replacements 600 700 800 Total costs: Fixed costs . .................................................................. (a) $56,000 $56,000 (b) $56,000 Variable costs. .............................................................. (c) 24,000 28,000 (d) 32,000 Total costs. ............................................................. (e) $80,000 $84,000 (f) $88,000 Cost per muffler replacement: Fixed cost . .................................................................... (g) $ 93.33 * (h) $ 80 (i) $ 70 Variable cost. ................................................................ (j) 40.00 (k) 40 (l) 40 Total cost per muffler replacement. ..................... (m) $133.33 (n) $120 (o) $110 *Rounded.
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EXERCISE 2-30 (CONTINUED) Explanatory Notes: (a) Total fixed costs do not vary with activity. (c) Variable cost per replacement = $28,000/700 = $40 Total variable cost for 600 replacements = $40 × 600 = $24,000 (g) Fixed cost per replacement = $56,000/600 = $93.33 (rounded) (j ) Variable cost per replacement = $24,000/600 = $40 PROBLEM 2-40 (10 MINUTES) Cost Item Number Product Cost or Period Cost 1. Product 2. Period* 3. Product 4. Period* 5. Product 6. Period* 7. Product 8. Product 9. Product *Service industry and retail firms typically treat all costs as operating expenses which are period expenses. Such firms do not inventory costs. PROBLEM 2-37 (25 MINUTES) 1. a. Total prime costs: Direct material. ................................................................................... $ 1,050,000 Direct labor: Wages . ............................................................................................ 242,500 Fringe benefits. .............................................................................. 47,500 Total prime costs. .............................................................................. $ 1,340,000 b. Total manufacturing overhead: Depreciation on factory building. ..................................................... $ 57,500 Indirect labor: wages. ........................................................................ 70,000
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ch2 - SolutiontoChapter2...

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