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Exam 1 Homework Assignment Solutions

Exam 1 Homework Assignment Solutions - Exercise22(10minutes...

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Exam 1 Homework Assignment Solutions Exercise 2-2  (10 minutes) 1. The cost of a hard drive installed in a computer: direct materials. 2. The cost of advertising in the  Puget Sound Computer User  newspaper:  selling. 3. The wages of employees who assemble computers from components:  direct labor. 4. Sales commissions paid to the company’s salespeople: selling. 5. The wages of the assembly shop’s supervisor: manufacturing overhead. 6. The wages of the company’s accountant: administrative. 7. Depreciation on equipment used to test assembled computers before  release to customers: manufacturing overhead. 8. Rent on the facility in the industrial park: a combination of manufacturing  overhead, selling, and administrative. The rent would most likely be  prorated on the basis of the amount of space occupied by  manufacturing, selling, and administrative operations. Exercise 2-4  (15 minutes) CyberGames Income Statement Sales ........................................................ $1,450,000 Cost of goods sold: Beginning merchandise inventory ......... $  240,000
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Add: Purchases .....................................       950,000     Goods available for sale ........................ 1,190,000 Deduct: Ending merchandise inventory.       170,000         1,020,000     Gross margin ............................................ 430,000 Selling and administrative expenses: Selling expense ..................................... 210,000 Administrative expense .........................       180,000             390,000     Net operating income ............................... $            40,000     Exercise 2-5  (15 minutes) Lompac Products Schedule of Cost of Goods Manufactured Direct materials: Beginning raw materials inventory ........... $ 60,000 Add: Purchases of raw materials .............   690,000     Raw materials available for use ............... 750,000 Deduct: Ending raw materials inventory...       45,000     Raw materials used in production ............ $  705,000 Direct labor ................................................. 135,000
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Manufacturing overhead .............................         370,000     Total manufacturing costs ........................... 1,210,000 Add: Beginning work in process inventory..         120,000     1,330,000 Deduct: Ending work in process inventory..         130,00     0 Cost of goods manufactured ...................... $1,200,000 Exercise 2-6  (15 minutes) A few of these costs may generate debate. For example, some may argue  that the cost of advertising a rock concert is a variable cost because the  number of people who come to the rock concert depends on the amount of  advertising. However, one can argue that if the price is within reason, any  rock concert in New York City will be sold out and the function of  advertising is simply to let people know the event will be happening.  Moreover, while advertising may affect the number of persons who  ultimately buy tickets, the causation is in one direction. If more people buy  tickets, the advertising costs don’t go up.
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