chapter 2 - Chapter2 CostTerms,Concepts,andClassifications...

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Chapter 2 Cost Terms, Concepts, and Classifications Solutions to Questions 2-8 Yes, costs such as salaries and depreciation can end up as part of assets on the balance sheet if these are  manufacturing costs. Manufacturing costs are inventoried until the associated finished goods are sold. Thus, if some units  are still in inventory, such costs may be part of either Work in Process inventory or Finished Goods inventory at the end of  a period. 2-15 Direct labor cost  (34 hours  ×  $15 per hour) .......... $510 Manufacturing overhead cost  (6 hours  ×  $15 per hour) ............    90 Total wages earned ........................ $600 2-16 Direct labor cost  (45 hours  ×  $14 per hour) .......... $630 Manufacturing overhead cost  (5 hours  ×  $7 per hour) ..............    35 Total wages earned ........................ $665 2-19 Shifting the focus to prevention and away from appraisal is usually the most effective way to reduce total quality  costs. It is usually more effective to prevent defects than to attempt to fix them after they have occurred. 2-21 Most accounting systems do not track and accumulate the costs of quality. It is particularly difficult to get a feel for  the magnitude of quality costs since they are incurred in many departments throughout the organization
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Exercise 2-1  1. The wages of employees who build the sailboats: direct labor cost. 2. The cost of advertising in the local newspapers: marketing and selling cost. 3. The cost of an aluminum mast installed in a sailboat: direct materials cost. 4. The wages of the assembly shop’s supervisor: manufacturing overhead cost. 5. Rent on the boathouse: a combination of manufacturing overhead, administrative, and marketing  and selling cost. The rent would most likely be prorated on the basis of the amount of space  occupied by manufacturing, administrative, and marketing operations. 6. The wages of the company’s bookkeeper: administrative cost. 7. Sales commissions paid to the company’s salespeople: marketing and selling cost. 8. Depreciation on power tools: manufacturing overhead cost.
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Exercise 2-2   Product  (Inventoriable)  Cost Period  Cost 1. The cost of the memory chips used in a radar set .... X 2. Factory heating costs ................................................ X 3. Factory equipment maintenance costs ..................... X 4. Training costs for new administrative employees ..... X 5. The cost of the solder that is used in assembling  the radar sets ......................................................... X 6. The travel costs of the company’s salespersons ...... X 7. Wages and salaries of factory security personnel .... X 8. The cost of air-conditioning  executive offices ..................................................... X 9. Wages and salaries in the department that handles  billing customers .................................................... X 10. Depreciation on the equipment in the fitness room  used by factory workers ......................................... X   11. Telephone expenses incurred by factory  management .......................................................... X 12. The costs of shipping completed radar sets to 
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