Are all costs in the income statement other than cost

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Process Technology Troubleshooting
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Chapter 4 / Exercise 1
Process Technology Troubleshooting
Thomas
Expert Verified
are all costs in the income statement other than cost of goods sold. These costs are treated as expenses of the period in which they are incurred because they are presumed not to benefit future periods (or because there is not sufficient evidence to conclude that such benefit exists). Expensing these costs immediately best matches expenses to revenues. 3. (a) Mineral water purchased for resale by Safeway—inventoriable cost of a merchandising company. It becomes part of cost of goods sold when the mineral water is sold. (b) Electricity used at GE assembly plant—inventoriable cost of a manufacturing company. It is part of the manufacturing overhead that is included in the manufacturing cost of a refrigerator finished good. (c) Depreciation on AOL's computer equipment—period cost of a service company. AOL has no inventory of goods for sale and, hence, no inventoriable cost. (d) Electricity for Safeway's store aisles—period cost of a merchandising company. It is a cost that benefits the current period and is not traceable to goods purchased for resale. (e) Depreciation on GE's assembly testing equipment—inventoriable cost of a manufacturing company. It is part of the manufacturing overhead that is included in the manufacturing cost of a refrigerator finished good. (f) Salaries of Safeway's marketing personnel—period cost of a merchandising company. It is a cost that is not traceable to goods purchased for resale. It is presumed not to benefit future periods (or at least not to have sufficiently reliable evidence to estimate such future benefits). (g) Water consumed by AOL's engineers—period cost of a service company. AOL has no inventory of goods for sale and, hence, no inventoriable cost. (h) Salaries of AOL's marketing personnel—period cost of a service company. AOL has no inventory of goods for sale and, hence, no inventoriable cost. -  10
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Process Technology Troubleshooting
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Chapter 4 / Exercise 1
Process Technology Troubleshooting
Thomas
Expert Verified
2- 30 (20 min.) Computing cost of goods purchased and cost of goods sold. (a) Marvin Department Store Schedule of Cost of Goods Purchased For the Year Ended December 31, 2004 (in thousands) Purchases $155,000 Add transportation-in 7,000 162,000 Deduct: Purchase return and allowances $4,000 Purchase discounts 6,000 10,000 Cost of goods purchased $152,000 (b) Marvin Department Store Schedule of Cost of Goods Sold For the Year Ended December 31, 2004 (in thousands) Beginning merchandise inventory 1/1/2004 $ 27,000 Cost of goods purchased (above) 152,000 Cost of goods available for sale 179,000 Ending merchandise inventory 12/31/2004 34,000 Cost of goods sold $145,000 2 - 31 (30 - 40 min.) Cost of goods manufactured. 1. Mandelo Company Schedule of Cost of Goods Manufactured for the Year Ended December 31, 2004 (in thousands) Direct materials costs: Beginning inventory, Jan. 1, 2004 $22,000 Purchases of direct materials 75,000 Cost of direct materials available for use 97,000 Ending inventory, Dec. 31, 2004 26,000 Direct materials used $ 71,000 Direct manufacturing labor costs 25,000 Indirect manufacturing costs: Indirect manufacturing labor costs 15,000 Plant insurance 9,000 Depreciation––plant building and equipment 11,000 Repairs and maintenance––plant 4,000 39,000 Manufacturing costs incurred during 2004 135,000 Add beginning work - in - process inventory, Jan. 1, 2004 21,000 Total manufacturing costs to account for 156,000 Deduct ending work - in - process inventory, Dec. 31, 2004 20,000 -  11

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