Chapter 002, Managerial Accounting and Cost Concepts

| October 3, 2018

136. Sid Freeman has developed a new electronic device that he has
decided to produce and market. The production facility will be in a nearby
industrial park which Sid will rent for $4,000 per month. Utilities will cost
about $500 per month. He will use his personal computer, which he purchased for
$2,000 last year, to monitor the production process. The computer will become
obsolete before it wears out from use. The computer will be depreciated at the
rate of $1,000 per year. He will rent production equipment at a monthly cost of
$8,000. Sid estimates the material cost per finished unit of product to be $50,
and the labor cost to be $10. He will hire workers, and spend his time
promoting the product. To do

this he will quit his job
which pays $4,500 per month. Advertising will cost $2,000 per month. Sid will
not draw a salary from the new company until it gets well established.

Required:

Complete the chart below by placing an “X” under each
heading that helps to identify the cost involved. There can be “Xs”
placed under more than one heading for a single cost; e.g., a cost might be a
sunk cost, an overhead cost, and a product cost. There would be an
“X” placed under each of these headings opposite the cost.
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*Between the alternatives of producing and not producing the
device.

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Chapter 002, Managerial Accounting and Cost Concepts

137. The following data (in
thousands of dollars) have been taken from the accounting records of Larsen
Corporation for the just completed year.
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Required:

a.
Prepare a Schedule of Cost
of Goods Manufactured in good form.

b. Compute the Cost of Goods Sold.

c. Using data from your answers above as needed, prepare an Income
Statement in good form.

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Chapter 002, Managerial Accounting and Cost Concepts

138. Beauchesne Corporation,
a manufacturing company, has provided the following data for the month of May:
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Raw materials purchased during May totaled $69,000 and the cost of
goods manufactured totaled $146,000.

Required:

a.
What was the cost of raw
materials used in production during May? Show your work.

b.
What was the cost of goods
sold for May? Show your work.

139. During the month of January, Fisher Corporation, a
manufacturing company, purchased raw materials costing $76,000. The cost of
goods manufactured for the month was $129,000. The beginning balance in the raw
materials account was $26,000 and the ending balance was $21,000. The beginning
balance in the finished goods account was $52,000 and the ending balance was
$35,000.

Required:

a.
What was the cost of raw
materials used in production during January? Show your work.

b.
What was the cost of goods
sold for January? Show your work.

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Chapter 002, Managerial Accounting and Cost Concepts

140. Joe Ringworth, factory supervisor at Winger Enterprises, had
been attending night classes to earn a degree in business. He was particularly
puzzled by what one of his accounting professors had said in class the previous
evening. The professor, who knew that Joe worked as a factory supervisor, had
said that some of Joe’s salary could end up on the company’s balance sheet at
the end of the month. This didn’t make any sense to Joe since he gets the
salary, not the company.

Required:

Explain to Joe why some of
his salary could end up on the company’s balance sheet at the end of the month.

141. A partial listing of costs incurred at Rust Corporation
during August appears below:
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Required:

a.
What is the total amount of
product cost listed above? Show your work.

b.
What is the total amount of
period cost listed above? Show your work.

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Chapter 002, Managerial Accounting and Cost Concepts

142. Machowski Corporation
has provided the following partial listing of costs incurred during November:
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Required:

a.
What is the total amount of
product cost listed above? Show your work.

b.
What is the total amount of
period cost listed above? Show your work.

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