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Chapter 16: 13RQ (page 885)
What are prime costs? Conversion costs?
Prime cost is the combination of direct cost and conversion cost is the combination of direct labor and manufacturing overhead.
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Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost.
6. Wages of assembly line workers for a factory
Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):
2. Helps in planning and controlling operations.
Preparing a schedule of cost of goods manufactured Wilson Corp., a lamp manufacturer, provided the following information for the year ended December 31, 2018:
Balances: Beginning Ending
Direct Materials \( 59,000 \) 23,000
Work-in-Process Inventory 109,000 62,000
Finished Goods Inventory 41,000 44,000
Other information:
Depreciation, plant building and equipment $ 16,000
Direct materials purchases 151,000
Insurance on plant 24,000
Sales salaries 47,000
Repairs and maintenance—plant 10,000
Indirect labor 39,000
Direct labor 121,000
Administrative expenses 60,000
Requirements 1. Use the information to prepare a schedule of the cost of goods manufactured.
Comparing managerial accounting and financial accounting
For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA):
d. Reports must follow Generally Accepted Accounting Principles (GAAP).
Determining the flow of costs through a manufacturer’s inventory accounts
True Fit Shoe Company makes loafers. During the most recent year, True Fit incurred total manufacturing costs of \(21,900,000. Of this amount, \)2,600,000 was direct materials used and \(14,800,000 was direct labor. Beginning balances for the year were Direct Materials, \)700,000; Work-in-Process Inventory, \(1,500,000; and Finished Goods Inventory, \)1,100,000. At the end of the year, balances were Direct Materials, \(800,000; Work-in-Process Inventory, \)2,000,000; and Finished Goods Inventory, $1,080,000.
Requirements Analyze the inventory accounts to determine:
1. Cost of direct materials purchased during the year.
2. Cost of goods manufactured for the year.
3. Cost of goods sold for the year.
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