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Chapter 16: Q16-5SE-d (page 886)
Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:
d. Salaries of the company’s top executives.
The salaries of company’s top executives will come under the period cost.
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How does a service company calculate unit cost per service?
Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:
a. Salaries of scientists studying ways to speed forest growth.
Preparing an income statement and calculating unit cost for a merchandising company
Dillon Young owns Dillon’s Pets, a small retail shop selling pet supplies. On December 31, 2018, the accounting records for Dillon’s Pets showed the following:
Merchandise Inventory on December 31, 2018 $ 10,500
Merchandise Inventory on January 1, 2018 16,000
Net Sales Revenue 56,000
Utilities Expense for the shop 3,200
Rent for the shop 4,100
Sales Commissions 2,750
Purchases of Merchandise Inventory 25,000
Requirements
1. Prepare an income statement for Dillon’s Pets for the year ended December 31, 2018.
2. Dillon’s Pets sold 5,550 units. Determine the unit cost of the merchandise sold, rounded to the nearest cent.
Distinguishing between direct and indirect costs Granger Cards is a manufacturer of greeting cards. Classify its costs by matching the costs to the terms.
a. Artists’ wages
b. Wages of materials warehouse workers
c. Paper
d. Depreciation on manufacturing equipment
e. Manufacturing plant manager’s salary
f. Property taxes on manufacturing plant
g. Glue for envelopes
Making ethical decisions
Sue Peters is the controller at Vroom, a car dealership. Dale Miller recently has been hired as the bookkeeper. Dale wanted to attend a class in Excel spreadsheets, so Sue temporarily took over Dale’s duties, including overseeing a fund used for gas purchases before test drives. Sue found a shortage in the fund and confronted Dale when he returned to work. Dale admitted that he occasionally uses the fund to pay for his own gas. Sue estimated the shortage at $450.
Requirements 2. Would you change your answer if Sue Peters was the one recently hired as controller and Dale Miller was a well-liked, long time employee who indicated he always eventually repaid the fund?
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