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Chapter 16: Q1TI_5 (page 865)
Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):
5. Summary reports prepared quarterly or annually.
The correct answer to this question is financial accounting
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Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:
i. Life insurance on the CEO.
Selected data for three companies are given below. All inventory amounts are ending balances and all amounts are in millions.
Company A Company B Company C
Cash \( 6 Wages Expense \) 12 Administrative Expenses $ 4
Net Sales Revenue 48 Equipment 32 Cash 25
Finished Goods Inventory 10 Accounts Receivable 8 Net Sales Revenue 75
Cost of Goods Sold 23 Service Revenue 65 Selling Expenses 8
Selling Expenses 4 Cash 34 Merchandise Inventory 12
Equipment 67 Rent Expense 12 Equipment 55
Work-in-Process Inventory 9 Accounts Receivable 19
Accounts Receivable 14 Cost of Goods Sold 25
Cost of Goods Manufactured 23
Administrative Expenses 7
Raw Materials Inventory 6
Using the data on the previous page, calculate total current assets for each company
How does a service company calculate unit cost per service?
Winnebago Industries, Inc. is a leading manufacturer of recreational vehicles (RVs), including motorized and towable products. The company designs, develops, manufactures, and markets RVs as well as supporting products and services. The RVs are sold to consumers through a dealer network. On the August 29, 2015, balance sheet, Winnebago reported inventory of approximately \(112 million. Of this amount, approximately \)12 million, about 11%, was Finished Goods Inventory (Notes to Consolidated Financial Statements, Note 3). Suppose Winnebago motor homes have an average sales price of $96,000 and cost of goods sold is 89% of sales. Thor Industries, Inc., a major competitor, has an average cost of goods sold of 86% of sales. For year ending August 29, 2015, Winnebago sold 9,097 motor homes (Form 10-K, Item 1 Business).
Requirements
1. Why would the Finished Goods Inventory be such a relatively small portion of total inventory?
2. What is the average cost of goods sold (in dollars) for a Winnebago motor home? What is the average gross profit?
3. If Winnebago could reduce production costs so that the average cost of goods sold is equal to their competitor’s average cost of goods sold, how much more profit would Winnebago earn on each motor home sold?
4. Based on 2015 sales, how much would operating income increase if the company reduced the average cost of goods sold to equal their competitor’s average cost of goods sold?
5. How could managers at Winnebago use managerial accounting to reduce costs and increase profits?
How is cost of goods manufactured calculated?
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