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Chapter 16: Q2TI_3 (page 869)

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.

8. Property taxes on the factory

Short Answer

Expert verified

It is product cost, manufacturing overhead and it is a conversion cost.

Step by step solution

01

Definition of the property tax

The property tax is defined as the compulsory payment to the government on the property owned by some individual or legal entity.

02

Identification of costs

The property tax is considered as the product cost as it is associated with the production of goods.

It will be manufacturing overhead as it does not affect production directly. It is a conversion cost.

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Most popular questions from this chapter

Question:Calculating income and cost per unit for a merchandising company

Conway Brush Company sells standard hair brushes. The following information summarizes Conway’s operating activities for 2018:

Selling and Administrative Expenses $ 47,058

Purchases 85,800

Net Sales Revenue 151,800

Merchandise Inventory, January 1, 2018 7,920

Merchandise Inventory, December 31, 2018 11,748

Requirements

1. Calculate the operating income for 2018.

2. Conway sold 6,600 brushes in 2018. Compute the unit cost for one brush.

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.

Computing manufacturing overhead

Sunglasses Unlimited Company manufactures sunglasses. Following is a list of costs the company incurred during May. Use the list to calculate the total manufacturing overhead costs for the month.

Glue for frames $ 250

Depreciation on company cars used by sales force 4,000

Plant depreciation 7,500

Interest Expense 1,500

Lenses 52,000

Company president’s salary 24,500

Plant foreman’s salary 3,500

Plant janitor’s wages 1,300

Oil for manufacturing equipment 150

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.

How does a manufacturing company calculate unit product cost?
See all solutions

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