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Chapter 16: Q2TI_5 (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.

10.Salary of the factory maintenance supervisor

Short Answer

Expert verified

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

Step by step solution

01

Definition of manufacturing overhead

The manufacturing overhead is defined as the cost incurred by the business which includes all the indirect costs.

02

Identification of costs

The salary of the factory maintenance supervisor is the product cost as it involves the production of goods.

It is a manufacturing overhead cost as it is an indirect cost.

It is the conversion cost.

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Most popular questions from this chapter

Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:

e. Cost of chemicals to treat the paper.

Match the term with the correct definition.

1. A philosophy designed to integrate all organizational areas in order to provide customers with superior products and services while meeting organizational objectives. Requires improving quality and eliminating defects and waste.

2. Use of the Internet for business functions such as sales and customer service. Enables companies to reach customers around the world.

3. Evaluating a company’s performance by its economic, social, and environmental impact.

4. Software system that integrates all of a company’s functions, departments, and data into a single system.

5. A system in which a company produces products just when they are needed to satisfy needs. Suppliers deliver materials when they are needed to begin production, and finished units are completed at the right time for delivery to customers.

a. ERP b. JIT c. E-commerce d. TQM e. Triple bottom line

Identifying ethical standards

The Institute of Management Accountants’ Statement of Ethical Professional Practice requires managerial accountants to meet standards regarding competence, confidentiality, integrity, and credibility. Consider the following situations. Which standard(s) is(are) violated in each situation?

b. You see others take home office supplies for personal use. As an intern, you do the same thing, assuming that this is a “perk.”

Preparing an income statement and calculating unit cost for a service company

The Glass Doctors repair chips in car windshields. The company incurred the following operating costs for the month of July 2018:

Salaries and wages \( 10,000

Windshield repair materials 4,100

Depreciation on truck 500

Depreciation on building and equipment 900

Supplies used 450

Utilities 4,550

The Glass Doctors earned \)25,000 in service revenues for the month of July by repairing 250 windshields. All costs shown are considered to be directly related to the repair service.

Requirements

1. Prepare an income statement for the month of July.

2. Compute the cost per unit of repairing one windshield, rounded to the nearest cent.

3. The manager of The Glass Doctors must keep unit operating cost below $80 per windshield in order to get his bonus. Did he meet the goal?

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?
See all solutions

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