1-3 MyAccountingLab Homework: Chapters 1 and 2-Harriet Creyer

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1. 2. Student: Harriet Creyer Date: 12/15/22 Instructor: Lori White, Harish Maurya, Anita Maskar Course: ACC-311-R2992 Cost Accounting 22EW2 Assignment: 1-3 MyAccountingLab Homework: Chapters 1 and 2 1: More Info Dell Computer incurs the following costs: (Click the icon to view the costs.) 1 Requirement Classify each of the cost items ( a-h ) into one of the business functions of the value chain. Value Chain Business Function a. Utility costs for the plant assembling the Latitude computer line of products Production Value Chain Business Function b. Distribution costs for shipping the Latitude line of products to a retail chain Distribution Value Chain Business Function c. Payment to David Newbury Designs for design of the XPS 2-in-1 laptop Design Value Chain Business Function d. Salary of computer scientist working on the next generation of servers Research and Development Value Chain Business Function e. Cost of Dell employees' visit to a major customer to demonstrate Dell's products Customer Service or Marketing Value Chain Business Function f. Purchase of competitors' products for testing against potential Dell products Design or Research and Development Value Chain Business Function g. Payment to business magazine for running Dell advertisements Marketing Value Chain Business Function h. Cost of cartridges purchased from outside supplier to be used with Dell printers Production a. Utility costs for the plant assembling the Latitude computer line of products b. Distribution costs for shipping the Latitude line of products to a retail chain c. Payment to David Newbury Designs for design of the XPS 2-in-1 laptop d. Salary of computer scientist working on the next generation of servers e. Cost of Dell employees' visit to a major customer to demonstrate Dell's products f. Purchase of competitors' products for testing against potential Dell products g. Payment to business magazine for running Dell advertisements h. Cost of cartridges purchased from outside supplier to be used with Dell printers Consider the following series of independent situations in which a firm is about to make a strategic decision. (Click the icon to view the decisions.) 2 Requirements 1. For each decision, state whether the company is following a cost leadership or a product differentiation strategy. 2. For each decision, select what information the management accountant can provide about the source of competitive advantage for these firms.

Requirement 1. For each decision, state whether the company is following a cost leadership or a product differentiation strategy. a. Phones is about to decide whether to launch production and sale of a cell phone with standard features. Julian cost leadership b. Airlines is investigating market demand for a unique design for first-class seating in the form of cabins on its route from Los Angeles to Honolulu. Western product differentiation strategy c. Coverings is developing window shades that will let light into a room and reduce glare based on the outside brightness. There are no such shades currently on the market. Brandon product differentiation strategy d. Brands, a manufacturer of breakfast cereal, is developing a line of generic bagged cereals to be sold to a national discount chain. Bledsoe cost leadership Requirement 2. For each decision, select what information the management accountant can provide about the source of competitive advantage for these firms. a. For Phones decision to launch production and sale of a cell phone with standard features, management accountants can provide the following information: (Complete all input fields.) Julian Cost to manufacture and sell the cell phone Sensitivity of target customers to price and quality The production capacity of Julian Phones and its competitors Productivity, efficiency, and cost advantages relative to competition Prices of competitive cell phones How the market for cell phones with standard features is growing b. For Airlines investigating market demand for a unique design for first-class seating in the form of cabins on its route from Los Angeles to Honolulu, management accountants can provide the following information: (Complete all input fields.) Western Financial comparison of added first class seats to lost coach seats Premium price that passengers would be willing to pay for first-class service Market demand for first-class service from Los Angeles to Honolulu The cost of any additional staffing and amenities necessary for first-class service Cost of modifying planes or purchasing new planes to accommodate for the additional first- class seating c. For Coverings development of window shades that will let light into a room and reduce glare based on the outside brightness, management accountants can provide the following information: (Complete all input fields.) Brandon Prices of regular window shades The production capacity needed to manufacture the window shades Cost of producing the new window shades Premium price that customers would be willing to pay for the window shades d. For Brands to develop a line of generic bagged cereals to be sold to a national discount chain, management accountants can provide the following information: (Complete all input fields.) Bledsoe Cost to manufacture, package, and sell new bagged cereals Productivity, efficiency, and cost advantages relative to competition Price of competitive low-priced breakfast cereal Sensitivity of target customers to price and quality The production capacity of Bledsoe to produce the new cereals Cash needed to manufacture, package, and sell new bagged cereal Market demand for bagged cereals

2: More Info Decisions a. Phones is about to decide whether to launch production and sale of a cell phone with standard features. Julian b. Airlines is investigating market demand for a unique design for first-class seating in the form of cabins on its route from Los Angeles to Honolulu. Western c. Coverings is developing window shades that will let light into a room and reduce glare based on the outside brightness. There are no such shades currently on the market. Brandon d. Brands, a manufacturer of breakfast cereal, is developing a line of generic bagged cereals to be sold to a national discount chain. Bledsoe YOU ANSWERED: cost leadership product differentiation strategy Cash needed to modify or purchase planes and market new concept Premium price that passengers would be willing to pay for first-class service Market demand for first-class service from Los Angeles to Honolulu The cost of any additional sta ﬃ ng and amenities necessary for first-class service Cost of modifying planes or purchasing new planes to accommodate for the additional first-class seating The exact cost to manufacture and sell the competitors shades The production capacity needed to manufacture the window shades Cost of producing the new window shades Premium price that customers would be willing to pay for the window shades

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3. 4. Essential College Supplies ( ) is a store on the campus on a large Midwestern university. The store has both an apparel section (t-shirts with the school logo) and a convenience section. reports revenues for the apparel section separately from the convenience section. ECS ECS Requirement Classify each cost item ( A-H ) as follows: a. Direct or indirect (D or I) costs of the total number of t-shirts sold. b. Variable or fixed (V or F) costs of how the total costs of the apparel section change as the total number of t-shirts sold changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of t-shirts sold.) Requirement a. Classify each cost item ( A-H ) as direct or indirect (D or I) costs of the total number of t-shirts sold. Cost Item D or I A. Annual fee for licensing the school logo D B. Cost of store manager's salary I C. Costs of t-shirts purchased for sale to customers D D. Subscription to College Apparel Trends magazine D E. Leasing of computer software used for financial budgeting at the ECS store I F. Cost of coffee provided free to all customers of the ECS store I G. Cost of cleaning the store every night after closing I H. Freight-in costs of t-shirts purchased by ECS D Requirement b. Classify each cost item ( A-H ) as variable or fixed (V or F) costs of how the total costs of the apparel section change as the total number of t-shirts sold changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of t-shirts sold.) Cost Item V or F A. Annual fee for licensing the school logo F B. Cost of store manager's salary F C. Costs of t-shirts purchased for sale to customers V D. Subscription to College Apparel Trends magazine F E. Leasing of computer software used for financial budgeting at the ECS store F F. Cost of coffee provided free to all customers of the ECS store V G. Cost of cleaning the store every night after closing F H. Freight-in costs of t-shirts purchased by ECS V Motors specializes in producing one specialty vehicle. It is called Surfer and is styled to easily fit multiple surfboards in its back area and top-mounted storage racks. has the following manufacturing costs: Combined Combined (Click the icon to view the manufacturing costs.) 3 currently produces vehicles per month. Combined 200 Requirements 1. What is the variable manufacturing cost per vehicle? What is the fixed manufacturing cost per month? 2. Plot a graph for the variable manufacturing costs and a second for the fixed manufacturing costs per month. How does the concept of relevant range relate to your graphs? Explain. 3. What is the total manufacturing cost of each vehicle if vehicles are produced each month? vehicles? How do you explain the difference in the manufacturing cost per unit? 75 200 Requirement 1. What is the variable manufacturing cost per vehicle? What is the fixed manufacturing cost per month? The variable cost per vehicle is 3,100 $ . Determine the fixed manufacturing cost per month at each of the following capacity levels.

0-500 tires per month 387,000 $ 501-1,000 tires per month 412,000 $ more than 1,000 tires per month 557,000 $ (After you hit continue, the screen may take you below the beginning of the next step. If so, scroll back up to the top of the step.) Requirement 2. Plot a graph for the variable manufacturing costs and a second for the fixed manufacturing costs per month. How does the concept of relevant range relate to your graphs? Explain. 4 Begin by plotting the variable manufacturing cost. Plot your graph using the following number of vehicles: 0 and vehicles. (Enlarge the graph and use the line button displayed below to draw the graph.) 240 04080120 160 200 240 280 320 360 400 440 480 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 $550,000 $600,000 $650,000 $700,000 $750,000 $800,000 $850,000 $900,000 $950,000 $0 $950,000 Vehicles Produced Total Variable Costs Select the graph that shows the fixed manufacturing costs. (Enlarge each graph before selecting your answer.) A. 0 500 1,0001,500 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 Tires Used in Production Total Fixed Costs B. 0 500 1,0001,500 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 Tires Used in Production Total Fixed Costs C. 0 5 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 Tires Us Total Fixed Costs How does the concept of relevant range relate to your graphs? Explain. The concept of relevant range relevant for both graphs. The question place restrictions on the unit variable costs. The relevant range for the total fixed costs is from 0 to 500 tires; 501 to 1000 tires; more than 1000 tires, and so on. is potentially does not Within these ranges, the total fixed costs do not change in total. Requirement 3. What is the total manufacturing cost of each vehicle if vehicles are produced each month? vehicles? How do you explain the difference in the manufacturing cost per unit? 75 200 Calculate the manufacturing cost of each vehicle (a) if vehicles are produced each month and (b) if vehicles are produced each month. (Round your answers to the nearest cent.) 75 200 Vehicles Fixed unit Variable unit Total unit per month cost per vehicle cost per vehicle cost per vehicle (a) 75 5,160.00 $ 3,100.00 $ 8,260.00 $ (b) 200 2,060.00 $ 3,100.00 $ 5,160.00 $ Explain the difference in the unit-cost figures. The difference is caused by the increment of being spread over an increment of vehicles and the fixed cost $170,000 125

5. 3: Data Table 4: Definition per unit is fixed cost lower. Plant management costs, per year $1,596,000 Cost of leasing equipment, per year $2,328,000 Workers' wages, per Surfer vehicle produced $900 Direct materials costs: Steel, per Surfer; Tires, per tire, each Surfer takes 5 tires (one spare) $1,700 $100 City license, which is charged monthly based on the number of tires used in production: 0-500 tires 60,000 $ 501-1,000 tires 85,000 $ more than 1,000 tires 230,000 $ When plotting the line, be sure to double-check that the points on the line are correct after they are drawn. If you need to adjust the points, click once on the point then use your arrow keys to move the point to the correct (x,y) coordinates. Each of the following cost items pertains to one of these companies: Home Depot (a merchandising-sector company), Apple (a manufacturing-sector company), and Rent a Nanny (a service-sector company): (Click the icon to view the cost items.) 5 Read the requirements . 6 Requirement 1. Distinguish between manufacturing-, merchandising-, and service- companies. companies provide services or intangible products to their customers for example, legal advice or audits. Service-sector — companies purchase materials and components and convert them into different finished goods. Manufacturing-sector companies purchase and then sell tangible products without changing their basic form. Merchandising-sector Requirement 2. Distinguish between inventoriable costs and period costs. Select whether each statement is explaining an inventoriable cost or a period cost. are all costs in the income statement other than cost of goods sold. Period costs are all costs of a product that are regarded as an asset when they are incurred and then become cost of goods sold when the product is sold. Inventoriable costs for a manufacturing company are included in work-in-process and finished goods inventory (they are "inventoried") to build up the costs of creating these assets. Inventoriable costs are treated as expenses at the time they are incurred because they are presumed not to benefit future periods (or because there is not sufficient evidence to conclude that such benefit exists). Expensing these costs immediately best matches expenses to revenues. Period costs Requirement 3. Classify each of the cost items ( A-I ) as an inventoriable cost or a period cost. Explain your answers. a. Lumber at Home Depot is a(n) since the lumber is inventoriable cost an asset (inventory) held to sale to customers. The cost of lumber becomes part of when it is sold to customers. cost of goods sold b. Electricity in an Apple manufacturing plant is a(n) . It is of the product being produced. inventoriable cost an indirect cost c. Depreciation on the shelving at Home Depot is a(n) . It is , not . period cost a cost of selling their products a cost of the products

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6. 5: More Info 6: Requirements d. Mileage for Rent a Nanny is a(n) since period cost it has no inventory. e. Wages for quality testing for Apple products during production is a(n) . It is , not . inventoriable cost a cost of producing the product a cost of selling their product f. Salaries of the advertising personnel for Rent a Nanny is a(n) since period cost it has no inventory. g. Lunches provided by Rent a Nanny is a(n) since period cost it has no inventory. h. Wages of the employees at Home Depot is a(n) since it is period cost presumed not to benefit future periods. i. Shipping costs for Apple to send products to retail stores is a(n) . It is , not . period cost a cost of selling the product a cost of making the product A. Cost of lumber and plumbing supplies available for sale at Home Depot B. Electricity used to provide lighting for assembly-line workers at an Apple manufacturing plant C. Depreciation on store shelving in Home Depot D. Mileage paid to nannies traveling to clients for Rent a Nanny E. Wages for personnel responsible for quality testing of the Apple products during the assembly process F. Salaries of Rent a Nanny marketing personnel planning local-newspaper advertising campaigns G. Lunches provided to the nannies for Rent a Nanny H. Salaries of employees at Apple retail stores I. Shipping costs for Apple to transport products to retail stores 1. Distinguish between manufacturing-, merchandising-, and service-sector companies. 2. Distinguish between inventoriable costs and period costs. 3. Classify each of the cost items (A–I) as an inventoriable cost or a period cost. Explain your answers. 1. Distinguish between manufacturing-, merchandising-, and service-sector companies. 2. Distinguish between inventoriable costs and period costs. 3. Classify each of the cost items ( A-I ) as an inventoriable cost or a period cost. Explain your answers. YOU ANSWERED: a direct cost The following data are for Department Store. The account balances (in thousands) are for . Matthew 2020 (Click the icon to view the account balances.) 7 Requirements 1. Compute (a) the cost of goods purchased and (b) the cost of goods sold. 2. Prepare the income statement for . 2020 Requirement 1. Compute (a) the cost of goods purchased and (b) the cost of goods sold. (a) Calculate the cost of goods purchased by completing the schedule.

7: Data Table Matthew Department Store Schedule of Cost of Goods Purchased For the Year Ended December 31, 2020 (in thousands) Purchases 153,000 $ Add: Transportation-in 9,000 162,000 Deduct: Purchase discounts 7,000 $ Purchase return and allowances 3,000 10,000 Cost of goods purchased 152,000 $ (b) Next calculate the cost of goods sold by completing the following schedule. Matthew Department Store Schedule of Cost of Goods Sold For the Year Ended December 31, 2020 (in thousands) Beginning merchandise inventory 1/1/2020 29,000 $ Cost of goods purchased 152,000 Cost of goods available for sale 181,000 Ending merchandise inventory 12/31/2020 38,000 Cost of goods sold 143,000 $ Requirement 2. Prepare the income statement for . 2020 Matthew Department Store Income Statement For the Year Ended December 31, 2020 (in thousands) Revenues 320,000 $ Cost of goods sold 143,000 Gross margin 177,000 Operating costs General and administrative expenses 41,000 $ Marketing, distribution, and customer-service costs 36,000 Miscellaneous costs 4,000 Utilities 16,000 Total operating costs 97,000 Operating income 80,000 $

7. Marketing, distribution, and customer-service costs 36,000 $ Merchandise inventory, January 1, 2020 29,000 Utilities 16,000 General and administrative costs 41,000 Merchandise inventory, December 31, 2020 38,000 Purchases 153,000 Miscellaneous costs 4,000 Transportation-in 9,000 Purchase returns and allowances 3,000 Purchase discounts 7,000 Revenues 320,000 selected data for are presented here (in millions): Salamone Heaters' October 2020 (Click the icon to view the data.) 8 Read the requirements . 9 Requirement 1. Calculate the cost of direct materials inventory, 31, . October 2020 Direct materials inventory 10/1/2020 75 $ Direct materials purchased 370 Direct materials available for production 445 Direct materials used (350) Direct materials inventory 10/31/2020 95 $ Requirement 2. Calculate the fixed manufacturing overhead costs for . October 2020 The fixed manufacturing overhead costs for October 2020 are 225 $ . Requirement 3. Calculate the direct manufacturing labor costs for . October 2020 Total manufacturing costs incurred 1,620 $ Less: Direct materials used (350) Total manufacturing overhead costs (470) Direct manufacturing labor costs for October 800 $ Requirement 4. Calculate the cost of work-in-process inventory, 31, . October 2020 Work-in-process inventory 10/1/2020 235 $ Total manufacturing costs incurred 1,620 Work-in-process available for production 1,855 Cost of goods manufactured (1,660) Work-in-process inventory 10/31/2020 195 $ Requirement 5. Calculate the cost of finished goods available for sale in . October 2020 Finished goods inventory 10/1/2020 150 $ Cost of goods manufactured 1,660 Finished goods available for sale in October 1,810 $

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8. 8: Data Table 9: Requirements Requirement 6. Calculate the cost of finished goods inventory, 31, . October 2020 Finished goods available for sale in October 1,810 $ Cost of goods sold (1,700) Finished goods inventory 10/31/2020 110 $ Direct materials inventory, October 1, 2020 75 $ Direct materials purchased 370 Direct materials used 350 Total manufacturing overhead costs 470 Variable manufacturing overhead costs 245 Total manufacturing costs incurred during October 2020 1,620 Work-in-process inventory, October 1, 2020 235 Cost of goods manufactured 1,660 Finished goods inventory, October 1, 2020 150 Cost of goods sold 1,700 Calculate the following costs: 1. Direct materials inventory, 31, October 2020 2. Fixed manufacturing overhead costs for October 2020 3. Direct manufacturing labor costs for October 2020 4. Work-in-process inventory, 31, October 2020 5. Cost of finished goods available for sale in October 2020 6. Finished goods inventory, 31, October 2020 Consider the following account balances (in thousands) for the Company: Benesch (Click the icon to view the account balances.) 10 Requirements 1. Prepare a schedule for the cost of goods manufactured for . 2020 2. Revenues for were million. Prepare the income statement for . 2020 $295 2020 Requirement 1. Prepare a schedule for the cost of goods manufactured for . 2020 Begin by preparing the schedule of cost of goods manufactured (in thousands). Start with the direct materials and labor costs, then indirect manufacturing costs, and complete the schedule by calculating cost of goods manufactured. Benesch Company Schedule of Cost of Goods Manufactured For the Year Ended December 31, 2020 (in thousands) Direct materials: Beginning inventory, Jan. 1, 2020 25,000 $ Purchases of direct materials 73,000 Cost of direct materials available for use 98,000 Ending inventory, Dec. 31, 2020 27,000 Direct materials used 71,000 $ Direct manufacturing labor 28,000

10: Data Table Indirect manufacturing costs: Depreciation—plant, building, and equipment 11,000 $ Indirect manufacturing labor 18,000 Plant insurance 6,000 Repairs and maintenance—plant 5,000 Total indirect manufacturing costs 40,000 Manufacturing costs incurred during 2020 139,000 Beginning work-in-process inventory, Jan. 1, 2020 24,000 Total manufacturing costs to account for 163,000 Ending work-in-process inventory, Dec. 31, 2020 22,000 Cost of goods manufactured 141,000 $ Requirement 2. Revenues for were million. Prepare the income statement for . (Use parentheses or a minus sign for operating losses.) 2020 $295 2020 Benesch Company Income Statement For the Year Ended December 31, 2020 (in thousands) Revenues 295,000 $ Cost of goods sold: Beginning finished goods, Jan. 1, 2020 14,000 $ Cost of goods manufactured 141,000 Cost of goods available for sale 155,000 Ending finished goods, Dec. 31, 2020 20,000 Cost of goods sold 135,000 Gross margin 160,000 Operating costs: Marketing, distribution, and customer-service costs 114,000 General and administrative costs 32,000 Total operating costs 146,000 Operating income/(loss) 14,000 $

9. Benesch Company Beginning of 2020 End of 2020 Direct materials inventory 25,000 27,000 Work-in-process inventory 24,000 22,000 Finished-goods inventory 14,000 20,000 Purchases of direct materials 73,000 Direct manufacturing labor 28,000 Indirect manufacturing labor 18,000 Plant insurance 6,000 Depreciation—plant, building, and equipment 11,000 Repairs and maintenance—plant 5,000 Marketing, distribution, and customer-service costs 114,000 General and administrative costs 32,000 YOU ANSWERED: Manufacturing costs incurred during 2020 139000 Beginning work-in-process inventory, Jan. 1, 2020 24000 Total manufacturing costs to account for 163000 Ending work-in-process inventory, Dec. 31, 2020 22000 Cost of goods manufactured 145000 's manufacturing costing system uses a three-part classification of direct materials, direct manufacturing labor, and manufacturing overhead costs. The following items (in millions) pertain to Corporation: Chester Chester (Click the icon to view the items.) (Click the icon to view the partial schedule of cost of goods manufactured.) 11 12 Read the requirements . 13 Requirement 1. Calculate total prime costs and total conversion costs. Total prime costs 143 $ million Total conversion costs 108 $ million Requirement 2. Calculate total inventoriable costs and period costs. Total inventoriable costs 212 $ million Period costs 90 $ million Requirement 3. Design costs and R&D costs are not considered product costs for financial statement purposes. When might some of these costs be regarded as product costs? Give an example. A. Contracting with government agencies. For example, if the Department of Energy negotiated a project with a contractor and the design costs and R&D costs are not closely related to delivering products under the contract. B. Preparing financial statements for external reporting under Generally Accepted Accounting Principles (GAAP). Under GAAP, design costs and R&D costs can be assigned to inventories although internal management reports must exclude these nonmanufacturing costs. C. Contracting with government agencies. For example, if the Air Force negotiated to contract with a company to build a new type of supersonic fighter plane, design costs and R&D costs may be included in the contract as product costs. D. None of the above. Design costs and R&D costs can never be regarded as product costs. Requirement 4. Suppose that both the direct materials used and the depreciation on plant and equipment are related to the manufacture of million units of product. Determine the unit cost for the direct materials assigned to those units and the unit cost for depreciation on plant and equipment. Assume that yearly depreciation is computed on a straight-line basis. 4

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11: Data Table Begin by determining the formula used to calculate the unit cost for direct materials. Direct materials used ÷ Units = Unit cost Now calculate the unit cost for direct materials and the unit cost for depreciation on plant and equipment. Use the same logic that you used in determining the formula for direct materials unit cost, when you calculate the depreciation unit cost. (Enter unit cost in dollars. Round your answers to the nearest cent.) Direct materials used unit cost 26.00 $ Depreciation unit cost 2.00 $ Requirement 5. Assume that the implied cost-behavior patterns in requirement 4 persist. That is, direct material costs behave as a variable cost and depreciation on plant and equipment behaves as a fixed cost. Repeat the computations in requirement 4, assuming that the costs are being predicted for the manufacture of million units of product. Determine the effect on total costs. 5 Repeat the computations in requirement 4, assuming that the costs are being predicted for the manufacture of million units of product. (Enter unit cost in dollars. Round your answers to the nearest cent.) 5 Direct materials used unit cost 26.00 $ Depreciation unit cost 1.60 $ Determine the effect on total costs. Total direct materials would and total depreciation costs would . increase remain unchanged Requirement 6. Assume that depreciation on the equipment (but not the plant) is computed based on the number of units produced because the equipment deteriorates with units produced. The depreciation rate on equipment is per unit. Calculate the depreciation on equipment assuming (a) million units of product are produced and (b) million units of product are produced. $4.00 4 5 Begin by determining the formula used to calculate the depreciation on equipment. Depreciation rate on equipment × Units = Depreciation on equipment Calculate the depreciation on equipment assuming: (Do not round intermediary calculations. Enter answers in millions rounded to two decimal places, $X.XX million.) (a) 4 million units of product are produced, the depreciation would be 16 $ million. (b) 5 million units of product are produced, the depreciation would then be 20 $ million. For Specific Date Work-in-process inventory, January 1, 2020 16 $ Direct materials inventory, December 31, 2020 9 Finished-goods inventory, December 31, 2020 14 Accounts payable, December 31, 2020 24 Accounts receivable, January 1, 2020 55 Work-in-process inventory, December 31, 2020 5 Finished-goods inventory, January 1, 2020 44 Accounts receivable, December 31, 2020 38 Accounts payable, January 1, 2020 45 Direct materials inventory, January 1, 2020 33

12: Reference 13: Requirements For Year 2020 Plant utilities 3 $ Indirect manufacturing labor 29 Depreciation—plant and equipment 8 Revenues 360 Miscellaneous manufacturing overhead 19 Marketing, distribution, and customer-service costs 90 Direct materials purchased 80 Direct manufacturing labor 39 Plant supplies used 6 Property taxes on plant 4 Partial Schedule of Cost of Goods Manufactured (in millions) Direct materials used 104 $ Direct manufacturing labor costs 39 Total indirect manufacturing overhead costs 69 Manufacturing costs incurred during 2020 212 Add: Beginning work-in-process inventory, Jan. 1, 2020 16 Total manufacturing costs to account for 228 Less: Ending work-in-process inventory, Dec. 31, 2020 5 Cost of goods manfactured 223 $ 1. Calculate total prime costs and total conversion costs. 2. Calculate total inventoriable costs and period costs. 3. Design costs and R&D costs are not considered product costs for financial statement purposes. When might some of these costs be regarded as product costs? Give an example. 4. Suppose that both the direct materials used and the depreciation on plant and equipment are related to the manufacture of million units of product. Determine the unit cost for the direct materials assigned to those units and the unit cost for depreciation on plant and equipment. Assume that yearly depreciation is computed on a straight-line basis. 4 5. Assume that the implied cost-behavior patterns in requirement 4 persist. That is, direct material costs behave as a variable cost and depreciation on plant and equipment behaves as a fixed cost. Repeat the computations in requirement 4, assuming that the costs are being predicted for the manufacture of million units of product. Determine the effect on total costs. 5 6. Assume that depreciation on the equipment (but not the plant) is computed based on the number of units produced because the equipment deteriorates with units produced. The depreciation rate on equipment is per unit. Calculate the depreciation on equipment assuming (a) million units of product are produced and (b) million units of product are produced. $4.00 4 5 YOU ANSWERED: Direct materials used unit cost 21 Depreciation unit cost 2