CHAPTER 1—PROBLEMS: SET B P1-1B Agler Company specializes in manufacturing motorcycle helmets The company has enough orders to keep the factory production at 1,000 motorcycle helmets per month Agler’s monthly manufacturing cost and other expense data are shown on the next page Maintenance costs on factory building Factory manager’s salary Advertising for helmets Sales commissions Depreciation on factory building Rent on factory equipment Insurance on factory building Raw materials (plastic, polystyrene, etc.) Utility costs for factory Supplies for general office Wages for assembly line workers Depreciation on office equipment Miscellaneous materials (glue, thread, etc.) Product Costs Direct Materials Direct Labor (LO 3, 4), AP $ 1,500 5,500 8,000 4,000 700 6,000 3,000 25,000 800 200 54,000 500 2,000 Instructions (a) Prepare an answer sheet with the following column headings Cost Item Classify manufacturing costs into different categories and compute the unit cost Manufacturing Overhead Period Costs (a) DM $25,000 DL $54,000 MO $19,500 PC $12,700 Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings Total the dollar amounts in each of the columns (b) Compute the cost to produce one motorcycle helmet P1-2B Elliott Company, a manufacturer of tennis rackets, started production in November 2013 For the preceding five years, Elliott had been a retailer of sports equipment After a thorough survey of tennis racket markets, Elliott decided to turn its retail store into a tennis racket factory Raw materials cost for a tennis racket will total $23 per racket Workers on the production lines are paid on average $15 per hour A racket usually takes two hours to complete In addition, the rent on the equipment used to produce rackets amounts to $1,300 per month Indirect materials cost $3 per racket A supervisor was hired to oversee production; her monthly salary is $3,500 Janitorial costs are $1,400 monthly Advertising costs for the rackets will be $8,000 per month The factory building depreciation expense is $8,400 per year Property taxes on the factory building will be $9,600 per year Instructions (a) Prepare an answer sheet with the following column headings Product Costs Cost Item Direct Materials Direct Labor Manufacturing Overhead Period Costs Classify manufacturing costs into different categories and compute the unit cost (LO 3, 4), AP (a) DM $57,500 DL $75,000 MO $15,200 PC $ 8,000 Assuming that Elliott manufactures, on average, 2,500 tennis rackets per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings Total the dollar amounts in each of the columns (b) Compute the cost to produce one racket P-1 P-2 Problems: Set B Indicate the missing amount of different cost items, and prepare a condensed cost of goods manufactured schedule, an income statement, and a partial balance sheet (LO 5, 6, 7), AN (b) Beg WIP $1,000 (c) Current assets $15,600 Prepare a cost of goods manufactured schedule, a partial income statement, and a partial balance sheet (LO 5, 6, 7), AP (a) CGM $324,900 (b) Gross profit $110,400 (c) Current assets $155,000 P1-3B Incomplete manufacturing costs, expenses, and selling data for two different cases are as follows Case Direct materials used Direct labor Manufacturing overhead Total manufacturing costs Beginning work in process inventory Ending work in process inventory Sales revenue Sales discounts Cost of goods manufactured Beginning finished goods inventory Goods available for sale Cost of goods sold Ending finished goods inventory Gross profit Operating expenses Net income A B $ 6,300 3,000 6,000 (a) 1,000 (b) 22,500 1,500 15,800 $ (c) 18,300 (d) 1,200 (e) 2,700 (f) $ (g) 4,000 5,000 16,000 (h) 2,000 (i) 1,200 20,000 $ 5,000 (j) (k) 2,500 6,000 (l) 2,200 Instructions (a) Indicate the missing amount for each letter (b) Prepare a condensed cost of goods manufactured schedule for Case A (c) Prepare an income statement and the current assets section of the balance sheet for Case A Assume that in Case A the other items in the current assets section are as follows: Cash $3,000, Receivables (net) $10,000, Raw Materials $700, and Prepaid Expenses $200 P1-4B The following data were taken from the records of Moxie Company for the year ended December 31, 2014 Raw Materials Inventory 1/1/14 Raw Materials Inventory 12/31/14 Finished Goods Inventory 1/1/14 Finished Goods Inventory 12/31/14 Work in Process Inventory 1/1/14 Work in Process Inventory 12/31/14 Direct Labor Indirect Labor Accounts Receivable $ 47,000 44,200 85,000 57,800 9,500 8,000 145,100 18,100 27,000 Factory Insurance Factory Machinery Depreciation Factory Utilities Office Utilities Expense Sales Revenue Sales Discounts Plant Manager’s Salary Factory Property Taxes Factory Repairs Raw Materials Purchases Cash $ 7,400 7,700 12,900 8,600 465,000 2,500 60,000 6,100 800 62,500 18,000 Instructions (a) Prepare a cost of goods manufactured schedule (Assume all raw materials used were direct materials.) (b) Prepare an income statement through gross profit (c) Prepare the current assets section of the balance sheet at December 31 Problems: Set B P1-5B Ortiz Company is a manufacturer of toys Its controller resigned in August 2014 An inexperienced assistant accountant has prepared the following income statement for the month of August 2014 Sales revenue Less: Operating expenses Raw materials purchases Direct labor cost Advertising expense Selling and administrative salaries Rent on factory facilities Depreciation on sales equipment Depreciation on factory equipment Indirect labor cost Utilities expense Insurance expense Prepare a cost of goods manufactured schedule and a correct income statement (LO 5, 6), AN Ortiz Company Income Statement For the Month Ended August 31, 2014 $675,000 $220,000 160,000 75,000 70,000 60,000 50,000 35,000 20,000 10,000 5,000 Net loss 705,000 $ (30,000) Prior to August 2014, the company had been profitable every month The company’s president is concerned about the accuracy of the income statement As her friend, you have been asked to review the income statement and make necessary corrections After examining other manufacturing cost data, you have acquired additional information as follows Inventory balances at the beginning and end of August were: Raw materials Work in process Finished goods August August 31 $19,500 25,000 40,000 $35,000 21,000 52,000 Only 60% of the utilities expense and 70% of the insurance expense apply to factory operations; the remaining amounts should be charged to selling and administrative activities Instructions (a) Prepare a cost of goods manufactured schedule for August 2014 (b) Prepare a correct income statement for August 2014 P-3 (a) CGM $493,000 (b) NL $ (6,500)