Question

The following calendar year-end information is taken from the December 31, 2015, adjusted trial balance Problem 18-2B and other records of Best Bikes. Classifying costs C2 C3 Advertising expense $ 20,250 Miscellaneous production costs 8.440 Depreciation expense-Office equipment.... 8,440 Office salaries expense 70,875 Depreciation expense-Selling equipment ... 10,125 Raw materials purchases 894,375 Depreciation expense-Factory equipment ... 35,400 Rent expense-Office space 23,625 Factory supervision 121.500 Rent expense-Selling space 27,000 Factory supplies used 6,060 Rent expense- Factory building .. 93,500 Factory utilities 37,500 Maintenance expense-Factory equipment ... 30.375 Direct labor. 562.500 Sales... 4,942.625 Indirect labor 59.000 Sales salaries expense 295.300 Required 1. Identify and classify each of the costs above as either a product or period cost. 2. Classify cach of the product costs as either direct materials, direct labor, or factory overhead. 3. Classify each of the period costs as either selling or general and administrative expenses. Using the information from Problem 18-2B and the inventory information for Best Bikes below, complete Problem 18-3B the requirements below. Assume income tax expense is $136,700 for the year. Schedule of cost of goods manufactured and income statement: Inventories Raw materials, December 31, 2014 analysis of inventories $ 40,375 Raw materials, December 31, 2015 P2 A1 70,430 Work in process, December 31, 2014 12,500 Work in process, December 31, 2015 14,100 Finished goods, December 31, 2014... 177,200 Finished goods, December 31, 2015. 141.750 Required 1. Prepare the company's 2015 schedule of cost of goods manufactured. Check (1) Cost of goods 2. Prepare the company's 2015 income statement that reports separate categories for (a) selling expenses manufactured, $1,815,995 and (b) general and administrative expenses. Analysis Component 3. Compute the (a) inventory turnover, defined as cost of goods sold divided by average inventory, and (b) days' sales in inventory, defined as 365 times ending inventory divided by cost of goods sold, for both its raw materials inventory and its finished goods inventory. (To compute turnover and days' sales in inventory for raw materials, use raw materials used rather than cost of goods sold.) Discuss some possible reasons for differences between these ratios for the two types of inventories. Round answers to one decimal place.

Answer 1