Question

Question 2:

Following are a number of costs that are incurred in a variety of organizations.

Cost Item	Cost Behaviour
The costs of advertising a U2 rock concert in Vancouver.
Depreciation on the Hard Rock Café building in Ottawa.
The electrical costs of running a roller coaster at West Edmonton Mall.
Property taxes on your local cinema.
The costs of synthetic materials used to make Reebok running shoes.
The costs of shipping Apple iPods to retail stores.
The cost of leasing a CT-scan diagnostic machine at the American Hospital in Paris.

Required:

Classify each cost as variable or fixed with respect to the number of units sold or services provided by the organization.

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Question 3:

Kelowna Plumbing Supplies shows the following data related to its December 31, 2020 fiscal year:

Raw materials inventory, January 1, 2020	$5,000
Raw materials inventory, December 31, 2020	8,000
Work in process inventory, January 1, 2020	23,000
Work in process inventory, December 31, 2020	21,000
Finished goods inventory, January 1, 2020	16,000
Finished goods inventory, December 31, 2020	10,000
Advertising	56,000
Factory supervisor's salary	42,000
Company president's salary	85,000
Property taxes - factory	25,000
Depreciation - factory	35,000
Factory maintenance	7,000
Sales commissions	32,000
Depreciation - office	2,000
Utilities expense - factory	23,000
Utilities expense - office	11000
Purchases of raw materials	148,000
Direct labour	160,000

Required:

Based on the information above, prepare a Schedule of Cost of Goods Manufactured.

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Question 4:

Outdoor Supplies manufactures gear for hunting and camping. The company shows the following data related to its December 31, 2020 fiscal year end:

Raw materials inventory, January 1, 2020	$14,000
Raw materials inventory, December 31, 2020	17,000
Work in process inventory, January 1, 2020	31,000
Work in process inventory, December 31, 2020	20,000
Finished goods inventory, January 1, 2020	84,000
Finished goods inventory, December 31, 2020	68,000
Direct labour	275,000
Factory supervisor's wages	64,000
Company president's salary	120,000
Purchases of raw materials	425,000
Depreciation (60% factory, 40% office)	240,000
Property taxes (80% factory, 20% office)	20,000
Sales commissions	100,000
Repairs and maintenance (100% relate to the factory)	15,000
Utilities expense (90% factory, 10% office)	30,000
Sales revenue	2,050,000
Advertising	215,000

Required:

Based on the information above:

1. Prepare a schedule of cost of goods manufactured.
2. Prepare a schedule of cost of goods sold.
3. Prepare an income statement (assuming a tax rate of 20%).

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Question 5:

Classify the following costs as either product (inventoriable) costs or period (non-inventoriable) costs in a manufacturing company:

	Costs	Product/Period
1.	Depreciation on salespeople’s cars.
2.	Rent on equipment used in the factory.
3.	Lubricants used for maintenance of factory equipment.
4.	Salaries of finished goods warehouse personnel.
5.	Soap and paper towels used by factory workers.
6.	Sales supervisors’ salaries.
7.	Property taxes on the factory building.
8.	Materials used in boxing units of finished product for shipment overseas. (Units are not normally boxed.)
9.	Advertising outlays.
10.	Workers’ compensation insurance on factory employees.
11.	Depreciation on chairs and tables in the administrative boardroom.
12.	Salary of the production quality supervisor for the company.
13.	Depreciation on a Learjet used by the company’s executives.
14.	Rent on rooms at a Florida resort for a manufacturing conference.
15.	Attractively designed box for packaging breakfast cereal.

Answer 1

Ans 2.

Cost item	Cost Behaviour
Cost of advertising U2 rock concert in Vancouver	Variable Cost
Depreciation on Hard Rock cafe Building in Ottawa	Fixed cost
The electrical costs of running a roller coaster at West Edmonton Mall.	VariableCost
Property taxes on your local cinema.	Fixed Cost
The costs of synthetic materials used to make Reebok running shoes.	VariableCost
The costs of shipping Apple iPods to retail stores.	VariableCost
The cost of leasing a CT-scan diagnostic machine at the American Hospital in Paris.	Fixed Cost

Ans 3.

Shedule of cost of goods manufactured

Kelowna plumbing supplies

For the year ended December 31 , 2020

	$	$
Direct Materials :
Raw materials Inventory as on 1sr Jan 2020	5000
Add : Raw materials purchased during the year	148000
Raw Material Availabel	153000
Less : Raw material as on 31 December , 2020	(8000)
Raw Materials Transferred to production		145000
Direct Labour		160000
Factory Overhead :
Factory Supervisor salary	42000
Property tax - factory	25000
Depriciation - factory	35000
Factory Maintenance	7000
Utilities Expense - Factory	23000
Total Factory Overheads		132000
Add : Work in progress as on 1st Jan 2020	23000
Less : Work in Progress as on 31st December 2020	(21000)	2000
Cost of Goods Manufactured		439000

Ans 4.

Schedule of cost of goods manufactured

Outdoor Supplies

For the year ended 31st december 2020

	$	$
Direct Materials :
Raw materials Inventory as on 1sr Jan 2020	14000
Add : Raw materials purchased during the year	425000
Raw Material Availabel	429000
Less : Raw material as on 31 December , 2020	(17000)
Raw Materials Transferred to production		412000
Direct Labour		275000
Factory Overhead :
Factory Supervisor Wages	64000
Property tax - factory	16000
Depriciation - factory	144000
Factory Maintenance	15000
Utilities Expense - Factory	27000
Total Factory Overheads		266000
Add : Work in progress as on 1st Jan 2020	31000
Less : Work in Progress as on 31st December 2020	(20000)	11000
Cost of Goods Manufactured		964000

Schedule of cost of goods sold

Outdoor supplies

For the year ended 31st december, 2020

Opening inventory of Finished goods	84000
Add : Cost of goods manufactured during the year	964000
Cost of goods availabel for sale	1048000
Less : Closing inventory of finished Goods	68000
Cost of goods sold	980000

Income statement

Outdoor supplies

For the year ended 31sr December 2020

Sales revenue		2050000
Less : Cost of goods sold		(980000)
Gross Margin		1070000
Operating Expenses
Company President Salary	120000
Depreciation	96000
Property Tax	4000
Sales Commission	100000
Utilities expenses	3000
Advertising Expenses	215000
Operating Expenses		(438000)
Operating Income		632000
Less : Income Tax @ 20%		(126400)
Net Income		505600

Ans 5.  

Costs	Product/Period
1.	Depreciation on salespeople’s cars.	Period Costs
2.	Rent on equipment used in the factory.	Product cost
3.	Lubricants used for maintenance of factory equipment.	Product costs
4.	Salaries of finished goods warehouse personnel.	Period costs
5.	Soap and paper towels used by factory workers.	Period costs
6.	Sales supervisors’ salaries.	Period costs
7.	Property taxes on the factory building.	Product costs
8.	Materials used in boxing units of finished product for shipment overseas. (Units are not normally boxed.)	Period costs
9.	Advertising outlays.	Period costs
10.	Workers’ compensation insurance on factory employees.	Product costs
11.	Depreciation on chairs and tables in the administrative boardroom.	Period costs
12.	Salary of the production quality supervisor for the company.	Product costs
13.	Depreciation on a Learjet used by the company’s executives.	Period costs
14.	Rent on rooms at a Florida resort for a manufacturing conference.	Period costs
15.	Attractively designed box for packaging breakfast cereal. Product costs