Three categories of product costs

Running Head: ACCOUNTING 1

ACCOUNTING 8

Title: ACCOUNTING

Student’s Name:

Institution:

Chapter 2

Exercise 2-28

1. The tire costs incurred by Ford Motor Company

Product cost, variable, direct material

2. The sales commissions paid to the sales force of Dell Inc.

Period cost, Variable

3. Wood glue consumed in the manufacture of Thomasville furniture

Product cost, variable, direct material

4. Hourly wages of refinery security guards employed by ExxonMobil Corporation

Product cost, variable, manufacturing overhead

5. The salary of a financial vice president of Hewlett Packard

Period cost, Fixed

6. Advertising costs of Coca-Cola

Period costs, Fixed

7. Straight line depreciation on factory machinery of Boeing Corporation.

Product cost, fixed, manufacturing overhead

8. Wages of assembly line personnel of Whirlpool Corporation

Product cost, variable, direct labor

9. Delivery costs incurred by Ben & Jerry’s for a shipment of their ice cream to a grocery store

Period cost, variable

10. Newsprint consumed in printing The New York Times

Product cost, variable, direct material

11. Plant insurance costs in Texas instruments

Product cost, fixed, manufacturing overhead

12. LED costs incurred in light bulb manufacturing of GE Lighting.

Product cost, variable, direct material

Problem 2-37

1. Evaluate the costs just cited, and determine whether the associated dollar amounts would be found on the firm’s balance sheet, income statement, or schedule of cost of goods manufactured. (Note: in some cases, more than one answer will apply)

· Salaries of players on the Boston Red Sox- Cost-of- Goods Manufactured

· Year-end completed goods of Levi Strauss jeans- Balance Sheet

· Executive compensation costs at Home Depot: -Balance Sheet and Income Statement

· Advertising costs for Sony- Income Statement

· Costs incurred during the period to insure a Ford plant against fire and floodlosses- Income Statement

· Current year's depreciation on a Carnival Cruise Line ship- Income Statement/Balance Sheet

· The cost of printer ink and paper used during the period by Shutterfly-Balance Sheet

· Assembly-line wage cost incurred at a Kona bicycle plant- Income Statement

· Year-end production in process at Lenovo Computer manufacturers- Cost-of- GoodsManufactured

· The cost of products sold to customers of a Target store- The cost of products sold

· The cost of products sold to distributors of carpet manufacturer Shaw Floors- income statement

2. What major assets will normally be insignificant for service enterprises and relatively substantial for retailers, wholesalers and manufacturers? Briefly discuss.

Inventory is the asset which differs in the businesses. However, the service businesses in the case do not carry an inventory. On the other hand, the wholesalers and the retailers always stock inventory which can be considerable in a way. Moreover, the manufacturers carry an inventory which is subdivided into three categories such as finished goods, work in process and raw materials.

3. Briefly explain the major differences between income statements of service enterprises versus those of retailers, wholesalers and manufacturers.

The similarities in the inventory are that the inventories are carried out for the purposes of making sales by the business. As far as the differences are concerned, the manufacturing firms are made to produce their goods while the retailers are made to purchase merchandise inventory

Problem 2-45

Cape Cod short shop manufactures T-shirts and decorates them with custom designs for retail sale on the premises. Several costs incurred by the company are listed below. For each cost, indicate which of the following classifications best describe the cost. More than one classification may apply to the same cost item.

Cost classifications

a. Variable

b. Fixed

c. Period

d. Product

e. Administrative

f. Selling

g. Manufacturing

h. Research and development

i. Direct material

j. Direct labor

k. Manufacturing overhead

Cost items

1. Cost of fabric used in T-shirt- Direct material

2. Wages of shirt makers- direct labor

3. Cost of new sign in front of retail T-shirt shop- direct labor

4. Wages of the employee who repair the firm’s sewing machines- direct labor

5. Cost of electricity used in the sewing department- variable

6. Wages of T-shirts designers and painters- direct labor

7. Wages of sales personnel- direct labor

8. Depreciation on sewing machines- Selling

9. Rent on the building. Part of the building’s first floor is used to make and paint T-shirts. Part of it is used for the retail sales shop. The second floor is used for administrative offices and storage of raw material and finished goods- period

10. Cost of daily advertisements in local media- Period and fixed

11. Wages of designers who experiment with new fabrics, paints and T-shirt designs- direct labor

12. Cost of hiring a pilot to fly along the beach pulling a banner advertising the shop- Period and fixed

13. Salary of the owner’s secretary- Period and fixed

14. Cost of repairing the gas furnace- Period, variable

15. Cost of insurance for the production employee- Product, fixed, manufacturing overhead

References

Spiceland, D., THOMAS, W., Nelson, M., TAN, P. H. N., Low, B., & LOW, K. Y. (2018). Intermediate accounting.

Duska, R. F., Duska, B. S., & Kury, K. W. (2018). Accounting ethics. Wiley-Blackwell.

Hoque, Z. (2018). Methodological issues in accounting research. Spiramus Press Ltd.