EXERCISE $2-9$ Product Cost Flows; Product versus Period Costs $[$L$02,$ LO$3]$

Running Reward began operations on February $1.$ The company produces a GPS app de$-$

signed for runners. Due to a successful marketing plan, over $3,000$ runners signed up for the

app during the first month. Once runners download and sign up for the app, they can upload

their favourite running routes and access favourite routes of other runners in locations

throughout Canada and the US$.$ Premium members can choose from a pre$-$set list of running

goals within the app, and each time a goal is achieved the runner can pay $$5$ to Running

Rewards to have a collectible medallion shipped to their home. The company purchases basic

medallions, all the same size and design, from a local manufacturer. Running Rewards then

uses a laser$-$cutting machine to inscribe these medallions in$-$house with different slogans and

illustrations depending on the goal the member has achieved. On February $15,$ the company

purchased $1,000$ basic medallions from the local manufacturer at a cost of $$2\mathrm{.}00$ each.

During February, $200$ medallions were taken from the raw materials inventory. Of these,

$20$ were left uninscribed and were set aside for the sales manager to give out as free adver$-$

tising at a trade show later in the year. The remaining medallions were moved into produc$-$

tion during February where a laser$-$cutting machine inscribed them to reflect the goals

predicted to be the most popular in the app. Laser$-$cutting adds $$0\mathrm{.}50$ to the cost of a

finished medallion. Of the medallions moved to the inscription stage in February, $75\%$ were

completed and transferred from work in process to finished goods; no work had been done

on the remaining $25\%.$ Of the medallions completed during the month, $60\%$ were shipped to

customers.

Required:

Determine the cost of medallions that would be in each of the following accounts at

February $28$:

a$.$ Raw Materials

b$.$ Work in Process

c$.$ Finished Goods

d$.$ Cost of Goods Sold

e$.$ Advertising Expense

Specify whether each of the above accounts would appear on the balance sheet or on

the income statement at February $28.$