Managerial Accounting Questions

EXERCISE 1-1 Identifying Direct and Indirect Costs Northwest Hospitat is a full-service hospital that provides everything from major surgery and emernency room care to outpatient clinics. Required: For ench cost incurred at Nostlwest Hospital, indicate whether it would most likely be a direct cost or an indirect cost of the specified cost object fy placing an X in the appropriate column. EXERCISE 12 Classifying Manufacturing Costs The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its ansembly shop and tetail sales store are housed in a single facility in a Redinond, Washington. industrial park. Listed below are some of the costs that the company incurs. Required: For eacts cost, indicate whether if would most likely be classiffed as direct mareriats. direet labor, manufacturing overhead. selling. of an administrative cost. 1. The cost of a hard drive installed in a computer. 2. The cost of advertising in the Puget Sownd Comynufer Viser newspaper. 3. The wages of employees who assemble computers from components. 4. Sales commissions paid to the company's salespeopie. 5. The salary of the assembly shop's supervisor. 6. The salary of the company's accountant. 7. Depreciation on equipment used to test assembled computers before release to customers. 8. Rent on the facility in the industriat park. EXERCISE 13 Classifying Costs as Product or Period Costs \( 1 \lcm{1} \) LO1-3 Suppose that you have been aiven a summer job as a3 interu at tssac Aircauns, a company that aumufactures sophisticated spy carmeras for remote-coatrolled military reconaaissance aircaaft. The company, which is privately owned, hiss appronched a bnnk-for a toan to beip Fisance its growth. The bank requires finaneial statemeuts before approvine the loan. Requirod; Classify each cost listed trelow as either a product cost or a period cost for the jurpose of preparing financial statenuents for the bank. 1. Depreciation on salespersons' ears. 2. Reat on equpment used in the factory: 3. Lubricants used for machine maintenance. 4. Salaries of personuel who work in the finished goods warehouse: \$. Soap and paper towels used by faetory workers at the end of a shift. 6. Factory supervisors' salariesi, 7. Heat, water, and power consumed in the factory- 8. Materials used for bexing produets for shipment overseas, (thits are not normally boxed.) 9. Advertising costs. 10. Workers' compensation insurance for factory employees. 11. Depreciation on chairs and tabies in the factory lunchroom. 12. The wages of the receptionist in the administrative offices. 13. Cost of teasing the corporate jet used by the company's executives. 14. The cost of feriting rooms at a Florida resort for the anual sales conference. 15. The cost of packaging the compaay's product. EXERCISE 1-5 Differential. Sunk, and Opportunity Costs [ LO1-5 Northeast Hospital's Radiology Department is considering replacing an old inefficient X-ray machine with a state of the art digital Xray machine. The new machine woutd provide higher quality X-rays in less time and at a lower cost ner X ray. it would afso require less power and would use a color laser printer to produce easily readable X-ray images, Instead of imvesting the funds in the new X-ray machine, the Laboratory Dopartment is lobbying the hospital's management to buy a new DNA analyzer. Required: For eacl, of the items below. indicate by placing an X in the appropriate column whether it should be considered a differential cost, a sunk cost, or an opportunity cost in the decision to feplace the old X.fay machine with a new machine. If none of the categories apply for a particular item. leave all columns blank. EXERCISE 1-7 Direct and Indirect Costs () LO1-1 costs ber minit are as follows: Required: 1. Assume the coss object is units of production a. What is the rotal direct imanufactiritue cost incuried to make 20,000 units? 6. What is the total indirect manufacturing cost incurred to make 20,000 units? 2. Assume the cost object is the Masmnetaring Departiment and that ifs fotal output is 20,000 unins. a. How misefi total manufocturias sost is thectly traceable to the Mainufacturing Department? b. How manch total namufacturing cott is an indinct cost that canno be easily traced to the Mamufieturing Departumen? 3. Assume the cost object is the compang's varioes sales representatives. Furthermore assume that the company apen $50,000 of as total nxed settine expence on advertisine anht the remainder of the total fixed selling expeme comprised the flued jortion of the conmany's sales tepesentatives' congensation. a. When the conpany selfs 20,000 units, what is the total direct sellitig expense that can be readity uraced to indivitual sates repeesentatives? 6. When the conysany sells 20.000 units, What is the todal indirect seliag expense that cannot be reailing traced to individual sales representatives? 4. Are Kuibsin's administrative expenses always going to be treated as indfirect costs in its ingernal management iepotiv? EXERCISE 1-12 Product and Period Cost Flows The Devon Motor Company produces automobiles. On Aprit Ist the company had no beginning inventories and it purchased 8.000 batteries at a cost of $80 per battery. It withdrew 7,600 batteries from the storeroom during the month. Of these. 100 were used to replace batteries in cars being used by the company's traveling sales staff. The remaining 7,500 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90% were completed and transferred from work in process to finished goods. Of the cars completed during the month, 30s, were unsold at April 30 th. Required: 1. Determine the cost of batteries that would appear in eaeh of the following aceounts on Aprit 30 th. a. Raw Materials b. Work in Process e. Finished Goods d. Cost of Goods Sold e. Selling Expense EXERCISE 1-15 Traditional and Contribution Format Income Statements 9 LO1-6 (3. The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31: Roquired: 1. Prepare a traditional income statement for the quarter ended March 31 . 2. Prepare a contribution format income statement for the quarter ended Mareh 31. 3. What was the contribution margin per unit? EXERCISE 1-17 Classifying Variable and Fixed Costs and Product and Period Costs (T LO1-3. 1014 Below are listed various costs that are found in organizations. 1. Hamburger buns in a Wendy's restaurant, 2. Advertising by a dental office. 3. Apples processed and canned by Del Monte: 4. Shipping canned apples from a Del Monte plant to eustomers. 5. Insurance on a Bausch \& Lomb factory producing contact lenses. 6. Insurance on Nucor's corporate headguarters. 7. Salary of a supervisor overseeing production of printers at Ricoh. 8. Commissions paid to automobile salespersons: 9. Depreciation of factory lunclaom facilities at a General Electric plant. 10. Steering wheels instalted in Tesla electric vehicles. Required: Using the table shown below, deseripe each of the costs mentioned above in two ways. It terms of cost classifications for predictine cost behavior (column 1). indicate whether the cost is fixed or variable with respect to the nubber of units prodiced and fold. With respect to cost elassifications for preparing financial statements (column 2), indicate whether the item is a preduct cost or period cost (selling and administrative cost?. EXERCISE 1-1 Identifying Direct and Indirect Costs Northwest Hospitat is a full-service hospital that provides everything from major surgery and emernency room care to outpatient clinics. Required: For ench cost incurred at Nostlwest Hospital, indicate whether it would most likely be a direct cost or an indirect cost of the specified cost object fy placing an X in the appropriate column. EXERCISE 12 Classifying Manufacturing Costs The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its ansembly shop and tetail sales store are housed in a single facility in a Redinond, Washington. industrial park. Listed below are some of the costs that the company incurs. Required: For eacts cost, indicate whether if would most likely be classiffed as direct mareriats. direet labor, manufacturing overhead. selling. of an administrative cost. 1. The cost of a hard drive installed in a computer. 2. The cost of advertising in the Puget Sownd Comynufer Viser newspaper. 3. The wages of employees who assemble computers from components. 4. Sales commissions paid to the company's salespeopie. 5. The salary of the assembly shop's supervisor. 6. The salary of the company's accountant. 7. Depreciation on equipment used to test assembled computers before release to customers. 8. Rent on the facility in the industriat park. EXERCISE 13 Classifying Costs as Product or Period Costs \( 1 \lcm{1} \) LO1-3 Suppose that you have been aiven a summer job as a3 interu at tssac Aircauns, a company that aumufactures sophisticated spy carmeras for remote-coatrolled military reconaaissance aircaaft. The company, which is privately owned, hiss appronched a bnnk-for a toan to beip Fisance its growth. The bank requires finaneial statemeuts before approvine the loan. Requirod; Classify each cost listed trelow as either a product cost or a period cost for the jurpose of preparing financial statenuents for the bank. 1. Depreciation on salespersons' ears. 2. Reat on equpment used in the factory: 3. Lubricants used for machine maintenance. 4. Salaries of personuel who work in the finished goods warehouse: \$. Soap and paper towels used by faetory workers at the end of a shift. 6. Factory supervisors' salariesi, 7. Heat, water, and power consumed in the factory- 8. Materials used for bexing produets for shipment overseas, (thits are not normally boxed.) 9. Advertising costs. 10. Workers' compensation insurance for factory employees. 11. Depreciation on chairs and tabies in the factory lunchroom. 12. The wages of the receptionist in the administrative offices. 13. Cost of teasing the corporate jet used by the company's executives. 14. The cost of feriting rooms at a Florida resort for the anual sales conference. 15. The cost of packaging the compaay's product. EXERCISE 1-5 Differential. Sunk, and Opportunity Costs [ LO1-5 Northeast Hospital's Radiology Department is considering replacing an old inefficient X-ray machine with a state of the art digital Xray machine. The new machine woutd provide higher quality X-rays in less time and at a lower cost ner X ray. it would afso require less power and would use a color laser printer to produce easily readable X-ray images, Instead of imvesting the funds in the new X-ray machine, the Laboratory Dopartment is lobbying the hospital's management to buy a new DNA analyzer. Required: For eacl, of the items below. indicate by placing an X in the appropriate column whether it should be considered a differential cost, a sunk cost, or an opportunity cost in the decision to feplace the old X.fay machine with a new machine. If none of the categories apply for a particular item. leave all columns blank. EXERCISE 1-7 Direct and Indirect Costs () LO1-1 costs ber minit are as follows: Required: 1. Assume the coss object is units of production a. What is the rotal direct imanufactiritue cost incuried to make 20,000 units? 6. What is the total indirect manufacturing cost incurred to make 20,000 units? 2. Assume the cost object is the Masmnetaring Departiment and that ifs fotal output is 20,000 unins. a. How misefi total manufocturias sost is thectly traceable to the Mainufacturing Department? b. How manch total namufacturing cott is an indinct cost that canno be easily traced to the Mamufieturing Departumen? 3. Assume the cost object is the compang's varioes sales representatives. Furthermore assume that the company apen $50,000 of as total nxed settine expence on advertisine anht the remainder of the total fixed selling expeme comprised the flued jortion of the conmany's sales tepesentatives' congensation. a. When the conpany selfs 20,000 units, what is the total direct sellitig expense that can be readity uraced to indivitual sates repeesentatives? 6. When the conysany sells 20.000 units, What is the todal indirect seliag expense that cannot be reailing traced to individual sales representatives? 4. Are Kuibsin's administrative expenses always going to be treated as indfirect costs in its ingernal management iepotiv? EXERCISE 1-12 Product and Period Cost Flows The Devon Motor Company produces automobiles. On Aprit Ist the company had no beginning inventories and it purchased 8.000 batteries at a cost of $80 per battery. It withdrew 7,600 batteries from the storeroom during the month. Of these. 100 were used to replace batteries in cars being used by the company's traveling sales staff. The remaining 7,500 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90% were completed and transferred from work in process to finished goods. Of the cars completed during the month, 30s, were unsold at April 30 th. Required: 1. Determine the cost of batteries that would appear in eaeh of the following aceounts on Aprit 30 th. a. Raw Materials b. Work in Process e. Finished Goods d. Cost of Goods Sold e. Selling Expense EXERCISE 1-15 Traditional and Contribution Format Income Statements 9 LO1-6 (3. The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31: Roquired: 1. Prepare a traditional income statement for the quarter ended March 31 . 2. Prepare a contribution format income statement for the quarter ended Mareh 31. 3. What was the contribution margin per unit? EXERCISE 1-17 Classifying Variable and Fixed Costs and Product and Period Costs (T LO1-3. 1014 Below are listed various costs that are found in organizations. 1. Hamburger buns in a Wendy's restaurant, 2. Advertising by a dental office. 3. Apples processed and canned by Del Monte: 4. Shipping canned apples from a Del Monte plant to eustomers. 5. Insurance on a Bausch \& Lomb factory producing contact lenses. 6. Insurance on Nucor's corporate headguarters. 7. Salary of a supervisor overseeing production of printers at Ricoh. 8. Commissions paid to automobile salespersons: 9. Depreciation of factory lunclaom facilities at a General Electric plant. 10. Steering wheels instalted in Tesla electric vehicles. Required: Using the table shown below, deseripe each of the costs mentioned above in two ways. It terms of cost classifications for predictine cost behavior (column 1). indicate whether the cost is fixed or variable with respect to the nubber of units prodiced and fold. With respect to cost elassifications for preparing financial statements (column 2), indicate whether the item is a preduct cost or period cost (selling and administrative cost