Unit 1 Exercises

Question 1.1 (Total: 18 marks)

The following information was taken from the accounting records of Dunbar Mifflin Company in 2018.

Beginning of 2018Ending of 2018

Direct materials inventory135,00083,000

Work-in-process inventory185,000154,000

Finished-goods inventory255,000216,000

Purchases of direct materials270,000

Direct manufacturing labor225,000

Indirect manufacturing labor103,000

Plant insurance11,000

Depreciation-plant, building, and equipment48,000

Plant utilities29,500

Repairs and maintenance-plant13,500

Equipment leasing costs66,800

Marketing, distribution, and customer-service costs129,500

General and administrative costs72,500

Required:

1.a schedule of cost of goods manufactured.

Question 1.2(Total: 38 marks)

Following are the account balances for the DC Company in 2018:

Beginning of 2018Ending of 2018

Direct materials inventory26,50027,000

Work-in-process inventory30,50028,400

Finished-goods inventory16,50022,100

Purchases of direct materials79,000

Direct manufacturing labor24,500

Indirect manufacturing labor18,600

Plant insurance7,900

Depreciation-plant, building, and equipment11,800

Repairs and maintenance-plant3,500

Marketing, distribution, and customer-service costs87,900

General and administrative costs26,500

Required:

1. a schedule for the cost of goods manufactured for 2018.

2.Revenues for 2018 was $425,000. Prepare the income statement for 2018.

Question 1.3(Total: 30 marks)

Identify if the following costs are "product" or "period" costs:

COST

Period Cost or Product Cost?

1. Television advertisements for Bailey's products

2. Lubricants used in running bottling machines

3. Research and Development related to the elimination of antibiotic residues in milk

4. Gasoline used to operate refrigerated trucks delivering finished dairy products to grocery stores

5. Company president's annual bonus

6. Depreciation on refrigerated trucks used to collect raw milk

7. Plastic gallon containers in which milk is packaged

8. Property insurance on dairy processing plant

9. Cost of milk purchased from local dairy farmers

10. Depreciation on tablets used by sales staff

11. Depreciation on chairs and tables in the factory lunchroom.

12. The cost of packaging the company's product.

13. The wages of the receptionist in the administrative offices.

14. Cost of leasing the corporate jet used by the company's executives.

15. The cost of renting rooms at a BC resort for the annual conference.

Question 1.4(Total: 14 marks)

The Trump International Hotel & Tower is a five-star hotel located in downtown Toronto. The hotel's operations vice president would like to replace the hotel's legacy computer terminals at the registration desk with attractive state-of-the-art flat-panel displays. The new displays would take less space, consume less power than the old computer terminals, and provide additional security since they can be viewed only from a restrictive angle. The new computer displays would not require any new wiring. However, the hotel's chef believes the funds would be better spent on a new bulk freezer for the kitchen.

Submission Instructions

1.Classify each item as a differential cost, an opportunity cost, or a sunk cost in the decision to replace the old computer terminals with new flat-panel displays. Add an "X" in the right field. If none of the categories apply for a particular item, select "None".

Item

Differential Cost

Opportunity Cost

Sunk Cost

None

Cost of the old computer terminals

Rent on the space occupied by the registration desk

Benefits from a new freezer

Cost of removing the old computer terminals

Cost of the new flat-panel displays

Wages of registration desk personnel

Cost of existing registration desk wiring