CHAPTER 1—PROBLEMS: SET B

P1-1B Agler Company specializes in manufacturing motorcycle helmets. The compa- Classify manufacturing costs
ny has enough orders to keep the factory production at 1,000 motorcycle helmets per into different categories and
month. Agler’s monthly manufacturing cost and other expense data are shown on the compute the unit cost.
next page. (LO 3, 4), AP

Maintenance costs on factory building $ 1,500

Instructions
(a) Prepare an answer sheet with the following column headings. (a) DM $25,000
DL $54,000
Product Costs MO $19,500
Cost Direct Direct Manufacturing Period PC $12,700
Item Materials Labor Overhead Costs

Enter each cost item on your answer sheet, placing the dollar amount under the ap-
propriate headings. Total the dollar amounts in each of the columns.
(b) Compute the cost to produce one motorcycle helmet.

P1-2B Elliott Company, a manufacturer of tennis rackets, started production in November Classify manufacturing costs
2013. For the preceding five years, Elliott had been a retailer of sports equipment. After a into different categories and
thorough survey of tennis racket markets, Elliott decided to turn its retail store into a tennis compute the unit cost.
racket factory. (LO 3, 4), AP
Raw materials cost for a tennis racket will total $23 per racket. Workers on the produc-
tion lines are paid on average $15 per hour. A racket usually takes two hours to complete.
In addition, the rent on the equipment used to produce rackets amounts to $1,300 per
month. Indirect materials cost $3 per racket. A supervisor was hired to oversee produc-
tion; her monthly salary is $3,500.
Janitorial costs are $1,400 monthly. Advertising costs for the rackets will be $8,000 per
month. The factory building depreciation expense is $8,400 per year. Property taxes on the
factory building will be $9,600 per year.

Instructions
(a) Prepare an answer sheet with the following column headings. (a) DM $57,500
DL $75,000
Product Costs MO $15,200
Cost Direct Direct Manufacturing Period PC $ 8,000
Item Materials Labor Overhead Costs

Assuming that Elliott manufactures, on average, 2,500 tennis rackets per month, enter
each cost item on your answer sheet, placing the dollar amount per month under the
appropriate headings. Total the dollar amounts in each of the columns.
(b) Compute the cost to produce one racket.

P-1
P-2 Problems: Set B

Indicate the missing amount P1-3B Incomplete manufacturing costs, expenses, and selling data for two different cases
of different cost items, and are as follows.
prepare a condensed cost of
goods manufactured schedule, Case
an income statement, and A B
a partial balance sheet.
Direct materials used $ 6,300 $ (g)
(LO 5, 6, 7), AN Direct labor 3,000 4,000
Manufacturing overhead 6,000 5,000
Total manufacturing costs (a) 16,000
Beginning work in process inventory 1,000 (h)
Ending work in process inventory (b) 2,000
Sales revenue 22,500 (i)
Sales discounts 1,500 1,200
Cost of goods manufactured 15,800 20,000
Beginning finished goods inventory $ (c) $ 5,000
Goods available for sale 18,300 (j)
Cost of goods sold (d) (k)
Ending finished goods inventory 1,200 2,500
Gross profit (e) 6,000
Operating expenses 2,700 (l)
Net income (f) 2,200

Instructions
(a) Indicate the missing amount for each letter.
(b) Beg. WIP $1,000 (b) Prepare a condensed cost of goods manufactured schedule for Case A.
(c) Current assets $15,600 (c) Prepare an income statement and the current assets section of the balance sheet for
Case A. Assume that in Case A the other items in the current assets section are as
follows: Cash $3,000, Receivables (net) $10,000, Raw Materials $700, and Prepaid
Expenses $200.

Prepare a cost of goods P1-4B The following data were taken from the records of Moxie Company for the year
manufactured schedule, a ended December 31, 2014.
partial income statement,
and a partial balance sheet. Raw Materials Factory Insurance $ 7,400
(LO 5, 6, 7), AP Inventory 1/1/14 $ 47,000 Factory Machinery
Raw Materials Depreciation 7,700
Inventory 12/31/14 44,200 Factory Utilities 12,900
Finished Goods Office Utilities Expense 8,600
Inventory 1/1/14 85,000 Sales Revenue 465,000
Finished Goods Sales Discounts 2,500
Inventory 12/31/14 57,800 Plant Manager’s Salary 60,000
Work in Process Factory Property Taxes 6,100
Inventory 1/1/14 9,500 Factory Repairs 800
Work in Process Raw Materials Purchases 62,500
Inventory 12/31/14 8,000 Cash 18,000
Direct Labor 145,100
Indirect Labor 18,100
Accounts Receivable 27,000

Instructions
(a) CGM $324,900 (a) Prepare a cost of goods manufactured schedule. (Assume all raw materials used were
direct materials.)
(b) Gross profit $110,400 (b) Prepare an income statement through gross profit.
(c) Current assets $155,000 (c) Prepare the current assets section of the balance sheet at December 31.
 Problems: Set B P-3

P1-5B Ortiz Company is a manufacturer of toys. Its controller resigned in August 2014. Prepare a cost of goods
An inexperienced assistant accountant has prepared the following income statement for manufactured schedule and
the month of August 2014. a correct income statement.
(LO 5, 6), AN
Ortiz Company
Income Statement
For the Month Ended August 31, 2014
Sales revenue $675,000
Less: Operating expenses
Raw materials purchases $220,000
Direct labor cost 160,000
Advertising expense 75,000
Selling and administrative salaries 70,000
Rent on factory facilities 60,000
Depreciation on sales equipment 50,000
Depreciation on factory equipment 35,000
Indirect labor cost 20,000
Utilities expense 10,000
Insurance expense 5,000 705,000
Net loss $ (30,000)

Prior to August 2014, the company had been profitable every month. The company’s
president is concerned about the accuracy of the income statement. As her friend, you have
been asked to review the income statement and make necessary corrections. After examin-
ing other manufacturing cost data, you have acquired additional information as follows.
1. Inventory balances at the beginning and end of August were:
August 1 August 31
Raw materials $19,500 $35,000
Work in process 25,000 21,000
Finished goods 40,000 52,000
2. Only 60% of the utilities expense and 70% of the insurance expense apply to factory
operations; the remaining amounts should be charged to selling and administrative
activities.
Instructions
(a) Prepare a cost of goods manufactured schedule for August 2014. (a) CGM $493,000
(b) Prepare a correct income statement for August 2014. (b) NL $ (6,500)