TUTORIAL 7 ACCOUNTING FOR MANUFACTURING

BE 156
Identify whether each of the following is classified as a product cost or a period cost.
______________ 1. Direct labor
______________ 2. Direct materials
______________ 3. Factory utilities
______________ 4. Repairs to office equipment
______________ 5. Property taxes on factory building
______________ 6. Sales staff salaries
Ans: N/A, SO: 4, Bloom: C, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: None, IMA:
Business Economics

Solution 156 (5 min.)

1. Product cost 4. Period cost
2. Product cost 5. Product cost
3. Product cost 6. Period cost

BE 160
Raynor Manufacturing Company has the following data:
Direct labor $76,000
Direct materials used 84,000
Total manufacturing overhead 60,000
Ending work in process 30,000
Beginning work in process 45,000

Instructions
Compute (a) total manufacturing costs and (b) cost of goods manufactured.
Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: Business Economics

Solution 160 (5 min.)

(a) Direct labor $ 76,000
Direct materials used 84,000
Total manufacturing overhead 60,000
Total manufacturing costs $220,000

(b) Beginning work in process $ 45,000

Total manufacturing costs 220,000
Less ending work in process (30,000)
Cost of goods manufactured $235,000
Or alternatively, you can calculate like this

Beginning work in process $ 45,000

Less ending work in process (30,000)
Completed WIP $15,000
Total manufacturing costs 220,000
Cost of goods manufactured $235,000

Ex. 163
Determine whether each of the following is classified as:
DM: Direct materials
DL: Direct labor
MO: Manufacturing overhead

_____1. Assembly line workers' wages.

_____2. Factory supervisors' salaries.
_____3. Steel used in manufacturing product.
_____4. Insurance on factory building.
_____5. Rivets and screws used in production.
_____6. Tires used in manufacturing vehicles.
Ans: N/A, SO: 3, Bloom: C, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC:
None, IMA: Reporting

Solution 163 (5 min.)

1. DL 4. MO
2. MO 5. MO
3. DM 6. DM

Ex. 164
Presented below is a list of costs and expenses incurred in the factory by Nu-Way
Corporation, a manufacturer of recreational vehicles.
____ 1. Property taxes on the factory land - MO
____ 2. Nails and glue used in production - MO
____ 3. Cabinet maker's wages – DL
____ 4. Factory supervisors’ salaries - MO
____ 5. Metal used in manufacturing – DM
____ 6. Depreciation on factory machines – MO
____ 7. Factory utilities – MO
____ 8. Carpeting for the recreational vehicles - DM
____ 9. Property taxes on the factory building - MO
____ 10. Insurance on factory equipment - MO

Instructions
Classify the above items into the following categories:
DM — Direct Materials
DL — Direct Labor
MO — Manufacturing Overhead
Ans: N/A, SO: 3, Bloom: C, Difficulty: Easy, Min: 8, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA

Solution 164 (8–10 min.)

1. MO 6. MO
2. MO 7. MO
3. DL 8. DM
4. MO 9. MO
5. DM 10. MO

Ex. 166
Kennedy Company reports the following costs and expenses in May.

Factory utilities $ 13,500 Direct labor $79,100

Depreciation on factory Sales salaries 48,400
equipment 12,650 Property taxes on factory
Depreciation on delivery trucks 3,800 building 2,500
Indirect factory labor 48,900 Repairs to office equipment 1,300
Indirect materials 70,800 Factory repairs 2,000
Direct materials used 157,600 Advertising 23,000
Factory manager's salary 8,000 Office supplies used 2,640

Instructions
From the information, determine the total amount of:
(a) Manufacturing overhead.
(b) Product costs.
(c) Period costs.
Ans: N/A, SO: 3, 4, Bloom: AP, Difficulty: Hard, Min: 12, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: Business Economics

Solution 166 (10–12 min.)

(a) Factory utilities......................................................................... $ 13,500
Depreciation on factory equipment.......................................... 12,650
Indirect factory labor................................................................ 48,900
 Indirect materials..................................................................... 70,800
Factory manager's salary......................................................... 8,000
Property taxes on factory building........................................... 2,500
Factory repairs......................................................................... 2,000
Manufacturing overhead.......................................................... $158,350

(b) Direct materials........................................................................ $157,600

Direct labor.............................................................................. 79,100
Manufacturing overhead.......................................................... 158,350
Product costs........................................................................... $395,050

(c) Depreciation on delivery trucks................................................. $ 3,800

Sales staff salaries.................................................................... 48,400
Repairs to office equipment...................................................... 1,300
Advertising................................................................................. 23,000
Office supplies used.................................................................. 2,640
Period costs............................................................................... $ 79,140

Ex. 174
Glavine Corporation incurred the following costs while manufacturing its product.

Materials used in product $120,000 Advertising expense $45,000

Depreciation on plant 60,000 Property taxes on plant 19,000
Property taxes on store 7,500 Delivery expense 21,000
Labor costs of assembly-line workers 110,000 Sales commissions 35,000
Factory supplies used 23,000 Salaries paid to sales clerks 50,000

Work-in-process inventory was $22,000 at January 1 and $15,500 at December 31. Finished
goods inventory was $65,000 at January 1 and $50,600 at December 31.

Instructions
(a) Compute cost of goods manufactured. =beg WIP+Product cost- ending WIP
(b) Compute cost of goods sold. = Beg finished inv + cost of good manufactured – End
finished inv
Ans: N/A, SO: 5, 6, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC:
Problem Solving, IMA: Reporting

a)

(a) Work-in-process, 1/1.................................................... $ 22,000

Direct materials used................................................... $120,000
Direct labor................................................................... 110,000
Manufacturing overhead
Depreciation on plant............................................. $60,000
 Factory supplies used............................................ 23,000
Property taxes on plant.......................................... 19,000
Total manufacturing overhead..................................... 102,000
Total manufacturing costs............................................ 332,000
Total cost of work in process....................................... 354,000
Less: ending work in process....................................... 15,500
Cost of goods manufactured........................................ $338,500

(b) Finished goods, 1/1 $ 65,000

Cost of goods manufactured 338,500
Cost of goods available for sale 403,500
Finished goods, 12/31 (50,600)
Cost of goods sold $352,900

Ex. 175
The following information is available for Elliot Company.
January 1, 2012 2012 December 31, 2012
Raw materials inventory $ 26,000 $30,000
Work in process inventory 13,500 22,200
Finished goods inventory 30,000 21,000
Materials purchased $170,000
Direct labor 220,000
Manufacturing overhead 180,000
Sales 800,000

Instructions
(a) Compute cost of goods manufactured.
(b) Prepare an income statement through gross profit.
Ans: N/A, SO: 5, 6, Bloom: AP, Difficulty: Hard, Min: 12, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC:
Problem Solving, IMA: Reporting

(a) Statement of Goods Manufactured

Work in process, 1/1................................................... $ 13,500

Direct materials
Materials inventory, 1/1......................................... $ 26,000
Materials purchased.............................................. 170,000
Materials available for use.................................... 196,000
Less: Materials inventory, 12/31........................... 30,000
 Direct materials used.................................................. $166,000
Direct labor.................................................................. 220,000
Manufacturing overhead............................................. 180,000
Total manufacturing costs........................................... 566,000
Total cost of work in process...................................... 579,500
Less: Work in process, 12/31..................................... 22,200
Cost of goods manufactured....................................... $557,300

(b) Sales........................................................................... $800,000

Cost of goods sold
Finished goods, 1/1............................................... $ 30,000
Cost of goods manufactured................................. 557,300
Cost of goods available for sale............................ 587,300
Finished goods, 12/31........................................... 21,000
Cost of goods sold........................................... 566,300
Gross profit............................................................... $233,700

Ex. 179
The following costs and inventory data were taken from the accounts of Simon Company for
2012:
January 1, 2012 December 31, 2012
Inventories:
Raw materials $ 8,000 $ 7,000
Work in process 15,000 13,000
Finished goods 16,000 12,000

Costs incurred:
Raw materials purchases $93,000
Direct labor 42,000
Factory rent 8,000
Factory utilities 10,000
Indirect materials 4,000
Indirect labor 9,000
Operating expenses 17,000

Instructions
a. Prepare a schedule showing the amount of direct materials used in production during the
year.
b. Compute the amount of manufacturing overhead incurred during the year.
c. Prepare a schedule of Cost of Goods Manufactured for Simon Company for the year
ended December 31, 2012 in good form.
d. Prepare the Cost of Goods Sold section of the Income Statement for Simon Company for
the year ended December 31, 2012 in good form.
Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 18, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: Business Economics

A E 202
Financial and managerial accounting are both concerned with the economic events of an
enterprise. Similarities between financial and managerial accounting do exist, but they do
have different focus. Briefly distinguish between financial and managerial accounting as they
relate to (1) the primary users, (2) the type and frequency of reports, (3) the purpose of
reports, and (4) the content of reports.
Ans: N/A, SO: 1, Bloom: K, Difficulty: Easy, Min: 5, AACSB: Communications, AICPA BB: Industry/Sector, AICPA FN: Reporting, AICPA PC:
Communication, IMA: Business Economics