BALBOA, Miguel Rene Q.

ID 11907924
ACCCOB3 K31 - HOMEWORK#2

Exercise 1-1: Identifying Direct & Indirect Costs

Cost Cost Object
Example Catered food served to patients A particular patient
1 The wages of pediatric nurses The pediatric department
2 Prescription drugs A particular patient
3 Heating the hospital The pediatric department
4 The salary of the head of pediatrics The pediatric department
5 The salary of the head of pediatrics A particular pediatric patient
6 Hospital chaplain's salary A particular patient
7 Lab tests by outside contractor A particular patient
8 Lab tests by outside contractor A particular department

Exercise 1-2: Classifying Manufacturing Costs

1 The cost of a hard drive installed in a computer.
2 The cost of advertising in the Puget Sound Computer User newspaper.
3 The wages of employees who assemble computers from components.
4 Sales commissions paid to the company’s salespeople.
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 cus
8 Rent on the facility in the industrial park.

Exercise 1-3: Classifying Costs as Product or Period Costs.

1 Depreciation on salespersons' cars.
2 Rent on equipment used in the factory.
3 Lubricants used for machine maintenance.
4 Salaries of personnel who work in the finished goods warehouse.
5 Soap and paper towels used by factory workers at the end of a shift.
6 Factory supervisors' salaries.
7 Heat, water, and power consumed in the factory.
8 Materials used for boxing products for shipment overseas. (Units are not normall bo
9 Advertising costs.
10 Workers' compensation insurance for factory employees.
11 Depreciation on chairs and tables in the factory lunchroom.
12 The wages of the receptionist in the administrative offices.
13 Cost of leasing the corporate jet used by the company's executives.
14 The cost of renting rooms at a Florida resort for the annual sales conference.
15 The cost of packaging the company's product.

Exercise 1-5: Differential, Sunk, and Opportunity Costs

Item
Example Cost of X-ray film used in the old machine
1 Cost of the old X-ray machine
2 The salary of the head of the Radiology Department
3 The salary of the head of the Laboratory Department
4 Cost of the new color laser printer
5 Rent on the space occupied by Radiology
6 The cost of maintaining the old machine
7 Benefits from a new DNA analyzer
8 Cost of electricity to run the X-ray machines
ost Object Direct Cost Indirect Cost
particular patient X
he pediatric department X
particular patient X
he pediatric department X
he pediatric department X
particular pediatric patient X
particular patient X
particular patient X
particular department X

Direct materials cost

puter User newspaper. Selling cost
ers from components. Direct labor cost
Selling cost
Manufacturing overhead cost
Administrative cost
ed computers before release to customers. Manufacturing overhead cost
Manufacturing overhead cost

Period Cost
Product Cost
Product Cost
ods warehouse. Period Cost
at the end of a shift. Product Cost
Product Cost
Product Cost
overseas. (Units are not normall boxed.) Period Cost
Period Cost
Product Cost
Product Cost
Period Cost
mpany's executives. Period Cost
he annual sales conference. Period Cost
Product Cost

Differential Cost Sunk Cost Opportunity Cost

X
X

X
X
X
BALBOA, Miguel Rene Q.
ID 11907924
ACCCOB3 K31 - HOMEWORK#2
Exercise 1-7: Direct and Indirect Costs
Average Cost per Unit
Direct materials $ 7.00
Direct labor $ 4.00
Variable manufacturing overhead $ 1.50
Fixed manufacturing overhead $ 5.00
Fixed selling expense $ 3.50
Fixed administrative expense $ 2.50
Sales commissions $ 1.00
Variable administrative expense $ 0.50

1. Assume the cost object is the units of production:

a. What is the total direct manufacturing cost incurred to make 20,000 units?
Direct materials per unit
Direct labor per unit
Direct manufacturing cost per unit
Number of units sold
Total direct manufacturing cost

b. What is the total indirect manufacturing cost incurred to make 20,000 units?
Variable manufacturing overhead per unit
Fixed manufacturing overhead per unit
Indirect manufacturing cost per unit
Number of units sold
Total indirect manufacturing cost

2. Assume the cost object is the Manufacturing Department and that its total output is 20,000 units
a. How much total manufacturing cost is directly traceable to the Manufacturing Department?
Direct materials per unit
Direct labor per unit
Variable manufacturing overhead per unit
Fixed manufacturing overhead per unit
Total manufacturing cost per unit
Number of units sold
Total direct costs

b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Man
Total indirect costs

All manufacturing costs can be considered as a direct cost of the said department.

3. Assume the cost object is the company's various sales representatives. Furthermore, assume t
the company spent $50,000 of its total fixed selling expense on advertising and the remainder of th
total fixed selling expense comprised the fixed portion of the company's sales representatives’
compensation.
 3. Assume the cost object is the company's various sales representatives. Furthermore, assume t
the company spent $50,000 of its total fixed selling expense on advertising and the remainder of th
total fixed selling expense comprised the fixed portion of the company's sales representatives’
compensation.
a. When the company sells 20,000 units, what is the total direct selling expense that can be rea
Sales commissions per unit
Number of units sold
Total sales commission
Fixed portion of sales representatives' compensation
Total direct selling expense

b. When the company sells 20,000 units, what is the total indirect selling expense that cannot b
Total indirect costs

Exercise 1-8: Product Costs and Period Costs; Variable and Fixed Costs
Average Cost per Unit Total Fixed Cost (18,000 Unit
Direct materials $ 7.00 $ 126,000
Direct labor $ 4.00 $ 72,000
Variable manufacturing overhead $ 1.50 $ 27,000
Fixed manufacturing overhead $ 5.00 $ 100,000
Fixed selling expense $ 3.50 $ 70,000
Fixed administrative expense $ 2.50 $ 50,000
Sales commissions $ 1.00 $ 18,000
Variable administrative expense $ 0.50 $ 9,000

1. For financial accounting purposes, what is the total amount of product costs incurred to make 20,000 u
Direct materials per unit
Direct labor per unit
Variable manufacturing overhead per unit
Total manufacturing cost per unit
Number of units made

Fixed manufacturing overhead expense

Total direct costs

2. For financial accounting purposes, what is the total amount of period costs incurred to sell 20,000 units
Sales commissions per unit
Variable administrative expense per unit
Total selling cost per unit
Number of units sold

Fixed selling expense

Fixed administrative expense
Total selling costs

3. For financial accounting purposes, what is the total amount of product costs incurred to make 22,000 u
Direct materials per unit
Direct labor per unit
Variable manufacturing overhead per unit
Total manufacturing cost per unit
 Number of units made
Total manufacturing cost
Fixed manufacturing overhead expense
Total direct costs

4. For financial accounting purposes, what is the total amount of period costs incurred to sell 18,000 units
Sales commissions per unit
Variable administrative expense per unit
Total selling cost per unit
Number of units sold

Fixed selling expense

Fixed administrative expense
Total selling costs

Exercise 1-12: Product and Period Cost Flows

1. Determine the cost of batteries that would appear in each of the following accounts on April 30th.
a. Raw Materials
Number of batteries purchased
Number of batteries used
Remaining batteries
Initial purchase cost per unit
Total cost of raw materials

b. Work in Process
Number of batteries used for production
Amount of work remaining
Remaining batteries placed on work in progress
Initial purchase cost per unit
Total cost of work in process

c. Finished Goods
Number of batteries used for production
Initial purchase cost per unit
Total cost of batteries used for production
Amount of work completed
Total cost of 90% work completed
Amount of units unsold
Total cost of finished goods

d. Cost of Goods Sold

Number of batteries used for production
Initial purchase cost per unit
Total cost of batteries used for production
Amount of work completed
Total cost of 90% work completed
Amount of units sold
 Total cost of finished goods

e. Selling Expense
Number of batteries used
Number of batteries used for production
Number of batteries given to sales staff
Initial purchase cost per unit
Total selling expense

2. Specify whether each of the above accounts would appear on the balance sheet or on the income state
a. Raw Materials $32,000.00
b. Work in Process $60,000.00
c. Finished Goods $162,000.00
d. Cost of Goods Sold $378,000.00
e. Selling Expense $8,000.00
 20,000 units?
$7.00
4.00
$11.00
20000
$220,000.00

ke 20,000 units?
$1.50
5.00
$6.50
20000
$130,000.00

t its total output is 20,000 units:

he Manufacturing Department?
$7.00
4.00
1.50
5.00
$17.50
20000
$350,000.00

annot be easily traced to the Manufacturing Department?

$0

ect cost of the said department.

tatives. Furthermore, assume that

ertising and the remainder of the
any's sales representatives’
tatives. Furthermore, assume that
ertising and the remainder of the
any's sales representatives’

ct selling expense that can be readily traced to individual sales representatives?

$1.00
20000
$20,000.00
20,000.00
$40,000.00

ect selling expense that cannot be readily traced to individual sales representatives?
$50,000.00

Total Fixed Cost (18,000 Units) Total Fixed Cost (20,000 Units) Total Fixed Cost (22,000 Units)
$ 126,000.00 $ 140,000.00 $ 154,000.00
$ 72,000.00 $ 80,000.00 $ 88,000.00
$ 27,000.00 $ 30,000.00 $ 33,000.00
$ 100,000.00 $ 100,000.00 $ 100,000.00
$ 70,000.00 $ 70,000.00 $ 70,000.00
$ 50,000.00 $ 50,000.00 $ 50,000.00
$ 18,000.00 $ 20,000.00 $ 22,000.00
$ 9,000.00 $ 10,000.00 $ 11,000.00

costs incurred to make 20,000 units?

$7.00
4.00
1.50
$12.50
20,000.00
$250,000.00
100,000.00
$350,000.00

costs incurred to sell 20,000 units?

1.00
0.50
$1.50
20,000
$30,000.00
70,000.00
50,000.00
$150,000.00

costs incurred to make 22,000 units?

$7.00
4.00
1.50
$12.50
 22,000.00
$275,000.00
100,000.00
$375,000.00

costs incurred to sell 18,000 units?

1.00
0.50
$1.50
18,000
$27,000.00
70,000.00
50,000.00
$147,000.00

ing accounts on April 30th.

8,000
7,600
400
$80.00
$32,000.00

7,500
10.00%
750
$80.00
$60,000.00

7,500
$80.00
$600,000.00
90.00%
$540,000.00
30.00%
$162,000.00

7,500
$80.00
$600,000.00
90.00%
$540,000.00
70.00%
 $378,000.00

7,600
7,500
100
$80.00
$8,000.00

ance sheet or on the income statement at the end of the month.

Balance Sheet
Balance Sheet
Balance Sheet
Income Statement
Income Statement
BALBOA, Miguel Rene Q.
ID 11907924
ACCCOB3 K31 - HOMEWORK#2
Exercise 1-15: Traditional and Contribution Format Income Statements
Amount
Sales $150,000.00
Selling price per pair of skis $750.00
Variable selling expense per pair of skis $50.00
Variable administrative expense per pair of skis $10.00
Total fixed selling expense $20,000.00
Total fixed administrative expense $20,000.00
Beginning merchandise inventory $30,000.00
Ending merchandise inventory $40,000.00
Merchandise purchases $100,000.00

Cost of Goods Sold Formula

Beginning merchandise inventory $30,000.00
Merchandise purchases $100,000.00
(LESS) Ending merchandise inventory $40,000.00
Cost of Goods Sold $90,000.00

Number of Units Sold Formula

Sales $150,000.00
Selling price per pair of skis $750.00
Number of Units Sold 200

1. Prepare a traditional income statement for the quarter ended March 31.
The Alpine House, Inc.
Income Statement
For the Quarter ended March 31
Sales $150,000.00
Cost of Goods Sold 90,000.00
Gross Margin $60,000.00
Selling and Administrative Expenses
Selling Expenses $30,000.00
Administrative Expenses 22,000.00 52,000.00
Net Operating Income $8,000.00

2. Prepare a contribution format income statement for the quarter ended March 31.
The Alpine House, Inc.
Income Statement
For the Quarter ended March 31
Sales $150,000.00
Variable Expenses
Cost of Goods Sold $90,000.00
Selling Expenses 10,000.00
Administrative Expenses 2,000.00 102,000.00
 Contribution Margin $48,000.00
Fixed Expenses
Selling Expenses $20,000.00
Administrative Expenses 20,000.00 40,000.00
Net Operating Income $8,000.00

3. What was the contribution margin per unit

Contribution margin $48,000.00
Number of units sold 200
Contribution margin per unit $240.00

Exercise 1-17: Classifying Variable and Fixed Costs and Product and Period Costs

Cost Item

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 customers.
5 Insurance on a Bausch & Lomb factory producing contact lenses.
6 Insurance on Nucor's corporate headquarters.
7 Salary of a supervisor overseeing production of printers at Ricoh.
8 Commissions paid to automobile salespersons.
9 Depreciation of factory lunchroom facilities at a General Electric plant.
10 Steering wheels installed in Tesla electric vehicles.
 Cost Classifications for:
Predicting Cost Preparing Financial
Behavior Statements
Variable Cost Product Cost
Fixed Cost Period Cost
Variable Cost Product Cost
Variable Cost Period Cost
Fixed Cost Product Cost
Fixed Cost Period Cost
Fixed Cost Product Cost
Variable Cost Period Cost
ectric plant. Fixed Cost Product Cost
Variable Cost Product Cost
BALBOA, Miguel Rene Q.
ID 11907924
ACCCOB3 K31 - HOMEWORK#2

Problem 1-23: Cost Classification

Cost Variable or Fixed

Example Direct labor Variable
Executive salaries Fixed
Factory rent Fixed
1 Property taxes, factory. Fixed
2 Boxes used for packaging detergent produced by the company. Variable
3 Salespersons’ commissions. Variable
4 Supervisor’s salary, factory. Fixed
5 Depreciation, executive autos. Fixed
6 Wages of workers assembling computers. Variable
7 Insurance, finished goods warehouses. Fixed
8 Lubricants for production equipment. Variable
9 Advertising costs. Fixed
10 Microchips used in producing calculators. Variable
11 Shipping costs on merchandise sold. Variable
12 Magazine subscriptions, factory lunchroom. Fixed
13 Thread in a garment factory. Variable
14 Executive life insurance. Fixed
15 Ink used in textbook production. Variable
16 Fringe benefits, materials handling workers. Variable
17 Yarn used in sweater production. Variable
18 Wages of receptionist, executive offices. Fixed
 Manufacturing (Product) Cost
Variable or Fixed Selling Cost Administrative Cost Direct Indirect
Variable Yes
Fixed Yes
Fixed Yes
Fixed Yes
Variable Yes
Variable Yes
Fixed Yes
Fixed Yes
Variable Yes
Fixed Yes
Variable Yes
Fixed Yes
Variable Yes
Variable Yes
Fixed Yes
Variable Yes
Fixed Yes
Variable Yes
Variable Yes
Variable Yes
Fixed Yes
(Product) Cost
Indirect

Yes
Yes

Yes

Yes

Yes
Yes

Yes
Yes