Question

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

​​​​​​Beginning of 2018​Ending of 2018

Direct materials inventory​​​135,000​​83,000

Work-in-process inventory​​​185,000​​154,000

Finished-goods inventory​​​255,000​​216,000

Purchases of direct materials​​​​​​270,000

Direct manufacturing labor​​​​​​225,000

Indirect manufacturing labor​​​​​​103,000

Plant insurance​​​​​​​11,000

Depreciation-plant, building, and equipment​​​​48,000

Plant utilities​​​​​​​​29,500

Repairs and maintenance-plant​​​​​13,500

Equipment leasing costs​​​​​​66,800

Marketing, distribution, and customer-service costs​​​129,500

General and administrative costs​​​​​72,500

Required:

1. Prepare a schedule of cost of goods manufactured.

Question 2​​​​​​​​​(Total: 38 marks)

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

​​​​​Beginning of 2018​Ending of 2018

Direct materials inventory​​26,500​​​27,000

Work-in-process inventory​​30,500​​​28,400

Finished-goods inventory​​16,500​​​22,100

Purchases of direct materials​​​​​79,000

Direct manufacturing labor​​​​​24,500

Indirect manufacturing labor​​​​​18,600

Plant insurance​​​​​​7,900

Depreciation-plant, building, and equipment​​​11,800

Repairs and maintenance-plant​​​​3,500

Marketing, distribution, and customer-service costs​​87,900

General and administrative costs​​​​26,500

Required:

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

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

Question 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 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 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.

Required:

2. 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. 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

Answer 1

1.

	Direct material	270000
add	opening inventory	135000
less	closing inventory	-83000	322000
add	direct labour		225000
	PRIME COST		547000
add	Insurance		11000
add	Depreciation		48000
add	Repairs and maintainance		13500
add	plany and utilities		29500
add	equip leasing cost		66800
	Works cost		168800
	indirect labour		103000
	COST OF GOODS MANUFACTURED		818800

2.

	Direct material	79000
add	opening inventory	26500
less	closing inventory	-27000	78500
add	direct labour		24500
	PRIME COST		103000
add	Insurance		7900
add	Depreciation		11800
add	Repairs and maintainance		3500
	Works cost		23200
	indirect labour		18600
	COST OF GOODS MANUFACTURED		144800

3.

1.Television advertisements for Bailey’s products	period cost
2. Lubricants used in running bottling machines	product cost
3. Research and Development related to elimination of antibiotic residues in milk	product cost
4. Gasoline used to operate refrigerated trucks delivering finished dairy products to grocery stores	product cost
5. Company president’s annual bonus	period cost
6. Depreciation on refrigerated trucks used to collect raw milk	period cost
7. Plastic gallon containers in which milk is packaged	product cost
8. Property insurance on dairy processing plant	product cost
9. Cost of milk purchased from local dairy farmers	product cost
10. Depreciation on tablets used by sales staff	period cost
11. Depreciation on chairs and tables in the factory lunchroom.	period cost
12. The cost of packaging the company’s product.	product cost
13. The wages of the receptionist in the administrative offices.	period cost
14. Cost of leasing the corporate jet used by the company’s executives.	period cost
15. The cost of renting rooms at a BC resort for the annual conference.	period cost
Television advertisements for Bailey’s products	period cost
2. Lubricants used in running bottling machines	product cost
3. Research and Development related to elimination of antibiotic residues in milk	product cost
4. Gasoline used to operate refrigerated trucks delivering finished dairy products to grocery stores	product cost
5. Company president’s annual bonus	period cost
6. Depreciation on refrigerated trucks used to collect raw milk	period cost
7. Plastic gallon containers in which milk is packaged	product cost
8. Property insurance on dairy processing plant	product cost
9. Cost of milk purchased from local dairy farmers	product cost
10. Depreciation on tablets used by sales staff	period cost
11. Depreciation on chairs and tables in the factory lunchroom.	period cost
12. The cost of packaging the company’s product.	product cost
13. The wages of the receptionist in the administrative offices.	period cost
14. Cost of leasing the corporate jet used by the company’s executives.	period cost
15. The cost of renting rooms at a BC resort for the annual conference.	period cost

4.

cost of the old computer terminals				sunk cost
Rent on the space occupied by the registration desk				differential cost
Benefits from a new freezer				oppurtunity cost
Cost of removing the old computer terminals				differential ost
Cost of the new flat-panel displays				none
Wages of registration desk personnel				sunk cost
Cost of existing registration desk wiring differential cost