Preparation of a Schedule of Cost of Goods Manufactured and Cost of Goods Sold

The following cost and inventory data for the year just completed are taken from the accounting records of Eccles Company:

Costs incurred:

Advertising expense ...........................$100,000

Direct labour cost ..................................$80,000

Purchases of raw materials ................$137,000

Rent, factory building ............................$80,000

Indirect labour .......................................$56,300

Sales commissions................................$35,000

Utilities, factory ........................................$9,000

Maintenance, factory equipment ...........$24,000

Supplies, factory ........................................ $700

Depreciation, office equipment.................$8,000

Depreciation, factory equipment ............$40,000

                                                            Beginning                  End

                                                            of Year                       of Year

Inventories:

Raw materials ......................          $10,000                      $8,000

Work in process .....................        $20,000                      $5,000

Finished goods .....................          $25,000                      $70,000

Required:

1. Prepare a schedule of cost of goods manufactured.

2. Prepare the cost of goods sold section of Eccles Company's income statement for the year.

18. Provide an explanation or the rationale for the cost of capital (average or overall cost of capital, WACC) to an economic firm. That is, explain why the WACC should be used as the minimum required return.

What is a period cost and how does it differ from a product cost?

Describe COST OF QUALITY in detail? (Prevention Cost and other related Costs)

The weighted average cost of capital is determined by _____ the weighted average cost of equity.

a. multiplying the weighted average aftertax cost of debt by

b. adding the weighted average pretax cost of debt to

c. adding the weighted average aftertax cost of debt to

d. dividing the weighted average pretax cost of debt by

e. dividing the weighted average aftertax cost of debt by

ABC Inc. is considering a project that will cost $60 million. The cost of capital for this type of project is 10%, and the risk-free rate is 6%. The project will generate the following cash flows every year for the next two years. Assume that there is a 30% chance of high demand with associated future cash flows of $45 million per year. There is also a 40% chance of average demand with cash flows of $30 million per year as well as a 30% chance of low demand with cash flows of only $15 million per year. Assume that the project has an investment timing option because it can be delayed for a year. The cost will still be $60 million at the end of the year, and the cash flows for the three scenarios will still last 2 years. However, Tropical Sweets will know for sure the level of demand one year from now and implement the project only if the demand is high or average with a positive NPV. Answer the following three questions: 1) What is the NPV of the project without the timing option? 2) What is the NPV of the project with the investment timing option? 3) Should the firm delay the implementation of the project one year?

A. 1) ($7.93); 2) $4.32; 3) Yes

B. 1) $14.61; 2) $12.75; 3) No

C. 1) $4:61; 2) $11.56; 3) Yes

D. 1) ($7.93); 2) $2.22; 3) No

Which of the following would be classified as an appraisal cost on a quality cost report?

Multiple Choice

• Test and inspection of in-process goods.

• Technical support provided to suppliers.

• Debugging software errors.

• Audits of the effectiveness of the quality system.

1) The cost of quality training is an example of what type of quality cost?

A) External failure costs

B) Internal failure costs

C) Appraisal or inspection costs

D) Prevention costs

2) Which of the following statements is correct about the differences between a volume-based cost system and an ABC system?

A) The only difference is how the methods assign direct costs to products.

B) The only difference is how the methods assign indirect costs to products.

C) There is no difference in how the methods assign direct or indirect costs to products.

D) The methods assign both direct and indirect costs differently to products.