Questions On Accounting - 378 Words

EXERCISE 2-28 (20 MINUTES)
1. Tire costs: Product cost, variable, direct material
2. Sales commissions: Period cost, variable
3. Wood glue: Product cost, variable, either direct material or manufacturing overhead (i.e., indirect material) depending on how significant the cost is
4. Wages of security guards: Product cost, variable, manufacturing overhead
5. Salary of financial vice-president: Period cost, fixed
6. Advertising costs: Period cost, fixed
7. Straight-line depreciation: Product cost, fixed, manufacturing overhead
8. Wages of assembly-line personnel: Product cost, variable, direct labor
9. Delivery costs on customer shipments: Period cost, variable
10. Newsprint consumed: Product cost, variable, direct material
11. Plant insurance: Product cost, fixed, manufacturing overhead
12. Glass costs: Product cost, variable, direct material

Exercise 2-30 (15 minutes)

Number of Muffler Replacements

500
600
700
Total costs:

Fixed costs
(a) $42,000
$42,000
(b) $42,000 Variable costs
(c) 25,000 30,000
(d) 35,000 Total costs
(e) $67,000
$72,000
(f) $77,000

Cost per muffler replacement:

Fixed cost
(g) $ 84
(h) $ 70
(i) $ 60 Variable cost
(j) 50
(k) 50
(l) 50 Total cost per muffler replacement
(m) $134
(n) $120
(o) $110

Explanatory Notes:
(a) Total fixed costs do not vary with activity.
(c) Variable cost per replacement = $30,000/600 = $50 Total variable cost for 500 replacements = $50  500 = $25,000
(g) Fixed cost per replacement = $42,000/500 = $84
(j ) Variable cost per replacement = $25,000/500 = $50

Problem 2-42 (25 minutes)
1.
a.
Total prime costs:

Direct material
$ 2,100,000

Direct labor:

Wages
485,000

Fringe benefits 95,000

Total prime costs
$ 2,680,000

b.
Total manufacturing overhead:

Depreciation on factory building
$ 115,000

Indirect labor: wages
140,000

Production

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