{"id":47439,"date":"2022-03-31T19:47:24","date_gmt":"2022-03-31T19:47:24","guid":{"rendered":"https:\/\/assignmenttutors.net\/blog\/brief-exercise-16-1-product-vs-period-costs-during-the-year\/"},"modified":"2022-03-31T19:47:24","modified_gmt":"2022-03-31T19:47:24","slug":"brief-exercise-16-1-product-vs-period-costs-during-the-year","status":"publish","type":"post","link":"https:\/\/assignmenttutors.net\/blog\/brief-exercise-16-1-product-vs-period-costs-during-the-year\/","title":{"rendered":"Brief exercise 16.1 product vs. period costs during the year,"},"content":{"rendered":"
\n

BRIEF EXERCISE 16.1<\/span><\/strong><\/p>\n

Product vs. Period Costs<\/span><\/strong><\/p>\n

\u00a0<\/span><\/p>\n

During the year, Coronado Boat Yard has incurred manufacturing costs of $420,000 in building three large sailboats. At year-end, each boat is about 70 percent complete. How much of these manufacturing costs should be recognized as expense in Coronado Boat Yard\u2019s income statement for the current year? Explain.<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

BRIEF EXERCISE 16.2<\/span><\/strong><\/p>\n

Direct Materials Used<\/span><\/strong><\/p>\n

\u00a0<\/span><\/p>\n

During the current year, the cost of direct materials purchased by a manufacturing firm was $325,000, and the direct materials inventory increased by $65,000. What was the cost of direct materials used during the year?<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

BRIEF EXERCISE 16.3<\/span><\/strong><\/p>\n

Cost of Goods Sold<\/span><\/strong><\/p>\n

\u00a0<\/span><\/p>\n

A company that assembles trucks produces 60 trucks during the current year and incurs $3 million of material, labor, and overhead costs. Fifty-three trucks were sold during the year and each is allocated the same amount of costs. How much of the $3 million assembly costs should<\/span><\/p>\n

appear on the company\u2019s income statement for the current year?<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

BRIEF EXERCISE 16.6<\/span><\/strong><\/p>\n

Manufacturing Overhead<\/span><\/strong><\/p>\n

\u00a0<\/span><\/p>\n

During the current year, CF Manufacturing Co. incurred $370,000 of indirect labor costs, $15,000 of indirect materials costs, $125,000 of rent costs, and $163,000 of other overhead costs. How much did CF Manufacturing assign to the Work in Process Inventory account from the Manufacturing Overhead account?<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

BRIEF EXERCISE 16.9<\/span><\/strong><\/p>\n

Prime vs. Conversion Costs<\/span><\/strong><\/p>\n

\u00a0<\/span><\/strong><\/p>\n

Star Repairs Co. does all the repair work for a medium-sized manufacturer of handheld computer games. The games are sent directly to Star, and after the games are repaired, Star bills the game<\/span><\/p>\n

manufacturer for cost plus a 20 percent markup. In the month of February, purchases of parts (replacement parts) by Star amounted to $97,000, the beginning inventory of parts was $38,500,and the ending inventory of parts was $15,250. Payments to repair technicians during the month of February totaled $52,500. Overhead incurred was $121,000.<\/span><\/p>\n

\u00a0<\/span><\/p>\n

a.\u00a0\u00a0\u00a0\u00a0 <\/span><\/span>What was the cost of materials used for repair work during the month of February?<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

b.\u00a0\u00a0\u00a0\u00a0 <\/span><\/span>What was the prime cost for February?<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

c.\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span><\/span>What was the conversion cost for February?<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

d.\u00a0\u00a0\u00a0\u00a0 <\/span><\/span>What was the total repair cost for February?<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

Reference Information for Each Exercise<\/span><\/strong><\/p>\n

\u00a0<\/span><\/p>\n

For BE 16.1 see ( LOI 16-3 )<\/span><\/strong><\/p>\n

\u00a0<\/span><\/p>\n

For BE 16.2 see ( LOI 16-4 )<\/span><\/strong><\/p>\n

\u00a0<\/span><\/p>\n

For BE 16.3 see ( LOI 16-3 thru LOI 16-4 )<\/span><\/strong><\/p>\n

\u00a0<\/span><\/p>\n

For BE 16.6 see ( LOI 16-4 thru LOI 16-5 )<\/span><\/strong><\/p>\n

\u00a0<\/span><\/p>\n

For BE 16.9 see ( LOI 16-3 thru LOI 16-5 )<\/span><\/strong><\/p>\n

\u00a0<\/span><\/strong><\/p>\n

\u00a0<\/span><\/strong><\/p>\n

\u00a0<\/span><\/strong><\/p>\n

\u00a0<\/span><\/strong><\/p>\n

\u00a0<\/span><\/strong><\/p>\n

\u00a0<\/span><\/strong><\/p>\n

\u00a0<\/span><\/strong><\/p>\n

LO16-2 <\/span>Describe the three basic types of<\/span><\/p>\n

manufacturing costs. <\/span><\/p>\n

\u00a0<\/span><\/p>\n

Direct materials used consist of<\/span><\/p>\n

the parts and mate-rials that become part of the finished<\/span><\/p>\n

products. Direct labor cost consists of the wages paid<\/span><\/p>\n

to factory employees who work directly on the products<\/span><\/p>\n

being manufactured. Manufacturing overhead includes all<\/span><\/p>\n

manufacturing costs other than the cost of materials used and<\/span><\/p>\n

direct labor. Examples of manufacturing overhead include<\/span><\/p>\n

depreciation of machinery and the plant security service<\/span><\/p>\n

\u00a0<\/span><\/strong><\/p>\n

\u00a0<\/span><\/strong><\/p>\n

LO16-3 <\/span>Distinguish between product costs and<\/span><\/p>\n

period costs. <\/span><\/p>\n

\u00a0<\/span><\/p>\n

Product costs are the costs of creating inventory.<\/span><\/p>\n

They are treated as assets until the related goods are sold, at<\/span><\/p>\n

which time the product costs are deducted from revenue as the<\/span><\/p>\n

cost of goods sold. Thus, goods manufactured this year but not<\/span><\/p>\n

sold until next year are deducted from next year\u2019s revenue.<\/span><\/p>\n

Period costs are charged to expense in the accounting<\/span><\/p>\n

period in which they are incurred. Period costs are not related<\/span><\/p>\n

to production of goods; consequently, they are deducted from<\/span><\/p>\n

revenue on the assumption that the benefits obtained from<\/span><\/p>\n

the expenditures are received in the same period as the costs<\/span><\/p>\n

are incurred. Period costs include general and administrative<\/span><\/p>\n

expense, selling expense, and income taxes expense.<\/span><\/p>\n

END-OF-CHAPTER REVIEW<\/span><\/p>\n

SUMMARY<\/span><\/p>\n

\u00a0<\/span><\/p>\n

\u00a0OF LEARNING OBJECTIVES<\/span><\/p>\n

LO16-4 <\/span>Describe how manufacturing costs flow<\/span><\/p>\n

through perpetual inventory accounts. <\/span><\/p>\n

\u00a0<\/span><\/p>\n

Manufacturing<\/span><\/p>\n

costs originally are recorded in three controlling accounts:<\/span><\/p>\n

Materials Inventory, Direct Labor, and Manufacturing<\/span><\/p>\n

Overhead. As these costs become applicable to goods placed<\/span><\/p>\n

into production, they are transferred from these manufacturing<\/span><\/p>\n

cost accounts to the Work in Process Inventory account. As<\/span><\/p>\n

units are completed, their cost is transferred from the Work<\/span><\/p>\n

in Process account to Finished Goods Inventory. Then, when<\/span><\/p>\n

units are sold, their costs are transferred from Finished Goods<\/span><\/p>\n

Inventory to the Cost of Goods Sold account.<\/span><\/p>\n

\u00a0<\/span><\/p>\n

LO16-5 <\/span>Distinguish between direct and indirect<\/span><\/p>\n

costs. <\/span><\/p>\n

\u00a0<\/span><\/p>\n

Direct manufacturing costs (direct materials and<\/span><\/p>\n

direct labor) can be identified with specific products. Indirect<\/span><\/p>\n

manufacturing costs are the many elements of manufacturing<\/span><\/p>\n

overhead that apply to factory operations as a whole and cannot<\/span><\/p>\n

\u00a0<\/p>\n

be traced to specific products.<\/span><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

BRIEF EXERCISE 16.1 Product vs. Period Costs \u00a0 During the year, Coronado Boat Yard has incurred manufacturing costs of $420,000 in building three large sailboats. At year-end, each boat is about 70 percent complete. How much of these manufacturing costs should be recognized as expense in Coronado Boat Yard\u2019s income statement for the current year? […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[],"class_list":["post-47439","post","type-post","status-publish","format-standard","hentry","category-education"],"_links":{"self":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/47439","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/comments?post=47439"}],"version-history":[{"count":0,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/47439\/revisions"}],"wp:attachment":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/media?parent=47439"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/categories?post=47439"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/tags?post=47439"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}