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Wheels, Inc. manufactures wheels for bicycles, tricycles, and scooters. For each cost given below, determine if the cost is a product cost or a period cost. If the cost is a product cost, further determine if the cost is direct materials (DM), direct labor (DL), or manufacturing
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- Wheels, Inc. manufactures wheels for bicycles, tricycles, and scooters. For each cost given below, determine if the cost is a product cost or a period cost. If the cost is a product cost, further determine if the cost is direct materials (DM), direct labor (DL), or manufacturing overhead (MOH) and then determine if the product cost is a prime cost, conversion cost, or both. If the cost is a period cost, further determine if the cost is a selling expense or administrative expense (Admin). Cost (a) is answered as a guide. (If an answer does not apply, leave the box blank.) Product Product Period Cost DM DL MOH Prime Conversion Selling Admin. a. Metal used for rims X X b. Sales salaries c. Rent on factory d. Wages of assembly workers e. Salary…arrow_forwardWhich of the following statements is true? (You may select more than one answer.)a. Conversion costs include direct materials and direct labor.b. Indirect materials are included in manufacturing overhead.c. Prime costs are included in manufacturing overhead.d. Selling costs are considered period costsarrow_forwardCost Relationships The following costs are for Optical View Inc., a contact lens manufacturer: Required Calculate and graph total costs, the total variable cost, and total fixed cost. For each level of output calculate the per-unit total cost, per-unit variable cost, and per-unit fixed cost. Using the results from requirement 2, graph the per-unit total cost, per-unit variable cost, and per-unit fixed cost, and discuss the behavior of the per-unit costs over the given output levels.arrow_forward
- Atlanta Systems produces two different products, Product A, which sells for $450 per unit, and Product B, which sells for $800 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows: Usage by Product A Usage by Product B Cost Design (Engineering Hours) Machining (Machine Hours) Inspection (Batches) $ 190,000 $1,800,000 $ 108 142 2,160 2,840 160,000 42 38 8 Atlanta manufactures 12,500 units of Product A and 10,200 units of Product B per month. Each unit of Product A uses $100 of direct materials and $45 of direct labor, while each unit of Product B uşes $140 of direct materials and $75 of direct labor.arrow_forwardFollowing is a list of cost terms described in the chapter as well as a list of brief descriptive settings for each item.Cost terms:a. Opportunity costb. Period costc. Product costd. Direct labor coste. Selling costf. Conversion costg. Prime costh. Direct materials costi. Manufacturing overhead costj. Administrative costSettings:1. Marcus Armstrong, manager of Timmins Optical, estimated that the cost of plastic, wagesof the technician producing the lenses, and overhead totaled $30 per pair of single-visionlenses.2. Linda was having a hard time deciding whether to return to school. She was concernedabout the salary she would have to give up for the next 4 years.3. Randy Harris is the finished goods warehouse manager for a medium-sized manufacturingfirm. He is paid a salary of $90,000 per year. As he studied the financial statementsprepared by the local certified public accounting firm, he wondered how his salary wastreated.4. Jamie Young is in charge of the legal department at company…arrow_forwardYou have been asked by management to classify the costs associated with the start-up of this new product line. Using the cost information provided below, classify each cost under the appropriate heading according to the chart provided below. Note that some costs may be classified under more than one heading. For example, a cost may be a fixed cost and a period cost. Name of cost Variable Cost Fixed Cost Direct Materials Direct Labor Factory Overhead Period Cost Prime Cost Conversion Cost Carlson “New Product” Cost Information Cost Amount Cost Type Depreciation on Building (annual) $ 10,000 Direct Labor Cost (per unit) $ 75 Direct Materials Cost (per unit) $ 60 Factory Utilities (per unit) $ 8 Indirect Materials (per unit) $ 4 Interest on Investments (annual) $3,000 Machinery Rental (monthly) $ 6,000 Marketing (annual) $ 35,000 Rent from Tenant (annual) $40,000…arrow_forward
- The problem gives me total costs for materials and labor. Can you tell me the cost per materials and labor per unit?arrow_forwardThe three major cost components of manufacturing a product are a. Direct materials, direct labor, and factory overhead. b. Period costs, product costs, and conversion costs. c. Indirect labor, indirect materials, and fixed expenses. d. Variable costs, fixed costs, and period costs. e. Overhead costs, fixed costs, and direct costs.arrow_forwardCalculate the inventoriable cost per unit using each level of capacity to compute fixed manufacturing cost per unit.arrow_forward
- A direct material standard cost is? The cost of direct materials that should be incurred to produce one unit of output or product. The cost of all materials and supplies used to produce one unit of output or product. The price that should be spent to purchase each unit of direct material for production. The amount of direct materials that should be used to produce one unit of output or product.arrow_forward2. Ehrlich Manufacturing produces small boats. The following list represents some of the different types of costs incurred in the manufacture of these boats Required: Identify the following costs as PRODUCT COST or PERIOD COST. For a product cost, also indicate whether it is direct materials (DM), direct labor (DL), or manufacturing overhead (MOH). For a period cost, also indicate whether it is selling or administrative. 1. The cost of boxes used in shipping the product to customers 2. The cost of heating the plant. 3. The cost of heating executive offices. 4. The cost of metal boards used in the boats. 5. Salaries and commissions of company salespersons. 6. Depreciation on office equipment used in the executive offices. 7. Depreciation on production equipment used in the plant. 8. Wages of janitorial personnel who clean the plant. 9. The cost of insurance on the plant building. 10. Salaries of the assembly workers. 11. The cost of advertising on TV for the company’s product. 12. The…arrow_forwardIdentify each of the following costs as either a product cost (PROD) or a period cost (PER). Indirect materials used in making goods.arrow_forward
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