# 264ch2egSol-2023

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© copyright, 2022 Terry Kosowick. All rights reserved Page 1 BUAD 264 Solutions to Ch 2 Examples Solution to Example 1: Toy rockets. a) Total materials (plastic) cost, 5 rockets: 30G X \$0.10 X 5 rockets = \$15.00. b) Total materials cost, 10 rockets: 30G X \$0.10 X 10 rockets = \$30.00. c) Total materials cost, 20 rockets: 30G X \$0.10 X 20 rockets = \$60.00. d) Total rent cost, 5 rockets: \$200.00. e) Total rent cost, 20 rockets: \$200.00. f) Is materials cost a variable or a fixed cost? A variable cost. g) Is rent cost a variable or a fixed cost? A fixed cost. Solution to Example 2: Q Corp's clothing department includes shoes and other clothes. Is the clothing dept manager's salary a direct cost if cost object = clothing department? YES. If cost object=shoes product line? NO. It is an indirect cost. Solution to Example 3, Brief Ex. 2-5, Parts 1 to 6. 1. Depreciation on salespersons' cars.......... Period 2. Rent on equipment used in the factory....... Product 3. Lubricants used for maintenance of machines.... Product 4. Salaries of finished goods warehouse personnel... Period 5. Soap and paper towels used by factory workers at the end of a shift... Product 6. Sales supervisors' salaries..... Period Solutions to Eg.s 4 and 5 on following page...
© copyright, 2022 Terry Kosowick. All rights reserved Page 2 Solution to Example 4: (Brief Exercise 2-7) Lompac Products Schedule of Cost of Goods Manufactured Direct materials: Beginning raw materials inventory .................. \$340,000 Add: Purchases of raw materials ..................... 870,000 Raw materials available for use ...................... \$1,210,000 Deduct: Ending raw materials inventory .......... 210,000 Raw materials used in production ................... \$ 1,000,000 Direct labour .................................................... 245,000 Manufacturing overhead ................................... 560,000 Total manufacturing costs ................................. \$1,805,000 Add: Beginning work in process inventory .......... 150,000 \$1,955,000 Deduct: Ending work in process inventory .......... 170,000 Cost of goods manufactured ............................. \$ 1,785,000 Solution to Example 5 : This \$300 would be part of the October cost of goods manufactured (which is all costs relating to units completed during the period regardless of when incurred) but it would NOT be part of the October total manufacturing costs (which is manufacturing costs incurred during the period including any units not completed during the period).