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HAWASSA UNIVERSITY Department of Accounting and Finance

Cost and Management Accounting - I Chapter Two
1. A company’s gross profit is 50% of cost of goods sold and its net income is 40% of gross profit. If the
total sales revenues during a period are Br 600,000, what is the operating expense in the period?
2. Elder Company is a manufacturer of personal computers. Various costs and expenses associated with
its operations are as follows.
1. Property taxes on the factory building.
2. Production superintendents’ salaries.
3. Memory boards and chips used in assembling computers.
4. Depreciation on the factory equipment.
5. Salaries for assembly line quality control inspectors.
6. Sales com m i ssi ons paid to sell personal computers.
7. Electrical components used in assembling computers.
8. Wages of workers assembling personal computers.
9. Soldering materials used on factory assembly lines.
10. Salaries for the night security guards for the factory building.
Instructions: - The Company intends to classify these costs and expenses into t he following
categories: List the items (1) through (10). For each item, indicate the cost category to which it
belongs
A. direct materials
B. direct labor
C . manufacturing overhead, and
D. Period costs.

3. Rapid Delivery Service reports the following costs and expenses in June 2011.
Indirect materials $ 5,400 Drivers’ salaries $11,000
Depreciation on delivery equipment 11,200 Advertising 1,600
Dispatcher’s salary 5,000 Delivery equipment repairs 300
Property taxes on office building 870 Office supplies 650
CEO’s salary 12,000 Office utilities 990
Gas and oil for delivery trucks 2,200 Repairs on office equipment 180
Instructions:- Determine the total amount of:
A. product costs and
B. period costs

4. A Company's manufacturing overhead is 20% of its total conversion costs. If direct labor is $45,000 and
if direct materials are $53,000, the manufacturing overhead is:
5. G7 Company's direct labor is 40 percent of its conversion cost. If the manufacturing overhead cost for the
last period was $60,000 and the direct materials cost was $30,000, the direct labor cost was:

6. The following data (in thousands of dollars) have been taken from the accounting records of Larder
Corporation for the just completed year.
Sales $950
Purchases of raw materials $170
Direct labor $210
Manufacturing overhead. $200
Administrative expenses $180

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HAWASSA UNIVERSITY Department of Accounting and Finance
Cost and Management Accounting - I Chapter Two
Selling expenses $140
Raw materials inventory, beginning $70
Raw materials inventory, ending $80
Work in process inventory, beginning $30
Work in process inventory, ending $20
Finished goods inventory, beginning $100
Finished goods inventory, ending $70
Required:
A. Prepare a Schedule of Cost of Goods Manufactured in good form.
B. Compute the Cost of Goods Sold.
C. Using data from your answers above as needed, prepare an Income Statement
7. The following data are for Marvin Department Store. The account balances (in thousands) are for 2011.
Marketing, distribution, and customer-service costs $ 37,000
Merchandise inventory, January 1, 2011 27,000
Utilities 17,000
General and administrative costs 43,000
Merchandise inventory, December 31, 2011 34,000
Purchases 155,000
Miscellaneous costs 4,000
Transportation-in 7,000
Purchase returns and allowances 4,000
Purchase discounts 6,000
Revenues 280,000
Required:
A. Compute the cost of Merchandise purchased and
B. The cost of Merchandise sold.
C. Prepare the income statement for 2011.

8. In a production process, the total prime cost incurred is Br 400,000 and the total conversion cost is Br
320,000. If the sum of direct material cost and MOH cost is Br 500,000, what will be the total cost
incurred in the period?
9. A fire destroyed XYZ manufacturing company completely on January 29, 2011. Fortunately certain
accounting records were kept in another building. It revealed the following for the period from January 1,
2011 to January 29, 2011.

Direct material purchased Br 160,000

WIP January 1 34,000
Direct material January 1,2011 16,000
Finished Goods Inventory January1,2004 36,000
MOH cost 40% of conversion cost
Revenue 500,000
Direct labor cost 180,000
Prime cost 294,000
Gross profit based on sales 20%
Cost of Goods available for sale 450,000

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HAWASSA UNIVERSITY Department of Accounting and Finance
Cost and Management Accounting - I Chapter Two
Required: Chapter Two
A. Direct material destroyed
B. Cost of goods manufactured
C. Finished goods destroyed
D. WIP destroyed
10. Melat recently took over as the controller of Johnson Brothers Manufacturing. Last month, the previous
controller left the company with little notice and left the accounting records in disarray. Melat needs the
ending inventory balances to report first quarter numbers. For the previous month (March 2011) Melat
was able to piece together the following information:
Direct materials purchased $ 240,000
Work-in-process inventory, 3/1/2011 70,000
Direct materials inventory, 3/1/2011 25,000
Finished goods inventory, 3/1/2011 320,000
Conversion Costs 660,000
Total manufacturing costs added during the period 840,000
Cost of goods manufactured 4 times direct materials used
Gross margin as a percentage of revenues 20%
Revenues 1,037,500

Required: - Calculate the cost of:

I. Finished goods inventory, 3/31/2011
II. Work-in-process inventory, 3/31/2011
III. Direct materials inventory, 3/31/2011

11. An incomplete cost of goods manufactured schedule is presented below.

Garcia Manufacturing Company
Cost of Goods Manufactured
Schedule for the Year Ended December 31, 2011
Work in (1/1)

Raw materials (1/1) $

Add: Raw
Total raw for
Less: Raw

$1

Total
Total
Total cost of work in
Less: Work in
Cost of

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HAWASSA UNIVERSITY Department of Accounting and Finance
Cost and Management Accounting - I Chapter Two
Instructions:- Complete the cost of goods manufactured schedule for Garcia Chapter Two
Manufacturing Company.

12. The following information is available for Rolen Manufacturing Company.

Raw material inventory April 1 $10,000
Raw material inventory April 31 $14,000
Work in process inventory 5,000
Work in process inventory 3,500
Materials purchased in April $98,000
Direct labor in April 60,000
Manufacturing overhead in April 180,000
Instructions:- Prepare the cost of goods manufactured schedule for the month of April.

13. Manufacturing cost data for Enos Company are presented below. Determine the missing
amount of different cost items.
Case A Case B
Case C
Direct materials used (a) $58,400 $130,000
Direct labor $57,000 86,000 (g)
Manufacturing overhead 46,500 81,600 102,000
Total manufact ur ing costs 185,650 (d) 253,700
Work in process 1/1/11 (b) 16,500 (h)
Total cost of work in process 221,500 (e) 337,000
Work in process 12/31/11 (c) 11,000 70,000
Cost of goods manufactured 185,275 (f) (i)
Instructions: - Determine the missing amount of different cost items, and prepare a
condensed cost of goods manufactured schedule

14. Incomplete manufacturing cost data for Mabry Company for 2011 are presented as follows for
four different situations.
DM DL Used Manufacturing Total Manufacturing WIP 1/1 WIP Cost of Goods
Used Overhead Costs 12/31 Manufactured
(1) $127,00 $140,000 $ 77,000 (a) $33,00 (b) $360,000
(2) (c) 200,000 132,000 $450,000 (d) $40,000 470,000
(3) 80,00 100,000 (e) 245,000 60,000 80,000 (f)
(4) 70,00 (g) 75,000 288,000 45,000 (h) 270,000
Required:
A. Determine the missing amount of different cost items
B. Prepare a condensed cost of goods manufactured schedule for situation (1) for the year
ended December 31, 2011.
15. The following balances are from the accounts of Secol Machining Company:
January 1 (Beginning) December 31 (Ending)
Direct materials inventory $48,000 $59,000
Work-in-process inventory 58,000 56,000
Finished goods inventory 43,800 45,000
NB: Direct materials purchased during the year amount to $310,000, and the cost of goods sold for the
year was $1,075,000.
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HAWASSA UNIVERSITY Department of Accounting and Finance
Cost and Management Accounting - I Chapter Two
Chapter Two
Required: - Reconstruct a cost of goods sold statement and determine in the following missing data:
A. Cost of direct materials used during the year.
B. Cost of goods manufactured during the year.
C. Total manufacturing costs incurred during the year.
16. The following data refer to one year and find the missing data.
Direct material inventory, January 1 $ 2,600
Direct material inventory, December 31 a
Work-in-process inventory, January 1 2,700
Work-in-process inventory, December 31 3,800
Finished goods inventory, January 1 1,900
Finished goods inventory, December 31 300
Purchases of direct materials 16,100
Cost of goods manufactured during the year b
Total manufacturing costs 55,550
Cost of goods sold 56,050
Gross margin c
Direct labor 26,450
Direct materials used 14,600
Manufacturing overhead 13,800
Sales revenue 103,300

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