Exam 1: B: Basic Cost Management Concepts

Correct Answer:

Verified

a.
Carter Company
Statement of Cost of Goods Manufactured
For the Year Ended December 31
$\begin{array}{l}\text { Direct materials: }\\\text { Beginning inventory* } & \$ 20,000 \\\text { Add: Purchases* } & 113,200 \\\text { Materials available } & \$ 133,200 \\\text { Less: Ending inventory* }(\$ 20,000 \times 1.20) & 24,000 \\\text { Direct materials used in production } & \$ 109,200 \\\text { Direct labour }[(.7 \times 273,000)-109,200] & 81,900 \\\text { Manufacturing overhead }[(.6 \times 273,000)-81,900] & 81,900 \\\text { Total manufacturing costs added } & \$ 273,000 \\\text { Add: Beginning work-in-process inventory* } & 18,000 \\\text { Total costs in process } & \$ 291,000 \\\text { Less: Ending work-in-process inventory* }(\$ 18,000 \times 0.50) & \$ 9,000 \\\text { Cost of goods manufactured } & \$ 282,000\end{array}$
b.
Carter Company
Income Statement
For the Year Ended December 31
$\begin{array}{lr}\text { Sales* } &&\$300,000 \\\text { Less: Cost of goods sold: } \\\text { Add: Cost of goods manufactured }& \$ 282,000 \\\text { Beginning inventory finished goods* } & 62,000 \\\text { Cost of goods available for sale } & \$ 344,000 \\\text { Less: Ending inventory finished goods* }(\$ 62,000+\$ 8,000) & 70,000&274,000\\\text { Gross margin } && \$ 26,000 \\\text { Less: Selling and administrative expenses* } && 18,000 \\\text { Net income* } &&18,000 \\* \text { These items are provided. } &\end{array}$

Correct Answer:

Verified

a.
$\begin{array}{c}\text { Fisher Enterprises}\\\text { Statement of Cost of Goods Manufactured}\\\text { For the Month of March}\\\\\begin{array}{llr}\text { Direct materials: }\\\text { Beginning inventory } & \$ 24,000 \\\text { Add: Purchases } & \underline{54,000} \\\text { Materials available } & \$ 78,000 \\\text { Less: Ending inventory } & \underline{26,100} \\\text { Direct materials used in production }&&51,900\\\text { Direct labour }\\ \text {Manufacturing overhead:}&&31,200\\ \text {Indirect labour }& \$ 15,000 \\ \text {Depreciation on machinery} &9,000 \\ \text { Rent on factory } &\underline{21,000}&\underline{45,000}\\ \text {Total manufacturing costs added } &&\$128,100\\ \text {Add: Beginning work-in-process inventory } &&\underline{6,300}\\ \text { Total costs in process } &&\$134,400\\ \text { Less: Ending work-in-process inventory} &&\underline{9,600}\\ \text {Cost of goods manufactured } &&\underline{\$124,800}\\\end{array}\end{array}$

b.
$\begin{array}{c}\text { Fisher Enterprises}\\\text { Income Statement}\\\text { For the Month of March}\\\\\begin{array}{lr}\text { Sales}&&\$165,900\\\text { Less: Cost of goods sold:}\\\text { Add: Cost of goods manufactured } & \$ 124,800 \\\text { Beginning inventory finished goods } & \underline{ 15,000} \\\text { Cost of goods available for sale } & \$ 139,800 \\\text { Less: Ending inventory finished goods } & \underline{17,100}& \underline{122,700 }\\\text { Gross margin } &&\$43,200 \\\text { Less: Selling and administrative expenses } && \underline{18,900 }\\\text { Operating income }&& \underline{\$24,300}\end{array}\end{array}$
c.Prime costs = $51,900 + $31,200 = $83,100
Conversion costs = $31,200 + $45,000 = $76,200

Correct Answer:

Verified

The cost management information system is an accounting information subsystem that is primarily concerned with producing outputs for internal users using inputs and processes needed to satisfy management objectives.The objectives are as follows: 1. To provide information for costing aut services, products, and ather objects of interest to management.
2. To provide information for planning and control.
3. Ta provide information for decision maloing. The major subsystems of a cost management information system are the cost accounting information system and the operational control information system.