IZZA PAYABYAB

A-235

PROBLEM 4

CLASSSIFY EACH OF THE FOLLOWING COST OF BUG COMPANY IN TWO WAY; (A) AS VARIABLE (V) AS
FIXED COST (F); (B) AS INVENTORIABLE COST (I) OR PERIOD COST (P):

EXAMPLE: DIRECT LABOR (A) V OR F (B) I OR P

1. Wood used in bookcases V P
2. Machine depreciation based on machine hours. F I
3. Fire insurance on factory equipment F I
4. Writing used in radios V I
5. Indirect materials F I
6. Sales commissions V P
7. Bottles used to package liquid V I
8. Gasoline for delivery truck V I
9. Straight line depreciation of trucks used for delivery of sales F P
to customers
10. Machine operators hourly wages F I

PROBLEM 5

1. PC= Direct materials + Direct labor

= 50,000 + 52,000

= 102,000

2. CC= Direct labor + Factory overhead

= 52,000 + 95,000

=147,000

3. TOTAL PRODUCTION COST= Direct Materials + Direct labor + Factory overhead

= 50,000 + 52,000 + 95,000

= 197,000
4. TOTAL PERIOD= General and administrative expenses + Office salaries

= 2,600 + 18,600

= 21,200

5. 4,500 UNITS x 50

225,000 (COGS)

- 197,000 (Manufacturing expenses)

- 21, 200 (Operating expenses)

6,800  NET INCOME

PROBLEM 10
VALDEZ MOTOR CO. MAKES MOTORCYCLE MANAGEMENT WANTS TO ESTIMATE OVERHEAD
COST TO PLAN ITS OPERATION. A RECENT TRADE PUBLICATION REVEALED THAT OVERHEAD
COST TENDS TO VARY WITH MACHINE HOURS. TO CHECK THIS, THEY COLLECTED THE
FOILLOWING DATA FOR THE 12 MONTHS.

1. HL METHOD
= 5,475 – 3,975 / 210 – 145
= 1,500 / 65
= 23.0769 OR 23.08

FIXED COST = 5,475 – (23.0769 x 210) = 3,975 – (23.0769 x 145)

= 5,475 – 4,846.15 = 3,975 – 3,346. 15
= 628.85 = 628.85

2. ESTIMATED OVERHEAD COST = 5,100