COSTS CLASSIFICATIONS

EXERCISE 1 (2-18 P. 47 of the Horngren’s)

The Fremont NUMMI Plant assembles 2 types of cars (Corollas and Geo Prisms).

A separate assembly line is used for each type of cars.

REQUIRED:

Classify each of the following costs items as:

a) Direct or Indirect (D or I) costs with respect to the type of car assembled (Corolla or Geo Prism)
b) Variable or fixed (V or F) costs with respect to how the total cost of the plant change as the
number of cars assembled change. You will have 2 answers (D or I, and V or F ) for each of the
following items

Cost item D or I V or F
Cost of tires used on Geo Prisms
Salary of public relations manager of the plant
Annual awards diner of for corolla suppliers
Salary of engineer who monitors design changes on geo Prisms
Freight costs of corolla engines shipped from Corolla Japan to the plant
Electricity costs for the plant (single bill covers the entire plant)
Wages paid to temporary assembly-line workers
Annual fire-insurance policy cost for the plant
EXERCISE 2 (2-19 P. 47) Variable costs, fixed costs, total costs.
Ana Compo is getting ready to open a small restaurant.
She is in a thigh budget and must choose between the following long-distance phone plans:
Plan A: Pay 10 cents per minute of long-distance calling

Plan B: Pay a fixed monthly fee of $16 for up to 300 long-distance minutes and 5 cents per minute
thereafter (if she uses fewer than 300 minutes in any month, she still pays $16 for the month)

Plan C: Pay a fixed monthly fee of $20 for up to 480 long-distance minutes and 4 cents per minute there
after (if she uses fewer than 480 minutes, she still pays $20 for the month)

Required :
Which plan should Compo choose if she expects to make 100 minutes of long-distance calls? 300
minutes? And 500 minutes?
EXERCISE 3 (2-26 P. 49) Computing cost of goods manufactured and cost of goods sold.

The following are account balances relating to 2019 (in thousands):

Property tax on plant building $ 3,800

Marketing, distribution, and costumer- service costs 44,400
Finished goods inventory, January 1, 2019 32,400
Plant utilities 20,400
Work-in-process inventory, January 1, 2019 31,200
Depreciation of plant building 10,800
General and administrative costs (nonplant) 51,600
Direct materials used 104,400
Finished goods inventory, December 31, 2019 40,800
Depreciation of plant equipment 13,200
Plant repairs and maintenance 19,200
Work-in-process inventory, January 1, 2019 24,000
Direct manufacturing labour 40,800
Indirect manufacturing labour 27,600
Indirect materials used 13,200
Miscellaneous plant overheated 5,800

Required:
Compute cost of good manufactured and costs on goods sold.