CHAPTER TWO : MANUFACTURING COST : CONCEPTS AND COMPONENTS

1. For the manufacturing company, identify the following as either a product cost or a
period cost
a) Depreciation on plant equipment
b) Depreciation on salespersons’ automobiles
c) Insurance on plant building
d) Marketing manager’s salary
e) Raw materials
f) Manufacturing overhead
g) Electricity bill for home office
h) Production employee wages

2. Jaffar , Inc., a retail distributor of futons, provided the following information for 2015.

RM
Merchandise Inventory, January 1 20,000
Merchandise Inventory, December 31 30,000
Sales Salaries Expense 50,000
Delivery Expense 18,000
Net purchase of Futons 265,000
Rent Expense 15,000
Utilities Expense 3,000
Freight In 15,000
Administrative Salaries Expense 64,000
Sales revenue 500,000
Units sold during the year 2,500 futons

Required

a) Calculate the cost of goods sold. What is the cost per futon sold?
b) Calculate the total period costs
c) Prepare Jaffar’s income statement for the year ended December 31, 2015. Do not
categorize operating expenses between selling and administrative.
Solution

(Horngren’s Accounting 10th edition)