ACC210 Ch2 Set 3

Question 1

Prime costs

Answer 1

the costs of direct material and direct labour

Question 2

Product cost

Answer 2

the cost assigned to goods that were either manufactured or purchased for resale

Question 3

Cost of goods sold expense

Answer 3

the cost of the products that are sold, matched against revenue received to determine gross margin

Question 4

Inventoriable cost (inventoried cost)

Answer 4

another term for product cost, derived from the process of ‘storing’ the cost of inventory until the goods are sold

Question 5

Period costs

Answer 5

costs that are expensed in the accounting period in which they are incurred

Question 6

Selling expenses

Answer 6

the costs of marketing and distributing the firm’s goods or services

Question 7

Administrative expenses

Answer 7

the costs of running a business as a whole, including the costs of senior management and administrative support departments

Question 8

Raw material inventory

Answer 8

the major materials that will be used in production

Question 9

Work in process inventory

Answer 9

the products on which manufacture has begun but is only partially complete at balance date

Question 10

Finished goods inventory

Answer 10

the manufactured goods that are complete and ready for sale

Question 11

Schedule of cost of goods manufactured

Answer 11

schedule detailing the cost of direct materials, direct labour and manufacturing overhead applied to work in process during the period, and showing the changes to the work in process inventory

Question 12

Schedule of cost of goods sold

Answer 12

report showing the cost of goods sold, which is equal to the cost of goods manufactured adjusted for changes in finished goods inventory under/overapplied overhead goods inventory

Question 13

Cost of goods manufactured =

Answer 13

Cost of goods manufactured = beginning work in process + total manufacturing costs - ending work in process

Question 14

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Answer 14

Schedule of Cost of Goods Manufactured

Question 15

Schedule of Cost of Goods Sold

Answer 15

Schedule of Cost of Goods Sold for the year ended 31 December Finished goods inventory, 1 January…..$80,000 Add: Cost of goods manufacture…………….. 415,000 Cost of goods available for sale………………495,000 Deduct: Finished goods inventory, 31 December………………………………………………………. 70,000 Cost of goods sold………………………………………. $425,000

Question 16

Income Statement schedule

Answer 16

Income Statement for the year ended 31 December Sales revenue…………………………………….$700,000 Less: Cost of goods sold…………………….425,000 Gross profit……………………………………………275,000 Selling & administrative expenses..175,000 Profit before taxes……………………………….100,000 Income tax expense…………………………….40,000 Net profit……………………………………………….$60,000

Question 17

Cost of goods sold =

Answer 17

cost of goods sold = beginning finished goods + cost of goods manufactured - ending finished goods