1

Answers to Assigned Questions
Chapter 2&3 2‐33 (30 min.) 1.

2.

Comprehensive problem on unit costs, product costs.

If 2 kilograms of direct materials are used to make each unit of finished product,
100,000 units  2 kg, or 200,000 kg, were used at $0.70 per kilogram of direct materials
($140,000 ÷ 200,000 kg). (The direct material costs of $140,000 are direct materials used, not purchased.) Therefore, the ending inventory of direct materials is 2,000 kg 
$0.70 = $1,400

Direct materials costs
Direct manufacturing labour costs
Plant energy costs
Indirect manufacturing labour costs
Other indirect manufacturing costs
Cost of goods manufactured

Manufacturing Costs for 100,000 units
Variable
Fixed
Total
$140,000
$ –
$140,000
30,000
–
30,000
5,000
–
5,000
10,000
16,000
26,000 8,000 24,000 32,000
$193,000
$40,000
$233,000

Average unit manufacturing cost:
$233,000 ÷ 100,000 units = $2.33 per unit
Finished goods inventory in units: $20,970 (given) ÷ $2.33 per unit = 9,000 units 3.

4.

Units sold in 2013 = Beginning inventory + Production – Ending inventory

= 0 + 100,000 – 9,000 = 91,000 units Selling price per unit in 2013: $436,800 ÷ 91,000 = $4.80 per unit

Revenue (91,000 units sold  $4.80)
Cost of units sold: Beginning finished goods, Jan. 1, 2013 Cost of goods manufactured Cost of goods available for sale Ending finished goods, Dec. 31, 2013
Gross margin
Operating costs: Marketing, distribution, and customer‐service costs Administrative costs
Operating income

$436,800

$ 0 233,000
233,000
20,970

212,030
224,770

162,850 50,000

212,850
$ 11,920

2

2‐33 (cont’d) Note: Although not required, the full set of unit variable costs are:

Direct materials costs
Direct manufacturing labour costs Plant energy costs
Indirect manufacturing labour costs Other indirect manufacturing costs Marketing, distribution, and customer‐service costs

$1.40
0.30
0.05

= $1.93 per unit manuf’d (100,000)

0.10
0.08
1.35

} per unit sold (91,000)

2‐35 (30‐40 min.) Cost of goods manufactured. 1.

Canseco Company
Schedule of Cost of Goods Manufactured
For the Year Ended December 31, 2013
(in thousands)
Direct materials costs: Beginning inventory, Jan. 1, 2013
$22,000
Purchases of direct materials 75,000 Cost of direct materials available for use
97,000
Ending inventory, Dec. 31, 2013 26,000 Direct materials used Direct manufacturing labour costs Indirect manufacturing costs: Indirect manufacturing labour costs
$15,000
Plant insurance
9,000
Amortization—plant building and equipment
11,000
Repairs and maintenance—plant 4,000
Manufacturing costs incurred during 2013 Add beginning work in process inventory, Jan. 1, 2013 Total manufacturing costs to account for Deduct ending work in process inventory, Dec. 31, 2013 Cost of goods manufactured

$71,000
25,000

39,000
135,000
21,000
156,000
20,000
$136,000

3
2.

Canseco Company
Income Statement
For the Year Ended December 31, 2013
(in thousands)

Revenue
$300,000
Cost of goods sold: Beginning finished goods, Jan. 1, 2013 Cost of goods manufactured (Requirement 1) Cost of goods available for sale Ending finished goods, Dec. 31, 2013
Gross margin
Operating costs: Marketing, distribution, and customer‐service General and administrative
Operating income

$ 18,000 136,000
154,000
23,000

131,000
$169,000

$ 93,000 29,000

122,000
$ 47,000

3‐32 (20‐30 min.) Effects on operating income, pricing decision. 1.

Analysis of special order:
Sales, 5,000 units  $98 Variable costs: