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Chapter 2

ADMS 2510 Chapter Notes - Chapter 2: Avon Products, Fixed Cost, Chief Financial Officer


Department
Administrative Studies
Course Code
ADMS 2510
Professor
Alison Beavis
Chapter
2

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Chapter 2
Cost Terms, Concepts, and Classifications
Exercise 2-1 (15 minutes)
1. The wages of employees who build the sailboats: direct labour cost.
2. The cost of advertising in the local newspapers: marketing and selling cost.
3. The cost of an aluminum mast installed in a sailboat: direct materials cost.
4. The wages of the assembly shop’s supervisor: manufacturing overhead cost.
5. Rent on the boathouse: a combination of manufacturing overhead, administrative, and
marketing and selling cost. The rent would most likely be prorated on the basis of the
amount of space occupied by manufacturing, administrative, and marketing operations.
6. The wages of the company’s bookkeeper: administrative cost.
7. Sales commissions paid to the company’s salespeople: marketing and selling cost.
8. Depreciation on power tools: manufacturing overhead cost.
© McGraw-Hill Ryerson Ltd. 2011. All rights reserved.
Solutions Manual, Chapter 2 1

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Exercise 2-3 (15 minutes)
Mountain High
Income Statement
For the month ended xxx
Sales........................................................ $3,200,00
0
Cost of goods sold:
Beginning merchandise inventory......... $ 140,00
0
Add: Purchases...................................... 2,550,00
0
Goods available for sale........................ 2,690,000
Deduct: Ending merchandise inventory. 180,00
0
2,510,00
0
Gross margin........................................... 690,000
Selling and administrative expenses:
Selling expense..................................... 110,000
Administrative expense......................... 470,00
0
580,00
0
Operating income.................................... $ 110,00
0
© McGraw-Hill Ryerson Ltd. 2012. All rights reserved.
2Managerial Accounting, 9th Canadian Edition

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Exercise 2-5 (30 minutes)
1. Per unit amounts:
Item
Variable expenses: Amount
July
Activity Per
Unit
Direct materials $200,0
00
1,000 $200
Direct labour $30,00
0
1,000 $30
Indirect materials $10,00
0
1,000 $10
Fixed expenses:
Installation supervisor’s
wages
$4,000 1,000 $4
Installation scheduler’s
wages
$2,000 1,000 $2
Warehouse expenses $5,000 1,000 $5
2. a & b
Item (1) (2) (3) (3) ÷
(1)
Variable expenses:
Augus
t
July
Per
August
Total
August
Per Unit
© McGraw-Hill Ryerson Ltd. 2011. All rights reserved.
Solutions Manual, Chapter 2 3
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