Brief exercise 16.1 product vs. period costs during the year,


Product vs. Period Costs


During the year, Coronado Boat Yard has incurred manufacturing costs of $420,000 in building three large sailboats. At year-end, each boat is about 70 percent complete. How much of these manufacturing costs should be recognized as expense in Coronado Boat Yard’s income statement for the current year? Explain.




Direct Materials Used


During the current year, the cost of direct materials purchased by a manufacturing firm was $325,000, and the direct materials inventory increased by $65,000. What was the cost of direct materials used during the year?




Cost of Goods Sold


A company that assembles trucks produces 60 trucks during the current year and incurs $3 million of material, labor, and overhead costs. Fifty-three trucks were sold during the year and each is allocated the same amount of costs. How much of the $3 million assembly costs should

appear on the company’s income statement for the current year?







Manufacturing Overhead


During the current year, CF Manufacturing Co. incurred $370,000 of indirect labor costs, $15,000 of indirect materials costs, $125,000 of rent costs, and $163,000 of other overhead costs. How much did CF Manufacturing assign to the Work in Process Inventory account from the Manufacturing Overhead account?





Prime vs. Conversion Costs


Star Repairs Co. does all the repair work for a medium-sized manufacturer of handheld computer games. The games are sent directly to Star, and after the games are repaired, Star bills the game

manufacturer for cost plus a 20 percent markup. In the month of February, purchases of parts (replacement parts) by Star amounted to $97,000, the beginning inventory of parts was $38,500,and the ending inventory of parts was $15,250. Payments to repair technicians during the month of February totaled $52,500. Overhead incurred was $121,000.


a.     What was the cost of materials used for repair work during the month of February?



b.     What was the prime cost for February?



c.      What was the conversion cost for February?



d.     What was the total repair cost for February?




Reference Information for Each Exercise


For BE 16.1 see ( LOI 16-3 )


For BE 16.2 see ( LOI 16-4 )


For BE 16.3 see ( LOI 16-3 thru LOI 16-4 )


For BE 16.6 see ( LOI 16-4 thru LOI 16-5 )


For BE 16.9 see ( LOI 16-3 thru LOI 16-5 )








LO16-2 Describe the three basic types of

manufacturing costs.


Direct materials used consist of

the parts and mate-rials that become part of the finished

products. Direct labor cost consists of the wages paid

to factory employees who work directly on the products

being manufactured. Manufacturing overhead includes all

manufacturing costs other than the cost of materials used and

direct labor. Examples of manufacturing overhead include

depreciation of machinery and the plant security service



LO16-3 Distinguish between product costs and

period costs.


Product costs are the costs of creating inventory.

They are treated as assets until the related goods are sold, at

which time the product costs are deducted from revenue as the

cost of goods sold. Thus, goods manufactured this year but not

sold until next year are deducted from next year’s revenue.

Period costs are charged to expense in the accounting

period in which they are incurred. Period costs are not related

to production of goods; consequently, they are deducted from

revenue on the assumption that the benefits obtained from

the expenditures are received in the same period as the costs

are incurred. Period costs include general and administrative

expense, selling expense, and income taxes expense.





LO16-4 Describe how manufacturing costs flow

through perpetual inventory accounts.



costs originally are recorded in three controlling accounts:

Materials Inventory, Direct Labor, and Manufacturing

Overhead. As these costs become applicable to goods placed

into production, they are transferred from these manufacturing

cost accounts to the Work in Process Inventory account. As

units are completed, their cost is transferred from the Work

in Process account to Finished Goods Inventory. Then, when

units are sold, their costs are transferred from Finished Goods

Inventory to the Cost of Goods Sold account.


LO16-5 Distinguish between direct and indirect



Direct manufacturing costs (direct materials and

direct labor) can be identified with specific products. Indirect

manufacturing costs are the many elements of manufacturing

overhead that apply to factory operations as a whole and cannot


be traced to specific products.

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.

Read more

Free-revision policy

The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.

Read more

Privacy policy

The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.

Read more

Fair-cooperation guarantee

By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages