Week One Textbook Problems
Megan O'Brien
Neil Fischer

BE16.9 - 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? 38,500+97,000-15,250= 120,250
b. What was the prime cost for February? 120,250+52,500=172,759
c. What was the conversion cost for February? 52,500+121,000=173,500
d. What was the total repair cost for February? 120,250+52,500+121,000=293,750

E16.1 - Listed below are eight technical accounting terms introduced or emphasized in this chapter:
Accounting Terminology
Work in Process Inventory Cost of finished goods manufactured
Conversion costs Cost of Goods Sold
Period costs Management accounting
Product costs Manufacturing overhead
Each of the following statements may (or may not) describe one of these technical terms. For each
statement, indicate the accounting term described, or answer "None" if the statement does not correctly
describe any of the terms.
a. The preparation and use of accounting information designed to assist managers in planning and
controlling the operations of a business. Management accounting
b. All manufacturing costs other than direct materials used and direct labor. Manufacturing overhead
c. Direct materials and direct labor used in manufacturing a product. None - Prime costs
d. A manufacturing cost that can be traced conveniently and directly to manufactured units of
product. none - direct manufacturing cost
e. The account debited at the time that the Manufacturing Overhead account is credited. Work in process
f. The amount transferred from the Work in Process Inventory account to the Finished Goods
Inventory account. Inventory cost finished goods manufactured
g. Costs that are debited directly to expense accounts when the costs are incurred. Period costs

3. E16.2 -Into which of the three elements of manufacturing cost would each of the following be classified?
a. Tubing used in manufacturing bicycles. Direct materials
b. Wages paid by an automobile manufacturer to employees who test-drive completed automobiles. Direct labor
c. Property taxes on machinery. Manufacturing overhead
d. Gold bullion used by a jewelry manufacturer. Direct materials
e. Wages of assembly-line workers who package frozen food. Direct labor
f. Salary of plant superintendent. Manufacturing overhead
g. Electricity used in factory operations. Manufacturing overhead
h. Salary of a nurse in a factory first-aid station. Direct Labor

4. E16.3 - Indicate whether each of the following should be considered a product cost or a period cost. If
you identify the item as a product cost, also indicate whether it is a direct or an indirect cost. For
example, the answer to item 0 is "indirect product cost." Begin with item a.
0. Property taxes on factory building. Period cost
a. Cost of disposal of hazardous waste materials to a chemical plant. Product cost - indirect
b. Amounts paid by a mobile home manufacturer to a subcontractor who installs plumbing in each
mobile home. Product cost - direct
c. Depreciation on sales showroom fixtures. Period cost
d. Salaries of security guards in an administrative office building. Product cost - direct
e. Salaries of factory security guards. Product cost - direct
f. Salaries of office workers in the credit department. Product Cost - indirect
g. Depreciation on the raw materials warehouse. Period Cost
h. Income taxes on a profitable manufacturing company. Period Cost

5. E16.6 - The Ryde and Rowe Inc. had the following account balances as of January 1:
Flow of Costs through
Manufacturing Accounts
LO16-3 through LO16-5
Direct Materials Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 89,200
Work in Process Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,400
Finished Goods Inventory . . . . . . . . . . . . . . . . . . . . . . .