LO 2.1Ballentine Manufacturing produces and sells lawnmowers through a national dealership network. They purchase raw materials from a variety of suppliers, and all manufacturing and assembly work is performed at their plant outside of Kansas City, Missouri. They recorded these costs for the year ending December 31, 2017. Construct an income statement for Ballentine Manufacturing to reflect their net income for 2017.
LO 2.1Tom West is a land surveyor who operates a small surveying company, performing surveys for both residential and commercial clients. He has a staff of surveyors and engineers who are employed by the firm. For the year ending December 31, 2017, he reported these income and expenses. Using this information, construct an income statement to reflect his net income for 2017.
LO 2.1Just Beachy is a retail business located on the coast of Florida where it sells a variety of beach apparel, T-shirts, and beach-related souvenir items. They purchase all of their inventory from wholesalers and distributors. For the year ending December 31, 2017, they reported these revenues and expenses. Using this information, prepare an income statement for Just Beachy for 2017.
LO 2.2Listed as follows are various costs found in businesses. Classify each cost as a fixed or variable cost, and as a product and/or period cost.
- Wages of administrative staff
- Shipping costs on merchandise sold
- Wages of workers assembling computers
- Cost of lease on factory equipment
- Insurance on factory
- Direct materials used in production of lamps
- Supervisor salary, factory
- Advertising costs
- Property taxes, factory
- Health insurance cost for company executives
- Rent on factory
LO 2.2Wachowski Company reported these cost data for the year 2017.
Use the data to complete the following table.
|Total prime costs
|Total manufacturing overhead costs
|Total conversion costs
|Total product costs
|Total period costs
LO 2.3Carolina Yachts builds custom yachts in its production factory in South Carolina. Once complete, these yachts must be shipped to the dealership. They have collected this shipping cost data:
- Prepare a scatter graph of the shipping data. Plot cost on the vertical axis and yachts shipped on the horizontal axis. Is the relationship between shipping costs and unit shipped approximately linear? Draw a straight line through the scatter graph.
- Using the high-low method, create the cost formula for Carolina Yachts’ shipping costs.
- The least-squares regression method was used and the analysis resulted in this cost equation: Y = 4,000 + 1,275x. Comment on the accuracy of your high-low method estimation.
- What would you estimate shipping costs to be if Carolina Yachts shipped 10 yachts in a single month? Use the cost formula you obtained in part B. Comment on how accurately this is reflected by the scatter graph you constructed.
- What factors other than number of yachts shipped do you think could affect Carolina Yachts’ shipping expense? Explain.