2-27

1. $70,000

$60,000

$50,000

$40,000
Total Costs

$30,000

$20,000

$10,000

$0

0 5000 10000
Number Of Flanges

Notes :
The production costs include $28.000 of fixed manufacturing costs but not the $10.000 of period

2. Manufacturing cost per unit (assume sells 5000 flanges)

$3.80 x 5000 + $28,000 = $47,000
average (unit) cost
$47,000 / 5000 units = $9.40 per unit

this is flora's selling price of $10 per flange. However, in order to make a profit. Gayle's Glasswork
thus total cost, both inventoriable (manufacturing) and period (non-manufacturing) is $9.40 + $2

3. Assume Gayle's Glassworks produces 10.000 flanges, total inventoriable cost :

variable cost + fix manufacturing cost = total manufacturing cost
( $3.80 x 10000 ) + $28,000 = $66,000
 $66,000 / 10000 = $6.60 per flange

Unit total cost including both inventoriable and period cost :

( $66,000 + $10,000 ) / 10000 = $7.60 per flange
Gayle's Glasswork will be able to sell the flanges for less than Flora and still make a profit

2-28 a. Cost of lettuce and tomatoes on sale in Star Market's produce department (inventoriable costs)
b. Electricity used to provide lighting for assembly-line workers at Maytag refrigerator-assembly plant (
c. Depreciation on Yahoo!'s computer equipment used to update its Web site (period costs)
d. Electricity used to provide lighting for Star Market's store aisles (period costs)
e. Depreciation on Maytag's computer equipment used for quality testing of refrigerator components d

2-29 1a. Marvin Department Store

Schedule of Cost Goods Purchased
For the Year Ended December 31, 2014
(in thousands)

Purchases $ 155,000
Add transportation-in $ 7,000
$ 162,000

Deduct :
Purchase returns and allowances $ 4,000
Purchase discounts $ 6,000 $ 10,000

Cost of goods purchased $ 152,000

1b. Marvin Department Store

Schedule of Cost Goods Sold
For the Year Ended December 31, 2014
(in thousands)

Beginning merchandise inventory 1/1/2014 $ 27,000

Cost of goods purchased $ 152,000
Cost of goods available for sale $ 179,000
 Ending merchandise inventory 12/31/2014 $ 34,000
Cost of goods sold $ 145,000

2. Marvin Departemen Store

Income Statement
Year Ended December 31, 2014
(in thousands)

Revenues $ 280,000
Cost of goods sold $ 145,000
Gross margin $ 135,000
Operating costs
Marketing, distribution, and
customer service cost
$ 37,000
Utilities $ 17,000
General and administrative costs $ 43,000
Miscellaneous costs $ 4,000
Total operating costs $ 101,000
Operating income $ 34,000
ot the $10.000 of period cost. Variable cost = $1 per flange for materials and $2.80 per flange ( $28 / 10 flanges per hour ). T

profit. Gayle's Glassworks also needs to cover the period (non-manufacturing) of $10,000 / 5000 = $2 per unit
ufacturing) is $9.40 + $2 = $11.40. Gayles's Glasswork cannot sell below flora's price of $10 and still make a profit on the fla
till make a profit

nventoriable costs)
gerator-assembly plant ( inventoriable costs)
(inventoriable cost)

frigerator components during the assembly process (inventoriable costs)

10 flanges per hour ). Total direct manufacturing labor $3.80 per flange.

make a profit on the flanges.