ADMS 2510 Managerial Accounting Week 1 in class problems 2-9, 2-17 - Questions and Solutions

Exercise 2-9: Gelinas Computer Co was organized on May1. On that date the company purchased 22,000 USB flash drives to be sold with personal computers, each preloaded with the company’s product information brochures. The front of the USB flash drives displays the company’s name and an attractive logo. Each USB flash drive cost Gelinas $6. During May, 19,500 USB flash drives were drawn from the raw materials inventory account. Of these, 500 were taken by the sales manager to an important sales meeting with prospective customers and handed out as advertising. The remaining USB flash drives drawn from inventory were sold by bundling them with units of the company’s product that were being manufactured during May. Of the units of product that were bundled with the USB flash drives during May, 95% were completed and transferred from work-in-process to finished goods. Of the units completed during the month, 80% were sold and shipped to customers. Required: Determine the cost of flash drives that would be in each of the following accounts at May 31st: a. Raw materials; b. Work-in-process; c. Finished goods; d. Cost of goods sold; e. Advertising expense. 1.a. USB flash drives purchased 22,000 USB flash drives drawn from inventory 19,500 USB flash drives remaining in inventory 2,500 Cost per USB flash drive × $6 Cost in Raw Materials Inventory at May 31 $15,000 b. USB flash drives used in production (19,500 – 500) 19,000 Units completed and transferred to Finished Goods (95% × 19,000) 18,050 Units still in Work in Process at May 31 950 Cost per flash drive × $6 Cost in Work in Process Inventory at May 31 $ 5,700 c. Units completed and transferred to Finished Goods (above) 18,050 Units sold during the month (80% × 18,050) 14,440 Units still in Finished Goods at May 31 3,610 Cost per USB flash drive × $6 Cost in Finished Goods Inventory at May 31 $21,660 d . Units sold during the month (above) 14,440 Cost per USB flash drive × $6 Cost in Cost of Goods Sold at May 31 $86,640