1. A portion of a company\'s income statement is shown below: Sales$350,000 Cost
ID: 2437247 • Letter: 1
Question
1. A portion of a company's income statement is shown below: Sales$350,000 Cost of Goods Sold: Beginning InventoryS15,000 Purchases 250,000 Cost of Goods Available for Sale 265,000 Less: Ending Inventory13,000 Cost of Goods Sold Gross Profit What type of company is illustrated? 252,000 $ 98,000 A. Merchandising Corporation B. Manufacturing Corporation C. Service Corporation D. Not-for-profit Corporation 2. Which of the following is NOT a value chain activity? A. Human Resources B. Customer Service C. Marketing D. Production 3. Work in process inventory is: A. raw materials that will be used in manufacturing B. completed goods not yet sold C. goods that are in the manufacturing process but are not yet complete. D. goods that have been shipped to customers 4. Which of the following is a direct cost in the production of wine for a winery? A. Utilities B. Taxes C. Insurance D. Grapes 5. Which of the following is a NOT a component of manufacturing overhead? A. B. C. D. Depreciation on plant machinery Salaries of plant supervisors Oil and lubricants for machines Direct LaborExplanation / Answer
1. Solution: The correct option is “ A “
The type of company that is illustrated in the income statement is a Merchandising Corporation. The reason for this is the inclusion of purchases in the “COST OF GOODS SOLD” portion. Since the cost of gods sold contains Purchases and not units produced during the year, it is clear that it is not a manufacturing corporation but a merchandising corporation.
2. All of the activities mentioned are value chain activities. Production is a Primary Activity of the Value Chain and Human Resource, Customer Service and Marketing are Support Activities of the Value Chain .
3. : The correct option is “ C “
Work-in-proSolution cess inventory is goods that are in the manufacturing process but are not yet complete. Work- in-process inventory means that inventory of the company on which some work has been done.i.e it is partially done or complete and not fully complete as a finished product for the organization which would be ready for sale. This is that inventory which is yet to be completed.
4. Solution: The correct option is “ D”
The Direct cost in the production of wine in a winery is the cost of grapes because for a winery grapes is that direct input or direct material which is responsible or attributable for the production of wine.
5. Solution: The correct option is” D”
Direct labour is not a component of Manufacturing Overhead because direct labour is a direct cost of production i.e a variable cost that varies with the production level. Manufacturing overheads are all the indirect factory costs incurred for the production process and are fixed costs.
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