Consider the following cost items: 1. Salaries of players on the Boston Red Sox.
ID: 2331420 • Letter: C
Question
Consider the following cost items:
1. Salaries of players on the Boston Red Sox.
2. Year-end completed goods of Levi Strauss jeans.
3. Executive compensation costs at Home Depot.
4. Advertising costs for Sony.
5. Costs incurred during the period to insure a Ford plant against fire and flood losses.
6. Current year’s depreciation on a Carnival Cruise Line ship.
7. The cost of printer ink and paper used during the period by Shutterfly.
8. Assembly-line wage cost incurred at a Kona bicycle plant.
9. Year-end production in process at Lenovo computer manufacturer.
10. The cost of products sold to customers of a Target store.
11. The cost of products sold to distributors of carpet manufacturer Shaw Floors.
Required:
1. Evaluate the costs just cited, and determine whether the associated dollar amounts would be found
on the firm’s balance sheet, income statement, or schedule of cost-of-goods-manufactured. (Note:
In some cases, more than one answer will apply.)
2. What major asset will normally be insignificant for service enterprises and relatively substantial
for retailers, wholesalers, and manufacturers? Briefly discuss.
3. Briefly explain the major differences between income statements of service enterprises versus
those of retailers, wholesalers, and manufacturers.
Explanation / Answer
Answer:
1
Items
Firms Balance sheet
Income Statement
Cost-of-goods-manufactured
1
Salaries of players on the Boston Red Sox.
X
2
Year-end completed goods of Levi Strauss jeans
X
3
Executive compensation costs at Home Depot
X
X
4
Advertising costs for Sony.
X
5
Costs incurred during the period to insure a Ford plant against fire and flood losses
X
6
Current year's depreciation on a Carnival Cruise Line ship
X
7
The cost of chemicals and paper used during the period
by Kodak.
X
8
Assembly-line wage cost incurred at a Kana bicycle plant
X
9
Year-end production in process at Gateway Computer
X
10
The cost of products sold to customers of a Target store
X
11
The cost of products sold to distributors of a carpet manufacturer, such as Shaw or Dalton
X
__________________________________________________________________
2
The major asset will normally be insignificant for service enterprises and relatively substantial for retailers, wholesalers, and manufacturers is inventory. The asset that differs among these businesses is because of the inventory.
We can see that in service businesses generally No inventory or few inventory are there. On the other hand in the retailers and the wholesalers business maintain adequate level of the inventory. Manufacturers business also carry the significant level of the inventories, generally they are bifurcated in following three categories:
____________________________________________________________
3
The service business's income statement has generally separate sections of
On the otherhand retailers, wholesalers and manufacturers has to disclose sales revenue, followed immediately by cost of goods sold and gross margin. Operating expenses are listed next followed by other income (expenses).
Items
Firms Balance sheet
Income Statement
Cost-of-goods-manufactured
1
Salaries of players on the Boston Red Sox.
X
2
Year-end completed goods of Levi Strauss jeans
X
3
Executive compensation costs at Home Depot
X
X
4
Advertising costs for Sony.
X
5
Costs incurred during the period to insure a Ford plant against fire and flood losses
X
6
Current year's depreciation on a Carnival Cruise Line ship
X
7
The cost of chemicals and paper used during the period
by Kodak.
X
8
Assembly-line wage cost incurred at a Kana bicycle plant
X
9
Year-end production in process at Gateway Computer
X
10
The cost of products sold to customers of a Target store
X
11
The cost of products sold to distributors of a carpet manufacturer, such as Shaw or Dalton
X
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