Chapter 4


Question Description:

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4-10. Jay Manufacturing began operations five years ago producing probos. The demand of probos far exceeded initial expectations. the company devoted a section of the plant to develop the new equipment. Within six months a machine was develop at a cost of $170,000 that successfully increased production and reduce labor. AFter this the company built three more machines of the same type at a cost of $80,000 each. a. In addition to satisfying a need that outsiders could not meet within the desire time, why might a company self-construct fixed assets for its own use? b. b. Generally, what costs should a company capitalize for a self-constructed fixed asset? c.Discuss the propriety of including in the capitalized cost of self-constructed assets: (1) The increase in overhead caused by the self-construction of fixed assets. (2) A proportionate share of overhead on the same basis as that applied to goods manufactured for sale. d. Discuss the accounting treatment for the $90,000 amount ($170,000 – $80,000) by which the cost of the first machine exceeded the cost of subsequent machines. Attachments: Worksheet-in-….xlsx

Answer

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