Chapt

er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Tr
ue/
Fal
seQuest
ions

1.Thesum ofal
lcost
sofmanuf
act
uri
ngcost
sexceptdi
rectmat
eri
alsi
scal
l
ed
manufact
uri
ngover
head.

Ans:
  
Fal
se AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
  
Easy

2.Conv
ersi
oncosti
sthesum ofdi
rectl
aborandmanuf
act
uri
ngov
erhead.

Ans:
  
True AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Level
: 
 Easy

3.Pr
imecosti
sthesum ofdi
rectl
aborandmanuf
act
uri
ngov
erhead.

Ans:
  
Fal
se AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
  
Easy

4.Thr
eadusedintheproducti
onofmat
tresses,
ani
ndi
rectmat
eri
al,
iscl
assi
fi
ed
asmanufact
uri
ngoverhead.

Ans:
  
True AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Level
: 
 Easy

5.Per
iodcost
sar
eal
soknownasi
nvent
ori
abl
ecost
s.

Ans:
  
Fal
se AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
  
Easy

6.Al
lcost
sinamer
chandi
singcompanyar
eper
iodcost
s.

Ans:
  
Fal
se AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
  
Easy

7.Thecostofgoodssoldofamanufact
uringcompanyequalsbegi
nni
ngfi
nished
goodsinvent
ory+costofgoodsmanufactur
ed-endi
ngfini
shedgoods
i
nventory
.

Ans:
  
TrueAACSB:
  
Ref
lect
ive 
Thi
nki
ngAI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ngAI
CPA 
FN:
 
 Repor
ti
ng,
 
Me
LO: 
 3 Level
:
  
Easy

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
7
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

8.Avar
iabl
ecostisconstanti
fexpr
essedonaperunitbasi
sbutt het
otal
dol
l
ar
amountchangesasthenumberofunit
sincr
easesordecreases.

Ans:
  
True AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Level
: 
 Easy

9.Asacti
vi
tyincr
easeswi
thi
nther
elev
antr
ange,
fixedcost
sremai
nconst
antona
peruni
tbasis.

Ans:
  
Fal
se AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
  
Easy

10.Dir
ectcost
sareof
tendi
ff
icul
ttot
racet
othespeci
fi
ccostobj
ectunder
consi
derat
ion.

Ans:
  
Fal
se AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 6 Lev
el:
  
Easy

11.All
ofthefoll
owingareexamplesofopport
unit
ycosts:
sal
arygi
venuptostar
ta
busi
ness;rent
alincomegivenupwheny ouli
veinahouseyouown;i
nter
est
i
ncomet hatcouldbeearnedonmoneyspentf oracar
.

Ans:
  
True AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 7 Level
: 
 Medi
um

12.Theamountt
hatwaspai
dbyacompanyf
orabui
l
dingt
ohousei
tsoper
ati
onsi
s
anexampl
eofasunkcost.

Ans:
  
True AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 7 Level
: 
 Easy

13.Themostef
fectivewayt omini
mizequal
it
ycostswhilemai
ntai
ninghighqual
i
ty
i
stoavoi
dhavingqual i
typrobl
emsinthefi
rstpl
ace.Thi
sisthereasonfor
i
ncur
ri
ngappraisalcosts.

Ans:
  
Fal
se AACSB:
 
 Ref
lect
ive 
Thinking AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2B LO: 
 9 Level: 
 Medium

14.External
fai
lur
ecostsar
eli
mit
edt
othecost
sofr
epai
ri
ngdef
ect
ivepr
oduct
s
thatareunderwar
rant
y.

Ans:
  
Fal
se AACSB:
 
 Ref
lect
ive 
Thinki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2B LO: 
 9 Level: 
 Har
d

2-
8 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

15.Thecost
soflostsal
esar
isi
ngf
rom poorqual
i
tyar
eal
way
sincl
udedi
nqual
i
ty
costr
epor
ts.

Ans:
  
Fal
se AACSB:
 
 Ref
lect
ive 
Thinki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2B LO: 
 10 Level:
  
Medium

Mul
ti
pleChoi
ceQuest
ions

16.Thecostofthecushi
onsthatar
eusedt
omanuf
act
uresof
asi
sbestdescr
ibed
asa:
A) manuf actur
ingover
headcost
.
B) per i
odcost.
C) v ar
iabl
ecost.
D) conv er
sioncost.

Ans:
  C AACSB: 
 
Reflecti
ve 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1,
2,
5 Lev el
: 
 Medium

17.ChezpereCompanymanufactur
esandsel l
swashingmachines.I
norderto
makeassemblyofthemachinesfasterandeasi
er,someofthemetalpart
sin
themachinesar
ecoatedwit
hgr ease.Howshouldthecostofthi
sgreasebe
classi
fi
ed?

Di
rectMater
ial
Cost Fi
xedCost
A) Yes Yes
B) Yes No
C) No Yes
D) No No

Ans:
  D AACSB: 
 Refl
ecti
ve 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1,
5,
6 Lev el
:
  Hard

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
9
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

18.Asecur
it
yguar
d'swagesataf
act
orywoul
dbeanexampl
eof
:

I
ndi
rectl
abor Fi
xedmanuf
actur
ingov
erhead
A) No No
B) Yes Yes
C) Yes No
D) No Yes

Ans:
  B AACSB:
  
Refl
ect
ive 
Thi
nki
ng AICPA BB: 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1,
5 Level:
 
 Medi
um Sour ce:
  
CPA, 
adapted

19.Manuf
acturi
ngoverheadincludes:
A) alldir
ectmateri
al,
directlaborandadmini
strat
ivecosts.
B) allmanufact
uringcostsexceptdirectl
abor.
C) allmanufact
uringcostsexceptdirectl
aboranddirectmater
ial
s.
D) allsel
li
ngandadmi nistrat
ivecost
s.

Ans:
  
C AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Easy

20.Mater
ialsusedi ntheoperati
onofafactor
y,suchascl
eaningsuppl
i
es,
thatar
e
notanintegral
par toft
hef i
nalpr
oductshoul
dbeclassi
fi
edas:
A) di rectmat er
ial
s.
B) aper i
odcost .
C) admi ni
strati
veexpense.
D) manuf acturi
ngoverhead.

Ans:
  
D AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Easy

21.Theonecostt hatwouldbecl
assi
fi
edaspar
tofbot
hpr
imecostandconv
ersi
on
costwouldbe:
A) i ndirectmateri
al.
B) di rectlabor.
C) di rectmat er
ial
.
D) i ndirectl
abor.

Ans:
  
B AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Easy

2-
10 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

22.Di
rectcosts:
A) ar eincur
redtobenef
itapart
icul
araccounti
ngperi
od.
B) ar eincur
redduetoaspecif
icdecisi
on.
C) canbeeasi lytr
acedtoaparti
cul
arcostobject.
D) ar ethevari
abl
ecostsofproduci
ngapr oduct.

Ans:
  
C AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Easy

23.Pr
imecost sconsistof:
A) directmat er
ialsandthevari
ableport
ionofmanufact
uri
ngov er
head.
B) directlaborandindir
ectlabor
.
C) indirectl
aborandt hefi
xedport i
onofmanufact
uri
ngoverhead.
D) directlaboranddirectmateri
als.

Ans:
  
D AACSB: 
 Ref
lect
ive 
Thinki
ng AICPA BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Easy Sour ce:
 
 CMA, 
adapted

24.Whi
choft hef ol
lowingisNOTaper i
odcost ?
A) Mont hlydepreci
ati
onoft heequipmentinaf i
tnessroom usedbyfact
ory
wor kers.
B) Salar yofabilli
ngclerk.
C) Insur anceonacompanyshowr oom, wher
ecur rentandpotent
ial
cust omer scanv i
ewnewpr oducts.
D) Costofasemi narconcerni
ngt axlawupdatesthatwasat t
endedbythe
company '
scontrol
ler
.

Ans:
  
A AACSB: 
 
Refl
ect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Medi
um

25.Theannuali
nsurancepremium forthef act
orybuil
dingwouldbea:
A) f i
xedcost,
periodcost,andindirectcostwit
hregardtounitsofpr
oduct.
B) f i
xedcost,
productcost,anddi r
ectcostwi t
hregardtounit
sofproduct.
C) v ari
abl
ecost,productcost,di
rectcostwithregardtounit
sofproduct.
D) f i
xedcost,
productcost,indir
ectcostwi t
hregardtounit
sofproduct.

Ans:
  D AACSB: 
 Ref
lecti
ve 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2,
5,
6 Lev el
:
  Medium

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
11
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

26.Fact
orysuppl
iesinamanuf actur
ingpl
antar
emostl
i
kel
y:
A) sunkcost s.
B) per i
odcosts.
C) v ar
iabl
ecost s.
D) excludedf r
om productcosts.

Ans:
  C AACSB: 
 
Reflecti
ve 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2,
5,
7 Lev el
: 
 Medium

27.Al
loft
hef ol
lowingareexamplesofpr oductcostsexcept
:
A) depreciati
onont hecompany '
sretail
outlet
s.
B) salaryoftheplantmanager.
C) insuranceonthef act
oryequipment.
D) rentalcostsofthefactor
yfacil
i
ty.

Ans:
  
A AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Easy

28.I
nvent
ori
able(i
.e.
,product
)cost
sthathav
ebecomeexpensescanbef
oundi
n:
A) peri
odcost s.
B) sell
ingexpenses.
C) costofgoodssol d.
D) admi ni
str
ativ
eexpenses.

Ans:
  
C AACSB: 
 
Refl
ect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Medi
um

29.Thef
ixedpor
ti
onoft
hecostofel
ect
ri
cit
yforamanuf
act
uri
ngpl
anti
sa:

Per
iodcost Pr
oductcost
A) Yes No
B) Yes Yes
C) No Yes
D) No No

Ans:
  
C AACSB: 
 
Refl
ect
ive 
Thi
nki
ng AICPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Medi
um Sour ce:
 
 CPA,
 
adapt
ed

2-
12 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

30.Whi
chofthefoll
owingst at
ement saboutproductcostsist
rue?
A) Productcostsarededuct edfrom r
evenuewhent heproduct
ionpr
ocessis
completed.
B) Productcostsarededuct edfrom r
evenueasexpendituresaremade.
C) Productcostsassociatedwithunsoldfini
shedgoodsandwor ki
nprocess
appearonthebal ancesheetasasset s.
D) Productcostsappearonf i
nanci
alstatementsonlywhenproduct
sare
sold.

Ans:
  
C AACSB: 
 
Refl
ect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Medi
um

31.Conv
ersioncost
sconsi
stof:
A) directandi
ndir
ectl
abor.
B) directl
aboranddir
ectmater
ial
s.
C) directl
aborandmanufact
uri
ngoverhead.
D) primecostsandmanufactur
ingover
head.

Ans:
  
C AACSB: 
 Ref
lect
ive 
Thinki
ng AICPA BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Easy Sour ce:
 
 CMA, 
adapted

32.Whi
chofthefol
lowingi sanexampleofaperiodcost?
A) Fabri
cusedt opr oducemen'spants.
B) Advert
isi
ngcostf oranewproductcampaign.
C) Fact
orysupervisor '
ssal
ary
.
D) Monthlydepreciationofpr
oducti
onequi
pment .

Ans:
  
B AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Easy

33.Inthepreparati
onoft heschedul eofCostofGoodsManuf act
ured,
the
account
anti ncorrect
lyincludedaspar tofmanuf actur
ingov er
headtherent
al
expenseont hefirm'sretailfaci
l
iti
es.Thisinclusionwoul d:
A) ov erstateper i
odexpensesont heincomest at
ement .
B) ov erstatethecostofgoodssol dont heincomest atement.
C) under st at
et hecostofgoodsmanuf actured.
D) hav enoef fectont hecostofgoodsmanuf actured.

Ans:
  
B AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 4 Lev
el:
 
 Hard

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
13
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

34.DescoElectronics,Inc.manuf act
urescarr
adi
os.Thedir
ectmaterial
cost
assi
gnedt ocarr adiost hatDescost ar
teddur
ingtheper
iodbutdidnotful
l
y
complet
ewoul dbef oundi ntheendingbal
anceof:
A) r awmat eri
alsinv entory.
B) wor kinprocessi nventory.
C) f i
nishedgoodsi nventory.
D) bot hr awmat erialsi
nv entor
yandwor ki
nprocessi
nventor
y.

Ans:
  
B AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 4 Lev
el:
 
 Easy

35.RotongaManuf act
uri
ngCompanyl easesavehicl
ethati
tusest
odeliv
eri
ts
fi
nishedproductst
ocustomers.Whichofthefoll
owingt
ermscouldbeusedto
correct
lydescr
ibethemonthl
yleasepaymentsmadeont hedel
iver
yvehi
cle?

Di
rectCost Fi
xedCost
A) Yes Yes
B) Yes No
C) No Yes
D) No No

Ans:
  C AACSB:
  
Refl
ect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5,
6 Level:
 
 Medi
um

36.Wit
hinther elev
antrange,asthenumberofuni
tsproducedi
ncr
eases:
A) t hev ari
ablecostperunitremainst
hesame.
B) f i
xedcost sintotalremainthesame.
C) v ariablecostsincr
easeint ot
al.
D) al loftheabov e.

Ans:
  
D AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Easy

37.Whi
choft hefoll
owingproduct
ioncosts,i
fexpr
essedonaperunitbasi
s,woul
d
bemostli
kelytochangesignif
icantl
yastheproduct
ionl
evel
var
ies?
A) Directmat er
ial
s.
B) Directlabor.
C) Fixedmanuf actur
ingoverhead.
D) ResponsesAandBar ebothcorrect
.

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Medi
um

2-
14 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

38.Whenthelevelofacti
vi
tydecreaseswithi
nther
elev
antr
ange,
thef
ixedcostper
uni
twi
ll:
A) decr ease.
B) increase.
C) remai nthesame.
D) Theef f
ectcannotbepredicted.

Ans:
  
B AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Medi
um

39.Whi
choft
hef
oll
owi
ngi
scor
rectconcer
ningr
eact
ionst
oINCREASESi
nact
ivi
ty?

Tot
alVar i
ableCost Var
iabl
eCostPerUni
t
A) Increases Decreases
B) Constant Decreases
C) Decreases Constant
D) Increases Constant

Ans:
  
D AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Easy

40.Thedi
sti
nctionbet
weeni ndir
ectanddi r
ectcostsdependson:
A) whet heracostdif
fersbetweenal t
ernat
ives.
B) whet heracostisvari
ableorfixed.
C) whet heracostisapr oductoraperiodcost.
D) whet heracostcanbeeasi l
ytracedtothecostobjectunderconsi
der
ati
on.

Ans:
  
D AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 6 Lev
el:
 
 Easy

41.Anexampl eofaf ixedcostt hatwouldbeconsideredadi rectcosti

s:
A) acostaccount ant'
ssalarywhenthecostobj ectisauni tofpr
oduct.
B) t her ental
costofawar ehousetostorefi
nishedgoodswhent hecost
objectisthePur chasingDepartment.
C) apr oducti
onsuper visor'
ssalar
ywhent hecostobj ecti
veistheProduct
ion
Depar tment.
D) Boar dofDirectors'
feeswhent hecostobjectistheMar keti
ngDepartment.

Ans:
  
C AACSB:  
Anal
yti
c AICPA BB: 
 Cr
iti
cal
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 6 Lev
el:
 
 Har
d Sour ce:
 
 CMA, 
adapted

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
15
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

42.Whichofthef oll
owingstatementsconcerningdirectandindir
ectcostsi
sNOT
tr
ue?
A) Whet herapar t
icul
arcostisclassi
fi
edasdi rectorindi
rectdoesnot
dependont hecostobject.
B) Adi rectcostisonet hatcanbeeasi l
ytracedt otheparti
cul
arcostobject
.
C) Thef act orymanager'ssalarywoul
dbecl assifi
edasani ndir
ectcostof
producingoneuni tofproduct.
D) Apar t
icularcostmaybedi r
ectori
ndirect,
dependingont hecostobject.

Ans:
  
A AACSB: 
 
Refl
ect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 6 Lev
el:
 
 Medi
um

43.Alloft
hecostcat egori
esli
stedbel
owar
eusual
l
yfoundi
nacompany
's
accounti
ngr ecor ds,exceptfor
:
A) sunkcost s.
B) i nventoriablecost s.
C) oppor t
uni tycosts.
D) mar ketingcost s.

Ans:
  
C AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 7 Lev
el:
 
 Easy

44.CobraMi ni ngCompanyspent$200mi l
lionfi
veyear
sagot odevel
op
undergroundmi ningandmi l
li
ngoper at
ionsinaremoteareaofawester
nstate.
Metalspr iceshavesi ncedeclinedpreci
pitousl
yandthecompanyisconsi
deri
ng
abandoni ngt heoper ati
on.Thet er
mt hatwouldbestdescri
bethe$200mill
i
on
expenditur ewhenconsi der
ingtheabandonmentdeci si
onis:
A) sunkcost .
B) v ari
abl ecost .
C) di f
fer enti
alcost .
D) oppor tuni
tycost .

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
ng
LO: 
 7 Lev
el:
 
 Medium

2-
16 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

45.I
nadeci sion-maki ngsit
uationinvol
vi
nganasset ,
whichofthefol
lowingcost
sis
gener
allyNOTconsi der
edr el
evanttothedecisi
onandshouldbei gnor
ed?
A) I ncrement al costofselecti
ngonealter
nativ
eov eranot
her.
B) Oppor tunitycostofusi ngtheasseti
nanal ter
nativ
e.
C) Di fferenti
al costbetweent woalt
ernati
ves.
D) Theor i
ginal costoftheasset.

Ans:
  
D AACSB:  
Anal
yti
c AICPA 
BB: 
 Cri
ti
cal
 Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
ng
LO: 
 7 Lev
el:
 
 Easy Source:
  
CMA, 
adapted

46.Asunkcostis:
A) acostt hatisplannedtobei ncurr
edinthenearf
utur
e.
B) irr
elev
antf ordecisi
onmaki ng.
C) acostconnect edwi t
hdr i
l
li
ngf oroil
.
D) affect
edbychangesi nthelevelofacti
vi
ty.

Ans:
  
B AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
LO: 
 7 Lev
el:
  
Easy

47.Thepotenti
albenef
itt
hatisgi
venupwhenoneal t
ernat
ivei
ssel
ect
edov
er
anot
heriscall
ed:
A) Asunkcost .
B) Anoppor t
unit
ycost.
C) Bot hasunkcostandanoppor t
unit
ycost.
D) Nei therasunkcostnoranoppor
tuni
tycost
.

Ans:
  
B AACSB: 
 Ref
lect
ive 
Thi
nki
ng AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
LO: 
 7 Lev
el:
  
Easy

48.Adir
ectlaboroverti
mepr emium shouldbechargedtoaspecifi
cjobwhent he
ov
erti
mei scausedbyt he:
A) increasedov eral
llev
elofactiv
ityi
nthefactor
y.
B) cust omer'
sr equi
rementforearlycomplet
ionofthejob.
C) management '
sfai
luretoincl
udethejobintheproducti
onschedul
e.
D) management '
srequir
ementthatthejobbecompl et
edbeforetheannual
fact
oryclosureduet ovacati
on.

Ans:
  
B AACSB:
 
 Refl
ect
ive 
Thi
nki
ng AI
CPA 
BB:  
Cri
ti
cal
 
Thinking AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2A LO: 
 8 Level:
 
 Medi
um Source:
  
CPA, 
adapted

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
17
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

49.Theidl
etimecostofassemblyl
i
newor
ker
sinamanuf
act
uri
ngcompanyi
s
usual
lyi
ncludedasapartof
:
A) sel l
i
ngcost .
B) di r
ectlaborcost
.
C) admi nistr
ati
vecost
.
D) manuf act
uri
ngover
headcost
.

Ans:
  
D AACSB:
  
Refl
ect
ive 
Thi
nki
ng AICPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2A LO: 
 8 Level:
 
 Medi
um

50.Inpreparingaqual i
tycostrepor
t,t
hecostofempl
oyee'
sti
mespenti
nqual
i
ty
cir
clesispar tof :
A) pr eventioncost s.
B) appr aisal costs.
C) i nternal fail
urecosts.
D) ext ernalfailur
ecosts.

Ans:
  
A AACSB:
  
Reflect
ive 
Thi
nki
ng AICPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2B LO: 
 9,10 Level:
 
 Medi
um

51.Whichofthef oll
owingwoul dbeclassi
fiedasapr event
ioncostonaqual
i
tycost
repor
t?
A) Netcostofspoi l
age.
B) Super visionoftestingandinspectionacti
vi
t i
es.
C) Li abi
li
tyar i
singfrom defect
iveproducts.
D) Techni cal supportprovi
dedtosuppl i
ers.

Ans:
  
D AACSB:
  
Reflect
ive 
Thi
nki
ng AICPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2B LO: 
 9,10 Level:
 
 Medi
um

52.Whichofthefol
lowingwouldbeclassi
fi
edasanint
ernalf
ail
urecostonaqual
i
ty
costr
eport?
A) Sy stemsdev el
opment .
B) Ret urnsandallowancesar
isingf
rom qual
i
typrobl
ems.
C) Netcostofscr ap.
D) Fi nalpr
oducttesti
ngandinspecti
on.

Ans:
  
C AACSB:
  
Reflect
ive 
Thi
nki
ng AICPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2B LO: 
 9,10 Level:
 
 Medi
um

2-
18 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

53.Whichofthefol
lowingwoul dbeclassi
fi
edasanexternal
fai
l
urecostona
qual
it
ycostreport
?
A) Depr eci
ati
onoft estequi
pment .
B) Repai r
sandr eplacementsbeyondthewar r
ant
yperi
od.
C) Suppl i
esusedi ntesti
ngandinspecti
on.
D) Re- ent
eri
ngdat abecauseofkey i
ngerror
s.

Ans:
  
B AACSB:
 
 Reflect
ive 
Thi
nki
ng AICPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2B LO: 
 9,10 Level:
 
 Medi
um

54.Anincreaseinappr
aisalcostsinaquali
tyi
mprovementprogr
am wouldusual
l
y
hav
et hefoll
owingi
niti
aleffect
soninter
nalandext
ernalf
ail
urecost
s:

I
nter
nalfail
urecost
s Ext
ernalfail
urecost
s
A) Increase Incr
ease
B) Increase Decrease
C) Decrease Incr
ease
D) Decrease Decrease

Ans:
  
B AACSB: 
 Anal
yti
c AICPA BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2B LO: 
 9 Level
:
  Har
d

55.Thecostoft est i
ngincomingmat
eri
alsr
ecei
vedf
rom suppl
i
erswoul
dbe
cl
assi
fi
edasa( n):
A) pr eventioncost .
B) appr aisal cost.
C) internal fail
urecost.
D) ext ernalfailur
ecost.

Ans:
  
B AACSB:
 
 Refl
ect
ive 
Thi
nking AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2B LO: 
 9 Level:
 
 Easy

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
19
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

56.Incl
assi
fyi
ngthecostsofquali
tyatacompanyt hatmanuf acturessonar
equi
pment,whichofthefoll
owingisconsider
edanext er
nal fail
urecost?
A) t henetcostofscrapandspoilageincur
redduri
ngpr oduction.
B) t hecostofrepai
rsandreplacementsmadedur i
ngt hewar rantyperi
od.
C) t hecostofdebuggingsof
t wareerr
orsfoundinthesonarequi pment
duri
nginspecti
onattheplant.
D) bot hBandCabov e.
E) noneoft heabov e.

Ans:
  
B AACSB:
 
 Refl
ect
ive 
Thi
nki
ng AICPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2B LO: 
 9 Level:
 
 Medi
um

57.Thef
ourcategori
esofquali
tycost sinaqual it
ycostrepor
tar e:
A) externalf
ail
ure,
productl
iabili
ty,preventi
on,andcarr
ying.
B) externalf
ail
ure,
int
ernalf
ailure,preventi
on,andappraisal.
C) war r
anty,pr
oductl
iabi
li
ty,prevention,andapprai
sal.
D) war r
anty,pr
oductl
iabi
li
ty,tr
aining,andappraisal
.

Ans:
  
B AACSB:
 
 Refl
ect
ive 
Thi
nking AI
CPA 
BB: 
 Cr
it
ical
 Thinki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2B LO: 
 9 Level:
 
 Easy Sour
ce:
  
CMA, adapted

58.Thef
oll
owi
ngcost
swer
eincur
redi
nJul
y:

$35,
00
Di
rectmat
eri
als 0
$13,
00
Di
rectl
abor 0
$15,
00
Manuf
act
uri
ngov
erhead 0
$14,
00
Sel
l
ingexpenses 0
$30,
00
Admi
nist
rat
iveexpenses 0

Pr
imecostsduri
ngt
hemont
htot
aled:
A) $48,000
B) $28,000
C) $107,000
D) $63,000

Ans:
  A AACSB: 
 Analy
tic AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1,
2 Level
:
  
Medi um

2-
20 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sol
uti
on:

Dir
ectmat er
ial
s $35,
000
Dir
ectlabor  
13,
000
Total $48,
000

59.AbelCompany'smanuf
actur
ingover
headis20%ofi
tstotal
conv
ersi
oncosts.
If
di
rectl
aboris$38,
000andifdi
rectmater
ial
sar
e$47,000,t
hemanufact
uri
ng
over
headis:
A) $152, 000
B) $11,750
C) $21,250
D) $9,500

Ans:
  
D AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Har
d

Sol
uti
on:

Conv
ersi
oncost
s=Dir
ectl
abor+Manufactur
ingoverhead
Conv
ersi
oncost
s=$38,
000+Manufact
uringoverhead

0.
20×Conv ersi
oncost s=Manufacturi
ngov erhead
0.
20×( $38,
000+Manufacturi
ngov erhead)=Manufacturingoverhead
$7,
600+0. 20×Manufactur
ingov erhead=Manufacturi
ngov erhead
$7,600=0. 80×Manuf actur
ingov er
head
Manuf
acturi
ngov erhead=$9,500

60.Duri
ngthemonthofJuly,di
rectlaborcostt
otal
ed$12,
000anddir
ectl
aborcost
was30%ofpr i
mecost.Iftotal
manuf actur
ingcost
sdur
ingJul
ywere$86,000,
themanufact
uri
ngoverheadwas:
A) $46,000
B) $40,000
C) $28,000
D) $74,000

Ans:
  
A AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Har
d

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
21
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sol
uti
on:

0.
30×Primecost=Dir
ectlabor
0.
30×Primecost=$12,
000
Pr
imecost=$40,000
Pr
imecost=Dir
ectmat eri
als+Di
rectl
abor
$40,
000=Dir
ectmat eri
als+$12,
000
Dir
ectmater
ial
s=$28,
000

Total
Di
rect Manufactur
in
manufact
uri
ng = + Di
rectl
abor +
mat
erial
s gOverhead
costs
Manufactur
in
$86,
000 = $28,
000 + $12,
000 +
gOverhead
Manuf
act
uri
ngov
erhead=$46,
000

61.InJul
ydi r
ectlaborwas40%ofconv
ersi
oncost.I
fthemanufact
uri
ngover
head
costforthemont hwas$34,
000andthedi
rectmater
ial
scostwas$23,
000,t
he
dir
ectlaborcostwas:
A) $22, 667
B) $15, 333
C) $51, 000
D) $34, 500

Ans:
  
A AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Har
d

Sol
uti
on:

0.
40×Conv ersioncost
s=Directl abor
0.
60×Conv ersioncost
s=Manuf actur
ingover
head
0.
60×Conv ersioncost
s=$34, 000
Conversioncosts=$56,667
Conversioncosts=Dir
ectl abor+Manufactur
ingov
erhead
$56, 667=Di
rectlabor+$34,000
Directlabor=$22,
667

2-
22 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

62.Shownbelowareanumberofcostsi
ncur
redl
astyearatMeccaPubl
i
shi
ngCo.
,
amanufactur
erofel
ement
aryschoolt
ext
books:

Solvent sandcleanersusedbythecust
odiansto
cleant hetext
bookpr i
ntingpr
esses $500
Depr eciat
ionont heautomobil
esusedbysales $4,
20
representati
ves 0
$2,
00
Fi
rei
nsur
anceonf
act
orybui
l
ding 0
$3,
70
Shi
ppi
ngcost
sont
ext
bookssol
d 0

Whati
sthetot
aloft
hemanuf
act
uri
ngov
erheadcost
sabov
e?
A) $500
B) $2,500
C) $6,200
D) $6,700

Ans:
  
B AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Medi
um

Sol
uti
on:

Sol
ventsandcleanersusedbyt hecustodi
anst
o
cleanthetext
bookpr i
nti
ngpr esses
Fi
reinsur
anceonf actor
ybuil
ding
Tot
al
‘

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
23
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

63.MammoserManuf act
uri
ngCorpor
ati
onrent
sabui
ldi
ngfor$8,
000permonth
andusesitf
oranumberofdif
fer
entpur
poses.
Thebui
ldi
ngspacei
suti
li
zedby
thev
ariousact
ivi
ti
esasfol
l
ows:

Recei
vi
ngandst
ori
ngr
awmat
eri
als 5%
70
Pr
oduct
ionoper
ati
ons %
15
Sal
esof
fi
ces %
10
Admi
nist
rat
iveof
fi
ces %

Howmuchoft he$8,
000mont
hlyr
entcostshoul
dbecl
assi
fi
edas
manuf
actur
ingover
head?
A) $5,600
B) $6,000
C) $6,800
D) $7,200

Ans:
  
B AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Medi
um

Sol
uti
on:

Receivi
ngandstor
ingr
awmateri
als(
5%×$8,
000) $  
 400
Producti
onoper
ati
ons(70%×$8,
000)   
5,600
$6,000

2-
24 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

64.Consi
dert
hef
oll
owi
ngcost
s:

$33,
00
Di
rectmat
eri
als 0
$12,
00
Depr
eci
ati
ononf
act
oryequi
pment 0
$23,
00
Fact
oryj
ani
tor
’ssal
ary 0
$28,
00
Di
rectl
abor 0
Ut
il
it
iesforf
act
ory $9,
000
$16,
00
Sel
l
ingexpenses 0
$34,
00
Pr
oduct
ionsuper
visor
’ssal
ary 0
$21,
00
Admi
nist
rat
iveexpenses 0

Whati
sthetotal
amountofmanuf
act
uri
ngov
erheadi
ncl
udedabov
e?
A) $78,000
B) $139,000
C) $44,000
D) $37,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Medi
um

Sol
uti
on:

$12,
00
Depreciati
ononf actor
yequipment 0
Factoryjani
tor’
ssalary 23,
000
Uti
li
tiesforfact
ory 9,
000
Productionsupervi
sor’
ssalary  
34,
000
$78,
00
Tot
al 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
25
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

65.Theinformat
ionbelowr el
atestoDerbyManufact
uringCompany'
soperati
ons
forarecentmonth.(Assumet hatal
lrawmateri
alsaredi
rectmat
eri
als.
):

Pur
chasesofr
awmat
eri
als $91,
000
$122,
00
Dir
ectlaborcost 0
Sel
lingcosts( t
otal) $42,
000
Admi ni
strat
ivecost s(tot
al) $56,
000
$340,
00
Manuf actur
ingov erheadcosts( t
otal
) 0
Rawmat eri
alsinventory,
beginning $22,
000
Worki nprocessi nventor
y,beginning $27,
000
Fi
nishedgoodsi nventory
,beginning $42,
000
Rawmat eri
alsinventory,
ending $7,
000
Worki nprocessi nventor
y,ending $35,
000
Fi
nishedgoodsi nventory
,ending $15,
000

WhatwasDer
by'
scostofgoodsmanuf
act
uredf
ort
hemont
h?
A) $545,
000
B) $560,
000
C) $568,
000
D) $587,
000

Ans:
  B AACSB:
  Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Measur
ement
LO: 
 2,
4 Level
: 
 Hard

Sol
uti
on:

DerbyManuf acturi
ngCompany
Schedul eofCostofGoodsManuf actured
Directmat erial
s:
Beginningr awmat eri
alsi
nventory $22, 00
0
Add: Purchasesofr awmat eri
als   
 91,00
0
Rawmat er i
alsav ai
labl
eforuse 113,000
Deduct: Endingr awmat eri
alsinvent
ory   
   
7,00
0
Rawmat er i
alsusedi nproducti
on $106,
000
Directl
abor 122,
000
Manuf acturi
ngov erhead  
340,
000
Totalmanuf actur
ingcost s 568,
000

2-
26 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Add:
Begi
nni
ngwor
kinpr
ocessi
nvent
ory   
  
27,
000
595,
000
Deduct
:Endingwor
kinprocessi
nvent
ory   
  
35,
000
Costofgoodsmanufact
ured $560,
000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
27
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

66.Consi
dert
hef
oll
owi
ngcost
sincur
redi
nar
ecentper
iod:

$33,
00
Di
rectmat
eri
als 0
$12,
00
Depr
eci
ati
ononf
act
oryequi
pment 0
$23,
00
Fact
oryj
ani
tor
’ssal
ary 0
$28,
00
Di
rectl
abor 0
Ut
il
it
iesforf
act
ory $9,
000
$16,
00
Sel
l
ingexpenses 0
$34,
00
Pr
oduct
ionsuper
visor
’ssal
ary 0
$21,
00
Admi
nist
rat
iveexpenses 0

Whatwasthetot
alamountoft
heper
iodcost
sli
stedabov
efort
heper
iod?
A) $78,000
B) $71,000
C) $46,000
D) $37,000

Ans:
  
D AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Medi
um

Sol
uti
on:

$16,
00
Sel
l
ingexpenses 0
Admini
str
ati
veexpenses 21,
000
$37,
00
Tot
al 0

2-
28 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

67.Usi
ngthefol
l
owingdat
aforar
ecentper
iod,
cal
cul
atet
hebegi
nni
ngf
ini
shed
goodsi
nvent
ory
:

$40,
00
Sal
es 0
Begi
nni
ngf
ini
shedgoodsi
nvent
ory ?
$16,
00
Costofgoodsmanufactured 0
Endi
ngfini
shedgoodsinventor
y $5,
000
Costofgoodssol
d ?
$17,
00
Grossmargi
n 0
Admini
str
ati
veandsel
l
ingexpenses ?
$10,
00
Netoper
ati
ngi
ncome 0

Thebegi
nningf
ini
shedgoodsi
nvent
orywas:
A) $24,000
B) $23,000
C) $7,000
D) $12,000

Ans:
  D AACSB:
  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3,
4 Level:
 
 Har
d

Sol
uti
on:

Costofgoodssol
d=Sal
es−Grossmargi
n
Costofgoodssol
d=$40,
000−$17,
000
Costofgoodssol
d=$23,
000

Costof
Beginning Endi
ng
goods Costofgoods
f
ini
shedgoods + −f
ini
shedgoods =
manufact
ure sol
d
inventory i
nvent
ory
d
Begi nning
f
inishedgoods + $16, 000 − $5,
000 = $23,
000
i
nv entory
Beginningf i
nishedgoodsi
nventor
y=$12,
000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
29
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

68.Thef
oll
owi
ngdat
aar
eforar
ecentper
iod'
soper
ati
ons:

$150,
47
Begi
nni
ngf
ini
shedgoodsi
nvent
ory 5
$145,
75
Endi
ngf
ini
shedgoodsi
nvent
ory 0
$400,
00
Sal
es 0
$120,
00
Gr
ossmar
gin 0

Thecostofgoodsmanuf
act
uredwas:
A) $115,275
B) $284,725
C) $275,275
D) $124,725

Ans:
  C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3,
4 Lev el
:
  
Hard

Sol
uti
on:

Sales−Costofgoodssol
d=Grossmar gi
n
$400,000−Costofgoodssold=$120,000
Costofgoodssol
d=$280,000

Costof
Beginning Endi
ng
goods Costofgoods
f
ini
shedgoods + −f i
nishedgoods =
manufact
ure sol
d
inventory invent
ory
d
Costof
goods
$150,
475 + − $145, 750 = $280,
000
manufact
ure
d
Costofgoodsmanuf
act
ured=$275,275

2-
30 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

69.Lastmont
hamanuf
act
uri
ngcompanyhadt
hef
oll
owi
ngoper
ati
ngr
esul
ts:

Begi
nni
ngf i
nishedgoodsinv
entor
y $77,
000
Endi
ngfi
nishedgoodsinventor
y $72,
000
$593,
00
Sales 0
Grossmar
gin $67,
000

Whatwast
hecostofgoodsmanuf
act
uredf
ort
hemont
h?
A) $588,
000
B) $526,
000
C) $521,
000
D) $531,
000

Ans:
  C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3,
4 Lev el
:
  
Hard

Sol
uti
on:

Sales−Costofgoodssold=Grossmargi
n
$593,
000−Costofgoodssold=$67,000
Costofgoodssold=$526,000

Costof
Beginning Ending
goods Costofgoods
f
ini
shedgoods + −fini
shedgoods =
manufact
ure sol
d
inventory i
nventory
d
Costof
goods
$77,
000 + − $72,000 = $526,
000
manufact
ure
d
Costofgoodsmanufact
ured=$521,000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
31
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

70.Thef
oll
owi
ngdat
aper
tai
ntoar
ecentper
iod'
soper
ati
ons:

Sal
es ?
Begi
nningf i
nishedgoodsi nvent
ory $12,
000
Costofgoodsmanuf actured $36,
000
Endi
ngf i
nishedgoodsi nventory $6,
000
Costofgoodssol d ?
40%of
Grossmargin Sal
es
Admini
str
ativeandsel
li
ngexpenses $10,
000
Netoper
atingincome ?

Netoper
ati
ngincomewas:
A) $18,000
B) $10,000
C) $14,000
D) $46,000

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3,
4 Lev el
:
  
Hard

Sol
uti
on:

Costof
Beginning
Costof goods Endingfi
nished
= f
ini
shedgoods + −
goodssol
d manufact
ure goodsinventor
y
inventory
d
Costof
= $12,
000 + $36,
000 − $6,
000
goodssold
Costofgoodssol
d=$42,
000

Sal
es−Costofgoodssold=Grossmargi
n
Sal
es−$42, 000=Grossmargi
n
Grossmar gi
n=40%×Sales
Sal
es−$42, 000=40%×Sales
60%×Sal es=$42,
000
Sales=$70,
000

Gr
ossmar
gin−Admi
nist
rat
iveandsel
li
ngexpenses=Netoper
ati
ngi
ncome
Gr
ossmargin=40%×Sales
Gr
ossmargin=$28,
000

$28,
000−$10,000=Netoperat
ingi
ncome
Netoperat
ingi
ncome=$18,000

2-
32 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
33
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

71.Thef
oll
owi
ngi
nvent
orybal
anceshav
ebeenpr
ovi
dedf
ort
hemostr
ecenty
ear
:

Begi
nni
n
g Endi
ng
$15,
00
Rawmat
eri
als $21,
000 0
$29,
00
Wor
kinpr
ocess $18,
000 0
$33,
00
Fi
nishedgoods $57,
000 0

Thecostofgoodsmanuf
act
uredwas$714,
000.Whatwast
hecostofgoods
sol
d?
A) $738,000
B) $693,000
C) $714,000
D) $733,000

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3,
4 Lev el
:
  
Medium

Sol
uti
on:

Fi
nishedgoodsi nventor
y,beginning $  
57,
000
Add:Costofgoodsmanuf actured  
714,
000
Goodsav ai
labl
ef orsale 771,
000
Deduct:Fi
nishedgoodsi nventory
, endi
ng   
  
33,
000
Costofgoodssol d $738,
000

2-
34 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

72.Thecostofgoodsmanufactur
edforOctoberatToul
eManuf
act
uri
ng
Corporat
ionwas$907,
000.Thefol
lowi
ngchangesoccur
redi
nToulei
nvent
ory
accountsdur
ingOct
ober:

$24,
00
Decr
easei
nrawmat
eri
alsi
nvent
ory 0
$17,
00
Decr
easei
nwor
kinpr
ocessi
nvent
ory 0
$38,
00
I
ncr
easei
nfi
nishedgoodsi
nvent
ory 0

WhatwasToul
e'
scostofgoodssol
dforOct
ober
?
A) $869,
000
B) $886,
000
C) $928,
000
D) $945,
000

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3,
4 Lev el
:
  
Hard

Sol
uti
on:

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
35
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

73.Gabri
oInc.isamerchandisi
ngcompany.Lastmonththecompany '
s
merchandisepur
chasestotal
ed$87,
000.Thecompany '
sbeginni
ng
merchandisei
nvent
orywas$19,000anditsendi
ngmer chandi
seinvent
orywas
$11,
000.Whatwast hecompany'scostofgoodssol
df ort
hemont h?
A) $79, 000
B) $87, 000
C) $95, 000
D) $117, 000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Easy

Sol
uti
on:

Merchandiseinv entor
y ,beginning $ 19,
000
Add:Mer chandisepur chased   
 87,
000
Goodsav ail
ablef orsale 106,000
Deduct:Fini
shedgoodsi nventory
,endi
ng 11,
000
Costofgoodssol d $ 95,
000

74.HaalaI
nc.i
samer chandisi
ngcompany.Lastmonththecompany'
scostof
goodssol
dwas$68, 000.Thecompany'
sbeginni
ngmerchandi
seinvent
orywas
$11,
000anditsendi
ngmer chandi
sei
nventorywas$17,
000.Whatwasthetotal
amountofthecompany '
smerchandi
sepurchasesf
orthemonth?
A) $96,000
B) $62,000
C) $68,000
D) $74,000

Ans:
  
D AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medi
um

2-
36 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sol
uti
on:

Merchandiseinv entor
y ,beginning $11,
000
Add:Mer chandisepur chased ?
Goodsav ail
ablef orsale ?
Deduct:Fini
shedgoodsi nventory
,endi
ng  
17,
000
Costofgoodssol d $68,
000

Goodsav
ail
abl
eforsal
e=$68,
000+$17,
000
Goodsav
ail
abl
eforsal
e=$85,
000

Mer
chandi
sepur
chased=$85,
000−Merchandi
sei
nvent
ory
,begi
nni
ng
Mer
chandi
sepur
chased=$85,
000−$11,
000
Mer
chandi
sepur
chased=$74,
000

75.Duri
ngJul
y,thecostofgoodsmanuf act
uredatXxisCorporat
ionwas$70, 000.
Thebegi
nningfi
nishedgoodsinv
entorywas$19,000andt heendingfi
nished
goodsi
nventor
ywas$15, 000.Whatwast hecostofgoodssoldforthemont h?
A) $104,000
B) $74,000
C) $70,000
D) $66,000

Ans:
  
B AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Easy

Sol
uti
on:

Fi
nishedgoodsi nventor
y,beginning $19,
000
Add:Costofgoodsmanuf actured 70,
000
Goodsav ai
labl
ef orsale 89,
000
Deduct:Fi
nishedgoodsi nventory
, endi
ng 15,
000
Costofgoodssol d $74,
000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
37
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

76.Att hebegi
nningofthemostrecentmont
h'soper
ati
ons,f
ini
shedgoods
i
nv entor
ywas$30,000.Thecostofgoodsmanufact
uredwas$326,000and
endi ngf
ini
shedgoodsinvent
orywas$42,
000.Whatwasthecostofgoodssol
d
fort hemonth?
A) $320, 000
B) $338, 000
C) $314, 000
D) Cannotbecal cul
ated.

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Easy

Sol
uti
on:

Fi
nishedgoodsi nventor
y,beginning $ 30,
000
Add:Costofgoodsmanuf actured 326,
000
Goodsav ai
labl
ef orsale 356,
000
Deduct:Fi
nishedgoodsi nventory
, endi
ng 42,
000
Costofgoodssol d $314,
000

2-
38 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

77.Gi
venthefol
l
owi
ngi
nfor
mat
ion,
cal
cul
atet
hecompany
'smanuf
act
uri
ng
ov
erhead:

Wor
kinpr
ocess,
endi
ng $8,
000
$11,
00
Wor
kinpr
ocess,
begi
nni
ng 0
$70,
00
Costofgoodsmanuf
act
ured 0
$25,
00
Di
rectl
abor 0
$20,
00
Di
rectmat
eri
als 0

Themanufact
uri
ngov
erheadi
s:
A) $22,000
B) $25,000
C) $28,000
D) $36,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Hard

Sol
uti
on:

Schedul
eofCostofGoodsManuf
act
ured

Di
rectmat
eri
als $20,
00
0
Di
rectl
abor 25,
000
Manufact
uri
ngov
erhead 22,
000
*
Tot
almanuf
act
uri
ngcost
s 67,
000
*
Add:
Wor
kinpr
ocess,
begi
nni
ng 11,
000
78,
000
*
Deduct
:Workinpr
ocess,endi
ng 8,
000
Costofgoodsmanuf
actured $70,
00
0

*Thesei
temsmustbecal
cul
atedbywor
kingbackwar
dsupwar
dthr
ought
he

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
39
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

st
atement
s.

2-
40 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

78.Thef
oll
owi
ngdat
ahav
ebeenpr
ovi
dedf
ort
hemostr
ecentmont
h'soper
ati
ons:

Di
rectmat
eri
als $8,
000
$25,
00
Dir
ectlabor 0
Manuf actur
ingov er
head $9,
000
Totalmanuf actur
ingcosts ?
Beginningwor kinprocessinv
entor
y ?
Endingwor kinprocessinventor
y $8,
000
$45,
00
Costofgoodsmanuf
act
ured 0

Thebegi
nningwor
kinpr
ocessi
nvent
oryi
s:
A) $11,000
B) $42,000
C) $53,000
D) $37,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Hard

Sol
uti
on:

Schedul
eofCostofGoodsManuf
act
ured

Di
rectmat
eri
als $  
8,00
0
Dir
ectlabor 25,
000
Manufactur
ingoverhead 9,
000
Total
manuf act
uri
ngcosts 42,
000
Add:Wor ki
nprocess,begi
nni
ng
11,
000
*
53,
000
*
Deduct
:Workinpr
ocess,endi
ng 8,
000
Costofgoodsmanuf
actured $45,
00
0

*Thesei
temsmustbecal
cul
atedbywor
kingbackwar
dsupwar
dthr
ought
he
st
atements.

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
41
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

2-
42 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

79.Usi
ngt
hef
oll
owi
ngdat
aforJul
y,cal
cul
atet
hecostofgoodsmanuf
act
ured:

$31,
00
Di
rectmat
eri
als 0
$22,
00
Di
rectl
abor 0
$29,
00
Manuf
act
uri
ngov
erhead 0
$14,
00
Begi
nni
ngwor
kinpr
ocessi
nvent
ory 0
$15,
00
Endi
ngwor
kinpr
ocessi
nvent
ory 0

Thecostofgoodsmanuf
act
uredwas:
A) $83,000
B) $96,000
C) $81,000
D) $82,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medium

Sol
uti
on:

Schedul
eofCostofGoodsManuf
act
ured

Di
rectmat
eri
als $31,
00
0
Dir
ectlabor 22,
000
Manufactur
ingoverhead 29,
000
Total
manuf act
uri
ngcosts 82,
000
Add:Wor ki
nprocess,begi
nni
ng 14,
000
96,
000
Deduct
:Workinpr
ocess,endi
ng 15,
000
Costofgoodsmanuf
actured $81,
00
0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
43
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

80.Duringthemont hofApril
,LTPCompanyi ncurr
ed$30,000ofmanuf acturi
ng
overhead,$40,000ofdir
ectlabor
,andpurchased$25,
000ofrawmat erial
s.
Betweent hebeginni
ngandt heendoft
hemont h,
therawmaterial
sandwor kin
processinventori
esdecreasedby$4,
000and$3, 000,
respect
ively
.Thet otal
manuf act
uringcostsusedinthecomputati
onofcostofgoodsmanuf actured
duri
ngt hemont hofAprilwas:
A) $88, 000
B) $91, 000
C) $99, 000
D) $102, 000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Hard

Sol
uti
on:

Fi
rstcal
cul
aterawmat
eri
alsused:
Begi
nning Ending
Purchase Rawmateri
als
invent
oryraw + − i
nvent
oryraw =
s used
materi
als material
s

Byr
ear
rangi
ng:
Beginning Endi
ng
Raw
Pur
chas inventory i
nventor
y
+( − )= mat
eri
als
es r aw raw
used
mat er
ials mater
ial
s

Si
ncerawmat er
ial
invent
orydecr
easedby$4,
000,weknowt
hat
:
Begi
nningi
nvent
oryrawmat er
ial
s−Endingi
nvent
oryr
awmater
ial
s=$4,
000

Subst
it
uti
ngi
ntoequat
ion:
$25,
000+$4,000=Rawmat er
ial
sused
$29,
000=Rawmat eri
alsused

Next
,solvefort
otal
manuf actur
ingcost
s:
Raw Total
Manufactur
in
mat eri
als + Di rectlabor + = manufactur
ing
goverhead
used costs
$29,000 + $40, 000 + $30,
000 = $99,000

2-
44 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

81.Thef
oll
owi
nginf
ormat
ionr
elat
est
oMakoManuf
act
uri
ngCompanyf
ort
he
mont
hofAugust
:

$78,
00
Costofgoodsmanuf
act
ured 0
$82,
00
Costofgoodssol
d 0
$90,
00
Tot
almanuf
act
uri
ngcost
s 0
$95,
00
Costofgoodsav
ail
abl
eforsal
e 0

Whatwasthebal
ancei
nMako'
sFi
nishedGoodsI
nvent
oryaccountatt
heendof
August
?
A) $4,000
B) $5,000
C) $8,000
D) $13,000

Ans:
  
D AACSB: 
 
Analy
tic AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Hard

Sol
uti
on:

Goodsavail
abl
eforsal
e-Endingfi
nishedgoodsi
nvent
ory=Costofgoodssol
d
Endi
ngfi
nishedgoodsi
nvent
or y=Goodsav ai
l
abl
eforsal
e-Costofgoodssol
d
Endi
ngfi
nishedgoodsinv
entory=$95,000-$82,
000
Endi
ngfi
nishedgoodsinv
entory=$13,000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
45
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

82.Thefol
l
owi
nginv
entor
ybal
ancesrel
atet
oKomi
zaManuf
act
uri
ngCor
por
ati
on
att
hebegi
nni
ngandendoftheyear
:

Beginnin
g Ending
$21,00
Rawmater
ial
s $10,000 0
Worki
nprocess $5,000 $3,000
$48,00
Fi
nishedgoods $41,000 0

Komiza'
scostofgoodsavail
abl
eforsal
ewas$622,
000.WhatwasKomi
za'
s
costofgoodsmanufact
ured?
A) $581, 000
B) $615, 000
C) $629, 000
D) $663, 000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Hard

Sol
uti
on:

Costof
Beginning Goods
goods
f
ini
shedgoods + = av
ail
ablef
or
manufact
ure
inventory sal
e
d
Costof
goods
$41,
000 + = $622,000
manufact
ure
d
Costofgoodsmanufact
ured=$581,000

2-
46 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

83.Lastyeart herewasnochangei nei t

hertherawmat er
ial
sorthewor kinprocess
beginningandendi ngi nv
entor
ies.Howev er
,fi
nishedgoods,
whi chhada
beginningbal anceof$25,000,
increasedby$15,000.I
fthemanuf act
uringcosts
i
ncur r
edt otaled$600,000duri
ngt heyear,t
hecostofgoodsav ail
ableforsale
musthav ebeen:
A) $585, 000
B) $600, 000
C) $610, 000
D) $625, 000

Ans:
  
D AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medi
um

Sol
uti
on:

Beginning
Costofgoods fi
nished Costofgoods
= +
avai
labl
eforsal
e goods manufact
ured
inventory
Costofgoods
= $25, 000 + $600, 000
avai
labl
eforsal
e
Costofgoodsavai
l
ableforsale=$625,
000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
47
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

84.Acompanyhaspr
ovi
dedt
hef
oll
owi
ngcostdat
afori
tsmostr
ecentaccount
ing
per
iod:

Di
rectl
abor $98,
000
Admini
str
ati
veexpenses $15,
000
Manufact
uri
ngoverhead $25,
000
$200,
00
Dir
ectmater
ial
s 0
Sel
li
ngexpenses $22,
000

Whatwasthecostofgoodsmanufact
uredf
ort
heper
iod?Assumet
her
ewer
e
nobegi
nni
ngorendinginvent
ori
es.
A) $303,000
B) $323,000
C) $338,000
D) $360,000

Ans:
  
B AACSB: 
 Anal
yti
c AI
CPA BB:
 
 Cri
ti
cal
 Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Easy Source:
  
CMA, 
adapted

Sol
uti
on:

$ 
98,00
Di
rectl
abor 0
Manufact
uri
ngover
head 25,000
Di
rectmater
ial
s 200,000
$323,00
Costofgoodsmanuf
act
ured 0

2-
48 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

85.Beginni
ngworkinprocesswas$145,
000.Manufact
uri
ngcosti
ncur
redfort
he
mont hwas$810,
000.Theendingworki
nprocesswas$200,
000.Whatwasthe
costofgoodsmanufactureddur
ingt
hemonth?
A) $900, 000
B) $810, 000
C) $755, 000
D) $1, 155,
000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medium

Sol
uti
on:

$145,
000
Begi
nni
ngworkinpr
ocessinv
ent
ory  
Add:Manuf
act
uri
ngcosts 810,
000 

Deduct
:Endi
ngwor
kinpr
ocessi
nvent
ory (200,
000)
$755,
000
Costofgoodsmanuf
act
ured  

86.Lasty
ear
,VashandaCor
por
ati
oni
ncur
redt
hef
oll
owi
ngcost
stopr
oduce
18,
000uni
ts:

$86,
40
Costofrawmat er
ial
sused 0
Proper
tytaxesonfactor
ybui
l
ding $9,
000

Whatshoul
dbet hecostperuni
tfort
heabov
ecost
sif20,
000uni
tsofpr
oduct
ar
eproducednextyear
?

Rawmater
ial
s Pr
opert
ytaxes
A) $4.
32 $0.
45
B) $4.
32 $0.
50
C) $4.
80 $0.
45
D) $4.
80 $0.
50

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
49
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Medi
um

Sol
uti
on:

Vari
abl
emanufact
uri
ngcost
s:
$86,
40018,
000=$4.80

Propert
ytaxesar
eaf i
xedcost:$9,
000
At20,000unit
s,f
ixedcostperuni
t=$9,00020,
000uni
ts=$0.
45peruni
t

2-
50 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

87.Atasalesvol
umeof20, 000units,
total
costsar
e$55,000.Thecompany's
var
iabl
ecostperuniti
s$1. 50.Whatshoul
dbethetotalfi
xedcostatasal
es
vol
umeof30, 000unit
s,assumingthati
swithi
ntherelev
antrange.
A) $25, 000
B) $30, 000
C) $45, 000
D) Cannotbedet ermined.

Ans:
  
A AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Har
d

Sol
uti
on:

88.Amat t
ressmanuf acturerhaspr
ovidedthef ol
lowingcostdata.Thecostof
fabr
ic,f
oam, spr
ings,andlumberis$68,000.Thecostofi ndi
rectmateri
alsi
s
$21,
000.Laborcostofassembl ywor kersis$52,000andforproducti
on
superv
isorsi
s$14, 000.Howmuchi ndi
rectcostisincl
udedintheabovecosts?
A) $21, 000
B) $35, 000
C) $89, 000
D) $103, 000

Ans:
  
B AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 6 Lev
el:
 
 Easy

Sol
uti
on:

I
ndirectmat er
ial
s $21,
000
Productionsupervi
sor
s  
14,
000
Totalindir
ectcosts $35,
000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
51
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

89.Howmuchsunkcosti
srepr
esent
edi
nthef
oll
owi
ngl
i
st?

$80,
00
Annualoper ati
ngcost 0
Fi
xedoper atingcostsot
hert
handepr
eci
ati
on $14,
00
0
$25,
00
Resalevalue, i
fsol
dnow 0
$68,
00
Ori
ginalcostofcur r
entmachi
ne 0

A) $80,
000
B) $14,
000
C) $25,
000
D) $68,
000

Ans:
  
D AACSB:  
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 7 Lev
el:
 
 Easy

Sol
uti
on:
Onl
ytheori
ginal
costoft
hecur
rentmachi
nei
sasunkcosti
ntheabov
eli
st.

90.JohnAdams,anoperat
orofamanufactur
ingmachine,r
ecei
vesti
me-and-
a-hal
f
foranyti
meworkedinexcessof40hoursperweek.Hisrat
eofpayi
s$16per
hour.Howmuchshouldbechargedtodir
ectl
aborifheworked48hoursl
ast
weekandhadnoidleti
me?
A) $768
B) $640
C) $832
D) $192

Ans:
  
A AACSB: 
 Anal
yti
c AICPA BB: 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2A LO: 
 8 Level
:
  Medium

Sol
uti
on:
48hours×$16perhour=$768

2-
52 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

91.Duri
ngthelastweekinOctober,
Harveywor kedat otalof45hoursandhadno
i
dleti
me.Har v
eyispaid$10perhourf orr egularti
me,andispaid
ti
me-and-
a-hal
fforal
lhoursinexcessof35hour sperweek.Giventhi
s
i
nformati
on:
A) $350shoul dbechargedtodirectlabor
B) $50shoul dbechargedtomanuf act uringoverhead
C) $150shoul dbechargedtomanuf actur i
ngoverhead
D) $500shoul dbechargedtodirectlabor .

Ans:
  
B AACSB: 
 Anal
yti
c AICPA BB: 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2A LO: 
 8 Level
:
  Medium

Sol
uti
on:

Overt
imepremi
um =$5
$10×1.5=$15over
ti
merat
e
$15over
ti
merate−$10r
egul
arr
ate=$5ov
ert
imepr
emi
um

Tot
alhours−Regul
arworkweekhour
s=Overt
imehour
s
45−35=10
10hours×$5perhour=$50amountt
obechargedt
omanuf
act
uri
ngov
erhead

92.SandraPiet
roinst
all
smuf fler
satDethtr
appMotorcycl
eCompany .Sandrai
s
pai
d$14perhourandanext r
a$7perhourforev
eryhourover40thatisworked
i
nagi venweek.LastweekSandr aworked50hourswi t
h2ofthesehours
corr
ectlycl
assi
fi
edasi dl
etime.HowmuchofSandr a'swageslastweekshould
beincl
udedinmanuf actur
ingoverheadcost
?
A) $28
B) $70
C) $98
D) $168

Ans:
  
C AACSB: 
 Anal
yti
c AICPA BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
Appendi
x:
  
2A LO: 
 8 Level
:
  Har
d

Solut
ion:
Overti
mepr emium char
gedt omanufactur
ingoverhead:
(50totalhour
s−40r egularhour
s)×$7ov ert
imepr emium =$70
2hour sofidl
etime×$14perhour=$28
Totalwagestobeincludedinmanufacturi
ngoverhead=$70+$28=$98

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
53
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions93-
96:

Mendoza, Inc.manuf act

uresandsel lsaluminum dishesforcampi ngandout door
enthusi
astst hroughamai lordercatalogoper at
ion.Largerect
angul arsheetsof
aluminum arepur chasedbyMendoza.Thesesheet sarecutdowni ntosmal l
er
squaresandar ethenfedintoamachi newher etheyaretrimmeddowni ntoaci rcul
ar
shape.Theseal uminum ci
rclesarethenf edintoastampi ngmachi newher etheyare
formedi nt
opl atesandbowl s.Aft
erpr oducti
on,thedishesareshippedt owar ehouses
wheret heyarepackedandt henshippedt ocust omers.

93.Whichofthefol
lowingt
ermscoul
dbeusedt
ocor
rect
lydescr
ibet
hecostoft
he
al
uminum sheets?
A) f i
xedcost
B) per i
odcost
C) directcost
D) conv ersi
oncost

Ans:
  C AACSB:
  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1,
2,
5,
6 Level
: 
 Medi
um

94.Whichofthefoll
owingtermscouldbeusedt
ocorr
ect
lydescr
ibethewages
pai
dtothemachi neoperatorwhooper
atest
hest
ampingmachine?
A) directlaborcost
B) admi nistr
ati
vecost
C) oppor t
unitycost
D) manuf acturi
ngoverheadcost

Ans:
  A AACSB:
  
Analyt
ic AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1,
2,
5,
6 Level
: 
 Easy

95.Whichoft hef oll

owingter
mscoul dbeusedtocor
rect
lydescr
ibet
hecostof
el
ectr
ici
tyusedt orunthestampingmachine?
A) v ariablecost
B) i ndirectcost
C) manuf acturi
ngoverheadcost
D) al loft heabov e

Ans:
  D AACSB:
  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1,
2,
5,
6 Level
: 
 Medi
um

2-
54 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

96.Whichoft hefol
lowingter
mscouldbeusedt
ocor
rect
lydescr
ibet
he
st
raight-
li
nedepreciat
ioncostont
hestampi
ngmachi
ne?
A) per iodcost
B) v ar
iabl
ecost
C) i nventor
iablecost
D) bot hAandCabov e

Ans:
  C AACSB:
  
Analy
tic AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1,
2,
5,
6 Level
: 
 Hard

Uset
hef
oll
owi
ngt
oanswerquest
ions97-
99:

Apart
ial
li
sti
ngofcost
sincur
redatAr
chutCor
por
ati
ondur
ingSept
emberappear
s
bel
ow:

$113,
00
Dir
ectmat eri
als 0
Uti
li
ties,factory $5,
000
Admi nist
rati
v esalari
es $81,
000
I
ndirectlabor $25,
000
Sal
escommi ssions $48,
000
Depreciationofpr oducti
onequipment $20,
000
Depreciationofadmi nist
rat
iveequi
pment $30,
000
$129,
00
Di
rectl
abor 0
$135,
00
Adv
ert
isi
ng 0

97.Thet
otal
ofthemanuf
act
uri
ngov
erheadcost
sli
stedabov
eforSept
emberi
s:
A) $586,000
B) $50,000
C) $292,000
D) $30,000

Ans:
  
B AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Medi
um

Sol
uti
on:

Uti
l
ities,factor
y $  
5,000
I
ndirectlabor 25,000
Depreciationofproduct
ionequipment  
20,000
Totalmanuf actur
ingoverheadcost
s $50,000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
55
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

2-
56 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

98.Thet
otal
ofthepr
oductcost
sli
stedabov
eforSept
emberi
s:
A) $292,000
B) $294,000
C) $50,000
D) $586,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Medi
um

Sol
uti
on:

$113,
00
Di
rectmat eri
als 0
Uti
l
iti
es, factor
y 5,
000
I
ndir
ectl abor 25,
000
Depreciationofproduct
ionequi
pment 20,
000
Di
rectlabor 129,
000
$292,
00
Tot
alpr
oductcost
s 0

99.Thet
otal
oftheper
iodcost
sli
stedabov
eforSept
emberi
s:
A) $294,000
B) $344,000
C) $292,000
D) $50,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Medi
um

Sol
uti
on:

$ 
81,00
Administrat
ivesalar
ies 0
Sal
escommi ssions 48,000
Depreci
at i
onofadmi ni
str
ati
veequi
pment 30,000
Adverti
sing 135,000
$294,00
Tot
alper
iodcost
s 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
57
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions100-
102:

Apar
ti
all
i
sti
ngofcost
sincur
reddur
ingMar
chatFebboCor
por
ati
onappear
sbel
ow:

Fact
orysuppl
ies $9,
000
Admini
str
ati
vewagesandsal
ari
es $85,
000
$126,
00
Dir
ectmat eri
als 0
Salesstaffsal
ari
es $30,
000
Factorydepreci
ati
on $33,
000
Corporateheadquart
ersbui
l
dingr
ent $43,
000
I
ndirectlabor $26,
000
Mar ket
ing $65,
000
Dir
ectlabor $99,
000

100.Thet
otal
oftheper
iodcost
sli
stedabov
eforMar
chi
s:
A) $68,000
B) $293,000
C) $291,000
D) $223,000

Ans:
  
D AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Medi
um

Sol
uti
on:

$ 85,
00
Admini
strat
ivewagesandsalar
ies 0
Sal
esstaffsalar
ies 30,000
Cor
porateheadquarter
sbui
l
dingrent 43,000
   
 65,
00
Mar
ket
ing 0
$223,00
Tot
alper
iodcost
s 0

2-
58 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

101.Thet
otal
ofthemanuf
act
uri
ngov
erheadcost
sli
stedabov
eforMar
chi
s:
A) $68,000
B) $35,000
C) $516,000
D) $293,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Medi
um

Sol
uti
on:

Factorysuppli
es $  
9,000
Factorydepreci
ati
on 33,000
I
ndirectl
abor   
26,000
Totalmanufacturi
ngov
erhead $68,000

102.Thet
otal
ofthepr
oductcost
sli
stedabov
eforMar
chi
s:
A) $516,000
B) $68,000
C) $293,000
D) $223,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Medi
um

Sol
uti
on:

Factorysuppli
es $  
 9,
000
Dir
ectmat eri
als 126,000
Factorydepreci
ati
on 33,000
I
ndirectl
abor 26,000
 
  
 99,
00
Di
rectl
abor 0
$293,00
Tot
alpr
oductcost
s 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
59
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions103-
105:

Thef
oll
owi
ngdat
aper
tai
ntoGr
aham Company
'soper
ati
onsi
nMay
:

May1 May31
$12,
00
Wor
kinpr
ocessi
nvent
ory $7,
000 0
$15,
00
Rawmat
eri
alsi
nvent
ory 0 ?
$20,
00
Fi
nishedgoodsi
nvent
ory ? 0

Ot
herdat
a:
Rawmat er
ial
sused $40,
000
$200,
00
Sal
es 0
$135,
00
Costofgoodsmanuf act
ured 0
Manufacturingover
headcost $60,
000
Rawmat erialspur
chases $30,
000
GrossMar gin $60,
000

103.Theendi
ngmater
ial
sinv
ent
orywas:
A) $5,000
B) $10,000
C) $15,000
D) $20,000

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 1,
3,
4 Lev el
:  
Medium

Sol
uti
on:

Begi
nningrawmat eri
alsinvent
ory $15,
000
Add:Rawmat eri
alspurchases 30,
000
Rawmat eri
alsavai
labl
ef oruse 45,
000
Deduct:Endi
ngrawmat eri
alsi
nvent
ory 5,
000 *
Rawmat eri
alsused $40,
000

*Cal
cul
atethisitem byworki
ngbackwar ds,asshown:
Rawmaterial
sused=Rawmat er
ial
sav ail
able−Endingrawmater
ial
sinv
ent
ory
$40,000=$45,000−Endi ngrawmat eri
alsinv
entor
y
Endingrawmat eri
alsi
nventory=$5,000

2-
60 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
61
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

104.Thebegi
nningf
ini
shedgoodsi
nvent
orywas:
A) $5,000
B) $15,000
C) $25,000
D) $30,000

Ans:
  C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 1,
3,
4 Lev el
:  
Har
d

Sol
uti
on:
Sal
es−Costofgoodssold=Grossmargi
n
Costofgoodssol
d=Sal
es−Gr ossmargi
n
Costofgoodssol
d=$200,000−$60,
000
Costofgoodssol
d=$140,000

Next
,solvebackwardsf orbeginningfini
shedgoodsi
nvent
ory
:
Beginningrawmat erial
sinventory $25,
000 *
Add: Costofgoodsmanuf actured 135,
000
Costofgoodsav ailableforsale 160,
000 *
Deduct: Endi
ngfi
nishedgoodsi nvent
ory 20,
000
$140,
00
Costofgoodssol d 0

*Thesei
temsmustbecal
cul
atedbywor
kingbackwar
dsupwar
dthr
ought
he
st
atements.

2-
62 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

105.Thedi
rectl
aborcostf
orMaywas:
A) $35,000
B) $40,000
C) $30,000
D) $25,000

Ans:
  B AACSB:
  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1,
3,
4 Level
:
  
Hard

Sol
uti
on:
Graham Company
Schedul
eofCostofGoodsManuf
act
ured

Di
rectmat
eri
als $40,
00
0
Di
rectl
abor 40,
000
*
Manuf
actur
ingover
head 60,
000
Tot
almanufact
uri
ngcost
s 140,
00
0*
Add:
Wor
kinpr
ocess,
begi
nni
ng 7,
000
147,
00
0*
Deduct
:Workinpr
ocess,endi
ng 12,
000
Costofgoodsmanuf
actured $135,0
00

*Thesei
temsmustbecal
cul
atedbywor
kingbackwar
dsupwar
dthr
ought
he
st
atements.

Uset
hef
oll
owi
ngt
oanswerquest
ions106-
107:

Demegl
i
oCor
por
ati
onr
epor
tedt
hef
oll
owi
ngdat
afort
hemont
hofSept
ember
:

Begi
nni
n
I
nvent
ori
es: g Endi
ng
$34,
00
Rawmat
eri
als $30,
000 0
$22,
00
Wor
kinpr
ocess $23,
000 0
$35,
00
Fi
nishedgoods $32,
000 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
63
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

2-
64 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

106.Ift
herawmater
ial
spurchaseddur
ingSeptembertot
aled$63,000,
whatwast
he
costoft
herawmater
ialsusedinproduct
ionf
orthemont h?
A) $67,000
B) $63,000
C) $59,000
D) $64,000

Ans:
  C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 1,
3 Lev el
:
  
Easy

Sol
uti
on:

Begi
nningrawmat eri
alsinventory $30,
000
Add:Rawmat eri
alspurchased 63,
000
Rawmat eri
alsavai
labl
ef oruse 93,
000
Deduct:Endi
ngrawmat eri
alinvent
ory 34,
000
Rawmat eri
alsusedinpr oducti
on $59,
000

107.I
fthecompanyt r
ansfer
red$222,
000ofcomplet
edgoodsfr
om workinprocess
tofi
nishedgoodsi
nventor
yduri
ngSeptember
,whatwasthecostofgoodssold
fort
hemont h?
A) $219, 000
B) $225, 000
C) $222, 000
D) $221, 000

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 1,
3 Lev el
:
  
Easy

Sol
uti
on:

Begi
nningfinishedgoodsinventory $32,
000
Add:Costofgoodsmanuf actured 222,
000
Goodsav ai
lableforsal
e 254,
000
Deduct
: Endingfini
shedinventory 35,
000
$219,
00
Costofgoodssol
d 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
65
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions108-
109:

Boar
dmanCompanyr
epor
tedt
hef
oll
owi
ngdat
afort
hemont
hofJanuar
y:

I
nvent
ori
es: 1/1 1/31
$32,
00 $31,00
Rawmat
eri
als 0 0
$18,
00 $12,00
Wor
kinpr
ocess 0 0
$30,
00 $35,00
Fi
nishedgoods 0 0

Addi
ti
onal
inf
ormat
ion:
$210,
00
Sal
esrevenue 0
Dir
ectl
aborcosts $40,
000
Manufact
uringoverheadcost
s $70,
000
Sel
li
ngexpenses $25,
000
Admini
strat
iveexpenses $35,
000

108.I
frawmateri
alscosti
ng$35,
000wer
epurchaseddur
ingJanuar
y,t
het
otal
manuf
act
uringcostsfort
hemonthwoul
dbe:
A) $145,000
B) $144,000
C) $151,000
D) $146,000

Ans:
  
D AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 1 Lev
el:
 
 Medi
um

Sol
uti
on:

Beginningrawmat eri
alsinvent
ory $32,
000
Add: Rawmat er
ialspurchased 35,
000
Rawmat eri
alsav ai
labl
ef oruse 67,
000
Deduct :Endi
ngr awmat eri
alsi
nvent
ory 31,
000
Rawmat eri
alsused 36,
000
Dir
ectlabor 40,
000
Manuf acturi
ngov erhead 70,
000
$146,
00
Tot
almanuf
act
uri
ngcost
s 0

2-
66 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

109.Boar
dmanCompany
'st
otal
conv
ersi
oncostf
orJanuar
ywoul
dbe:
A) $110,
000
B) $170,
000
C) $135,
000
D) $130,
000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
40,00
Di
rectl
abor 0
Manufact
uri
ngov
erhead 70,000
$110,00
Tot
alconv
ersi
oncost
s 0

Uset
hef
oll
owi
ngt
oanswerquest
ions110-
111:

Fassi
noCor
por
ati
onr
epor
tedt
hef
oll
owi
ngdat
afort
hemont
hofNov
ember
:

Begi
nni
n
I
nvent
ori
es: g Endi
ng
$30,
00
Rawmat
eri
als $23,
000 0
$20,
00
Wor
kinpr
ocess $19,
000 0
$29,
00
Fi
nishedgoods $55,
000 0

Addi
ti
onal
inf
ormat
ion:
$58,
00
Rawmat
eri
alspur
chases 0
$54,
00
Di
rectl
aborcost 0
$82,
00
Manuf
act
uri
ngov
erheadcost 0
$18,
00
Sel
l
ingexpense 0
$42,
00
Admi
nist
rat
iveexpense 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
67
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

110.Theconv
ersi
oncostf
orNov
emberwas:
A) $187,000
B) $112,000
C) $136,000
D) $140,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
54,00
Di
rectl
abor 0
Manufact
uri
ngov
erhead 82,000
$136,00
Tot
alconv
ersi
oncost
s 0

111.Thepr
imecostf
orNov
emberwas:
A) $136,
000
B) $60,
000
C) $105,
000
D) $112,
000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
23,00
Beginningrawmat eri
alsinvent
ory 0
Add: Rawmat eri
alspurchased 58,000
Rawmat eri
alsavai
labl
ef oruse 81,000
Deduct :Endi
ngrawmat eri
alsi
nvent
ory 30,000
Rawmat eri
alsused 51,000
Dir
ectlabor 54,000
$105,00
Tot
alpr
imecost 0

2-
68 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions112-
113:

ManagementofMcgi bboneyCor porati

onhasaskedy ourhelpasaninterninprepari
ng
somekeyr epor
tsforNov ember .Thebegi nningbal anceintherawmat eri
alsinvent
ory
accountwas$25, 000.Dur i
ngthemont h,thecompanymader awmat eri
alspurchases
amount i
ngt o$54,000.Attheendoft hemont h,thebalanceintherawmat er
ials
i
nventoryaccountwas$37, 000.Di r
ectlaborcostwas$25, 000andmanuf act
uring
overheadcostwas$62, 000.Thebegi nningbal anceinthewor kinprocessaccount
was$22, 000andt heendingbalancewas$23, 000.Thebegi nningbalanceinthe
fi
nishedgoodsaccountwas$44, 000andt heendi ngbalancewas$50, 000.Selli
ng
expensewas$21, 000andadmi ni st
rati
veexpensewas$38, 000.

112.Theconv
ersi
oncostf
orNov
emberwas:
A) $116,000
B) $79,000
C) $87,000
D) $129,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Medi
um

Sol
uti
on:

Dir
ectlabor $25,
000
Manufacturi
ngoverhead 62,
000
Total
conv er
sioncosts $87,
000

113.Thepr
imecostf
orNov
emberwas:
A) $79,
000
B) $59,
000
C) $67,
000
D) $87,
000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 1 Lev
el:
 
 Medi
um

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
69
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sol
uti
on:

Beginningrawmat eri
alsinvent
ory $25,
000
Add: Rawmat eri
alspurchased 54,
000
Rawmat eri
alsavai
labl
ef oruse 79,
000
Deduct :Endi
ngrawmat eri
alsi
nvent
ory 37,
000
Rawmat eri
alsused 42,
000
Dir
ectlabor 25,
000
Totalprimecost $67,
000

Uset
hef
oll
owi
ngt
oanswerquest
ions114-
116:

Yokum Companyhaspr
ovi
dedt
hef
oll
owi
ngdat
afort
hemont
hofAugust
:

August August
1 31
Rawmat er
ial
sinventory $8,
000 ?
Workinprocessinventor
y ? $14,
000
Fi
nishedgoodsinventory $25,
000 $35,
000

Ot
herDat
a:
$350,
00
Sal
es 0
Manuf act
uri
ngoverheadcost
s $44,
000
Dir
ectlabor $80,
000
Purchaseofrawmat eri
als $94,
000
Admi ni
str
ati
veexpenses $40,
000
$206,
00
Costofgoodsmanuf
act
ured 0
Rawmat er
ial
susedi
npr
oducti
on $87,
000
Sel
li
ngexpenses $15,
000

2-
70 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

114.Theendi
ngrawmat
eri
alsi
nvent
orywas:
A) $3,000
B) $11,000
C) $15,000
D) $7,000

Ans:
  C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 2,
3,
4 Lev el
:  
Har
d

Sol
uti
on:

Begi
nningrawmat eri
alsinvent
ory $ 8,
000
Add:Rawmat eri
alspurchased 94,
000
Rawmat eri
alsavai
labl
ef oruse 102,
000
Deduct:Endi
ngrawmat eri
alsi
nvent
ory 15,
000 *
Rawmat eri
alsused $87,
000

*Thisi
tem mustbecal
cul
atedbywor
kingbackwar
dsupwar
dthr
ought
he
st
atements.

115.Thebegi
nningwor
kinpr
ocessi
nvent
orywas:
A) $6,000
B) $9,000
C) $15,000
D) $2,000

Ans:
  B AACSB: 
 
Analyt
ic AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 2,
3,
4 Lev el
: 
 Har
d

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
71
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sol
uti
on:

Begi
nningrawmat eri
alsinvent
ory $ 8,
000
Add:Rawmat eri
alspurchased 94,
000
Rawmat eri
alsavai
labl
ef oruse 102,
000
Deduct:Endi
ngrawmat eri
alsi
nvent
ory 15,
000 *
Rawmat eri
alsused $87,
000

Rawmat eri
alsused $87,
000
Dir
ectlabor 80,
000
Manufacturi
ngoverhead 44,
000
Totalmanufact
uringcost
s 211,
000
Add:Beginni
ngwor kinpr
ocessinvent
ory 9,
000 *
Subtot
al 220,
000 *
Deduct:Endi
ngwor kinprocessi
nvent
ory 14,
000
$206,
00
Costofgoodsmanuf
act
ured 0

*Thesei
temsmustbecal
cul
atedbywor
kingbackwar
dsupwar
dthr
ought
he
st
atements.

2-
72 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

116.Thecostofgoodssol
dwas:
A) $196,000
B) $206,000
C) $211,000
D) $190,000

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 2,
3,
4 Lev el
:  
Medium

Sol
uti
on:

Begi
nningrawmat eri
alsinvent
ory $ 8,
000
Add:Rawmat eri
alspurchased 94,
000
Rawmat eri
alsavai
labl
ef oruse 102,
000
Deduct:Endi
ngrawmat eri
alsi
nvent
ory 15,
000 *
Rawmat eri
alsused $87,
000

Rawmat eri
alsused $87,
000
Dir
ectlabor 80,
000
Manufacturi
ngoverhead 44,
000
Totalmanufact
uringcost
s 211,
000
Add:Beginni
ngwor kinpr
ocessinvent
ory 9,
000 *
Subtot
al 220,
000 *
Deduct:Endi
ngwor kinprocessi
nvent
ory 14,
000
$206,
00
Costofgoodsmanuf
act
ured 0

*Thesei
temsmustbecal
cul
atedbywor
kingbackwar
dsupwar
dthr
ought
he
st
atements.

Begi
nningfinishedgoodsinventor
y $25,
000
Add:Costofgoodsmanuf actur
ed 206,
000
Goodsav ai
lableforsal
e 231,
000
Deduct
: Endingfini
shedgoodsinvent
ory 35,
000
$196,
00
Costofgoodssol
d 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
73
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions117-
120:

Thefoll
owi
ngdata(
inthousandsofdol
lars)hav
ebeentakenf
rom t
heaccount
ing
recor
dsofKar
li
ngCorporat
ionfort
hejustcomplet
edyear.

$99
Sal
es 0
Rawmat
eri
alsi
nvent
ory
,begi
nni
ng $40
Rawmat
eri
alsi
nvent
ory
,endi
ng $70
$12
Pur
chasesofr
awmat
eri
als 0
$20
Di
rectl
abor 0
$23
Manuf
act
uri
ngov
erhead 0
$15
Admi
nist
rat
iveexpenses 0
$14
Sel
l
ingexpenses 0
Workinpr
ocessinv
ent
ory
,begi
nni
ng $70
Workinpr
ocessinv
ent
ory
,endi
ng $50
$12
Fi
nishedgoodsi
nvent
ory
,begi
nni
ng 0
$16
Fi
nishedgoodsi
nvent
ory
,endi
ng 0

117.Thecostoft
herawmat
eri
alsusedi
npr
oduct
iondur
ingt
hey
ear(
int
housands
ofdol
lar
s)was:
A) $190
B) $90
C) $150
D) $160

Ans:
  B AACSB: 
 
Analyt
ic AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 2,
3,
4 Lev el
: 
 Medi
um

Sol
uti
on:
$4
Begi
nningrawmat eri
alsinvent
ory 0
Add:Rawmat eri
alspurchased 120
Rawmat eri
alsavai
labl
ef oruse 160
Deduct:Endi
ngrawmat eri
alsi
nvent
ory 70
Rawmat eri
alsused $90

2-
74 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
75
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

118.Thecostofgoodsmanuf
act
ured(
fi
nished)f
ort
hey
ear(
int
housandsofdol
l
ars)
was:
A) $540
B) $500
C) $570
D) $590

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 2,
3,
4 Lev el
:  
Medium

Sol
uti
on:

Begi
nningrawmat eri
alsinvent
ory $40
Add:Rawmat eri
alspurchased  
120
Rawmat eri
alsavai
labl
ef oruse 160
Deduct:Endi
ngrawmat eri
alsi
nvent
ory   
 70
Rawmat eri
alsused $ 90

Rawmat eri
alsused $ 90
Dir
ectlabor 200
Manufacturi
ngoverhead  
230
Totalmanufact
uringcost
s 520
Add:Beginni
ngwor kinpr
ocessinvent
ory   
 70
Subtot
al 590
Deduct:Endi
ngwor kinprocessi
nvent
ory   
 50
$54
Costofgoodsmanuf
act
ured 0

2-
76 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

119.Thecostofgoodssol
dfort
hey
ear(
int
housandsofdol
l
ars)was:
A) $700
B) $500
C) $660
D) $580

Ans:
  B AACSB: 
 
Analyt
ic AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 2,
3,
4 Lev el
: 
 Medi
um

Sol
uti
on:

Begi
nningrawmat eri
alsinvent
ory $40
Add:Rawmat eri
alspurchased 120
Rawmat eri
alsavai
labl
ef oruse 160
Deduct:Endi
ngrawmat eri
alsi
nvent
ory 70
Rawmat eri
alsused $90

Rawmat eri
alsused $90
Dir
ectlabor 200
Manufacturi
ngoverhead 230
Totalmanufact
uringcost
s 520
Add:Beginni
ngwor kinpr
ocessinvent
ory 70
Subtot
al 590
Deduct:Endi
ngwor kinprocessi
nvent
ory 50
$54
Costofgoodsmanuf
act
ured 0

$12
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 540
Goodsav ai
lableforsal
e 660
Deduct
: Endingfini
shedgoodsinvent
ory 160
$50
Costofgoodssol
d 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
77
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

120.Thenetoper
ati
ngi
ncomef
ort
hey
ear(
int
housandsofdol
l
ars)was:
A) $150
B) $200
C) $490
D) $250

Ans:
  B AACSB: 
 
Analyt
ic AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 2,
3,
4 Lev el
: 
 Medi
um

Sol
uti
on:

Begi
nningrawmat eri
alsinvent
ory $40
Add:Rawmat eri
alspurchased 120
Rawmat eri
alsavai
labl
ef oruse 160
Deduct:Endi
ngrawmat eri
alsi
nvent
ory 70
Rawmat eri
alsused $90

Rawmat eri
alsused $90
Dir
ectlabor 200
Manufacturi
ngoverhead 230
Totalmanufact
uringcost
s 520
Add:Beginni
ngwor kinpr
ocessinvent
ory 70
Subtot
al 590
Deduct:Endi
ngwor kinprocessi
nvent
ory 50
$54
Costofgoodsmanuf
act
ured 0

$12
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 540
Goodsav ai
lableforsal
e 660
Deduct
: Endingfini
shedgoodsinvent
ory 160
$50
Costofgoodssol
d 0

$99
Sales  
  
  
  
  0
Costofgoodssold  
  
  
  
  500
Grossmargin  
  
  
  
  490
Sell
ingandadmini
str
ativ
eexpenses:
Admi ni
str
ati
veexpense $150
Sel l
i
ngexpense   
140 290
$20
Netoper
ati
ngi
ncome  
  
  
  
  0

2-
78 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
79
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions121-
125:

Mar kisanengi
neerwhohasdesignedatel
ecommuni cati
onsdevice.Heisconv
inced
thatther
eisabigpotenti
almar
ketfort
hedevice.Accordi
ngl
y,hehasdecidedtoquit
hispresentj
obandstartacompanytomanufactureandmarketthedevice.

121.Thesal
arythatMarkearnsathi
spr
esentempl
oyi
s:
A) av ari
ablecost
B) af i
xedcost
C) apr oductcost
D) anoppor tuni
tycost

Ans:
  
D AACSB:  
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 7 Lev
el:
 
 Easy

122.Markpur
chasedamachi net
woy earsagotomakeexper
imental
boards.The
machi
newi l
lbeusedt omanufact
urethenewboar
d.Thecostoft
hismachinei
s:
A) anoppor tunit
ycost
B) asunkcost
C) adifferenti
alcost
D) aper i
odcost

Ans:
  
B AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 7 Lev
el:
 
 Easy

123.Thecostoftherawmat
eri
alst
hatwi
l
lbeusedi
nmanuf
act
uri
ngt
hecomput
er
boar
dis:
A) asunkcost
B) af i
xedcost
C) aper i
odcost
D) av ari
ablecost

Ans:
  D AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2,
5 Level
:
  
Easy

124.Rentontheadminist
rat
iveof
fi
cespacei
s:
A) av ari
ablecost
B) anoppor tuni
tycost
C) aper i
odcost
D) apr oductcost

Ans:
  C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2,
5 Level
:
  
Easy

2-
80 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

125.Pr
oper
tytaxesont hebuil
dingt
hatwi
l
lbepur
chasedt
ohouset
he
manuf
acturi
ngf aci
li
tyar
e:
A) apr oductcost
B) av ari
ablecost
C) anoppor tunit
ycost
D) aper i
odcost

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2,
5 Level
:
  
Easy

Uset
hef
oll
owi
ngt
oanswerquest
ions126-
128:

VignanaCorpor
ati
onmanufact
uresandsell
shand-paint
edcl
ayfi
gur
inesofpopul
ar
sportsher
oes.Shownbel
owaresomeoft hecostsincurr
edbyVi
gnanaforl
astyear
:

$65,
00
Costofcl
ayusedinproducti
on 0
$90,
00
Wagespaidt
ot heworkerswhopai
ntt
hefigur
ines 0
$22,
00
Wagespaidt
ot hesal
esmanager’
ssecret
ary 0
$47,
00
Costofj
unkmai l
advert
isi
ng 0

126.Whati
sthetotal
oft
hedi
rectcost
sabov
e?
A) $65,000
B) $112,000
C) $155,000
D) $202,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 6 Lev
el:
 
 Medi
um

Sol
uti
on:

Costofcl
ayusedinpr
oduct
ion $  
65,
000
Wagespaidtothewor
kerswhopai
ntt
hef
igur
ines 90,
000
$155,
00
Total
dir
ectcosts 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
81
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

127.Whati
sthetotal
oft
hei
nvent
ori
abl
e(pr
oduct
)cost
sabov
e?
A) $0
B) $69,000
C) $155,000
D) $159,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Medi
um

Sol
uti
on:

Costofcl
ayusedinpr
oduct
ion $  
65,
000
Wagespaidtothewor
kerswhopai
ntt
hef
igur
ines 90,
000
$155,
00
Total
productcost
s 0

128.Whati
sthetotal
oft
heconv
ersi
oncost
sabov
e?
A) $65,000
B) $69,000
C) $90,000
D) $155,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 2 Lev
el:
 
 Medi
um

Solut
ion:
Onlythewagespai
dtotheworkswhopai
ntt
hef
igur
ines(
$90,
000)ar
e
consi
deredtobeconv
ersi
oncosts.

2-
82 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions129-
132:

Gaedder
tCor
por
ati
onr
epor
tedt
hef
oll
owi
ngdat
afort
hemont
hofJul
y:

Begi
nni
n
I
nvent
ori
es: g Endi
ng
$27,
00
Rawmat
eri
als $36,
000 0
$16,
00
Wor
kinpr
ocess $13,
000 0
$42,
00
Fi
nishedgoods $36,
000 0

Addi
ti
onal
inf
ormat
ion:
$250,
00
Sal
es 0
Rawmat eri
alspurchases $76,
000
Dir
ectl
aborcost $33,
000
Manufactur
ingoverheadcost $81,
000
Sel
li
ngexpense $24,
000
Admini
strat
iveexpense $29,
000

129.Thet
otal
manuf act
uri
ngcostf
orJul
ywas:
A) $190,000
B) $114,000
C) $199,000
D) $81,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medium

Sol
uti
on:

$  
36,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 76,000
Rawmat eri
alsav ai
labl
ef oruse 112,000
Deduct:Endingrawmat eri
alsi
nvent
ory 27,000
Rawmat eri
alsused 85,000
Add:Dir
ectlaborcost s 33,000
Add:Manuf actur
ingover head 81,000
$199,00
Tot
almanuf
act
uri
ngcost
s 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
83
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

2-
84 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

130.Thecostofgoodsmanuf
act
uredf
orJul
ywas:
A) $196,000
B) $190,000
C) $202,000
D) $199,000

Ans: 
 A AACSB:
 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
Level
: 
 Medi
um

Sol
uti
on:

$  
36,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 76,000
Rawmat eri
alsav ai
labl
ef oruse 112,000
Deduct:Endingrawmat eri
alsi
nvent
ory 27,000
Rawmat eri
alsused 85,000
Add:Dir
ectlaborcost s 33,000
Add:Manuf actur
ingover head 81,000
$199,00
Tot
almanuf
act
uri
ngcost
s 0

$199,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 13,
000
Subtot
al 212,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 16,
000
$196,
00
Costofgoodsmanuf
act
ured 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
85
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

131.Thecostofgoodssol
dforJul
ywas:
A) $244,000
B) $138,000
C) $190,000
D) $202,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medium

Sol
uti
on:

$  
36,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 76,000
Rawmat eri
alsav ai
labl
ef oruse 112,000
Deduct:Endingrawmat eri
alsi
nvent
ory 27,000
Rawmat eri
alsused 85,000
Add:Dir
ectlaborcost s 33,000
Add:Manuf actur
ingover head 81,000
$199,00
Tot
almanuf
act
uri
ngcost
s 0

$199,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 13,
000
Subtot
al 212,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 16,
000
$196,
00
Costofgoodsmanuf
act
ured 0

$  
36,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 196,000
Costofgoodsav ai
labl
eforsale 232,000
Deduct
: Endingfini
shedgoodsinvent
ory 42,000
$190,00
Costofgoodssol
d 0

2-
86 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

132.Thenetoper
ati
ngi
ncomef
orJul
ywas:
A) $7,000
B) $60,000
C) $83,000
D) $9,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medium

Sol
uti
on:

Begi
nningrawmat eri
alsinvent
ory $36,
000
Add:Rawmat eri
alspurchased 76,
000
Rawmat eri
alsavai
labl
ef oruse 112,
000
Deduct:Endi
ngrawmat eri
alsi
nvent
ory 27,
000
Rawmat eri
alsused $85,
000

$  
85,00
Rawmat eri
alsused 0
Dir
ectlabor 33,000
Manufacturi
ngoverhead 81,000
Totalmanufact
uringcost
s 199,000
Add:Beginni
ngwor kinpr
ocessinvent
ory 13,000
Subtot
al 212,000
Deduct:Endi
ngwor kinprocessi
nvent
ory 16,000
$196,00
Costofgoodsmanuf
act
ured 0

$  
36,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 196,000
Goodsav ai
lableforsal
e 232,000
Deduct
: Endingfini
shedgoodsinvent
ory 42,000
$190,00
Costofgoodssol
d 0

$250,00
Sales  
  
  
  
  
  
   0
Costofgoodssold  
  
  
  
  
  
   190,000
Grossmargin  
  
  
  
  
  
   60, 000
Sell
ingandadminist
rat
iveexpenses:
Admi ni
str
ati
veexpenses $29,000
Sel l
i
ngexpenses   
24,000 53,000
Netoperati
ngincome  
  
  
  
  
  
   $ 
  
7,000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
87
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

2-
88 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions133-
136:

ManagementofJar vaCor porat

ionhasaskedy ourhelpasani nterninpreparingsome
keyr
eportsforMay .Thecompanyst artedt hemont hwithr awmat er
ial
sinventori
esof
$29,
000.Duringthemont h,thecompanymader awmat erialspur chasesamount i
ngto
$72,
000.Attheendoft hemont h,r
awmat eri
alsinvent
oriest otal
ed$33, 000.Di r
ect
l
aborcostwas$36, 000andmanuf acturingov erheadcostwas$57, 000.Thebegi nni
ng
bal
anceinthewor kinprocessaccountwas$24, 000andt heendi ngbalancewas
$16,
000.Thebegi nni
ngbal anceinthef ini
shedgoodsaccountwas$35, 000andt he
endi
ngbalancewas$46, 000.Sal estotaled$220, 000.Sel
lingexpensewas$14, 000
andadminist
rati
veexpensewas$36, 000.

133.Thet
otal
manuf act
uri
ngcostf
orMaywas:
A) $93,000
B) $57,000
C) $165,000
D) $161,000

Ans:
  
D AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
29,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 72,000
Rawmat eri
alsav ai
labl
ef oruse 101,000
Deduct:Endingrawmat eri
alsi
nvent
ory 33,000
Rawmat eri
alsused 68,000
Add:Dir
ectlaborcost s 36,000
Add:Manuf actur
ingover head 57,000
$161,00
Tot
almanuf
act
uri
ngcost
s 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
89
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

134.Thecostofgoodsmanuf
act
uredf
orMaywas:
A) $161,000
B) $165,000
C) $169,000
D) $153,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medium

Sol
uti
on:

$  
29,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 72,000
Rawmat eri
alsav ai
labl
ef oruse 101,000
Deduct:Endingrawmat eri
alsi
nvent
ory 33,000
Rawmat eri
alsused 68,000
Add:Dir
ectlaborcost s 36,000
Add:Manuf actur
ingover head 57,000
$161,00
Tot
almanuf
act
uri
ngcost
s 0

$161,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 24,
000
Subtot
al 185,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 16,
000
$169,
00
Costofgoodsmanuf
act
ured 0

2-
90 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

135.Thecostofgoodssol
dforMaywas:
A) $107,000
B) $180,000
C) $158,000
D) $209,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medium

Sol
uti
on:

$  
29,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 72,000
Rawmat eri
alsav ai
labl
ef oruse 101,000
Deduct:Endingrawmat eri
alsi
nvent
ory 33,000
Rawmat eri
alsused 68,000
Add:Dir
ectlaborcost s 36,000
Add:Manuf actur
ingover head 57,000
$161,00
Tot
almanuf
act
uri
ngcost
s 0

$161,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 24,
000
Subtot
al 185,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 16,
000
$169,
00
Costofgoodsmanuf
act
ured 0

$  
35,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 169,000
Costofgoodsav ai
labl
eforsale 204,000
Deduct
: Endingfini
shedgoodsinvent
ory 46,000
$158,00
Costofgoodssol
d 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
91
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

136.Thenetoper
ati
ngi
ncomef
orMaywas:
A) $77,000
B) $12,000
C) $62,000
D) $5,000

Ans:
  
B AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medi
um

Sol
uti
on:

Begi
nningrawmat eri
alsinvent
ory $ 
29,
000
Add:Rawmat eri
alspurchased 72,
000
Rawmat eri
alsavai
labl
ef oruse 101,
000
Deduct:Endi
ngrawmat eri
alsi
nvent
ory 33,
000
Rawmat eri
alsused $ 
68,
000

$  
68,00
Rawmat eri
alsused 0
Dir
ectlabor 36,000
Manufacturi
ngoverhead 57,000
Totalmanufact
uringcost
s 161,000
Add:Beginni
ngwor kinpr
ocessinvent
ory 24,000
Subtot
al 185,000
Deduct:Endi
ngwor kinprocessi
nvent
ory 16,000
$169,00
Costofgoodsmanuf
act
ured 0

$  
35,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 169,000
Goodsav ai
lableforsal
e 204,000
Deduct
: Endingfini
shedgoodsinvent
ory 46,000
$158,00
Costofgoodssol
d 0

$220,00
Sales  
  
  
  
  
  
   0
Costofgoodssold  
  
  
  
  
  
   158,000
Grossmargin  
  
  
  
  
  
   62, 000
Sell
ingandadminist
rat
iveexpenses:
Admi ni
str
ati
veexpenses $36,000
Sel l
i
ngexpenses   
14,000 50,000
Netoperati
ngincome  
  
  
  
  
  
   $  
12,00

2-
92 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
93
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions137-
139:

Thefol
lowi
ngselecteddat
aforMar
chwer
etakenf
rom Rubenst
einCompany
's
fi
nanci
alst
atements:

Costofgoodsav ai
lableforsale $65,
000
Manufact
uri
ngov erhead $20,
000
Costofgoodsmanuf actured $51,
000
Fi
nishedgoodsinvent or
y ,
ending $10,
000
Di
rectmateri
alsused $15,
000
$105,
00
Sal
es 0
Sel
li
ngandadmi nistr
ativ
eexpenses $30,
000
Dir
ectl
abor $20,
000
Workinprocessinventory,
begi
nning $0

137.Thegr
ossmar gi
nwas:
A) $55,000
B) $54,000
C) $50,000
D) $40,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medium

Sol
uti
on:

St
ep#1:
Costofgoodsavai
labl
eforsal
e $65,
000
Less:
Fini
shedgoodsinvent
ory
,endi
ng 10,
000
Costofgoodssold $55,
000

St
ep#2:
$105,00
Sal
es 0
Costofgoodssol
d 55,000
$  
50,00
Gr
ossmar
gin 0

2-
94 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

138.Thebegi
nningf
ini
shedgoodsi
nvent
orywas:
A) $24,000
B) $9,000
C) $10,000
D) $14,000

Ans:
  
D AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medi
um

Sol
uti
on:

$14,000
Fi
nishedgoodsinv
ent
ory,
beginni
ng *
Add:Costofgoodsmanufact
ured 51,
000 
 
$65,
000 
Costofgoodsav
ail
abl
eforsal
e  

*Thisi
tem mustbecal
cul
atedbywor
kingbackwar
dsupwar
dthr
ought
he
st
atements.

139.Theendi
ngworki
npr
ocessi
nvent
orywas:
A) $4,000
B) $8,000
C) $10,000
D) $0

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medium

Sol
uti
on:

Begi
nni
ngwor kinprocessinvent
ory $ 0
Add:Di
rectmateri
als 15,
000
Add:Di
rectl
abor 20,
000
Add:Manufact
uri
ngov erhead 20,
000
55,
000
Deduct
:Endingwor
kinprocessi
nvent
ory 4,
000 *
Costofgoodsmanufact
ured $51,
000

*Thisi
tem mustbecal
cul
atedbywor
kingbackwar
dsupwar
dthr
ought
he
st
atements.

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
95
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions140-
143:

DauenhauerCor
por
ati
onr
epor
tedt
hef
oll
owi
ngdat
afort
hemont
hofApr
il
:

Begi
nni
n
I
nvent
ori
es: g Endi
ng
$20,
00
Rawmat
eri
als $27,
000 0
$24,
00
Wor
kinpr
ocess $10,
000 0
$28,
00
Fi
nishedgoods $38,
000 0

Addi
ti
onal
inf
ormat
ion:
$230,
00
Sal
es 0
Rawmat eri
alspurchases $76,
000
Dir
ectl
aborcost $30,
000
Manufactur
ingoverheadcost $61,
000
Sel
li
ngexpense $22,
000
Admini
strat
iveexpense $26,
000

140.Thet
otal
manuf act
uri
ngcostf
orApr
ilwas:
A) $61,000
B) $167,000
C) $91,000
D) $174,000

Ans:
  
D AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
27,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 76,000
Rawmat eri
alsav ai
labl
ef oruse 103,000
Deduct:Endingrawmat eri
alsi
nvent
ory 20,000
Rawmat eri
alsused 83,000
Add:Dir
ectlaborcost s 30,000
Add:Manuf actur
ingover head 61,000
$174,00
Tot
almanuf
act
uri
ngcost
s 0

2-
96 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
97
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

141.Thecostofgoodsmanuf
act
uredf
orApr
ilwas:
A) $160,000
B) $174,000
C) $167,000
D) $188,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medium

Sol
uti
on:

$  
27,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 76,000
Rawmat eri
alsav ai
labl
ef oruse 103,000
Deduct:Endingrawmat eri
alsi
nvent
ory 20,000
Rawmat eri
alsused 83,000
Add:Dir
ectlaborcost s 30,000
Add:Manuf actur
ingover head 61,000
$174,00
Tot
almanuf
act
uri
ngcost
s 0

$174,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 10,
000
Subtot
al 184,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 24,
000
$160,
00
Costofgoodsmanuf
act
ured 0

2-
98 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

142.Thecostofgoodssol
dforApr
ilwas:
A) $240,000
B) $170,000
C) $150,000
D) $113,000

Ans:
  
B AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
27,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 76,000
Rawmat eri
alsav ai
labl
ef oruse 103,000
Deduct:Endingrawmat eri
alsi
nvent
ory 20,000
Rawmat eri
alsused 83,000
Add:Dir
ectlaborcost s 30,000
Add:Manuf actur
ingover head 61,000
$174,00
Tot
almanuf
act
uri
ngcost
s 0

$174,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 10,
000
Subtot
al 184,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 24,
000
$160,
00
Costofgoodsmanuf
act
ured 0

$  
38,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 160,000
Costofgoodsav ai
labl
eforsale 198,000
Deduct
: Endingfini
shedgoodsinvent
ory 28,000
$170,00
Costofgoodssol
d 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
99
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

143.Thenetoper
ati
ngi
ncomef
orApr
ilwas:
A) $60,000
B) $15,000
C) $12,000
D) $91,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medium

Sol
uti
on:

Begi
nningrawmat eri
alsinvent
ory $27,
000
Add:Rawmat eri
alspurchased 76,
000
Rawmat eri
alsavai
labl
ef oruse 103,
000
Deduct:Endi
ngrawmat eri
alsi
nvent
ory 20,
000
Rawmat eri
alsused $83,
000

$  
83,00
Rawmat eri
alsused 0
Dir
ectlabor 30,000
Manufacturi
ngoverhead 61,000
Totalmanufact
uringcost
s 174,000
Add:Beginni
ngwor kinpr
ocessinvent
ory 10,000
Subtot
al 184,000
Deduct:Endi
ngwor kinprocessi
nvent
ory 24,000
$160,00
Costofgoodsmanuf
act
ured 0

$  
38,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 160,000
Goodsav ai
lableforsal
e 198,000
Deduct
: Endingfini
shedgoodsinvent
ory 28,000
$170,00
Costofgoodssol
d 0

$230,00
Sales  
  
  
  
  
  
   0
Costofgoodssold  
  
  
  
  
  
   170,000
Grossmargin  
  
  
  
  
  
   60, 000
Sell
ingandadminist
rat
iveexpenses:
Admi ni
str
ati
veexpenses $26,000
Sel l
i
ngexpenses   
22,000 48,000
Netoperati
ngincome  
  
  
  
  
  
   $  
12,00

2-
100 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
101
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions144-
145:

Juar
tCor
por
ati
onr
epor
tedt
hef
oll
owi
ngdat
afort
hemont
hofDecember
:

Begi
nni
n
I
nvent
ori
es: g Endi
ng
$38,
00
Rawmat
eri
als $26,
000 0
$21,
00
Wor
kinpr
ocess $22,
000 0
$56,
00
Fi
nishedgoods $54,
000 0

Addi
ti
onal
inf
ormat
ion:
$230,
00
Sal
es 0
Rawmat eri
alspurchases $78,
000
Dir
ectl
aborcost $24,
000
Manufactur
ingoverheadcost $58,
000
Sel
li
ngexpense $15,
000
Admini
strat
iveexpense $45,
000

144.Thecostofgoodssol
dforDecemberwas:
A) $147,000
B) $97,000
C) $228,000
D) $151,000

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3,
4 Lev el
:
  
Medium

2-
102 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sol
uti
on:

$  
26,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 78,000
Rawmat eri
alsav ai
labl
ef oruse 104,000
Deduct:Endingrawmat eri
alsi
nvent
ory 38,000
Rawmat eri
alsused 66,000
Add:Dir
ectlaborcost s 24,000
Add:Manuf actur
ingover head 58,000
$148,00
Tot
almanuf
act
uri
ngcost
s 0

$148,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 22,
000
Subtot
al 170,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 21,
000
$149,
00
Costofgoodsmanuf
act
ured 0

$  
54,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 149,000
Costofgoodsav ai
labl
eforsale 203,000
Deduct
: Endingfini
shedgoodsinvent
ory 56,000
$147,00
Costofgoodssol
d 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
103
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

145.Thenetoper
ati
ngi
ncomef
orDecemberwas:
A) $23,000
B) $83,000
C) $88,000
D) $10,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medium

Sol
uti
on:

$  
26,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 78,000
Rawmat eri
alsav ai
labl
ef oruse 104,000
Deduct:Endingrawmat eri
alsi
nvent
ory 38,000
Rawmat eri
alsused 66,000
Add:Dir
ectlaborcost s 24,000
Add:Manuf actur
ingover head 58,000
$148,00
Tot
almanuf
act
uri
ngcost
s 0

$148,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 22,
000
Subtot
al 170,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 21,
000
$149,
00
Costofgoodsmanuf
act
ured 0

$  
54,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 149,000
Costofgoodsav ai
labl
eforsale 203,000
Deduct
: Endingfini
shedgoodsinvent
ory 56,000
$147,00
Costofgoodssol
d 0

$230,
00
Sales  
  
  
  
  
  
   0
Costofgoodssold  
  
  
  
  
  
   147,
000
Grossmargin  
  
  
  
  
  
   83,000
Sell
ingandadmini
str
ativ
eexpenses:
Admi ni
str
ati
veexpenses $45,000

2-
104 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sell
i
ngexpenses  
 15,
000 60,
000
Netoper
ati
ngincome   
  
  
  
  
  
  $ 
23,
000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
105
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions146-
147:

St
eenber
genCor
por
ati
onr
epor
tedt
hef
oll
owi
ngdat
afort
hemont
hofJune:

Begi
nni
n
I
nvent
ori
es: g Endi
ng
$32,
00
Rawmat
eri
als $39,
000 0
$23,
00
Wor
kinpr
ocess $24,
000 0
$30,
00
Fi
nishedgoods $28,
000 0

Addi
ti
onal
inf
ormat
ion:
$250,
00
Sal
es 0
Rawmat eri
alspurchases $50,
000
Dir
ectl
aborcost $44,
000
Manufactur
ingoverheadcost $71,
000
Sel
li
ngexpense $21,
000
Admini
strat
iveexpense $27,
000

146.Thet
otal
manuf act
uri
ngcostf
orJunewas:
A) $165,000
B) $71,000
C) $115,000
D) $172,000

Ans:
  
D AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
39,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 50,000
Rawmat eri
alsav ai
labl
ef oruse 89,000
Deduct:Endingrawmat eri
alsi
nvent
ory 32,000
Rawmat eri
alsused 57,000
Add:Dir
ectlaborcost s 44,000
Add:Manuf actur
ingover head 71,000
$172,00
Tot
almanuf
act
uri
ngcost
s 0

2-
106 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
107
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

147.Thenetoper
ati
ngi
ncomef
orJunewas:
A) $37,000
B) $87,000
C) $79,000
D) $31,000

Ans:
  
D AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
39,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 50,000
Rawmat eri
alsav ai
labl
ef oruse 89,000
Deduct:Endingrawmat eri
alsi
nvent
ory 32,000
Rawmat eri
alsused 57,000
Add:Dir
ectlaborcost s 44,000
Add:Manuf actur
ingover head 71,000
$172,00
Tot
almanuf
act
uri
ngcost
s 0

$172,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 24,
000
Subtot
al 196,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 23,
000
$173,
00
Costofgoodsmanuf
act
ured 0

$  
28,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 173,000
Costofgoodsav ai
labl
eforsale 201,000
Deduct
: Endingfini
shedgoodsinvent
ory 30,000
$171,00
Costofgoodssol
d 0

2-
108 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions148-
151:

ManagementofThedeCor porat
ionhasaskedy ourhelpasani nterninpreparingsome
keyreportsforJuly.Thebegi nni
ngbal anceintherawmat eri
alsinventoryaccountwas
$29,000.Duringthemont h, t
hecompanymader awmat eri
alspur chasesamount i
ngt
o
$55,000.Attheendoft hemont h,thebal anceintherawmat eri
alsinventoryaccount
was$37, 000.Dir
ectl aborcostwas$41, 000andmanuf acturi
ngov erheadcostwas
$61,000.Thebegi nningbalanceint hewor kinprocessaccountwas$22, 000andt he
endingbalancewas$23, 000.Thebegi nningbalanceint hefini
shedgoodsaccount
was$42, 000andt heendi ngbalancewas$55, 000.Salestotaled$230, 000.Sell
ing
expensewas$13, 000andadmi nist
rativeexpensewas$32, 000.

148.Thet
otal
manuf act
uri
ngcostf
orJul
ywas:
A) $157,000
B) $149,000
C) $61,000
D) $102,000

Ans:
  
B AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
29,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 55,000
Rawmat eri
alsav ai
labl
ef oruse 84,000
Deduct:Endingrawmat eri
alsi
nvent
ory 37,000
Rawmat eri
alsused 47,000
Add:Dir
ectlaborcost s 41,000
Add:Manuf actur
ingover head 61,000
$149,00
Tot
almanuf
act
uri
ngcost
s 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
109
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

149.Thecostofgoodsmanuf
act
uredf
orJul
ywas:
A) $149,000
B) $150,000
C) $148,000
D) $157,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medium

Sol
uti
on:

$  
29,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 55,000
Rawmat eri
alsav ai
labl
ef oruse 84,000
Deduct:Endingrawmat eri
alsi
nvent
ory 37,000
Rawmat eri
alsused 47,000
Add:Dir
ectlaborcost s 41,000
Add:Manuf actur
ingover head 61,000
$149,00
Tot
almanuf
act
uri
ngcost
s 0

$149,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 22,
000
Subtot
al 171,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 23,
000
$148,
00
Costofgoodsmanuf
act
ured 0

2-
110 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

150.Thecostofgoodssol
dforJul
ywas:
A) $217,000
B) $135,000
C) $161,000
D) $115,000

Ans:
  
B AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
29,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 55,000
Rawmat eri
alsav ai
labl
ef oruse 84,000
Deduct:Endingrawmat eri
alsi
nvent
ory 37,000
Rawmat eri
alsused 47,000
Add:Dir
ectlaborcost s 41,000
Add:Manuf actur
ingover head 61,000
$149,00
Tot
almanuf
act
uri
ngcost
s 0

$149,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 22,
000
Subtot
al 171,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 23,
000
$148,
00
Costofgoodsmanuf
act
ured 0

$  
42,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 148,000
Costofgoodsav ai
labl
eforsale 190,000
Deduct
: Endingfini
shedgoodsinvent
ory 55,000
$135,00
Costofgoodssol
d 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
111
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

151.Thenetoper
ati
ngi
ncomef
orJul
ywas:
A) $28,000
B) $95,000
C) $50,000
D) $83,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medium

Sol
uti
on:

$  
29,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 55,000
Rawmat eri
alsav ai
labl
ef oruse 84,000
Deduct:Endingrawmat eri
alsi
nvent
ory 37,000
Rawmat eri
alsused 47,000
Add:Dir
ectlaborcost s 41,000
Add:Manuf actur
ingover head 61,000
$149,00
Tot
almanuf
act
uri
ngcost
s 0

$149,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 22,
000
Subtot
al 171,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 23,
000
$148,
00
Costofgoodsmanuf
act
ured 0

$  
42,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 148,000
Costofgoodsav ai
labl
eforsale 190,000
Deduct
: Endingfini
shedgoodsinvent
ory 55,000
$135,00
Costofgoodssol
d 0

$230,
00
Sales  
  
  
  
  
  
   0
Costofgoodssold  
  
  
  
  
  
   135,
000
Grossmargin  
  
  
  
  
  
   95,000
Sell
ingandadmini
str
ativ
eexpenses:
Admi ni
str
ati
veexpenses $32,000

2-
112 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sel
l
ingexpenses  
 13,
000 45,000
$  
50,00
Netoper
ati
ngi
ncome  
  
  
  
  
  
   0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
113
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions152-
153:

TheCFOofCl aussenCor porati

onhaspr ovi
dedthef ol
lowingdataforJune.The
beginni
ngbal anceintherawmat eri
alsinventor
yaccountwas$38, 000.Duri
ngthe
mont h,t
hecompanymader awmat eri
alspurchasesamount ingto$53,000.Attheend
ofthemont h,thebalanceint herawmat eri
alsi
nventoryaccountwas$27, 000.Direct
l
aborcostwas$33, 000andmanuf acturi
ngov er
headcostwas$74, 000.Thebeginning
bal
ancei nthewor kinprocessaccountwas$24, 000andt heendingbalancewas
$23,000.Thebeginningbalancei nthef i
nishedgoodsaccountwas$57, 000andt he
endingbalancewas$55, 000.Salest otal
ed$290, 000.Sell
i
ngexpensewas$17, 000
andadmi nist
rati
veexpensewas$43, 000.

152.Thecostofgoodssol
dforJunewas:
A) $174,000
B) $170,000
C) $292,000
D) $124,000

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3,
4 Lev el
:
  
Medium

Sol
uti
on:

$  
38,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 53,000
Rawmat eri
alsav ai
labl
ef oruse 91,000
Deduct:Endingrawmat eri
alsi
nvent
ory 27,000
Rawmat eri
alsused 64,000
Add:Dir
ectlaborcost s 33,000
Add:Manuf actur
ingover head 74,000
$171,00
Tot
almanuf
act
uri
ngcost
s 0

$171,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 24,
000
Subtot
al 195,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 23,
000
$172,
00
Costofgoodsmanuf
act
ured 0

$ 
 57,
00
Begi
nni
ngf
ini
shedgoodsi
nvent
ory 0

2-
114 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Add:Costofgoodsmanuf actur
ed 172,
000
Costofgoodsavail
ableforsale 229,
000
Deduct
:Endingfi
nishedgoodsinvent
ory 55,
000
$174,
00
Costofgoodssol
d 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
115
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

153.Thenetoper
ati
ngi
ncomef
orJunewas:
A) $56,000
B) $123,000
C) $70,000
D) $116,000

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3,
4 Lev el
:
  
Medium

Sol
uti
on:

$  
38,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 53,000
Rawmat eri
alsav ai
labl
ef oruse 91,000
Deduct:Endingrawmat eri
alsi
nvent
ory 27,000
Rawmat eri
alsused 64,000
Add:Dir
ectlaborcost s 33,000
Add:Manuf actur
ingover head 74,000
$171,00
Tot
almanuf
act
uri
ngcost
s 0

$171,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 24,
000
Subtot
al 195,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 23,
000
$172,
00
Costofgoodsmanuf
act
ured 0

$  
57,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 172,000
Costofgoodsav ai
labl
eforsale 229,000
Deduct
: Endingfini
shedgoodsinvent
ory 55,000
$174,00
Costofgoodssol
d 0

$290,
00
Sales  
  
  
  
  
  
   0
Costofgoodssold  
  
  
  
  
  
   174,
000
Grossmargin  
  
  
  
  
  
   116,
000
Sell
ingandadmini
str
ativ
eexpenses:
Admi ni
str
ati
veexpenses $43,000

2-
116 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sel
l
ingexpenses  
 17,
000 60,000
$  
56,00
Netoper
ati
ngi
ncome  
  
  
  
  
  
   0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
117
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions154-
155:

Downi nCorporationhaspr ov i
dedt hefol
lowingdat aforMay .Thebegi nningbalancein
therawmat er
ialsinventoryaccountwas$34, 000.Dur i
ngt hemont h,thecompany
mader awmat eri
alspur chasesamount i
ngt o$65,000.Att heendoft hemont h,t
he
balanceinther awmat eri
alsinventoryaccountwas$29, 000.Dir
ectl aborcostwas
$30,000andmanuf act
ur i
ngov erheadcostwas$56, 000.Thebegi nningbal anceinthe
wor ki
npr ocessaccountwas$15, 000andt heendi ngbal ancewas$16, 000.The
beginningbalancei nthef i
nishedgoodsaccountwas$41, 000andt heendi ngbalance
was$57, 000.Salest ot
aled$220, 000.Selli
ngexpensewas$21, 000andadmi nist
rati
ve
expensewas$42, 000.

154.Thet
otal
manuf act
uri
ngcostf
orMaywas:
A) $156,000
B) $86,000
C) $151,000
D) $56,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medium

Sol
uti
on:

$  
34,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 65,000
Rawmat eri
alsav ai
labl
ef oruse 99,000
Deduct:Endingrawmat eri
alsi
nvent
ory 29,000
Rawmat eri
alsused 70,000
Add:Dir
ectlaborcost s 30,000
Add:Manuf actur
ingover head 56,000
$156,00
Tot
almanuf
act
uri
ngcost
s 0

2-
118 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

155.Thenetoper
ati
ngi
ncomef
orMaywas:
A) $71,000
B) $81,000
C) $6,000
D) $18,000

Ans:
  
D AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
34,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 65,000
Rawmat eri
alsav ai
labl
ef oruse 99,000
Deduct:Endingrawmat eri
alsi
nvent
ory 29,000
Rawmat eri
alsused 70,000
Add:Dir
ectlaborcost s 30,000
Add:Manuf actur
ingover head 56,000
$156,00
Tot
almanuf
act
uri
ngcost
s 0

$156,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 15,
000
Subtot
al 171,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 16,
000
$155,
00
Costofgoodsmanuf
act
ured 0

$  
41,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 155,000
Costofgoodsav ai
labl
eforsale 196,000
Deduct
: Endingfini
shedgoodsinvent
ory 57,000
$139,00
Costofgoodssol
d 0

$220,
00
Sales  
  
  
  
  
  
   0
Costofgoodssold  
  
  
  
  
  
   139,
000
Grossmargin  
  
  
  
  
  
   81,000
Sell
ingandadmini
str
ativ
eexpenses:
Admi ni
str
ati
veexpenses $42,000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
119
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sel
l
ingexpenses  
 21,
000 63,000
$  
18,00
Netoper
ati
ngi
ncome  
  
  
  
  
  
   0

2-
120 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions156-
157:

Yor
eCorporati
onhaspr ovi
dedt hefoll
owingdatafort
hemont hofJune.
Thebeginni
ng
bal
anceinthefinishedgoodsi nventoryaccountwas$35,000andt heendi
ngbalance
was$26,000.Salestotaled$220,000.Costofgoodsmanuf actur
edwas$99,000,
sel
l
ingexpensewas$15, 000,andadmi ni
str
ati
veexpensewas$46, 000.

156.Thecostofgoodssol
dforJunewas:
A) $99,000
B) $160,000
C) $90,000
D) $108,000

Ans:
  
D AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Easy

Sol
uti
on:

$  
35,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 99,000
Costofgoodsav ai
labl
eforsale 134,000
Deduct
: Endingfini
shedgoodsinvent
ory 26,000
$108,00
Costofgoodssol
d 0

157.Thenetoper
ati
ngi
ncomef
orJunewas:
A) $51,000
B) $60,000
C) $121,000
D) $130,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Easy

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
121
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sol
uti
on:

$  
35,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 99,000
Costofgoodsav ai
labl
eforsale 134,000
Deduct
: Endingfini
shedgoodsinvent
ory 26,000
$108,00
Costofgoodssol
d 0

$220,00
Sales  
  
  
  
  
  
   0
Costofgoodssold  
  
  
  
  
  
   108,000
Grossmargin  
  
  
  
  
  
   112,000
Sell
ingandadminist
rat
iveexpenses:
Admi ni
str
ati
veexpenses $46,000
Sel l
i
ngexpenses   
15,000 61,000
$  
51,00
Netoperati
ngincome  
  
  
  
  
  
   0

Uset
hef
oll
owi
ngt
oanswerquest
ions158-
159:

St
rei
fInc.
,al
ocal
ret
ail
er,
haspr
ovi
dedt
hef
oll
owi
ngdat
afort
hemont
hofJune:

Mer
chandi
sei
nvent
ory
,begi
nni
ngbalance $46,
000
Mer
chandi
sei
nvent
ory
,endi
ngbal
ance $52,
000
$260,
00
Sal
es 0
$128,
00
Pur
chasesofmerchandi
sei
nvent
ory 0
Sel
l
ingexpense $13,
000
Admini
str
ati
veexpense $40,
000

2-
122 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

158.Thecostofgoodssol
dforJunewas:
A) $128,000
B) $181,000
C) $122,000
D) $134,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Easy

Sol
uti
on:

$  
46,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 128,000
Costofgoodsav ai
labl
eforsale 174,000
Deduct
: Endingfini
shedgoodsinvent
ory 52,000
$122,00
Costofgoodssol
d 0

159.Thenetoper
ati
ngi
ncomef
orJunewas:
A) $132,000
B) $126,000
C) $85,000
D) $79,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 3 Lev
el:
 
 Easy

Sol
uti
on:

$  
46,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 128,000
Costofgoodsav ai
labl
eforsale 174,000
Deduct
: Endingfini
shedgoodsinvent
ory 52,000
$122,00
Costofgoodssol
d 0

$260,
00
Sales  
  
  
  
  
  
   0
Costofgoodssold  
  
  
  
  
  
   122,
000
Grossmargin  
  
  
  
  
  
   138,
000
Sell
ingandadmini
str
ativ
eexpenses:
Admi ni
str
ati
veexpenses $40,000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
123
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sel
l
ingexpenses  
 13,
000 53,000
$  
85,00
Netoper
ati
ngi
ncome  
  
  
  
  
  
   0

2-
124 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions160-
161:

Mccl
eanCor
por
ati
onr
epor
tedt
hef
oll
owi
ngdat
afort
hemont
hofOct
ober
:

Begi
nni
n
I
nvent
ori
es: g Endi
ng
$36,
00
Rawmat
eri
als $29,
000 0
$21,
00
Wor
kinpr
ocess $19,
000 0
$53,
00
Fi
nishedgoods $55,
000 0

Addi
ti
onal
inf
ormat
ion:
$75,
00
Rawmat
eri
alspur
chases 0
$45,
00
Di
rectl
aborcost 0
$64,
00
Manuf
act
uri
ngov
erheadcost 0
$16,
00
Sel
l
ingexpense 0
$44,
00
Admi
nist
rat
iveexpense 0

160.Thet
otal
manuf act
uri
ngcostf
orOct
oberwas:
A) $177,000
B) $184,000
C) $64,000
D) $109,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medium

Sol
uti
on:

$  
29,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 75,000
Rawmat eri
alsav ai
labl
ef oruse 104,000
Deduct:Endingrawmat eri
alsi
nvent
ory 36,000
Rawmat eri
alsused 68,000
Add:Dir
ectlaborcost s 45,000
Add:Manuf actur
ingover head 64,000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
125
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

$177,
00
Tot
almanuf
act
uri
ngcost
s 0

2-
126 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

161.Thecostofgoodsmanuf
act
uredf
orOct
oberwas:
A) $177,000
B) $175,000
C) $184,000
D) $179,000

Ans:
  
B AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
29,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 75,000
Rawmat eri
alsav ai
labl
ef oruse 104,000
Deduct:Endingrawmat eri
alsi
nvent
ory 36,000
Rawmat eri
alsused 68,000
Add:Dir
ectlaborcost s 45,000
Add:Manuf actur
ingover head 64,000
$177,00
Tot
almanuf
act
uri
ngcost
s 0

$177,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 19,
000
Subtot
al 196,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 21,
000
$175,
00
Costofgoodsmanuf
act
ured 0

Uset
hef
oll
owi
ngt
oanswerquest
ions162-
163:

Vi
vesCor
por
ati
onr
epor
tedt
hef
oll
owi
ngdat
afort
hemont
hofApr
il
:

Begi
nni
n
I
nvent
ori
es: g Endi
ng
$21,
00
Rawmat
eri
als $27,
000 0
$10,
00
Wor
kinpr
ocess $21,
000 0
$41,
00
Fi
nishedgoods $48,
000 0

Addi
ti
onal
inf
ormat
ion:

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
127
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

$79,
00
Rawmat
eri
alspur
chases 0
$27,
00
Di
rectl
aborcost 0
$89,
00
Manuf
act
uri
ngov
erheadcost 0

2-
128 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

162.Thecostofgoodsmanuf
act
uredf
orApr
ilwas:
A) $212,000
B) $190,000
C) $201,000
D) $195,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medium

Sol
uti
on:

$  
27,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 79,000
Rawmat eri
alsav ai
labl
ef oruse 106,000
Deduct:Endingrawmat eri
alsi
nvent
ory 21,000
Rawmat eri
alsused 85,000
Add:Dir
ectlaborcost s 27,000
Add:Manuf actur
ingover head 89,000
$201,00
Tot
almanuf
act
uri
ngcost
s 0

$201,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 21,
000
Subtot
al 222,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 10,
000
$212,
00
Costofgoodsmanuf
act
ured 0

163.Thecostofgoodssol
dforApr
ilwas:
A) $267,000
B) $205,000
C) $219,000
D) $132,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medium

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
129
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sol
uti
on:

$  
27,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 79,000
Rawmat eri
alsav ai
labl
ef oruse 106,000
Deduct:Endingrawmat eri
alsi
nvent
ory 21,000
Rawmat eri
alsused 85,000
Add:Dir
ectlaborcost s 27,000
Add:Manuf actur
ingover head 89,000
$201,00
Tot
almanuf
act
uri
ngcost
s 0

$201,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 21,
000
Subtot
al 222,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 10,
000
$212,
00
Costofgoodsmanuf
act
ured 0

$  
48,00
Begi
nningfinishedgoodsinventor
y 0
Add:Costofgoodsmanuf actur
ed 212,000
Costofgoodsav ai
labl
eforsale 260,000
Deduct
: Endingfini
shedgoodsinvent
ory 41,000
$219,00
Costofgoodssol
d 0

Uset
hef
oll
owi
ngt
oanswerquest
ions164-
165:

ServerCor
porationhaspr ov i
dedt hefol
l
owingdataf orJul y.Thebeginningbal ancein
therawmat er
ialsinventoryaccountwas$22, 000.Dur i
ngt hemont h,thecompany
mader awmat erial
spur chasesamount ingt
o$76, 000.Att heendoft hemont h,the
balancei
nther awmat eri
al sinventor
yaccountwas$36, 000.Directlaborcostwas
$25,000andmanuf acturi
ngov erheadcostwas$79, 000.Thebegi nningbal anceinthe
wor ki
nprocessaccountwas$11, 000andtheendi ngbal ancewas$20, 000.The
beginni
ngbalancei nthef inishedgoodsaccountwas$43, 000andt heendi ngbalance
was$39,000.

2-
130 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

164.Thet
otal
manuf act
uri
ngcostf
orJul
ywas:
A) $166,000
B) $104,000
C) $79,000
D) $180,000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medium

Sol
uti
on:

$  
22,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 76,000
Rawmat eri
alsav ai
labl
ef oruse 98,000
Deduct:Endingrawmat eri
alsi
nvent
ory 36,000
Rawmat eri
alsused 62,000
Add:Dir
ectlaborcost s 25,000
Add:Manuf actur
ingover head 79,000
$166,00
Tot
almanuf
act
uri
ngcost
s 0

165.Thecostofgoodsmanuf
act
uredf
orJul
ywas:
A) $166,000
B) $157,000
C) $180,000
D) $175,000

Ans:
  
B AACSB: 
 
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO: 
 4 Lev
el:
 
 Medi
um

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
131
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sol
uti
on:

$  
22,00
Begi
nningrawmat eri
alsinventor
y 0
Add:Rawmat eri
alspurchased 76,000
Rawmat eri
alsav ai
labl
ef oruse 98,000
Deduct:Endingrawmat eri
alsi
nvent
ory 36,000
Rawmat eri
alsused 62,000
Add:Dir
ectlaborcost s 25,000
Add:Manuf actur
ingover head 79,000
$166,00
Tot
almanuf
act
uri
ngcost
s 0

$166,
00
Totalmanufact
uri
ngcost
s 0
Add:Beginni
ngworkinpr
ocessi
nvent
ory 11,
000
Subtot
al 177,
000
Deduct:Endi
ngworkinpr
ocessi
nvent
ory 20,
000
$157,
00
Costofgoodsmanuf
act
ured 0

Uset
hef
oll
owi
ngt
oanswerquest
ions166-
167:

Atasalesvol
umeof20,000uni
ts,Choi
ceCorporat
ion'
ssal
escommi
ssi
ons(
acost
thati
svari
abl
ewi
threspectt
osalesvolume)tot
al$132,
000.

166.Tothenearestwhol
edoll
ar,whatshoul
dbethetotalsal
escommissionsata
sal
esv ol
umeof18,400uni
ts?(Assumethatt
hissalesvol
umeiswithinthe
rel
evantr
ange.)
A) $126, 720
B) $132, 000
C) $121, 440
D) $143, 478

Ans:
  
C AACSB:  
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Easy

Solut
ion:
$132,
000÷20,000=$6.
60peruni
t
18,
400units×$6.
60=$121,
440

2-
132 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

167.Tot henearestwhol
ecent
,whatshouldbetheav
eragesal
escommissi
onper
unitatasalesvol
umeof18,500uni
ts?(Assumet
hatthi
ssal
esvol
umeiswit
hin
therelev
antrange.
)
A) $6. 60
B) $6. 87
C) $7. 17
D) $7. 14

Ans:
  
A AACSB:  
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Easy

Solut
ion:
$132,
000÷20,
000=$6.
60peruni
tav
eragecost

Uset
hef
oll
owi
ngt
oanswerquest
ions168-
169:

Atasal
esv ol
umeof38,000uni
ts,Ti
rr
iCorpor
ati
on'
spr
oper
tyt
axes(
acostt
hati
sfi
xed
wit
hrespecttosal
esvolume)t
otal$733,
400.

168.Tot henear
estwholedol
l
ar,
whatshoul
dbet hetotalpr
oper
tytaxesatasales
volumeof37,200unit
s?(
Assumethatt
hissalesvolumeiswit
hintherel
evant
range.)
A) $725, 680
B) $733, 400
C) $749, 172
D) $717, 960

Ans:
  
B AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Easy

Soluti
on:
Fixedcostsdonotchangewithchangesinvol
ume;t
her
efor
e,f
ixedcost
swi
l
l
total$733,
400atasalesvol
umeof37, 200uni
ts.

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
133
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

169.Tothenearestwhol
ecent,
whatshoul
dbetheaver
ageproper
tytaxperuni
tata
sal
esv ol
umeof37,300uni
ts?(
Assumethatthi
ssal
esvolumeiswithi
nthe
rel
evantr
ange.)
A) $19. 30
B) $19. 66
C) $19. 72
D) $19. 48

Ans:
  
B AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Easy

Solut
ion:
$733,
400÷37,
300uni
ts=$19.
66peruni
t(r
ounded)

Uset
hef
oll
owi
ngt
oanswerquest
ions170-
171:

LeasCorporati
onstaf
fsahel
plinetoanswerquesti
onsfrom customers.Thecostsof
operat
ingthehelpl
i
nearevar
iablewit
hrespectt
ot henumberofcal l
sinamont h.Ata
vol
umeof25, 000call
sinamont h,
thecostsofoperat
ingthehelpli
netotal
$452,500.

170.Tothenear
estwholedol
lar,
whatshouldbethet
otalcostofoper
ati
ngthe
hel
pli
necost
satav ol
umeof23, 900cal
lsi
namont h?(Assumethatt
hiscal
l
vol
umeiswithi
ntherel
evantrange.
)
A) $442,545
B) $452,500
C) $473,326
D) $432,590

Ans:
  
D AACSB:  
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Easy

Soluti
on:
$452,500÷25,
000call
s=$18.
10percal
l
$18.10percal
l×23,
900cal
l
s=$432,590

2-
134 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

171.Tothenear
estwholecent,
whatshoul
dbetheaver
agecostofoperat
ingthe
hel
pli
nepercal
latavolumeof25,
300cal
l
si namonth?(
Assumet hatthi
scall
vol
umeiswithi
ntherel
evantr
ange.
)
A) $18.93
B) $18.00
C) $17.89
D) $18.10

Ans:
  
D AACSB:  
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Easy

Solut
ion:
$452,
500÷25,
000cal
l
s=$18.
10percal
l(av
erage)

Uset
hef
oll
owi
ngt
oanswerquest
ions172-
173:

Batt
ersonCor
porati
onl
easesi
tscorporat
eheadquart
ersbuil
ding.Thisl
easecosti
s
fi
xedwithr
espectt
othecompany'
ssalesvol
ume.Inarecentmont hinwhicht
hesales
vol
umewas28, 000uni
ts,
thel
easecostwas$697,200.

172.Tothenearestwholedoll
ar,
whatshouldbet
het otall
easecostatasal
es
vol
umeof29, 200uni
tsinamonth?(Assumethatthissal
esvolumeiswi
thi
nthe
rel
evantr
ange.)
A) $712, 140
B) $697, 200
C) $727, 080
D) $668, 548

Ans:
  
B AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Easy

Soluti
on:
Fixedcostsdonotchangewithchangesi
nvolume;t
heref
ore,
fixedcost
swi
l
l
total$697,
200atal
lsalesl
evel
swi t
hint
herel
evantr
ange.

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
135
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

173.Tothenear
estwhol
ecent,whatshoul
dbetheaver
ageleasecostperuni
tata
sal
esvol
umeof26,400uni
tsinamont h?(
Assumethatthi
ssalesvol
umeis
wit
hint
herel
evantr
ange.
)
A) $25.66
B) $24.90
C) $23.88
D) $26.41

Ans:
  
D AACSB:  
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 5 Lev
el:
 
 Easy

Solut
ion:
$697,
200÷26,
400uni
ts=$26.
41(
rounded)

Uset
hef
oll
owi
ngt
oanswerquest
ions174-
175:

Thefol
l
owi
ngcostdat
aper
tai
ntot
heoper
ati
onsofLadwi
gDepar
tmentSt
ores,
Inc.
,
fort
hemont
hofDecember
.

$68,
00
Cor
por
atel
egal
off
icesal
ari
es 0
$66,
00
ShoeDepar
tmentcostofsal
es-
-Br
ent
woodSt
ore 0
$86,
00
Cor
por
ateheadquar
ter
sbui
l
dingl
ease 0
$10,
00
Stor
emanager
’ssalary
--Br
ent
woodStore 0
ShoeDepar
tmentsalescommissi
ons-
-Br
ent
wood
St
ore $5,
000
$11,
00
Stor
euti
li
ti
es--
Brent
woodStore 0
ShoeDepartmentmanager
’ssal
ary
--Br
ent
woodSt
ore $3,
000
Centr
alwarehousel
easecost $3,
000
$11,
00
Jani
tor
ial
cost
s--
Brent
woodSt
ore 0

TheBrentwoodStor
eisjustoneofmanystoresownedandoperat
edbythecompany.
TheShoeDepartmentisoneofmanydepart
ment satt
heBrent
woodStor
e.Thecent
ral
warehouseser
vesallofthecompany
'sst
ores.

2-
136 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

174.Whati
sthetotal
amountoft
hecost
sli
stedabov
ethatar
edi
rectcost
soft
he
ShoeDepar
tment?
A) $66,000
B) $74,000
C) $106,000
D) $71,000

Ans:
  
B AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 6 Lev
el:
 
 Easy

Sol
uti
on:

$66,
00
ShoeDepar
tmentcostofsal
es–BrentwoodSt or
e 0
ShoeDepar
tmentsal
escommi ssi
ons–Br ent
wood
St
ore 5,
000
ShoeDepar
tmentManager’
sSalar
y –BrentwoodStor
e 3,
000
$74,
00
Tot
aldi
rectcost
s 0

175.Whatist
hetotal
amountoft
hecost
sli
stedabov
ethatar
eNOTdi
rectcost
sof
theBr
ent
woodSt or
e?
A) $74,000
B) $32,000
C) $157,000
D) $86,000

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 6 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
68,00
Corpor
atel
egal of
fi
cesalari
es 0
Corpor
ateheadquarter
sbuil
dingl
ease 86, 000
Centr
alwarehouseleasecost 3,000
$157,00
Total 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
137
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions176-
177:

Thefol
l
owi
ngcostdataper
tai
ntot
heoper
ati
onsofQui
nonezDepar
tmentSt
ores,
Inc.
,
fort
hemont
hofSeptember.

$77,
00
Corpor
ateheadquar
ter
sbuil
dingl
ease 0
CosmeticsDepar
tmentsal
escommi ssi
ons–Nor
thr
idge
Store $4,
000
$59,
00
Cor
por
atel
egal
off
icesal
ari
es 0
$11,
00
St
oremanager
’ssal
ary
–Nor
thr
idgeSt
ore 0
$10,
00
Heat
ing–Nor
thr
idgeSt
ore 0
$37,
00
Cosmet
icsDepar
tmentcostofsal
es–Nor
thr
idgeSt
ore 0
$16,
00
Cent
ral
war
ehousel
easecost 0
$12,
00
St
oresecur
it
y–Nort
hri
dgeSt
ore 0
Cosmeti
csDepar
tmentmanager
’ssal
ary
–Nor
thr
idgeSt
ore $4,
000

TheNorthr
idgeStorei
sjustoneofmanyst
oresownedandoper
atedbythecompany.
TheCosmet i
csDepart
mentisoneofmanydepartment
satt
heNor t
hri
dgeStor
e.The
cent
ral
war ehouseser
vesalloft
hecompany'
sstor
es.

176.Whati
sthetotal
amountoft
hecost
sli
stedabov
ethatar
edi
rectcost
soft
he
Cosmet
icsDepart
ment
?
A) $78,000
B) $45,000
C) $41,000
D) $37,000

Ans:
  
B AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 6 Lev
el:
 
 Easy

Sol
uti
on:

Cosmet i
csDepartmentsal
escommi ssi
ons–Nort
hri
dge $  
4,00
Stor
e 0
Cosmet i
csDepartmentcostofsal
es–Nort
hri
dgeStore 37,
000
Cosmet i
csDepartmentmanager’
ssalar
y–Nort
hri
dgeStor
e 4,
000
Totaldi
rectcost
s $45,00

2-
138 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
139
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

177.Whatisthetotal
amountoft
hecost
sli
stedabov
ethatar
eNOTdi
rectcost
sof
theNort
hridgeStor
e?
A) $152, 000
B) $33, 000
C) $45, 000
D) $77, 000

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 6 Lev
el:
 
 Medi
um

Sol
uti
on:

$  
77,00
Corpor
ateheadquarter
sbuil
dingl
ease 0
Corpor
atel
egal of
fi
cesalari
es 59,000
Centr
alwarehouseleasecost 16,000
$152,00
Tot
alcost
swhi
char
eNOTdi
rect 0

Uset
hef
oll
owi
ngt
oanswerquest
ions178-
180:

Atrucki
ngbusinessi
sconsi
der
ingwhethert
ogi v
eupi
tsl
ocal
del
i
ver
yrout
esort
o
expandit
slonghaul(
over100mil
es)operat
ions.

178.I
nt hi
sdeci
sion,theori
ginalcostofanyoft
het
ruckst
hati
tcur
rent
lyownscan
bestbedescri
bedasa( n):
A) oppor t
unitycost
B) conv ersi
oncost
C) sunkcost
D) di f
fer
ential(i
ncr
ement al
)cost

Ans:
  
C AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
ng
LO: 
 7 Lev
el:
 
 Easy

179.I
nt hi
sdecision,thewagecostsoft
headdit
ional
dri
verst
hatwil
lhav
etobe
hi
redforthel onghauloper
ati
onscanbestbedescr
ibedasa(
n):
A) oppor t
unitycost
B) admi ni
st r
ativ
ecost
C) sunkcost
D) di f
ferent i
al(i
ncr
emental
)cost

Ans:
  
D AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
ng
LO: 
 7 Lev
el:
 
 Easy

2-
140 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

180.I
nthi
sdecision,thelosti
ncomefrom t
hel
ocal
del
i
ver
yrout
esgi
venupcanbest
bedescri
bedasa( n):
A) oppor tuni
tycost
B) conv ersi
oncost
C) sunkcost
D) di f
ferenti
al(i
ncremental
)cost

Ans:
  
A AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
ng
LO: 
 7 Lev
el:
 
 Easy

Uset
hef
oll
owi
ngt
oanswerquest
ions181-
183:

Domi nikCor porat

ionpur chasedamachi ne5y ear
sagof or$527,000whenitlaunched
productM08Y.Unf ortunat
ely,thi
smachi nehasbr okendownandcannotber epair
ed.
Themachi necoul dber epl
acedbyanewmodel 310machi necosti
ng$545,000orbya
newmodel 240machi necost i
ng$450, 000.Managementhasdeci dedtobuyt he
model 240machi ne.Ithasl esscapaci t
ythanthemodel 310machi ne,buti
tscapacity
i
ssuf fici
entt ocont i
nuemaki ngpr oductM08Y.Managemental soconsider
ed, but
rej
ected, t
heal t
ernat i
veofdr oppingproductM08Yandnotr epl
acingtheoldmachi ne.
I
ft hatweredone, the$450,000i nvestedinthenewmachi necouldinsteadhavebeen
i
nv estedinapr ojectthatwoul dhav ereturnedatotalof$532,
000.

181.I
nmakingthedeci
siontobuythemodel
240machi
ner
athert
hant
hemodel
310
machi
ne,t
hediff
erenti
alcostwas:
A) $95,000
B) $5,000
C) $77,000
D) $18,000

Ans:
  
A AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
ng
LO: 
 7 Lev
el:
 
 Easy

Sol
uti
on:

$545,00
Model
310cost 0
Model
240cost 450,000
$  
95,00
Di
ff
erent
ial
cost 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
141
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

182.I
nmakingthedeci
siont
obuythemodel
240machi
ner
athert
hant
hemodel
310
machi
ne,t
hesunkcostwas:
A) $545,000
B) $450,000
C) $527,000
D) $532,000

Ans:
  
C AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
ng
LO: 
 7 Lev
el:
 
 Easy

Sol
uti
on:
Theor
igi
nal
costof$527,
000i
sasunkcost
.

183.I
nmakingt
hedeci
siont
oinv
esti
nthemodel
240machi
ne,
theoppor
tuni
tycost
was:
A) $545,
000
B) $450,
000
C) $532,
000
D) $527,
000

Ans:
  
C AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
ng
LO: 
 7 Lev
el:
 
 Easy

Sol
uti
on:

Theoppor
tuni
tycosti
sthepr
oceedsf
rom t
hepr
ojectt
hatwoul
dhav
eyi
elded
$532,
000.

Uset
hef
oll
owi
ngt
oanswerquest
ions184-
186:

ManagementofPlascenciaCorporat
ionisconsi
der
ingwhet hert
opurchaseanew
model370machinecosting$360,000oranewmodel 220machinecosting$340,
000
t
oreplaceamachinethatwaspur chased7y ear
sagof or$348,
000.Theoldmachine
wasusedtomakepr oductI43Luntil
itbr
okedownl astweek.Unfort
unat
ely,t
heold
machi
necannotber epai
red.

Managementhasdeci
dedtobuyt
henewmodel 220machine.
Ithasl
esscapaci
tyt
han
t
henewmodel 370machine,
buti
tscapaci
tyi
ssuffi
cientt
oconti
nuemakingpr
oduct
I
43L.

Managemental soconsi
dered,butrej
ected,
theal
ter
nati
veofsi
mplydr
oppi
ngpr
oduct
I43L.I
fthatweredone,i
nsteadofinvesti
ng$340,
000inthenewmachi
ne,t
hemoney
couldbeinvest
edinaprojectthatwouldret
urnatot
alof$411,
000.

2-
142 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

184.I
nmakingthedeci
siont
obuythemodel
220machi
ner
athert
hant
hemodel
370
machi
ne,t
hesunkcostwas:
A) $348,000
B) $340,000
C) $360,000
D) $411,000

Ans:
  
A AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
ng
LO: 
 7 Lev
el:
 
 Easy

Sol
uti
on:

Theori
ginal
costoft
hemachi
nepur
chased7y
ear
sagof
or$348,
000i
sasunk
cost
.

185.I
nmakingthedeci
siontobuythemodel
220machi
ner
athert
hant
hemodel
370
machi
ne,t
hediff
erenti
alcostwas:
A) $20,000
B) $8,000
C) $12,000
D) $63,000

Ans:
  
A AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
ng
LO: 
 7 Lev
el:
 
 Easy

Sol
uti
on:

$360,00
Costofmodel
370machi
ne 0
Costofmodel
220machi
ne 340,000
$  
20,00
Di
ff
erent
ial
cost 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
143
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

186.I
nmakingt
hedeci
siont
oinv
esti
nthemodel
220machi
ne,
theoppor
tuni
tycost
was:
A) $348,
000
B) $340,
000
C) $360,
000
D) $411,
000

Ans:
  
D AACSB:  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
ng
LO: 
 7 Lev
el:
 
 Easy

Sol
uti
on:

Theoppor
tuni
tycosti
sthepr
oceedsf
rom t
hepr
ojectt
hatwoul
dhav
eyi
elded
$411,
000.

2-
144 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions187-
190:

(Appendix2A)Debr
awor ksontheassemblyl
i
neofamanufact
uringcompanywhere
sheinstal
lsacomponentpartf
oroneofthecompany
'spr
oducts.Sheispai
d$16per
hourforregul
art
imeandt i
meandahal ff
oral
lworki
nexcessof40hoursperweek.

187.Debrawor ks42hoursduri
ngaweeki nwhicht
herewasnoidleti
me.The
al
locat
ionofDebra'
swagesf ortheweekbetweendi
rectl
aborcostand
manufacturi
ngoverheadcostwoul dbe:
Di
rectLabor ManufacturingOverhead
A) $664 $24
B) $688 $0
C) $640 $48
D) $672 $16

Ans:
  
D AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 8 Lev
el:
 
 Medi
um

Sol
uti
on:

Tot
alwagesf
ort
heweek:
$64
Regul
arti
me:40hour
s×$16perhour 0
Overt
ime:2hour
s×$24perhour  
  
48
$68
Totalwages 8
All
ocati
onoftot
alwages:
$67
Di
rectl
abor:
42hours×$16perhour 2
Manufact
uri
ngov
erhead:
2hours×$8per
hour  
  
16
$68
Tot
alwages 8

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
145
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

188.Debraworks43hoursi
nagi venweekbuti
sidl
efor4hour
sduri
ngt heweekdue
toequi
pmentbreakdowns.Theall
ocati
onofDebra'
swagesfortheweek
bet
weendi r
ectl
aborcostandmanufactur
ingover
headcostwouldbe:
Dir
ect Manufactur
ing
Labor Overhead
A) $712 $0
B) $688 $24
C) $624 $88
D) $640 $72

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 8 Lev
el:
 
 Medi
um

Sol
uti
on:

Tot
alwagesf
ort
heweek:
$64
Regul
arti
me:40hour
s×$16perhour 0
Overt
ime:3hour
s×$24perhour  
  
 72
$71
Totalwages 2
All
ocati
onoftot
alwages:
$62
Di
rectlabor
:39hours×$16perhour 4
Manufactur
ingov
erhead:
Idl
etime:4hours×$16perhour $64
Ov er
timepremi
um: 3hour
s×$8perhour  
24  
  
 88
$71
Tot
alwages 2

2-
146 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

189.Debra'
sempl oyeroffersfr
ingebenef i
tsthatcostthecompany$3f oreachhour
ofemployeet i
me( bothregularandov erti
me).Duringagi v
enweek, Debr
a
works42hour sbuti sidl
efor3hour sduet omat eri
alshortages.Thecompany
tr
eatsall
fri
ngebenef i
tsaspar tofmanuf act
uri
ngov erhead.Theallocati
onof
Debra'
swagesandf r
ingebenef i
tsfortheweekbet weendi rectl
aborcostand
manufactur
ingov erheadwoul dbe:
Dir
ect Manufacturi
ng
Labor Ov erhead
A) $688 $126
B) $624 $190
C) $672 $142
D) $640 $174

Ans:
  
B AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 8 Lev
el:
 
 Medi
um

Sol
uti
on:

Tot
alwagesandf
ri
ngebenef
it
sfort
heweek:
$64
Regul
arti
me:40hours×$16perhour 0
Overt
ime:2hour
s×$24perhour 48
Fri
ngebenef
it
s:42hour
s×$3perhour  
 126
$81
Tot
alwagesandf
ri
ngebenefi
ts 4
Al
l
ocati
onofwagesandfr
ingebenef
it
s:
$62
Di
rectl
abor:
39hours×$16perhour 4
Manufact
uri
ngov
erhead:
$ 
4
I
dlet
ime:
3hours×$16perhour 8
Over
ti
mepremi
um:2hours×$8perhour 16
 
12
Fr
ingebenef
it
s:42hour
s×$3perhour 6  
 190
$81
Tot
alwagesandf
ri
ngebenef
it
s 4

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
147
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

190.Debr a'
sempl oyeroffersfringebenefitsthatcostthecompany$3f oreachhour
ofempl oyeet i
me( bothr egularandov erti
me).Duringagi venweek, Debra
wor ks42hour sbuti sidl
ef or3hour sduet omat eri
al shortages.Thecompany
treatsall
fr i
ngebenef i
tsrelatingtodirectl
aborasaddeddi rectl
aborcostand
ther emainderaspar tofmanuf actur
ingov er
head.Theal l
ocat i
onofDebra'
s
wagesandf ri
ngebenef i
tsf ortheweekbet weendi rectlaborcostand
manuf acturingov erheadwoul dbe:
Direct Manuf actur
ing
Labor Ov erhead
A) $688 $126
B) $624 $190
C) $741 $73
D) $672 $142

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 8 Lev
el:
 
 Medi
um

Sol
uti
on:

Al
l
ocati
onofwagesandf
ri
ngebenef
it
s:
Dir
ectl
abor
:
$62
Wagecost
:39hour
s×$16perhour 4
$74
Fri
ngebenefi
ts:39hours×$3perhour  
117 1
Manufact
uri
ngoverhead:
Idl
etime:3hours×$16perhour 48
Overti
mepremium: 2hour
s×$8perhour 16
Fri
ngebenefi
ts:3hours×$3perhour  
  
 9  
  
 73
$81
Tot
alwagesandf
ri
ngebenef
it
s 4

Uset
hef
oll
owi
ngt
oanswerquest
ions191-
194:

(Appendi
x2A)Larr
yisaqual
it
yinspectorontheassemblyli
neofamanufact
uri
ng
company.Heispai
d$16perhourforregulart
imeandt i
meandahalfforal
lworki
n
excessof40hour
sperweek.Heisclassif
iedasadirectl
aborwor
ker
.

2-
148 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

191.Larr
ywor ks44hour sduri
ngaweeki nwhi
chther
ewasnoidleti
me.The
al
locat
ionofLar r
y'swagesfort heweekbet
weendir
ectl
aborcostand
manufacturingoverheadcostwouldbe:
Direct Manufacturi
ng
Labor Overhead
A) $736 $0
B) $640 $96
C) $704 $32
D) $688 $48

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 8 Lev
el:
 
 Medi
um

Sol
uti
on:

Total wagesf ortheweek:

Regulart i
me: 40hours×$16perhour $640
Over t
ime: 4hours×$24perhour   
  
96
Total wages $736
All
ocat i
onoft otalwages:
Directlabor:44hours×$16perhour $704
Manuf acturi
ngov er
head:4hour
s×$8per
hour  
  
32
Total wages $736

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
149
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

192.Lar
ryworks45hoursinagiv enweekbutisidl
efor4hoursdur i
ngtheweekdue
toequi
pmentbreakdowns.Theal l
ocati
onofLarry
'swagesf ortheweek
bet
weendi r
ectl
aborcostandmanuf actur
ingoverheadcostwouldbe:
Di r
ect Manuf actur
ing
Labor Over head
A) $656 $104
B) $760 $0
C) $720 $40
D) $640 $120

Ans:
  
A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 8 Lev
el:
 
 Medi
um

Sol
uti
on:

Tot
alwagesf
ort
heweek:
$64
Regul
arti
me:40hour
s×$16perhour 0
Overt
ime:5hour
s×$24perhour  
 120
$76
Totalwages 0
All
ocati
onoftot
alwages:
$65
Di
rectl
abor:
41hours×$16perhour 6
Manufact
uri
ngov
erhead:
$6
I
dlet
ime:
4hours×$16perhour 4
Over
ti
mepremi
um:5hours×$8perhour  
40  
 104
$76
Tot
alwages 0

2-
150 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

193.Larr
y'
sempl oyeroff
ersfringebenefi
tsthatcostthecompany$5f oreachhour
ofemployeetime(bothregularandov er
time).
Dur i
ngagi venweek,Larr
yworks
45hoursbutisidlefor4hour sduetomat eri
alshortages.Thecompanyt r
eats
al
lfri
ngebenefit
saspar tofmanuf act
uringoverhead.Theal l
ocati
onofLarr
y'
s
wagesandf ri
ngebenefit
sf ortheweekbet weendirectlaborcostand
manufactur
ingoverheadwoul dbe:
Dir
ect Manuf actur
ing
Labor Overhead
A) $760 $225
B) $640 $345
C) $656 $329
D) $720 $265

Ans:
  
C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 8 Lev
el:
 
 Medi
um

Sol
uti
on:

Tot
alwagesandf
ri
ngebenef
it
sfort
heweek:
$64
Regul
arti
me:40hours×$16perhour 0
Overt
ime:5hour
s×$24perhour 120
Fri
ngebenef
it
s:45hour
s×$5perhour  
 225
$98
Tot
alwagesandf
ri
ngebenefi
ts 5
Al
l
ocati
onofwagesandfr
ingebenef
it
s:
$65
Di
rectlabor
:41hour s×$16perhour 6
Manufactur
ingoverhead:
Idl
etime:4hour s×$16perhour $ 
64
Ov er
timepremium: 5hour
s×$8perhour 40
Fri
ngebenef i
ts:45hours×$5perhour  
225  
 329
$98
Tot
alwagesandf
ri
ngebenef
it
s 5

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
151
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

194.Larr
y '
sempl oy
erof fer
sf ri
ngebenef it
st hatcostthecompany$5f oreachhour
ofempl oyeeti
me( bot
hr egularandov erti
me) .Duri
ngagi venweek,Larryworks
45hour sbutisidlefor4hour sduet omat eri
alshortages.Thecompanyt r
eats
all
fringebenef i
tsr el
ati
ngt odi rectlaborasaddeddi rectl
aborcostandt he
remai nderaspar tofmanuf acturingov erhead.Theal l
ocati
onofLarry'
swages
andf ringebenefitsfortheweekbet weendi rectl
aborcostandmanuf acturi
ng
overheadwoul dbe:

Dir
ect Manufactur
ing
Labor Ov erhead
A) $720 $265
B) $861 $124
C) $760 $225
D) $656 $329

Ans:
  
B AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 8 Lev
el:
 
 Medi
um

Sol
uti
on:

Al
l
ocati
onofwagesandf
ri
ngebenef
it
s:
Dir
ectl
abor
:
$65
Wagecost
:41hour
s×$16perhour 6
$86
Fri
ngebenefi
ts:41hours×$5perhour 205 1
Manufact
uri
ngoverhead:
Idl
etime:4hours×$16perhour 64
Overti
mepremium: 5hour
s×$8perhour 40
 
  
2
Fr
ingebenef
it
s:4hour
s×$5perhour 0  
 124
$98
Tot
alwagesandf
ri
ngebenef
it
s 5

2-
152 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions195-
196:

(Appendix2B)Ci
rcl
eKToy s,I
nc.manufact
urest
oysandchi
ldr
en'
sclot
hingandsel
l
s
theseproduct
storet
ailout
let
s.Thefol
l
owingcostswer
eincur
redi
nperformi
ng
quali
tyacti
vi
ti
esatCir
cleKduringt
heyear:

$370,
00
Pr
oductr
ecal
lact
ivi
ti
es 0
$240,
00
Qual
i
tyt
rai
ningact
ivi
ti
es 0
$154,
00
Qual
i
tyi
mpr
ovementact
ivi
ti
es 0
$109,
00
War r
antyclai
m acti
v i
ti
es 0
Quali
tyinspecti
onandt est
ingactiv
iti
es $61,
000
Rewor kacti
vi
ti
es $38,
000
Quali
tydatacollect
ionandr epor
ti
ng
acti
vit
ies $15,
000

195.Whati
sthetot
aloft
hepr
event
ioncost
sforCi
rcl
eK?
A) $394,000
B) $409,000
C) $455,000
D) $470,000

Ans:
  B AACSB:
  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medi
um

Sol
uti
on:

$240,
00
Qual
i
tytr
aini
ngacti
v i
ti
es 0
Qual
i
tyimprovementacti
vi
ti
es 154,
000
Qual
i
tydatacoll
ect
ionandrepor
ti
ng
acti
vi
ti
es 15,
000
$409,
00
Tot
alpr
event
ioncost
s 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
153
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

196.Whati
sthetotal
oft
hei
nter
nal
fai
l
urecost
sforCi
rcl
eK?
A) $53,000
B) $99,000
C) $517,000
D) $38,000

Ans:
  D AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medium

Sol
uti
on:

Rewor
kact
ivi
ti
es $38,
000

2-
154 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Uset
hef
oll
owi
ngt
oanswerquest
ions197-
200:

(
Appendi
x2B)EanCompany
'squal
i
tycostr
epor
tist
obebasedont
hef
oll
owi
ngdat
a:

$57,
00
Qual
i
tyci
rcl
es 0
$98,
00
Downt
imecausedbyqual
i
typr
obl
ems 0
$98,
00
Debuggi
ngsof
twar
eer
ror
s 0
$68,
00
St
ati
sti
cal
processcont
rol
act
ivi
ti
es 0
$24,
00
Testandi
nspect
ionofi
n-pr
ocessgoods 0
$66,
00
Fi
nal
productt
est
ingandi
nspect
ion 0
$87,
00
Costoff
iel
dser
vici
ngandhandl
i
ngcompl
aint
s 0
$72,
00
Pr
oductr
ecal
l
s 0
$75,
00
Mai
ntenanceoft
estequi
pment 0

197.Whatwouldbethet
otal
prev
ent
ioncostappear
ingont
hequal
i
tycostr
epor
t?
A) $143,000
B) $125,000
C) $81,000
D) $129,000

Ans:
  B AACSB:
  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medi
um

Sol
uti
on:

$  
57,00
Qual
i
tycir
cles 0
St
ati
sti
calprocesscont
rol
act
ivi
ti
es 68,000
$125,00
Tot
alpr
event
ioncost
s 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
155
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

198.Whatwouldbethet
otal
appr
aisal
costappear
ingont
hequal
i
tycostr
epor
t?
A) $141,000
B) $165,000
C) $90,000
D) $164,000

Ans:
  B AACSB:
  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medi
um

Sol
uti
on:

$  
24,00
Testandinspecti
onofin-
processgoods 0
Fi
nalproducttest
ingandinspect
ion 66,000
Maintenanceoftestequi
pment 75,000
$165,00
Tot
alappr
aisal
cost 0

199.Whatwoul
dbethet
otal
int
ernal
fai
l
urecostappear
ingont
hequal
i
tycostr
epor
t?
A) $185,
000
B) $196,
000
C) $173,
000
D) $170,
000

Ans:
  B AACSB:
  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medi
um

Sol
uti
on:

$  
98,00
Downti
mecausedbyqual
itypr
obl
ems 0
Debuggi
ngsof
twar
eerror
s 98,000
$196,00
Tot
ali
nter
nal
fai
l
urecost 0

2-
156 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

200.Whatwoul
dbethet
otal
ext
ernal
fai
l
urecostappear
ingont
hequal
i
tycost
repor
t?
A) $170,
000
B) $645,
000
C) $159,
000
D) $355,
000

Ans:
  C AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medium

Sol
uti
on:

Costoffieldserv
ici
ngandhandl
i
ng $  
87,00
compl aints 0
Productrecall
s 72,000
$159,00
Tot
alext
ernal
fai
l
urecost 0

Uset
hef
oll
owi
ngt
oanswerquest
ions201-
204:

(
Appendi
x2B)Fagel
Company
'squal
i
tycostr
epor
tist
obebasedont
hef
oll
owi
ngdat
a:

$42,
00
Di
sposal
ofdef
ect
ivepr
oduct
s 0
$73,
00
Super
visi
onoft
est
ingandi
nspect
ionact
ivi
ti
es 0
$78,
00
St
ati
sti
cal
processcont
rol
act
ivi
ti
es 0
$53,
00
Costoff
iel
dser
vici
ngandhandl
i
ngcompl
aint
s 0
$46,
00
Re-
ent
eri
ngdat
abecauseofkey
inger
ror
s 0
$87,
00
War
rant
yrepai
rsandr
epl
acement
s 0
$89,
00
Suppl
i
esusedi
ntest
ingandi
nspect
ion 0
$27,
00
Qual
i
tyci
rcl
es 0
$14,
00
Downt
imecausedbyqual
i
typr
obl
ems 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
157
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

201.Whatwouldbethet
otal
prev
ent
ioncostappear
ingont
hequal
i
tycostr
epor
t?
A) $105,000
B) $80,000
C) $151,000
D) $116,000

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medium

Sol
uti
on:

St
ati
sti
calprocesscont
rol
act
ivi
ti
es $  
78,
000
Qual
i
tycir
cles 27,
000
$105,
00
Tot
alpr
event
ioncost 0

2-
158 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

202.Whatwoul
dbethet
otal
appr
aisal
costappear
ingont
hequal
i
tycostr
epor
t?
A) $115,
000
B) $135,
000
C) $267,
000
D) $162,
000

Ans:
  D AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medium

Sol
uti
on:

Super
v i
sionoft
esti
ngandinspecti
onacti
vi
ti
es $  
73,
000
Suppl
iesusedintest
ingandinspect
ion 89,
000
$162,
00
Tot
alappr
aisal
cost 0

203.Whatwouldbethet
otal
int
ernal
fai
l
urecostappear
ingont
hequal
i
tycostr
epor
t?
A) $129,000
B) $67,000
C) $115,000
D) $102,000

Ans:
  D AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medium

Sol
uti
on:

Disposalofdef
ect
iveproducts $  
42,
000
Re-enter
ingdat
abecauseofkey inger
ror
s 46,
000
Downt i
mecausedbyqual i
typroblems 14,
000
$102,
00
Tot
ali
nter
nal
fai
l
urecost 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
159
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

204.Whatwoul
dbethet
otal
ext
ernal
fai
l
urecostappear
ingont
hequal
i
tycost
repor
t?
A) $509,
000
B) $242,
000
C) $101,
000
D) $140,
000

Ans:
  D AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medium

Sol
uti
on:

Costoffi
eldservi
cingandhandl
ingcompl
aint
s $  
53,
000
Warrant
yrepair
sandr epl
acements 87,
000
$140,
00
Tot
alext
ernal
fai
l
urecost 0

Uset
hef
oll
owi
ngt
oanswerquest
ions205-
208:

(
Appendi
x2B)FaustCompany
'squal
i
tycostr
epor
tist
obebasedont
hef
oll
owi
ngdat
a:

$68,
00
Qual
i
tyengi
neer
ing 0
$35,
00
Qual
i
tyci
rcl
es 0
$72,
00
Super
visi
onoft
est
ingandi
nspect
ionact
ivi
ti
es 0
$76,
00
Netcostofscrap 0
Testandinspect
ionofin-pr
ocessgoods $6,
000
Li
abil
it
yarisi
ngfrom defect
ivepr
oducts $3,
000
$56,
00
War
rant
yrepai
rsandr
epl
acement
s 0
$68,
00
Debuggi
ngsof
twar
eer
ror
s 0
$19,
00
Rewor
klaborandov
erhead 0

2-
160 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

205.Whatwouldbethet
otal
prev
ent
ioncostappear
ingont
hequal
i
tycostr
epor
t?
A) $107,000
B) $41,000
C) $140,000
D) $103,000

Ans:
  D AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medium

Sol
uti
on:

Qual
i
tyengi
neer
ing $  
68,
000
Qual
i
tyci
rcl
es 35,
000
$103,
00
Tot
alpr
event
ioncost 0

206.Whatwouldbethet
otal
appr
aisal
costappear
ingont
hequal
i
tycostr
epor
t?
A) $78,000
B) $181,000
C) $81,000
D) $74,000

Ans:
  A AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medium

Sol
uti
on:

Supervi
sionoft esti
ngandinspect
ionact
ivi
ti
es $72,
000
Testandi nspecti
onofin-
processgoods 6,
000
Totalappraisalcost $78,
000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
161
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

207.Whatwouldbethet
otal
int
ernal
fai
l
urecostappear
ingont
hequal
i
tycostr
epor
t?
A) $71,000
B) $163,000
C) $74,000
D) $132,000

Ans:
  B AACSB:
  
Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medi
um

Sol
uti
on:

Netcostofscrap $  
76,
000
Debuggi
ngsof t
wareerr
ors 68,
000
Reworklaborandover
head 19,
000
$163,
00
Tot
ali
nter
nal
fai
l
urecost 0

208.Whatwouldbethet
otal
ext
ernal
fai
l
urecostappear
ingont
hequal
i
tycost
repor
t?
A) $222,000
B) $403,000
C) $79,000
D) $59,000

Ans:
  D AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng
LO: 
 9,
10 Level
:
  
Medium

Sol
uti
on:

Li
abi
li
tyari
singfr
om defecti
veproduct
s $  
3,000
Warr
antyrepai
rsandreplacements 56,000
Tot
alexter
nalfai
l
urecost $59,000

2-
162 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

EssayQuest
ions

209.Theinformat
ionbel
owrelat
estoGuzzar
diManuf
act
uri
ngCompany
.(Assume
thatal
lrawmateri
alsar
edir
ectmater
ial
s.)
:

$362,
00
Pur
chasesofr
awmat
eri
als 0
$207,
00
Dir
ectlaborcost 0
Sel
lingcosts( t
otal) $61,
000
Admi ni
strat
ivecost s(tot
al) $84,
000
$775,
00
Manuf actur
ingov erheadcosts( t
otal
) 0
Rawmat eri
alsinventory,
beginning $37,
000
Worki nprocessi nventor
y,beginning $19,
000
Fi
nishedgoodsi nventory
,beginning $62,
000
Rawmat eri
alsinventory,
ending $44,
000
Worki nprocessi nventor
y,ending $3,
000
Fi
nishedgoodsi nventory
,ending $77,
000

Requi
red:
WhatisGuzzar
di'
scostofgoodssol
d?

Ans:

$  
 362,00
Pur
chasesofr
awmat
eri
als 0
  
  
   
37,00
Add:
Rawmat
eri
alsi
nvent
ory
,begi
nni
ng 0
399, 000
  
  
   
44,00
Deduct
:Rawmat er
ial
sinventor
y,endi
ng 0
Rawmat er
ial
susedinproducti
on 355, 000
Dir
ectl
aborcost 207, 000
  
  
 775,00
Manuf
actur
ingover
headcost
s(t
otal
) 0
Tot
almanufact
uri
ngcost 1,
337, 000
  
  
   
19,00
Add:
Wor
kinpr
ocessi
nvent
ory
,begi
nni
ng 0
1,
356, 000
  
  
   
  
3,00
Deduct
:Wor
kinpr
ocessi
nvent
ory
,endi
ng 0
$1,353,00
Costofgoodsmanuf
act
ured 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
163
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

$  
  
62,00
Fi
nishedgoodsi
nvent
ory
,begi
nni
ng 0
 
1,353,00
Add:Costofgoodsmanufactured 0
Goodsavail
abl
eforsal
e 1,415,000
Deduct
:Fini
shedgoodsinventory
,endi
ng  
  
   
77,000
$1,338,00
Costofgoodssol
d 0

AACSB: 
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yti
c AICPA 
BB: 
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it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO:
  
1,2,
3,4 Level
:
  
Medium

2-
164 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

210.Miy
oseCorpor
ati
on,amanuf
act
uri
ngcompany
,haspr
ovi
dedt
hef
oll
owi
ngdat
a
f
orthemonthofJune:

Begi
nni
n
I
nvent
ori
es: g Endi
ng
$21,
00
Rawmat
eri
als $23,
000 0
$37,
00
Fi
nishedgoods $32,
000 0

Rawmateri
alspurchaseddur
ingJunet
otal
ed$67,
000andt
hecostofgoods
manuf
actur
edtotaled$124,
000.

Requir
ed:
a.Whatwast hecostofrawmater
ial
susedinproducti
ondur
ingJune?Show
y
ourwork.
b.Whatwast hecostofgoodssol
dforJune?Showy ourwor
k.

Ans:
a.
$23,
00
Begi
nningmat er
ial
sinvent
ory 0
Add:Purchasesofrawmat eri
als  
67,
000
Rawmat eri
alsavai
labl
eforuse 90,
000
Deduct
: Endi
ngrawmat eri
alsinvent
ory  
21,
000
$69,
00
Rawmat
eri
alsusedi
npr
oduct
ion 0

b.
$124,00
Costofgoodsmanuf
act
ured 0
  
  
32,00
Add:Begi
nningfi
nishedgoodsi
nvent
ory 0
Goodsavai
lablef
orsale 156,000
  
  
37,00
Deduct
:Endi
ngf
ini
shedgoodsi
nvent
ory 0
$119,00
Costofgoodssol
d 0

AACSB: 
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yti
c AICPA 
BB:
 
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it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO:
  
1,3 Level:
  
Easy

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
165
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

211.DuringthemonthofMay ,RussnakCorpor
ation,amanuf
acturi
ngcompany,
purchasedrawmaterial
scosti
ng$73,000.Thecostofgoodsmanufactur
edfor
themont hwas$102,000.Thebeginni
ngbalanceinther
awmat er
ial
saccount
was$26, 000andt
heendingbalancewas$39, 000.
Thebeginni
ngbal
anceinthe
fi
nishedgoodsaccountwas$42, 000andtheendingbal
ancewas$46,000.

Requir
ed:
a.Whatwast hecostofrawmater
ial
susedinpr
oduct
ionduri
ngMay
?Show
y
ourwork.
b.Whatwast hecostofgoodssol
dforMay?Showyourwork.

Ans:

a.
$26,
00
Begi
nningmat er
ial
sinvent
ory 0
Add:Purchasesofrawmat eri
als  
73,
000
Rawmat eri
alsavai
labl
eforuse 99,
000
Deduct
: Endi
ngrawmat eri
alsinvent
ory  
39,
000
$60,
00
Rawmat
eri
alsusedi
npr
oduct
ion 0

b.
$102,00
Costofgoodsmanuf
act
ured 0
  
  
42,00
Add:Begi
nningfi
nishedgoodsi
nvent
ory 0
Goodsavai
lablef
orsale 144,000
  
  
46,00
Deduct
:Endi
ngf
ini
shedgoodsi
nvent
ory 0
$  
98,00
Costofgoodssol
d 0

AACSB: 
 Anal
yti
c AICPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO:
  
1,3 Level:
  
Easy

2-
166 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

212.MaryTappin,
anassi
stantVi
cePr esi
dentatGal
axyToys,
wasdisturbedt
ofi
nd
onherdeskamemof rom herboss,GaryResni
ck,
tothecont
rol
lerofthe
company.Thememoappear sbelow:

Gal
axyToy
sInt
ernal
Memo

Sept15

To:
Harr
yWilson,Control
l
er
Fm:Gar
yResnick,Execut
iveVi
cePr
esi
dent

Asyouknow, wewon'tst
artrecor
dingmanysalesuntil
Octoberwhenstores
st
artaccepti
ngshi
pmentsfrom usf ort
heChr
istmasseason.Meanwhile,
we
ar
eproducingfl
at-
outandarebuil
dingupourf
inishedgoodsinv
entor
iessothat
wewillbereadyt
oshipnextmont h.

Unf ort
unately,weareinabi ndri
ghtnowsinceitl
ooksl i
kethenetincomef or
thequar terendingonSept30i sgoingtobeprett
yawf ul
.Thismaygetusi n
troublewi t
ht hebanksincetheyalwaysrevi
ewthequar t
erl
yfinanci
alreport
s
andmaycal l i
nourloaniftheydon'tl
ikewhatt
heysee.Isthereanypossi bi
li
ty
thatwecoul dchangetheclassifi
cati
onofsomeofourper i
odcost stoproduct
cost s-
-suchast herentonthefini
shedgoodswar ehouse?

Pl
easel
etmeknowassoonaspossi
ble.ThePr
esi
denti
spushi
ngf
orr
esul
ts.

Marydi
dn'
tknowwhattodoaboutt
hememo.I
twasn'
ti
ntendedf
orher
,buti
ts
cont
ent
swerealar
ming.

Requi
red:
a.WhyhasGar yResni
cksuggestedrecl
assi
fyi
ngsomeper
iodcost
sas
pr
oductcost
s?
b.Whydoy out
hinkMarywasalarmedaboutthememo?

Ans:

a.GaryResni ckhassuggest edreclassif y

ingsomeper iodcost saspr oduct
costssincet hecompanyi sbuildingupl argefinishedgoodsi nventoriesin
anti
cipati
onoft heChr i
stmassel li
ngseason.Pr oductcost sar einventor i
ed
andflowt hrought ot heincomest atementonl ywhenpr oduct saresold.
Peri
odexpenses, incont rast,f
lowdi rectl
yt othei ncomest atement .Since
mostoft hef ini
shedgoodsi nventorieswi l
lbehel dov ertot henextquar ter,
recl
assify
ingper iodcost saspr oductcost swilleffectiv
elydef errecognition
ofexpensesunt i
l nextquar t
erandt heref orewillimpr ovethecur rent
quarter
'snetoper at i
ngincome.

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
167
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

2-
168 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

b.MaryTappini spr obabl

yalarmedbybot ht heeconomi csi tuationt
he
companyfindsi tselfi
nandbyt heapparentwi ll
ingnessoft opmanagement
tobendther ules.Improperl
yreclassi
fyi
ngcost si sani ndicati
onthatt
op
managementdoesnotf eell
ikeithastoplaybyt herulesorbehonesti ni
ts
deal
ingswiththebank. Withsuchl ooseethicalstandards, Marymaywonder
whatotherthingst heyaredoingthatareunet hicaland/ oril
legal
.

AACSB: 
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yti
c AI
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BB:
 
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it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Deci
sion 
Maki
ng LO:
 
 2
Lev
el:
 
 Medium

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
169
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

213.Apart
ial
li
sti
ngofcost
sincur
redatBoy
lenCor
por
ati
ondur
ingMar
chappear
s
bel
ow:

$181,
00
Dir
ectmat eri
als 0
Uti
li
ties,factory $10,
000
Sal
escommi ssions $69,
000
Admi nist
rati
v esalari
es $99,
000
I
ndirectlabor $32,
000
Adver t
isi
ng $75,
000
Depreciationofpr oduct
ionequi
pment $28,
000
$120,
00
Di
rectlabor 0
Depreciat
ionofadmi
nist
rat
iveequi
pment $49,
000

Requi
red:
a.Whatisthet
otal
amountofproductcostli
stedabove?Showyourwor
k.
b.Whatisthet
otal
amountofperi
odcostlist
edabov e?Showyourwor
k.

Ans:

a.Productcost sconsi
stofdi
rectmater
ial
s,di
rectl
abor
,andmanuf act
uri
ng
overhead:
$181,00
Directmat erial
s 0
Directlabor 120,000
Manuf acturingover
head:
$10,
00
Uti
li
ties,factor
y 0
I
ndirectlabor 32,
000
  
  
70,00
Depreciationofpr
oducti
onequipment  
28,
000 0
$371,00
Totalpr oductcost 0

b.Peri
odcost sconsistofal
lcostsothert
hanpr
oductcost
s:
$  
99,00
Administrati
vesalari
es 0
Sal
escommi ssi
ons 69,000
Depreciationofadminist
rat
iveequipment 49,000
  
  
75,00
Adverti
sing 0
$292,00
Totalperiodcost 0

2-
170 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng LO:
 
 2
Lev
el:
 
 Medium

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
171
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

214.MarquessCor
por
ati
onhaspr
ovi
dedt
hef
oll
owi
ngpar
ti
all
i
sti
ngofcost
s
i
ncurr
edduri
ngMay:

Market
ingsalar
ies $39,
000
Pr
opertytaxes,
fact
ory $8,
000
$102,
00
Admi ni
strati
vetravel 0
Sal
escommi ssi
ons $73,
000
I
ndirectlabor $31,
000
$197,
00
Dir
ectmat er
ial
s 0
$145,
00
Adverti
sing 0
Depreciati
onofpr oduct
ionequi
pment $39,
000
Dir
ectlabor $78,
000

Requi
red:
a.Whatisthet
otal
amountofproductcostli
stedabove?Showyourwor
k.
b.Whatisthet
otal
amountofperi
odcostlist
edabov e?Showyourwor
k.

Ans:

a.Productcost sconsistofdirectmater
ial
s,di
rectl
abor,andmanuf act
uri
ng
overhead:
$197,00
Directmat eri
als 0
Directlabor 78,000
Manuf act uri
ngov er
head:
$ 
8,00
Proper t
yt axes,f
actory 0
I
ndirectl abor 31,000
 
39,00    
  
78,00
Depreciat i
onofpr oduct
ionequipment 0 0
$353,00
Totalpr oductcost 0

b.Peri
odcost sconsistofal
lcost
sot
herthanpr
oductcost
s:
$102,00
Administrati
vetravel 0
Sal
escommi ssi
ons 73,
000
Marketingsal ar
ies 39,
000
 
145,00
Adverti
sing 0
Tot
al periodcost $359,00

2-
172 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

AACSB: 
 Anal
yti
c AI
CPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng LO:
 
 2
Lev
el:
 
 Medium

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
173
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

215.Cl
assif
ythefol
l
owi
ngcostsf
oranaut
omanufact
urerasei
therdi
rectmat
eri
als,
di
rectl
abor,
manuf
act
uri
ngover
head,
orper
iodcosts.

a.Steel usedi nautomobi l

es
b.Assembl ydepar tmentempl oyeewages
c.Utili
tycost susedi nexecutivebuildi
ng
d.Trav elcost susedbysal esper sonnel
e.Costofshi ppinggoodst ocust omer s
f. Pr
oper tytaxesonassembl ypl ant
g.Glassusedi naut omobiles
h.Mai ntenancesuppl ies
i
. Depr eciationonassembl yplant
j
. Plantmanager '
ssalary
k.CEO' ssal ary
l
. Depr eciationonexecut i
vebui l
ding
m.Salar yofmar ketingexecutive
n.Tiresi nst
al ledonaut omobi l
es
o.Adv ertisi
ng

Requi
red:
Completet
heanswersheetabov
ebypl
aci
ngan“
X”undereachheadi
ngt
hat
i
denti
fi
esthecosti
nvol
ved.

Di
rect Dir
ect Manufactur
ing Peri
od
Mat
erial
s Labor Ov erhead Cost
a.
b.
c.
d.
e.
f.
g.
h.
i
.
j
.
k.
l
.
m
.
n.
o.

2-
174 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Ans:

Di
rect Dir
ect Manufactur
ing Peri
od
Mat
erial
s Labor Ov erhead Cost
a. X
b. X
c. X
d. X
e. X
f. X
g. X
h. X
i
. X
j
. X
k. X
l
. X
m
. X
n. X
o. X

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yti
c AI
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it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
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ti
ng LO:
 
 2
Lev
el:
 
 Medium

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
175
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

216.Thef
oll
owi
ngcost
srel
atet
oonemont
h'sact
ivi
tyi
nCar
rCompany
:

I
ndirectl
abor $400
Rentonf act
orybui
lding $300
Maintenanceofequipment $100
$1,
20
Di
rectmater
ial
used 0
Ut
il
it
iesonfact
ory $200
$1,
50
Dir
ectlabor 0
Sel
lingexpense $500
Admi ni
str
ativeexpense $300
Worki nprocess,beginning $800
Worki nprocess,ending $600
Fi
nishedgoods, beginning $500
Fi
nishedgoods, ending $250

Requi
red:
a.Prepareaschedul
eofCostofGoodsManuf
act
uredi
ngoodf
orm.
b.Determinet
heCostofGoodsSoldfort
hemont
h.

Ans:
a.
$1,
20
Di
rectmater
ial
s 0
Di
rectl
abor 1,
500
Manufact
uri
ngover
head:
$40
Indi
rectlabor 0
Rent 300
Maintenance 100
Util
i
ties  
200  
1,000
Totalmanufactur
ingcost 3,700
Add:WI P,
beginni
ng  
  
 800
4,500
Deduct
:WI
P,endi
ng  
  
 600
$3,90
Costofgoodsmanuf
act
ured 0

2-
176 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

b.
Fi
nishedgoods,beginni
ng $  
500
Add:Costofgoodsmanuf act
ured  3,
900
Goodsavail
ableforsale 4,
400
  
  
 25
Fi
nishedgoods,
endi
ng 0
$4,15
Costofgoodssol
d 0

AACSB: 
 Anal
yti
c AI
CPA BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO:
  
3,4 Level:
  
Medi
um

217.Ni
shCor
por
ati
onhaspr
ovi
dedt
hef
oll
owi
ngdat
afort
hemont
hofApr
il
:

$220,
00
Sal
es 0
Rawmat eri
alspurchases $50,
000
Dir
ectl
aborcost $23,
000
Manufactur
ingoverheadcost $59,
000
Sel
li
ngexpense $18,
000
Admini
strat
iveexpense $43,
000

Begi
nni
n
I
nvent
ori
es: g Endi
ng
$35,
00
Rawmat
eri
als $26,
000 0
$22,
00
Wor
kinpr
ocess $18,
000 0
$29,
00
Fi
nishedgoods $42,
000 0

Requi
red:
a.PrepareaSchedul
eofCostofGoodsManuf
actur
edingoodf
ormf
orApr
il
.
b.PrepareanI
ncomeStatementi
ngoodfor
mf orApri
l
.

Ans:

a.Schedul
eofCostofGoodsManuf
act
ured
Di
rectmat
eri
als:
$26,
00
Begi
nningmat er
ial
sinvent
ory 0
Add:Purchasesofrawmat er
ial
s  
50,
000
Rawmat eri
alsavai
labl
eforuse 76,
000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
177
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Deduct
:Endi
ngr
awmat
eri
alsi
nvent
ory  
35,
000
$  
41,00
Rawmat er
ial
susedi
npr
oduct
ion 0
Dir
ectl
abor 23,000
  
  
59,00
Manuf
actur
ingover
head 0
Tot
almanufact
uri
ngcost
s 123,000
  
  
18,00
Add:
Begi
nni
ngwor
kinpr
ocessi
nvent
ory 0
141,000

2-
178 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

  
  
22,
00
Deduct
:Endi
ngwor
kinpr
ocessi
nvent
ory 0
$119,
00
Costofgoodsmanuf
act
ured 0

b.I
ncomeSt
atement
$220,
00
Sal
es 0
Costofgoodssol
d:
$ 
42,
00
Begi
nni
ngf
ini
shedgoodsi
nvent
ory 0
 
119,
00
Add:
Costofgoodsmanuf
act
ured 0
161,
00
Goodsav
ail
abl
eforsal
e 0
 
132,
00
Deduct:Endi
ngfini
shedgoodsinvent
ory  
 29,
000 0
Grossmargin 88,
000
Sell
i
ngandadmi ni
str
ativ
eexpenses:
Selli
ngexpenses 18,
000
Admi ni
str
ati
veexpenses 43,
000  
  
61,000
$ 
27,00
Netoper
ati
ngi
ncome 0

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yti
c AI
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it
ical
 
Thi
nki
ng AI
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ti
ng,
 
Measur
ement
LO:
  
3,4 Level:
  
Medi
um

218.Thefol
l
owingdatahavebeenpr
ovi
dedt
heMonst
erManuf
act
uri
ngCompany
fort
hemostrecentper
iod:

$16,
80
Sal
es 0
Rawmat eri
alsinventory,
beginning $900
Rawmat eri
alsinventory,
ending $750
Purchasesofr awmat eri
als $8,
400
Dir
ectlabor $1,
240
Manuf actur
ingov erhead $2,
070
Admi ni
strat
iveexpenses $1,
890
Sel
lingexpenses $1,
000
Wor kinprocessi nventor
y,beginning $700
Wor kinprocessi nventor
y,ending $1,
050
Fi
nishedgoodsi nventory
,beginning $970
Fi
nishedgoodsi nventory
,ending $1,
120

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
179
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Requi
red:
Cal
cul
atethecostofgoodsmanuf
act
uredandpr
epar
eani
ncomest
atement
.

2-
180 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Ans:

Costofgoodsmanufactured:
Dir
ectmateri
als=$900+$8,400-
$750=$8,550
Total
manufacturi
ngcosts=$8,550+$1,
240+$2,
070=$11,
860
Costofgoodsmanufacturi
ng=$11,860+$700-
$1,
050=$11,
510

Monst
erManufacturi
ngCompany
IncomeStatement
$16,
80
Sal
es 0
Costofgoodssol
d:
$ 
   
97
Begi
nni
ngf
ini
shedgoodsi
nvent
ory 0
 
11,51
Pluscostofgoodsmanuf act
ured 0
Costofgoodsav ail
abl
eforsal
e 12,480
Lessendingfi
nishedgoodsinvent
ory  
  
1,120
 
 11,
36
Costofgoodssol d 0
Grossmar gin 5,
440
Sell
ingandadmi nist
rati
veexpenses:
Admi ni
strati
veexpenses 1,890
Sel l
i
ngexpenses  
  
1,000
Totalsel
li
ngandadmi ni
str
ati
veexpense   
 2,
890
Netoperatingincome $ 2,
550

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yti
c AICPA 
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it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO:
  
3,4 Level:
  
Easy

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
181
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

219.I
nDecember ,
Voll
ickCorporat
ionhadsalesof$245,000,sel
l
ingexpensesof
$23,
000,andadminist
rat
iveexpensesof$26,000.Thecostofgoods
manufact
uredwas$190,000.Thebeginningbalanceint
hefini
shedgoods
i
nvent
oryaccountwas$59,000andt heendingbalancewas$56,000.

Requir
ed:
Prepar
eanIncomeSt
atementi
ngoodf
ormf
orDecember
.

Ans:

I
ncomeSt
atement
$245,
00
Sal
es 0
Costofgoodssol
d:
$ 59,
00
Begi
nni
ngf
ini
shedgoodsi
nvent
ory 0
 
190,00
Add:
Costofgoodsmanuf
act
ured 0
249,00
Goodsav
ail
abl
eforsal
e 0
  
 56,
00  
 193,
00
Deduct
:Endingfi
nishedgoodsinvent
ory 0 0
Grossmargi
n 52,
000
Sell
i
ngandadmi ni
str
ati
veexpenses:
Sell
i
ngexpenses 23,000
 
  
26,00
Admini
str
ati
veexpenses 0  
  
49,000
Netoper
ati
ngincome $ 
  
3,000

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yti
c AICPA 
BB:
 
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it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
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ti
ng,
 
Measur
ement
LO:
  
3 Level
: 
 Easy

220.InApri
l
,Holder
nessInc.
,amer chandisingcompany ,hadsal
esof$221,
000,
sel
li
ngexpensesof$14,000,
andadmi nist
rati
veexpensesof$25,
000.Thecost
ofmerchandi
sepurchasedduringthemont hwas$155,000.Thebegi
nni
ng
bal
anceinthemerchandisei
nventoryaccountwas$34, 000andtheending
bal
ancewas$48,000.

Requir
ed:
Prepar
eanIncomeSt
atementi
ngoodf
ormf
orApr
il
.

2-
182 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Ans:
I
ncomeSt
atement
$221,
00
Sales 0
Costofgoodssol d:
Begi nningmer chandiseinventor
y $ 34,
000
Add: Purchases  
155,000
Goodsav ai
lablef orsale 189,000
Deduct : Endingmer chandi
seinvent
ory   
 48,
000  
141,
000
Grossmar gin 80,
000
Sell
ingandadmi nistr
ativeexpenses:
Sel l
i
ngexpenses 14,
000
Admi ni
st r
ati
v eexpenses  
  
25,
000   
 39,
000
Netoper atingincome $ 41,
000

AACSB:
 
 Anal
yti
c AICPA 
BB:
 
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it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO:
  
3 Level
: 
 Easy

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
183
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

221.Thef
oll
owingdat
awer
etakenf
rom t
hecostr
ecor
dsofMor
reyCompanyf
or
l
asty
ear:

Depr
eci
ati
on,
fact
ory $60,
000
$100,
00
Indir
ectlabor 0
Util
it
ies,factor
y $40,
000
Insurance,fact
ory $10,
000
Lubricantsformachi
nes $15,
000
$200,
00
Di
rectl
abor 0
$150,
00
Pur
chasesofr
awmat
eri
als 0

I
nvent
ori
esatt
hebegi
nni
ngandatt
heendoft
hey
earwer
easf
oll
ows:

Begi
nni
n
g Endi
ng
$20,
00
Rawmater
ial
s $10,
000 0
Worki
nprocess $25,
000 $5,
000
$50,
00
Fi
nishedgoods $30,
000 0

Requir
ed:
Prepar
easchedul
eofcostofgoodsmanuf
act
uredi
ngoodf
orm.

Ans:

Mor
reyCompany
ScheduleofCostofGoodsManuf actured
Dir
ectmat erial
s:
$ 
10,00
Rawmat er i
alsinventor
y,beginning 0
 
150,00
Add: Purchasesofr awmat eri
als 0
Rawmat er i
alsavail
ableforuse 160,000
Deduct :
Rawmat erial
sinventory
, endi
ng  
  
20,000
Rawmat er i
alsusedi nproducti
on $140,
000
Dir
ectlabor 200,
000
Manufacturingov erhead:
Depreciation,fact
or y 60,000
Indi
rectlabor 100,000
Util
i
ties,factory 40,000

2-
184 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Insur
ance,f
act
ory 10,
000
Lubri
cantsf
ormachi
nes  
  
15,
000

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
185
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Total
manuf
act
uri
ngover
headcost   
225,000
Total
manuf
act
uri
ngcosts 565,000
Add:Wor
kinpr
ocessi
nventor
y,begi
nni
ng   
  
25,000
590,000
Deduct
:Workinpr
ocessinvent
ory
,endi
ng   
  
  
5,000
CostofGoodsManufact
ured $585,000

AACSB:
 
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yti
c AI
CPA 
BB:
 
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it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
LO:
  
4 Level
: 
 Medi
um

222.PamerCor
por
ati
onhaspr
ovi
dedt
hef
oll
owi
ngdat
afort
hemont
hofSept
ember
:

$60,
00
Rawmat
eri
alspur
chases 0
$27,
00
Di
rectl
aborcost 0
$76,
00
Manuf
act
uri
ngov
erheadcost 0

Begi
nni
n
I
nvent
ori
es: g Endi
ng
$23,
00
Rawmat
eri
als $20,
000 0
$18,
00
Wor
kinpr
ocess $24,
000 0
$32,
00
Fi
nishedgoods $43,
000 0

Requir
ed:
Prepar
eaSchedul
eofCostofGoodsManuf
act
uredi
ngoodf
ormf
or
September
.

Ans:
Schedul eofCostofGoodsManuf
actur
ed
Di
rectmat eri
als:
$20,
00
Beginningmat eri
alsinvent
ory 0
Add: Purchasesofr awmat eri
als  
60,
000
Rawmat eri
alsav ail
abl
eforuse 80,
000
Deduct: Endi
ngr awmat eri
alsinvent
ory  
23,
000
$ 
57,00
Rawmat eri
alsusedinproduct
ion 0
Dir
ectl
abor 27,000
Manufactur
ingoverhead  
  
76,000

2-
186 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Total
manufact
uri
ngcost
s 160,
000
Add:Begi
nni
ngworkinpr
ocessi
nvent
ory  
  
24,
000
184,
000
Deduct
:Endi
ngwor
kinpr
ocessi
nvent
ory  
  
18,
000
$166,
00
Costofgoodsmanuf
act
ured 0

AACSB:
 
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yti
c AI
CPA 
BB:
 
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it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
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ti
ng,
 
Measur
ement
LO:
  
4 Level
: 
 Medi
um

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
187
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

223.Anumberofcost
sandmeasur
esofact
ivi
tyar
eli
stedbel
ow.

Possi
bleMeasureof
CostDescr ipti
on Acti
vi
ty
1. Costofv accineusedatacl ini
c Vacci
nesadminist
ered
2. Buildingrentatat acoshop Doll
arsal
es
3. Salaryofpr oduct i
onmanageratasnowboar d
manuf acturer Snowboar
dspr
oduced
4. Costofel ectri
cit
yf orproducti
onequi pmentata
snowboar dmanuf acturer Snowboar
dspr
oduced
5. Ferrycapt ain’ssalaryonar egul ar
lyscheduled
passengerf erry Numberofpassengers
6. Costofgl ueusedi nf urni
tur
epr oduction Unit
sproduced
7. Janitorialwagesatasnowboar dmanuf acturer Snowboardsproduced
8. Depr eciati
ononf actorybuil
dingatasnowboar d
manuf acturer Snowboar
dsproduced
9. Costofadv ert
isi
ngatasnowboar dcompany Snowboar
dssold
10 Costofshi ppingbagsoff er
til
izertoacust omerata
. chemi cal plant Bagsshi
pped

2-
188 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Required:
Foreachitem above,i
ndi
cat
ewhet
herthecosti
sMAINLYfi
xedorv
ari
abl
ewi
th
respecttothepossibl
emeasur
eofact
ivi
tyl
ist
ednextt
oit
.

Ans:

1.Costofv acci neusedatacl inic;Vaccinesadmi nistered;Vari

able
2.Buildingrentatat acoshop; Dol l
arsales;Fixed
3.Salaryofpr oduct i
onmanageratasnowboar dmanuf actur
er;Snowboar ds
produced; Fixed
4.Costofel ect ri
cityforproductionequipmentatasnowboar dmanuf acturer;
Snowboar dspr oduced;Vari
abl e
5.Ferrycapt ain'ssalaryonar egularlyschedul edpassengerf err
y; Numberof
passenger s; Fixed
6.Costofgl ueusedi nfurni
tur
epr oduction; Unitspr oduced;Variable
7.Janitori
alwagesatasnowboar dmanuf acturer;Snowboar dspr oduced;
Fixed
8.Depr eci
ationonf actorybuil
dingatasnowboar dmanuf act
urer;Snowboar ds
produced; Fixed
9.Costofadv er t
isingatasnowboar dcompany ;Snowboar dssold; Fixed
10.
Costofshi ppingbagsoff er
til
izertoacust omeratachemi cal plant ;
Bags
shipped;Var i
abl e

AACSB: 
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yti
c AI
CPA 
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it
ical
 
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nki
ng AI
CPA 
FN:
 
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ti
ng LO:
 
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Lev
el:
 
 Easy

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
189
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

224.Anumberofcost
sar
eli
stedbel
ow.

CostDescr
ipt
ion CostObj ect
1. Wagesofcarpent
ersonahomebuildi
ngsit
e Apart
icularhome
2. Costofwi
ri
ngusedinmakingapersonal
comput
er Apart
icularpersonal
computer
3. Manager ’
ssal aryatahot el r
unbyachai nofhotels Apart
icularhotelguest
4. Manager ’
ssal aryatahot el r
unbyachai nofhotels Theparti
cularhotel
5. Costofalumi num masti nstall
edi nay achtatay acht
manuf act
ur er Apart
icularyacht
6. Mont hl
yleasecostofX- rayequi pmentatahospi tal TheRadiology(X-Ray
)
Depar
tment
7. Costofscr ewsusedt osecur ewoodt r
imi nayachtata
yachtmanuf acturer Apart
icularyacht
8. Costofelect ronicnavi
gat i
onsy stem install
edina
yachtatay achtmanuf acturer Apart
icularyacht
9. Costofar epl acementbat teryinst al
ledinacaratt he
autorepairshopofanaut omobi l
edeal er Theautor epai
rshop
10 Costofameasl esvaccineadmi nisteredatan
. outpati
entcl i
nicatahospi tal Apart
icularpati
ent

Requir
ed:
Foreachit
em abov
e,indi
cat
ewhethert
hecosti
sdi
rectori
ndi
rectwi
thr
espect
tothecostobj
ectl
i
stednexttoi
t.

Ans:

1.Wagesofcar pent er
sonahomebui ldingsi t
e;Apar ti
cul
arhome; Di
rect
2.Costofwi ringusedi nmaki ngaper sonal comput er;Aparti
cularper sonal
comput er;I
ndirect
3.Manager '
ssal aryatahot elrunbyachai nofhotels;Aparticularhotel guest
;
Indir
ect
4.Manager '
ssal aryatahot elrunbyachai nofhot els;Theparti
cul arhotel;
Direct
5.Costofal uminum masti nst al
ledinay achtatay achtmanuf acturer;A
parti
cularyacht; Dir
ect
6.Mont hl
yleasecostofX- rayequipmentatahospi tal
;TheRadi ology( X-Ray)
Depar t
ment ;Direct
7.Costofscr ewsusedt osecur ewoodt rimi nayachtatay achtmanuf acturer
;
Apar ti
cularyacht ;I
ndirect
8.Costofel ectr
oni cnav i
gat i
onsy stem i
nst all
edinay achtatay acht
manuf acturer;Apar t
icularyacht ;
Direct

2-
190 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

9.Costofarepl
acementbat t
eryi
nst
alledinacarattheautorepai
rshopofan
aut
omobil
edealer;
Theaut orepai
rshop; Di
rect
10.
Costofameaslesvaccineadmini
steredatanoutpati
entcl
i
nicatahospit
al;
Aparti
cul
arpati
ent
;Direct

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yti
c AI
CPA 
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it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng LO:
 
 6
Lev
el:
 
 Easy

225.Adirectl
aborwor
keratUdeCorpor
ati
onispai
d$24perhourforr
egul
art
ime
andtimeandahalfforal
lwor
kinexcessof40hour
sperweek.Thi
semploy
ee
works44hoursduri
ngaweekinwhichther
ewasnoi dl
eti
me.

Required:
Determinehowmuchoft hewor
ker
'swagesfort
heweekwouldbecl
assi
fi
edas
di
rectlaborcostandhowmuchwouldbecl
assif
iedasmanuf
act
uri
ngoverhead
cost.Showy ourwork.

Ans:

Di
rectlabor
:$24perhour×44hour=$1,
056
Manufactur
ingov
erhead:
Overt
imepremium:$12perhour×4hour
s=$48

AACSB:
 
 Anal
yti
c AICPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng Appendi
x:
  
2A
LO:
  
8 Level
: 
 Easy

226.Adir
ectlaborworkeratBodreauCorporat
ionispai
d$14perhourforregul
ar
ti
meandt i
meandahal fforal
lworkinexcessof40hoursperweek.This
employ
eewor ks48hour sinagiv
enweekbuti si
dlefor4hour
sduri
ngtheweek
duetoequipmentbreakdowns.

Required:
Determinehowmuchoft hewor
ker
'swagesfort
heweekwouldbecl
assi
fi
edas
di
rectlaborcostandhowmuchwouldbecl
assif
iedasmanuf
act
uri
ngoverhead
cost.Showy ourwork.

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
191
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Ans:

Di
rectl
abor
:
$61
$14perhour×44hours 6
Manuf
actur
ingover
head:
$  
5
I
dlet
ime:
$14perhour×4hour
s 6
 
  
Ov
ert
imepr
emi
um:
$7perhour×8hour
s 56
$11
Tot
almanuf
act
uri
ngov
erhead 2

AACSB:
 
 Anal
yti
c AICPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng Appendi
x:
  
2A
LO:
  
8 Level
: 
 Easy

227.Adir
ectl
aborwor keratChi ari
niCorpor
ati
onispaid$14perhourforregular
ti
meandt i
meandahal fforallworkinexcessof40hoursperweek.The
company'
sfringebenefit
scost$4f oreachhourofemployeeti
me( bothregul
ar
andover
time).Lastweekt hisemployeeworked45hoursbutwasi dlefor3
hour
sduet omat er
ialshortages.Thecompanytreat
sallf
ringebenefi
tsaspart
ofmanufacturi
ngov er
head.

Required:
Determinehowmuchoft hewor
ker
'swagesfort
heweekwouldbecl
assi
fi
edas
di
rectlaborcostandhowmuchwouldbecl
assif
iedasmanuf
act
uri
ngoverhead
cost.Showy ourwork.

Ans:

Di
rectl
abor
:
$58
$14perhour×42hour s 8
Manufactur
ingoverhead:
I
dletime:$14perhour×3hour s $ 
42
Overti
mepr emium: $7perhour×5hours 35
Fri
ngebenef i
ts:$4perhour×45hours  
180
$25
Tot
almanuf
act
uri
ngov
erhead 7

AACSB:
 
 Anal
yti
c AICPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng Appendi
x:
  
2A
LO:
  
8 Level
: 
 Medi
um

2-
192 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

228.Adir
ectlaborwor keratKimmerCor por
ati
onispaid$18perhourforregul
ar
ti
meandt imeandahal fforall
worki nexcessof40hoursperweek.The
company'sfri
ngebenef it
scost$4f oreachhourofemployeet
ime(bothregul
ar
andovert
ime) .Lastweekt hi
sempl oyeeworked42hoursbutwasi dl
efor4
hour
sduet omat erialshort
ages.Thecompanyt reat
sal
lfri
ngebenefi
tsrel
ati
ng
todi
rectl
aborasaddeddi rectl
aborcostandt heremai
nderaspartof
manufacturi
ngov erhead.

Required:
Determinehowmuchoft hewor
ker
'swagesfort
heweekwouldbecl
assi
fi
edas
di
rectlaborcostandhowmuchwouldbecl
assif
iedasmanuf
act
uri
ngoverhead
cost.Showy ourwork.

Ans:

Di
rectl
abor
:
$68
Wages:$18perhour×38hours 4
Fr
ingebenef
it
s:$4perhour×38hour
s 152
$83
Totaldirectlabor 6
Manuf acturingoverhead:
Idletime: $18perhour×4hour s $ 72
Ov erti
mepr emium: $9perhour×2hour
s 18
Fringebenef i
ts:$4perhour×4hours   
 16
$10
Tot
almanuf
act
uri
ngov
erhead 6

AACSB:
 
 Anal
yti
c AICPA 
BB:
 
 Cr
it
ical
 
Thi
nki
ng AI
CPA 
FN:
 
 Repor
ti
ng Appendi
x:
  
2A
LO:
  
8 Level
: 
 Medi
um

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
193
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

229.Tool
eManuf
actur
ingCompanymanufact
uresandsel
l
sceili
ngf
ans.Tool
e
i
ncur
redt
hefol
l
owi ngcost
srel
atedt
oquali
tyf
ortheyear
:

$35,
00
Costofwar
rant
yrepai
rs 0
$27,
00
Costofempl oy eequalitytraining 0
$18,
00
Costincurredtor eworkf ans 0
$15,
00
Spoil
agecost( net) 0
$11,
00
Costofhandl i
ngcust omercompl ai
nts 0
Depreciati
oncostoft estequi pment $6, 000
Costofqual i
tyci r
cles $5,
000
Maintenancecostoft estequi pment $3, 000
Costofr et
estingr eworkedf ans $2,
000
Costoff i
naltestingoff ans $1,
000

Requir
ed:
PrepareaQual
it
yCostRepor
tforTool
eManufact
uri
ngCompanyshowi
ngbot
h
doll
arsandper
cent
s.Assumethatsal
eswer
e$2,000,
000.

Ans:
Tool
eManufact
uri
ngCompany
Qual
i
tyCostRepor
t

Amount Per
cent
Pr
event
ioncost
s:
$  
27,00
Costofempl
oyeequal
i
tyt
rai
ning 0 1.
35
  
  
  
5,00
Costofqual
i
tyci
rcl
es 0 0.
25
  
  
32,00
Totalprev enti
oncost 0 1.
60
Appraisal costs:
Depr eciationcostoft
estequi
pment 6,
000 0.
30
Mai ntenancecostoftestequi
pment 3,
000 0.
15
 
  
   
1,00
Costoff
inal
test
ingoff
ans 0 0.
05
 
  
 10,00
Totalappraisalcost 0 0.
50
I
nternalfai
lurecosts:
Costincur redtorewor
kfans 18,
000 0.
90

2-
194 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Spoi
l
agecost(
net
) 15,000 0.
75
 
  
   
2,00
Costofr
etest
ingr
ewor
kedf
ans 0 0.
10
 
  
 35,00
Tot
ali
nter
nal
fai
l
urecost 0 1.
75

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
195
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Ext
ernal
fail
urecost
s:
Costofwarrant
yrepair
s 35,000 1.
75
Costofhandli
ngcustomer   
  
11,00
complai
nts 0 0.
55
  
  
46,00
Tot
alext
ernal
fai
l
urecost 0 2.
30
$123,00
Tot
alqual
i
tycost 0 6.
15

AACSB: 
 Anal
yti
c AI
CPA BB:
 
 Cri
ti
cal 
Thinki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
Appendi
x: 
 2B LO: 
 9,
10 Level
: 
 Easy

230.GadCompany
'squal
i
tycostr
epor
tist
obebasedont
hef
oll
owi
ngdat
a:

$17,
00
Re-
ent
eri
ngdat
abecauseofkey
inger
ror
s 0
$88,
00
Netcostofspoi
lage 0
Supervi
sionoft
esti
ngandi
nspect
ion $78,
00
act
ivi
ti
es 0
$17,
00
Lostsal
esduet
opoorqual
i
ty 0
$92,
00
War
rant
yrepai
rsandr
epl
acement
s 0
$12,
00
Depr
eci
ati
onoft
estequi
pment 0
$75,
00
Mai
ntenanceoft
estequi
pment 0
$79,
00
Sy
stemsdev
elopment 0
$19,
00
Qual
i
tyt
rai
ning 0

Requi
red:

PrepareaQuali
tyCostReportingoodform wi
thseparat
esecti
onsfor
prevent
ioncost
s,appr
aisalcosts,
int
ernalf
ail
urecost
s,andext
ernalf
ail
ure
costs.

Ans:

Pr
event
ioncost
s
$ 
 19,
00
Qual
i
tyt
rai
ning 0

2-
196 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Sy stemsdev el
opment  
  
79,
000
Total prev enti
oncost  
  
98,
000
Appr aisal costs
Depr eciationoftestequi
pment 12,
000
Super vi
si onoftesti
ngandinspect
ionact
ivi
ti
es 78,
000
Mai ntenanceoft estequi
pment  
  
75,
000
 
165,
00
Totalappraisal
cost 0
I
nternalfai
lurecosts
Re-enteri
ngdat abecauseofkey
inger
ror
s 17,
000
Netcostofspoi lage  
  
88,
000
 
105,
00
Tot
ali
nter
nal
fai
l
urecost 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
197
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Ext
ernalf
ail
urecost
s
Lostsal
esduet opoorquali
ty 17,
000
War r
ant
yrepair
sandreplacement
s  
  
92,
000
 
109,
00
Tot
alext
ernal
fai
l
urecost 0
$477,
00
Tot
alqual
i
tycost 0

AACSB: 
 Anal
yti
c AI
CPA BB:
 
 Cri
ti
cal
 Thinki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
Appendi
x: 
 2B LO: 
 9,
10 Level
: 
 Medium

231.Har
tzCompany
'squal
i
tycostr
epor
tist
obebasedont
hef
oll
owi
ngdat
a:

$86,
00
Lostsal
esduet
opoorqual
i
ty 0
$35,
00
Netcostofspoi
l
age 0
$19,
00
Fi
nal
productt
est
ingandi
nspect
ion 0
$88,
00
Netcostofscr
ap 0
$83,
00
Sy
stemsdev
elopment 0
$94,
00
Suppl
i
esusedi
ntest
ingandi
nspect
ion 0
$72,
00
Rewor
klaborandov
erhead 0
$43,
00
Qual
i
tydat
agat
her
ing,
anal
ysi
s,andr
epor
ti
ng 0
$53,
00
Pr
oductr
ecal
l
s 0

Required:
PrepareaQuali
tyCostReportingoodform wi
thseparat
esecti
onsfor
preventi
oncost
s,appr
aisalcosts,
int
ernalf
ail
urecost
s,andext
ernalf
ail
ure
costs.

Ans:

Pr
event
ioncost
s
$ 
83,00
Syst
emsdev el
opment 0
Qual
itydatagather
ing,
anal
ysi
s,andr
epor
ti
ng  
  
43,000
Tot
alprevent
ioncost  
126,00

2-
198 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

0
Apprai
sal cost
s
Finalproducttest
ingandi
nspecti
on 19,
000
Suppliesusedi nt
esti
ngandinspect
ion  
  
94,
000
 
113,
00
Totalappraisal
cost 0
I
nternalfai
lurecosts
Rewor klaborandov er
head 72,
000
Netcostofscr ap 88,
000
Netcostofspoi lage  
  
35,
000
 
195,
00
Tot
ali
nter
nal
fai
l
urecost 0

Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on 2-
199
Chapt
er2CostTer
ms,
Concept
s,andCl
assi
fi
cat
ions

Ext
ernalf
ailur
ecost
s
Lostsalesduetopoorqual
i
ty 86,
000
Productrecal
ls  
  
53,
000
 
139,
00
Tot
alext
ernal
fai
l
urecost 0
$573,
00
Tot
alqual
i
tycost 0

AACSB: 
 Anal
yti
c AI
CPA BB:
 
 Cri
ti
cal
 Thinki
ng AI
CPA 
FN:
 
 Repor
ti
ng,
 
Measur
ement
Appendi
x: 
 2B LO: 
 9,
10 Level
: 
 Medium

2-
200 Gar
ri
son/
Nor
een/
Brewer
,Manager
ialAccount
ing,
Twel
ft
hEdi
ti
on