Professional Documents
Culture Documents
Sisa 1-6
Sisa 1-6
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Chapter 1
B 1. An organizational concept that groups business functions around resources, processes, and human
interrelations is the:
A. resources function
B. functionalteamwork concept
C. processes function
D. linestaff concept
E. matching concept
E 2. The measurement of performance and the control of costs is aided the most by:
A. organizational charts
B. continuous supervision
C. preparation for the future
D. planning
E. budgets and standards
A 3. All of the following are abbreviations for systems or processes that represent changes in
manufacturing technology, except:
A. CMA
B. JIT
C. CIM
D. CAD
E. FMS
D 4. The process of providing individuals with the authority to carry out their assigned responsibilities is
referred to as:
A. control circuit
B. objective setting
C. accountability
D. delegation
E. linestaff organization
A 5. The department that uses pertinent cost data to determine products that are most profitable and sales
policies is:
A. Marketing
B. Manufacturing
C. Treasury
D. Legal
E. Cost
B 7. The coordinated development of a company's organization with the cost and budgetary system will
lead to an approach to accounting and reporting called:
A. functionalteamwork system
B. responsibility accounting
C. linestaff organization
D. controllable segmentation
E. superiorsubordinate relationship
E 8. The organizational group that advises or performs technical functions of an enterprise is the:
A. line
B. function
C. team
D. executive management
E. staff
A 9. The business function in the functionalteamwork concept of management that deals with activities
such as product design, research and development, purchasing, manufacturing, advertising, marketing,
and billing is the:
A. processes function
B. executive function
C. resources function
D. staff
E. human interrelations function
E 10. Pronouncements of the Cost Accounting Standards Board adhere to the concept of:
A. indirect costing
B. common costing
C. direct costing
D. standard costing
E. full costing
B 11. The professional certification developed by the IMA indicating professional competence in the
management accounting field is the:
A. CIA
B. CMA
C. CA
D. CPA
E. CPM
C 12. The plans that are sufficiently detailed to permit the preparation of budgeted financial statements
for the entity as of a future date are:
A. strategic plans
B. medium-range plans
C. short-range plans
D. long-range plans
E. none of the above
B 13. All of the following are organizations in the private sector that influence the development of cost
accounting theory and practice except:
A. FEI
B. IRS
C. AICPA
D. FASB
E. IMA
D 14. Budgeting plays an important role in influencing individual and group behavior at all of the
following stages of the management process, except:
A. setting goals
B. motivating desired performance
C. evaluating performance
D. computing bonuses
E. suggesting when corrective action should be taken
B 15. The functional teamwork concept of management is structured to emphasize all of the following
except:
A. human interrelations
B. accountability
C. resources
D. processes
E. none of the above
D 17. The department that has the responsibility for the financial administration of a company is:
A. Tax
B. Controller's
C. Cost
D. Treasury
E. Internal Audit
D 18. The collection, presentation, and analysis of cost data should help management accomplish all of
the following tasks except:
A. control the physical quantities of inventory
B. determine company costs and profits for an accounting period
C. choose from among two or more alternatives that will increase revenues
D. conform to FASB reporting requirements for pensions
E. establish costing methods and procedures that permit cost reductions
D 19. In an attempt to resolve an ethical conflict in a publicly-held corporation, if the accountant has
unsuccessfully gone to the board of directors, the next step is to:
C 20. An organizational concept recognizing that all positions or functional divisions can be categorized
into two groups is:
A. functionalteamwork concept
B. processes function
C. linestaff concept
D. matching concept
E. resources function
A 21. In an attempt to resolve an ethical conflict when the immediate superior is involved, an accountant
should first:
A. go to the next higher level of management
B. report the problem to the SEC
C. resign
D. go to the company president
E. none of the above
C 22. The Standards of Ethical Conduct for Management Accountants presents fifteen responsibilities of
the management accountant that encompass all of the following categories except:
A. competence
B. confidentiality
C. dependability
D. integrity
E. objectivity
Chapter 2
C 1. A cost accounting information system necessarily should accomplish all of the following except:
A. reflect the division of authority so that individual managers can be held accountable
B. provide management with information that facilitates prompt identification of activities needing
attention
C. be more sophisticated than is required by legal, regulatory, and contractual requirements
D. be tailored to give the most efficient blend of sophistication and simplicity
E. focus management's attention
A 2. Cost classifications are based on the relationship of costs to all of the following except:
A. ledger accounts
B. accounting periods
C. products
D. volume of production
E. manufacturing departments
C 8. In constructing a chart of accounts, all of the following guidelines should be adhered to except:
A. using numbers rather than letters in coding the accounts
B. dividing charts into balance sheet accounts and income statement accounts
C. using account titles that reflect a maximum level of detail about each item
D. giving maximum information with a minimum of supplementary analysis
E. providing sufficient classification to enable cost assignment to responsible managers
C 9. An expense that is likely to contain both fixed and variable components is:
A. security guard wages
B. supplies
C. heat, light, and power
D. small tools
E. taxes on real estate
C 10. A type of employee whose wages are not a component of indirect labor is a(n):
A. inspector
B. supervisor
C. assembler
D. maintenance worker
E. shop clerk
B 11. Pitino Company has a beginning inventory of direct materials on March 1 of $30,000 and an ending
inventory on March 31 of $36,000. The following additional manufacturing cost data were available for
the month of March:
SUPPORTING CALCULATION:
C 12. Pitino Company has a beginning inventory of direct materials on March 1 of $30,000 and an ending
inventory on March 31 of $36,000. The following additional manufacturing cost data were available for
the month of March:
C 14. The following statement that best describes a fixed cost is:
A. it may change in total when such change depends on production within the relevant range
B. it increases on a perunit basis as production increases
C. it decreases on a per-unit basis as production increases
D. it may change in total when such change is related to changes in production
E. it is constant per unit of production
A 15. The term "relevant range" as used in cost accounting means the range over which:
A. cost relationships are valid
B. production may vary
C. relevant costs are incurred
D. costs may fluctuate
E. none of the above
B 16. When the number of units manufactured increases, the most significant change in average unit cost
will be reflected as:
A. a decrease in the variable element
B. a decrease in the nonvariable element
C. an increase in the semivariable element
D. an increase in the variable element
E. an increase in the nonvariable element
C 17. Within a relevant range, the amount of variable cost per unit:
A. moves in the same direction as fixed cost per unit
B. differs at each production level
C. remains constant at each production level
D. increases as production increases
E. decreases as production increases
A 22. Prime cost and conversion cost share what common element of total cost?
A. direct labor
B. commercial expense
C. variable overhead
D. fixed overhead
E. direct materials
C 25. Wages of the security guard for a small plant are an example of:
Fixed Factory
Indirect Labor Overhead
A. No Yes
B. No No
C. Yes Yes
D. Yes No
E. none of the above
B 26. Wages paid to factory machine operators of a manufacturing plant are an element of:
B 29. All of the following are examples of nonfinancial performance measures except:
A. the number of defective units produced
B. the gross margin on a product line income statement
C. hours of machine downtime
D. number of days on schedule
E. weight of scrap material produced
E 30. Reasons for the increased attention being given to nonfinancial performance measures include:
A. dissatisfaction with exclusive reliance on financial measures
B. dissatisfaction with financial measures of plant utilization
C. dissatisfaction with financial measures of processing efficiency
D. dissatisfaction with the slow pace at which a company's data processing system can modify traditional
financial measures
E. all of the above
E 32. General corporate-level costs, such as bond interest and taxes, would be readily traceable to:
A. each unit of product
B. each division of the company
C. each batch of production
D. all units of product ever produced
E. none of the above
A 35. The measures in a balanced scorecard’s growth and learning perspective attempt to report on:
A. three kinds of intangible resources: human capital, information, and the alignment of incentives
B. the organization’s most important work—work in which the organization must excel in order to
successful
C. the final results that are most important to the owners of the organization, and the rates of improvement
in those results
D. the extent to which the organization is creating and sustaining desirable customer relationships
all of the above
A 37. When a balanced scorecard represents a series of predictions telling how management intends for
the organization to succeed, the predictions are in a sequence that begins with:
A. growth and learning
B. innovation
C. customer service
D. customer satisfaction
investment opportunity
PROBLEMS
PROBLEM
1.
Identification of Variable, Fixed, and Semivariable Costs. Place a check mark in the appropriate column
to indicate whether the following costs are variable, fixed, or semivariable.
SOLUTION
1. Variable
2. Fixed
3. Semivariable
4. Semivariable
5. Fixed
6. Fixed
7. Variable
8. Variable
9. Fixed
10. Semivariable
PROBLEM
2.
Classification of Costs. Place a check mark in the appropriate column to indicate the proper classification
of each of the following costs.
Other
Indirect Admini-
Indirect Indirect Factory Marketing strative
Item Materials Labor _ Costs _ Expenses _ Expenses
1. Factory heat, light,
and power
2. Advertising
3. Wages of stockroom clerk
4. Freight out
5. Oil for machines
6. Salary of vice president
of human relations
7. Legal expenses
8. Salary of the factory manager
9. Employer payroll taxes on
controller's salary
10. Idle time due to assembly
line breakdown
SOLUTION
PROBLEM
3.
Fixed and Variable Costs. In 19A, the Lin Company had sales of $2,500,000, with $1,250,000 variable
and $900,000 fixed costs. In 19B, sales are expected to decrease 10% and the fixed costs are not expected
to change.
Required: Determine Lin Company's expected operating income or loss for 19B.
SOLUTION
PROBLEM
4.
Determination of per Unit Total Costs. The estimated unit costs for Hoteling Industries, when operating
at a production and sales level of 10,000 units, are as follows:
Required:
SOLUTION
5.
Components of Manufacturing Cost. Myerson Inc. produces video cameras. The direct labor cost of one
camera is $200, and the total manufacturing cost is $650. The overhead cost of one camera is two-thirds
as large as its conversion cost.
Required:
SOLUTION
Chapter 3
D 1. Expenses that require a series of payments over a long period of timeCsuch as long-term debt and
lease rentalsCare frequently known as:
A. programmed fixed expenses
B. avoidable expenses
C. variable expenses
D. committed fixed expenses
E. normal capacity expenses
C 2. A mathematical technique used to fit a straight line to a set of plotted points is:
A. integral calculus
B. the EOQ model
C. the method of least squares
D. linear programming
E. PERT network analysis
E 6. When cost relationships are linear, total variable manufacturing costs will vary in proportion to
changes in:
A. machine hours
B. direct labor hours
C. total material cost
D. total overhead cost
E. volume of production
B 7. The term "relevant range" as used in cost accounting means the range over which:
A. relevant costs are incurred
B. cost relationships are valid
C. costs may fluctuate
D. sales volume fluctuates
E. production may vary
E 8. Within a relevant range, the amount of fixed cost per unit:
A. differs at each production level on a perunit basis
B. remains constant in total
C. decreases as production increases on a perunit basis
D. increases as production decreases on a perunit basis
E. all of the above
C 9. The following relationships pertain to a year's budgeted activity for Buckeye Company:
High Low
Direct labor hours 400,000 300,000
Total costs $154,000 $129,000
SUPPORTING CALCULATION:
B 10. Maintenance expenses of a company are to be analyzed for purposes of constructing a flexible
budget. Examination of past records disclosed the following costs and volume measures:
High Low
Cost per month $39,200 $32,000
Machine hours 24,000 15,000
Using the highlow method of analysis, the estimated variable cost per machine hour is:
A. $12.50
B. $0.80
C. $0.08
D. $1.25
E. none of the above
SUPPORTING CALCULATION:
Based upon this information, the estimated variable cost per direct labor hour was:
A. $.125
B. $12.50
C. $.08
D. $8
E. none of the above
SUPPORTING CALCULATION:
A 12. The technique that can be used to determine the variable and fixed portions of a company's costs is:
A. scattergraph method
B. poisson analysis
C. linear programming
D. game theory
E. queuing theory
E 15. For a simple regression-analysis model that is used to allocate factory overhead, an internal auditor
finds that the intersection of the line of best fit for the overhead allocation on the y-axis is $50,000. The
slope of the trend line is .20. The independent variable, factory wages, amounts to $900,000 for the
month. What is the estimated amount of factory overhead to be allocated for the month?
A. $910,000
B. $950,000
C. $ 50,000
D. $180,000
E. $230,000
SUPPORTING CALCULATION:
A 16. As a result of analyzing the relationship of total factory overhead to changes in machine hours, the
following relationship was found:
This equation was probably found by using the mathematical techniques called:
A. simple regression analysis
B. dynamic programming
C. linear programming
D. multiple regression analysis
E. none of the above
A 17. As a result of analyzing the relationship of total factory overhead to changes in machine hours, the
following relationship was found:
C 18. As a result of analyzing the relationship of total factory overhead to changes in machine hours, the
following relationship was found:
D 19. As a result of analyzing the relationship of total factory overhead to changes in machine hours, the
following relationship was found:
The use of such a relationship of total factory overhead to changes in machine hours is said to be valid
only within the relevant range, which means:
A. within the range of reasonableness as judged by the department supervisor
B. within the budget allowance for overhead
C. within a reasonable dollar amount for machine costs
D. within the range of observations of the analysis
E. none of the above
C 20. A measure of the extent to which two variables are related linearly is referred to as:
A. sensitivity analysis
B. inputoutput analysis
C. coefficient of correlation
D. causeeffect ratio
E. costbenefit analysis
C 21. The appropriate range for the coefficient of correlation (r) is:
A. infinity r infinity
B. 0 r 1
C. 1 r 1
D. 100 r 100
E. none of the above
A 22. The covariation between two variables, such as direct labor hours and electricity expense, can best
be measured by:
A. correlation analysis
B. simple regression analysis
C. multiple regression analysis
D. high-low method
E. scattergraph method
B 23. The quantitative method that will separate a semivariable cost into its fixed and variable
components with the highest degree of precision is:
A. simplex method
B. least squares method
C. scattergraph method
D. account analysis
E. highlow method
A 24. If the coefficient of correlation between two variables is zero, a scatter diagram of these variables
would appear as:
A. random points
B. a least squares line that slopes up to the right
C. a least squares line that slopes down to the right
D. under this condition, a scatter diagram could not be plotted on a graph
E. none of the above
Dependent Independent
Variables _ Variables
A. 1 none
B. 1> 1
C. 1> 1>
D. 1 1>
C 26. A company using regression analysis to correlate income to a variety of sales indicators found that
the relationship between the number of sales managers in a territory and net income for the territory had a
correlation coefficient of 1. The best description of this situation is:
A. that more sales managers should be hired
B. imperfect negative correlation
C. perfect inverse correlation
D. no correlation
E. perfect positive correlation
B 27. The correlation coefficient that indicates the weakest linear association between two variables is:
A. 0.73
B. 0.11
C. 0.12
D. 0.35
E. 0.72
B 28. If regression was applied to the data shown in Figure 3-1, the coefficients of correlation and
determination would indicate the existence of a:
E 30. When two or more independent variables are correlated with one another, the condition is referred
to as:
A. serial correlation
B. autocorrelation
C. heteroscedacity
D. homoscedacity
E. multicollinearity
A 31. A large value for standard error of the estimate indicates that:
A. the actual cost will likely vary greatly from the estimated cost as portrayed by the regression line
B. the actual cost will be greater than the estimate cost as portrayed by the regression line
C. the actual cost will be less than the estimate cost as portrayed by the regression line
D. the actual cost will likely vary little from the estimated cost as portrayed by the regression line
E. none of the above
C 33. When the distribution of observations around the regression line is uniform for all values of the
independent variable, it is:
A. heteroscedastic
B. serially correlated
C. homoscedastic
D. autocorrelated
E. none of the above
E 34. Expenses that are fixed at management's discretion at a certain level for the period are referred to
as:
A. committed fixed costs
B. mixed costs
C. opportunity costs
D. sunk costs
E. programmed fixed costs
A 35. The separation of fixed and variable costs is necessary for all of the following purposes except:
A. absorption costing and net income analysis
B. direct costing and contribution margin analysis
C. break-even and cost-volume-profit analysis
D. differential and comparative cost analysis
E. capital budgeting analysis
PROBLEMS
PROBLEM
1.
High and Low Points Method. A controller is interested in analyzing the fixed and variable costs of
indirect labor as related to direct labor hours. The following data have been accumulated:
Required: Determine the amount of the fixed portion of indirect labor expense and the variable rate for
indirect labor expense, using the high and low points method. (Round the variable rate to three decimal
places and the fixed cost to the nearest whole dollar.)
SOLUTION
PROBLEM
2.
Fixed, Variable, and Semivariable Production Costs. Ibus Instruments Co. developed the following
regression equations to indicate costs at various activity levels:
During the next period, the company anticipates production of 20,000 units and usage of 3,000 machine
hours.
Required: Prepare a schedule of the production costs to be incurred during the next period.
SOLUTION
Production costs:
Direct labor $ 80,000
Direct materials 60,000
Overhead to be incurred:
Supervision $ 5,000
Power [$300 + ($.25 x 20,000 units) +
($.50 x 3,000 machine hours)] 6,800
Factory supplies [$250 + ($.75 x 20,000 units)] 15,250
DepreciationCequipment 3,000
DepreciationCbuilding 10,000 _ 40,050
Total production cost $ 180,050
PROBLEM
3.
Statistical Scattergraph. Dale Company management is interested in determining the fixed and variable
components of electricity expense, a semivariable cost, as measured against machine hours. Data for the
first eight months of the current year follow:
Machine Electricity
Month Hours _ Cost
January 4,500 $650
February 4,750 600
March 5,000 750
April 5,500 700
May 7,250 900
June 7,500 800
July 6,750 825
August 5,250 725
Required: Graph the data provided and determine the total fixed cost and the variable cost per machine
hour for electricity. (Round estimates to the nearest cent.)
SOLUTION
PROBLEM
4.
Method of Least Squares. The management of Rainbow Inc. would like to separate the fixed and variable
components of electricity as measured against machine hours in one of its plants. Data collected over the
most recent six months follow:
Electricity Machine
Month Cost _ Hours
January $1,100 4,500
February 1,110 4,700
March 1,050 4,100
April 1,200 5,000
May 1,060 4,000
June 1,120 4,600
Required: Using the method of least squares, compute the fixed cost and the variable cost rate for
electricity expense. (Round estimates to the nearest cent.)
SOLUTION
PROBLEM
5.
Coefficients of Correlation and Determination. The president of Scranton Steel Co. has prepared the
following data so that an assessment may be made for developing a regression analysis of smelting costs:
Required: Compute the coefficient of correlation (r) and the coefficient of determination (r2) for each of
the independent variables. (Round to three decimal places.)
Note to instructor: It may be helpful to provide students with the following equation:
SOLUTION
PROBLEM
6.
Standard Error of the Estimate and Confidence Interval Estimation. The production supervisor of Lyle
Inc. would like to know the range of electricity cost that should be expected about 95 percent of the time
at the 15,000 direct labor hour level of activity. The least squares estimate of electricity cost at that level
of activity is $750. The least squares parameter estimates (i.e., the estimates of fixed cost and the variable
cost rate) were derived from a sample of data for a recent 12-month period. The direct labor hour average
for the sample period is 13,000, and the direct labor hour deviations from its average squared and
summed (Σ(xi-xi)2) is 80,000,000. The prediction error squared (Σ(yi-yi)2) over the sample period is
$40,850.
Required:
Compute:
(1) the standard error of the estimate
(2) the 95 percent confidence interval (Table factor 2.228) estimate for electricity cost at the 15,000 direct
labor hour level of activity
SOLUTION
(1)
(2)
PROBLEM
7.
Method of Least Squares. The data below are found to be highly correlated for Mystic Modem
Manufacturing Corp.:
Fabricating Kilograms of
Costs _ Materials Used
$15,600 360
18,000 463
17,100 412
21,300 595
19,500 520
$91,500 2,350
Required:
(1) Write an equation reflecting the relationship between fabricating costs and kilograms of materials
used, using the method of least squares.
(2) Determine the standard error of the estimate.
(3) Determine the standard error of the estimate correction factor when direct labor hours are 500.
(4) Determine the coefficient of correlation (r) and the coefficient of determination (r2).
(Round dollar amounts to the nearest cent and unit amounts to four decimal places.)
SOLUTION
(1)
y = a + bx
$18,300 = a + ($23.89 x 470)
a = $18,300 $11,228.30
a = $7,071.70
Equation: y = $7,071.70 + $23.89x
(2)
(3)
(4)
Chapter 4
E 1. The tiein between general accounts and cost accounts is often discussed with accounting procedures.
An example of a general account is:
A. Materials
B. Work in Process
C. Factory Overhead Control
D. Finished Goods
E. Accumulated Depreciation
A 3. An industry that would most likely use job order costing procedures is:
A. road building
B. fertilizer manufacturing
C. flour milling
D. petroleum refining
E. textile manufacturing
D 4. An industry that would most likely use process costing procedures is:
A. musical instrument manufacturing
B. construction
C. aircraft
D. chemicals
E. office equipment
A 5. Supplies needed for use in the factory are issued on the basis of:
A. materials requisitions
B. time tickets
C. factory overhead analysis sheets
D. clock cards
E. purchase invoices
B 7. The best cost accumulation procedure to use when many batches, each differing as to product
specifications, are produced is:
A. absorption
B. job order
C. process
D. actual
E. standard
E 9. Under a job order cost system, the dollar amount of the entry to transfer the inventory from Finished
Goods to Cost of Goods Sold is the sum of the costs charged to all jobs:
A. completed during the period
B. started in process during the period
C. in process during the period
D. completed and sold during the period
E. sold during the period
A 10. The industry most likely to use job order costing in accounting for costs is:
A. accounting firms
B. textile manufacturer
C. paint manufacturer
D. oil refinery
E. none of the above
A 11. Job order cost accounting systems and process accounting systems differ in the way:
A. costs are traced to cost objects
B. orders are taken and in the number of units in the orders
C. product profitability is determined and compared with planned costs
D. manufacturing processes can be accomplished and in the number of production runs that may be
performed in a year
E. none of the above
D 12. In a job order cost system, the distribution of direct labor costs usually are recorded as an increase
in:
A. Cost of Goods Sold
B. Factory Overhead Control
C. Finished Goods
D. Work in Process
E. none of the above
C 15. The industry most likely to use process costing in accounting for costs is:
A. road builder
B. electrical contractor
C. airlines
D. automobile repair shop
E. none of the above
B 16. In the computation of manufacturing cost per equivalent unit, the weighted average method of
process costing considers:
A. current costs only
B. current costs plus cost of beginning work in process inventory
C. current costs plus cost of ending work in process inventory
D. current costs less cost of beginning work in process inventory
E. none of the above
B 17. The element of manufacturing cost that supports time tickets is:
A. materials
B. labor
C. factory overhead
D. all of the above
E. none of the above
C 18. The element of manufacturing cost that supports depreciation schedules is:
A. materials
B. labor
C. factory overhead
D. all of the above
E. none of the above
E 20. Factory Overhead Control is debited and Work in Process is credited for:
A. indirect materials requisitioned to production
B. the completion of work in process
C. the sale of completed product
D. direct materials requisitioned to production
E. none of the above
A 21. Products, operations, and processes costed on the basis of predetermined quantities of resources to
be used and predetermined prices of those resources are distinguishing characteristics of which:
A. standard cost system
B. historical cost system
C. process cost system
D. job order cost system
E. backflush cost system
D 22. The tax requirement that certain purchasing and storage costs be allocated to inventory is known as:
A. backflush costing
B. postdeduction
C. justintime
D. super absorption
E. none of the above
C 23. The manufacturing systems characterized by short setup times, moderate to low lead times, and
very low direct labor cost is:
A. manual systems
B. fixed automation systems
C. flexible manufacturing systems
D. process cost systems
E. job order cost systems
E 24. The cost accounting system noted for its lack of detailed tracking of work in process during the
accounting period is:
A. process costing
B. job order costing
C. standard costing
D. actual costing
E. backflush costing
D 25. Ziffel Company had the following account balances and results from operations for the month of
July: direct materials consumed, $10,400; direct labor, $8,000; factory overhead, $8,800; July 1, work in
process inventory, $2,400; July 31, work in process inventory, $1,800; finished goods inventory, July 1,
$1,200; finished goods inventory, July 31, $1,000. The total manufacturing cost for the month of July
was:
A. $27,800
B. $28,000
C. $18,400
D. $27,200
E. none of the above
C 26. Ziffel Company had the following account balances and results from operations for the month of
July: direct materials consumed, $10,400; direct labor, $8,000; factory overhead, $8,800; July 1, work in
process inventory, $2,400; July 31, work in process inventory, $1,800; finished goods inventory, July 1,
$1,200; finished goods inventory, July 31, $1,000. The cost of goods manufactured was:
A. $27,200
B. $28,000
C. $27,800
D. $26,600
E. none of the above
SUPPORTING CALCULATION: $27,200 + $2,400 - $1,800 = $27,800
B 27. Ziffel Company had the following account balances and results from operations for the month of
July: direct materials consumed, $10,400; direct labor, $8,000; factory overhead, $8,800; July 1, work in
process inventory, $2,400; July 31, work in process inventory, $1,800; finished goods inventory, July 1,
$1,200; finished goods inventory, July 31, $1,000. The cost of goods sold was:
A. $27,200
B. $28,000
C. $27,800
D. $27,600
E. none of the above
A 28. A cost system where only the variable manufacturing costs are allocated to production is:
A. direct costing
B. prime costing
C. absorption costing
D. standard costing
E. none of the above
D 29. A cost system where all manufacturing cost elements are allocated to production is:
A. direct costing
B. prime costing
C. standard costing
D. full absorption costing
E. none of the above
C 30. A cost system where only direct material and direct labor costs are allocated to production is:
A. direct costing
B. standard costing
C. prime costing
D. full absorption costing
E. none of the above
B 31. The manufacturing systems that are characterized by very high setup times, moderate lead times,
and high direct labor cost are:
A. flexible manufacturing systems
B. fixed automation systems
C. manual systems
D. backflush systems
E. none of the above
PROBLEMS
PROBLEM
1.
Computation of Total Manufacturing Cost, Cost of Goods Manufactured, and Cost of Goods
Sold. During the past year, the Rocco Company incurred these costs: direct labor, $2,500,000; factory
overhead, $4,000,000; and direct materials purchases, $1,500,000. Inventories were costed as follows:
Beginning Ending
Finished goods $250,000 $300,000
Work in process 450,000 550,000
Materials 75,000 125,000
Required:
SOLUTION
PROBLEM
2.
Journal Entries for the Cost Accounting Cycle. On January 1, the ledger of the Phinney Furniture
Company contained, among other accounts, the following: Finished Goods, $25,000; Work in Process,
$30,000; Materials, $15,000. During January, the following transactions were completed:
Required: Prepare journal entries for the transactions, including the recording, payment, and distribution
of the payroll.
SOLUTION
PROBLEM
3.
Cost of Goods Manufactured Statement. Cuervo Company manufacturers file cabinets made to consumer
specifications. The following information was available at the beginning of March:
Materials inventory $12,800
Work in process inventory 4,700
Finished goods inventory 2,300
During March, materials costing $26,000 were purchased, direct labor cost totaled $19,300, and factory
overhead was $12,500 (including $2,500 of indirect materials). March 31 inventories were:
Required: Prepare a cost of goods manufactured statement for March, 19--. (AICPA adapted)
SOLUTION
Cuervo Company
Cost of Goods Manufactured Statement
For the Month Ended March 31, 19--
Direct materials:
Materials inventory, March 1 $ 12,800
Purchases 26,000
Materials available for use $ 38,800
Less: Indirect materials used $ 2,500
Materials inventory, March 31 13,300 15,800
Direct materials consumed $ 23,000
Direct labor 19,300
Factory overhead 12,500
Total manufacturing cost $ 54,800
Add work in process inventory, March 1 4,700
$ 59,500
Less work in process inventory, March 31 6,800
Cost of goods manufactured $ 52,700
PROBLEM
4.
Income Statement Relationships. The following data are available for three companies at the end of their
fiscal years:
Company Alpha:
Finished goods, April 1 $ 400,000
Cost of goods manufactured 2,600,000
Sales 3,500,000
Gross profit on sales 35%
Finished goods inventory, March 31 ?
Company Beta:
Freight in $ 12,000
Purchases returns and allowances 22,000
Marketing expense 85,000
Finished goods, December 31 65,000
Cost of goods sold 550,000
Cost of goods available for sale ?
Company Chi:
Gross profit $ 264,000
Cost of goods manufactured 612,000
Finished goods, January 1 34,000
Finished goods, December 31 26,000
Work in process, January 1 18,000
Work in process, December 31 12,000
Sales ?
Required: Determine the amounts indicated by the question marks. (AICPA adapted)
SOLUTION
Company Alpha:
Sales $ 3,500,000
Cost of goods sold:
Finished goods inventory, April 1 $ 400,000
Cost of goods manufactured 2,600,000
Cost of goods available for sale $ 3,000,000
Finished goods inventory, March 31 725,000
Less cost of goods sold 2,275,000
Gross profit (20% of sales) $ 1,225,000
Company Beta:
Cost of goods available for sale $ 615,000
Less finished goods ending inventory 65,000
Cost of goods sold $ 550,000
Company Chi:
Sales $ 884,000
Cost of goods sold:
Cost of goods manufactured $ 612,000
Add beginning finished goods inventory 34,000
Cost of goods available for sale $ 646,000
Less ending finished goods inventory 26,000
Less cost of goods sold 620,000
Gross profit $ 264,000
PROBLEM
5.
Cost of Goods Manufactured; Prime and Conversion Costs. Wyoming Company's purchases of materials
during June totaled $25,000, and the cost of goods sold for June was $130,000. Factory overhead was
200% of direct labor cost. Other information pertaining to Wyoming Company's inventories and
production for June is as follows:
Required:
SOLUTION
* Cost of goods sold ($130,000) + ending finished goods inventory ($39,000) - beginning finished goods
inventory ($42,500) = $126,500.
** Purchases of materials during June ($25,000) + beginning materials inventory ($5,000) - ending
materials inventory ($8,500) = $21,500.
*** Production costs for June ($128,000) - direct materials ($21,500) = direct labor and factory overhead
($106,500).
PROBLEM
6.
Cost of Goods Manufactured and Sold. For May, Jimbo Inc. had cost of goods manufactured equal to
$90,000; direct materials used $30,000; cost of goods sold, $100,000; direct labor, $38,000; purchases of
materials, $40,000; cost of goods available for sale, $125,000; and total factory labor, $48,000. Work in
process was $25,000 on May 1 and $15,000 on May 31. The company uses a single materials account for
direct and indirect materials.
(1) A cost of goods sold statement. For brevity, show single-line items for factory overhead and direct
materials used.
(2) Summary general journal entries to record:
SOLUTION
(2)
Chapter 5
A 1. Under job order cost accumulation, the factory overhead control account controls:
A. factory overhead analysis sheets
B. all general ledger subsidiary accounts
C. job order cost sheets
D. cost reports by processes
E. materials inventories
B 2. Supplies needed for use in the factory are issued on the basis of:
A. job cost sheets
B. materials requisitions
C. time tickets
D. factory overhead analysis sheets
E. clock cards
B 3. Finished Goods is debited and Work in Process is credited for a:
A. transfer of completed goods out of the factory
B. transfer of completed production to the finished goods storeroom
C. purchase of goods on account
D. transfer of materials to the factory
E. return of unused materials from the factory
A 4. In job order costing, when materials are returned to the storekeeper that were previously issued to the factory for cleaning
supplies, the journal entry should be made to:
A. Materials
Factory Overhead
B. Materials
Work in Process
C. Purchases Returns
Work in Process
D. Work in Process
Materials
E. Factory Overhead
Work in Process
A 5. Under a job order cost system, the dollar amount of the entry to transfer the inventory from Work in Process to Finished
Goods is the sum of the costs charged to all jobs:
A. completed during the period
B. started in process during the period
C. in process during the period
D. completed and sold during the period
E. none of the above
B 6. When a manufacturing company has a highly automated plant producing many different products, probably the most
appropriate basis of applying factory overhead costs to Work in Process is:
A. units processed
B. machine hours
C. direct labor hours
D. direct labor dollars
E. none of the above
A 7. Cherokee Company applies factory overhead on the basis of direct labor hours. Budget and actual data for direct labor and
overhead for the year are as follows:
Budget Actual
Direct labor hours 600,000 650,000
Factory overhead costs $720,000 $760,000
SUPPORTING CALCULATION:
C 8. At the end of the year, Paola Company had the following account balances after applied factory overhead had been closed to
Factory Overhead Control:
The most common treatment of the balance in Factory Overhead Control would be to:
A. carry it as a deferred credit on the balance sheet
B. report it as miscellaneous operating revenue on the income statement
C. credit it to Cost of Goods Sold
D. prorate it between Work in Process and Finished Goods
E. prorate it among Work in Process, Finished Goods, and Cost of Goods Sold
A 10. The Waitkins Company estimated Department A's overhead at $255,000 for the period based on an estimated volume of
100,000 direct labor hours. At the end of the period, the factory overhead control account for Department A had a
balance of $265,500; actual direct labor hours were 105,000. What was the over- or under-applied overhead for the
period?
A. $2,250
B. $(2,250)
C. $15,000
D. $(15,000)
E. $(5,000)
SUPPORTING CALCULATION:
D 11. Howell Corporation has a job order cost system. The following debits (credits) appeared in Work in Process for the month
of July:
Howell applies overhead to production at a predetermined rate of 90% based on the direct labor cost. Job 1040, the
only job still in process at the end of July, has been charged with factory overhead of $2,250. What was the amount
of direct materials charged to Job 1040?
A. $6,750
B. $2,250
C. $2,500
D. $4,250
E. $9,000
SUPPORTING CALCULATION:
E 12. Valentino Corporation makes aluminum fasteners. Among Valentino's 19- manufacturing costs were:
B 13. Rudolpho Corporation makes aluminum fasteners. Among Rudolpho's 19-- manufacturing costs were:
C 14. Selected cost data (in thousands) concerning the past fiscal year's operations of the Moscow Manufacturing Company are
presented below.
Inventories
Beginning Ending
Materials $75 $ 85
Work in process 80 30
Finished goods 90 110
C 15. Selected cost data (in thousands) concerning the past fiscal year's operations of the Moscow Manufacturing Company are
presented below.
Inventories
Beginning Ending
Materials $75 $ 85
Work in process 80 30
Finished goods 90 110
Direct labor costs charged to production during the year amounted to:
A. $216
B. $135
C. $225
D. $360
E. none of the above
A 16. Selected cost data (in thousands) concerning the past fiscal year's operations of the Moscow Manufacturing Company are
presented below.
Inventories
Beginning Ending
Materials $75 $ 85
Work in process 80 30
Finished goods 90 110
A 17. Selected cost data (in thousands) concerning the past fiscal year's operations of the Moscow Manufacturing Company are
presented below.
Invento
ries
Beginning Ending
Materials $75 $ 85
Work in process 80 30
Finished goods 90 110
A 18. J. D. Doonesbury Company manufactures tools to customer specifications. The following data pertain to Job 1501 for
April:
What is the total manufacturing cost recorded on Job 1501 for April?
A. $9,600
B. $10,300
C. $11,100
D. $5,400
E. $8,800
C 19. In service businesses using job order costing, the most commonly used base for applying overhead to jobs is:
A. machine hours
B. direct materials consumed
C. direct labor cost
D. meals, travel, and entertainment
E. none of the above
A 20. In service businesses using job order costing, the hourly rate used to charge costs to a job usually includes:
A. both labor and overhead cost
B. labor cost only
C. overhead cost only
D. labor, overhead, and miscellaneous costs
E. none of the above
A 23. Applied Factory Overhead is debited and Factory Overhead is credited to:
A. close the estimated overhead account to actual overhead
B. record the actual factory overhead for the period
C. charge estimated overhead to all jobs worked on during the period
D. to record overapplied overhead for the period
E. none of the above
C 24. The best overhead allocation base to use in a labor-intensive manufacturing environment probably would be:
A. materials cost
B. machine hours
C. direct labor hours
D. units of production
E. none of the above
D 25. Finished Goods is debited and Cost of Goods Sold is credited for:
A. transfer of completed goods to the customer
B. sale of a customer order
C. return of materials to the supplier
D. return of goods by the customer
E. none of the above
PROBLEMS
PROBLEM
1.
Job Order Cost Schedule. Winkel Woodcrafters produces special-order wood products. The company uses job
order costing for pricing and cost accumulation purposes. The following costs were incurred on two recent jobs:
Job Birch-10
Direct materials:
Issued $6,500 $8,000
Returned 500 0
Indirect materials used 500 400
Direct labor $9,000 $15,000
Direct labor rate $9 per hour $10 per hour
Overhead application rate $10 per direct labor hour $15 per direct labor hour
The company adds a 50% markup on cost in determining the amount to charge for each job.
Required: Prepare a schedule showing the cost and the amount to be charged for each job.
SOLUTION
PROBLEM
2.
Job Order Cost Sheet; Over- or Underapplied Overhead. During June, the following transactions took place at
the Cassandran Corp.
Required: Assuming that Jobs 001 and 002 were the only jobs during the period and that all overhead (as recorded
above) is the total applicable overhead for these projects:
SOLUTION
(1)
Job 001 Job 002
Materials $ 3,000 $ 11,850
Labor 9,000 6,000
Overhead applied 18,000 12,000
Total cost $ 30,000 $ 29,850
PROBLEM
3.
Job Order Cycle Entries. The following completed cost sheets were prepared for three jobs that were in
production during April in the Special Order Division of Byron Company:
On April 1, Job 097 was 75% complete as to materials, labor, and overhead. It was finished during the month. The
other jobs were started and finished during the month. Jobs 097 and 946 were sold on account at the end of the
month.
Required: Prepare general journal entries to be recorded in April to accumulate these job costs for Work in Process
as well as for Finished Goods and for the sale of the two jobs.
SOLUTION
Debit Credit
Work in Process 8,300 *
Materials 8,300
PROBLEM
4.
Voyager Inc. produces customized vans in a job order shop. On November 1, the following balances appear in the
inventory records:
The amount in Finished Goods represents $101,000 recorded for Van 175 and $78,000 recorded for Van 177. The
work in process account represents the three vans in process, as follows:
SOLUTION
Debit Credit
(a) Materials 80,000
Accounts Payable 80,000
PROBLEM
5.
Manufacturing Costs. The work in process account of Meyers Company showed:
Work in Process
Materials charged to the one job still in process amounted to $5,000. Factory overhead is applied as a predetermined
percentage of direct labor cost.
SOLUTION
x = $20,400
1.5x = 1.5($20,400)
1.5x = $30,600 factory overhead in finished goods
PROBLEM
6.
Manufacturing Costs. Teddy Company is to submit a bid on the production of 5,500 vases. It is estimated that the
cost of materials will be $8,500, and the cost of direct labor will be $12,000. Factory overhead is applied at 50% of
direct labor cost in the Molding Department and at $7.50 per direct labor hour in the Finishing Department. Of the
above direct labor, it is estimated that 500 direct labor hours at a cost of $4,000 will be required in Finishing. The
company wishes a markup of 100% of its total production cost.
SOLUTION
PROBLEM
7.
Flow of Costs Through T Accounts. The Palmer Company had the following inventories at the beginning and end
of July:
July 1 July 31
Materials $20,000 $ 45,000
Work in process ? 185,000
Finished goods 65,000 115,000
During July, the cost of materials purchased was $160,000 and factory overhead of $125,000 was applied at a rate of
75% of direct labor cost. July cost of goods sold was $240,000.
Required: Prepare completed T accounts showing the flow of the cost of goods manufactured and sold.
SOLUTION
Chapter 6
B 1. An equivalent unit of material or conversion cost is equal to:
A. the prime cost
B. the amount of material or conversion cost necessary to complete one unit of production
C. a unit of work in process inventory
D. the amount of material or conversion cost necessary to start a unit of production into work in process
E. 50% of the material or conversion cost of a unit of finished goods inventory, assuming a linear production pattern
B 2. The product flow format where certain portions of the work are done simultaneously and then brought together for
completion is called:
A. applied
B. parallel
C. standard
D. selective
E. sequential
D 5. When added materials in subsequent departments result in an increase of the units produced, the unit transferred-in costs will:
A. be reclassified as new materials
B. be increased to provide for the additional units
C. be accounted for under the fifo costing method
D. be decreased as they are spread over more units
E. remain unchanged
E 6. Gyro Products transferred 10,000 units to one department. An additional 3,000 units of materials were added in the
department. At the end of the month, 7,000 units were transferred to the next department. There was no beginning
inventory. The costs for units transferred in would be effectively allocated over:
A. 17,000 units
B. 3,000 units
C. 10,000 units
D. 7,000 units
E. 13,000 units
: 7,000 units transferred out + 6,000 units in ending inventory = 13,000 units
E 9. In a process costing system, how is the unit cost affected in a production cost report when materials are added in a department
subsequent to the first department and the added materials result in additional units?
A. The first department's unit cost is increased, but it does not necessitate an adjustment of the transferred-in unit cost.
B. The first department's unit cost is decreased, but it does not necessitate an adjustment of the transferred-in unit cost.
C. The first department's unit cost is not affected.
D. The first department's unit cost is increased, which necessitates an adjustment of the transferred-in unit cost.
E. The first department's unit cost is decreased, which necessitates an adjustment of the transferred-in unit cost.
E 10. Assuming that there was no beginning work in process inventory and the ending work in process inventory is 50% complete
as to conversion costs, the number of equivalent units as to conversion costs would be:
A. less than the units completed
B. more than the units completed
C. the same as the units placed in process
D. the same as the units completed
E. less than the units placed in process
A 11. An error was made in the computation of the percentage of completion of the current year's ending work in process
inventory. The error resulted in assigning a lower percentage of completion to each component of the inventory than
actually was the case. What is the effect of this error upon:
(1) the computation of equivalent units in total
(2) the computation of costs per equivalent unit
(3) costs assigned to cost of goods completed for the period
C 12. Read, Inc. instituted a new process in October. During October, 10,000 units were started in Department A. Of the units
started, 7,000 were transferred to Department B, and 3,000 remained in work in process at October 31. The work in
process at October 31 was 100% complete as to material costs and 50% complete as to conversion costs. Materials
costs of $27,000 and conversion costs of $39,950 were charged to Department A in October. What were the total
costs transferred to Department B?
A. $46,900
B. $53,600
C. $51,800
D. $57,120
E. none of the above
SUPPORTING CALCULATION:
D 13. In accounting for beginning inventory costs, the method that allows the addition of beginning inventory costs with costs
incurred during the period is referred to as:
A. first-in, first-out
B. addition
C. last-in, first-out
D. average
E. first-in, last-out
E 14. Chicago Processing Co. uses the average costing method and reported a beginning inventory of 5,000 units that were 20%
complete with respect to materials in one department. During the month, 11,000 units were started; 8,000 units were
finished; ending inventory amounted to 8,000 units that were 60% complete with respect to materials. Total
materials cost during the period for work in process should be spread over:
A. 7,200 units
B. 16,000 units
C. 11,200 units
D. 13,200 units
E. 12,800 units
E 15. In determining the cost of goods transferred in from a previous department under the average cost method:
A. a simple average of unit costs is used
B. beginning inventory costs are separated from costs transferred in during the period
C. a first-in, first-out approach is used
D. equivalent production in ending inventory is separated from other transferred-in costs
E. a weighted average of unit costs is used
E 16. The average and fifo process costing methods differ in that the average method:
A. can be used under any cost flow assumption
B. is much more difficult to apply than the fifo method
C. requires that ending work in process inventory be stated in terms of equivalent units of production
D. considers the ending work in process inventory only partially complete
E. does not consider the degree of completion of beginning work in process inventory when computing equivalent units of production
A 17. The first step in applying the average cost method is to:
A. add the beginning work in process costs to the current period's production costs
B. divide the current period's production costs by the equivalent units
C. subtract the beginning work in process costs from the current period's production costs
D. A and B
E. B and C
C 18. Beginning work in process was 60% complete as to conversion costs, and ending work in process was 45% complete as to
conversion costs. The dollar amount of the conversion cost included in ending work in process (using the average
cost method) is determined by multiplying the average unit conversion costs by what percentage of the total units in
ending work in process?
A. 60%
B. 55%
C. 45%
D. 522%
E. 100%
C 19. Dover Corporation's production cycle starts in the Mixing Department. The following information is available for April:
Units
Work in process, April 1 (50% complete) 40,000
Started in April 240,000
Work in process, April 30 (60% complete) 25,000
Materials are added at the beginning of the process in the Mixing Department. Using the average cost method, what
are the equivalent units of production for the month of April?
Materials Conversion
A. 255,000 255,000
B. 270,000 280,000
C. 280,000 270,000
D. 305,000 275,000
E. 240,000 250,000
SUPPORTING CALCULATION:
Materials
Units Costs
Beginning work in process 17,000 $12,800
Started in June 82,000 69,700
Units completed 85,000
Ending work in process 14,000
All materials are added at the beginning of the process. Using the average cost method, the cost per equivalent unit
for materials is:
A. $0.825
B. $0.833
C. $0.85
D. $0.97
E. $1.01
B 21. Kennedy Company adds materials in the beginning of the process in the Forming Department, which is the first of two
stages of its production cycle. Information concerning the materials used in the Forming Department in October is as
follows:
Materials
Units Costs
Work in process, October 1 6,000 $ 3,000
Units started 50,000 25,560
Units completed and transferred out 44,000
Using the average cost method, what was the materials cost of work in process at October 31?
A. $3,000
B. $6,120
C. $3,060
D. $5,520
E. $6,000
SUPPORTING CALCULATION:
E 22. Roger Company manufactures Product X in a two-stage production cycle in Departments A and B. Materials are added at
the beginning of the process in Department B. Roger uses the average costing method. Conversion costs for
Department B were 50% complete as to the 6,000 units in beginning work in process and 75% complete as to the
8,000 units in ending work in process. A total of 12,000 units were completed and transferred out of Department B
during February. An analysis of the costs relating to work in process and production activity in Department B for
February follows:
The total cost per equivalent unit transferred out for February of Product X, rounded to the nearest penny, was:
A. $2.82
B. $2.85
C. $2.05
D. $2.75
E. $2.78
SUPPORTING CALCULATION:
A 23. Simpson Co. adds materials at the beginning of the process in Department M. The following information pertains to
Department M's work in process during April:
Units
Work in process on April 1
(60% complete as to conversion cost) 3,000
Started in April 25,000
Completed in April 20,000
Work in process on April 30
(75% complete as to conversion cost) 8,000
Under the average costing method, the equivalent units for conversion cost are:
A. 26,000
B. 25,000
C. 24,000
D. 21,800
E. none of the above
D 24. During March, Quig Company's Department Y equivalent unit product costs, computed under the average cost method,
were as follows:
Materials $1
Conversion 3
Transferred-in 5
Materials are introduced at the end of the process in Department Y. There were 4,000 units (40% complete as to
conversion costs) in work in process at March 31. The total costs assigned to the March 31 work in process
inventory should be:
A. $36,000
B. $28,800
C. $27,200
D. $24,800
E. none of the above
The following questions are based on the material in the Appendix to the chapter.
B 25. If a company reports two different unit costs for goods transferred to the next department, it is reasonable to assume that:
A. the department accounts for lost units at the end of the process
B. a fifo costing method is used
C. lost unit costs are computed separately
D. an average costing method is used
E. errors must have occurred in recording costs
C 26. In order to compute equivalent units of production using the fifo method of process costing, work for the period must be
broken down to units:
A. started and completed during the period
B. completed during the period and units in ending inventory
C. completed from beginning inventory, started and completed during the month, and units in ending inventory
D. started during the period and units transferred out during the period
E. processed during the period and units completed during the period
A 27. The first-in, first-out method of process costing will produce the same cost of goods manufactured amount as the average
cost method when:
A. there is no beginning inventory
B. there is no ending inventory
C. beginning and ending inventories are each 50% complete
D. beginning inventories are 100% complete as to materials
E. goods produced are homogeneous
B 28. The fifo method of process costing differs from the average cost method of process costing in that fifo:
A. allocates costs based on whole units, but the average cost method uses equivalent units
B. considers the stage of completion of beginning work in process in computing equivalent units of production, but the average cost
method does not
C. does not consider the stage of completion of beginning work in process in computing equivalent units of production, but the average
cost method does
D. is applicable only to those companies using the fifo inventory pricing method, but the average cost method may be used with any
inventory pricing method
E. none of the above
A 29. Connor Company computed the flow of physical units completed for Department M for the month of March as follows:
Units completed:
From work in process on March 1 15,000
From March production 45,000
Total 60,000
Materials are added at the beginning of the process. The 12,000 units of work in process at March 31 were 80%
complete as to conversion costs. The work in process at March 1 was 60% complete as to conversion costs. Using
the fifo method, the equivalent units for March conversion costs were:
A. 60,600
B. 55,200
C. 57,000
D. 54,600
E. 63,600
D 30. The Hilo Company computed the physical flow of units for Department A for the month of April as follows:
Units completed:
From work in process on April 1 10,000
From April production 30,000
Total 40,000
Materials are added at the beginning of the process. Units of work in process at April 30 were 8,000. The work in
process at April 1 was 80% complete as to conversion costs, and the work in process at April 30 was 60% complete
as to conversion costs. What are the equivalent units of production for the month of April using the fifo method?
SUPPORTING CALCULATION:
E 31. Department A is the first stage of Mann Company's production cycle. The following information is available for conversion
costs for the month of April:
Using the fifo method, the equivalent units for the conversion cost calculation are:
A. 336,000
B. 360,000
C. 328,000
D. 320,000
E. 324,000
SUPPORTING CALCULATION:
PROBLEMS
PROBLEM
1.
Cost of Production Report. Fort Myers Corporation manufactures a product that is processed in two
departments: Mixing and Cooking. At the beginning and end of May, there were no inventories of unfinished work.
During May, 50,000 units of this product were completed. Materials used during May cost $28,000, of which one
half were used in the Mixing Department and one half were used in the Cooking Department. Direct labor wages
totaled $60,000, with $40,000 applicable to Mixing and $20,000 to Cooking. The amounts for direct factory
overhead incurred for each department and for general factory overhead apportioned to each department were:
Mixing Cooking
Department Department
Factory overhead incurred $7,500 $9,000
General factory overhead apportioned 5,000 6,000
Required: Prepare a partial cost of production report, showing the total cost to be accounted for in each department.
SOLUTION
PROBLEM
2.
Computation of Equivalent Production. Hanrahan Company uses process costing to account for the costs of its
only product, X. Production takes place in two departmentsCSanding and Polishing. On December 31, the inventory
for Product X was as follows:
No unused materials
Work in processC
Sanding Department 800 units (3/4 complete as to labor)
Work in processC
Polishing Department 1,000 units (1/2 complete as to materials and
3/4 complete as to direct labor)
Required:
(1) Compute the equivalent units of materials in all inventories combined at December 31.
(2) Compute the equivalent units of the Sanding Department's direct labor in all inventories at December 31.
SOLUTION
* All Sanding Department direct labor would be in all of these units or else they never would have been transferred.
PROBLEM
3.
Calculation of Unit CostsCAverage Costing Method. Barcelona Beach Products reports the following data for the
first department in its production process:
(1) Compute the unit cost for materials, labor, and factory overhead.
(2) Determine the cost of the work in process ending inventory.
SOLUTION
(1) Materials: ($100,000 + $304,000) / 40,000 units* = $10.10 per unit
Labor: ($125,400 + $407,100) / 37,500 units* = $14.20 per unit
Factory overhead: ($173,500 + $407,750) / 37,500 units = $15.50 per unit
*Equivalent production:
Materials: 33,000 + 2,000 + 5,000 = 40,000 units
Labor and factory overhead: 33,000 + 2,000 + (1/2 x 5,000) = 37,500 units
PROBLEM
4.
Journal Entries for Process Cost System. Xavier Corporation uses process costing in its two production
departments. A separate work in process account is kept in the general ledger for each production department. The
following data relate to operations for the month of March:
Beginning Added
Inventory During March
Direct materials cost: Department A $ 5,000 $25,000
Department B 3,000 20,000
Direct labor cost: Department A 6,000 40,000
Department B 4,500 35,000
Applied overhead: Department A 12,000 90,000
Department B 4,500 35,000
During March, 45,000 units with a cost of $5 each were transferred from Department A to Department B, and
40,000 units with a cost of $9 each were transferred from Department B to finished goods inventory.
Required: Prepare the appropriate general journal entries to record the cost charged to the producing departments
during March and the cost of units transferred from Department A to Department B and Department B to finished
goods inventory.
SOLUTION
PROBLEM
5.
Cost of Production Report, Second Department, Average Costing. Isogen Corporation manufactures a product
in three departments. The product is cut out of lumber in the Cutting Department, then transferred to the Planing
Department where it is shaped and certain parts purchased from outside vendors are added to the unit, and finally
transferred to the Finishing Department where it is primed, painted, and packaged. Since only one product is
manufactured by the company, a process cost system is used. The company adopted the average cost flow
assumption to account for its work in process inventories. Data related to September operations in the Planing
Department follow:
Beginning Added
Costs charged to the department: Inventory _ This Period
Costs from the preceding department $15,500 $63,250
Materials 7,800 20,700
Direct labor 3,200 16,750
Factory overhead 9,975 39,900
Required: Prepare a September cost of production report for the Planing Department.
SOLUTION
Isogen Corporation
Planing Department
Cost of Production Report
For September, 19--
bor Overhead Quantity
Beginning inventory 3,000
Received from Cutting Department 7,500
10,500
% Unit Total
Cost Accounted for as Follows Units Complete Cost Cost
Transferred to Finishing
Department 8,500 100% $17.70 $150,450
Work in process,
ending inventory:
Cost from preceding
department 2,000 100 7.50 $ 15,000
Materials 2,000 75 2.85 4,275
Labor 2,000 50 2.10 2,100
Factory overhead 2,000 50 5.25 5,250 26,625
Total cost accounted for $177,075
* Total number of equivalent units required in the cost accounted for section determined as follows:
Prior
Dept. Cost Materials Labor Overhead
Equivalent units transferred out 8,500 8,500 8,500 8,500
Equivalent units in ending inventory 2,000 1,500 1,000 1,000
Total equivalent units 10,500 10,000 9,500 9,500
PROBLEM
6.
Cost of Production Report, Increase in Quantity with Added Materials, Average Costing. Carlson Chemical
Company produces a chemical in three departments, Mixing, Blending, and Bottling. Mixing, where the compounds
are added, is the first department. The powder is then transferred to the second department where water is added to
produce a liquid. After water has been added, the chemical is bottled for storage and transported to customers. A
process cost system with an average cost flow assumption is used to account for work in process inventories. Data
related to operations in the Blending Department during the month of October follow:
Beginning Added
Costs charged to the department: Inventory This Period
Costs from the preceding department $2,300 $11,200
Materials 720 2,520
Direct labor 1,150 2,750
Factory overhead 2,100 5,700
SOLUTION
% Unit Total
as Follows Units Complete Cost Cost
Transferred to Bottling
Department 14,000 100% $1.68 $23,520
Work in process,
ending inventory:
Cost from preceding
department 4,000 100 .75 $3,000
Materials 4,000 100 .18 720
Labor 4,000 40 .25 400
Factory overhead 4,000 40 .50 800 4,920
Total cost accounted for $28,440
* Total number of equivalent units required in the cost accounted for section determined as follows:
Prior
Dept. Cost Materials Labor Overhead
Equivalent units transferred out 14,000 14,000 14,000 14,000
Equivalent units in ending inventory 4,000 4,000 1,600 1,600
Total equivalent units 18,000 18,000 15,600 15,600
PROBLEM
7.
Equivalent Production Schedule. Javis Jam Co. uses fifo costing for its production processes. In December, the
Cooking Department reported the following summary of its activities:
SOLUTION
Labor and
Factory
Materials Overhead
Units transferred out 19,000 19,000
Less beginning inventory (all units) 8,000 8,000
PROBLEM
8.
Cost of Production Report, Second Department, Fifo Costing. Handy Tool Company manufactures a product in
two departments, Shaping and Assembly. The product is cut out of sheet metal, bent to shape, and painted in the
Shaping Department. Then, it is transferred to the Assembly Department where component parts purchased from
outside vendors are added to the unit. A process cost system with a fifo cost flow assumption is used to account for
work in process inventories. Data related to November operations in the Assembly Department follow:
Units in beginning inventory (90% materials, 80% labor and overhead) 1,000
Units received from the Shaping Department this period 3,000
Units transferred to Finished Goods Inventory this period 2,800
Units in ending inventory (50% materials, 40% labor and overhead) 1,200
Beginning Added
Required: Prepare a November cost of production report on a fifo basis for the Assembly Department.
SOLUTION
% Unit Total
as Follows Units Complete Cost Cost
Transferred to Finished Goods:
Beginning inventory $39,700
Cost to complete:
Materials 1,000 10% $ 5.35 535
Labor 1,000 20 3.90 780
Factory overhead 1,000 20 6.70 1,340 $ 42,355
Started and completed this
period 1,800 100 25.70 46,260
Total cost transferred to
Finished Goods $ 88,615
Work in process,
ending inventory:
Cost from preceding
department 1,200 100% $ 9.75 11,700
Materials 1,200 50 5.35 3,210
Labor 1,200 40 3.90 1,872
Factory overhead 1,200 40 6.70 3,216 19,998
Total cost accounted for $ 108,613
* Number of equivalent units of cost added during the current period determined as follows:
Prior
Dept. Cost Materials Labor Overhead
To complete beginning inventory 0 100 200 200
Started and completed this period 1,800 1,800 1,800 1,800
Ending inventory 1,200 600 480 480
Total equivalent units 3,000 2,500 2,480 2,480