Untitled

Leah
Gelay
No. 1
When production levels are expected to decline within a relevant range, what effects would be antiClpate-d with respect to each
Fixed costs per unit increase. Variable costs per unit also increase.
Fixed costs per unit stay the same. Variable costs per unit decrease
Fixed costs per unit stay the same . Variable costs per unit increase.
Fixe d costs per unit stay the same . Variable costs per unit also stay the same.
Fixed costs per unit increase. Vanable costs per unit no change.
No. 4
Operating income reported urtder full costing will exceed operating income reported under variable costing for a given period if:
The variable overhead exceeds the fixed overhead
Sales exceed production for that period.
Production equals sales for that period
The fixed overhead exceeds the variable overhead
Production exceeds sales for that period
No. 5
What is the definition of a variable cost?
A cost that, within the relevant range, includes both variable and fixed cost components.
A cost that varies with the cost driver, but in discrete steps within the relevant range, also called semi-fixed cost
A cost that changes in total in response to changes in one or more cost drivers
The total cost (materials, labor, and overhead} divided by the number of units of output.
The portion of the total cost that, within the relevant range, does not change with a change in the quantity of a design
No. 12
When is job costing system propriate to use?
When the costs of a product increase dramatically.
When products produced are homogenous in nature.
When mass production is used
Whenit is impractical to use trace cost to individual products
When most cost incurred for the job can be readily identified with a specific product
No. 13
The three major differences between process and job order costing systems are those relating to:
quantity, quality and cost
responsibility for cost, system design, and authorization codes
speed, accuracy and design
none of these answer choices are correct
cost object, product or service variety, and timing of unit calculation
No. 17
Which of the following best describes fixed cost?
it may change in total when such change depends on production volume within the relevant range]
it may change in total when such change is related to changes in production volume
it is constant per unit of change in production volume
it may change in total when such change is unrelated to changes in production volume
No. 18
Which of the following methods accurately represents the process below?
A customer orders twenty cases of nails, and the firm then produces the nails
overhead assignment method
order method
pull method
labor decision method
push method
No. 19
There is no convenient or economical way to trace a(n) _________ from the cot to the cost pool to the cost object
cost allocation
indirect cost
cost driver
cost assignment
direct cost
No. 20
Inventory under the variable costing method includes:
Prime cost and all conversion cost
Direct materials cost and direct labor cost
Direct materials cost, direct labor cost and variable factory overhead cost
Direct materials cost, direct labor cost, but no factory overhead cost.
Prime cost but not conversion cost
No. 22
What is the assignment of indirect cost to cost pools and cost objects called?
Cost allocation nia
Cost integration
Allocation bases
Cost separation
Overhead cost
No. 23
A company's operatng income recently increased by 30% while its inventory increased in a given year. Which of the following a
favorable income results?
Activity-based costing
Standard direct costing
Direct costing
Full-costing (same)
Variable costing
No. 26
How will unit (average) cost of manufacturing (materials, labor and overhead) usually change if the production level rises?
It will remain constant
It will decrease, but not iin direct proportion to the production increases
It will decrease inversely and in direct proportion to the production increases
It will increase, but inversely with the production increase
It will increase in direct proportion to the production increase
No. 27
Under full costing, fixed manufacturing overhead costs would be classified as:
Product cost
Selling cost
Inventory cost
Period cost
Annual cost
No. 28
Fixed factory overhead is unnecessary for the production of a product

Fixed factory overhead is necessary for the production of a product
Variable factory overhead is a period cost
Fixed factory overhead is difficult to allocate properly
Full costing overstates the balance sheet value of inventories
No. 32
Complete the inventory formula:
Beginning inventory + ____________ = _____________ + Ending Inventory
None of the answers are correct
Cost transferred out; cost added
Cost added; cost of good manufactured
Cost of goods sold; cost added
Cost added; cost transferred out (same)
No. 33
Which of the following is not a correct pairing of the activity and the potential cost driver?
Process loan applicatios-number of loan applications processed
Mail customer statements-number of accounts by customer type and size
Provide cashier service-number of customers
Advise customers on baking services-number of ATM transactions
No.34
Home Products Incorporated has failed to reach its planned activity level during its first two years of operation. The following ta
produced, sales, and normal activity for these years and the projected relationship for Year 3. All prices and costs have remaine
expected to do so in Year 3. Income has been positive in both Year 1 and Year 2.
Units Produced Sales Planned Production
Year 1 90,000 90,000 100,000
Year 2 95,000 95,000 100,000
Year 3 95,000 90,000 100,000
Because Home Products uses a full costing system, one would predict operating income for Year 3 to be:
Less than year 2
Greater then operating income under variable costing
Less than the operating income under variable costing
The same as operating income under variable costing
None of these answer choices is correct
No. 35
In an income statement prepared using the variable costing method, which of the terms should appear?
Gross Profit (margin) Net income
A) Yes Yes
B) Yes No
C) No No
D) No Yes
Not enough information is given to make a determination
Option D (SAME)
Option C
Option B
Option A
No. 36
The two main advantages of using predetermined factory overhead rates are to provide more accurate unit cost information and
Simplify the accounting process
Insure transmission of correct data
Extend the useful life of the cost data
Provide cost information on a timely basis
Adjust for variances in data sources
No. 38
Product costing provides useful cost information for all the following except:
Financial statement reporting
For non-manufacturing firms
Management planning cost control and performance evaluation
Identifying and hiring competent managers
Both manufacturing and non-manufacturing firms
No. 39
Many firms use which one of the following terms to indicate the use of job costing in service industries?
Industry costing
Standard costing
Normal costing
Project costing
Actual costing
No. 40
When completed units are transferred to the warehouse.
Cost of Goods Sold account id debited
Finished Goods Inventory is debited
Work-in-Process Inventroy is debited
Finished Goods Inventory is credited
Cost of Goods Manufactured account is debited
No. 42
Which of the following can produce unit product costs that fluctuate significantly?
Standard costing system
Overhead costing system
Industry costing system
Normal costing system
Actual costing system
No. 45
The Gray Company has a staff of five clerks in its general accounting department. Three clerks who work during the day perfor
the two clerks who work in the evening are responsibile for (1) collecting the cost data for tha various jobs in process, (2) verifyi
and labor reports, and (3) supplying production reports to the supervisors by the next morning. The salaries of these two clerks
be classified as:
Product costs
Indirect costs
Variable Costs
Direct costs
Period costs same
No. 47
A manufacturer of machinery currently produces equipment for a single client. The client supplies all required raw material on a
manufacturer contracts to complete the desired units from this raw material. The total production costs incurred by the manufac
as:
Conversion costs same
Prime costs
FIxed costs
Factory overhead
Variable production costs
No. 49
The value stream income statement can be compared to
The static budget
The contribution income statement
A streamlined production process
Value chain analysis
A streamlined accounting system
No. 51
Which of the following is not among the most frequently used volume-based cost drivers for applying factory overhead?
Machine hours
Direct labor hours
None of theses answers are correct
Number of products made
Direct labor costs
No. 52
Other things being equal, income computed by the variable costing method will exceed that computed by the full costing metho
Units sold exceed unit produced
Fixed manufacturing costs increase
Variable manufacturing costs increase
Units produced exceed unit sold nia
Units produced exceeds units started
No. 55
In job costing, the job might consist of:
a batch of similar products
a batch of identical products
a single product
a single, well-defined project
a single product, a batch of products, or a single well-defined project
ADD
The term relevant range as used in cost accounting means the range over which;
Relevant costs are incurred
Costs may fluctuate
relevant costs are avoided
cost relationships are approximately linear
Production may vary
8 Under variable costing fixed manufacturing overhead costs would be classified as

Product costs
Selling Costs
Annual Costs
Period Costs
Inventory Costs
10 volume-based rates are appropriate in situations where the incurrence of factory overhead
is related to several non-homogenous cost drivers
is related to a single, common cost driver
is related to multiple cost drivers
varies considerably from period to period
is relatively small in amount
13 Which of the following industries is more suitable for using a job costing system?
Food processing
Medical Clinics
Cement manufacturing
Petroleum product manufacturing
Chemical plants
14 Which costing system is required by GAAP?

Fixed Costing
Full Costing
Dual Costing
Variable Costing
Spread Costing
22 Total product costs at the end of the accounting period should be based on what?
Estimated overhead
applied overhead
Normal overhead
Standard overhead
actual overhead
26 If the volume of production is increased over the level planned, the cost per unit wold be expected to
Increase for fixed costs and increase for variable costs
remain unchanged for fixed costs and increase for variable costs
decrease for fixed costs and remain unchanged for variable costs
decrease for fixed costs and decrease for variable costs
decrease for fixed costs and increase for variable costs
51 Product costing system design or selection:
Requires an understanding of the nature of the business
Should provide useful cost information for strategic and operational decision needs
All of these answer choices are correct
Involves cost management expertise
Should be cost effective in design and operation
36 The journal entry required to record factory depreciation includes:

Non of these answer choices are correct
A debit to Factory Overhead account
A debit to Accumelated Depreciation Account
A debit to Cost of Goos Manufactured
A debit to Depreciation Expense Account
37 Volume-based cost accounting systems often do not provide sufficiently accurate product costing because they:
Too often use an allocation base that does not have a cause-effect relationship to resource usage
37 Home Products Incorporated has failed to reach its planned activity level during its first two years of operation. The fo
relationship between units produced, sales, and normal activity for these years and the projected relationship for Year
remained the same for the last two years and are expected to do so in Year 3. Income has been positive in both Year 1
Units Produced Sales Planned

Year 1 90,000 90,000 100,000
Year 2 95,000 95,000 100,000
Year 3 95,000 90,000 100,000
Because Home Products uses a full costing system, one would predict operating income for Year 3 to be:
Greater than Year 2.
Equal to Year 1.
Greater than Year 1.
Equal to Year 2.
38 Which of the following can be inferred as an argument against the use of variable costing?
Fixed manufacturing overhead is necessary for the production of a product.
39 Which of the following is not one of the four steps to obtain the predetermined overhead rate?
40 Which of the following is not technology used to track cost flows in a company?
Card reader
Biometric scanning device
Barcode technology
Smart phone
RFID scanner
41 A job in which quantity of products is ordered by a single customer is more likely to be an example of:
the lean method of production
the resource-based method
the single method of production
the push method of production
the pull method of production (nia)
42 Under variable costing, fixed manufacturing overhead costs would be classified as:
product costs
selling costs
annual costs
inventory cost
period costs nia
43 A normal costing system uses actual costs for direct materials and direct labor, and:
Estimated costs for factory overhead (nia)
Estimated costs that the firm should attain
Estimated factory overhead costs based on material cost
Actual costs for factory overhead
Charges actual factory overhead as a lump sum
44 When is a job costing system appropriate to use?

When products produced are homogenous in nature
When it is impractical to trace costs to individual products
When most costs incurred for the job can be readily identified with a specific product
When mass production is used
When the costs of a product increase dramatically
45 The key distinction between job costing and process costing is:
The standard applies
The use made of the collected data
The difference in detail required by each approach
The journal entries required
The accumulation of costs to assign to cost objects (nia)
46 The time ticket shows which amount for an employee?

Total hours worked each day
Number of hours a manager assigns
The pay rate (nia)
Overtime costs
Check-in times and check-out times
47 A company's operating income recently increased by 30% while its inventory increased in a given year. Which of the f
Full Costing
48 Operating income reported under full costing will exceed operating income reported under variable costing for a given
Production exceeds sales for that period
49 What is the assignment of indirect costs to cost pools and cost objects called?
Cost Allocation
50 Which of the following journal entries is correct if scrap is being incurred and sold for all jobs in common in the amoun
Debit - Cash 600
Credit - Factory Overhead 600
ld be antiClpate-d with respect to each of the following?
r variable costing for a given period if:
ange, also called semi-fixed cost
h a change in the quantity of a designated cost driver.
the relevant range]
nia
st pool to the cost object
*NOTE: Allocation bases are cost drivers used to allocate or assign these costs to cost objects.
a given year. Which of the following accounting methods would produce the most
nge if the production level rises?

nia
wo years of operation. The following table shows the relationship between units
ar 3. All prices and costs have remained the same for the last two years and are
for Year 3 to be:
hould appear?
more accurate unit cost information and tax
ce industries?
clerks who work during the day perform sundry accounting tasks;
tha various jobs in process, (2) verifying manufacturing material
ning. The salaries of these two clerks who work at night should
supplies all required raw material on a no-cost basis. The
duction costs incurred by the manufacturer are correctly identified
or applying factory overhead?
at computed by the full costing method if:

wold be expected to
te product costing because they:
to resource usage nia
its first two years of operation. The following table shows the
and the projected relationship for Year 3. All prices and costs have
come has been positive in both Year 1 and Year 2.
g income for Year 3 to be:
verhead rate? 1) Identify the activities that will be used to allocate overhead and estimate theircosts,
2) Identify the allocation base for each activity and estimate the total quantity of each allocationbase,
3) Compute the predetermined overhead rate for eachactivity,
4) Allocate indirect costs to the cost objectesp
y to be an example of:
(nia)
creased in a given year. Which of the following accounting methods would produce the most favorable income results?
rted under variable costing for a given period if:
d for all jobs in common in the amount of $600?

A. increase no change
f each allocationbase,
No. 2 Incorporated manufactures hair brushes that sell at wholesale for $2.60 per unit. Budge ted
Smooth
production in both 2021 and 2022 was 3,000 units. There was no beginning
inventory in 2021. The following data summarized the 2021 and 2022 operations:
Costs 2021 2022
Units sold 2,500 3,200
Units produced 3,000 3,000
Costs
Variable factory overhead per unit $0.65 $0.65
Fixed factory overhead $1,290 $1,290
Variable marke:ing per unit $0.80 $0.80
Fixed Selling and Adminisua tive $650.00 $650.00
1 Full costing operating income for 2021 is calculated to be:

$1,150
935
1,352
1,395
1,200
2 Full costing operating income for 2022 is calculated to be:

1,654
3 Variable costing operating income for 2022 is calculated to be:

1,150
gelay 1,740
850
1,295
1,654
4 Variable costing operating income for 2021 is calculated to be:

$1,200
$1,352
$935
SOLUTION
2021 2022 2.6
Units sold 2,500.00 3,200.00
Units produce 3,000.00 3,000.00
Costs
Variable facto 0.65 0.65
Fixed factory 1,290.00 1,290.00
Variable marke 0.80 0.80
Fixed Selling 650.00 650.00
1. Full costing operating income for 2021 is calculated to be:
Unit profuct cost under full costing:

Variable overhead per unit 0.65
Fixed overhead per unit 0.43
Product cost per unit 1.08
Sales 6500
Less: Cost of Goods Sold
Beginning Inventory 0
Cost of goods produced 3240
Cost of goods available for sale 3240
Less: Ending inventory 540
Cost of goods sold (total) 2700
Gross Margin 3800
Less: Selling & Administrative expenses:
Fixed 650.00
Variable 2000
Total Selling and administrative expenses 2,650.00
Net operating income 1,150.00
2. Variable costing operating income for 2022 is calculated to be:
Unit profuct cost under variabl costing:

Sales 8320
Add: Selling & Administrative expenses: 2560 4640
Gross Margin 3680
Less: Fixed manufacturing costs 1,290.00
Less: Selling and administrative expenses 650.00
3. Variable costing operating income for 2021 is calculated to be:

Sales 6500
Add: Selling & Administrative expenses: 2000 3625
Gross Margin 2875
Less: Fixed manufacturing costs 1,290.00
Less: Selling and administrative expenses 650.00
Net operating income 935.00
4. Full costing operating income for 2022 is calculated to be:
Unit profuct cost under full costing:

Fixed overhead per unit 0.43
Sales 8320
Gross Margin 4864
Fixed 650.00
Variable 2560
No. 3
Furniture Comp any incurred the following costs during 2016:
Conversion costs $240,000
Prime costs $210,000
Manufacturing overhead $115 ,000
What was the amount of direct materials and direct labor used for the year?
Direct materials Direct laoor
A. $95 ,000 $100,000
B. $105,000 $80,000
C. $125,000 $90,000
D. $85,000 $125,000
Option D
Option A
Option B
Option C
None of these options are correct
SOLUTION
Prime cost = DL + DM
DM DL
OPTION D 85000 125000 210000
No6
Randall Company manufactures products to customer specifications. A joo costing
system is used to accumulate production costs. Factory overhead cost wes applied at
125% of direct labor cost Selected data concerning the past year's operation of the
company are presented below.
January 1 December 31.
Direct materials $77,000 40,000
Work in process 66,000 42,000
Finished goods 115,000 100,000
Other information
Direct materiais purchases $324,000
Cost of goods available for sale 950,000
Actual factory averneed costs 260,000
The cost of goods sold (before adjustment for under or overapplied overhead) is
$811,000
$348,000.00
$867,000
$835,000
$850,000.00
The cost of goods manufactured during the year is:
835,000
The total manufacturing cost for the year are:

811,000
348,000
850,000
867,000
835,000
SOLUTION
Direct materials used

Material inventory, Beginning $77,000
Direct materials purchases $324,000
Total direct materials available $401,000
Less: Direct materials inventory, Ending 40,000
Direct materials used $361,000
Direct labor - wages
Factory overhead applied
Total manufacturing costs incurred during year 811,000
Add: Work in process inventory, Beginning 66,000
Total manufacturing costs to account for 877,000
Less: Work in process inventory, Ending 42,000
Cost of goods manufactured 835,000
Add: Finished Good, Beginning 115,000
Total Goods Available for Sale 950,000
Less: Finished Good, Ending 100,000
COGS 850,000
No7
Cap Incorporated manufactures call point pens that sell at wholesale for $0.80 per unit. Buageted production in potn 2021
and 2022 was 8,000 units. There was no beginning inventory in 2021. The following cete summarized the 2021 and 2022
operations
2021 2022
Costs
Variable factory overhead per unit $0.20 $1,200
Fixed factory overhead $1,200 $1,200
Variable marketing per unit $0.30 $0.30
Fixed Selling and Administrative 320 320
Full costing operating income for 2021 is calculated to be

$149
430
$1,030
$1,180
655

1,030
655
1,180
149
430
SOLUTION

Unit product cost under full costing:
Variable overhead per unit $0.20
Fixed overhead per unit (1200/8000) $0.15
Product cost per unit $0.35
Sales 5200
Cost of goods produced (8000*0.35) $2,800.00
Less: Ending inventory [(8000-6500)*0.35] -$525.00
Gross Margin 2925
Fixed 320
Variable $1,950.00
Total Selling and administrative expenses 2270
Net operating income 655
Unit product cost under full costing:
Fixed overhead per unit (1200/8000) $0.15
Sales 7200
Beginning Inventory $525.00
Cost of goods produced (8000*0.35) $2,800.00
Cost of goods available for sale $3,325.00
Less: Ending inventory [(8000-6500)*0.35] -$175.00
Cost of goods sold (total) $3,150.00
Gross Margin $4,050.00
Fixed 320
Variable $2,700.00
Total Selling and administrative expenses 3020
Net operating income $1,030.00
No. 10
d production in potn 2021 Cap Incorporated manufactures call point pens that sell at wholesale for $0.80 per unit. Buageted produc
arized the 2021 and 2022 in potn 2021 and 2022 was 8,000 units. There was no beginning inventory in 2021. The following cete
summarized the 2021 and 2022 operations
2021 2022
Costs
Variable factory overneed per unit $0.20 $1,200
Fixed factory overneed $1,200 $1,200
Variable marketing per unit $0.30 $0.30
Fixed Selling and Administrative 320 320
Variable costing operating income for 2022 is calculated to be

$149
$1,030
$1,180
655
Variable costing operating income for 2021 is calculated to be

430
149
1,030
1,180
655
SOLUTION
Variable costing operating income for 2021 is calculeted to be

Sales
Cost of goods produced $1,600.00
Less: Ending inventory $300.00
Add: Selling & Administrative expenses: $1,950.00
Gross Margin
Less: Fixed manufacturing costs $1,200
0.8 Less: Selling and administrative expenses 320
Total Selling and administrative expenses
Net operating income
Variable costing operating income for 2022 is calculeted to be
Sales
Beginning Inventory $300.00
Cost of goods produced $1,600.00
Cost of goods available for sale $1,900.00
Less: Ending inventory $100.00
Add: Selling & Administrative expenses: $2,700.00
Gross Margin
Less: Fixed manufacturing costs $1,200
Less: Selling and administrative expenses 320
Total Selling and administrative expenses
Net operating income
No. 11
esale for $0.80 per unit. Buageted production Blue Sky Incorporated listed the following cata for the current year
g inventory in 2021. The following cete Buageted factory overhead 1,271,000.00
Budgeted direct inbor hours 82000
Budgeted macnine hours 41,000
Actual factory overhead 1,201,000.00
Actual direct labor hours 86300
Actual machine hours 39,400
If overhead is applied based on direct labor nours overapplied underapplied overeed is
(Round intermediate calculations to 2 decimal places)
$174775 overapplied
$136,650 overapplied
0
$136,650 underapplied.
$174775 underapplied
SOLUTION
Predetermined OH rate 15.5
Applied Factory Overhead 1,337,650.00

136,650.00 overapplied
0.8
5200
$3,250.00
$1,950.00
$1,520
$430.00
7200
$4,500.00
$2,700.00
$1,520
$1,180.00
No. 14
Music incorporated planned and manufactured 250,000 units of its single product in 2022
its first year of operations. Verisole manufacturing costs were 30 per unit of production.
Planned and actual fixed manufacturing costs were 600,000 Marketing and administrative
costs (all fixed) were 300,000 in 2022. Music Incorporated sold 200,000 units of product
in 2022 at 60 per unit
Sales for 2022 are calculated to be

$12,000,000
d underapplied overeed is $7,500,000
$5,000,000
$1,000,000
$10,000,000
SOLUTION
Units manufactured @ 30 7,500,000.00
Planned & Actual fixed manufacturin 600,000.00
Marketing & Administrative cost 300,000.00
Units sold @ 60 12,000,000.00

No. 15
Electric Car Compeny listed the following data for the current year
Buageted factory overhead 1,044,000.00

Budgeted direct inbor hours 69,600.00
Budgeted macnine hours 24,000.00
Actual direct labor hours 72,600.00
Actual machine hours 23600
If overheadeed is applied based on direct labor hours, the

overapplied/underapplied overhead is
$15,300 underapplied
$51,600 overapplied
$15,300 overapplied
0
If overhead is applied based on machine hours, the overapplied/underapplied overhead

is:
$10,800 overapplied
$0
$15,300 overapplied
SOLUTION
If overheadeed is applied based on direct labor hours, the

overapplied/underapplied overhead is

51,600.00 overapplied
If overhead is applied based on machine hours, the overapplied/underapplied overhead

is:
Applied Factory Overhead 1026600

(10,800.00) underapplied
No. 16 No. 21
Assume the following information pertaining to Star Company Tierney Construction, Incorpora
Prime costs 195,000 DM DL office theft. The following accou
Conversion costs 221,000 DL FO
Direct materials used 85,000 Cost of goods sold
Beginning work in process 98,000 Work in process inventory, Janu
Ending work in process 81,000 Work in process inventory, Dec
Selling and Administrative Expe
1 Cost of goods manufactured is calculated to be Net Income
$314,000 Factory overhead
$348.00 Direct materials inventory, Janu
323,000 Direct materials inventory, Dece
$289,000 Cost of goods manufactured
$297,000 Finished goods inventory, Janu
2 Factory overhead is calculated to be: Direct labor cost incurred during

$84,000 The Chief Financial Officer of T
$110,000 recalculate the following accoun
$306,000
$111,000 What should be the amount o
$26,000 $15,000
$25,000
3 Total manufacturing cost is calculated to be: $29,000
306,000 $24,000
What should be the amount o

SOLUTION $15,000
$12,000
$19,000
1 Cost of goods manufactured is calculated to be 10,000
2 Factory overhead is calculated to be: 28,000
Material inventory, Beginning What amount should be the a
Direct materials purchases 94,000
Total direct materials available
Less: Direct materials inventory, Ending SOLUTION
Direct materials used 85,000 Direct materials used
Direct labor - wages 110,000 Material inventory, Beginning
Factory overhead applied 111,000 Direct materials purchases
Total manufacturing costs incurred during year 306,000 Total direct materials available
Add: Work in process inventory, Beginning 98,000 Less: Direct materials inventory
Total manufacturing costs to account for 404,000 Direct materials used
Less: Work in process inventory, Ending 81,000 Direct labor - wages
Cost of goods manufactured 323,000 Factory overhead applied
Add: Finished Good, Beginning Total manufacturing costs incur
Total Goods Available for Sale Add: Work in process inventory
Less: Finished Good, Ending Total manufacturing costs to ac
COGS Less: Work in process inventory
Cost of goods manufactured
OR
Conversion Costs 221,000
Prime Cost 195,000
Direct Materials used -85,000
Direct Labor 110,000
Factory overhead 111,000
OR
Conversion Cost - Direct Labor (*Prime cost - direct materials used) = Factory overhead
No. 24
y Construction, Incorporated recently lost a portion of its financial records in an Assume the following information pertaining to Sta
theft. The following accounting information remained in the office files:
of goods sold $80,000.00 Finished goods inventory

n process inventory, January 1, 2021 18,500.00 Work in process inventory
n process inventory, December 31, 2021 14,500.00 Direct materials
g and Administrative Expenses 16,000.00
30,000.00 Costs incurred during the period are as follows:
20,000.00
materials inventory, January 1, 2021 26,000.00 Total manufacturing costs
materials inventory, December 31, 2021 14,000.00 Factory overhead
of goods manufactured 98,000.00 Direct materials used
ed goods inventory, January 1, 2021 31,000.00
Materials purchases are calculated to be:
labor cost incurred during the period amounted to 2.5 times the factory overhead. $156,000
hief Financial Officer of Tierney Construction, Incorporated has asked you to $140,000
ulate the following accounts and to report to him by the end of tomorrow. $143,000
$169,000
should be the amount of direct materials used?
SOLUTION
Direct Materials used

Add: Direct Materials ending
should be the amount of direct materials purchased? Less: Direct Materials beginning
amount should be the amount of total manufacturing cost?
materials used
ial inventory, Beginning 26,000.00
materials purchases 12,000.00
direct materials available 38,000.00
Direct materials inventory, Ending 14,000.00
materials used 24,000.00
labor - wages 50000
y overhead applied 20,000.00
manufacturing costs incurred during year 94,000.00
Work in process inventory, Beginning 18,500.00
manufacturing costs to account for 112,500.00
Work in process inventory, Ending 14,500.00
f goods manufactured 98,000.00
No. 25
ormation pertaining to Star Company: Woodcarving Company incurred the following costs during May:
$
Beginning Ending Conversion costs 460,000
130,000 124,000 Prime costs 390,000
85,000 104,000 Manufacturing overhead 315,000
117,000 130,000
What was the amount of direct materials and direct labor used
e period are as follows: Direct materials Direct labor
A. $100,000 $295,000
896,000 B. $105,000 $215,000
199,000 C. $245,000 $145,000
156,000 D. $70,000 $75,000
e calculated to be: Option A

Option B
Option C
Option D
None of these options are correct
SOLUTION
Prime cost = DL + DM
156,000 DM DL
130,000 OPTION C $245,000 $145,000
-117,000
169,000
No. 30 Incorporated recently lost a portion of its records in an office fire. The following
Conrad,
ing costs during May: information was salvaged from the accounting records.
Cost of Goods Sold

Work-in-process Inventory, Beginning
Work-in-process Inventory, Ending
Selling and Administrative Expense
s and direct labor used in May? Finished Goods Inventory, Ending
FInished Goods Inventory, Beginning
Factory overhead Applied
Operating Income
Direct Materials Inventory, Beginning
Direct Materials Inventory, Ending
Cost of Goods Manufactured
Direct labor cost incurred during the period amounted to 1.5 times the factory overhead
Chief Financial Officer of Conrad, Incorporated has asked you to recalculate the follow
accounts and to report to him by the end of the day.
What is the amount in the finished goods inventory at the beginning of the year?
$20,000
$15,000
$10,500 (gelay)
$390,000 $25,000
$18,000
What is the amount of direct materials purchased?

$28,500
$22,000
$31,000
$23,500
What is the amount of direct materials used?

$28,500
$23,500
What is the amount of net sales?
$68,500
72,500
75,000
96,000
94,000 (nia)
SOLUTION
Material inventory, Beginning
Direct materials purchases
Total direct materials available
Less: Direct materials inventory, Ending
Direct labor - wages
Factory overhead applied
Total manufacturing costs incurred during year
Add: Work in process inventory, Beginning
Total manufacturing costs to account for
Less: Work in process inventory, Ending
Add: Finished Good, Beginning
Total Goods Available for Sale
Less: Finished Good, Ending
COGS
cost of sales 80,000

Net Sales 94,000
ts records in an office fire. The following No. 31 Company's computer system recently crashed, erasing much of the compan
GigaBite
ecords. financial data. The following accounting information was discovered soon afterwards s
$ afterwards on the Chief Financial Officer's back-up computer data.
65,000 $
10,500 Cost of Goods Sold 380,000
9,000 Work-in-Process Inventory, Beginning 30,000
15,000 Work-in-Process Inventory, Ending 40,000
15,000 Selling and Administrative Expense 50,000
? Finished Goods Inventory, Ending 15,000
? Finished Goods Inventory, Beginning ?
12,000 Direct Materials Purchased 171,000
14,000 Factory Overhead Applied 112,000
11,000 Operating Income 22,000
6,000 Direct Materials Inventory, Beginning 18,000
60,000 Direct Materials Inventory, Ending 6,000
Cost of Goods Manufactured 340,000
ounted to 1.5 times the factory overhead. The Direct Labor 55,000
has asked you to recalculate the following
day. The Chief Financial Officer of GigaBite Company has asked you to recalculate the
following accounts and report to him by week's end.
ventory at the beginning of the year?
What should be the amount of direct materials used?
$189,000
$183,000
$204,000
What should be the amount in the finished goods inventory at the beginning of t
year?
$15,000
$55,000
57,000
61,000
45,000
What should be the amount of total manufacturing cost?

380,000
350,000 try (nia)
360,000
395,000
340,000
SOLUTION

Material inventory, Beginning 18,000
Direct materials purchases 171,000
Total direct materials available 189,000
Less: Direct materials inventory, Ending 6,000
Direct materials used 183,000
Direct labor - wages 55,000
11,000 Factory overhead applied 112,000
23,500 Total manufacturing costs incurred during year 350,000
34,500 Add: Work in process inventory, Beginning 30,000
6,000 Total manufacturing costs to account for 380,000
28,500 Less: Work in process inventory, Ending 40,000
18000 Cost of goods manufactured 340,000
12,000 Add: Finished Good, Beginning 55,000
58,500 Total Goods Available for Sale 395,000
10,500 Less: Finished Good, Ending 15,000
69,000 COGS 380,000
9,000
60,000
20,000
80,000
15,000
65,000
sing much of the company's No. 46
overed soon afterwards soon During January, Lang, Incorporated produced 10,000 units of product with costs as
data. follows:
$
Direct materials 40,000
Direct labor 22,000
Variable overhead 10,000
Fixed overhead 90,000
162,000
What is Lang's unit cost for January, calculated on the varibale costing basis?
$8.50
$7.20
$7.50
$6.20
$9.50
SOLUTION
you to recalculate the
Direct labor 22,000
Total Variable Costs 72,000
Divide units 10000
Unit cost 7.2
ory at the beginning of the

No. 48 Mount Fishery is a canning company in Astoria. The company uses a normal costing system in
Maple
which factory overhead is applied on the basis of direct labor costs. Budgeted factor overhead for the
year was 680,400, and management budgeted 324,000 of direct labor costs. During the year, the
company incurred the following actual costs.
$
Direct labor 306,000
Factory overhead 658,000
The January 1 balances of inventory accounts are shown below.

$
Material-all direct 70,000
Work-in-process 41,000
Finished goods 26,000
The December 31 balances of these inventory accounts were ten percent lower than the balances at
the beginning of the year.
The total manufacturing costs for the year are:

$1,354,700
$1,336,700
$1,373,600
$1,339,300
$1,332,600 (same)
The adjusted cost of goods sold, after under or overapplied, is:

1,373,600
1,332,600
1,339,300
1,354,700
The normal cost of goods sold, before under or overapplied overhead is:
1,354,700
1,336,700
1,373,600
1,332,600
1,339,300
The cost of goods manufactured during the year is:

1,339,600
1,332,600
1,354,700
1,336,700 nia
1,373,600
SOLUTION
The total manufacturing costs for the year are:

Predetermined factory overhead rate 2.1

Direct Labor 306,000
Direct Labor * Predetermined rate 642600
1,332,600
The adjusted cost of goods sold, after under or overapplied, is:

Cost of Goods manufactured
Direct labor 306,000
Factory overhead Applied 642,600
Total Manufacturing Costs to Account F 1,332,600
Add: WIP, Jan 1 41,000
Total Manufacturing Cost 1,373,600
Less: WIP, Dec 31 (36,900.00)
Cost of Goods manufactured 1,336,700
Cost of Goods Sold

Finished goods, Jan 1 26,000
Add: Cost of goods manufactured 1,336,700
Total Goods Available for Sale 1,362,700
Less: Finished goods, Dec 31 (23,400)
Cost of goods Sold 1,339,300
Add: Underapplied 15,400
Adjusted Cost of goods Sold 1,354,700
Applied factory overhead 642,600

Less: Actual Overhead (658,000)
Underapplied (15,400)
Pre-Determined factory Overhead 2.1

Applied Factory Overhead (Direct Labor * Overhead rate) 642,600
Jan, Bal Adjustment (10% lower) Dec 31, Adjusted Bal

Material-all direct 70,000 7,000.00 63,000.00
Work-in-process 41,000 4,100.00 36,900.00
Finished goods 26,000 2,600.00 23,400.00
No. 50
A company's operating income was 70,000 using variable costing for a given period. Beginning and
ending inventories for that period were 45,000 units and 50,000 units, respectively. Ignoring income
taxes, if 8.00 per unit, what would operating income have been using full costing?
$
30,000
140,000
100,000
Cannot be determined from the information given
110,000
SOLUTION
Ending Inventory 50000

Less: Beginning Inventory -45000
5000
x cost per unit ( 8 per unit) 8
40000
Add: operating income 70000
Operating income using full costing 110000
No. 53
overhead rate based on direct labor hours to apply overhead to individual jobs. For the current
year, estimated direct abor hours are 133,000 and estimated factory overhead is $784,700. The
following information is for September. Job X was completed during September, while Job Y
was started but not finished.
$
September 1, inventories:
Materials 24,000
Work-in-process (All Job X) 53,400
Finished goods 105,600
Materials purchases 157,000
Direct materials requisitioned:
Job X 74,000
Job Y 68,000
Direct labor hours:
Job X 7,000
Job Y 5,500
Labor costs incurred:
Direct labor ($6.00 per hour) 75,000
Indirect labor 24,200
Factory supervisory salaries 11,100
Rental costs:
Administrative offices 3,200
Total equipment depreciation costs:
Administrative offices 2,800
Indirect materials used 17,800
The total factory overhead applied during September is:

$ 57,572
73,750
68,120
79,300
The total ending work-in-process for September is:

133,450
Cost of goods manufactured for September is:

157300
169,400
145,500
105,600
210,700
Predetermined overhead 5.9
Direct labor hours:

Job X 7,000
Job Y 5,500
Total direct labor hours 12,500
Total factory overhead applied 73,750
Total ending work-in-process 133,450
Cost of Goods Manufactured 210,700

No. 54
If estimated annual factory overhead is 480,000; overhead is applied using direct labor hours;
estimated annual direct labor hours are 200,000; actual March factory overhead is 42,000; and
actual March direct labor hours are 17,000; then overhead is:
$
200 overapplied
200 underapplied
800 underapplied
1,200 underapplied
800 overapplied
SOLUTION
Predetermined Overhead rate (480,000/200,000) 2.4

March factory overhead applied (17,000 * 2.4) 40800
Actual March factory overhead 42,000

March factory overhead applied 40800
1,200 underapplied
No. 55 No. 56
A company had income of 50,0
The following data pertains to Lam Company's manufacturing operations: period were 80,000 units and 9
per unit, what would operating
Inventories 4/1 4/30
Direct Materials $18,000 $15,000 $
Work in Process 9,000 6,000
Finished Goods 27,000 36,000
Additional information for the month of April:

Direct materials purchased $32,000
Direct labor 30,000 SOLUTION
Direct labor rate per hour 10
Factor overhead incurred 40,000 Ending inventory
Less: Beginning inventory
Overhead is applied at $12 per direct labor hour.
x fixed overhead rate per unit
For the month of April, prime cost incurred was:
65,000 nia Add: Income using variable cos
None of these answers are correct Operating income using full c
62,000
66,000
75,000
Direct Materials 4/1 $18,000

Less: Direct Material 4/30 -$15,000
Add: Direct material purchased $32,000
Add: Direct Labor 30,000
Prime Cost $65,000
any had income of 50,000 using variable costing for a given period. Beginning and ending for that No. 57
were 80,000 units and 90,000 units, respectively. If the fixed overhead application rate were 10.00 Consider the following for Guardian
, what would operating income have been using full costing?
Change in finished goods inventory
-$50,000 Change in work-in-process inventor
150,000 (gelay) Total manufacturing costs
170,000
0 What are the cost of goods manu
Cannot be determined from the information given
Cost of goods manufactured: 485 ;
90,000 Cost of goods manufactured: 505 ;
eginning inventory -80,000 Cost of goods manufactured: 485 ;
10,000
overhead rate per unit 10
100000
come using variable costing 50000 Cost of goods manufactured
ng income using full costing 150000 Cost of goods sold
No. 58
der the following for Guardian Manufacturing Company: The following information was taken from the acco
Corporation. Unfortunately, some of the data were
ge in finished goods inventory $315 increase
ge in work-in-process inventory $145 increase Sales Revenue
manufacturing costs $630 Finished Goods Inventory, Beginning
Finished Goods Inventory, Ending
are the cost of goods manufactured and cost of goods sold? Cost of Goods Sold
Gross Margin
of goods manufactured: 485 ; Cost of goods sold 170 Direct Materials Used
of goods manufactured: 470 ; Cost of goods sold 320 Selling and Administrative Expense
of goods manufactured: 585 ; Cost of goods sold 420 Operating Income
of goods manufactured: 505 ; Cost of goods sold 280 Work-in-process Inventory, Beginning
of goods manufactured: 485 ; Cost of goods sold 370 Work-in-process Inventory, Ending
Direct Labor used
Factory overhead
Total Manufacturing Cost
of goods manufactured $485 Cost of Goods Manufactured
of goods sold $170
Work in process inventory, beginning, is calcu
Cost of goods manufactured is calculated to b
Cost of goods sold

Selling and admin
WIP, beg
Total Manufacturing
Cost of Goods Manufactured = COGS + FGI, END

Cost of goods sold
Add: FGI, ending
Less: FGI, beginning
COGM
No. 59
employees. Budgeted direct salary costs include 160,000 f
on was taken from the accounting records of Elliot Manufacturing considered as indirect 200,000 although the actual cost wa
ely, some of the data were destroyed by a computer malfunction. CPA. Direct and indirect costs are applied on a CPA-labor
5,000. If a client used 500 labor-hours, what are the budge
$58,000 rate, respectively?
ory, Beginning 9,000
6,000 62;40
? 62;45
25,000 64;40
10,000 100;40
ve Expense ? 90;40
14,000
ory, Beginning ?
5,000
9,000 Direct salary 160000
12,000 Indirect salary 200000
? actual cost 225000
? actual salaries 155000
Labor hours 5000
ntory, beginning, is calculated to be:
$11,000 Direct budgeted labor rate
4,000 Direct budgeted overhead rate
Total direct
ctured is calculated to be:
30,000 Indirect budgeted rate
38,000
27,000
33,000
32,000
$33,000
11,000
$4,000
31,000
$30,000
tured = COGS + FGI, ENDING - FGI, BEGINNING

$33,000
6,000
-9,000
$30,000
No. 60
y costs include 160,000 for each CPA. The support employees are
hough the actual cost was 225,000. Actual salaries were 155,000 for each Orange, Inc. has identified the following cost drivers for i
applied on a CPA-labor-hour basis. Total budgeted CPA-labor-hours were
ours, what are the budgeted direct-cost rate and the budgeted indirect-cost Overhead Item
Setup costs
Ordering costs
gelay Maintenance
Power
Total overhead
Total direct labor hours budgeted = 2,000 hours.

The following actual data applies to one of the products
Product X
each (2 full time) Direct materials
Drect labor
Units completed
each CPA Direct labor hours
If Orange, Incorporated uses direct labor hours to as

32 be:
32
64
40
If Orange, Incorporated uses machine hours to alloc

will be:
SOLUTION
If Orange, Incorporated uses direct labor hours to as

be:
Expected Total overhead
Divide by: Budgeted direct labor hours
Overhead per direct labor hour
Total Cost: Direct materials + direct labor + (overhead per direc

Total Cost: 5,000 + 3,000 + ($100 * 100) / 100 units =
If Orange, Incorporated uses machine hours to alloc
will be:
Expected Total overhead
Divide by: Budgeted direct labor hours
Overhead per direct labor hour
Total Cost: Direct materials + direct labor + (overhead per direc

Total Cost: 5,000 + 3,000 + ($100 * 50) / 100 units =
No. 61
Bright Star Incorporated is a job
has identified the following cost drivers for its expected overhead costs for the year: overhead rate based on direct la
current year, estimated direct la
Expected Cost Cost Driver Expected quantity was $695,400. The following inf
$50,000 Number of setups 250 September, while Job Y was sta
30,000 Number of orders 1,500
100,000 Machine hours 2,000
20,000 Kilowatt hours 4,000 Sentember 1, inventories:
$200,000 Work-in-process (All Job X).
Finished goods
abor hours budgeted = 2,000 hours. Materials purchases
g actual data applies to one of the products completed during the year. Direct materials requisitioned:
Job X
Job Y
$5,000 Number of setups 5 Direct labor hours:
$3,000 Number of orders 50 Job X
100 Machine hours 50 Job Y
100 Kilowatt hours 500 Labor costs incurred:
Direct labor ($6.00 per hour)
corporated uses direct labor hours to assign overhead, the unit product cost for Product X will Indirect labor
Factory supervisory salaries
$70 Rental costs:
$60 Factory
$90 Administrative offices
$180 Total equipment depreciation co
$80 Factory
Administrative offices
corporated uses machine hours to allocate overhead cost, the unit product cost of Product X Indirect materials used
$80
$60 The total cost of Job X is:
$130
$90
$110
corporated uses direct labor hours to assign overhead, the unit product cost for Product X will The total factory overhead ap
tal overhead $200,000

udgeted direct labor hours 2000
r direct labor hour $100
ect materials + direct labor + (overhead per direct labor hour * direct labor hours) / units completed
,000 + 3,000 + ($100 * 100) / 100 units = $180
Predetermined overhead rate

corporated uses machine hours to allocate overhead cost, the unit product cost of Product X total cost of job
tal overhead 200,000 total factory overhead

udgeted direct labor hours 2000
r direct labor hour 100
ect materials + direct labor + (overhead per direct labor hour * machine hours) / units completed
,000 + 3,000 + ($100 * 50) / 100 units = $130
No. 62
Star Incorporated is a job-order manufacturer. The company uses a predetermined
ead rate based on direct labor hours to apply overhead to individual jobs. For the Jeffrey's Bottling Company incurred the following c
t year, estimated direct labor hours were 114,000 and estimated factory overhead
695,400. The following information was for September. Job X was completed during Prime Costs
mber, while Job Y was started but not finished. Direct Materials
Direct Labor
Manufacturing Overhead
mber 1, inventories: $9,000 Conversion Cost
in-process (All Job X). 37,400
80,400
als purchases $125,000
materials requisitioned:
54,500
40,000
labor hours:
5,000
4,500
costs incurred:
labor ($6.00 per hour) $57,000
16,200
y supervisory salaries 7,200
8,400
istrative offices 2,200
equipment depreciation costs:
$9,000
istrative offices 1,900
ct materials used $14,400
otal cost of Job X is:

128,200
140,800
151,900
152,400 nia
129,600
otal factory overhead applied during September is:

56,120
57,710
57,848
57,950 (nia)
59,300
termined overhead rate 6.1

152,400
actory overhead 57,950

No. 63
ny incurred the following costs during November: Sutherland Company listed the following data for the current year:
220,000.00 Budgeted Factory Overhead 2,100,000.00

- 140,000.00 Budgeted Direct Labor Hours 89,000.00
80,000.00 Budgeted Machine Hours 51,000.00
175,000.00 Actual Factory Overhead 2,201,000.00
255,000.00 Actual Direct Labor Hours 83,700.00
Actual Machine Hours 48,900.00
If overhead is applied based on machine hours, the overapplied/und
Exact
Predetermined Overhead Rate 41.17647058824

- 187,470.59
No. 64
ata for the current year: During October, Rover Industries produced 35,000 units of product with costs as follow

Direct labor 43,000
Fixed overhead 147,000
287,000

ours, the overapplied/underapplied overhead is: Direct labor 43,000
Estimated Total Variable Costs 140,000
41.18 Divide units 35,000.00
Unit cost 4
2,013,702.00
2,201,000.00
- 187,298.00 underapplied
roduct with costs as follows:
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Leah

Fixed factory overhead is unnecessary for the production of a product

8 Under variable costing fixed manufacturing overhead costs would be classified as

14 Which costing system is required by GAAP?

36 The journal entry required to record factory depreciation includes:

Units Produced Sales Planned

44 When is a job costing system appropriate to use?

46 The time ticket shows which amount for an employee?

r variable costing for a given period if:

ange, also called semi-fixed cost

h a change in the quantity of a designated cost driver.

the relevant range]

nge if the production level rises?

for Year 3 to be:

or applying factory overhead?

at computed by the full costing method if:

g income for Year 3 to be:

rted under variable costing for a given period if:

d for all jobs in common in the amount of $600?

1 Full costing operating income for 2021 is calculated to be:

2 Full costing operating income for 2022 is calculated to be:

3 Variable costing operating income for 2022 is calculated to be:

4 Variable costing operating income for 2021 is calculated to be:

Unit profuct cost under full costing:

2. Variable costing operating income for 2022 is calculated to be:

Unit profuct cost under variabl costing:

Unit profuct cost under variabl costing:

4. Full costing operating income for 2022 is calculated to be:

Unit profuct cost under full costing:

The total manufacturing cost for the year are:

Direct materials used

Full costing operating income for 2021 is calculated to be

Full costing operating income for 2022 is calculated to be

Full costing operating income for 2021 is calculated to be

Variable costing operating income for 2022 is calculated to be

Variable costing operating income for 2021 is calculated to be

Variable costing operating income for 2021 is calculeted to be

Predetermined OH rate 15.5

Applied Factory Overhead 1,337,650.00

Sales for 2022 are calculated to be

Units sold @ 60 12,000,000.00

Buageted factory overhead 1,044,000.00

If overheadeed is applied based on direct labor hours, the

If overhead is applied based on machine hours, the overapplied/underapplied overhead

If overheadeed is applied based on direct labor hours, the

Applied Factory Overhead 1,089,000.00

If overhead is applied based on machine hours, the overapplied/underapplied overhead

Applied Factory Overhead 1026600

2 Factory overhead is calculated to be: Direct labor cost incurred during

What should be the amount o

of goods sold $80,000.00 Finished goods inventory

Direct Materials used

amount should be the amount of total manufacturing cost?

e calculated to be: Option A

Cost of Goods Sold

What is the amount of direct materials purchased?

What is the amount of direct materials used?

What is the amount of net sales?

cost of sales 80,000

What should be the amount of total manufacturing cost?

Direct materials used

ory at the beginning of the

The January 1 balances of inventory accounts are shown below.

The total manufacturing costs for the year are: