cost accounting *

1. Company XYZ produces a single product and has provided the following cost data for last month:

Direct materials: $50,000

Direct labor: $75,000

Variable overhead: $20,000

Fixed overhead: $30,000

If Company XYZ produced 2,000 units of the product last month, what is the total cost per unit?

Solution:

Direct Cost per unit = (Direct materials + Direct labor)/number of units produced

Direct Cost per unit = ($50,000 + $75,000)/2,000 = $62.50

Total Cost per unit = Direct Cost per unit + Variable overhead per unit + (Fixed overhead/number of
units produced)

Total Cost per unit = $62.50 + ($20,000/2,000) + ($30,000/2,000) = $75

Therefore, the total cost per unit produced by Company XYZ last month was $75.

2. Company ABC produces three products (A, B, and C) with the following data:

Product A:

Direct materials: $20

Direct labor: $40

Variable overhead: $10

Fixed overhead: $30

Product B:
Direct materials: $30

Direct labor: $50

Variable overhead: $15

Fixed overhead: $20

Product C:

Direct materials: $25

Direct labor: $45

Variable overhead: $5

Fixed overhead: $40

If the company produced 1,000 units of product A, 1,500 units of product B, and 2,000 units of product C
last month, what was the total cost of production?

Solution:

Total cost of production = (Direct materials + Direct labor + Variable overhead) x number of units
produced + (Fixed overhead/number of units produced) x total number of units produced

Total cost of production = ($20 + $40 + $10) x 1,000 + ($30/1,000) x 1,000 + ($30 + $50 + $15) x 1,500 +
($20/1,500) x 1,500 + ($25 + $45 + $5) x 2,000 + ($40/2,000) x 2,000

Total cost of production = $70,000 + $50 + $154,500 + $13.33 + $150,000 + $20 = $324,523.33

Therefore, the total cost of production for Company ABC last month was $324,523.33.

3. Company LMN produces two products (X and Y). For the month of January, the company has provided
the following information:

Product X:

Direct materials: $15

Direct labor: $25

Variable overhead: $5
Fixed overhead: $20

Product Y:

Direct materials: $20

Direct labor: $30

Variable overhead: $10

Fixed overhead: $30

If the company produces 1,500 units of product X and 2,000 units of product Y in January, what is the
cost per unit of each product?

Solution:

Cost per unit = (Direct materials + Direct labor + Variable overhead + Fixed overhead/number of units
produced)

Cost per unit of product X = $15 + $25 + $5 + ($20/1,500) = $21.33

Cost per unit of product Y = $20 + $30 + $10 + ($30/2,000) = $23

Therefore, the cost per unit of product X is $21.33 and the cost per unit of product Y is $23.

Rvu, [11/17/2023 8:48 PM]

4. Company PQR produces a single product and has the following information for the month of
September:

Direct materials: $40,000

Direct labor: $30,000

Variable overhead: $15,000

Fixed overhead: $25,000

Units produced: 2,500

What are the total prime costs, total conversion costs, and total manufacturing costs for the company
for the month of September?

Solution:

Total prime costs = Direct materials + Direct labor = $40,000 + $30,000 = $70,000

Total conversion costs = Direct labor + Variable overhead + Fixed overhead = $30,000 + $15,000 +
$25,000 = $70,000

Total manufacturing costs = Total prime costs + Total conversion costs = $70,000 + $70,000 = $140,000

Therefore, the total prime costs for Company PQR for the month of September were $70,000, the total
conversion costs were also $70,000, and the total manufacturing costs were $140,000.

5. Company MNO sold 10,000 units of its product last month. Each unit sold for $150. The company
incurred $200,000 in total variable costs and $300,000 in fixed costs for the month. What is the break-
even point in units for the company?

Solution:

Contribution margin per unit = Selling price per unit - Variable cost per unit

Contribution margin per unit = $150 - ($200,000/10,000) = $130

Break-even point in units = Fixed costs/Contribution margin per unit

Break-even point in units = $300,000/$130 = 2,308 units

Therefore, the break-even point in units for Company MNO is 2,308 units.

6. Company LMN produces and sells two products: Product X and Product Y. The company sold 4,000
units of Product X last month at a selling price of $75 per unit and 6,000 units of Product Y at a selling
price of $100 per unit. The variable cost per unit for Product X is $50 and for Product Y is $70. The
company incurred $100,000 in fixed costs last month. What is the company's total contribution margin
for last month and its contribution margin ratio?

Solution:
Contribution margin for Product X = Selling price per unit - Variable cost per unit

Contribution margin for Product X = $75 - $50 = $25

Contribution margin for Product Y = Selling price per unit - Variable cost per unit

Contribution margin for Product Y = $100 - $70 = $30

Total contribution margin = (Contribution margin for Product X x Units sold for Product X) +
(Contribution margin for Product Y x Units sold for Product Y)

Total contribution margin = ($25 x 4,000) + ($30 x 6,000) = $270,000

Contribution margin ratio = Total contribution margin/Sales revenue

Contribution margin ratio = $270,000/($75 x 4,000 + $100 x 6,000) = 0.45 or 45%

Therefore, the company's total contribution margin for last month was $270,000 and its contribution
margin ratio was 45%.

Rvu, [11/17/2023 8:48 PM]

cost accounting *

1. Company XYZ produces a single product and has provided the following cost data for last month:

Direct materials: $50,000

Direct labor: $75,000

Variable overhead: $20,000

Fixed overhead: $30,000

If Company XYZ produced 2,000 units of the product last month, what is the total cost per unit?

Solution:

Direct Cost per unit = (Direct materials + Direct labor)/number of units produced
Direct Cost per unit = ($50,000 + $75,000)/2,000 = $62.50

Total Cost per unit = Direct Cost per unit + Variable overhead per unit + (Fixed overhead/number of
units produced)

Total Cost per unit = $62.50 + ($20,000/2,000) + ($30,000/2,000) = $75

Therefore, the total cost per unit produced by Company XYZ last month was $75.

2. Company ABC produces three products (A, B, and C) with the following data:

Product A:

Direct materials: $20

Direct labor: $40

Variable overhead: $10

Fixed overhead: $30

Product B:

Direct materials: $30

Direct labor: $50

Variable overhead: $15

Fixed overhead: $20

Product C:

Direct materials: $25

Direct labor: $45

Variable overhead: $5

Fixed overhead: $40

If the company produced 1,000 units of product A, 1,500 units of product B, and 2,000 units of product C
last month, what was the total cost of production?
Solution:

Total cost of production = (Direct materials + Direct labor + Variable overhead) x number of units
produced + (Fixed overhead/number of units produced) x total number of units produced

Total cost of production = ($20 + $40 + $10) x 1,000 + ($30/1,000) x 1,000 + ($30 + $50 + $15) x 1,500 +
($20/1,500) x 1,500 + ($25 + $45 + $5) x 2,000 + ($40/2,000) x 2,000

Total cost of production = $70,000 + $50 + $154,500 + $13.33 + $150,000 + $20 = $324,523.33

Therefore, the total cost of production for Company ABC last month was $324,523.33.

3. Company LMN produces two products (X and Y). For the month of January, the company has provided
the following information:

Product X:

Direct materials: $15

Direct labor: $25

Variable overhead: $5

Fixed overhead: $20

Product Y:

Direct materials: $20

Direct labor: $30

Variable overhead: $10

Fixed overhead: $30

If the company produces 1,500 units of product X and 2,000 units of product Y in January, what is the
cost per unit of each product?

Solution:
Cost per unit = (Direct materials + Direct labor + Variable overhead + Fixed overhead/number of units
produced)

Cost per unit of product X = $15 + $25 + $5 + ($20/1,500) = $21.33

Cost per unit of product Y = $20 + $30 + $10 + ($30/2,000) = $23

Therefore, the cost per unit of product X is $21.33 and the cost per unit of product Y is $23.

Rvu, [11/17/2023 8:48 PM]

* questions on job order cost **

1. Which of the following cost items is an example of a direct cost in job-order costing?

a. electricity

b. advertising

c. raw materials

d. rent

Solution:

c. raw materials

2. Which of the following departments is most likely to use job-order costing?

a. assembly line

b. research and development

c. customer service

d. custom manufacturing

Solution:

d. custom manufacturing
3. At the beginning of the year, a company had no work-in-progress inventory. During the year, it started
and completed six jobs. What is the company's ending work-in-progress inventory if three of the jobs
were completed during the year and the other three jobs are still in process?

a. the value of the three completed jobs

b. the value of the three incomplete jobs

c. the sum of the costs of all six jobs

d. zero

Solution:

b. the value of the three incomplete jobs

4. Direct labor costs are usually recorded in which of the following accounts?

a. Work-in-Progress Inventory

b. Finished Goods Inventory

c. Cost of Goods Sold

d. Manufacturing Overhead

Solution:

a. Work-in-Progress Inventory

5. Which of the following statements about job-order costing is true?

a. Different products are assigned the same average cost per unit.

b. The cost of each job is accumulated separately.

c. All costs are charged directly to Cost of Goods Sold.

d. It is used only in service industries.

Solution:

b. The cost of each job is accumulated separately.

Rvu, [11/17/2023 8:48 PM]

1. Which of the following is an example of a manufacturing overhead cost?

a. direct materials cost

b. direct labor cost

c. electricity cost for factory lighting

d. shipping cost for finished goods

Solution:

c. electricity cost for factory lighting

2. Which of the following is used to record the flow of costs in job-order costing?

a. general journal

b. general ledger

c. job cost sheet

d. trial balance

Solution:

c. job cost sheet

3. Which of the following is an example of a finished goods inventory?

a. raw materials

b. goods in transit

c. goods ready for sale

d. goods received from suppliers

Solution:

c. goods ready for sale

4. When a job is completed, its total cost is transferred from the Work-in-Progress Inventory account to
which account?

a. Cost of Goods Sold

b. Raw Materials Inventory

c. Finished Goods Inventory

d. Manufacturing Overhead

Solution:

c. Finished Goods Inventory

5. Which of the following occurs when a job is started in job-order costing?

a. The company incurs direct materials costs only.

b. The company incurs direct labor and manufacturing overhead costs only.

c. The company incurs direct labor and raw materials costs only.

d. The company incurs direct materials, direct labor, and manufacturing overhead costs.

Solution:

d. The company incurs direct materials, direct labor, and manufacturing overhead costs.