Cost behavior Cost management Review of accounting for manufacturing operations operations
BCSV
[COST ACCOUNTIN! Cost behavior Cost management Review of accounting for manufacturing operations
I.
Theories
"u#tip#e Choice Choose the letter of the best answer. answer.
1. Cost behavio behaviorr analysis analysis is a study study of how how a rm's rm's costs costs A. relate to to co competitors' co costs. B. relat elate e to to gene genera rall pri pric ce le level vel cha chang nges es.. C. resp respon ond d to to cha chang nges es in in act activ ivit ity y lev level els s wit withi hin n the the comp compan any y. . respo espond nd to chan chang ges in in the the gros gross s nati nation onal al prod produc uct. t. !. "he term #relevant #relevant range$ as as used in cost accounting means the range over which A. costs may %uctuate B. cost re relationships ar are va valid C. production may vary . relevant co costs ar are in incurred &. An item or event that has has a causee(ect relationship relationship with the incurrence incurrence of a variable cost is called a A. mi)ed cost. B. predictor. C. direct cost. . cost driver. *. +hich of the following following describes describes the behavior behavior of the variable variable cost per unit, -ariable cost A. -arie aries s in inc incre reas asin ing g pro propo port rtio ion n with with cha chang nges es in in the the acti activi vity ty lev level el.. B. -arie aries s in inc incre reas asin ing g pro propo port rtio ion n with with cha chang nges es in in the the acti activi vity ty lev level el.. C. Remai emains ns con const stan antt wit with h cha chang nges es in in the the acti activi vity ty leve level. l. . -arie aries s in in dir direc ectt pro propo port rtio ion n wit with h the the acti activi vity ty leve level. l. /. A cost that remains constant constant on a per unit basis in a given given period despite despite changes in the level of activity should be considered a0an A. variable cost. B. prime cost. C. )ed cost. . overhead cost. 2. +hen +hen the number number of units units manufa manufactu cture red d incre increase ases3 s3 the most most signi signican cantt change in unit cost will be re%ected as a0n A. increase in the )ed element. B. decrea eas se iin n th the va variable e ellement. C. increase in the mi)ed element. Page 1 of 29
Cost behavior Cost management Review of accounting for manufacturing operations operations .
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decrea eas se in the )ed element.
4. +hich of of the follow following ing best best describes describes a )ed )ed cost, cost, A. It may may cha chang nge e in tot total whe when n such such chang change e is unr unrelate lated d to cha changes nges in in production. B. It may chan hange in total when such chan hange is related to chan hanges in production. C. It is cons consta tant nt per per unit unit of chan change ge in prod produc ucti tion on.. . It may may cha chang nge e in tot total al when when such such cha chang nge e dep depen ends ds on on prod product uctio ion n wit withi hin n the relevant range. 5.If activity true, A. B. C. .
increases3 which of the following statements about cost behavior is 6i)ed cost per unit will increase -ariable cost per unit will increase 6i)ed 6i)ed cost per unit will decrease -ariable cost per unit will decrease
7. +hich of the follow following ing statements statements regar regarding ding )ed )ed costs is incorrec incorrect, t, A. 8)pre 8)press ssin ing g )ed )ed cos costs ts on on a per per uni unitt bas basis is usua usuall lly y is is the the best best app appro roac ach h for decisionma9ing process. B. 6i)ed i)ed cost costs s e)pres presse sed d on a per unit unit basi basis s will reac reactt inve invers rse ely wit with changes in activity. C. Assumptions by accountants regarding the behavior of )ed costs rest heavily on the concept of the relevant range. . 6i)ed i)ed costs costs fre: fre:ue uent ntly ly repr represen esentt long longt ter erm m inve invest stme ment nts s in prope propert rty3 y3 plant3 and e:uipment. 1;."he increased use of automation and less use of the wor9 force in companies has caused a trend towards an increase in A. both va variable an and )ed costs. B. )ed )ed costs osts and a dec decrrea ease se in va variab riable le costs osts.. C. vari variab able le cost costs s and and a decr decrea ease se in )ed )ed cost costs. s. . vari variab able le costs osts and and no no cha chang nge e in in ) )ed cost costs. s. 11.Costs that increase as the volume of activity decreases within the relevant range are A. Average cost per unit. B. Average variable cost per unit nit. C. "otal )ed costs. . "otal variable costs. 1!.+hich costs will change with an increase in activity within the relevant range, A. "otal otal )ed )ed cost costs s and and tota totall vari variab able le cost cost.. B.
Cost behavior Cost management Review of accounting for manufacturing operations
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A. 6i)ed cost per unit stays the same and variable cost per unit stays the same. B. 6i)ed cost per unit stays the same and variable cost per unit increases. C. 6i)ed cost per unit increases and variable cost per unit increases. . 6i)ed cost per unit decreases and variable cost per unit stays the same. 1*.+ithin the relevant range3 the di(erence between variable costs and )ed costs is A. variable costs per unit %uctuate and )ed cost per unit remains constant. B. variable cost per unit is constant and )ed cost per unit %uctuates. C. both total variable cost and total )ed cost are constant. . both total variable cost and total )ed cost %uctuate. 1/. Classifying costs by behavior is a. associated primarily with nancial accounting. b. not relevant to a company that has only selling e)penses. c. common in reports prepared for e)ternal readers. d. none of the above. 12. +hich is not a common accounting classication of costs, a. By the method of payment for the e)penditure. b. By the ob=ective of e)penditure. c. By behavior. d. By the function incurring the e)penditure. 14. +hich classication of costs is most relevant for income statements to be used internally, a. Behavior. b. 6unction. c. >ethod of payment. d. ?b=ect. 15. Income statements classifying costs by ob=ect show such items as a. ta) e)pense3 wages e)pense3 depreciation e)pense. b. cost of goods sold3 selling e)penses3 administrative e)penses. c. assets3 liabilities3 owners' e:uity. d. all of the above. 17. "he period that begins with the arrival of materials and ends with the shipment of a completed good is the a. cycle time. b. manufacturing cell. c. computerintegrated manufacturing. d. performance period. !;. In contrast to a balance sheet3 an income statement a. is for a period of time3 a balance sheet is at a point in time. b. gives information about cash and a balance sheet does not. Page 3 of 29
Cost behavior Cost management Review of accounting for manufacturing operations
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c. is prepared after the statement of retained earnings. d. has two columns3 while a balance sheet has more than two. !1.
ining and petroleum companies have no inventoriable costs. !&. B?. !*. >anufacturing overhead A. includes direct materials3 indirect materials3 indirect labor3 and factory depreciation. B. is easily traced to =obs. C. includes all selling costs. . should not be assigned to individual =obs because it bears no obvious relationship to them. 8. is a pool of indirect production costs that must somehow be attached to each unit manufactured. !/. As production ta9es place3 all manufacturing costs are added to the A. +or9inanufacturing?verhead Inventory account. C. Costofoods@old account. . 6inishedoods Inventory account. 8.
Cost behavior Cost management Review of accounting for manufacturing operations
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C. +or9inanufacturing ?verhead. . "he use of indirect materials gives rise to a credit to >anufacturing @upplies Inventory. 8. irect materials are accounted for in a di(erent manner than indirect materials. !7. ongview Corporation recently used <4!3;;; of direct materials and <&3;;; of indirect materials in production activities. "he =ournal entries re%ecting these transactions would include A. a debit to Raw>aterial Inventory for <4!3;;;. B. a debit to >anufacturing ?verhead for <&3;;;. C. a credit to >anufacturing ?verhead for <&3;;;. . a debit to +or9inanufacturing ?verhead for <4/3;;;. &;. A review of a company's +or9inaterial Inventory. B. also recorded a credit to >anufacturing @upplies Inventory. C. was accounting for the usage of direct materials. . was accounting for the usage of indirect materials. 8. was accounting for the usage of direct materials by also crediting the Raw>aterial Inventory account. &1.?regon >anufacturing incurred <1;23;;; of direct labor and <113;;; of indirect labor. "he proper =ournal entry to record these events would include a debit to +or9 in
Cost behavior Cost management Review of accounting for manufacturing operations A. B. C. . 8.
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<; because +or9 in
&!. "he following information relates to ?ctober anufacturing ?verhead *3/;; +ages anufacturing ?verhead *3/; ; C. +or9inanufacturing ?verhead !3;;; +ages anufacturing ?verhead. 8. +or9inanufacturing would include A. a debit to Advertising 8)pense. B. a credit to Advertising 8)pense. C. a debit to >anufacturing ?verhead. . a credit to >anufacturing ?verhead. 8. a debit to
Cost behavior Cost management Review of accounting for manufacturing operations
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review of the company's accounting records should reveal a A. debit to epreciation 8)pense for <7;3;;;. B. debit to >anufacturing ?verhead for <7;3;;;. C. debit to >anufacturing ?verhead for <4!3;;;. . debit to +or9inanufacturing overhead. d. Insurance. *;. A cost is variable if it varies with the a. number of units manufactured. b. number of units sold. c. level of some activity. d. selling price of the product. Page 7 of 29
Cost behavior Cost management Review of accounting for manufacturing operations
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*1. R@"'s average cost per unit is the same at all levels of volume. +hich of the following is true, a. R@" must have only variable costs. b. R@" must have only )ed costs. c. R@" must have some )ed costs and some variable costs. d. R@"'s cost structure cannot be determined from this information. *!. A mi)ed cost a. increases in steps as volume increases. b. contains a )ed component and a variable component. c. varies with more than one measure of volume. d. cannot be accurately predicted. *&. "he components of manufacturing cost are a. variable costs3 )ed costs3 and overhead costs. b. materials3 direct labor3 and overhead. c. purchases3 wages3 and manufacturing overhead. d. wages and salaries3 maintenance and repairs3 utilities3 and depreciation. **. As volume increases3 a. total )ed costs remain constant and perunit )ed costs increase. b. total )ed costs remain constant and perunit )ed costs decrease. c. total )ed costs remain constant and perunit )ed costs remain constant. d. total )ed costs increase and perunit )ed costs increase. */. +hich cost is least li9ely to be direct to a particular product, a. @alaries of salespeople who sell all of the company's products. b. Advertising of the product. c. icense fees paid to the designer of the product. d. Cost of materials used to ma9e the product. *2.
+hich of the following denes variable cost behavior, "otal cost reaction to increase in activity
a. b. c. d.
remains constant remains constant increases increases
Cost per unit reaction to increase in activity remains constant increases increases remains constant
*4. +hen cost relationships are linear3 total variable prime costs will vary in proportion to changes in a. direct labor hours. b. total material cost. c. total overhead cost. d. production volume. Page 8 of 29
Cost behavior Cost management Review of accounting for manufacturing operations *5.
+hich of the following denes variable cost behavior, "otal cost reaction to increase in activity
a. b. c. d.
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remains constant remains constant increases increases
Cost per unit reaction to increase in activity remains constant increases increases remains constant
*7. +hen cost relationships are linear3 total variable prime costs will vary in proportion to changes in a. direct labor hours. b. total material cost. c. total overhead cost. d. production volume. /;. An e)ample of a )ed cost is a. total indirect material cost. b. total hourly wages. c. cost of electricity. d. straightline depreciation. /1. A cost that remains constant in total but varies on a perunit basis with changes in activity is called a0n a. e)pired cost. b. )ed cost. c. variable cost. d. mi)ed cost. /!. A0n HHHHHHHH cost increases or decreases in intervals as activity changes. a. historical cost b. )ed cost c. step cost d. budgeted cost /&. +hen the number of units manufactured increases3 the most signicant change in unit cost will be re%ected as a0n a. increase in the )ed element. b. decrease in the variable element. c. increase in the mi)ed element. d. decrease in the )ed element. /*.
+hich of the following always has a direct causee(ect relationship to a cost,
Cost driver Page 9 of 29
Cost behavior Cost management Review of accounting for manufacturing operations a. b. c. d.
yes yes no no
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yes no yes no
//. A cost driver a. causes )ed costs to rise because of production changes. b. has a direct causee(ect relationship to a cost. c. can predict the cost behavior of a variable3 but not a )ed3 cost. d. is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume. /2.
A selling cost is a0n
product cost a. b. c. d.
yes yes no no
period cost
inventoriable cost yes no yes yes
no no no yes
/5. +hich of the following is not a product cost component, a. rent on a factory building b. indirect production labor wages c. =anitorial supplies used in a factory d. commission on the sale of a product /7.
distribution costs a. yes yes b. no yes c. no
outside processing costs
sales commissions no yes no Page 10 of 29
Cost behavior Cost management Review of accounting for manufacturing operations no d. yes yes
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yes
21. "he three primary inventory accounts in a manufacturing company are a. >erchandise Inventory3 @upplies Inventory3 and 6inished oods Inventory. b. >erchandise Inventory3 +or9 in aterial Inventory3 +or9 in
irect Page 11 of 29
Cost behavior Cost management Review of accounting for manufacturing operations a. b. c. d.
yes yes no no
yes no no yes
BCSV
no yes no yes
25. Broussard Company is a construction company that builds houses on special re:uest. +hat is the proper classication of the cost of the cement building slab used, irect a. b. c. d.
6i)ed
no no yes yes
no yes yes no
27. Broussard Company is a construction company that builds houses on special re:uest. +hat is the proper classication of indirect material used,
a. b. c. d.
Conversio n
no no yes yes
-ariabl e
no yes yes no
no yes yes no
4;. +hich of the following costs would be considered overhead in the production of chocolate chip coo9ies, a. %our b. chocolate chips c. sugar d. oven electricity 41. All costs related to the manufacturing function in a company are a. prime costs. b. direct costs. c. product costs. d. conversion costs. 4!.
direct material a. b.
no yes
direct labor
overhea d yes yes
no no Page 12 of 29
Cost behavior Cost management Review of accounting for manufacturing operations c. d.
yes no
4&.
yes yes
prime cost a. b. c. d.
no yes
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no yes yes yes
product cost
direct cost yes no yes yes
)ed cost yes yes no yes
yes no yes no
4*. "he term prime cost refers to a. all manufacturing costs incurred to produce units of output. b. all manufacturing costs other than direct labor and raw material costs. c. raw material purchased and direct labor costs. d. the raw material used and direct labor costs. 4/. Conversion of inputs to outputs is recorded in the a. +or9 in aterial Inventory account. d. both a and b. 42. In a perpetual inventory system3 the sale of items for cash consists of two entries. ?ne entry is a debit to Cash and a credit to @ales. "he other entry is a debit to a. +or9 in anufactured represents the a. cost of goods sold for the period. b. total cost of manufacturing for the period. c. total cost of goods started and completed this period. d. total cost of goods completed for the period. Page 13 of 29
Cost behavior Cost management Review of accounting for manufacturing operations
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47. "he formula for cost of goods sold for a manufacturer is a. beginning 6inished oods Inventory plus Cost of oods >anufactured minus ending 6inished oods Inventory. b. beginning +or9 in anufactured minus ending +or9 in art report as an asset, A. Raw materials. B. +or9 in process. C. 6inished goods. . >erchandise inventory. 8. All of the above. 5*. +hich of the following inventories would a company ordinarily hold for sale, A. Raw materials. B. +or9 in process. C. 6inished goods. . Raw materials and nished goods. 8. +or9 in process and nished goods. 5/. >idwest >otors manufactures automobiles. +hich of the following would not be classied as direct materials by the company, A. @heet metal used in the automobile's body. B. "ires. Page 14 of 29
Cost behavior Cost management Review of accounting for manufacturing operations
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C. Interior leather. . C player. 8. +heel lubricant. 52. +hich of the following employees of a commercial printerJpublisher would be classied as direct labor, A. Boo9 binder. B.
Cost behavior Cost management Review of accounting for manufacturing operations B. C. . 8.
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direct labor and manufacturing overhead. direct materials3 direct labor3 and manufacturing overhead. direct materials and direct labor. direct materials and indirect materials.
7&. +hich of the following statements is true, A. ar9eting costs. . epreciation of delivery truc9s. 8. >ore than one of the above. 7/.+hich of the following e:uations is used to calculate cost of goods sold during the period, A. Beginning nished goods K cost of goods manufactured K ending nished goods. B. Beginning nished goods ending nished goods. C. Beginning nished goods K cost of goods manufactured. . Beginning nished goods K cost of goods manufactured ending nished goods. 8. Beginning nished goods K ending nished goods cost of goods manufactured. 72. +or9inprocess inventory is composed of A. direct material and direct labor. B. direct labor and manufacturing overhead. C. direct material and manufacturing overhead. . direct material only. 8. direct material3 direct labor3 and manufacturing overhead. 74.
Cost behavior Cost management Review of accounting for manufacturing operations
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8. 1;;E. 75. An employee accidentally overstated the year's advertising e)pense by ;3;;;. +hich of the following correctly depicts the e(ect of this error, A. Cost of goods manufactured will be overstated by ;3;;;. B. Cost of goods sold will be overstated by ;3;;;. C. Both cost of goods manufactured and cost of goods sold will be overstated by ;3;;;. . Cost of goods sold will be overstated by ;3;;;3 and cost of goods manufactured will be understated by ;3;;;. 8. Mone of the above. 77. +hich of the following would li9ely be a cost driver for the amount of direct materials used, A. "he number of units sold. B. "he number of direct labor hours wor9ed. C. "he number of machine hours wor9ed. . "he number of employees wor9ing in the factory. 8. "he number of units produced. 1;;.
-ariable costs are those costs that A. vary inversely with changes in activity. B. vary directly with changes in activity. C. remain constant as activity changes. . decrease on a perunit basis as activity increases. 8. increase on a perunit basis as activity increases.
1;1. As A. B. C. . 8.
activity decreases3 unit variable cost increases proportionately with activity. decreases proportionately with activity. remains constant. increases by a )ed amount. decreases by a )ed amount.
1;!. +hich of the following is not an e)ample of a variable cost, A. @traightline depreciation on a machine that has a veyear service life. B. +ages of manufacturing wor9ers whose pay is based on hours wor9ed. C. "ires used in the production of tractors. . Aluminum used to ma9e patio furniture. 8. Commissions paid to sales personnel. 1;&. 6i)ed costs are those costs that A. vary directly with changes in activity. B. vary inversely with changes in activity. C. remain constant on a perunit basis. . increase on a perunit basis as activity increases. 8. remain constant as activity changes. 1;*."he )ed cost per unit A. will increase as activity increases. Page 17 of 29
Cost behavior Cost management Review of accounting for manufacturing operations B. C. . 8.
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will increase as activity decreases. will decrease as activity increases. will remain constant. will e)hibit the behavior described in choices B and C.
1;/. +hich of the following is an e)ample of a )ed cost, A.
+hich of the following would not be characteried as a cost ob=ect, A. An automobile manufactured by eneral >otors. B. "he Mew Nor9 6ire epartment. C. A Burger Oing restaurant located in Cleveland3 ?hio. . A elta Airlines %ight from Atlanta to >iami. 8. All of the above are e)amples of cost ob=ects.
1;4. Costs that can be easily traced to a specic department are called A. direct costs. B. indirect costs. C. product costs. . manufacturing costs. 8. processing costs. 1;5. +hich of the following would not be considered a direct cost with respect to the service department of a new car dealership, A. +ages of repair techni:ues. B.
1. "he portion of an assetPs value on the balance sheet is referred to as an e)pired cost. !. "he portion of an asset that was consumed during a period is referred to an e)pired cost. &. A variable cost remains constant on a perunit basis as production increases Page 18 of 29
Cost behavior Cost management Review of accounting for manufacturing operations *. /. 2. 4. 5. 7. 1;. 11. 1!. 1&. 1*. 1/. 12. 14. 15. 17. !;. !1. !!. !&. !*. !/. !2. !4. !5. !7. &;. &1. &!. &&.
BCSV
A )ed cost remains constant on a perunit basis as production changes. "he relevant range is valid for all levels of activity An indirect cost can be easily traced to a cost ob=ect. Both accountants and economists view variable costs as linear in nature. 6i)ed cost per unit varies directly with production. -ariable cost per unit remains constant within the relevant range. A cost that shifts upward or downward when activity changes by a certain interval is referred to as a mi)ed cost. A cost that shifts upward or downward when activity changes by a certain interval is referred to as a step cost. If the cost of an additive is Q/3;;; K Q;./; for every unit of solvent produced3 the cost is classied as a mi)ed cost. If the cost of an additive is Q/3;;; K Q;./; for every unit of solvent produced3 the cost is classied as a step cost. A predictor which has an absolute cause and e(ect relationship to a cost is referred to a cost driver. A mi)ed cost will be an e(ective cost driver. A variable cost will be an e(ective cost driver. Dne)pired costs are re%ected on the balance sheet. 8)pired costs are re%ected on the balance sheet. istribution costs are an e)ample of product costs istribution costs are an e)ample of period costs. Retailers generally have a much high degree of conversion than do manufacturing or professional rms. Retailers generally have a much lower degree of conversion than do manufacturing or professional rms. In a service industry3 direct materials are usually insignicant in amount and cannot easily be traced to a cost ob=ect. In a service industry3 direct materials are usually signicant in amount and can be easily traced to a cost ob=ect. "here is an inverse relationship between prevention costs and failure costs. "here is a direct relationship between prevention costs and failure costs. In an actual cost system3 actual production overhead costs are accumulated in an ?verhead Control account and assigned to +or9 in anufactured statement prior to preparing the Cost of oods @old statement. &rob#ems &rob#em I Page 19 of 29
Cost behavior Cost management Review of accounting for manufacturing operations
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"he accounting records of +estcott Company revealed the following costs 6actory utilities +ages of assemblyline personnel Customer entertainment Indirect materials used epreciation on salespersons' cars
<&/3;;; 14;3;;; */3;;; 173;;; /13;;; 11;3;;;
1. Costs that would be considered in the calculation of manufacturing overhead total?
&rob#em II !. Oansas anufacturing had the following data for the period =ust ended
+or9 in process3 Lan. 1 +or9 in process3 ec. &1 6inished goods3 Lan. 1 6inished goods3 ec. &1 irect materials used irect labor 6actory depreciation @ales Advertising e)pense 6actory utilities Indirect materials Indirect labor
< !13;;; *;3;;; 4;3;;; 213;;; 1!23;;; !2;3;;; 5;3;;; 7*/3;;; /!3;;; !43;;; 173;;; &/3;;;
4. Calculate Panama's cost of goods manufactured. 5. Calculate Panama's cost of goods sold.
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Cost behavior Cost management Review of accounting for manufacturing operations
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&rob#em V ampton Company had the following inventory balances at the beginning and end of the year
Raw material +or9 in process 6inished goods
Lanuary ecember &1 1 < /;3;;; < &/3;;; 1&;3;;; 14;3;;; !5;3;;; !//3;;;
uring the year3 the company purchased <1;;3;;; of raw material and spent <&*;3;;; on direct labor. ?ther data manufacturing overhead incurred3 <*/;3;;;G sales3 <13/2;3;;;G selling and administrative e)penses3 <7;3;;;G income ta) rate3 &;E. 6. Calculate cost of goods manufactured. 7. Calculate cost of goods sold. 8. etermine !am"ton's net income.
&rob#em VI "he following selected information was e)tracted from the !;1& accounting records of >iami
Raw materials used irect labor Indirect labor @elling and administrative salaries Building depreciationS ?ther selling and administrative e)penses ?ther factory costs
S@eventy percent of the company's building was devoted to production activitiesG the remaining &;E was used for selling and administrative functions. >iami's beginning and ending wor9inprocess inventories amounted to <&;23;;; and
&rob#em VII "he >orton Company recorded the following transactions for 6ebruary !;)1
>aterials
+or9 in
6inished oods Page 21 of 29
Cost behavior Cost management Review of accounting for manufacturing operations
<1;;3;; ;
Beginning inventory 8nding inventory irect materials used irect labor >anufacturing overhead 0includes indirect materials used of <1;3;;; "ransferred to nished goods Cost of goods sold
BCSV
< 153;;; A
53;;; !;3;;; 7;3;;; B
<
8
&;3;;;
11/3;;; C
@ales were 2;3;;;3 with sales prices determined by adding a *;E mar9up to the rm's manufacturing cost. "he total cost of direct materials used3 direct labor3 and manufacturing overhead during the month was
&rob#em VIII OC >anufacturing3 which began operations on Lanuary 1 of the current year3 produces an industrial scraper that sells for <&!/ per unit. Information related to the current year's activities follows.
Mumber of scrapers produced Mumber of scrapers sold -ariable costs per unit irect materials irect labor >anufacturing overhead Annual )ed costs >anufacturing overhead @elling and administrative
!;3;;; 143;;;
OC carries its nishedgoods inventory at the average unit cost of production. "here was no wor9 in process at yearend. 1(.Com"ute the com"an%'s average unit cost of "roduction. 14.etermine the cost of the ecember (1 )nished*goods inventor%. 15.Com"ute the com"an%'s cost of goods sold.
&rob#em I' "he following information has been ta9en from the cost records of +ilson Company for the past year
Raw material used in production "otal manufacturing costs charged to production during the year 0includes direct material3 direct labor3 and overhead e:ual to 2;E of
<&!2 252 Page 22 of 29
Cost behavior Cost management Review of accounting for manufacturing operations direct labor cost Cost of goods available for sale @elling and Administrative e)penses Inventories Raw >aterial +or9 in
Beginni ng <4/ 5; 7;
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5!2 !/ 8ndin g < 5/ &; 11;
16.+he cost of raw material "urchased during the %ear was? 17.irect labor cost charged to "roduction during the %ear was? 18.Cost of ,oods $anufactured was? 1#.Cost of ,oods -old was?
&rob#em ' Brandt Company manufactures wood le cabinets. "he following information is available for Lune !;;1
Raw >aterial Inventory +or9 in
Beginnin 8nding g < 23;;; < 43/;; 143&;; 1134;; !13;;; 123&;;
irect labor is <7.2; per hour and overhead for the month was <732;;. "here were 13/;; direct labor hours and
&rob#em 'I !*.anufactured is ;3;;; less than Cost of oods @old, &rob#em 'II Inventories
Raw material +or9 in process 6inished goods Additional information for >arch Raw material purchased
>arch >arch 1 &1 <153;; <1/3;;; ; 73;;; 23;;; !43;;; &23;;;
<*!3;; Page 23 of 29
Cost behavior Cost management Review of accounting for manufacturing operations irect labor payroll irect labor rate per hour ?verhead rate per direct labor hour
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; &;3;;; <4./; 1;.;;
5.0or $arch "rime cost incurred was? 6.0or $arch conversion cost incurred was? 7.0or $arch Cost of ,oods $anufactured was?
&rob#em 'III "he following information is for the Rayne >anufacturing Company for Movember.
Inventories Raw >aterial +or9 in
Beginning 8nding <143*;; <1&3!;; &131/; !5374/ 173!;; !/3/;;
irect abor 0!13;;; T <1& Raw >aterial
Insurance?Fce ?Fce @upplies 8)pense Insurance6actory epr. ?Fce 8:uipment RepairJ>aintenance 6actory
!3/4; 7;; 1344; &3/;; 43*;;
Calculate2 8.+otal manufacturing costs. #.Cost of goods manufactured (&.Cost of sales
&rob#em 'IV Reyes Company has the following data on Luly &13 !;1&
>anufacturing ?verhead ecrease in inventories >aterials oods in
< &;31;1.5; !3*&;.;; /7;.;; 13&!;.*;
"he manufacturing overhead amounts to /;E of the direct labor and the direct labor and manufacturing overhead combined e:ual /;E of the total cost of manufacturing. All materials are purchased 6?B @hipping point. Com"ute for the2 (1.$aterial "urchases (.Cost of goods manufactured &&. Cost of goods sold Page 24 of 29
Cost behavior Cost management Review of accounting for manufacturing operations
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&rob#em 'V "he following data are obtained from Captain CoCo Co. Cost of goods manufactured is <1543/;; •
1 •
• • •
Inventory valuation are as follows raw materials ending inventory is
3
based on raw materials3 beginningG no initial inventory of wor9 in progress3 but at the end of period <1!3/;; was on handG nished goods inventory was four times as large at end of period as at the start. Met income after ta)es amounted to
Raw materials consumed /;E irect labor &;E 6actory e)penses !;E Com"ute for the2 (4.3mount of raw materials beginning inventor%
&rob#em 'VI "he following data represent transactions and balances for ecember !;1&3 the e -era CompanyPs rst month of operations.
Com"ute for the2 (5.umber of units sold in ecember (6.umber of units com"leted in ecember (7.Cost of goods manufactured in ecember (8.Per unit cost of goods manufactured in ecember
&rob#em 'VII Ludith Co. showed cost of goods sold of <*3&!;3;;; in its statement of comprehensive income after the rst year of operations. "he total manufacturing cost comprised /;E materials used3 &;E direct labor incurred3 and !;E manufacturing overhead. oods in process at yearend were 1;E of the total manufacturing cost. 6inished goods at yearend amounted to !;E of the cost of goods manufactured. Page 25 of 29
Cost behavior Cost management Review of accounting for manufacturing operations
BCSV
Com"ute for the2 (#.3mount of direct labor cost. 4&.0inished goods end.
&rob#em 'VIII uevarra mugs produces and sells various types of ceramic mugs. "he business began operations on Lanuary 13 !;1&. "he cost incurred during the year follow
irect >aterial cost irect abor Indirect >anufacturing costs Administrative and >ar9eting
<1;;35;; 5732;; 11!3;;; 1&&3!;;
?n ecember &13 !;1&3 direct materials inventory consisted of 43/;; pounds of materials.
&rob#em 'I' "he following information was ta9en from the records of Lohann >anufacturing IMC.
Increase in 6inished oods ecrease in +or9inaterials "otal Costs to account for
!;3;;; 153;;; 73;;; &1;3;;; 4;3;;; 7;3;;; 2*3;;;
44.!ow much is the amount of cost of goods sold? 45.!ow much is the amount of factor% overhead?
&rob#em '' 6or the year !;;43 the gross margin of >ondala Co. was <723;;;G the cost of goods manufactured was <&*;3;;;G the beginning inventories of wor9 in process and nished goods were
Compute for the sales
&rob#em ''I "he following accounts of @ebastian >anufacturing Co. appeared in its balance sheets on ecember &13 !;1! and ecember &13 !;1& Page 26 of 29
Cost behavior Cost management Review of accounting for manufacturing operations ()*( <2;3;;; &*3;;; *23;;; 23!;;
>aterials +or9 in process 6inished goods Accrued factory wages
BCSV
()*+ <7;3;;; &/3;;; &23;;; 43;;;
"he following amounts appeared in the companyPs income statement for !;1&
>aterials used Cost of sales direct labor Indirect labor
< 2;;3;;; 135*;3;;; *1;3;;; 1*;3;;;
Com"ute for the 47.3mount of raw materials "urchased 48.+otal cost of manufacturing 4#.Cost of goods manufactured 5&.Pa%ment of factor% wages UUUU ur greatest weaness lies in giving u". +he most certain wa% to succeed is alwa%s to tr% ust one more time.9 : +homas 3. ;dison
Answer Key Multiple Choice
1. C 2. B 3. D 4. C 5. A 6. D 7. A 8. C 9. A 10. B 11. A 12. B 13. D 14. B 15. D 16. A 17. A
38. B 39. C 40. C 41. A 42.B 43.B 44.B 45.A 46.D 47.D 48.D 49.D 50.D 51.B 52.C 53.D 54.C
75.A 76.C 77.B 78.D 79.A 80.B 81.C 82.B 83.D 84.C 85.E 86.A 87.E 88.C 89.C 90.A 91.C Page 27 of 29
Cost behavior Cost management Review of accounting for manufacturing operations 18. A 19. A 20. A 21. D 22. D 23. D 24. E 25. A 26. E 27. D 28. A 29. B 30. E 31. D 32. A 33. D 34. A 35. C 36. A 37. A
55.B 56.C 57.C 58.D 59.A 60.A 61.D 62.B 63.C 64.D 65.B 66.C 67.B 68.D 69.B 70.D 71.C 72.B 73.D 74.D
BCSV
92.D 93.E 94.A 95.D 96.E 97.D 98. E 99.E 100.B 101.C 102.A 103.E 104.E 105.B 106.E 107.A 108.B 109.B
True or Flse
1. F 2. T 3. T 4. F 5. F 6. F 7. F 8. F 9. T 10. F 11. T
12. T 13. F 14. T 15. F 16. T 17. T 18. F 19. F 20. T 21.F 22.T
23. T 24. F 25. T 26. F 27. T 28. F 29. T 30. F 31. T 32. F 33. F !ro"le#s
1. 2. 3. 4.
164,000 65,000. 51,800 528,000
5. 6. 7. 8.
537,000 865,000 890,000 406,000
18. 736 19. 716. 20. 43,500 21. PC 33,900 an! CC24,000 22. 49,100. 23. 53,800. 24. 70,000 25. 75,000.
35. 27,000 units 36. 30,000 unit s 37. 327,000 38. 10.90"unit 39. 1,800,000 40. 1,080,000 41. 9,000 42. 7,500 units Page 28 of 29
Cost behavior Cost management Review of accounting for manufacturing operations 9. 886,000 10. 1,409,000 11. 1,419,000 12. A. 18,000 B. 80,000 C. 273,000 D. 400,000 E. 157,000 13. 20 14. 420,000 15. 2,380,000 16. 336 17. 225.
26. 70,000. 27. 118,000. 28. 435,220 29. 437,395
43. 41,400 44. 244,000 45. 77,000 46. 429,000
30. 431,095 31. 87,875.40 32. 181,200.80 33. 179,880.40 34. 90,000
47. 630,000 48. 1,831,000 49. 1,830,000 50. 549,200
BCSV
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