Question 1

Variable costing:

Accepted Answer

A) expenses administrative costs as cost of goods sold. 
B) is required for external reporting to shareholders. 
C) includes fixed manufacturing overhead as an inventoriable cost. 
D) treats direct manufacturing costs as a product cost. 
A) expenses administrative costs as cost of goods sold. 
B) is required for external reporting to shareholders. 
C) includes fixed manufacturing overhead as an inventoriable cost. 
D) treats direct manufacturing costs as a product cost.

Question 2

Answer the following questions using the information below:
The Rest-a-Lot chair company manufactures a standard recliner.During February,the firm's Assembly Department started production of 75 000 chairs.During the month,the firm completed 80 000 chairs,and transferred them to the Finishing Department.The firm ended the month with 10 000 chairs in ending inventory.There were 15 000 chairs in beginning inventory.All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process.The FIFO method of process costing is used by Rest-a-Lot.Beginning work in process was 30% complete as to conversion costs,while ending work in process was 80% complete as to conversion costs.
 Beginning inventory:

$\begin{array}{ll}
\text { Direct materials } & \$ 24000 \
\text { Conversion costs } & \$ 35000
\end{array}$

Manufacturing costs added during the ocounting period:

$\begin{array} { l l } \text { Direct materials } & \$ 168000 \ \text { Conversion costs } & \$ 278000 \end{array}$
-What were the equivalent units for conversion costs during February?

Accepted Answer

A) 83 500 
B) 79 500 
C) 85 000 
D) 75 000 
A) 83 500 
B) 79 500 
C) 85 000 
D) 75 000

Question 3

If there was no beginning work in process and no ending work in process under the weighted-average process-costing method,the number of equivalent units for direct materials,if direct materials were added at the start of the process,would be:

Accepted Answer

A) equal to the units completed. 
B) equal to the units started or transferred in. 
C) less than the units completed. 
D) Both A and B are correct. 
A) equal to the units completed. 
B) equal to the units started or transferred in. 
C) less than the units completed. 
D) Both A and B are correct.

Question 4

Answer the following questions using the information below:
Injection Molding Ltd manufactures plastic moldings for car seats.Its costing system utilises two cost categories,direct materials and conversion costs.Each product must pass through Department A and Department B.Direct materials are added at the beginning of production.Conversion costs are allocated evenly throughout production.
 Data for Department A for Febuary 2018 are:

$\begin{array}{ll}
\text { Work-in-process, beginning inventory, } 40 \% \text { converted } & 200 \text { units } \
\text { Units started during February } & 600 \text { units } \
\text { Work in proces, ending inventory } & 100 \text { units }
\end{array}$

Costs for Department A for Febuary 2018 are:
$\begin{array}{lc}
\text {Work-in-process, beginning inventory:}\
\text {Direct materials}&&\$ 100000 \ 
\text { Conversion costs } & \$ 100000 \
\text { Direct materials costs added during February } & \$ 1000000 \
\text { Conversion costs added during February } & \$ 1250000
\end{array}$

-What is the unit cost per equivalent unit in Department A?

Accepted Answer

A) $3500 
B) $1750 
C) $1000 
D) $3750 
A) $3500 
B) $1750 
C) $1000 
D) $3750

Question 5

The first-in,first-out process-costing method assumes that units in beginning inventory are completed during the current accounting period.

Accepted Answer

A) True 
 B)False

Question 6

Answer the following questions using the information below:
Sunny Company makes gas pipes and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $15 per direct labour-hour.The following data are obtained from the accounting records for June 2018:
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 280000 \
\text { Direct labour (7000 hours @ } \$ 11 / \text { hour) } & \$ 77000 \
\text { Ind irect labour } & \$ 20000 \
\text { Plant facility rent } & \$ 60000 \
\text { Deprecia tion on plant machinery and equipment } & \$ 30000 \
\text { Sales commissions } & \$ 40000 \
\text { Administrative expenses } & \$ 50000
\end{array}$$
-One reason indirect costs may be underapplied is if actual indirect costs exceed budgeted indirect costs.

Accepted Answer

A) True 
 B)False

Question 7

Direct costs are traced the same way for actual costing and normal costing.

Accepted Answer

A) True 
 B)False

Question 8

SBW Corporation planned to be in operation for three years.
-During the first year,2016,it had no sales but incurred $120 000 in variable manufacturing expenses and $40 000 in fixed manufacturing expenses.
-In 2017,it sold half of the finished goods inventory from 2016 for $100 000 but it had no manufacturing costs.
-In 2018,it sold the remainder of the inventory for $120 000,had no manufacturing expenses and went out of business.
-Marketing and administrative expenses were fixed and totalled $20 000 each year.
Required:
a.Prepare an income statement for each year using absorption costing.
b.Prepare an income statement for each year using variable costing.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.Absorpti

Question 9

Answer the following questions using the information below:
The Sleepyhead Chair Company manufactures a standard recliner.During February,the firm's Assembly Department started production of 75 000 chairs.During the month,the firm completed 85 000 chairs and transferred them to the Finishing Department.The firm ended the month with 10 000 chairs in ending inventory.All direct materials costs are added at the beginning of the production cycle.Weighted-average costing is used by Sleepyhead.
-What were the equivalent units for conversion costs for February if the beginning inventory was 70% complete as to conversion costs and the ending inventory was 40% complete as to conversion costs?

Accepted Answer

A) 89 000 
B) 75 000 
C) 95 000 
D) 85 000 
A) 89 000 
B) 75 000 
C) 95 000 
D) 85 000

Question 10

The adjusted cost-driver rate approach yields the benefits of:

Accepted Answer

A) a timeliness and convenience of normal costing. 
B) allocation of actual manufacturing overhead costs at the end of the year. 
C) Both A and B are correct. 
D) Neither A or B are correct. 
A) a timeliness and convenience of normal costing. 
B) allocation of actual manufacturing overhead costs at the end of the year. 
C) Both A and B are correct. 
D) Neither A or B are correct.

Question 11

Answer the following questions using the information below:
The Sleepyhead Chair Company manufactures a standard recliner.During February,the firm's Assembly Department started production of 75 000 chairs.During the month,the firm completed 85 000 chairs and transferred them to the Finishing Department.The firm ended the month with 10 000 chairs in ending inventory.All direct materials costs are added at the beginning of the production cycle.Weighted-average costing is used by Sleepyhead.
-Of the 75 000 units Sleepyhead started during February,how many were finished during the month?

Accepted Answer

A) 75 000 
B) 95 000 
C) 65 000 
D) 85 000 
A) 75 000 
B) 95 000 
C) 65 000 
D) 85 000

Question 12

A distinctive feature of the FIFO process-costing method is that the work done on beginning inventory before the current period is averaged with work done in the current period.

Accepted Answer

A) True 
 B)False

Question 13

Answer the following questions using the information below:
Queanbeyan Company incurred fixed manufacturing costs of $7200 during 2018.Other information for 2018 includes:
The budgeted denominator level is 800 units.
Units produced total 1000 units.
Units sold total 950 units.
Beginning inventory was zero.
The fixed manufacturing cost rate is based on the budgeted denominator level.Manufacturing variances are closed to cost of goods sold.
-What can management do to discourage production for inventory purposes?
Variant question

Accepted Answer

A) Incorporate a carrying charge for inventory in the internal accounting system 
B) Evaluate performance over a three- to five-year period rather than a single year 
C) Evaluate non-financial measures such as units in ending inventory compared to units in sales 
D) All of these answers are correct. 
A) Incorporate a carrying charge for inventory in the internal accounting system 
B) Evaluate performance over a three- to five-year period rather than a single year 
C) Evaluate non-financial measures such as units in ending inventory compared to units in sales 
D) All of these answers are correct.

Question 14

Answer the following questions using the information below:
Wangaratta Corporation incurred fixed manufacturing costs of $6000 during 2018.Other information for 2018 includes:
The budgeted denominator level is 1000 units.
Units produced total 750 units.
Units sold total 600 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level.Manufacturing variances are closed to cost of goods sold.
-Fixed manufacturing costs expensed on the income statement (excluding adjustments for variances)total:

Accepted Answer

A) $3600 
B) 0 
C) $6000 
D) $4800 
A) $3600 
B) 0 
C) $6000 
D) $4800

Question 15

The Laramie Factory produces expensive boots.It has two departments that process all the items.During January,the beginning work in process in the tanning department was 40% complete as to conversion and 100% complete as to direct materials.The beginning inventory included $6000 for materials and for conversion costs.Ending work-in-process inventory in the tanning department was 40% complete.Direct materials are added at the beginning of the process.
Beginning work in process in the finishing department was 60% complete as to conversion.Beginning inventories included $7000 for transferred-in costs and $10 000 for conversion costs.Ending inventory was 30% complete.
Additional information about the two departments follows:
 $$\begin{array} { | l | r | r | } 
\hline & \text { Tanning } & \text { Finishing } \
\hline \text { Beginning work-in-process units } & 5000 & 4000 \
\hline \text { Units started this period } & 14000 & ? \
\hline \text { Units transferred this period } & 16000 & 18000\
& &  \
\hline \text { Ending work-in-process units } & ? &  2 0 0 0\
\hline & & \
\hline \text { Material costs added } & \$ 18000 & ? \
\hline \text { Conversion costs } & 32000 & \$ 19000 \
& &  \
\hline \text { Transferred-out cost } & 50000 & ? \
\hline
\end{array}$$ 
Required:
Prepare a production cost worksheet using weighted-average costing for the finishing department.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Production Cost Worksheet
Finishing Depa

Question 16

One way of determining the difference between operating profits for absorption costing and variable costing is to:

Accepted Answer

A) subtract fixed manufacturing overhead in beginning inventory from fixed manufacturing overhead in ending inventory. 
B) add fixed manufacturing costs to the production-volume variance. 
C) multiply the number of units produced by the budgeted fixed manufacturing cost rate. 
D) subtract sales of the previous period from sales of this period. 
A) subtract fixed manufacturing overhead in beginning inventory from fixed manufacturing overhead in ending inventory. 
B) add fixed manufacturing costs to the production-volume variance. 
C) multiply the number of units produced by the budgeted fixed manufacturing cost rate. 
D) subtract sales of the previous period from sales of this period.

Question 17

Describe the differences between process costing and job costing,and give some examples of where each type of costing system would be used.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

When products are unique,job costing is

Question 18

Ways to 'produce for inventory' that result in increasing operating profit include:

Accepted Answer

A) delaying items that absorb the greatest amount of fixed manufacturing costs. 
B) switching production to products that absorb the least amounts of fixed manufacturing costs. 
C) deferring maintenance to accelerate production. 
D) All of these answers are correct. 
A) delaying items that absorb the greatest amount of fixed manufacturing costs. 
B) switching production to products that absorb the least amounts of fixed manufacturing costs. 
C) deferring maintenance to accelerate production. 
D) All of these answers are correct.

Question 19

Answer the following questions using the information below:
Alice Opals produces and sells a mantel clock for $100 per unit.In 2010,100 000 clocks were produced and 80 000 were sold.Other information for the year includes:
 $$\begin{array} { l l } 
\text { Direct materials } & \$ 30.00 \text { per unit } \
\text { Direct manufacturing labour } & \$ 2.00 \text { per unit } \
\text { Variable manufacturing costs } & \$ 3.00 \text { per unit } \
\text { Sales commissions } & \$ 5.00 \text { per part } \
\text { Fixed manufacturing costs } & \$ 25.00 \text { per unit } \
\text { Administrative expenses, all fixed } & \$ 15.00 \text { per unit }
\end{array}$$
-What is the inventoriable cost per unit using absorption costing?

Accepted Answer

A) $32 
B) $35 
C) $60 
D) $80 
A) $32 
B) $35 
C) $60 
D) $80

Question 20

Which of the following statement(s)concerning conversion costs is correct?

Accepted Answer

A) The calculation of equivalent units is relatively easy for the textile industry. 
B) Estimating the degree of completion of direct materials in a partially completed unit is usually easier to calculate than estimating the degree of completion for conversion costs. 
C) Estimates are usually not considered acceptable. 
D) Both B and C are correct. 
A) The calculation of equivalent units is relatively easy for the textile industry. 
B) Estimating the degree of completion of direct materials in a partially completed unit is usually easier to calculate than estimating the degree of completion for conversion costs. 
C) Estimates are usually not considered acceptable. 
D) Both B and C are correct.

Variable costing:

If there was no beginning work in process and no ending work in process under the weighted-average process-costing method,the number of equivalent units for direct materials,if direct materials were added at the start of the process,would be:

The first-in,first-out process-costing method assumes that units in beginning inventory are completed during the current accounting period.

Direct costs are traced the same way for actual costing and normal costing.

The adjusted cost-driver rate approach yields the benefits of:

A distinctive feature of the FIFO process-costing method is that the work done on beginning inventory before the current period is averaged with work done in the current period.

One way of determining the difference between operating profits for absorption costing and variable costing is to:

Describe the differences between process costing and job costing,and give some examples of where each type of costing system would be used. _ _

Ways to 'produce for inventory' that result in increasing operating profit include:

Which of the following statement(s)concerning conversion costs is correct?

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

Exam 6: Estimating the Costs of Products and Inventory

Variable costing:

If there was no beginning work in process and no ending work in process under the weighted-average process-costing method,the number of equivalent units for direct materials,if direct materials were added at the start of the process,would be:

The first-in,first-out process-costing method assumes that units in beginning inventory are completed during the current accounting period.

Direct costs are traced the same way for actual costing and normal costing.

The adjusted cost-driver rate approach yields the benefits of:

A distinctive feature of the FIFO process-costing method is that the work done on beginning inventory before the current period is averaged with work done in the current period.

One way of determining the difference between operating profits for absorption costing and variable costing is to:

Ways to 'produce for inventory' that result in increasing operating profit include:

Which of the following statement(s)concerning conversion costs is correct?

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters