Exam 11: Product Costing in Service and Manufacturing Entities

Actual overhead costs are added to the Manufacturing Overhead account,while estimated overhead costs are added to the Work in Process account.

Service companies generally do not have Work in Process and Finished Goods inventory accounts.

Kelly Company's manufacturing overhead costs totaled $2,871,400 during the year.At the end of the year,manufacturing overhead had been underapplied by $5,310.As a result:

Indicate whether each of the following statements is true or false. The direct costs for a manufacturing company are direct materials and direct labor.______ To assign direct costs to its products,a manufacturer uses a predetermined overhead rate.______ To calculate a predetermined overhead rate,a company must select an appropriate allocation base.______ The predetermined overhead rate is calculated by dividing the expected level of the allocation base by the expected amount of manufacturing overhead costs.______ Calculation and use of a predetermined overhead rate is applicable to service companies as well as manufacturing companies.______

Describe the flow of costs in a manufacturing company,starting with raw materials inventory.What accounts do the costs flow through?

Hughes Company paid production workers $25,550 cash.These wages will be classified as:

Indicate whether each of the following statements is true or false. Wages paid to production workers are classified as wages expense.______ Wages paid to production workers represent an asset exchange transaction.______ Supplies used in production are considered an indirect input and are accounted for as part of manufacturing overhead.______ Raw materials are indirect inputs to the production process.______

McDonnell Industries estimated manufacturing overhead for the year at $290,000.Manufacturing overhead for the year was underapplied by $12,000.The company applied $235,000 to work in process.The amount of actual overhead would have been:

Indicate whether each of the following statements is true or false: Service and product cost information is used for both financial reporting and managerial accounting.______ Companies report service costs but not product costs in their financial statements.______ Service companies are required to match the costs of providing services with the revenues generated from the services.______ Information about the cost of providing services or products is essential for decision making.______ For a hospital or electric utility,service and product costing information is useful in contract negotiations and in setting rates.______

Company X manufactures 3-ring notebooks.All of the following are considered indirect costs except:

The absorption costing approach uses the contribution margin income statement format.

Select the response that indicates the correct sequence of product cost flows from production to sale.

Cost of goods sold is equal to the cost of goods:

Indicate whether each of the following statements is true or false. A restaurant or dry cleaner is considered to be a manufacturing company.______ Service companies cannot have an inventory of raw materials.______ Service companies accumulate cost information for the services they provide to customers.______ Information about the cost of services provided is useful in budgeting,and budgeting is important for service companies.______ A service company typically reports finished goods on its balance sheet.______

Under variable costing,all variable production costs are expensed when incurred.

Virginia Company paid $7,500 cash for various manufacturing overhead costs.As a result of this transaction:

Argus Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused the indicated effects on the company's accounting equation?

Which of the following is not an inventory account maintained by a manufacturing company?

Michie Company's management accountant prepared the following income statement relating to its second year of operations using the absorption costing format: ^* Variable manufacturing costs of $8.00 plus fixed manufacturing costs of $2.00. Required: Prepare an income statement for Michie Company under variable costing.