Exam 11: Product Costing in Service and Manufacturing Entities

Warren Company applies overhead based on direct labor cost.Warren Company estimated that it would incur $180,000 in manufacturing overhead costs and $120,000 of direct labor costs during the current year.Actual manufacturing overhead cost totaled $150,000 and actual direct labor costs totaled $110,000 during the current year.If total manufacturing costs were $320,000,what amount of direct materials was used during the year?

The cost of direct materials purchased on account is expensed at the time the:

Selected T-accounts from the books of Street Manufacturing Company are provided below: Required: 1)Assuming overhead was allocated on the basis of direct labor cost,compute the predetermined overhead rate. 2)Compute the amount by which overhead was over- or underapplied.(Be sure to indicate whether over- or underapplied.) 3)Compute the cost of goods sold assuming that the company writes off any over- or underapplied overhead directly against cost of goods sold. 4)Compute net income for the period. 5)Compute the total amount of inventory that will be reported on the end-of-year balance sheet,including the balances from all of the company's inventory accounts.

Product costs are expensed as cost of goods sold:

Burgess Company incurred product costs of $50,000 during the period when no units were sold.No product costs will be reported on the company's income statement for the period.

The cost of direct materials flow through all of the following accounts except:

Describe the schedule of cost of goods manufactured and sold.What information does it include,and how is it used?

Service companies accumulate information about the cost of services provided,and they report those costs in an inventory account.

Purchasing raw materials on account is a(n):

Indicate whether each of the following statements is true or false. In a period when finished goods decreases,use of absorption costing results in higher net income than variable costing.______ Direct materials and direct labor usually behave as variable costs.______ Generally accepted accounting principles allow a company to use either variable or absorption costing for external financial reporting.______ Under absorption costing,fixed manufacturing costs are expensed in the period incurred.______ Increasing the number of units produced during a period increases net income under absorption costing because the cost of goods sold decreases.______

Absorption costing provides incentives for a company to hold excess inventory,which may increase the company's costs.

The accounting records for Poole Manufacturing Company included the following cost information relating to its first year of operations: Direct materials \6 0,000 Direct labor \8 0,000 Fixed manufacturing overhead \1 00,000 Variable manufacturing overhead \2 0,000 Assume the company produced 10,000 units of inventory and sold 6,000 of these units for $192,000.What amount of finished goods will be reported on the balance sheet at the end of the year under absorption costing?

Which of the following statements is true?

Fortune Company had beginning raw materials inventory of $16,000.During the period,the company purchased $92,000 of raw materials on account.If the ending balance in raw materials was $10,000,the amount of raw materials transferred to work in process is:

Pinkston Company completed 12,000 units of product at a total cost of $28,000.The recording of the product completed would include a decrease to:

Furst Company pays production workers' salaries on account.The cost will be recognized as an expense when:

For the month of January,Year 1,Ghent Corporation had a beginning balance of $103,200 in work in process.During the month,the company added the following costs to work in process: direct materials,$90,900; direct labor,$54,000; and manufacturing overhead,$81,000.The ending amount of work in process was $37,400.What was the cost of goods manufactured for the period? Prepare a schedule that shows the calculation of the cost of goods manufactured.

Describe the conflict between the need for cost information to make managerial decisions and the timing of the availability of actual cost data.How do companies resolve this conflict?

Tucker Company's Work in Process account decreased by $1,000,while its Finished Goods Inventory account increased by $500.Assuming total manufacturing costs were $5,000,what was the company's cost of goods sold amount?

By the end of the year,Shirley Company's Manufacturing Overhead account had a $1,500 credit balance.This means that overhead was underapplied during the year.