Question 1

A credit to the Raw Materials Inventory account represents:

Accepted Answer

A)  raw materials added to production. 
B)  raw materials purchased. 
C)  raw materials available for use. 
D)  none of these answers are correct. 
A)  raw materials added to production. 
B)  raw materials purchased. 
C)  raw materials available for use. 
D)  none of these answers are correct.

Question 2

Coleridge Company estimates that its production workers will work 125,000 direct labor hours during the upcoming period and that overhead costs will amount to $750,000.Assume overhead to be allocated on the basis of direct labor hours.What predetermined overhead rate would be used to apply overhead to production during the period?

Accepted Answer

A)  $6.00 per direct labor hour 
B)  $0.67 per direct labor hour 
C)  $0.67 per unit 
D)  $6.00 per unit 
A)  $6.00 per direct labor hour 
B)  $0.67 per direct labor hour 
C)  $0.67 per unit 
D)  $6.00 per unit

Question 3

All of the following costs are accumulated in the Work in Process Inventory account except:

Accepted Answer

A)  depreciation on factory equipment. 
B)  direct labor costs. 
C)  manufacturing overhead costs. 
D)  direct material costs. 
A)  depreciation on factory equipment. 
B)  direct labor costs. 
C)  manufacturing overhead costs. 
D)  direct material costs.

Question 4

Estimated overhead costs are applied to work in process at the time the goods are sold.

Accepted Answer

A) True 
 B)False

Question 5

Redmond Manufacturing Company began operations on January 1.The company was affected by the following events during its first year of operation:
a)Company issued stock to owners for $100,000 cash.
b)Purchased materials,$8,000 cash.
c)Transferred $4,000 of direct materials to production (Job #1: $3,000; Job #2: $1,000).
d)Paid direct labor costs,$5,000 (Job #1: $2,500; Job #2: $2,500).
e)Paid $3,000 cash for various actual overhead costs.
f)Allocated overhead to work in process at 60% of direct labor cost.
g)Completed Job #1 and transferred it to finished goods.
h)Sold Job #1 for $8,400 cash.
i)Paid $200 cash for selling and administrative expenses.
Required:
1)Record the above events in the T-accounts provided.Label your transactions (a)- (i).
2)Determine the ending balance in the Work in Process account.
3)Prepare a schedule of cost of goods manufactured and sold.
4)Compute the amount of gross profit earned on Job #1.

Accepted Answer

1)Posted T-accounts:
 @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& 
2)Endin

Question 6

Purchasing production supplies for cash is a(n):

Accepted Answer

A)  asset source transaction. 
B)  asset exchange transaction. 
C)  asset use transaction. 
D)  claims exchange transaction. 
A)  asset source transaction. 
B)  asset exchange transaction. 
C)  asset use transaction. 
D)  claims exchange transaction.

Question 7

Describe the basic differences between absorption and variable costing.Why are managers sometimes motivated to produce too much inventory when income is computed under an absorption costing system?

Accepted Answer

Absorption costing is the conventional a

Question 8

Lewes Company produced 8,000 units of inventory and sold 6,000.The company incurred the following production costs: Variable manufacturing cost: $12.00 per unit
Fixed manufacturing overhead cost: $60,000
Assuming the company sells its product at a price of $25 per unit,and incurred $10,000 in selling and administrative cost,what is the amount of net income under variable costing?

Accepted Answer

A)  $107,000 
B)  $68,000 
C)  $23,000 
D)  $8,000 
A)  $107,000 
B)  $68,000 
C)  $23,000 
D)  $8,000

Question 9

Recognizing estimated manufacturing overhead costs at the end of a month is a(n):

Accepted Answer

A)  asset source transaction. 
B)  asset use transaction. 
C)  asset exchange transaction. 
D)  claims exchange transaction. 
A)  asset source transaction. 
B)  asset use transaction. 
C)  asset exchange transaction. 
D)  claims exchange transaction.

Question 10

Indicate whether each of the following statements is true or false.
Estimated overhead costs are applied to work in process at the time the goods are produced.______
Overhead is applied to work in process by debiting Manufacturing Overhead and crediting Finished Goods Inventory.______
Recognizing estimated overhead is an asset exchange transaction.______
Actual overhead costs are recorded with a credit to Manufacturing Overhead.______
During a company's accounting period,manufacturing overhead is likely to be either overapplied or underapplied.______

Accepted Answer

Estimated overhead costs are applied to

Question 11

Johnson Company estimates that its production workers will work 88,000 direct labor hours to produce 8,800 units during the upcoming period and that overhead costs will amount to $880,000.During the year,its manufacturing employees actually worked 100,000 direct labor hours to produce 10,000 units and incurred $1,100,000 of overhead costs.Because the goods made by Johnson are homogeneous (that is,they are identical),the company has decided it makes sense to use number of units as the allocation base for overhead.Based on this information the predetermined overhead rate is:

Accepted Answer

A)  $110.00 per unit. 
B)  $10.00 per direct labor hour. 
C)  $100.00 per unit. 
D)  $11.00 per direct labor hour. 
A)  $110.00 per unit. 
B)  $10.00 per direct labor hour. 
C)  $100.00 per unit. 
D)  $11.00 per direct labor hour.

Question 12

Orlando Company paid $100 cash to purchase production supplies.How does this transaction affect the financial statements?

Accepted Answer

A)  $$\begin{array} {| l| l | l | l | l | l | l | l | l |l|l|l| } 
\hline 100 &+& \mathrm { NA } &= & \mathrm { NA } &+& (100) & \mathrm { NA } & - &100&=& 100\
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l|l|l|} 
\hline \mathrm { NA } & + &100 & =& 100 & + & \mathrm { NA }& \mathrm { NA } & - & \mathrm { NA } & =&\mathrm { NA }\ 
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l|l|l|} 
\hline (100)& + &100 & =& \mathrm { NA }& + & \mathrm { NA }& \mathrm { NA } & - & \mathrm { NA } & =&\mathrm { NA }\ 
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l|l|l|} 
\hline (100)& + &\mathrm { NA }& =& 100 & + & \mathrm { NA }& \mathrm { NA } & - & \mathrm { NA } & =&\mathrm { NA }\ 
\hline 
\end{array}$$ 
A)  $$\begin{array} {| l| l | l | l | l | l | l | l | l |l|l|l| } 
\hline 100 &+& \mathrm { NA } &= & \mathrm { NA } &+& (100) & \mathrm { NA } & - &100&=& 100\
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l|l|l|} 
\hline \mathrm { NA } & + &100 & =& 100 & + & \mathrm { NA }& \mathrm { NA } & - & \mathrm { NA } & =&\mathrm { NA }\ 
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l|l|l|} 
\hline (100)& + &100 & =& \mathrm { NA }& + & \mathrm { NA }& \mathrm { NA } & - & \mathrm { NA } & =&\mathrm { NA }\ 
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l|l|l|} 
\hline (100)& + &\mathrm { NA }& =& 100 & + & \mathrm { NA }& \mathrm { NA } & - & \mathrm { NA } & =&\mathrm { NA }\ 
\hline 
\end{array}$$

Question 13

The work in process inventory account increases when raw materials are placed into production.

Accepted Answer

A) True 
 B)False

Question 14

At the beginning of the year,Hilliard Company estimated that its total overhead cost would be $250,000 and its production volume would be 80,000 units.Total actual overhead cost for the year was $246,000.The actual number of units produced during the year was 78,000.
Required:
1)What amount of overhead was applied to the products Hilliard completed during the year?
2)Calculate the volume variance for the year.Indicate whether it is favorable or unfavorable.Do not round intermediate calculations.
3)Calculate the spending variance for the year.

Accepted Answer

1)78,000 units × $250,000 ÷ 80

Question 15

Describe how firms use service and product cost information.

Accepted Answer

Product and service cost information is

Question 16

Select the incorrect statement regarding service companies.

Accepted Answer

A)  Service companies do not maintain a Finished Goods Inventory account. 
B)  Service companies accumulate their service costs in a Work in Process Inventory account similar to manufacturers. 
C)  Service companies may have raw material costs. 
D)  Understanding the cost of providing a service is just as important as knowing the cost of making a product. 
A)  Service companies do not maintain a Finished Goods Inventory account. 
B)  Service companies accumulate their service costs in a Work in Process Inventory account similar to manufacturers. 
C)  Service companies may have raw material costs. 
D)  Understanding the cost of providing a service is just as important as knowing the cost of making a product.

Question 17

Cost of goods sold must be determined prior to computing cost of goods manufactured.

Accepted Answer

A) True 
 B)False

Question 18

Product costs flow through the manufacturer's inventory accounts in the following order: raw materials,finished goods,and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 19

The Juarez Corporation incurred the following transactions during its first year of operations.(Assume all transactions involve cash).
1)Acquired $1,000 of capital from the owners.
2)Purchased $400 of direct raw materials.
3)Used $300 of these direct raw materials in the production process.
4)Paid production workers $400 cash.
5)Paid $200 for manufacturing overhead (applied and actual overhead are the same).
6)Started and completed 200 units of inventory.
7)Sold 50 units at a price of $6 each.
8)Paid $40 for selling and administrative expenses.
The amount of cost of goods manufactured would be:

Accepted Answer

A) $1,000. 
B) $900. 
C) $800. 
D) $600. 
A) $1,000. 
B) $900. 
C) $800. 
D) $600.

Question 20

The accounting records for Eisner Manufacturing Company included the following cost information relating to its first year of operations: $\begin{array}{lrr}
  \text {  Direct materials} &\$60,000\
 \text { Direct labor } &\$80,000\
 \text {  Fixed manufacturing overhead} &\$100,000\
 \text {Variable manufacturing overhead  } &\$20,000\
\end{array}$

Assume the company produced 10,000 units of inventory and sold 6,000 of these units during the year for $192,000.The cost per unit under variable and absorption costing would be,respectively:

Accepted Answer

A)  $5.00 and $11.00. 
B)  $16.00 and $26.00. 
C)  $14.00 and $10.00. 
D)  $19.00 and $30.00. 
A)  $5.00 and $11.00. 
B)  $16.00 and $26.00. 
C)  $14.00 and $10.00. 
D)  $19.00 and $30.00.

A credit to the Raw Materials Inventory account represents:

All of the following costs are accumulated in the Work in Process Inventory account except:

Estimated overhead costs are applied to work in process at the time the goods are sold.

Purchasing production supplies for cash is a(n):

Describe the basic differences between absorption and variable costing.Why are managers sometimes motivated to produce too much inventory when income is computed under an absorption costing system?

Recognizing estimated manufacturing overhead costs at the end of a month is a(n):

Orlando Company paid $100 cash to purchase production supplies.How does this transaction affect the financial statements?

The work in process inventory account increases when raw materials are placed into production.

Describe how firms use service and product cost information.

Select the incorrect statement regarding service companies.

Cost of goods sold must be determined prior to computing cost of goods manufactured.

Product costs flow through the manufacturer's inventory accounts in the following order: raw materials,finished goods,and cost of goods sold.

Management Accounting and Corporate Governance

Cost Behavior, operating Leverage, and Profitability Analysis

Analysis of Cost, volume, and Pricing to Increase Profitability

Cost Accumulation,tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Job-Order, process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 11: Product Costing in Service and Manufacturing Entities

A credit to the Raw Materials Inventory account represents:

All of the following costs are accumulated in the Work in Process Inventory account except:

Estimated overhead costs are applied to work in process at the time the goods are sold.

Purchasing production supplies for cash is a(n):

Describe the basic differences between absorption and variable costing.Why are managers sometimes motivated to produce too much inventory when income is computed under an absorption costing system?

Recognizing estimated manufacturing overhead costs at the end of a month is a(n):

Orlando Company paid $100 cash to purchase production supplies.How does this transaction affect the financial statements?

The work in process inventory account increases when raw materials are placed into production.

Describe how firms use service and product cost information.

Select the incorrect statement regarding service companies.

Cost of goods sold must be determined prior to computing cost of goods manufactured.

Product costs flow through the manufacturer's inventory accounts in the following order: raw materials,finished goods,and cost of goods sold.

Management Accounting and Corporate Governance

Cost Behavior, operating Leverage, and Profitability Analysis

Analysis of Cost, volume, and Pricing to Increase Profitability

Cost Accumulation,tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Job-Order, process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters