Question 1

Indicate whether each of the following statements about process costing systems is

Accepted Answer

A company that uses a process costing system may use separate predetermined overhead rates for each department involved in production.T
Company X completed 10,000 units of a product in January and had 1,000 units (80% completed)at the end of the month.Company X's equivalent whole units for January were 10,800.T
The reason for calculating the number of equivalent whole units for a period is to allocate product costs between work in process inventory and the cost of units completed and transferred out.T
A company that uses a process costing system completes a job cost sheet for each department each month.F
The transfer of goods from one processing department to another is an asset use transaction.F

Question 2

During 2014the current accounting period,O'Hare applied $14,500 of estimated overhead cost to production.Actual overhead costs were $14,325.Assuming that the balance in the Manufacturing Overhead is insignificant,tThe recognition of these transactions to close that account will: This makes the explanation much easier

Accepted Answer

A)   Decrease cost of goods sold and increase stockholder's equity.
B)   Increase cost of goods sold.
C)   Decrease stockholder's equity.
D)   Decrease total assets and total liabilities.This makes the explanation much easier A

Question 3

Burton Company custom-produces specialty souvenir products.During 2014the current accounting period,the company completed the following transactions:
(a)Purchased $20,000 of raw materials,paying cash.
(b)Used direct materials in production as follows: $\begin{array}{|l|c|}
\hline \text { Job Number } & \text { Direct Materials } \
\hline 1 & \$  10,000 \
\hline 2 & 5,000 \
\hline 3 & \underline {2,000} \
\hline \text { Total } & \$  17,000 \
\hline
\end{array}$ (c)Paid direct labor costs as follows: $\begin{array}{|l|r|}
\hline \text { Job Number } & \text { Direct Labor } \
\hline 1 & \$  10,000 \
\hline 2 & 8,000 \
\hline 3 & \underline {6,000} \
\hline \text { Total } & \$  24,000 \
\hline
\end{array}$ (d)Paid cash for various actual factory overhead costs,$40,000.
(e)Applied factory overhead to production using a predetermined overhead rate of $1.50 per direct labor dollar.
(f)Completed Job 1.
(g)Job 1 was sold for $50,000 cash.
(h)Paid $1,000 for selling and administrative expenses.
Required:
1)Record the data in the T-accounts provided.Post costs to the job cost sheet for Job 1 as necessary.
Label the transactions (a)- (h).  2)As transaction (i)post the closing entry for any over- or underapplied or overapplied manufacturing overhead assuming that the amount is written off directly against cost of goods sold.
3)Prepare a schedule of cost of goods manufactured and sold assuming there were no beginning inventories.
4)Compute the amount of gross profit earned on Job 1.

Accepted Answer

Answers will vary
Feedback: 1)Completed job cost sheet: $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $ \quad $ $\text { Job No } 1$
$\begin{array}{lll}
\hline \quad \quad \quad \quad \quad \quad \quad \quad \quad \text { JOB COST SHEET }\
\begin{array}{|r|r|r|r|}
\hline {\text { Direct Material }} & {\text { Direct Labor }} & {\text { Overhead }} & {\text { Total }} \
\hline \$ 10,000 & \$ 10,000 & \$ 15,000 & \$ 35,000 \
\hline
\end{array}
\end{array}$ 2)Posted T-accounts:  3)Schedule of cost of goods manufactured and sold: \(\begin{array}{l}
\quad \quad \quad \quad \quad \quad \quad \quad \quad \text { Burton Company } \
\quad \text { Schedule of Cost of Goods Manufactured and Sold } \
\quad \quad \quad \quad \text { For the Year Ended December 31,2014 } \
\begin{array}{lll}
\text { Beginning materials inventory } \
\text { Add purchases } \
\text { Materials available for use } \
\text { Less ending materials imentory } \
\text {Materials used } \
\text {Direct labor} \
\text {Overhead (Actulal overhead cost) } \
\text { Total manufacturing cost } \
\text {Add beginning work in process inventory } \
\text {Total work in process } \
\text { Less ending work in process } \
\text {Cost of goods manufactured} \
\text {Add beginning finished goods inventory } \
\text {Cost of goods avaiable for sale } \
\text { Less ending finished goods inventory } \
\text {Cost of goods sold } \
\end{array}
\begin{array}{r}
\$ -\
\hline 20,000 \
\hline 20,000 \
3,000 \
\hline 17,000 \
24,000 \
40,000 \
\hline 81,000 \
\hline- \
\hline 31,000 \
42,000 \
\hline 39,000 \
\hline- \
\hline 39,000 \
- \
\hline\$ 39,000
\end{array}
\end{array}\) 4)Gross profit earned on Job #1:
Revenues - Cost of goods sold = $50,000 - $39,000 = $11,000

Question 4

Indicate whether each of the following statements about product cost systems is

Accepted Answer

The answer of Indicate whether each of the following statements...

Question 5

Select the correct formula for computing the cost to be assigned to ending inventory in a process costing system.

Accepted Answer

A)   Ending inventory equivalent units × cost per equivalent unit
B)   Ending inventory units × cost per equivalent unit
C)   Beginning inventory cost + transferred-in costs
D)   Beginning inventory units + units transferred in - units transferred out

Question 6

Job-order and process cost systems are two different costing systems that a company chooses between based on the preference of management.

Accepted Answer

A) True 
 B)False

Question 7

A variety of organizations,products,and services are described in the following table: $\begin{array}{|l|l|}
\hline \text { Product or Service } & \text { Type of Cost System } \
\hline \text { 1. Apple iPads } & \
\hline \text { 2. Ryan homebuilders } & \
\hline \text { 3. Chobani yogurt } & \
\hline \text { 4. Aamco auto repair } & \
\hline \text { 5. Shell Oil } & \
\hline \text { 6. Virgin America Airlines } & \
\hline \text { 7. Custom Motor Homes } & \
\hline \text { 8. Vitamin Water } & \
\hline \text { 9. R. M. Parrott, Orthodontist } & \
\hline \text { 10. Tylenol } & \
\hline
\end{array}$ Required:
In the second column of the above table,enter "Process" if a process cost system would be appropriate for the situation described or "Job order" if a job order cost system would be more appropriate.

Accepted Answer

The answer of A variety of organizations,products,and services are described...

Question 8

Oregon Company started the month of August with 4,000 units in beginning work in process;these units were 60 percent complete on August 1.During the month,16,000 units were completed and transferred to Finished Goods.The ending work in process was 2,000 units that were 20% complete.
Required:
Calculate Oregon's equivalent whole units for the month of August.

Accepted Answer

The answer of Oregon Company started the month of August...

Question 9

Jiminez Company engaged in the following transactions during May 2014:
1.Purchased raw materials for cash,$400
2.Used raw materials to begin jobs,$284
3.Paid wages of production employees,$180
4.Applied overhead at rate of $1.25 per direct labor dollar
5.Completed job that had cost $320
6.Sold for $440 cash,goods that had cost $295 to complete
Required:
Use the horizontal statements model provided to indicate how each of these events affected Juarez's financial statements.Show dollar amounts of increases and decreases.If an item is not affected by a transaction,indicate by writing NA.

Accepted Answer

The answer of Jiminez Company engaged in the following transactions...

Question 10

Payment of cash for sales staff salaries is an asset exchange transaction.

Accepted Answer

A) True 
 B)False

Question 11

At the time indirect materials are issued to production,the balance in the:

Accepted Answer

A)   The balance in the manufacturing overheadManufacturing Overhead account will decrease.
B)   The balance in the work in process inventoryWork in Process Inventory account will increase.
C)   The balance in the raw materials inventoryRaw Materials inventory account will increase.
D)   The balance in the manufacturing overheadManufacturing Overhead account will increase.

Question 12

The purchase of raw materials for cash is:

Accepted Answer

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

Question 13

The Neptune Corporation uses a process cost system and the weighted average method.The company started March with 2,300 units in work in process-Dept.A.During the month 4,000 units were started.At the end of the month there were 3,200 units in ending work in process-Dept.A inventory that were 30% complete.The beginning work in process balance was $120,270 and total manufacturing cost for the period was $304,000.Based on this information,the amount of cost transferred from work in process-Dept.A to work in process-Dept.B was:

Accepted Answer

A)   $323,950.
B)   $127,281.
C)   $271,667.
D)   $100,320.

Question 14

Which of the following is incorrect regarding a job-order cost system?

Accepted Answer

A)   Unit cost is determined for each product or job.
B)   Source documents are used to assign costs to the subsidiary accounts.
C)   Costs are accumulated for homogenous products that are produced through a continuous process.
D)   Costs may be accumulated for a batch of work that contains many units of a product.

Question 15

O'Hare Company,is a manufacturing firm that uses a job-order cost system to determine the costs of its products.During 2014the current accounting period,O'Hare recognized depreciation of $600 on manufacturing equipment.Which of the following describes the effect of this event on the accounting equation?

Accepted Answer

A)   Total assets and total equity are unaffected.
B)   Both total assets and total equities increase.
C)   Total assets and net income decrease.
D)   Total assets increase and net income increase.

Question 16

Ringgold Company experienced an event that affected its financial statements as indicated below: $\begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|}
\hline  & \text { Assets }&&= & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \
\hline \text { Mfg. } & + & \text { WIP } & & & & & & & & \
\text { OH }&  &\text { Inv. }\
\hline (1,200)& + & (1,200) &= & \mathrm{n} / \mathbf{a} & +&\mathrm{n} / \mathrm{a} & \mathrm{n} / \mathrm{a} & -&\mathrm{n} / \mathrm{a} & = & \mathrm{n} / \mathrm{a} \
\hline
\end{array}$ Which of the following accounting events caused the indicated effects on the company's accounting equation?

Accepted Answer

A)   Actual overhead cost was incurred
B)   Underapplied overhead was written off
C)   Estimated overhead was charged to production
D)   None of these.

Question 17

O'Hare Company,is a manufacturing firm that uses a job-order cost system to determine the costs of its products.During 2014the current accounting period,O'Hare paid $700 for equipment rental and other indirect costs.The recognition of this event would:

Accepted Answer

A)   Decrease total assets.
B)   Increase total assets.
C)   Reduce net income.
D)   Have no impact on total assets.

Question 18

Payment of cash for production department employee wages is an asset exchange transaction.

Accepted Answer

A) True 
 B)False

Question 19

Which source document provides information for the journal entry to transfer costs from the work in process inventoryWork in Process Inventory account to the finished goods inventoryFinished Goods Inventory account?

Accepted Answer

A)   Job cost sheet
B)   Work ticket
C)   Standard cost card
D)   Materials requisition

Question 20

A materials requisition in a job-order cost system is used as a:

Accepted Answer

A)   A source document for assigning costs to individual departments.
B)   A subsidiary account for recording the materials used on each job.
C)   Request form for getting the necessary materials from the materials store room.
D)   A means of ordering materials from outside suppliers.

Exam 12: Job-Order, Process, and Hybrid Costing Systems

Indicate whether each of the following statements about process costing systems is

Indicate whether each of the following statements about product cost systems is

Select the correct formula for computing the cost to be assigned to ending inventory in a process costing system.

Job-order and process cost systems are two different costing systems that a company chooses between based on the preference of management.

Payment of cash for sales staff salaries is an asset exchange transaction.

At the time indirect materials are issued to production,the balance in the:

The purchase of raw materials for cash is:

Which of the following is incorrect regarding a job-order cost system?

O'Hare Company,is a manufacturing firm that uses a job-order cost system to determine the costs of its products.During 2014the current accounting period,O'Hare paid $700 for equipment rental and other indirect costs.The recognition of this event would:

Payment of cash for production department employee wages is an asset exchange transaction.

Which source document provides information for the journal entry to transfer costs from the work in process inventoryWork in Process Inventory account to the finished goods inventoryFinished Goods Inventory account?

A materials requisition in a job-order cost system is used as a: