ACT Exam 1

The cost of electricity for running production equipment is classified as:

Converstion cost yes, Period costs no

Period Costs

all the costs that are not product costs. All selling and administrative expenses are treated as period costs. -Sales Commissions, Advertising, executive Salaries, Public Relations

Under a job-order costing system, the dollar amount transferred from Work in Process to Finished Goods is the sum of the costs charged to all jobs:

completed during the period

The amount of overhead applied to a particular job equals the actual amount of overhead caused by the job.

False

Acheson Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its most recent year of operations. Estimated manufacturing overhead $157,050 Estimated machine-hours 4,500 Actual manufacturing overhead $156,000 Actual machine hours 4,580 The applied manufacturing overhead for the year is closest to

159,842 Estimated manufacturing overhead/ Estimated machine hours= 34.9* 4,580

Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours (DLH). The company based its predetermined overhead rate for the current year on the following data: Total Direct-labor hours 40,000 Total fixed manufacturing overhead cost: $96,000 Variable manufacturing overhead per direct- labor hour: $3.00 Direct Hour labor rate $40.00 Recently, Job P951 was completed with the following characteristics: Number of unites in the job 20 Direct materials $755 Direct labor cost $4,000 The predetermined overhead rate per DLH is closest to:

5.40 Rate= Estimated fixed overhead/ Estimated labor hours + Variable rate

Which of the following is an example of a period cost in a company that makes clothing?

Advertising cost for a new line of clothing

Fassino Corporation reported the following data for the month of November: Direct Materials: $51,000 Direct Labor Costs: $54,000 Manufacturing Overhead: $82,000 Selling Expense: $18,000 Administrative Expense: $42,000

Direct Labor costs+ Manufacturing overhead= $136,000

Two of the reasons why manufacturing overhead may be underapplied are: (1) the estimated total manufacturing overhead cost may have been too high; and (2) the estimated total amount of the allocation base may have been too low.

False The estimated total amount of the allocation base must be high

Predetermined overhead rate

estimated annual overhead costs / expected annual operating activity Estimated fixed overhead/ Estimated labor hours + variable rate

A debit to manufacturing overhead could be any of the following except:

overhead cost applied to work in process Inventory

Grib Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. The predetermined overhead rates for the year are 200% of direct labor cost for Department A and 50% of direct labor cost for Department B. Job 436, started and completed during the year, was charged with the following costs: A. B Direct Materials $50,000. $10,000 Direct Labor ? $60,000 Manufacturing overhead $80,000. ? The total manufacturing cost assigned to Job 436 was:

270,000 Direct cost of dept A = (Manufacturing overhead / 200)*100 = ($80,000/200)*100 = $40,000 Manufacturing overhead of dept B = 50% *($60,000) = $30,000 Total Manufacturing cost of Job 436 = $50,000 + $40,000 + $80,000 + $10,000+$60,000+$30,000 = $270,000

Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $360,000 or a new model 220 machine costing $340,000 to replace a machine that was purchased 7 years ago for $348,000. The old machine was used to make product I43L until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 220 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product I43L. Management also considered, but rejected, the alternative of simply dropping product I43L. If that were done, instead of investing $340,000 in the new machine, the money could be invested in a project that would return a total of $411,000. In making the decision to invest in the model 220 machine, the opportunity cost was:

411,000

The relative proportion of variable, fixed, and mixed costs in a company is known as the company's:

Cost Structure

If a job is not completed at year end, then no manufacturing overhead cost would be applied to that job when a predetermined overhead rate is used.

Fasle MOH has to be 'cleared' at the end of every period, so works in process have MOH assigned as they are worked on.

Product Costs

Include all costs involved in acquiring or making a product -Direct Materials, Direct Labor, Manuftering overhead

The costs of direct materials are classified as:

Manufacturing cost, prime cost and no conversion cost

Which of the following is the correct formula to compute the predetermined overhead rate?

Predetermined overhead rate = Estimated total manufacturing overhead costs ÷ Estimated total units in the allocation base

A given cost can be direct or indirect. The classification can change if the cost object changes.

True

The three cost elements ordinarily included in product costs are direct materials, direct labor, and manufacturing overhead.

True

The cost of goods manufactured for a period includes only the costs of units that are completed during the period.

True The cost of goods manufactured includes only cost of unites completed and finished during the year

Barredo Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: Direct materials: $6.60 Direct Labor: $3.65 Variable manufacturing overhead: $1.65 Fixed Manufacturing overhead: $2.80 Fixed selling expense: $0.70 Fixed administrative expense $0.40 Sales commissions: $0.50 Variable Administrative expense: $0.45 If 4,000 units are sold, the variable cost per unit sold is closest to:

Variable Cost= Direct material+ Direct labor + Variable manuftering overhead + Sales commission + Variable administrative expense. = 12.85

In the standard cost formula Y = a + bX, what does the "b" represent?

Y= Total mixed cost A= Total fixed cost B= The variable cost per unit of activity X= Level of activity

The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n):

indirect material cost

In a job-order costing system, which of the following events would trigger recording data on a job cost sheet?

the purchase of direct materials

Variable Costs

varies in total, in direct proportion to changes in level of activity -COGS for merchandising companies, Direct Materials, Direct Labor, Variable elements manufacturing overhead, indirect materials, supplies, power, commissions, shipping costs