Cost 2 - Exam 2
Serile Pharma places 820 units in production during the month of January. All 820 units are completed during the month. It had no opening inventory. Direct material costs added during January was $96,000 and conversion costs added during January was $10,600.What is the total cost per unit of the product produced during January?
$130
Colil Computer Systems, Inc., manufactures printer cir cuit cards. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $307,000 during the month. Work-in-process records revealed that 15,000 card units were started in January, 7500 card units were complete, and 4600 card units were spoiled as expected. Ending work-in-process card units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete. What is the direct material cost assigned to good units completed?
$307,000/15,000= 20.47 (7,500*20.47)= 153,525 (4,600*20.47)= 94,162 153,525 + 94,162= 247,687
Vital Industries manufactured 2400 units of its product Huge in the month of April. It incurred a total cost of $132,000 during the month. Out of this $132,000, $45,400 comprised of direct materials used in the product and the rest was incurred because of the conversion cost involved in the process. Ryan had no opening or closing inventory. What will be the total cost per unit of the product, assuming conversion costs contained $10,100 of indirect labor?
$55
Ventaz Corp manufactures small windows for back yard sheds. Historically, its demand has ranged from 30 to 50 windows per day with an average of 47. Alex is the one production worker and he works eight hours a day, five days a week. Each order is one window and each window takes 99 minutes. What is the average waiting time in minutes?
(47*9^2) / (2 * (480-(47*9)) 33.39
_____ is a formal means of distinguishing between random and nonrandom variation in an operating process. A. Statistical process control (SPC) B. A Pareto diagram C. A cause-and-effect diagram D. A fishbone diagram
A cause-and-effect diagram
Colil Computer Systems, Inc., manufactures printer circuit cards. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $306,000 during the month. Work-in-process records revealed that 11,500 card units were started in January, 5750 card units were complete, and 5200 card units were spoiled as expected. Ending work-in-process card units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete. What is the direct material cost per equivalent unit?
Costs to account for: $306,000/ Equivalent Units: 11,500 units =$26.61
What is Appraisal?
Costs to detect non-conforming products Ex: Inspection, product testing...
What is Prevention?
Costs to prevent the production of non-conforming products. Ex: Design engineering, product engineering, quality training
What are the main features of JIT production? A. Organize production in manufacturing cells, hire and retain workers who are multi-skilled, and aggressively pursue total quality management (TQM) to eliminate defects. B.Place emphasis on reducing both setup time and manufacturing lead time and carefully select suppliers who are capable of delivering quality materials in a timely manner. C.Sharing of information across companies enables a reduction in inventory levels at all stages, fewer stockouts at the retail level, and a reduction in expedited manufacturing orders. D. Both A and B E. Both B and C
Both A and B
Which of the following companies is most likely to use process costing? A) Crimpson Color, a company selling customized garments for niche customers B) Effel & Associates, a consulting firm providing various audit and related services C) Red Paste Inc., a company manufacturing and selling toothpaste on a large scale D) Grimpy Corp., a company manufacturing furniture for customers as per their requirements
C) Red Paste Inc., a company manufacturing and selling toothpaste on a large scale
What is Internal failure?
Costs incurred on defective products *before* shipment. Ex: Spoilage, rework, scrap
Which of the following correctly reflects what units passed inspection this period? Assume beginning work in process was completed and ending work in process was started during the period. Inspection Point at Completion Level 10% 50% 100% A) Beginning work in process (30% complete) No No Yes B) Started and completed No Yes Yes C) Ending work in process (40% complete) Yes No Yes D) Beginning work in process (5% complete) Yes Yes Yes
D
When spoiled goods have a disposal value, the net cost of the spoilage is computed by ________ A)deducting disposal value from the costs of the spoiled goods accumulated to the inspection point B) adding the costs to complete a saleable product to the costs accumulated to the inspection point C) deducting the costs to complete a saleable product from the costs accumulated to the inspection point D) adding disposal value to the costs of the good units transferred
deducting disposal value from the costs of the spoiled goods accumulated to the inspection point
The costs of normal spoilage are allocated to the units in ending work-in-process inventory, in addition to completed units if the units ________. A) in ending inventory have not passed the inspection point B) in ending work-in-process inventory have passed the inspection point C) in ending work in process inventory are more than 25% complete D) in ending work-in-process inventory are less than 25% complete
in ending work-in-process inventory have passed the inspection point
Spoilage that is an inherent result of the particular production process and arises even under efficient operating conditions is referred to as ________. A) incremental spoilage B) normal spoilage C) irregular spoilage D) direct spoilage
normal spoilage
A golf shoe manufacturer makes and sells thousands of golf shoes each year through two channels: wholesale to sporting good stores and direct to consumers through it's custom portal. Customers can specify modifications to 6 basic golf shoe models including spiked or spikeless, traditional or casual, even laced or other closures. From there, customers can specify many details to their preferred model such as size and width (different for each foot), favorite colors for the base, saddle, accents and laces. A customer can choose to embroidered a name or initials or include the logo of their favorite MLB, NFL, NHL or NCAA team. Which of the following costing systems would make the most sense for the custom golf shoe operation and the main product operation (not customized/wholesale)? A. operation-costing and process costing B.job costing for both operations C.operation-costing and job costing D.process costing for both operations
operation-costing and process costing
The four cost categories in a cost of quality program are A. product design, process design, internal success, and external success. B. prevention, appraisal, internal failure, and external failure. C. design, conformance, control, and process. D. design, process specification, on-time delivery, and customer satisfaction.
prevention, appraisal, internal failure, and external failure.
Costing systems that are used for the costing of like or similar units of products in mass production are called ________. A) inventory-costing systems B) job-costing systems C) process-costing systems D) weighted-average costing systems
process-costing systems
An advantage of financial cost of quality measures is that they A. are often easy to quantify and understand. B. provide immediate short-run feedback on whether quality improvement efforts have, in fact, succeeded in improving quality. C. direct attention to physical processes and therefore focus attentions on the precise problem areas needing improvement. D. provide a single, summary measure of quality performance.
provide a single, summary measure of quality performance.
Without nonfinancial quality measures, A. quality problems might not be identified until it is too late. B.the precise problem areas that need improvement cannot be identified. C.the operating income cannot be improved. D.the short-run effectiveness of financial quality measures is questionable.
quality problems might not be identified until it is too late.
EOQ formula
square root of 2DP/C
The weighted-average process-costing method calculates the equivalent units by ________. A)considering only the work done during the current period B) the units started during the current period minus the units in ending inventory C) the units started during the current period plus the units in ending inventory D) the equivalent units completed during the current period plus the equivalent units in ending inventory
the equivalent units completed during the current period plus the equivalent units in ending inventory
Assembly department of Zahra Technologies had 100 units as work in process at the beginning of the month. These units were 60% complete. It has 300 units which are 35% complete at the end of the month. During the month, it completed and transferred 500 units. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Zahra uses weighted -average process-costing method. The number of equivalent units of work done during the month for direct materials is ________.
Equivalent units for direct material = 500 units + 300 units-100 units = 700 units
Assembly department of Zahra Technologies had 200 units as work in process at the beginning of the month. These units were 50% complete. It has 300 units which are 25% complete at the end of the month. During the month, it completed and transferred 500 units. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Zahra uses weighted-average process- costing method. Calculate the total equivalent units in ending inventory for assignment of conversion costs?
Equivalent units in ending inventory = 300 units × 25% = 75 units
What is a cause and effect diagram (fishbone)?
Expresses potential reasons for a problem. Goal= to continuously reduce the defect rate and the standard deviation.
What is a control chart?
Helps distinguish random from non-random variations in an operating process.
A key question in relevant cost and relevant revenue analysis is: A. By how much can sales be increased and costs reduced? B. What purpose is best served for cost allocation and which criterion is most appropriate? C. How will total costs and total revenues change under each alternative? D. What are the amounts of incremental costs and incremental revenues under each alternative?
How will total costs and total revenues change under each alternative?
Rector Corporation is examining its quality control program. Which of the following statements is/are correct? I.Rework costs should be regarded as a cost of quality when the rework is caused by internal failure. II.Prevention costs are costs that are incurred to prevent the sale and production of defective units. III.Internal failure costs are costs of failure of machinery on the production line.
I only
Which of the following statements is true? A. In a job-costing system, overheads are allocated to all units equally. B. In a process-costing system, each unit uses approximately the same amount of resources. C. In a job-costing system, average production cost is calculated for all units produced. D. In a process-costing system, individual jobs use different quantities of production resources.
In a process-costing system, each unit uses approximately the same amount of resources.
What is a pareto diagram?
Indicate how frequently defects occur ranked from most to least frequent.
Just-in-time inventory assumes all of the following, except: A. Just-in-time inventory presumes first-in, first-out costing. B. Resources will only be introduced as they are needed. C. Zero defects. D. Production of components occurs only when requested further downstream in the manufacturing cycle.
Just-in-time inventory presumes first-in, first-out costing.
Which of the following is not a nonfinancial performance measure for customer satisfaction? A. Number of defective units shipped to customers as a percentage of the total units of product shipped B. Number of customer complaints C. On-time delivery D. Number of defects for each product line
Number of defective units shipped to customers as a percentage of the total units of product shipped
Which of the following is true of unit costs of normal and abnormal spoilage when they are detected at the same inspection point? A) Unit cost of normal spoilage is more than unit cost of abnormal spoilage. B) Unit cost of normal spoilage is equal to unit cost of abnormal spoilage. C) Unit cost of abnormal spoilage is more than unit cost of normal spoilage. D) Addition of unit cost of normal spoilage and unit cost of abnormal spoilage is equal to unit cost of good units produced and transferred.
Unit cost of normal spoilage is equal to unit cost of abnormal spoilage.
Manufacturing Cycle Efficiency Equation (MCE)
Value added manufacturing time/ manufacturing cycle time
Assuming beginning work in process is zero, the equivalent units of production computed using FIFO versus weighted average will have the following relationship: A. Weighted-average equivalent units are always greater than FIFO equivalent units. B. FIFO equivalent units will be greater than weighted-average equivalent units. C. FIFO equivalent units will be less than weighted-average equivalent units. D. Weighted-average equivalent units will be equal to FIFO equivalent units.
Weighted-average equivalent units will be equal to FIFO equivalent units.
Costs of normal spoilage are usually accounted for as ___. A) a deduction from the cost of goods sold B) a component of the costs of good units manufactured C) a "loss from normal spoilage account" in income statement D) a liability on a balance sheet
a component of the costs of good units manufactured
The purpose of the equivalent- unit computation is to ________. A) convert completed units into the amount of partially completed output units that could be made with that quantity of input B) assist the business in determining the cost assigned to ending inventory and work-in-process inventory C) predict the future production capabilities of the organization D) satisfy the GAAP requirements which requires all partially completed goods to be reported as equivalent-units
assist the business in determining the cost assigned to ending inventory and work-in-process inventory
In a process-costing system average unit costs are calculated ________. A. by multiplying total costs in a given accounting period by total units produced in that period B. by multiplying total costs in a given accounting period by units started in that period C. by dividing total costs in a given accounting period by total units produced in that period D.by dividing total costs in a given accounting period by units started in that period
by dividing total costs in a given accounting period by total units produced in that period
An illustration that resembles the bone structure of a fish and identifies potential reasons why a problem exists is called: A. control chart B. Pareto diagram C. time-series graphs D. cause-and-effect diagram
cause-and-effect diagram
What us external failure?
costliest The cost of defective products *after* they are shipped Ex: Customer support, warranty repair, liability claims
The amount of time between when a customer places an order for a product or requests a service to when the product or service is delivered to that customer is called A. customer-response time. B. order receipt time. C. order delivery time. D. manufacturing lead time.
customer-response time.
All of the following are accurate regarding the treatment of normal or abnormal spoilage by a firm with the exception of: A. Abnormal spoilage has no financial statement impact. B.Abnormal spoilage is excluded in the standard cost of a manufactured product. C.Normal and abnormal spoilage units affect the equivalent units of production. D.Normal spoilage is capitalized as part of inventory cost.
Abnormal spoilage has no financial statement impact.
Which of the following cost categories are important in managing goods for sale in a retail company? A. 1. carrying costs 2. stockout costs B. 1. quality costs 2. shrinkage costs C. 1. purchasing costs 2. ordering costs D. All of the above are correct
All of the above are correct
Assembly department of Zahra Technologies had 100 units as work in process at the beginning of the month. These units were 60% complete. It has 200 units which are 20% complete at the end of the month. During the month, it completed and transferred 600 units. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Zahra uses weighted-average process-costing method. What is the total equivalent units in ending inventory for assignment of direct materials cost?
As direct materials are added at the beginning of production, equivalent units = 200 units
Journal Entry for Finished Goods SOLD
DR. COGS CR. Finished Goods Control
Journal Entry for recognizing material scrap to all jobs at time of sale
DR. Cash or AR CR. Manufacturing overhead control
Journal Entry for recognizing immaterial scrap at time of sale
DR. Cash or AR CR. Scrap Revenue
Journal entry for recognizing material scrap related to a specific job at time of sale
DR. Cash or AR CR. WIP Control
Journal Entry for under/overallocation of conversion costs
DR. Conversion Costs Allocated DR/CR. COGS CR. Conversion Costs Control
Journal Entry for conversion costs incurred
DR. Conversion Costs Control CR. Various Accounts
Journal Entry for Completed finished goods
DR. Finish Goods Control CR. Accounts Payable Control CR. Conversion Costs Allocated
Journal entry for recognizing material scrap as inventory at time of production and recording at NRV
DR. Materials Control CR. WIP Control DR. Cash or AR CR. Materials Control
Comfort chair company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 73,900 chairs. During the month, the firm completed 78,000 chairs, and transferred them to the Finishing Department. The firm ended the month with 10,400 chairs in ending inventory. There were 16,000 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Comfort. Beginning work in process was 20% complete as to conversion costs, while ending work in process was 85% complete as to conversion costs.
Number of equivalent units in beginning inventory = 12,800 (16,000 × 0.8) Total equivalent units for conversion costs = 12,800 + 63,500 + 8840 = 85,140 units
Which of the following is a chart which indicates how frequently each type of defect occurs? A. fishbone diagram B. Pareto diagram C. scatter diagram D. control chart
Pareto diagram
Nonfinancial measures for internal business process quality performance include all but which of the following? A. Employee empowerment B. Process yields C. Feedback D.Product defect levels
Product defect levels
Which of the following categories of costs are important when managing inventories of goods for sale according to the authors of the text? a. Purchasing, ordering, supply, spoilage, and opportunity b. Purchasing, stockout, carrying, ordering, and quality c. Buying, holding, invoicing, opportunity, and investment d. Supply, obsolescence, holding, stockout, and transportation-in
Purchasing, stockout, carrying, ordering, and quality
What are JIT benefits and costs? A. The benefits of JIT production include lower quality items, but higher margins from better flow of information, higher quality, and faster delivery, as well as simpler accounting systems. The cost of JIT production is ordering costlong dash—the costs of preparing and issuing purchase orders, receiving and inspecting the items included in the orders, and matching invoices received, purchase orders, and delivery records to make payments. B. The benefits of JIT production include higher quality, higher cost items that produce higher margins from better flow of information, higher quality, and faster delivery, as well as simpler accounting systems. The cost of JIT production is purchasing costlong dash—the costs of goods acquired from suppliers, including incoming freight costs. C. The benefits of JIT production include lower freight costs and lower margins from better flow of information, higher quality, and faster delivery, as well as simpler accounting systems. The cost of JIT production is carrying costlong dash— the costs that arise while goods are being held in inventory. D. The benefits of JIT production include lower costs and higher margins from better flow of information, higher quality, and faster delivery, as well as simpler accounting systems. The cost of JIT production is the risk of stockoutslong dash—a production problem in any step of the manufacturing process will result in materials (goods) not being produced in time.
The benefits of JIT production include lower costs and higher margins from better flow of information, higher quality, and faster delivery, as well as simpler accounting systems. The cost of JIT production is the risk of stockoutslong dash—a production problem in any step of the manufacturing process will result in materials (goods) not being produced in time.
Alex is injured and rushed to Care Hospitals for treatment. He spent 62 minutes at the hospital out of which he filled a form for 18 minutes, stood in the queue for 13 minutes, doctor treated him for 21 minutes, and payment time was 10 minutes. What is the service cycle efficiency for his visit?
Treatment time/ total time 21/62 = 33.87%
Comfort chair company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 73,600 chairs. During the month, the firm completed 78,300 chairs, and transferred them to the Finishing Department. The firm ended the month with 10,600 chairs in ending inventory. There were 15,800 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Comfort. Beginning work in process was 20% complete as to conversion costs, while ending work in process was 80% complete as to conversion costs.
umber of units started and completed during February = 73,600 chairs (units started in production)-10,600 chairs (ending inventory) = 63,000 chairs
Delays in customer-response time occur because of the A. uncertainty about when customers will order products. B. unused capacity that impedes average manufacturing time. C. customers' response in paying invoices on time. D. overemphasis on measuring time drivers.
uncertainty about when customers will order products.
Spoilage refers to ________. A) units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units B) units of production whether fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices C) residual material that results from manufacturing a product D) products of a joint production process that have low total sales values relative to the total sales value of the main product
units of production whether fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices
A distinct feature of the FIFO process-costing method is that the ________. A) work done on beginning inventory before the current period is blended with the work done during the current period in the calculation of equivalent units B) work done on beginning inventory before the current period is kept separate from the work done during the current period in the calculation of equivalent units C) work done on ending inventory is kept separate from the work done during the current period in the calculation of equivalent units and is usually not included in the calculation D) FIFO process-costing method is only minimally different from the weighted-average process-costing method
work done on beginning inventory before the current period is kept separate from the work done during the current period in the calculation of equivalent units