Cost Accounting

Rapid Enterprises allocates manufacturing overhead to its cost objects on the basis of 80% of direct material cost. If Product 17X had $95,000 of manufacturing overhead allocated to it during May, the direct materials assigned to Product 17X was:

$95,000/0.80 = $118,750

QuikCard processes credit card receipts for local banks. QuikCard processed 1,500,000 receipts in October. All receipts are processed the same day they are received. October costs were labor of $38,000 and overhead of $52,000. What is the cost to process 1,600 receipts?

($38,000 + $52,000)/1,500,000 = $0.06/receipt × 1,600 receipts = $96.00

The Phantom Corporation started 6,800 units during February. Phantom started the month with 900 units in process (45% complete) and ended the month with 600 units in process (45% complete). How many units were transferred to the Finished Goods Inventory during February?

900 + 6,800 − 600 = 7,100 units

Which of the following statements is true?

A problem with activity-based costing (ABC) is that it requires more record keeping than other methods.

In computing the cost per equivalent unit, the weighted-average method considers:

Current costs plus costs in beginning WIP inventory.

What are the transfers from the Finished Goods Inventory called?

Cost of Goods Sold.

The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method:

does not consider the degree of completion of units in the beginning work-in-process inventory when computing equivalent units of production.

Underapplied overhead occurs when the balance in the Manufacturing Overhead Control account is:

greater than the balance in the Applied Manufacturing Overhead account.

A company should use process costing, rather than job costing, if:

the product is composed of mass-produced homogeneous units.

Direct materials $3,791 Direct labor-hours 83 labor-hours Direct labor wage rate $13 per labor-hour Machine-hours 129 machine-hours The company allocates manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $28 per machine-hour. The total cost for Product B-09 for the current period would be:

Direct materials $3,791 Direct labor (83 direct labor-hours × $13.00 per direct-labor hour) 1,079 Overhead (129.00 machine-hours × $28 per machine-hour) 3,612 Total manufacturing cost for Product B-09 $8,482

The journal entry to write-off a significant underapplied overhead balance at the end of an accounting period is:

Dr. Applied MOH Dr. WIP Dr. Finished Goods Dr. COGS Cr. MOH Control

The journal entry to record the completion of a job in a job costing system is:

Dr. Finished Goods Cr. WIP

The journal entry to record the actual manufacturing overhead costs for indirect materials is:

Dr. MOH Control Cr. Materials Inv

The journal entry to record the requisition of direct materials for new jobs started during the period is:

Dr. WIP Cr. Materials Inv

What is the typical effect on the numbers of cost pools and cost assignment bases when an activity-based costing (ABC) system replaces a traditional costing system? (CPA adapted)

Increase, Increase

Which of the following accounts is used to accumulate the actual manufacturing overhead costs incurred during a period?

Manufacturing Overhead Control.

Using the department allocation method, a company establishes a separate overhead allocation rate for each department.

True

Which of the following statements is true?

Volume-based costing has typically resulted in lower gross margins for high-volume products and higher gross margins for low-volume products.

In a process costing system, the application of factory overhead usually would be recorded as an increase in: (CPA adapted)

Work-in-process inventory

When a department or product line is dropped, the common fixed costs which had been allocated to that department:

are allocated to the remaining departments or product lines.

In a job costing system, the dollar amount in the journal entry that transfers the costs of jobs from Work-in-Process Inventory to Finished Goods Inventory is the sum of the costs charged to all jobs:

completed during the period.

Direct materials issued to production$91,000 Indirect materials issued to production 9,000 Manufacturing overhead incurred 126,000 Manufacturing overhead applied 114,000 Direct labor costs 108,000 Eagle had neither beginning nor ending inventory in Work-in-Process Inventory. What was the cost of jobs completed in February? (CPA adapted)

DM ($91,000) + DL ($108,000) + OH applied ($114,000) = $313,000.

An error was made by Marrow Company in computing the percentage-of-completion of the current year's ending Work-in-Process Inventory. The error resulted in the assignment of a lower percentage of completion to each component of the inventory than actually was the case. There was no beginning Work-in-Process Inventory. What is the effect of this error on (1) cost assigned to cost of goods completed for the period and (2) the computation of costs per equivalent unit?

Overstated; Overstated

Volume-based costing allocates indirect product costs based on the volume of output, using such allocation bases as direct labor hours, machine hours, or the amount of direct material used in the production process. Activity-based costing (ABC) has consistently shown that volume-based costing ___________ the cost of high-volume products and ______________ the cost of low-volume products.

Overstates; Understates

The equivalent unit concept refers to the actual amount of work during the period stated in terms of the work required to complete an equal number of whole units.

True

If materials are added continuously throughout the production process, then the equivalent units for materials will always equal the equivalent units for the conversion costs.

True

If materials are only added at the beginning of the production process, then the degree of completion for materials in the ending Work-in-Process Inventory is always 100%.

True

One of the primary differences between job costing for service firms and job costing for manufacturing companies is service firms generally:

use fewer direct materials.