Exam 2 Financial Accounting

In the manufacture of 8,000 units of a product, direct materials cost incurred was $154,600, direct labor cost incurred was $84,000, and applied factory overhead was $45,500. What is the total conversion cost?

$129,500

In the manufacture of 10,000 units of a product, direct materials cost incurred was $165,000, direct labor cost incurred was $105,000, and applied factory overhead was $53,000. What is the total conversion cost?

$158,000

If a company uses a process costing system to account for the costs in its five production departments, how many work in process accounts will it use?

5

In a process cost system, the amount of work in process inventory is valued by

allocating departmental costs between completed and partially completed units

A process cost accounting system records all actual factory overhead costs directly in the Work in Process account.

False

Activity-based costing is much easier to apply than single plantwide factory overhead allocation.

False

The cost of production report reports the cost of the goods sold.

False

The entry to transfer goods in process from Department X to Department Y includes a debit to Work in Process—Department X.

False

The cost system best suited to industries that manufacture a large number of identical units of commodities on a continuous basis is

Process

The cost of production report reports the cost charged to production and the costs allocated to finished goods and work in process.

True

When a plantwide factory overhead rate is used, overhead costs are applied to all products by a single rate.

True

Using multiple department factory overhead instead of a single plantwide factory overhead rate:

results in more accurate product costs. results in distorted product costs.

Which of the following is not a reason for banks to use activity-based costing?

to determine service quality to determine the amounts charged to customers for services provided

Challenger Factory produces two similar products - regular widgets and deluxe widgets. The total plant overhead budget is $675,000 with 300,000 estimated direct labor hours. It is further estimated that deluxe widget production will need 3 direct labor hours for each unit and regular widget production will require 2 direct labor hours for each unit.

$391,500

The two categories of cost comprising conversion costs are

Direct Labor and Factory Overhead

Which of the following is not included in conversion costs?

Direct Materials

Managers depend on accurate factory overhead allocation to make decisions regarding product mix and product price.

True

Which of the following is not a characteristic of a process cost system?

The system measures costs for each completed job

Activity rates are determined by

dividing the cost budgeted for each activity pool by the estimated activity base for that pool

A process cost system be appropriate for a

natural gas refinery