Accounting 2 Exam 1
The following partially completed T-accounts summarize transactions for Faaberg Corporation during the year: The Cost of Goods Manufactured was:
(Finished Goods) 2nd row (Left)
The following partially completed T-accounts summarize transactions for Faaberg Corporation during the year: The manufacturing overhead applied was:
(Manufacturing Overhead) 1st row (Right)
An example of a committed fixed cost is:
a long-term equipment lease.
Overapplied manufacturing overhead would result if:
manufacturing overhead costs incurred were less than manufacturing overhead costs charged to production.
Gallon Corporation had $24,000 of raw materials on hand on April 1. During the month, the Corporation purchased an additional $52,000 of raw materials. During April, $62,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $2,000. The debits to the Work in Process account as a consequence of the raw materials transactions in April total:
$60,000
At the beginning of December, Altro Corporation had $26,000 of raw materials on hand. During the month, the Corporation purchased an additional $76,000 of raw materials. During December, $72,000 of raw materials were requisitioned from the storeroom for use in production. The credits entered in the Raw Materials account during the month of December total:
$72,000
The following partially completed T-accounts summarize transactions for Faaberg Corporation during the year: The manufacturing overhead was:
$800 underapplied (Manufacturing Overhead) Difference of all boxes Left = Underapplied Right = Overapplied
Which of the following would usually be found on a job cost sheet under a normal cost system?
Actual direct material cost: Yes Actual manufacturing overhead cost: No
Fatzinger Corporation has two production departments, Milling and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department's predetermined overhead rate is based on machine-hours and the Assembly Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: The predetermined overhead rate for the Assembly Department is closest to:
Assembly Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department) = $57,400 + ($3.40 per direct labor-hour × 7,000 direct labor-hours) = $57,400 + $23,800 =$81,200 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred =$81,200 ÷ 7,000 direct labor-hours = $11.60 per direct labor-hour
The costs of direct materials are classified as:
Conversion Cost: N Manufacturing Cost: Y Prime Cost: Y
The cost of electricity for running production equipment is classified as:
Conversion Cost: Y Period Cost: N
In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the cost of goods manufactured is computed according to which of the following equations?
Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory - Ending work in process inventory
Swango Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: The estimated total manufacturing overhead for the Customizing Department is closest to:
Customizing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department) =$86,400 + ($3.00 per direct labor-hour × 8,000 direct labor-hours) = $86,400 + $24,000 =$110,400
Wages paid to the supervisor of the warehouse where raw materials and parts are temporarily stored before being used in production is considered an example of:
Direct Labor: N Period Cost: N
Landmann Corporation's relevant range of activity is 7,000 units to 11,000 units. When it produces and sells 9,000 units, its average costs per unit are as follows: For financial reporting purposes, the total amount of product costs incurred to make 9,000 units is closest to:
Direct materials $6.35 Direct labor 4.10 Variable manufacturing overhead 1.35 Variable manufacturing cost per unit 6.35+4.10+1.35=$11.80 Total variable manufacturing cost ($11.80 per unit × 9,000 units produced) $106,200 Total fixed manufacturing overhead cost ($13.50 per unit × 9,000 units produced) 121,500 Total product (manufacturing) cost 106200+121500= $227,700
Brault Corporation has provided the following information: If 10,000 units are sold, the variable cost per unit sold is closest to:
Direct materials $6.85 Direct labor 3.85 Variable manufacturing overhead 1.25 Sales commissions 1.00 Variable administrative expense 0.55 Variable cost per unit sold 6.85+3.85+1.25+1+.55= $13.50
Camm Corporation has two manufacturing departments--Forming and Assembly. The company used the following data at the beginning of the year to calculate predetermined overhead rates: Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. The departmental predetermined overhead rate in the Assembly Department is closest to:
Estimated fixed manufacturing overhead $4,600 Estimated variable manufacturing overhead ($2.50 per MH × 2,000 MHs) 5,000 Estimated total manufacturing overhead cost (a)$9,600 Estimated total machine-hours (b) 2,000MHs Departmental predetermined overhead rate (a) ÷ (b) = $4.80per MH
Purves Corporation is using a predetermined overhead rate that was based on estimated total fixed manufacturing overhead of $121,000 and 10,000 direct labor-hours for the period. The company incurred actual total fixed manufacturing overhead of $113,000 and 10,900 total direct labor-hours during the period. The predetermined overhead rate is closest to:
Estimated total fixed manufacturing overhead (a) $121,000 Estimated activity level (b) 10,000 Predetermined overhead rate (a) ÷ (b) = $12.10
Baj Corporation uses a predetermined overhead rate base on machine-hours that it recalculates at the beginning of each year. The company considers all of its manufacturing overhead costs to be fixed and it has provided the following data for the most recent year. The predetermined overhead rate per machine-hour would be closest to:
Estimated total fixed manufacturing overhead (a)$534,000 Estimated activity level (b) 30,000 Predetermined overhead rate (a) ÷ (b) = $17.80
Fusaro Corporation uses a predetermined overhead rate base on machine-hours that it recalculates at the beginning of each year. The company has provided the following data for the most recent year. The amount of manufacturing overhead that would have been applied to all jobs during the period is closest to: (Round your intermediate calculations to 2 decimal places.)
Estimated total fixed manufacturing overhead (a)$684,000 Estimated activity level (b) 40,000 Predetermined overhead rate (a) ÷ (b) = (c) $17.10 Actual activity level (d) 37,700 Manufacturing overhead applied (c) x (d) =$644,670
Giannitti Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the upcoming year appear below: The predetermined overhead rate for the recently completed year was closest to:
Estimated total manufacturing overhead = $1,058,040 + ($3.01 per machine-hour × 36,000 machine-hours) = $1,166,400 Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $1,166,400 ÷ 36,000 machine-hours =$32.40 per machine-hour
Longobardi Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the labor-hours for the upcoming year at 46,000 labor-hours. The estimated variable manufacturing overhead was $6.25 per labor-hour and the estimated total fixed manufacturing overhead was $1,026,260. The actual labor-hours for the year turned out to be 41,200 labor-hours. The predetermined overhead rate for the recently completed year was closest to:
Estimated total manufacturing overhead = $1,026,260 + ($6.25 per labor-hour × 46,000 labor-hours) = $1,313,760 Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $1,313,760 ÷ 46,000 labor-hours = $28.56 per labor-hour
Laflame Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: The estimated total manufacturing overhead is closest to:
Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $357,000 + ($3.90 per machine-hour × 70,000 machine-hours) = $357,000 + $273,000 = $630,000
When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the following would be true?
Gross margin will increase.
As the level of activity increases, how will a mixed cost in total and per unit behave?
In Total: Increase Per Unit: Decrease
Which of the following statements about using a plantwide overhead rate based on direct labor is correct?
It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.
Prayer Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: The estimated total manufacturing overhead for the Machining Department is closest to:
Machining Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department) = $110,200 + ($2.00 per machine-hour × 19,000 machine-hours) = $110,200 + $38,000 =$148,200
Which of the following costs could contain both variable and fixed cost elements with respect to the total output of the company?
Manufacturing overhead.
Refer to the T-account below: The ending balance of $8,000 represents which of the following?
Overapplied overhead.
Kreuzer Corporation is using a predetermined overhead rate of $22.30 per machine-hour that was based on estimated total fixed manufacturing overhead of $446,000 and 20,000 machine-hours for the period. The company incurred actual total fixed manufacturing overhead of $409,000 and 18,200 total machine-hours during the period. The amount of manufacturing overhead that would have been applied to all jobs during the period is closest to:
Predetermined overhead rate (a)$22.30 Actual activity level (b) 18,200 Manufacturing overhead applied (a) x (b) = $405,860
In a job-order costing system that is based on machine-hours, which of the following formulas is correct?
Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours
Lister Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year: Results of operations: The total amount of manufacturing overhead applied to production is:
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $624,000 ÷ 39,000 direct labor-hours = $16.00 per direct labor-hour Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred = $16.00 per direct labor-hour × 36,000 direct labor-hours =$576,000
Brendal Corporation is a manufacturer that uses job-order costing. The company has supplied the following data for the just completed year: Results of operations: How much is the total manufacturing cost added to Work in Process during the year?
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $693,000 ÷ 42,000 direct labor-hours = $16.50 per direct labor-hour Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred = $16.50 per direct labor-hour × 49,000 direct labor-hours =$808,500 Direct materials $525,000 Direct labor 690,000 Manufacturing overhead applied 808,500 Total manufacturing cost =$2,023,500
Steele Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. Steele Corporation has provided the following estimated costs for next year: Steele estimates that 10,000 direct labor-hours and 16,000 machine-hours will be worked during the year. The predetermined overhead rate per hour will be:
Salary of production supervisor $40,000 Indirect materials 8,000 Rent on factory equipment 20,000 Manufacturing overhead =$68,000 Predetermined overhead rate = $68,000 ÷ 16,000 machine-hours = $4.25 per machine-hour
Acheson Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its most recent year of operations. The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company's predetermined overhead rate for the year. The applied manufacturing overhead for the year is closest to: (Round your intermediate calculations to 2 decimal places.)
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $157,800 ÷ 4,650 machine-hours = $33.94 per machine-hour Manufacturing overhead applied = Predetermined overhead rate × Actual amount of the allocation base = $33.94 per machine-hour × 4,880 machine-hours = $165,627
Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $240,600 and 5,600 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $242,600 and actual direct labor-hours were 4,900. The overhead for the year was: (Round your intermediate calculations to 2 decimal places.)
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total direct labor-hours = $240,600 ÷ 5,600 direct labor-hours = $42.96 per direct labor-hour Manufacturing overhead applied = Predetermined overhead rate × Actual direct labor-hours = $42.96 per direct labor-hour × 4,900 direct labor-hours =$210,504 Actual manufacturing overhead incurred $242,600 Manufacturing overhead applied to Work in Process 210,504 Underapplied (overapplied) manufacturing overhead =$32,096
Which of the following statements about product costs is true?
Product costs associated with unsold finished goods and work in process appear on the balance sheet as assets.
In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the "Total raw materials available" is computed by adding together the "Beginning raw materials inventory" and:
Purchases of raw materials
Refer to the T-account below: Raw Materials Bal | (9) (5). | Entry (5) could represent which of the following?
Purchases of raw materials.
Tyare Corporation had the following inventory balances at the beginning and end of May: During May, $64,000 in raw materials (all direct materials) were drawn from inventory and used in production. The company's predetermined overhead rate was $12 per direct labor-hour, and it paid its direct labor workers $15 per hour. A total of 410 hours of direct labor time had been expended on the jobs in the beginning Work in Process inventory account. The ending Work in Process inventory account contained $7,600 of direct materials cost. The Corporation incurred $43,650 of actual manufacturing overhead cost during the month and applied $42,900 in manufacturing overhead cost. The raw materials purchased during May totaled:
Raw materials used in production = Beginning raw materials inventory + Purchases of raw materials - Ending raw materials inventory $64,000 = $31,000 + Purchases of raw materials - $41,000 Purchases of raw materials = $64,000 - $31,000 + $41,000 =$74,000
Johansen Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for the next year: Jameson estimates that 20,000 direct labor-hours will be worked during the year. The predetermined overhead rate per hour will be:
Rent on factory building $15,000 Depreciation on factory equipment 8,000 Indirect labor 12,000 Production supervisor's salary 15,000 Manufacturing overhead = $50,000 Per Direct Labor Hour $50,000 ÷ 20000 =$2.50
Phaup 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: For financial reporting purposes, the total amount of period costs incurred to sell 5,000 units is closest to:
Sales commissions $0.50 Variable administrative expense 0.45 Variable selling and administrative expense per unit $0.95 Total variable selling and administrative expense ($0.95 per unit × 5,000 units sold) $4,750 Total fixed selling and administrative expense($0.90 per unit × 5,000 units + $0.60 per unit × 5,000 units) 7,500 Total period (nonmanufacturing) cost 4750+7500=$12,250
Kogler Corporation's relevant range of activity is 7,000 units to 11,000 units. When it produces and sells 9,000 units, its average costs per unit are as follows: If the selling price is $25.00 per unit, the contribution margin per unit sold is closest to:
Selling price per unit $25.00 (Right) Direct materials $4.85 (Left) Direct labor 4.20 (Left) Variable manufacturing overhead 1.55 (Left) Sales commissions 0.50 (Left) Variable administrative expense 0.45 (Left) Variable cost per unit sold 11.55 (Right) Contribution margin per unit =$13.45
Tirri Corporation has provided the following information: If the selling price is $26.20 per unit, the contribution margin per unit sold is closest to:
Selling price per unit $26.20 (Right) Direct materials $6.85 (Left) Direct labor 3.90 (Left) Variable manufacturing overhead 1.25 (Left) Sales commissions 1.00 (Left) Variable administrative expense 0.55 (Left) Variable cost per unit sold 13.55 (Right) Contribution margin per unit =$12.65
Which of the following statements is true? I.Overhead can be applied slowly as a job is worked on. II.Overhead can be applied when the job is completed. III.Overhead should be applied to any job not completed at year-end in order to properly value the work in process inventory.
Statements I, II, and III are all true.
Which of the following is correct concerning reactions to INCREASES in activity?
Total Variable Cost Increase Variable Cost Per Unit Constant
Wofril Corporation uses the cost formula Y = $5,300 + $0.60X for the maintenance cost, where X is machine-hours. The August budget is based on 8,000 hours of planned machine time. Maintenance cost expected to be incurred during August is:
Y = $5,300 + ($0.60 per unit × X) = $5,300 + ($0.60 per unit × 8,000 hours) = $5,300 + $4,800 = $10,100
Perteet 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: If 4,000 units are produced, the total amount of manufacturing overhead cost is closest to:
Total variable manufacturing overhead cost ($1.60 per unit × 4,000 units) $6,400Total fixed manufacturing overhead cost ($3.00 per unit × 5,000 units*) 15,000 Total manufacturing overhead cost (a) 6400+15000=$21,400
Kneeland Corporation has provided the following information: If 10,000 units are produced, the total amount of manufacturing overhead cost is closest to:
Total variable manufacturing overhead cost ($1.65 per unit × 10,000 units) $16,500 Total fixed manufacturing overhead cost 121,500 Total manufacturing overhead cost (a) 121500+16500=$138,000
Which of the following approaches to preparing an income statement includes a calculation of the gross margin?
TraditionalApproach Yes ContributionApproach No
At a sales volume of 40,000 units, Lonnie Company's total fixed costs are $40,000 and total variable costs are $60,000. The relevant range is 30,000 to 50,000 units. If Lonnie were to sell 42,000 units, the total expected cost would be:
Variable cost per unit = Total variable cost ÷ Units = $60,000 ÷ 40,000 = $1.50 per unit Total cost = Fixed cost + (Variable cost per unit × Units) = $40,000 + ($1.50 per unit × 42,000 units) = $103,000
In a job-order costing system, manufacturing overhead applied is recorded as a debit to:
Work in Process inventory.
Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. Accordingly, he has decided to quit his present job and start a company to manufacture and market the device. Rent on the administrative office space is:
a period cost
Depreciation on a personal computer used in the marketing department of a manufacturing company would be classified as:
a period cost that is fixed with respect to the company's output.
The salary paid to the president of a company would be classified on the income statement as a(n):
administrative expense.
Direct costs:
can be easily traced to a particular cost object.
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.
Product costs that have become expenses can be found in:
cost of goods sold.
Piekos Corporation incurred $90,000 of actual Manufacturing Overhead costs during June. During the same period, the Manufacturing Overhead applied to Work in Process was $92,000. The journal entry to record the application of Manufacturing Overhead to Work in Process would include a:
credit to Manufacturing Overhead of $92,000
Firlit Corporation incurred $69,000 of actual Manufacturing Overhead costs during October. During the same period, the Manufacturing Overhead applied to Work in Process was $70,000. The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a:
debit to Manufacturing Overhead of $69,000
During July at Loeb Corporation, $83,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The journal entry to record the requisition from the storeroom would include a:
debit to Work in Process of $79,000
Dizzy Amusement Park is open from 8:00 am till midnight every day of the year. Dizzy charges its patrons a daily entrance fee of $30 per person which gives them unlimited access to all of the park's 35 rides. Dizzy employees a certified operator for each of its 35 rides. Each operator is paid $20 per hour. The cost of the certified operators would best be described as a:
fixed cost
For the past 8 months, Jinan Corporation has experienced a steady increase in its cost per unit even though total costs have remained stable. This cost per unit increase may be due to _____________ costs if the level of activity at Jinan is _______________.
fixed, decreasing
Dizzy Amusement Park is open from 8:00 am till midnight every day of the year. Dizzy charges its patrons a daily entrance fee of $30 per person which gives them unlimited access to all of the park's 35 rides. For liability insurance, Dizzy pays a set monthly fee plus a small additional amount for every patron entering the park. The cost of liability insurance would best be described as a:
mixed cost
Property taxes on a company's factory building would be classified as a(n):
product cost.
A cost incurred in the past that is not relevant to any current decision is classified as a(n):
sunk cost.
In the standard cost formula Y = a + bX, what does the "Y" represent?
total cost
Within the relevant range, a difference between variable costs and fixed costs is:
variable costs per unit are constant and fixed costs per unit fluctuate.