Acct2002 exam 1
Cost of Direct Materials Used in Production for a Manufacturing Company Walker Manufacturing Company reported the following materials data for the month ending June 30: Materials purchased $845,700 Materials inventory, June 1 $238,500 Materials inventory, June 30 $190,400 Determine the cost of direct materials used in production by Walker during the month ended June 30. $__________
1) Start with beginning materials inventory 2) + Add the materials purchased 3) - Subtract ending materials inventory Cost of Direct Materials Used = (Beg Material Inventory + Materials Purchased) - Ending Materials Inventory = ($238,500 + $845,700) - $190,400 = $1,084,200 - $190,400 = $893,800
A company used $35,000 of direct materials, incurred $73,000 in direct labor cost, and had $114,000 in factory overhead costs during the period. If beginning and ending work in process inventories were $28,000 and $32,000, respectively, the cost of goods manufactured was a. $218,000 b. $190,000 c. $222,000 d. $226,000
1) Total manufacturing cost = Direct materials + Direct Labor + Manufacturing Overhead $35,000 + $73,000 + $114,000 = $222,000 2) Add beginning work in process inventory $222,000 + $28,000 = $250,000 3) Subtract ending work in process inventory $250,000 - $32,000 = $218,000 Answer = a
T/F A service organization will not use the job order costing method because it has no direct materials.
False. A service organization can still use job order costing, even if they don't have direct materials. In service organizations, the focus might be on direct labor and other allocable overheads related to a specific job or project. The essence of job order costing is to trace costs to individual jobs or projects, making it suitable for service organizations that undertake unique or customized tasks for clients.
T/F Conversion cost is the combination of direct materials cost and factory overhead cost.
False. Conversion cost is the combination of direct labor cost and factory overhead cost, not direct materials cost.
T/F Multiple production department factory overhead rates are less accurate than are plantwide factory overhead rates.
False. Multiple production department factory overhead rates typically provide a more accurate allocation of overhead costs to products based on their use of resources in each specific department, whereas plantwide factory overhead rates allocate overhead using a single rate for the entire facility, which might not reflect the specific overhead costs associated with producing a particular product.
Issuance of Materials On May 7, Keenan Company purchased on account 800 units of raw materials at $24 per unit. During May, raw materials were requisitioned for production as follows: 304 units for Job 200 at $21 per unit and 328 units for Job 305 at $24 per unit. Journalize the entry on May 7 to record the purchase. If an amount box does not require an entry, leave it blank. May 7 ___________ ____ ____ ___________ ____ ____ Journalize the entry on May 31 to record the requisition from the materials storeroom. If an amount box does not require an entry, leave it blank. May 31 ___________ ____ ____ ___________ ____ ____
May 7: Total Cost = 800 units x $24/unit = $19,200 Debit: Materials $19,200 __________ Credit: Accounts Payable __________ $19,200 May 31: Job 200: 304 units x $21/unit = $6,384 Job 305: 328 units x $24/unit = $7,872 Total cost of raw materials requisitioned = $6,384 + $7,872 = $14,256 Debit: Work in Process $14,256 __________ Credit: Materials __________ $14,256
Classifying Costs as Product or Period Costs For apparel manufacturer Abercrombie & Fitch, Inc. (ANF), classify each of the following costs as either a product cost or a period cost: a. Advertising expenses b. Chief financial officer's salary c. Depreciation on office equipment d. Depreciation on sewing machines e. Fabric used during production f. Factory janitorial supplies g. Factory supervisors' salaries h. Property taxes on factory building and equipment i. Oil used to lubricate sewing machines j. Repairs and maintenance costs for sewing machines k. Research and development costs l. Sales commissions m. Salaries of distribution center personnel n. Salaries of production quality control supervisors o. Travel costs of media relations employees p. Utility costs for office building q. Wages of sewing machine operators
Product costs are directly associated with the manufacturing process and are inventoriable, whereas period costs are associated with time periods and are expensed in the period they are incurred. a. Period Cost b. Period Cost c. Period Cost d. Product Cost e. Product Cost f. Product Cost g. Product Cost h. Product Cost i. Product Cost j. Product Cost k. Period Cost l. Period Cost m. Period Cost (if distribution occurs post-production) n. Product Cost o. Period Cost p. Period Cost q. Product Cost
The cost of a manufactured product generally consists of which of the following costs? a. direct materials cost and factory overhead cost only b. direct materials cost and direct labor cost only c. direct labor cost and factory overhead cost only d. direct labor cost, direct materials cost, and factory overhead cost
d. direct labor cost, direct materials cost, and factory overhead cost
All of the following can be used as an allocation base for calculating factory overhead rates except a. direct labor dollars b. machine hours c. direct labor hours d. total units produced
d. total units produced
Direct Labor Costs During May, Darling Company accumulated 660 hours of direct labor costs on Job 200 and 880 hours on Job 305. The total direct labor was incurred at a rate of $17 per direct labor hour for Job 200 and $15 per direct labor hour for Job 305. Journalize the entry to record the flow of labor costs into production during May. If an amount box does not require an entry, leave it blank. ________________ _____ _____ ________________ _____ _____
Total DL Costs = DLH Worked x Hourly Rate Job 200: 660 DLH x $17/hr = $11,220 Job 305; 880 DLH x $15/hr = $13,200 Add Total DL Costs for both jobs = $24,420 Debit: Work in Process $24,420 Credit: Wages Payable $24,420
T/F Using the job order cost system, service organizations are able to bill customers on a weekly or monthly basis, even when the job has not been completed.
True
T/F Managers depend on accurate factory overhead allocation to make decisions regarding product mix and product price.
True. Managers rely on accurate factory overhead allocation to determine the true cost of producing a product. Accurate allocation ensures that they can make informed decisions regarding pricing, product mix, profitability analyses, and other strategic considerations. If overhead is not allocated accurately, it can distort product costs and potentially lead to suboptimal decision-making.
Job Costs At the end of May, Bergan Company had completed Jobs 200 and 305. Job 200 is for 2,390 units, and Job 305 is for 2,053 units. The following data relate to these two jobs: On May 7, Bergan Company purchased on account 10,000 units of raw materials at $8 per unit. During May, raw materials were requisitioned for production as follows: 7,500 units for Job 200 at $8 per unit and 1,480 units for Job 305 at $5 per unit. During May, Bergan Company accumulated 2,500 hours of direct labor costs on Job 200 and 3,000 hours on Job 305. The total direct labor was incurred at a rate of $28 per direct labor hour for Job 200 and $24 per direct labor hour for Job 305. Bergan Company estimates that total factory overhead costs will be $620,000 for the year. Direct labor hours are estimated to be 80,000. a. Determine the balance on the job cost sheets for Jobs 200 and 305 at the end of May. Job 200 ________ Job 305 ________ b. Determine the cost per unit for Jobs 200 and 305 at the end of May. If required, round your answers to two decimal places. Job 200 ________ Job 305 ________
a) Materials Costs: Job 200: 7,500 units x $8/unit = $60,000 Job 305: 1,480 units x $5/unit = $7,400 Direct Labor Costs: Job 200: 2,500 hrs x $28/hr = $70,000 Job 305: 3,000 hrs x $24/hr = $72,000 Factory Overhead: Predetermined FOH Rate = Total Estimated FOH Costs / Total Estimated DLH = $620,000 / 80,000 hrs = $7.75 per DLH Job 200: 2,500 hrs x $7.75/hr = $19,375 Job 305: 3,000 hrs x $7.75/hr = $23,250 Total Cost for Job 200: $60,000 (materials) + $70,000 (labor) + $19,375 (overhead) = $149,375 Total Cost for Job 305: $7,400(materials) + $72,000 (labor) + $23,250 (overhead) = $102,650 Job 200: $149,375 Job 305: $102,650 b) CPU = Total Cost / # of units Job 200: $149,375 / 2,390 units = $62.50 per unit Job 305: $102,650 / 2,053 units = $50 per unit Job 200: $62.50 Job 305: $50
Multiple Production Department Factory Overhead Rates The total factory overhead for Bardot Marine Company is budgeted for the year at $943,500, divided into two departments: Fabrication, $547,500, and Assembly, $396,000. Bardot Marine manufactures two types of boats: speedboats and bass boats. The speedboats require one direct labor hour in Fabrication and four direct labor hours in Assembly. The bass boats require four direct labor hours in Fabrication and two direct labor hours in Assembly. Each product is budgeted for 6,000 units of production for the year. If required, round all per unit answers to the nearest cent. a. Determine the total number of budgeted direct labor hours for the year in each department. Fabrication _____ direct labor hours Assembly _____ direct labor hours b. Determine the departmental factory overhead rates for both departments. Fabrication $_____ per dlh Assembly $_____ per dlh c. Determine the factory overhead allocated per unit for each product using the department factory overhead allocation rates. Speedboat: $_____ per unit Bass boat: $_____ per unit
a) Speedboats: Fabrication: 1 DLH per boat x 6,000 boats = 6,000 DLH Assembly: 4 DLH per boat x 6,000 boats = 24,000 DLH Bass Boats: Fabrication: 4 DLH per boat x 6,000 boats = 24,000 DLH Assembly: 2 DLH per boat x 6,000 boats = 12,000 DLH Total Fabrication: 6,000 + 24,000 = 30,000 DLH Total Assembly: 24,000 + 12,000 = 36,000 DLH b) Overhead rate = Total Department Overhead / Total Department DLH Fabrication: $547,500 / 30,000 DLH = $18.25 per DLH Assembly: $396,000 - 36,000 DLH = $11 per DLH c) Speedboats: Fabrication: 1 DLH x $18.25 = $18.25 Assembly: 4 DLH x $11 = $44 Total: $18.25 + $44 = $62.25 per unit Bass boats: Fabrication: 4 DLH x $18.25 = $73 Assembly: 2 DLH x $11 = $22 Total: $73 + $22 = $95 per unit
Which of the following would most likely use a job order costing system? a. swimming pool installer b. oil refinery c. company that manufactures chlorine for swimming pools d. paper mill
a. swimming pool installer A job order costing system is best suited for businesses that produce unique, custom-ordered products, or jobs.
Multiple Production Department Factory Overhead Rate Method Handy Leather, Inc., produces three sizes of sports gloves: small, medium, and large. A glove pattern is first stenciled onto leather in the Pattern Department. The stenciled patterns are then sent to the Cut and Sew Department, where the glove is cut and sewed together. Handy Leather uses the multiple production department factory overhead rate method of allocating factory overhead costs. Its factory overhead costs were budgeted as follows: Pattern Department overhead $95,400 Cut and Sew Department overhead $161,000 Total $256,400 The direct labor estimated for each production department was as follows: Pattern Department 1,800 direct labor hours Cut and Sew Department 2,300 Total 4,100 direct labor hours Direct labor hours are used to allocate the production department overhead to the products. The direct labor hours per unit for each product for each production department were obtained from the engineering records as follows: Production Departments Small Glove Medium Glove Large Glove Pattern Department
a) Individual Dept Overhead Rate = Total Overhead for Dept / Total DLH for same dept Pattern: = $95,400 / 1,800 DLH = $53 per DLH Cut & Sew: = $161,000 / 2,300 DLH = $70 per DLH b) Total FOH per unit Small Glove: Pattern Dept Overhead = 0.05 DLH x $53 = $2.65 Cut & Sew Dept Overhead = 0.07 DLH x $70 = $4.90 Total = $2.65 + $4.90 = $7.55 per unit Medium Glove: Pattern Dept Overhead = 0.06 DLH x $53 = $3.18 Cut & Sew Overhead = 0.09 DLH x $70 = $6.30 Total = $2.65 + $4.90 = $9.48 per unit Large Glove: Pattern Dept Overhead = 0.07 DLH x $53 = $3.71 Cut & Sew Overhead = 0.11 DLH x $70 = $7.70 Total = $3.71 + $7.70 = $11.41
Applying Factory Overhead Salinger Company estimates that total factory overhead costs will be $288,000 for the year. Direct labor hours are estimated to be 24,000. a. For Salinger Company, determine the predetermined factory overhead rate using direct labor hours as the activity base. If required, round your answer to two decimal places. $_____ per direct labor hour b. During May, Salinger Company accumulated 760 hours of direct labor costs on Job 200 and 830 hours on Job 305. Determine the amount of factory overhead applied to Jobs 200 and 305 in May. $_____ c. Prepare the journal entry to apply factory overhead to both jobs in May according to the predetermined overhead rate. If an amount box does not require an entry, leave it blank. ________________ _____ _____ ________________ _____ _____
a) Predetermined FOH rate = Total estimated FOH costs / Total estimated DLH $288,000 / 24,000 = $12 per DLH b) Overhead applied = DLH x Predetermined FOH rate Job 200: 760 hrs x $12/hr = $9,120 Job 305: 830 hrs x $12/hr = $9,960 Total = $9,120 + $9,960 = $19,080 c) Debit: Work in Process Inventory $19,080 Credit: Factory Overhead $19,080
Single Plantwide Factory Overhead Rate The total factory overhead for Bardot Marine Company is budgeted for the year at $3,564,000. Bardot Marine manufactures two types of boats: speedboats and bass boats. The speedboat and bass boat each require six direct labor hours for manufacture. Each product is budgeted for 12,000 units of production for the year. When required, round all per unit answers to the nearest cent. a. Determine the total number of budgeted direct labor hours for the year. ______ direct labor hours b. Determine the single plantwide factory overhead rate. ______ per dlh c. Determine the factory overhead allocated per unit for each product using the single plantwide factory overhead rate. Speedboat $_____ per unit Bass boat $_____ per unit
a) Total DLH = DLH x Units Speedboat: 6 DLH x 12,000 units = 72,000 Total DLH Bass boat; 6 DLH x 12,000 units = 72,000 Total DLH Total: 72,000 Speedboat DLH + 72,000 Bass boat DLH = 144,000 DLH b) FOH Rate = Total Budgeted FOH / Total budgeted DLH = 3,564,000 / 144,000 = $24.75 per DLH c) Use FOH Rate x DLH per product Speedboat: $24.75 x 6 DLH = $148.50 Bass Boat: $24.75 x 6 DLH = $148.50
Classifying Costs The following is a list of costs incurred by several manufacturing companies: Classify each of the following costs as product cost or period cost. Indicate whether each product cost is a direct materials cost, a direct labor cost, or a factory overhead cost. Indicate whether each period cost is a selling expense or an administrative expense: a. Annual picnic for plant employees and their families b. Cost of fabric used by clothing manufacturer c. Cost of plastic for a toy manufacturer d. Cost of sewing machine needles used by a shirt manufacturer e. Cost of television commercials f. Depreciation of copying machines used by the Marketing Department g. Depreciation of microcomputers used in the factory to coordinate and monitor the production schedules h. Depreciation of office building i. Depreciation of robotic equipment used to assemble a product j. Electricity used to operate factory machinery k. Factory janitorial supplies l. Fees charged by collection agency on past-due customer accounts m. Fees paid to lawn service for office grounds n. Maintenance costs for factory equipment o. Oil lubricants for factory plant and equipment p. Pens,
a. Period cost (factory overhead cost) b. Product cost (Direct materials cost) c. Product cost (Direct materials cost) d. Product cost (Factory overhead cost) e. Period cost (Selling expense) f. Period cost (selling expense?) g. Product cost (Factory overhead cost) h. Period cost (Administrative expense) i. Product cost (Factory overhead cost) j. Product cost (Factory overhead cost) k. Product cost (Factory overhead cost) l. Period cost (Administrative expense) m. Period cost (Administrative expense) n. Product cost (Factory overhead cost) o. Product cost (Factory overhead cost) p. Period cost (Administrative expense) q. Product cost (Factory overhead cost) r. Product cost (Factory overhead cost) s. Product cost (Factory overhead cost) t. Product cost (Factory overhead cost) u. Period cost (Administrative expense) v. Period cost (Selling expense) w. Product cost (Direct labor cost) x. Product cost (Direct materials cost) Product costs are costs associated with the product. Period costs are selling and administrative expenses. Direct materials are the costs of any material integral to the finished product. Employee wages integral to the finished product are direct labor. Factory overhead costs are manufacturing costs that are neither direct materials nor direct labor.
In order to be useful to managers, managerial accounting reports should possess all of the following characteristics except a. provide objective measures of past operations and subjective estimates about future decisions b. be prepared in accordance with generally accepted accounting principles c. be prepared to report information for any unit of the business to support decision making d. be provided at any time management needs information
b. be prepared in accordance with generally accepted accounting principles
Using multiple department factory overhead rates instead of a single plantwide factory overhead rate a. is simpler and less expensive to compute than a plantwide rate b. results in more accurate product costs c. results in distorted product costs d. applies overhead costs to all departments equally
b. results in more accurate product costs. Multiple department overhead rates assign overhead costs based on the specific activities and costs associated with each department. This method can provide a more accurate allocation of overhead costs to products based on their use of resources in each department. In contrast, a plantwide rate allocates overhead using a single rate for the entire facility, which might not reflect the specific overhead costs associated with producing a particular product.
At the end of July, the first month of the current fiscal year, the factory overhead account had a debit balance. Which of the following describes the nature of this balance and how it would be reported on the interim balance sheet? a. overapplied, deferred debit b. underapplied, deferred debit c. overapplied, deferred credit d. underapplied, deferred credit
b. underapplied, deferred debit
Adirondack Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. Overhead Total DLH DLH per Product A B Painting D. $249,800 9,600 3 11 Finishing D. $79,600 11,000 5 4 Totals $329,400 20,600 8 15 Using a single plantwide rate, the factory overhead allocated per unit of Product A in the Painting Department is a. $78.06 per unit b. $15.99 per unit c. $47.97 per unit d. $598.48 per unit
c. $47.97 per unit 1) Plantwide FOH = Total Overhead / Total DLH $329,400/20,600 = $16 per DLH 2) Overhead allocated per unit of product A = Plantwide FOH rate x DLH per product A $16 x 3 DLH = $47.97
At the end of the year, overhead applied was $3,689,000. Actual overhead was $3,282,000. Closing over/underapplied overhead into Cost of Goods Sold would cause net income to a. decrease by $407,000 b. decrease by $814,000 c. increase by $407,000 d. increase by $814,000
c. increase by $407,000 Difference (Overapplied overhead) = Overhead applied - Actual overhead Difference = $3,689,000 - $3,282,000 Difference = $407,000 More overhead was applied than actually incurred If we close (adjust) the overapplied overhead into COGS, COGS will decrease by $407,000. A decrease in COGS would result in an increase in net income, because COGS is an expense, and decreasing an expense increases the profit.
