ACC-240 Chapter 13: Cost Accounting and Reporting

Which type of firms are likely to have the highest Work in Process Inventory balances at the end of an accounting period?

Those with long-duration manufacturing processes

Which inventory account is close to zero at the end of an accounting period for firms with very short production processes?

Work in Process

The inventory account used for the costs of items that are in production and being manufactured is known as:

Work in process inventory

Direct costs describe costs that:

are traceable to a cost object

A predetermined overhead rate is used to:

assign indirect costs to units produced.

The collecting and recording of organizational transactions in the accounting information system is the process of ______.

cost accumulation

The organizational process of attributing an appropriate amount of cost incurred to each cost object is known as ______.

cost assignment

Drilling down to varying levels of an organization for the purpose of observing separate and specific cost measurement information is a process for describing:

cost objects

The total amount of cost accumulated by the accounting information system is logically categorized in different ways, such as by production jobs, which is referred to as ______.

cost pooling

Cost management involves using cost information to manage the activities of an organization that leads to ______.

data collection and performance feedback

A cost that has an indirect relationship with computers being produced is:

electricity costs for packaging equipment

Cost accounting systems that mix elements of job order and process costing systems to accomplish the objective of assigning manufacturing costs to units produced are known as ______.

hybrid cost accounting systems

A system that focuses on product or process cost accumulation by element of the value chain is known as ______.

lean accounting

A debit balance in the Manufacturing Overhead account at the end of a period indicates that:

manufacturing overhead is underapplied

An example of a worker classified as direct labor in a production plant that prints textbooks would be:

printing press operator

An example of a product cost is:

production line maintenance costs

The ingredients of a product that are put into the production process to make the finished product are known as:

raw materials

A cost that has a direct relationship with products being produced is:

raw materials for a specific product

Cost accounting ______.

relates primarily to the accumulation and determination of product, process, or services costs

On the Statement of Cost of Goods Manufactured, the sum of raw materials used + direct labor incurred + manufacturing overhead applied is known as:

total manufacturing costs

A predetermined overhead application rate is established to apply manufacturing overhead to ______.

work in process

The following accounting information is available for Synergy Inc. for the month of May: Beginning inventory $121,190. Cost of goods manufactured 493,855. Ending inventory 63,800. Calculate the amount of cost of goods sold for Synergy Inc. for the month of May.

$551,245 Explanation: Cost of goods sold = Beginning inventory + Cost of goods manufactured - Ending inventory $121,190 + $493,855 - $63,800 = $551,245

Which are correct statements about lean accounting?

- The development of lean accounting reflects the requirement for managers to have increasingly relevant cost data. - Lean accounting focuses on product or process cost accumulation by element of the value chain.

Assume the following data for Elite Company's assembly department for the month of December: Units completed and transferred to the finishing department 150,000 Units in process at the end of December (60 percent complete) 25,000 Calculate the assembly department's equivalent units of production for the month of December.

165,000 units Explanation: Assembly department equivalent units of production = Units completed and transferred + (units in process x percent complete) 150,000 + (25,000 × 60%) =150,000 units + 15,000 units = 165,000 units

What is incurred when an organization acquires the resources used to fund the activities in its value chain?

A cost

Which of the following activities is not included in the organization's value chain?

Accounting

ABC Company uses machine hours to apply manufacturing overhead to units produced. If ABC estimates that it will generate 560,000 machine hours and incur $6,720,000 in manufacturing overhead costs during the year, its predetermined overhead application rate will be $______ per ______ hour.

Blank 1: 12 Blank 2: machine

Given the following information, calculate the product cost per unit. Direct materials = $28,000 Direct labor = $42,000. Overhead application rate = $15 per direct labor hour. Direct labor hours = 5,200. Units products = 7,400. Product cost per unit = $______. Round your answer to a whole dollar.

Blank 1: 20.00 OR 20

Using the following information, calculate the cost of goods manufactured. Beginning work in process inventory = $44,000, Ending work in process inventory = $41,000, Raw materials used = $74,000, Direct labor incurred = $56,000, Manufacturing overhead applied = $83,000. Cost of goods manufactured = $______.

Blank 1: 216,000 OR 216000

ABC Company uses a predetermined overhead rate of $10 per direct labor hour. Actual manufacturing overhead incurred during October amounted to $35,000 when ABC worked 3,200 direct labor hours. At the end of October, the Manufacturing overhead account has a balance of $______ that is ______ (underapplied/overapplied).

Blank 1: 3,000 OR 3000 Blank 2: underapplied

If ABC Company has 80,000 units in process at the end of June and the work on those units is determined to be 40 percent complete, the equivalent units of production used to value ABC'S ending work in process inventory is ______ units.

Blank 1: 32,000 OR 32000 Explanation: 80,000*0.4 = 32,000

Using the following information, calculate the cost of goods sold. Beginning finished goods inventory = $124,000, Ending finished goods inventory = $132,000, Cost of goods manufactured = $366,000. Cost of goods sold = $______.

Blank 1: 358,000 OR 358000 Explanation: Beginning finished goods inventory = $124,000 The ending finished goods inventory = $132,000 The cost of goods manufactured = $366,000 Cost of goods sold = Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory $124,000 + $366,000 - $132,000= $358,000

If ABC Company determines its cost per unit for July's production is $28.75 and it produced 12,600 units, ABC's total manufacturing costs (direct materials, direct labor, and manufacturing overhead) incurred in July is $______.

Blank 1: 362,250 OR 362250 Explanation: Cost per unit = $28.75 Number of units produced = 12,600 units 12,600*$28.75 = 362,250 Total manufacturing costs = 362,250

ABC Company uses machine hours to apply manufacturing overhead to units produced at the rate of $12 per machine hour. If ABC generates 6,500 machine hours, manufacturing overhead applied to units produced is $______.

Blank 1: 78,000 OR 78000 Explanation: $12*$6,500 = $78,000

ABC Company estimates total manufacturing overhead costs for the year to be $1,200,000 and expects to work 150,000 direct labor hours. ABC's predetermined overhead application rate to be used for product costing during the year would be $______ per direct labor hour.

Blank 1: 8.00 OR 8 Explanation: Predetermined Overhead Rate = Estimated Total Manufacturing Overhead Costs / Estimated Total Direct Labor Hours Estimated Total Manufacturing Overhead Costs = $1,200,000 Estimated Total Direct Labor Hours = 150,000 hours Predetermined Overhead Rate = $1,200,000 / 150,000 hours = $8 per direct labor hour

ABC Company incurred the following product costs to manufacture 1,000 finished units in May. Direct materials: $2,600. Direct labor: $3,800. Manufacturing overhead: $2,200. The cost of each unit produced in May is $______.

Blank 1: 8.60

Using the following information, calculate the cost of raw materials used. Beginning raw materials inventory = $20,000, Ending raw materials inventory = $22,000, Raw materials purchased = $84,000. Cost of raw materials used $______.

Blank 1: 82,000 OR 82000

The process of collecting and recording transaction data through the accounting information system is known as ______ ______.

Blank 1: cost Blank 2: accumulation

The process of attributing an appropriate amount of cost in the cost pool to each cost object is known as ______ ______.

Blank 1: cost Blank 2: assignment

The process of using cost information to assess and manage the activities of an organization is known as ______ ______.

Blank 1: cost Blank 2: management

Any sub-part (reference point) of an organization for which managers are interested in having cost measurement information is known as a(n) ______ ______.

Blank 1: cost Blank 2: object

The total amount of cost accumulated by the accounting information system is logically categorized by different cost objects, which is referred to as a(n) ______ ______.

Blank 1: cost Blank 2: pool OR pooling

Overapplied overhead represents a ______ (debit/credit) balance in the Manufacturing overhead account that results from applied overhead in excess of actual overhead costs.

Blank 1: credit

Underapplied overhead represents a ______ (debit/credit) balance in the Manufacturing overhead account that results from actual overhead costs in excess of applied overhead.

Blank 1: debit

When manufacturing overhead is applied to units in production, the resulting cost flow is that the Manufacturing Overhead account is ______ (increased/decreased) and the Work in process account is ______ (increased/decreased).

Blank 1: decreased Blank 2: increased

When units in production are completed, the resulting flow of cost of goods manufactured is that the Work in Process Inventory is ______ (increased/decreased) and the Finished Goods Inventory is ______ (increased/decreased).

Blank 1: decreased Blank 2: increased

When units of completed production are sold, the resulting cost flow is that the Finished goods inventory account is ______ (increased/decreased) and the Cost of goods sold account is ______ (increased/decreased).

Blank 1: decreased Blank 2: increased

A cost that is clearly traceable to a product or activity such that the cost would not be incurred if the product or activity were discontinued is known as a(n) ______ cost.

Blank 1: direct

The term used for the human effort provided by workers who are directly involved in the production of a finished product and to describe an element of the product's costs is known as ______ ______.

Blank 1: direct Blank 2: labor

Period costs are accounted for as ______ (assets/expenses) and recorded on the ______ ______ (balance sheet/income statement).

Blank 1: expenses Blank 2: income Blank 3: statement

Product costs are initially accounted for as inventory and ultimately transferred to the ______ ______ (balance sheet/income statement) when the product is ______.

Blank 1: income Blank 2: statement Blank 3: sold

When actual manufacturing overhead cost is incurred, it is recorded as a(n) ______ (increase/decrease) in the Manufacturing overhead account, and as manufacturing overhead costs are applied to units in production, it is recorded as a(n) ______ (increase/decrease) in the Manufacturing overhead account.

Blank 1: increase Blank 2: decrease

The product cost accounting system used when discrete products are manufactured is known as a ______ (job/process) costing system.

Blank 1: job

The Finished Goods Inventory account is increased for the cost of goods ______ (manufactured/sold) and is decreased for the cost of goods ______.

Blank 1: manufactured Blank 2: sold

The machine support and other manufacturing costs, except raw materials and direct labor, incurred as part of a product's costs is known as ______ ______.

Blank 1: manufacturing Blank 2: overhead

Costs not incurred for the manufacturing of a product and not included in inventory as a product cost are known as ______ costs.

Blank 1: period

Equivalent units of production is a technique used to value the ending work in process inventory in a ______ (job/process) costing manufacturing environment.

Blank 1: process

The product cost accounting system used when homogeneous products are manufactured in a relatively continuous production flow is known as a ______ (job/process) costing system.

Blank 1: process

The product cost accounting system used when homogeneous products are manufactured in a relatively continuous production flow is known as a ______ (job/process) costing system.

Blank 1: process

For a manufacturing firm, ______ costs are inventoried and treated as assets until inventory is sold while ______ costs are recorded as expense in the accounting period incurred.

Blank 1: product Blank 2: period

The ingredients used in a manufacturing firm to produce a finished product and to describe an element of the product's cost are known as ______ ______.

Blank 1: raw Blank 2: materials

An organization's ______ ______ is the sequence of functions and related activities that adds value for the customer over the life of a product or service.

Blank 1: value Blank 2: chain

Which of the following manufacturing environments would use a process costing system?

Coal mining

Which of the following process steps occurs first for managers to observe costs for different organizational reference points?

Cost accumulation

What is the primary focus of cost accounting?

Cost accumulation and assignment

True or false: Hybrid cost accounting systems use elements of only job order costing systems in order to achieve the objective of assigning manufacturing costs to units produced.

False Explanation: Hybrid cost accounting systems mix elements of job order and process costing systems to accomplish the objective of assigning manufacturing costs to units produced.

The inventory account applicable to goods available for sale to customers is known as:

Finished goods inventory

When a manufactured item is sold, where is its cost transferred in accounting terms?

From the balance sheet to the income statement

Synergy Corp. manufactures LED light bulbs. It applies manufacturing overhead to production on the basis of direct labor hours. A predetermined overhead application rate of $15 per direct labor hour was used for the current fiscal year. Actual manufacturing overhead incurred by Synergy during the year amounted to $100,000 against 9,100 hours, which was the expected number of direct labor hours to be used during the year. Calculate the amount of over- or underapplied overhead during the year.

Overapplied overhead of $36,500 Explanation: (9,100*$15) - $100,000 = $36,500 overapplied - less money needed than thought

Drag the type of cost to its synonymous term. Product cost <--> Period cost <-->

Product cost <--> Manufacturing cost Period cost <--> Nonmanufacturing cost

Which is a true statement representing the difference between product costs and period costs?

Products costs are manufacturing costs, whereas period costs are nonmanufacturing costs.

The inventory account applicable to product ingredients ready for the production process is known as:

Raw materials inventory

Which of the following manufacturing environments would use a job order costing system?

Textbook printing

Identify the following examples of product cost that would be classified as manufacturing overhead.

- Factory maintenance - Electricity for factory machines - Depreciation expense for factory building - Production manager's salary

Which of the following are elements of a product's cost for a manufacturing firm?

- Ingredients - Human production effort - Production machine support

Cost accounting plays a significant role in which aspects of financial accounting?

- Inventory valuation - Income measurement

Which are true statements about equivalent units of production?

- It refers to the number of units that would have been produced if all production efforts during the period had resulted in completed products. - It is calculated by adding units completed and transferred to the finishing department and product of the units in process and the percent complete.

Which are true statements about cost accounting?

- It reports the cost of goods manufactured and sold, as well as the cost of goods manufactured and not sold. - It is a subset of both financial and managerial accounting.

Which of the following items represent an increase in the Work in Process Inventory account?

- Manufacturing overhead applied - Raw material used - Direct labor incurred

Which of the following are associated with the cost behavior classification?

- Mixed cost - Variable cost

Which of the following are the inventory accounts involved in a manufacturing cost accounting system?

- Raw materials - Finished goods - Work-in-process