Accounting Exam 1 Review

Green Company ended the month of April with materials inventory of $50. During April, Green Company purchased $300 of materials. During April, Green Company introduced $260 worth of materials into the production process. What was Green Company's materials inventory on April 1?

$10

At the beginning of 20X5, Sticky Company estimated that its total manufacturing overhead cost for the coming year would be $100 and that it would consume 5 direct labor hours. Sticky Company's cost system applies manufacturing overhead to work-in-process based on direct labor hours. At the end of 20X5, Sticky Company's records shows actual manufacturing overhead costs of $95 and actual direct labor hour consumption of 6 direct labor hours. What was Sticky Company's pre-determined overhead rate (PDOR) for 20X5?

$20

Blue Company provides tax consulting services to clients and uses direct labor hours to allocated indirect costs to a client. Blue Company's PDOR for 20X4 is $10 per DLH. Records indicate that Client NOP required 20 direct labor hours in March. What is the indirect cost allocation to Client NOP in March?

$200

Blue Company makes denim jeans. Last week, direct materials (fabric, thread, zippers, and rivets) costing $10,000 were put into production. Direct labor costs of $20,000 (25 workers × 40 hours × $15 per hour) were incurred. Indirect costs for manufacturing equaled $30,000 and advertising costs were $5,000. The company produced 10,000 pairs of jeans for the week.

$60,000

On January 1, 20X8, Slippery Company estimated that its total manufacturing overhead cost for the coming year would be $500 and that it would make 50 ounces of its product, a hypnotic fragrance that can make one's excuses seem more believable. During 20X8, Slippery Company produced 49 ounces of its product and incurred $510 of overhead costs.

1. Calculate the predetermined overhead rate for 20X8, using ounces produced as the allocation base. $500 ÷ 50 ounces = $10 of MOH per ounce 2. Did the company overapply overhead or underapply overhead in 20X8, and by how much? Manufacturing Overhead variance = Actual MOH - Applied MOH = $510 - [$10 of MOH per ounce × 49 ounces] = $510 - $490 = $20 underapplied 3. What is the journal entry needed to close MOH Control for 20X8? Dr. Cost of Goods Sold $20 Cr. MOH Control $20

What are the four standards that are used by the IMA?

1. Integrity 2. Competence 3. Credibility 4. Confidentiality

2. Green Company makes blue jeans. Last week, direct materials (denim, thread, zippers, and rivets) costing $48,000 were put into production. Direct labor costs of $30,000 (50 workers × 40 hours × $15 per hour) were incurred. Indirect costs for manufacturing equaled $72,000 and advertising costs were $15,000. The company produced 30,000 pairs of jeans for the week. For the week, calculate the following. Total Product Cost, Cost of one pair of jeans, Total Prime Cost, Total Conversion Cost.

1. Total Product Cost $48,000 + $30,000 + $72,000 = $150,000 2. Cost of one pair of jeans $150,000 ÷ 30,000 pairs = $5.00 per pair 3. Total Prime Cost $48,000 + $30,000 = $78,000 4. Total Conversion Cost $30,000 + $72,000 = $102,000

Use the data for Clothing Company from the Session 7 and Session 8 Graded In-Class Activity to answer the following question: What is the total activity cost allocated to the Formal Line?

148

Use the data for Clothing Company from the Session 7 and Session 8 Graded In-Class Activity to answer the following question: What is the consumption ratio (as a %) for the Sewing Activity for the Casual Line?

30

Clothing Company identified three major activities in is production process: Cutting, Sewing, and Inspecting. The company has two product lines, Casual and Formal. Budgeted activity costs and consumption for the coming year are: Activity Budget Casual Line Requirement Formal Line Requirement Cutting $90 12 hours 18 hours Sewing $100 3 hours 7 hours Inspecting $36 2 hours 4 hours Calculate the amount of Sewing Activity costs that would be allocated to the Formal product line.

70

Clothing Company identified three major activities in is production process: Cutting, Sewing, and Inspecting. The company has two product lines, Casual and Formal. Budgeted activity costs and consumption for the coming year are: Activity Budget Casual Line Requirement Formal Line Requirement Cutting $90 12 hours 18 hours Sewing $100 3 hours 7 hours Inspecting $36 2 hours 4 hours

A. Calculate the activity rate for the Cutting activity $90 ÷ (12 hours + 18 hours) = $3 per hour B. Using the rate from Part A, calculate the amount of Cutting activity costs that would be allocated to the Formal product line $3 per hour × 18 hours = $54

Beginning Balance + ________________ = Ending Balance + Transfers Out

Additions

Rapid Builders works with customers to put up tiny houses for daily living. At the beginning of January, Rapid Builders began work for two clients, A and B. All other projects had been completed the year before. Rapid Builders applies production overhead at the rate of $5.00 of OH per dollar of direct materials cost. Data on costs added during January Client A and Client B are: Client A Client B Direct Materials $500 $1,000 Direct Labor $200 $500 A. Complete the job-order cost sheet for January for Client A and Client B for January.

Client A Client B Beginning Balance $0 $0 Direct Materials $500 $1,000 Direct Labor $200 $500 Applied Overhead $5.00 OH per DM$ × $500 DM = $2,500 OH $5.00 OH per DM$ × $1,000 DM = $5,000 OH Total cost attached $500 + $200 + $2,500 = $3,200 $1,000 + $500 + $5,000 = $6,500 B. On January 30, Client A paid for and took possession of their tiny house. Rapid Builders had not finished Client B's tiny house as of January 31. What are the values for January of: (0.33 pts each) Cost of Goods Sold $3,200 (total cost attached to Client A's tiny house) Ending WIP Inventory $6,500 (total cost attached (so far) to Client B's unfinished tiny house) Ending FG Inventory $0 There are no finished but unsold tiny houses

An accountant who does not learn about new methods for developing information is violating the ___________ standard of the IMA Statement of Ethical Professional Practice.

Competence

A cost analyst at Standard Lumber Company tells their brother that the company will report earnings significantly above financial analysts' estimates.

Confidentiality

An accountant who reveals information to someone who is not supposed to have the information is violating the ___________ standard of the IMA Statement of Ethical Professional Practice.

Confidentiality

The managerial accounting purpose that involves comparing actual outcomes to budgeted expectations is the ______________ purpose.

Controlling

The sum of Direct Labor Cost + Manufacturing Overhead Cost is called ___________ Cost.

Conversion

___________ is the value of the resources consumed to produce a product or deliver a service.

Cost

Someone asks you "how much does Product X cost"? In this context, Product X is the ________________.

Cost Object

Any underapplied overhead or overapplied overhead is closed out to _______________ at the end of the period.

Cost of Goods Sold

An accountant who intentionally provides misleading information to an internal decision-makes is violating the ___________ standard of the IMA Statement of Ethical Professional Practice.

Credibility

An accounting manager at Standard Lumber Company does not provide top managers with the detailed job descriptions as requested because the accounting manager fears the information may be used to eliminate a position from the department.

Credibility

The plant controller at Standard Lumber Company intentionally classified a $20,000 period cost as a product cost. The company produced 2,000 units of product and sold 1,000 of them during the year. Management is paid a bonus equal to 2% of net income.

Credibility

Total Manufacturing Costs

DM used + DL + MOH

The general balance equation is Beginning Balance + Additional = _________________ + Transfers Out

Ending Balance

Activity-based costing methods can only be used for cost objects that are tangible manufactured products

False

Each cost object has an individual PDOR

False

Managerial accounting follows a set of regulatory rules from the Securities and Exchange Commission

False

Prime Costs = Direct Labor Costs + Indirect Costs [Prime Costs are Direct Materials + Direct Labor]

False

The PDOR is part of an actual cost system

False

A purchasing agent at Standard Lumber Company, who is involved in materials sourcing decisions, accepts an expensive gift from a vendor who has made a bid to supply the company with materials for the coming year.

Integrity

_____________ are costs that appear on the income statement via the matching principle.

Period Costs

The managerial accounting purpose that involves budgeting for future operating activity is the ______________ purpose.

Planning

The sum of Direct Materials Costs + Direct Labors Costs is called ____________ Costs.

Prime

A critical type of managerial accounting information is the cost of ____________ consumed to perform activities, produce products, and deliver services.

Resources

Cost of Goods ________ is the income statement expense for units sold during the period.

Sold

Indirect costs are often referred to as "overhead" costs.

True

Managerial Accounting is based more on best practices than regulatory guidance

True

Managerial Accounting provides information for internal decision makers

True

Manufacturing Overhead Control is a temporary account that is closed at the end of each reporting period

True

Product diversity is a primary cause of cost distortion in a traditional cost allocation system

True

The IMA Statement of Ethical Professional Practice is based on the principles of honesty, objectivity, fairness, and responsibility.

True

The consumption of an allocation base should be correlated with the consumption of indirect resources

True

The consumption ratio is the percentage of the total amount of an activity required by a given cost object

True

The three categories of product costs are direct materials, direct labor, and manufacturing overhead

True

The following data relate to the Newell Company for last quarter. Beginning Ending Finished Goods Inventory $100,000 $95,000 Work-in-Process (WIP) Inventory $65,000 $80,000 Direct Materials Inventory $90,000 $100,000 Total manufacturing costs $689,000 Factory overhead $153,000 Direct materials used $120,000 Calculate the following amounts for Newell Company for the last quarter.

a. Direct Materials Purchased DM(B) + Purchases = DM Used + DM(E) Purchases = DM Used + DM(E) - DM(B) Purchases = $120 + $100 - $90 = $130,000 b. Total Direct Labor Cost Total manufacturing costs = DM + DL + MOH DL = Total manufacturing costs - DM Used - MOH DL = $689 - $120 - $153 = $416,000 c. Cost of Goods Sold Cost of Goods Manufactured WIP(B) + DM Used + DL + MOH = CGM + WIP(E) CGM = WIP(B) + DM + DL + MOH - WIP(E) CGM = $65 + $120 + $416 + $153 - $80 = $674,000 Cost of Goods Sold FG(B) + CGM = CGS + FG(E) CGS = FG(B) + CGM - FG(E) CGS = $100 + $674 - $95 = $679,000

The common name for advanced cost assignment is ____________-base costing.

activity

In activity-based management, _____________ involves choosing among different sets of activities that are caused by competing strategies.

activity selection

An activity that occurs each time a particular product is produced, regardless of how much of the product is produced, is called a ____-level activity.

batch

Direct Materials Used

beginning DM inventory + DM purchased - ending DM inventory

Cost of Goods Manufactured

beginning WIP + total manufacturing costs - ending WIP

Cost of Goods Sold

beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory

The proportion of each activity consumed by a product is the

consumption ratio

The _________ role of managerial accounting involves information to support effective resource allocation activity.

decision making

Activity-based costing can add value if it leads to different____ and _____ .

decisions, information

One way a company might improve the accuracy of its reported cost information is to use ___________ overhead rates instead of a plantwide overhead rate.

departmental

Costs that are easy to measure and trace to a product or service are called ________ costs.

direct

Differences in product size, product complexity, and production frequency contribute to product ___________, which creates distorted cost information in a traditional cost system

diversity

An example of a non-value-added activity is ____________

inspection

Materials requisition sheets are one component of a _____________ costing system.

job-order

One goal of activity-based management (ABM) is to identify and eliminate _____________ activities.

non-value added

A cost system that attaches the actual direct material and direct labor costs to units produced and a standard amount of indirect manufacturing costs (manufacturing overhead) to units produced is called a _____________ cost system.

normal

The PDOR is part of a normal cost system

normal

When a company produces large quantities of homogeneous products, ____________ costing is the appropriate cost system design.

process

An example of a value-added activity is ____________

production

When actual manufacturing overhead costs are larger than manufacturing overhead applied to work-in-process inventory, we say that overhead was __________applied.

underapplied

An important piece of information from the managerial accounting is the __________ of a product or service.

unit cost