Chapter 6 - Fundamentals of Product and Service Costing

A company started 125,000 units and completed production of 100,000 units last month. There was no beginning work-in-process inventory, and ending work-in-process inventory was 25% complete. Given total production costs of $1,168,750, what is the value assigned to finished goods inventory? Multiple choice question. $1,038,889 $1,100,000 $935,000 $748,000

$1,100,000

A company estimates that total overhead will be $272,500. Of the overhead, $92,500 consists of machine-related costs, and the balance is direct labor-related costs. They expect to work 15,000 labor hours and use 4,000 machine hours. Assuming the company uses two-stage cost allocation, what is the direct-labor-related overhead rate? Multiple choice question. $45.00 per direct labor-hour $18.17 per direct labor-hour $6.17 per direct labor-hour $12.00 per direct labor-hour

$12.00 per direct labor-hour

A company started 75,000 units and completed production of 70,000 units last month. Materials cost was $225,000, labor cost was $275,000, and $400,000 of overhead was applied to production. There was no beginning work-in-process inventory, and ending work-in-process inventory was 50% complete. Compute the cost per unit produced. Multiple choice question. $12.41 $11.61 $12.00 $12.86

$12.41

A company started 15,000 widgets in production last month and completed production of 10,000 of them. Materials and labor costs totaled $27,500, and $40,000 of overhead was applied to production. There was no beginning work-in-process inventory. Ending work-in-process inventory was 25% complete. What was the cost per widget produced? Multiple choice question. $4.00 $6.75 $4.50 $6.00

$6.00

Which of the following are criteria for selection allocation bases in the single and two-stage allocation systems? Multiple select question. - The ability of the bases to eliminate overhead costs. - The extent to which the bases can reduce the amount of overhead reported. - The extent to which the choice of allocation base affects reported product costs. - The relation between overhead incurrence and activity.

3 & 4

Which of the following represents the basic inventory equation? Multiple choice question. EB + TI - TO = BB BB - TI + TO = EB BB + TI - TO = EB EB - TI - TO = BB

BB + TI - TO = EB

The salary of production supervisors is classified as Blank______. Multiple choice question. a period cost manufacturing overhead direct materials direct labor

manufacturing overhead

A company started and completed production of 50,000 units last month. Materials cost was $125,000, labor cost was $200,000, and $310,000 of overhead was applied to production. If there was no beginning or ending work-in-process inventory, the cost per unit produced was Blank______. Multiple choice question. $10.20 $6.50 $63.50 $12.70

$12.70 (125000+200000+310000)/50000

Which of the following are true of an allocation base? Multiple select question. - An allocation base needs to be measured for each cost object. - A common allocation base is direct labor. - It should have a direct, cause-and-effect relation with the costs incurred. - An allocation base is used for all direct material.

1, 2, & 3

A company makes two products with the following expected costs for the upcoming year: Product. D-74. G-12 Material cost per unit $12.00. $15.00 Direct labor rate per hour $10.25. $14.00 Total direct labor hours. 8,000. 12,000 Total estimated overhead for the year is $400,000. How much total overhead cost will be allocated to Product D-74 if the allocation base used is direct labor cost? Multiple choice question. $268,800 $131,200 $200,000 $160,000

$131,200

A company makes a single product with a material cost of $20 per unit. The direct labor rate is $18 per hour. For the upcoming year, the company expects to work a total of 20,000 direct labor-hours. Total estimated overhead for the year is $450,000. What is the predetermined overhead rate based on direct labor hours? Multiple choice question. $40.50 $22.50 $60.50 $18.00

$22.50

A company makes two products with the following expected costs for the upcoming year: Product. D-74. G-12 Material cost per unit $12.00. $15.00 Direct labor rate per hour $10.25. $14.00 Total direct labor hours. 8,000. 12,000 Total estimated overhead for the year is $400,000. If the allocation base is direct labor-hours, how much total overhead cost will be allocated to Product G-12? Multiple choice question. $168,000 $200,000 $240,000 $160,000

$240,000

A company estimates that total overhead will be $300,000. Of the overhead, $100,000 consists of machine-related costs, and the other $200,000 is direct labor-related costs. They expect to work 20,000 labor hours and use 4,000 machine hours. Assuming the company uses two-stage cost allocation, what is the machine-related overhead rate? Multiple choice question. $50.00 per machine-hour $5.00 per machine-hour $25.00 per machine-hour $10.00 per machine-hour

$25.00 per machine-hour

A company makes two products with the following expected costs for the upcoming year: Product. D-74. G-12 Material cost per unit $12.00. $15.00 Direct labor rate per hour $10.25. $14.00 Total direct labor hours. 8,000. 12,000 Total estimated overhead for the year is $400,000. How much total overhead cost will be allocated to Product G-12 if the allocation base used is direct labor cost? Multiple choice question. $240,000 $131,200 $268,800 $168,000

$268,800

A company incurred $765,000 of production costs during a period where there was no beginning work-in-process inventory. There were 100,000 units started and 80,000 units completed and transferred out. Ending work-in-process inventory was 25% complete. What was the value assigned to ending work in process inventory? Multiple choice question. $180,000 $45,000 $191,250 $38,250

$45,000

A company started and completed production of 10,000 widgets last month. Materials and labor costs totaled $20,000, and $30,000 of overhead was applied to production. If there was no beginning or ending work-in-process inventory, the cost per widget produced was Blank______. Multiple choice question. $1.00 $2.00 $3.00 $5.00

$5.00 (20,000+30000)/10,000

A company estimates that total overhead will be $172,500, and a total of 15,000 labor hours will be worked on two products. AB-23 will use 10,000 direct labor-hours, and XY-15 will use 5,000 direct labor-hours. What is the total overhead allocated to Product XY-15? Multiple choice question. $57,500 $34,500 $115,000 $86,250

$57,500

Which of the following are characteristics of a continuous production process? Multiple select question. - All units go through the same process. - It is relatively easy to distinguish between different units. - It produces a series of identical units. - It includes a discrete set of steps that all units may or may not go through.

1 & 3

Which of the following are characteristics of operations costing? Multiple select question. - It is used in manufacturing goods that have some common characteristics and some individual characteristics. - It is used when identical units are mass-produced. - It is a hybrid of job and process costing. - It is used when costs and revenues need to be recorded for each individual job.

1 & 3

Goals of a well-designed cost management system are to Blank______. Multiple select question. - manage the trade-off between a bad decision and the cost of obtaining information - guarantee that the product costs reported routinely from the cost system is always "right" - ensure that the highest bid price is calculated for every sale made - balance potential product cost distortions with the cost of conducting a study when decisions must be made

1 & 4

Which of the following are important when designing a cost system for managerial purposes? Multiple select question. - Cost systems should have a decision focus. - Different cost information is used for different purposes. - Managerial cost information must meet the cost-benefit test. - Product costing must always follow GAAP.

1, 2, & 3

Which of the following are true of calculating product costs? Multiple select question. - Individual product costs are needed for computing inventory values and cost of goods sold for the financial statements. - Individual product costs should be provided to product managers for pricing decisions. - Individual product costs are needed for production decisions. - Individual product costs are required to be presented on a firm's financial statements.

1, 2, & 3

Cost allocations Blank______. Multiple select question. - can lead to poor decisions - will always result in the "right" costs - are somewhat arbitrary - can result in potential distortions

1, 3, & 4

The objective of a cost management system is to provide information about which of the following? Multiple select question. - Financial information presented for external reporting - Processes used to produce the goods and services - Cost information that is relevant to the decisions that managers make - Cost of goods and services sold by the firm

2, 3, & 4

Which of the following describes continuous flow processing? Multiple choice question. A system that traces costs to individual units or to specific jobs, contracts, or batches of goods. A hybrid system used in manufacturing goods that have some common characteristics and some individual characteristics. A standardized method or technique of making a product that is repeatedly performed. A system that generally mass-produces a single, homogeneous output.

A system that generally mass-produces a single, homogeneous output.

Which of the following is the most important reason for calculating individual product costs? Multiple choice question. For various product managers to make decisions regarding pricing, production, promotion, and so on. To compute the cost of goods value for the financial statements. For investors to determine whether the company is a good investment. To compute the inventory values for the financial statements.

For various product managers to make decisions regarding pricing, production, promotion, and so on.

Which of the following statements is true? Multiple choice question. If wages rates are related to seniority and production scheduling is random, direct labor cost is probably the best allocation base. There is no difference between using direct labor-hours or direct labor cost as an allocation base. If overhead costs are mostly determined by labor activity, regardless of seniority or skill, direct labor-hours is probably the best allocation base.

If overhead costs are mostly determined by labor activity, regardless of seniority or skill, direct labor-hours is probably the best allocation base.

Which of the following is a characteristic of a discrete production process? Multiple choice question. It includes a continuous flow process that all units follow. It is most appropriate for mass-produced products, such as paint. It produces a series of identical units. It includes a distinct set of steps that all units may or may not go through.

It includes a distinct set of steps that all units may or may not go through.

Which of the following statements is true? Multiple choice question. A two-stage allocation system will always result in the same product cost as a single allocation system. One criterion for selecting a single or two-stage allocation system is the extent to which the choice affects reported product cost. If employees use machinery, overhead should always be allocated using a two-stage system (direct-labor-related and machine-related costs).

One criterion for selecting a single or two-stage allocation system is the extent to which the choice affects reported product cost.

Which of the following would be LEAST likely to use operations costing? Multiple choice question. auto manufacturer construction company clothing manufacturer furniture manufacturer

construction company

A graphical representation of the product costing process is provided by a Blank______. Multiple choice question. two-stage cost allocation job costing cost flow diagram continuous flow processing

cost flow diagram

How costs from the cost pool are assigned and allocated to the cost object is illustrated on a(n) Blank______. Multiple choice question. cost management system predetermined overhead rate operations costing cost flow diagram

cost flow diagram

Providing information about the cost of goods and services sold by the firm and the processes used to produce the goods and services is the objective of the (blank) (blank) system.

cost management

Skilled workers that can easily track their time to products being produced are classified as Blank______. Multiple choice question. prime costs direct labor costs direct material costs manufacturing overhead costs

direct labor costs

A common allocation base is Blank______. Multiple choice question. total overhead cost direct labor-hours units produced supervisor-hours

direct labor-hours

Major inventory components that go into the production of products and can be easily assigned to the cost of the products are classified as Blank______. Multiple choice question. manufacturing overhead costs direct labor costs conversion costs direct material costs

direct material costs

Which of the following would be LEAST likely to use a process costing system? Multiple choice question. furniture manufacturer soda manufacturer paint manufacturer soap manufacturer

furniture manufacturer

Beginning balance + Transfers in - Transfers out = Ending Balance is the basic (blank) equation.

inventory

An accounting system that traces costs to individual units or to specific jobs, contracts, or batches of goods is a(n) Blank______ system. Multiple choice question. process costing job costing operations costing

job costing

Costs that cannot be directly traced to products at a reasonable cost are classified as Blank______. Multiple choice question. direct materials costs manufacturing overhead costs prime costs direct labor costs

manufacturing overhead costs

Which of the following would be LEAST likely to use a job costing system? Multiple choice question. paint manufacturer hospital construction company consulting firm

paint manufacturer

Estimated overhead divided by the estimated allocation base is the formula for the (blank) (blank) rate.

predetermined overhead

The cost per unit of allocation base used to charge overhead to products is called the (blank) (blank) rate.

predetermined overhead

Overhead is assigned to products using a(n) Blank______. Multiple choice question. predetermined overhead rate system of direct tracing estimated allocation base

predetermined overhead rate

Companies with continuous flow processing use Blank______ costing methods. Multiple choice question. operation job process

process

An accounting system used when identical units are produced through a series of uniform production steps is a(n) Blank______ system. Multiple choice question. operations costing job costing process costing

process costing

When using two-stage cost allocation Blank______. Multiple choice question. direct materials and direct labor are treated like overhead two or more intermediate cost pools are required overhead is directly traced to products and services all cost pools use the same allocation base

two or more intermediate cost pools are required

The process of allocating costs to intermediate cost pools and then to the individual cost objects using different allocation bases is Blank______. Multiple choice question. operations costing two-stage cost allocation process costing continuous flow processing

two-stage cost allocation

What is gained from improving cost information must outweigh the expense of making the improvement according to the (blank)-(blank) test.

cost-benefit

If most overhead costs are employee-related and affected by wage rate, the best choice for overhead allocation is probably Blank______. Multiple choice question. direct labor hours direct labor cost an allocation base that is unrelated to labor

direct labor cost