ACG6309 Ch 2 assessment
The accounting records of Dixon Company revealed the following costs: direct materials used, $250,000; direct labor, $425,000; manufacturing overhead, $375,000; and selling and administrative expenses, $220,000. Dixon's product costs total:
$1,050,000. Product costs = Direct materials used + Direct labor + Manufacturing overhead = $250,000 + $425,000 + $375,000 = $1,050,000
Rainier Industries has Raw materials inventory on January 1, 20x8 of $32,500 and Raw materials inventory on December 31, 20x8 of $26,700. If raw materials used during the year were $135,000 what was the amount of raw materials purchased during the year?
$129,200. Raw materials purchased = Raw materials used − (change in Raw material balances) = $135,000 − ($32,500 − $26,700) = $129,200.
The accounting records of Comacho Company revealed the following costs, among others: Factory insurance$32,000 Raw material used 256,000 Customer entertainment 15,000 Indirect labor 45,000 Depreciation on salespersons' cars 22,000 Production equipment rental costs 72,000 Costs that would be considered in the calculation of manufacturing overhead total:
$149,000. Manufacturing Overhead Costs = Factory insurance + Indirect labor + Production equipment rental costs = $32,000 + $45,000 + $72,000 = $149,000.
Guaranteed Appliance Co. produces washers and dryers in an assembly-line process. Labor costs incurred during a recent period were: corporate executives, $500,000; assembly-line workers, $180,000; security guards, $45,000; and plant supervisor, $110,000. The total of Guaranteed's direct labor cost was:
$180,000. the only direct labor is that associated with the actual production on the assembly line.
Your brother is trying to sell his bicycle for $200. He refuses to lose more than $50 on the sale because it originally cost him $229 when he purchased it two years ago. Which of the following would be his sunk cost?
$229. The sunk cost is that amount paid for the bicycle 2 years ago.
When 5,000 units are produced variable costs are $35 per unit and total costs are $200,000. What are the total costs when 8,000 units are produced?
$305,000. Total costs = Variable costs for 8,000 units + Fixed costs (or total costs − variable costs) =($35 × 8,000) + [$200,000 − ($35 × 5,000)] = $305,000.
Beckett Industries has the following beginning and ending inventories for the month of April. April 1April 30Direct materials $67,000 $62,000 Work-in-process 145,000 171,000 Finished goods 85,000 78,000 Production data for the month of April is: Direct labor$200,000 Actual overhead 132,000 Direct materials purchased 163,000 Transportation in 4,000 Purchase Returns and Allowances 2,000 Beckett uses one overhead control account and charges overhead to production at 70% of direct labor cost. The company does not formally recognize over- or underapplied overhead until year-end.What is Beckett's cost of goods sold for April?
$491,000. Materials used + Direct Labor + Overhead Applied = $170,000 + $200,000 + (70% × $200,000) = $510,000.Total manufacturing costs + WIP Beg Inv. − WIP End Inv. = $510,000 + $145,000 − $171,000 = $484,000.Beg. Finished + COGM= Goods Avail for Sale − End. Finished = COGS = $85,000 + $484,000 = $569,000 − $78,000 = $491,000.
Beckett Industries has the following beginning and ending inventories for the month of April. April 1April 30Direct materials $67,000 $62,000 Work-in-process 145,000 171,000 Finished goods 85,000 78,000 Production data for the month of April is: Direct labor$200,000 Actual overhead 132,000 Direct materials purchased 163,000 Transportation in 4,000 Purchase Returns and Allowances 2,000 Beckett uses one overhead control account and charges overhead to production at 70% of direct labor cost. The company does not formally recognize over- or underapplied overhead until year-end.What is Beckett's total manufacturing cost for April?
$510,000. Materials used + Direct Labor + Overhead Applied = $170,000 + $200,000 + (70% × $200,000) = $510,000.
The accounting records of Falcon Company revealed the following information: Raw materials used$60,000 Direct labor 125,000 Manufacturing overhead 360,000 Work-in-process inventory, 1/1 50,000 Finished-goods inventory, 1/1 189,000 Work-in-process inventory, 12/31 76,000 Finished-goods inventory, 12/31 140,000 Falcon's cost of goods manufactured is:
$519,000. Cost of goods manufactured = [Raw materials + Direct labor + Manufacturing Overhead] − Change in WIP = [$60,000 + $125,000 + $360,000] − ($76,000 − $50,000) = $519,000
Peyton Manufacturing has the following data: Work-in-process inventory, January 1, 20x8$43,000 Work-in-process inventory, December 31, 20x8 48,500 Conversion costs during the year 415,000 If direct materials used during the year were $135,000, what was cost of goods manufactured?
$544,500. Cost of goods manufactured = Conversion costs + Direct materials used − (change in WIP balances) = $415,000 + $135,000 − ($48,500 − $43,000) = $544,500.
The relevant range for Maxco Industries is 10,000 to 16,000 units of product. The variable costs per unit are $6 when a company produces 12,000 units of product. What are the variable costs per unit when 14,000 units are produced?
$6.00. The variable costs per unit are $6 per unit for 12,000 units of product and $6 per unit for 14,000 units as long as both are within the relevant range.
1. Calculate cost of goods sold using the following information: Inventory type January 1 December 31 Raw Materials $3,200 $2,800 Work-in Process $1,200 $ 950 Finished Goods $ 500 $ 650 Other information: Direct labor $10,200; manufacturing overhead $8,400; purchases of raw materials $45,800; total manufacturing costs $64,800.
$64,900. COGM = 1,200 + 64,800 - 950 = $65,050; COGS = 500 + 65,050 - 650 = $64,900
Using the following information, calculate cost of goods manufactured: Inventory type January 1 December 31 Raw Materials $3,200 $2,800 Work-in Process $1,200 $ 950 Finished Goods $ 500 $ 650 Other information: Direct labor $10,200; manufacturing overhead $8,400; purchases of raw materials $45,800; total manufacturing costs $64,800.
$65,050. COGM = 1,200 + 64,800 - 950 =65,050
1. An entity, such as a product, service, or department, to which a cost is assigned is called a(n) _____.
cost object
The accounting records of Upton Company revealed the following information: Cost of goods manufactured$754,000 Work-in-process inventory, 1/1 58,000 Finished-goods inventory, 1/1 125,000 Work-in-process inventory, 12/31 49,000 Finished-goods inventory, 12/31 158,000 Upton's cost of goods sold is:
$721,000. Cost of Goods Sold = Cost of goods manufactured − change in Finished Goods = $754,000 − ($158,000 − $125,000) = $721,000.
The total cost of goods completed and transfered from work-in-process to finished goods inventory is called
cost of goods manufactured
Which of the following entities would most likely have raw materials, work in process, and finished goods?
A petroleum refiner.
Which of the following is a period cost?
Advertising expense.
Which of the following would not be characterized as a cost object? A vehicle manufactured by an automobile manufacturer. A large city's fire department. A fast food restaurant located in a Midwest town. A regional airline flight from Atlanta to Miami.
All of these are examples of cost objects.
Which of the following statements is incorrect?
Cost of goods sold is an inventoriable cost.
Once inventory is sold, product costs become
cost of goods sold
What are the three categories of manufacturing costs?
Direct labor, manufacturing overhead, direct materials
1. Which of the following is the calculation of cost of goods manufactured?
Direct materials + direct labor + manufacturing overhead + beginning work-in-process - ending work-in-process.
Selling and administrative costs are only shown as period costs on merchandising and service firm income statements.
False
What is the primary trade-off that an accountant must consider when deciding whether to identify cost drivers?
Is the cost/benefit of the process reasonable for more accurate cost behavior obtained?
Which of the four items listed below is not a type of production process?
Job Flow.
Which type of production process is ideal for a low production volume and one-of-a-kind products?
Job Shop.
What would the cost of fire insurance for a manufacturing plant generally be categorized as?
Product cost. Fire insurance costs would be product costs since they are associated with the manufacturing plant.
1. Which of the following statements is correct?
Raw material is reclassified as direct material when it enters the production process.
Which of the following is true regarding managerial accounting information?
The benefit of the information should be weighed against the cost of obtaining and using the information.
Which of the following statements is true?
The cost of services is an expense
Selling and administrative costs are always period costs on any type of company's income statement.
True
An opportunity cost is
a benefit that is sacrificed with the choice of one course of action over another
A sunk cost is
a cost that has been incurred in the past
Identify which statements regarding costs in the service industry are correct.
a. A cost that a manager can significantly influence is a controllable cost in both a service and a manufacturing firm. b. Service firms can have direct materials
Which of the following are true?
a. Classified cost data may be appropriate for one use but inappropriate for another b. A cost is a sacrifice made to achieve a particular purpose. c. The word cost can have different meanings depending on the context used.
Direct labor includes
a. cost of salaries and wages for personnel who work directly on the manufactured products b. fringe benefits for assembly line personnel
1. Service firms such as lawyers and CPAs can have
a. direct material costs b. direct labor costs
Manufacturing overhead includes
a. indirect labor b. factory depreciation c. indirect materials
1. The product cost for a manufacturer includes
a. labor costs of production employees b. overhead incurred to manufacture the product
Objectives of a cost management system include
a. measuring the unused capacity of resources b. evaluating new activities that can improve organizational performance c. determining the efficiency and effectiveness of all major activities
The product cost for a merchandising retailer or wholesaler includes
a. shipping costs paid by the acquiring retailer or wholesaler for inventory b. purchase cost of inventory
1. Idle time
a. should be classified as overhead b. is caused by equipment breakdowns or new setups
In keeping with the focus on activities, managerial accountants have developed a system for determining the cost of goods or services called ____ costing
activity-based
1. The total manufacturing cost divided by the number of units manufactured is called the ______ cost per unit.
average
A cost that a manager can significantly influence is a(n) _____ cost
controllable
A resource expended or given up to achieve a particular purpose is a(n)
cost
As the activity level increases, fixed costs per unit will
decrease
As the activity level increases, the amount of the change in unit fixed costs
decreases
The amount by which a cost changes under alternative courses of action is a(n)
differential cost
Cost of salaries and wages for personnel who work directly on the manufactured products is classified as _____ labor costs
direct
Materials that can be easily traced to a product are called ___ materials
direct
A cost that can be traced to a particular cost object is called a(n) _____ of that cost objective
direct cost
Costs that can be easily traced to a specific department are called:
direct costs.
The costs of fringe benefits for assembly line workers are ____ costs.
direct labor
Conversion costs are
direct labor and manufacturing overhead.
Prime costs are
direct materials and direct labor
1. The three categories of manufacturing costs are ______ material, direct ____ and manufacturing ______.
direct, labor, overhead
Prime costs + conversion costs = Total manufacturing costs
false
Raw materials is another term for direct materials
false
Manufactured goods that are completed and ready for sale are called _____.
finished-goods inventory
Another term for gross profit is
gross margin
The portion of revenues left after deducting just the costs that have been classified as cost of sales is called ____.
gross profit
Time that is not spent productively by an employee due to such events as equipment breakdowns or new setups is classified as _____ time
idle
1. Production department supervisors, quality control inspectors and assembly plant security guards are classified as _____labor.
indirect
Costs of materials that are required for the production process, but do not become an integral part of the finished product are called ____materials
indirect
Materials that become an integral part of the finished product but are insignificant in cost are often classified as ______ material
indirect
A cost that is not easily traceable to a particular service or product is a(n)
indirect cost
Another term for product cost is _______ cost
inventoriable
Product costs are:
inventoried.
Using an activity-based costing system to improve the operations of an organization is called activity-based
management
The cost of goods completed and transfered from work-in-process to finished goods inventory is cost of goods
manufactured
All costs of production other than direct labor and direct materials are classified as
manufacturing (production) overhead
1. Costs of operating service departments that support manufacturing are classified as ______.
manufacturing overhead
Costs of operating service departments that support manufacturing are classified as
manufacturing overhead
Indirect labor is classified as part of
manufacturing overhead
The cost of idle time and overtime premiums paid to factory works is classified as
manufacturing overhead
Cost of activities that can be eliminated with no deterioration of product quality, performance or perceived worth are called ____ costs
on-value-added
A benefit that is sacrificed with the choice of one action precludes taking an alternative course of action is a(n)
opportunity cost
The salary that is sacrificed by a college student who pursues a degree full time is a(n):
opportunity cost.
The tuition that will be paid next semester by a college student who pursues a degree is a(n):
out-of-pocket cost.
The main difference between service production costs and a manufactured product costs is that service department costs are
period costs
Inventory that includes all materials before they are placed into production is called _____ inventory
raw-material
As activity increases, unit variable cost:
remains constant.
At the most basic level, a cost may be defined as a(n):
sacrifice made to achieve a particular purpose. At the most basic level, a cost may be defined as the sacrifice made to achieve a particular purpose, usually measured by the resources expended or given up.
Gross profit is
sales - cost of sales.
Direct materials are materials
that are physically incorporated into the finished products and are easily traceable to the product.
A differential cost is
the amount by which a cost differs under alternative courses of action.
A marginal cost is
the incremental cost of producing one additional item
A cost that is a direct cost in one deptment can be an indirect cost in another department
true
The benefit of information should always be weighed against the cost of obtaining the information
true
A cost that a manager can not influence significantly is a(n) _____ cost
uncontrollable
A cost that changes, in total, in direct proportion to a change of activity is a(n) _____ cost
variable
Inventory that is only partially completed at the balance sheet date is called
work-in-process
