SB7

ABC Company incurred $124,000 of manufacturing overhead in March and applied $120,000 to March production. If ABC produced 16,000 units during March, its predetermined overhead rate being used for the year is $______ per unit.

$120000/16000 = $7.50 per unit

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 = $_______

(28000+42000+15(5200))/7400 = 20

ABC Company is planning to use activity-based costing and estimated the following budgeted cost and driver activity for each cost driver: Machining cost = $100,000; machining time = 10,000 hours Direct labor cost = $80,000; direct labor time = 20,000 hours Inspection cost = $10,000; inspection time = 2,000 hours Calculate activity-based costing rates for each driver activity: Machining time = $______ per machine hour Direct labor time = $______ per direct labor hour Inspection time = $______ per inspection hour

10, 4, 5

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 $_______

12*6500 = 78000

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.

80000*.4 = 32000

Which of the following activities is not included in the organization's value chain? Production Research and development Customer service Accounting

Accounting

Which of the following costs would be classified as a period cost? Factory maintenance costs Advertising expense for the product Product machining labor Plant electricity

Advertising expense for the product

Which of the following process steps occurs first for managers to observe costs for different organizational reference points? Cost accumulation Cost assignment Cost pooling Identifying cost objects

Cost accumulation

Which of the following are elements of a product's cost for a manufacturing firm? Human production effort Accounting effort Production machine support Ingredients Distribution effort Sales effort

Human production effort Production machine support Ingredients

Match the following elements of a product's cost that appropriately apply to a manufacturing firm and a merchandising firm. Ingredients Purchased product Manufacturing firm Merchandising firm

Ingredients --> Manufacturing Firm Purchased Product --> Merchandising Firm

Which of the following manufacturing environments would use a job order costing system? Oil and gas refining Coal mining Corn processing Textbook printing

Textbook printing

Direct costs describe costs that: are not traceable to a cost object have fixed cost behavior have variable cost behavior are traceable to a cost object

are traceable to a cost object

A predetermined overhead rate is used to: keep track of actual overhead costs. assign indirect costs to units produced. assign direct costs to units produced. assign selling expenses to units produced.

assign indirect costs to units produced.

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

credit

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.

direct

The three components of product costs are: direct material, supervisor salaries, selling expenses. direct labor, manufacturing overhead, indirect material. manufacturing overhead, indirect material, indirect labor. direct material, direct labor, manufacturing overhead.

direct material, direct labor, manufacturing overhead.

In an activity-based costing system, a cost _____ is an activity that causes the incurrence of a manufacturing cost.

driver

An example of a cost likely to have an indirect relationship with products being manufactured is: production labor costs. raw material costs. electricity costs for packaging equipment. none of the answers are correct.

electricity costs for packaging equipment.

The difference between absorption costing and direct (or variable) costing is in the accounting for: fixed manufacturing overhead direct labor variable manufacturing overhead direct materials

fixed manufacturing overhead

The finished goods inventory account is increased for the cost of goods ________ (manufactured/sold) and is decreased for the cost of goods _______ (manufactured/sold).

manufactured, sold

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

period

On the statement of cost of goods manufactured, the sum of raw materials used + direct labor incurred + manufacturing overhead applied is known as: contribution margin cost of goods sold cost of goods manufactured total manufacturing costs

total manufacturing costs

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.

value chain

An example of a product cost is: wages of the production line maintenance staff. interest expense on a loan to finance a new sales office. a portion of the president's compensation expenses. delivery expense for the product.

wages of the production line maintenance staff.

A predetermined overhead application rate is established to apply manufacturing overhead to __________. work in process finished goods raw materials cost of goods sold

work in process

Identify the correct sequence of steps in the cost accumulation and assignment process, which allows managers to observe costs for different organizational cost objects. Identify cost objects Accumulate costs Pool costs Assign costs

1. Accumulate costs 2. Identify cost objects 3. Pool Costs 4. Assign Costs

Absorption costing and direct costing differ in the treatment of: fixed manufacturing overhead. variable manufacturing overhead. selling expenses. direct labor costs.

fixed manufacturing overhead.

A firm _____ _____ (can elect/is required) to use absorption costing for both financial reporting and income tax purposes.

is required

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

job

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.

product, period

An example of a product cost is: production line maintenance costs advertising expense for the product a portion of the president's salary interest expense on a company loan

production line maintenance costs

An example of a committed cost is: property taxes. advertising expenditures. administrative supplies. employee professional development.

property taxes.

Cost accounting _____. relates primarily to the accumulation and determination of product, process, or services costs fails to play any role in the inventory valuation aspects of financial accounting focuses only on providing information to stockholders and creditors of an organization need not be flexible enough to provide answers to support the broad array of managerial questions for decision making purposes

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

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. 135,000 units 165,000 units 150,000 units 15,000 units

165000 Assembly department equivalent units of production = Units completed and transferred + (units in process × percent complete) = 150,000 + (25,000 × 60%) = 150,000 units + 15,000 units = 165,000 units

Which of the following is a true statement regarding absorption and/or direct costing? Direct costing assigns only direct materials and direct labor to products. A firm can choose to use either absorption or direct costing for income tax purposes. A firm can choose to use either absorption or direct costing for financial reporting purposes. Absorption costing includes fixed overhead in product costs whereas direct costing does not.

Absorption costing includes fixed overhead in product costs whereas direct costing does not.

Identify the true statements about cost accounting. It only serves the needs of financial 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. It does not play any role in the income measurement aspect of financial 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. Need help? Review these concept resources.Read About the Concept Question Feedback Next Question Reading

From the following list of activities, identify those that could represent cost drivers in an activity-based costing system. Machine setup for production runs Raw material handling Production order preparation Quality inspection Sales order processing Payroll processing

Machine setup for production runs Raw material handling Production order preparation Quality inspection

In order to achieve higher quality cost information from the assignment of overhead costs to products manufactured, the use of a predetermined overhead rate is being replaced by: activity-based costing. job order costing. absorption costing. process costing.

activity-based costing.

The use of activity-based costing information to support the decision-making process is known as: cost distortion analysis. activity-based management. value chain analysis. cost-based management.

activity-based management.

An excess of cost of goods manufactured over cost of goods sold for the period represents: an increase in finished goods inventory. an increase in gross profit. a decrease in work in process inventory. overapplied manufacturing overhead.

an increase in finished goods inventory.

Cost of Goods Manufactured can be computed as: ending balance of work in process + raw materials purchased + direct labor costs incurred + manufacturing overhead costs applied - beginning balance of work in process. beginning balance of work in process + raw materials purchased + direct labor costs incurred + manufacturing overhead costs applied - ending balance of work in process. beginning balance of work in process + raw materials used + direct labor costs incurred + manufacturing overhead costs applied - ending balance of work in process. ending balance of work in process + raw materials used + direct labor costs incurred + manufacturing overhead costs applied - beginning balance of work in process.

beginning balance of work in process + raw materials used + direct labor costs incurred + manufacturing overhead costs applied - ending balance of work in process.

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

debit

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).

decreased, increased