ACT II Exam study guide

Kimble Company applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under- or overapplication of overhead for the period: Estimated annual overhead cost $1,200,000 Actual annual overhead cost $1,155,000 Estimated machine hours 400,000 Actual machine hours 380,000

$1,140,000 applied and $15,000 underapplied ((1,200,000/400,000= $3. $3x380,000=1,140,000. Actual 1,155,000-1,140,000= under 15,000))

Redman Company manufactures customized desks. The following pertains to Job No. 978: Direct materials used $9,450 Direct labor hours worked 360 Direct labor rate per hour $15.00 Machine hours used 300 Applied factory overhead rate per machine hour $22.00 What is the total manufacturing cost for Job No. 97?

$21,450 ((DL 360 x $15= 5400, Applied= $22 x 300= 6600, (9450+5400+6600=21,450))

Gutknecht Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system: Costs: Wages and salaries $300,000 Depreciation 180,000 Utilities 240,000 Total $720,000 Distribution of resource consumption: Activity Cost Pools OTHER: Wages and salaries 25%, Depr. 35%, Utilities 30% How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost pool?

$210,000 ((300,000(.25)+180,000(.35)+240,000(.30)= 210,000))

A company expected its annual overhead costs to be $900,000 and direct labor costs to be $1,000,000. Actual overhead was $870,000, and actual labor costs totaled $1,100,000. How much is the company's predetermined overhead rate to the nearest cent?

(900,000/1,000,000)= $0.90

The labor costs that have been identified as indirect labor should be charged to

Manufacturing overhead

Machining a part for a product is an example of

Unit-level activity

Products that are in the process of being manufactured but are not yet complete are called:

WIP Inventory

An opportunity cost is:

a cost of potential benefit lost

Variable costs are:

costs that change, in total, in direct proportion to changes in activity levels.

If the entry to assign factory labor showed only a debit to Work In Process Inventory, then all labor costs were

direct labor

Labor costs that are clearly associated with specific units or batches of product because the labor is used to convert raw materials into finished products are called:

direct labor

The three major cost components of a manufactured product are:

direct material, direct labor, and factory overhead

Managerial accounting, as compared to financial accounting, is primarily intended to facilitate:

making decisions with timely, relevant information

Property taxes on a manufacturing plant are an element of a product cost? period cost?

product: yes; period: no

Goods a company acquires to use in making products are called:

raw materials inventory

Period costs for a manufacturing company would flow directly to:

the current income statement

In activity-based costing, the activity rate for an activity cost pool is computed by dividing the total overhead cost in the activity cost pool by:

the total activity for the activity cost pool

What term describes all activities associated with providing a product or service?

the value chain

The sum of the direct materials costs, direct labor costs, and manufacturing overhead incurred is the

total manufacturing costs

A direct cost is a cost that is:

traceable to a cost object

For a manufacturing company, which of the following is an example of a period cost rather than a product cost?

wages of salesperson

Products that have been completed and are ready to be sold by the manufacturer are called:

Finished Goods Inventory

Kushman Combines, Inc. has $20,000 of ending finished goods inventory as of December 31, 2010. If beginning finished goods inventory was $10,000 and cost of goods sold was $40,000, how much would Kushman report for cost of goods manufactured?

50,000 ((Beg 10,000-COGS 40,000 -end 20,000= 50,000))

Emley Company incurred direct materials costs of $450,000 during the year. Manufacturing overhead applied was $420,000 and is applied based on direct labor costs. The predetermined overhead rate is 70%. How much are Emley Company's total manufacturing costs for the year?

= 1,470,000 ((420,000/70%= 600,000. (450,000+600,000+420,000)= 1,470,000))

Cost of goods manufactured is calculated as follows:

Beginning WIP + direct materials used + direct labor + manufacturing overhead - Ending WIP

Which one of the following does not appear on the balance sheet of a manufacturing company?

COGM

At the end of the year, any balance in the Manufacturing Overhead account is generally eliminated by adjusting

COGS

A mixed cost:

Contains a combination of fixed costs and variable costs.

When a job is completed and all costs have been accumulated on a job cost sheet, the journal entry that should be made is

Debit Finished Goods Inventory; Credit Work In Process Inventory

A fixed cost:

Does not change with changes in the volume of activity within the relevant range.