Exam 3 cost accounting
Flawless Cosmetic Company manufactures and distributes several different products. The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour. Loren is the department manager of the Makeup Department that produces Products - Concealer (C) and Glow Cream (GC). Jennifer is the department manager of the Hair Care Department that manufactures Product - Shampoo (S). The product costs (per case of 24 bottles) and other information are as follows: Products C GC. S Direct materials. $100.00 $72.00 $48.00 Direct labor 42.00 31.50 12.00 Overhead 28.00 21.00 14.00 --------------------------------- $170.00 $124.50 $74.00 Machine hours. 4 2 3 Number of cases (per year) 300 500 600 If Flawless changes its allocation basis to machine-hours, what is the total product cost per case for Product GC?
$117.15 Explanation: Total overhead = $28(300) + $21(500) + $14(600) = $27,300; Total machine hours = 4(300) + 2(500) + 3(600) = 4,000; Overhead rate = $27,300/4,000 = $6.825/MH; Product cost for GC: $72.00 + $31.50 + $6.825(2) = $117.15.
Parkway Company incurred $136,000 in material costs during July. Additionally, the 13,000 units in the Work-in-Process Inventory on July 1 had materials assigned to them of $42,000, even though they were only 10% complete as to materials. No additional units were started during July, and there were no unfinished units on hand on July 31. What is the material cost per equivalent unit for July, assuming Parkway uses weighted-average process costing?
$13.69 Explanation: $136,000 + $42,000)/13,000 = $13.69.
Department A had no Work-in-Process at the beginning of the period, 1,000 units were completed during the period, 200 units were 50% completed at the end of the period, and the following manufacturing costs were debited to the departmental Work-in-Process account during the period: Direct materials (1,200 at $10)$12,000 Direct labor 5,500 Factory overhead 4,400 Assuming that all direct materials are added at the beginning of production and Department A uses weighted-average process costing, what is the total cost of the departmental Work-in-Process Inventory at the end of the period?
$2,900 Explanation: Materials: $12,000/1,200 = $10.00 per unit; Conversion costs: ($5,500 + 4,400)/1,100 = $9.00; Ending inventory: 200($10.00) + 100($9.00) = $2,900
The Lakeside Company uses a weighted-average process costing system. The following data are available: Beginning inventory -0- Units started in production 20,000 Units finished during the period 16,000 Units in process at the end of the period(complete as to materials,¼ complete as to labor and overhead) 4,000 Cost of materials used $35,200 Labor and overhead costs$37,400 Cost per equivalent unit of labor and overhead is:
$2.20. Explanation: 16,000 + 4,000(0.25) = 17,000 EU; $37,400 ÷ 17,000 = $2.20 cost per EU.
Grayson Inc. has provided the following data for the month of October. The balance in the finished goods inventory account at the beginning of the month was $49,000 and at the end of the month was $45,000. The cost of goods manufactured for the month was $226,000. The actual manufacturing overhead cost incurred was $74,000 and the manufacturing overhead cost applied to work-in-process was $70,000. The adjusted cost of goods sold that would appear on the income statement for October is:
$234,000 Explanation: Adjusted COGS = Beginning FGI + COGM + Actual MOH - Applied MOH - Ending FGI. = $49,000 + $226,000 + $74,000 - $70,000 - $45,000 = $234,000 Adjusted COGS
Mission Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below. (CMA based) Wall Mirrors Specialty Windows Units Produced 20 20 Material moves per product line. 5 35 Direct labor hours per product line 600 700 Budgeted material handling costs:$132,000 Under an activity-based costing (ABC) system, the materials handling costs allocated to one unit of Specialty Windows would be:
$5,775.00. Explanation: $132,000/(5 + 35) = $3,300; ($3,300 × 35)/20 = $5,775.00.
Department B had a beginning inventory of 400 units, 1/4 completed; an ending inventory of 300 units, 2/3 completed, and received 900 units during the period from Department A. What were the equivalent units of production of Department B, assuming weighted-average process costing?
1,200 equivalent units Explanation: (400+900-300) + (300 x 2/3) = 1,200 equivalent units
The Fremont Company uses the weighted-average method in its process costing system. The company recorded 30,500 equivalent units for conversion costs for November in a particular department. There were 6,100 units in the ending work-in-process inventory on November 30, 80% complete with respect to conversion costs. The November 1 work-in-process inventory consisted of 8,100 units, 50% complete with respect to conversion costs. A total of 26,000 units were completed and transferred out of the department during the month. The number of units started during November in the department was
24,000 units. Explanation: Units started = Units completed and transferred out + Units in ending work-in-process − Units in beginning work-in-process = 26,000 + 6,100 − 8,100.= 24,000 units started.
The chart company has a process costing system. All materials added when the process is first begun. At the beginning of September, there were no units of product in process. During September 54,000 units were started, 5,400 of these were still in process at the end of September and were 3/5 finished. The equivalent units for the conversion costs in September were:
51,840 Explanation: Started and completed (54,000-5,400) + ending inventory 5,400(0.60) = 51,840 equivalent units
Which of the following would be the most appropriate activity and cost drivers pairing for a Purchasing Department?
Activity: Placing orders - Possible Cost Driver: Number of orders.
Predetermined manufacturing overhead rates can be used in all of the following costing systems except
Actual costing
Which one of the following accounts is not used in an activity-based costing (ABC) system?
Allocations Incurred.
Which of the following characteristics applies to process costing, but does NOT apply to job order costing?
the use of equivalent units of production
Which of the following costs is not related to a batch-related activity?
Compliance costs.
What are the transfers from the finished goods inventory called?
Cost of goods sold
In the computation of the manufacturing cost per equivalent unit, the weighted-average method of process costing considers
Current costs plus cost of beginning work-in-process inventory
First stage cost objects do not include:
Direct Materials
Which of the following is the correct formula to compute the predetermined overhead rate
Estimated total manufacturing overhead costs divided by estimated total units in the allocation base.
Plant administration is an example of a:
Facility-related activity.
Which of the following is not a characteristic of job costing?
Identical units are produced on an ongoing basis.
In computing its predetermined overhead rate, Marple Company inadvertently left its indirect labor costs out of the computation. This oversight will cause:
Manufacturing Overhead to be over applied
In a traditional job costing system, the use of indirect labor in the production department increases: (CPA adapted )
Manufacturing overhead control
Which of the following accounts is used to accumulate the actual manufacturing overhead costs incurred during a period?
Manufacturing overhead control
Product costs are computed by:
Multiplying the cost driver rate by the number of units of the cost driver in each product.
Which of the following measures is not used by activity-based costing (ABC) systems as an allocation base for allocating overhead costs to the units produced?
Need Related Activities
Which of the following statements is(are) true regarding product costing? (A) twenty-four cans of paint that are 25% full are equivalent to five cans of paint that are completely full (b) the equivalent unit concept refers to the actual amount of work during the period stated in terms of whole units
Only B is true
In process 2, material G is added when a batch is 60% complete. Ending work in process units, which are 50% complete, would be included in the computation of equivalent units for: (CPA adapted)
Option A - Conversion cost YES Material G NO
Madison Corporation's production cycle starts in the Processing Department. The following information is available for April: Units Work-in-process, April 1 (25% complete) 40,000 Total units in process during April 280,000 Work-in-process, April 30 (60% complete) 25,000 Materials are added at the beginning of the process in the Processing Department. What are the equivalent units of production for the month of April, assuming Madison uses the weighted-average method? Materials Conversion Costs A.240,000 260,000 B.255,000 235,000 C.280,000 270,000 D.315,000285,000
Option C Explanation: Materials: 255,000 (completed and transferred out) + 25,000 (ending inventory) = 280,000; Conversion costs: 255,000 + 25,000(0.60) = 270,000
Cost pools are used with: Plantwide Rates Department Rates A.Yes No B.No Yes C.No No D.Yes Yes
Option D
Would the following activities at a manufacturer of canned soup be best classified as volume-related, batch-related, or product-related activities? Researching new recipes Shipping orders to grocery stores A.Volume Volume B.Batch Batch C.Product Volume D.Product Batch
Option D
Manufacturing overhead applied on the basis of direct labor hours was $120,600, while actual manufacturing overhead incurred was $125,200 for the month of April. Which of the following is always true given the statement above?
Overhead was under applied by $4,600 Explanation: actual $125,200 - applied $120,600 = $4,600 under applied
The number of services provided by an accounting firm would be classified as an:
Product-related activity.
A basic assumption of activity-based costing (ABC) is that:
Products or services require the performance of activities and activities consume resources.
Complex jobs that take multiple time periods and require the work of many different departments, divisions, or subcontractors are called:
Projects
Which of the following should not be used as the allocation base in a company that appropriately uses a single plantwide rate?
Sales Volume
Which of the following is NOT a difference between job costing service firms and job costing for manufacturing companies
Service firms costs are immediately expensed since all work is completed during a period
Which of the following activities would be classified as a batch-level activity?
Setting up equipment.
The balance in the work-in-process inventory account equals
The balances on the job cost sheets of uncompleted jobs
One of the primary differences between job costing for service firms and job costing for manufacturing companies is service firms generally:
Use fewer direct materials
Which of the following statements is true regarding time equations used in time-driven activity-based costing?
Time equations allow managers to adjust times for orders with different characteristics
What document is used to determine the actual amount of direct labor to record on a job cost sheet?
Time ticket
are allocated to the remaining departments or product lines.
To accumulate cost information for financial reporting.
Multiple (departmental) manufacturing overhead rates are considered preferable to a single (plantwide) overhead rate when: (CMA adapted)
Various products are manufactured that do not pass through the same departments or use the same manufacturing techniques.
The computation of equivalent units under the FIFO method:
treats units in the beginning work-in-process inventory as if they represent a batch of goods separate and distinct from goods started and completed during the current period
Fogel flight company uses a job costing system. The direct materials for job #045391 were purchased in September and put into production in October. The job was NOT completed by the end of October. At the end of October, in what account would the direct materials costs assigned to job #045391 be located?
Work in process inventory
When a department or product line is dropped, the common fixed costs which had been allocated to that department
are allocated to the remaining departments or product lines.
The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method:
does not consider the degree of completion of units in the beginning work-in-process inventory when computing equivalent units of production.
In a production cost report using process costing, transferred-in costs are most similar to:
material added at the beginning of the process.
The basic difference between a first-stage cost allocation and a second-stage cost allocation is that:
when used in an ABC system, the first stage assigns costs to activities.
In a process costing system, manufacturing overhead applied is usually recorded as a debit to:
work in process
Which of the following accounts is debited when direct labor is recorded
work in process inventory