Deck 2: Product Costing: Manufacturing Processes, cost Terminology and Cost Flows

Question 1

Which of the following statements is true about manufacturing companies over the past 20 years?

A) The grouping of machines into 'manufacturing cells' has increased.
B) Carrying large amounts of inventory is often less costly than carrying small amounts of inventory.
C) They have moved from a 'pull' approach to more of a 'push' approach.
D) The basic production process has changed very little over the past 20 years.

Answer 1

A

Question 2

Under ideal conditions,companies operating in a _________ environment would reduce inventories of raw materials,work-in-process and finished goods to very low levels or even zero.

A) volatile
B) just-in-time
C) traditional manufacturing
D) favourable

Answer 2

B

Question 3

Which of the following types of organisations is most likely to have a raw materials inventory account?

A) A retailer
B) A manufacturer
C) A service provider
D) A government unit

Answer 3

B

Question 4

Which of the following is an advantage of lean production and just-in-time (JIT)manufacturing systems?

A) Deliver the product to the customer on time,even if the workers go on a strike.
B) Improved product quality and reduced processing time.
C) Reduced reliance on highly skilled employees
D) Increased reliance on few suppliers.

Question 5

A 'manufacturing cell' is defined as:

A) grouping of all the machinery and equipment that are needed to make a product being available in one area of the factory.
B) restructuring of the factory so that the companies are able to manufacture products quickly.
C) an area in the warehouse where similar raw materials are grouped together.
D) grouping of all the factories that are engaged in manufacturing similar products.

Question 6

Materials that can be directly traced to a particular product and become an integral part of the finished product are called:

A) indirect materials.
B) direct materials.
C) supplies.
D) product materials.

Question 7

Which of the following is a risk that would more likely be seen in a lean production and just-in-time manufacturing environment than in a traditional production environment?

A) Reduced customer satisfaction due to higher product defects
B) Reduced raw material supply bringing the production process to a halt
C) Increased inventory storage costs
D) Increased production time resulting in lost sales

Question 8

A traditional manufacturing environment does not have which of the following?

A) An automated production process
B) Trained employees
C) Extremely low levels of work-in-process inventory
D) Product cost information available

Question 9

Manufacturing costs typically consist of:

A) direct materials,direct labour,and administrative costs.
B) production and shipping costs.
C) direct materials,direct labour,and manufacturing overhead.
D) manufacturing overhead and selling costs.

Question 10

In a just-in-time environment,the production process often begins when:

A) products are moved from raw materials to work-in-process.
B) a customer places an order.
C) the product is delivered to a customer.
D) products are moved from work-in-process to finished goods.

Question 11

Companies that operate in a lean production and just-in-time manufacturing environment are more likely to experience which of the following?

A) Reduced manufacturing flexibility
B) Increased levels of raw materials inventory
C) Increased production time
D) Increased product quality

Question 12

In general,costs incurred in the factory that do not qualify as either direct material or direct labour are called:

A) manufacturing costs.
B) manufacturing overhead.
C) non-manufacturing costs.
D) selling and administrative costs.

Question 13

Which of the following statements about manufacturing in a traditional environment is true?

A) Factories are organised so that machines that are dissimilar are grouped together.
B) It is not desirable to accumulate raw materials inventory to serve as buffers in case of unexpected demand for products.
C) The process begins with a customer order and products are 'pulled' through the manufacturing process.
D) Partially completed inventory is accumulated in a work-in-process inventory account.

Question 14

Which of the following is a disadvantage of lean production and just-in-time (JIT)manufacturing systems?

A) Increased customer delivery time
B) Increased product defects
C) Decreased flexibility of manufacturing facilities
D) Increased reliance on fewer suppliers

Question 15

Lean production is focused on eliminating waste associated with all of the following except:

A) moving products farther than required.
B) down time caused by people waiting for work to do.
C) providing excessive customer service.
D) over-processing a product.

Question 16

Which of the following statements is true regarding the lean production and just-in-time (JIT)manufacturing systems?

A) Customers are often less satisfied with the purchased product.
B) The number of product defects often increases.
C) The number of suppliers the company can purchase raw materials from often increases.
D) The factory is often restructured where dissimilar machines are grouped together.

Question 17

Which of the following is a characteristic of a lean production and just-in-time (JIT)manufacturing environment but not of a traditional manufacturing environment?

A) Increased inventory levels
B) Increased product defects
C) Increased reliance on a select number of suppliers
D) Increased production time

Question 18

Which of the following statements regarding the traditional manufacturing environment is not true?

A) Machines are often put into 'manufacturing cells' whereby dissimilar machines are grouped together.
B) Raw material is 'pushed' to the next production area in anticipation of customer demand.
C) Manufacturers often have raw material,work-in-process,and finished goods inventory on hand.
D) Buffers of inventory may result in workers being less efficient.

Question 19

Which of the following is not a type of manufacturing cost?

A) Direct material costs
B) Administrative costs
C) Factory overhead costs
D) Direct labour costs

Question 20

Which of the following is a characteristic of a traditional production environment but not of a lean production and just-in-time (JIT)manufacturing environment?

A) Increase in the need for highly skilled labour
B) Increase in the need for highly reliable suppliers
C) Reduction in the motivation of the work force
D) Reduction in the processing time

Question 21

Which of the following types of employees would most likely have their wage be classified as direct labour?

A) Factory maintenance worker
B) Factory supervisor
C) Managerial accountant
D) Assembly-line factory worker

Question 22

Manufacturing overhead includes:

A) advertising costs.
B) indirect materials.
C) sales commissions.
D) shipping charges for finished goods.

Question 23

Which of the following increases the work-in-process account?

A) Cost of goods sold
B) Raw material purchased
C) Administrative costs
D) Raw material used

Question 24

Which of the following is an example of a manufacturing overhead cost?

A) Supplies used by administrative staff
B) Supplies used by a salesperson
C) Materials easily traced to a specific product
D) Lubricants used by factory maintenance workers

Question 25

Which of the following is not an example of manufacturing overhead costs?

A) Fringe benefits paid to assembly-line workers
B) Depreciation of factory machinery
C) Overtime pay to factory supervisors
D) Insurance on factory machinery

Question 26

Which of the following statements is false regarding non-manufacturing costs?

A) They are incurred outside the factory.
B) They include selling and administrative costs.
C) They are not directly incurred to make a product.
D) They include indirect materials and indirect labour costs.

Question 27

Product costs that transfer out of finished goods are called:

A) work-in-process.
B) cost of goods manufactured.
C) cost of goods sold.
D) period costs.

Question 28

Which of the following types of employees would most likely have their wage be classified as indirect labour?

A) Factory supervisor
B) Managerial accountant
C) Salesperson
D) Machine operator

Question 29

Which of the following types of companies would be the least likely to have the following cost pattern?
Raw materials $\rarr$ Work-in-Process $\rarr$ Finished Goods $\rarr$ Cost of goods sold

A) Tyre manufacturer
B) Computer software manufacturer
C) Retailer/merchandiser
D) Construction company

Question 30

Product costs that transfer into finished goods inventory are called:

A) cost of goods manufactured.
B) cost of goods sold.
C) period costs.
D) raw materials used.

Question 31

Jasper Corporation incurred the following costs in April:
$$\begin{array} { l r l r } \text { Salesperson's salaries } & \$ 40000 & \text { Factory maintenance worker } & \$ 20000 \\\text { Factory insurance } & 12000 & \text { Administrative utilities } & 4000 \\\text { Factory supervisor salary } & 30000 & \text { Administrative supplies } & 1000 \\\text { Advertising } & 15000 & \text { Delivery truck insurance } & 2000 \\\text { Factory machine operator } & 22000 & \text { Factory machine depreciation } & 6000 \\\text { Direct materials used } & 25000 & \text { Receptionist salary } & 18000\end{array}$$

-Total period costs are:

A) $86 000
B) $38 000
C) $40 000
D) $80 000

Question 32

Which of the following is a product cost?

A) Insurance on factory machinery
B) Insurance on delivery trucks
C) Lease expense on office computer
D) Advertising costs

Question 33

Jasper Corporation incurred the following costs in April:
$$\begin{array} { l r l r } \text { Salesperson's salaries } & \$ 40000 & \text { Factory maintenance worker } & \$ 20000 \\\text { Factory insurance } & 12000 & \text { Administrative utilities } & 4000 \\\text { Factory supervisor salary } & 30000 & \text { Administrative supplies } & 1000 \\\text { Advertising } & 15000 & \text { Delivery truck insurance } & 2000 \\\text { Factory machine operator } & 22000 & \text { Factory machine depreciation } & 6000 \\\text { Direct materials used } & 25000 & \text { Receptionist salary } & 18000\end{array}$$

-Total product costs are:

A) $130 000
B) $155 000
C) $115 000
D) $117 000

Question 34

Which of the following decreases the work-in-process account?

A) Raw materials used
B) Cost of goods manufactured
C) Direct labour
D) Manufacturing overhead

Question 35

Clyde Retailer's is a local merchandiser which buys vintage clothing and sells it to local college students.Clyde began the year with inventory costing $60 000.During the year inventory costing $300 000 was purchased.At the end of the year,inventory costing $45 000 still remained.What was Clyde's cost of goods sold for the year?

A) $255 000
B) $285 000
C) $300 000
D) $315 000

Question 36

Which of the following is not an example of a manufacturing overhead cost?

A) Shipping charges on finished products
B) Indirect materials
C) Indirect labour
D) Depreciation on factory equipment

Question 37

Products and their costs flow through a production facility in the following order:

A) Work-in-process,finished goods,cost of goods sold
B) Raw materials,work-in-process,finished goods,cost of goods sold
C) Work-in-process,raw materials,cost of goods sold,finished goods
D) Work-in-process,cost of goods manufactured,cost of goods sold

Question 38

The journal entry to record raw materials used would include a:

A) debit to finished goods.
B) debit to raw materials.
C) debit to work-in-process.
D) debit to cost of goods sold.

Question 39

Which of the following statements accurately describes manufacturing cost flows in a just-in-time (JIT)environment?

A) Direct labour and overhead are maintained in a work-in-process account for long periods of time.
B) There is little need to maintain a cost of goods sold account.
C) There is little need to maintain raw materials,work-in-process,or finished goods accounts.
D) Manufacturing costs are maintained in the finished goods account for long periods of time.

Question 40

Which of the following statements is true regarding manufacturing costs?

A) They will be appear on the income statement as the product is made.
B) They will not appear on the income statement or the balance sheet until the product is completed.
C) They will appear on the balance sheet as an inventory cost until the product is sold.
D) They will appear on the balance sheet as an inventory cost after the product is sold.

Question 41

Hillsborough Street Manufacturing Inc. incurred the following costs in 2009:
$$\begin{array} { l r } \text { Direct materials used } & \$ 37000 \\\text { Direct labour costs } & 45000 \\\text { Factory rent and utilities } & 18000 \\\text { Factory equipment depreciation } & 10000 \\\text { Marketing expenses } & 3000 \\\text { Administrative expenses } & 9000\end{array}$$
50 000 units were produced during the year out of which 40 000 units were sold for $10 each. There was no beginning or ending raw materials or work-in-process inventory.

-What is cost of goods sold for the year?

A) $ 88 000
B) $ 97 600
C) $122 000
D) $110 000

Question 42

When the cost of a product is matched with its sales price,the result (difference)is called:

A) net income.
B) gross margin.
C) cost of goods sold.
D) cost of goods manufactured.

Question 43

Michael’s Manufacturing, Inc. has the following information available for the month of July:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials inventory}\\ \text { Work-in-process inventory}\\ \text { Finished goods inventory}\\\\ \text { Raw materials purchased}\\ \text { Direct labour costs}\\ \text { Overhead costs}\end{array}\begin{array}{rr}\underline{\text { Beginning}}&\underline{\text { Ending }}\\\$ 50000 & \$ 62000 \\80000 & 55000 \\24000 & 35000 \\& \\& \$ 120000 \\& 60000 \\& 45000\end{array}\end{array}$


-Cost of goods sold for July is:

A) $227 000
B) $202 000
C) $249 000
D) $239 000

Question 44

Hillsborough Street Manufacturing Inc. incurred the following costs in 2009:
$$\begin{array} { l r } \text { Direct materials used } & \$ 37000 \\\text { Direct labour costs } & 45000 \\\text { Factory rent and utilities } & 18000 \\\text { Factory equipment depreciation } & 10000 \\\text { Marketing expenses } & 3000 \\\text { Administrative expenses } & 9000\end{array}$$
50 000 units were produced during the year out of which 40 000 units were sold for $10 each. There was no beginning or ending raw materials or work-in-process inventory.

-What is net income for the year?

A) $278 000
B) $312 000
C) $378 000
D) $300 000

Question 45

Scott Products manufactures high-quality running shoes. The following information is available for 2009:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials inventory}\\ \text { Work-in-process inventory}\\ \text { Finished goods inventory}\\\\ \text { Raw materials purchased}\\ \text { Direct labour costs}\\ \text { Factory rent}\\ \text { Factory supplies}\\ \text { Factory utilities}\\ \text { Factory depreciation}\\ \text { Marketing costs}\\ \text { Administrative costs}\\\end{array}\begin{array}{rr}\underline{\text { Beginning} } &\underline{ \text { Ending }}\\\$ 25000 & \$ 82000 \\280000 & 130000 \\90000 & 120000 \\& \\& \$ 250000 \\& 340000 \\&60000 \\&20000 \\& 15000 \\&30000 \\& 25000 \\& 100000\end{array}\end{array}$


In addition, 42 400 pairs were produced in 2009 out of which 40 900 pairs were sold for $70 each.

-What is net income for 2009? (ignore taxes)

A) $1 920 000
B) $2 025 000
C) $1 890 000
D) $2 045 000

Question 46

When non-manufacturing costs are subtracted from gross margin,the result is called:

A) cost of goods sold.
B) net income.
C) sales.
D) non-manufacturing income.

Question 47

Thompson Inc.has the following selected information available for 2009:
$\begin{array}{c}\begin{array}{l} \text {Cost of goods manufactured}\\ \text {Cost of goods sold}\\ \text {Direct labour costs incurred}\\ \text {Raw material purchased}\\ \text {Raw material used}\\\\ \text {Beginning work-in-process}\\ \text {Ending work-in-process}\\\end{array}\begin{array}{r}\$180000\\150000\\45000\\90000\\80000\\\\15000\\9000\end{array}\end{array}$

Manufacturing overhead costs in 2009 amounted to:

A) $39 000
B) $55 000
C) $49 000
D) $31 000

Question 48

Hudson Inc. has the following information available for September:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials }\\ \text { Work-in-process }\\ \text { Finished goods}\\\\ \text { Raw materials purchased}\\ \text { Direct labour costs}\\ \text { Manufacturing overhead costs}\\ \text { Administrative costs}\\ \text { Marketing costs}\\\end{array}\begin{array}{rr}\underline{\text { Beginning} } &\underline{ \text { Ending }}\\8000 & \$ 5000 \\30000 & 40000 \\7000 & 3000 \\\\& 25000 \\& 70000 \\& 30000 \\& 12000 \\& 6000 \end{array}\end{array}$




-Sales revenue for September totalled $400 000.Net income for September is:

A) $257 000
B) $260 000
C) $264 000
D) $278 000

Question 49

Nate’s Novelties, Inc. has the following information available for July:
$\begin{array}{c}\begin{array}{l} \text {Raw materials inventory }\\ \text {Work-in-process inventory}\\ \text { Finished goods inventory}\\\\ \text {Raw materials purchased}\\ \text {Direct labour costs}\\ \text { Overhead costs}\\\end{array}\begin{array}{rr}\$ 12000 & \$ 9000 \\35000 & 20000 \\20000 & 44000 \\& \\& \$ 25000 \\& 55000 \\& 35000\end{array}\end{array}$


-Cost of goods manufactured for July is:

A) $153 000
B) $103 000
C) $130 000
D) $133 000

Question 50

Michael’s Manufacturing, Inc. has the following information available for the month of July:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials inventory}\\ \text { Work-in-process inventory}\\ \text { Finished goods inventory}\\\\ \text { Raw materials purchased}\\ \text { Direct labour costs}\\ \text { Overhead costs}\end{array}\begin{array}{rr}\underline{\text { Beginning}}&\underline{\text { Ending }}\\\$ 50000 & \$ 62000 \\80000 & 55000 \\24000 & 35000 \\& \\& \$ 120000 \\& 60000 \\& 45000\end{array}\end{array}$


-Raw materials used for July is:

A) $112 000
B) $108 000
C) $120 000
D) $132 000

Question 51

Nate’s Novelties, Inc. has the following information available for July:
$\begin{array}{c}\begin{array}{l} \text {Raw materials inventory }\\ \text {Work-in-process inventory}\\ \text { Finished goods inventory}\\\\ \text {Raw materials purchased}\\ \text {Direct labour costs}\\ \text { Overhead costs}\\\end{array}\begin{array}{rr}\$ 12000 & \$ 9000 \\35000 & 20000 \\20000 & 44000 \\& \\& \$ 25000 \\& 55000 \\& 35000\end{array}\end{array}$


-Cost of goods sold for July is:

A) $106 000
B) $157 000
C) $129 000
D) $109 000

Question 52

The journal entry to record cost of goods manufactured would include a:

A) credit to work-in-process.
B) credit to finished goods.
C) debit to work-in-process.
D) debit to cost of goods sold.

Question 53

Scott Products manufactures high-quality running shoes. The following information is available for 2009:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials inventory}\\ \text { Work-in-process inventory}\\ \text { Finished goods inventory}\\\\ \text { Raw materials purchased}\\ \text { Direct labour costs}\\ \text { Factory rent}\\ \text { Factory supplies}\\ \text { Factory utilities}\\ \text { Factory depreciation}\\ \text { Marketing costs}\\ \text { Administrative costs}\\\end{array}\begin{array}{rr}\underline{\text { Beginning} } &\underline{ \text { Ending }}\\\$ 25000 & \$ 82000 \\280000 & 130000 \\90000 & 120000 \\& \\& \$ 250000 \\& 340000 \\&60000 \\&20000 \\& 15000 \\&30000 \\& 25000 \\& 100000\end{array}\end{array}$


In addition, 42 400 pairs were produced in 2009 out of which 40 900 pairs were sold for $70 each.

-Cost of goods manufactured for 2009 is:

A) $990 000
B) $973 000
C) $848 000
D) $865 000

Question 54

Hudson Inc. has the following information available for September:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials }\\ \text { Work-in-process }\\ \text { Finished goods}\\\\ \text { Raw materials purchased}\\ \text { Direct labour costs}\\ \text { Manufacturing overhead costs}\\ \text { Administrative costs}\\ \text { Marketing costs}\\\end{array}\begin{array}{rr}\underline{\text { Beginning} } &\underline{ \text { Ending }}\\8000 & \$ 5000 \\30000 & 40000 \\7000 & 3000 \\\\& 25000 \\& 70000 \\& 30000 \\& 12000 \\& 6000 \end{array}\end{array}$




-Cost of goods sold for September is:

A) $119 000
B) $143 000
C) $140 000
D) $122 000

Question 55

In 2009 Bradshaw Inc.incurred $40 000 of manufacturing overhead costs which will be paid for in 2010.Which of the following would be the correct journal entry to record this transaction?
a.
$\begin{array}{llcc} \text {Cost of goods sold } & 40000\\ \text { Accounts payable } &&40000\\\end{array}$

b.
$\begin{array}{llcc} \text {Inventory } & 40000\\ \text { Accounts payable } &&40000\\\end{array}$

c.
$\begin{array}{llcc} \text {Overhead expenses } & 40000\\ \text { Accounts payable } &&40000\\\end{array}$

d.
$\begin{array}{llcc} \text {Work-in-process inventory } & 40000\\ \text { Accounts payable } &&40000\\ \end{array}$

Question 56

Hudson Inc. has the following information available for September:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials }\\ \text { Work-in-process }\\ \text { Finished goods}\\\\ \text { Raw materials purchased}\\ \text { Direct labour costs}\\ \text { Manufacturing overhead costs}\\ \text { Administrative costs}\\ \text { Marketing costs}\\\end{array}\begin{array}{rr}\underline{\text { Beginning} } &\underline{ \text { Ending }}\\8000 & \$ 5000 \\30000 & 40000 \\7000 & 3000 \\\\& 25000 \\& 70000 \\& 30000 \\& 12000 \\& 6000 \end{array}\end{array}$




-Cost of goods manufactured for September is:

A) $118 000
B) $136 000
C) $115 000
D) $133 000

Question 57

Hillsborough Street Manufacturing Inc. incurred the following costs in 2009:
$$\begin{array} { l r } \text { Direct materials used } & \$ 37000 \\\text { Direct labour costs } & 45000 \\\text { Factory rent and utilities } & 18000 \\\text { Factory equipment depreciation } & 10000 \\\text { Marketing expenses } & 3000 \\\text { Administrative expenses } & 9000\end{array}$$
50 000 units were produced during the year out of which 40 000 units were sold for $10 each. There was no beginning or ending raw materials or work-in-process inventory.

-What is the product cost per unit?

A) $3.05
B) $2.75
C) $2.44
D) $2.20

Question 58

Michael’s Manufacturing, Inc. has the following information available for the month of July:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials inventory}\\ \text { Work-in-process inventory}\\ \text { Finished goods inventory}\\\\ \text { Raw materials purchased}\\ \text { Direct labour costs}\\ \text { Overhead costs}\end{array}\begin{array}{rr}\underline{\text { Beginning}}&\underline{\text { Ending }}\\\$ 50000 & \$ 62000 \\80000 & 55000 \\24000 & 35000 \\& \\& \$ 120000 \\& 60000 \\& 45000\end{array}\end{array}$


-Cost of goods manufactured for July is:

A) $188 000
B) $250 000
C) $238 000
D) $213 000

Question 59

Hudson Inc. has the following information available for September:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials }\\ \text { Work-in-process }\\ \text { Finished goods}\\\\ \text { Raw materials purchased}\\ \text { Direct labour costs}\\ \text { Manufacturing overhead costs}\\ \text { Administrative costs}\\ \text { Marketing costs}\\\end{array}\begin{array}{rr}\underline{\text { Beginning} } &\underline{ \text { Ending }}\\8000 & \$ 5000 \\30000 & 40000 \\7000 & 3000 \\\\& 25000 \\& 70000 \\& 30000 \\& 12000 \\& 6000 \end{array}\end{array}$




-Total non-manufacturing costs for September are:

A) $113 000
B) $161 000
C) $ 18 000
D) $ 43 000

Question 60

Nate’s Novelties, Inc. has the following information available for July:
$\begin{array}{c}\begin{array}{l} \text {Raw materials inventory }\\ \text {Work-in-process inventory}\\ \text { Finished goods inventory}\\\\ \text {Raw materials purchased}\\ \text {Direct labour costs}\\ \text { Overhead costs}\\\end{array}\begin{array}{rr}\$ 12000 & \$ 9000 \\35000 & 20000 \\20000 & 44000 \\& \\& \$ 25000 \\& 55000 \\& 35000\end{array}\end{array}$


-Raw materials used for July is:

A) $21 000
B) $22 000
C) $25 000
D) $28 000

Question 61

Identify some of the benefits and risks of a lean production and just-in-time (JIT)environment.

Question 62

Chancellor Industries,a manufacturing company,prepays its insurance coverage for a two-year period.The premium for two-year's worth of coverage is $14 400 and is paid at the beginning of the first year.Two-thirds of the premium relates to factory operations and one-third relates to selling and administrative activities.
The amount of premium that should be recorded as a product cost for the first year is:

A) $ 4800
B) $ 2400
C) $ 9600
D) $14 400

Question 63

Describe the cost accumulation process in a traditional manufacturing environment versus a just-in-time (JIT)environment.

Question 64

Capital Manufacturing produces a unique souvenir product for various museums around the country.During the year,the company incurred the following costs:
$\begin{array}{lr}\text { Direct material used } & \$ 50000 \\\text { Direct labour } & 80000 \\\text { Manufacturing overhead } & 30000 \\\text { Marketing expenses } & 10000 \\\text { Administrative expenses } & 20000\end{array}$

During the year,25 000 units were produced out of which 20 000 units were sold for $15 each.
Required:
A. Calculate the total product costs incurred for the year.
B. What is the product cost per unit?
C. What is cost of goods sold for the year?
D. What is net income for the year?

Question 65

Jones Manufacturing Inc. incurred the following costs in November:
$$\begin{array} { l r l r } \text { Direct labour } & \$ 50000 & \text { Advertising costs } & \$ 33000 \\\text { Indirect labour } & 20000 & \text { Factory rent } & 10000 \\\text { Administrative salaries } & 25000 & \text { Factory depreciation } & 6000 \\\text { Direct materials purchased } & 23000 & \text { Administrative rent } & 5000 \\\text { Indirect materials used } & 4000 & \text { Administrative depreciation } & 7000\end{array}$$
In addition, the following information is also available:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials }\\ \text { Work-in-process }\\ \text { Finished goods}\\\\ \text { Number of units produced }\\ \text {Number of units sold}\\ \text { (sales price of \( \$ 25 \) per unit)}\\\end{array}\begin{array}{rr}\underline{\text { Beginning} } &\underline{ \text { Ending }}\\\$ 5000 & \$ 8000 \\60000 & 55000 \\17250 & 9200 \\& \\& 20000 \text { units } \\\\& 21400 \text { units }\end{array}\end{array}$





-Net income for November is: (ignore taxes)

A) $371 950
B) $411 950
C) $369 150
D) $382 000

Question 66

Clapton Inc.would like to prepare an income statement for March.Their production department records show that total product costs in March were $225 000 when 50 000 units were produced.Their sales department records show that 46 000 units were sold for $16 each.Monthly administrative and marketing expenses totalled $60 000.What should be net income for March?

A) $529 000
B) $473 800
C) $451 000
D) $469 000

Question 67

Identify with an 'X' the following costs as either a manufacturing (product)or non-manufacturing (period)cost.If it is a manufacturing cost,further identify it as either direct material (DM),direct labour (DL),or overhead (OH).

Question 68

Provide specific examples of why accurate product or service costing information is important for internal purposes.

Question 69

Johnson Manufacturing has the following selected information available for the year:
$\begin{array}{lr} \text { Direct material purchased } &\$40000\\ \text { Direct material used } &45000\\ \text { Direct labour incurred } &75000\\ \text {Manufacturing overhead incurred } &50000\\ \text { Cost of goods manufactured} &100000\\\end{array}$

In addition,the cost of the finished goods inventory increased by $10 000 from the beginning to the end of the year.Cost of goods sold for the year is:

A) $ 80 000
B) $170 000
C) $ 90 000
D) $110 000

Question 70

Briefly describe the difference between a manufacturing and a non-manufacturing cost.

Question 71

Jones Manufacturing Inc. incurred the following costs in November:
$$\begin{array} { l r l r } \text { Direct labour } & \$ 50000 & \text { Advertising costs } & \$ 33000 \\\text { Indirect labour } & 20000 & \text { Factory rent } & 10000 \\\text { Administrative salaries } & 25000 & \text { Factory depreciation } & 6000 \\\text { Direct materials purchased } & 23000 & \text { Administrative rent } & 5000 \\\text { Indirect materials used } & 4000 & \text { Administrative depreciation } & 7000\end{array}$$
In addition, the following information is also available:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials }\\ \text { Work-in-process }\\ \text { Finished goods}\\\\ \text { Number of units produced }\\ \text {Number of units sold}\\ \text { (sales price of \( \$ 25 \) per unit)}\\\end{array}\begin{array}{rr}\underline{\text { Beginning} } &\underline{ \text { Ending }}\\\$ 5000 & \$ 8000 \\60000 & 55000 \\17250 & 9200 \\& \\& 20000 \text { units } \\\\& 21400 \text { units }\end{array}\end{array}$





-Cost of goods manufactured in November is:

A) $ 91 000
B) $115 000
C) $155 000
D) $143 000

Question 72

Identify at least two characteristics of a lean production and just-in-time (JIT)manufacturing environment.

Question 73

Franklin Street Manufacturing has the following cost information available for 2009:
$\begin{array}{lr}\text { Direct materials used } & \$ 10000 \\\text { Direct labour costs } & 25000 \\\text { Factory overhead } & 20000 \\\text { Marketing expenses } & 4000 \\\text { Administrative expenses } & 6000\end{array}$

20 000 units were produced during the year out of which 19 000 units were sold for $10 each.

-What is cost of goods sold for 2009?

A) $55 000
B) $52 250
C) $61 750
D) $65 000

Question 74

Brenda's Bakery has the following information available for October:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials }\\ \text { Work-in-process }\\ \text { Finished goods}\\ \text { Cost of goods manufactured}\\ \text {Cost of goods sold}\\ \text { Direct labour costs }\\ \text { Factory rent and depreciation}\\ \text { Selling expenses}\end{array}\begin{array}{rr}\underline{\text { Beginning} } &\underline{ \text { Ending }}\\\$ 4000 & \$ 2000 \\32000 & 17000 \\5000 & 3000 \\& 88000 \\& 90000 \\& 35000 \\& 10000 \\& 3000 \end{array}\end{array}$





How much raw material was purchased in October?

A) $23 000
B) $25 000
C) $26 000
D) $28 000

Question 75

Classify each of the following as either a direct material (DM),indirect material (IM),or period cost (P).
a.
Wood used to build custom bookshelves
b.
Sandpaper,glue,and nails used to build customer bookshelves
c.
Paper supplies used in the administrative offices
d.
Computer chips used in computer
e.
Cleaning supplies used in the factory

Question 76

Briefly compare a traditional manufacturing environment with a lean production and just-in-time (JIT)manufacturing environment.

Question 77

Which of the following statements is true regarding period costs?

A) They 'attach' themselves to the product.
B) They will appear on the balance sheet until the product is sold.
C) They will appear on the income statement in the year they are incurred.
D) They will not impact gross margin or net income.

Question 78

Jones Manufacturing Inc. incurred the following costs in November:
$$\begin{array} { l r l r } \text { Direct labour } & \$ 50000 & \text { Advertising costs } & \$ 33000 \\\text { Indirect labour } & 20000 & \text { Factory rent } & 10000 \\\text { Administrative salaries } & 25000 & \text { Factory depreciation } & 6000 \\\text { Direct materials purchased } & 23000 & \text { Administrative rent } & 5000 \\\text { Indirect materials used } & 4000 & \text { Administrative depreciation } & 7000\end{array}$$
In addition, the following information is also available:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials }\\ \text { Work-in-process }\\ \text { Finished goods}\\\\ \text { Number of units produced }\\ \text {Number of units sold}\\ \text { (sales price of \( \$ 25 \) per unit)}\\\end{array}\begin{array}{rr}\underline{\text { Beginning} } &\underline{ \text { Ending }}\\\$ 5000 & \$ 8000 \\60000 & 55000 \\17250 & 9200 \\& \\& 20000 \text { units } \\\\& 21400 \text { units }\end{array}\end{array}$





-The product cost per unit in November is:

A) $4.55
B) $7.75
C) $5.75
D) $5.37

Question 79

Franklin Street Manufacturing has the following cost information available for 2009:
$\begin{array}{lr}\text { Direct materials used } & \$ 10000 \\\text { Direct labour costs } & 25000 \\\text { Factory overhead } & 20000 \\\text { Marketing expenses } & 4000 \\\text { Administrative expenses } & 6000\end{array}$

20 000 units were produced during the year out of which 19 000 units were sold for $10 each.

-What is net income for 2009?

A) $127 750
B) $137 750
C) $125 000
D) $128 250

Question 80

Hudson Inc. has the following information available for September:
$\begin{array}{c}\begin{array}{l}\\ \text { Raw materials }\\ \text { Work-in-process }\\ \text { Finished goods}\\\\ \text { Raw materials purchased}\\ \text { Direct labour costs}\\ \text { Manufacturing overhead costs}\\ \text { Administrative costs}\\ \text { Marketing costs}\\\end{array}\begin{array}{rr}\underline{\text { Beginning} } &\underline{ \text { Ending }}\\8000 & \$ 5000 \\30000 & 40000 \\7000 & 3000 \\\\& 25000 \\& 70000 \\& 30000 \\& 12000 \\& 6000 \end{array}\end{array}$




-In a traditional manufacturing environment,as the cost of goods sold account increases,which account is most likely decreasing?

A) Work-in-process inventory
B) Finished goods inventory
C) Raw materials inventory
D) Cash