Deck 11: Product Costing in Service and Manufacturing Entities

Question 1

Purchasing raw materials on account is a(n):

A)asset source transaction.
B)asset use transaction.
C)asset exchange transaction.
D)claims exchange transaction.

Answer 1

A

Question 2

Orlando Company paid $700 cash for production workers' wages. How does this transaction affect the financial statements? $\begin{array}{|l|c|c|c|c|c|c|c|c|c|c|c|}\hline &{\text { Assets }} && = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline \text { Cash } & + & \text { WIP Inv. } & & & & & & & & & \\\hline\end{array}$

A) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(700) & + & 700 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$
B) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(700) & + & \text { NA } & = & \text { (700) } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$
C) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(700) & + & \text { NA } & = & \text { NA } & + & (700) & \text { NA } & - & 700 & = & \text { (700) } \\\hline\end{array}$
D) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline \text { NA } & + & 700 & = & 700 & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$

Answer 2

$\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(700) & + & 700 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$

Question 3

Orlando Company paid $100 cash to purchase production supplies. How does this transaction affect the financial statements?

A) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(100) & + & \text { NA } & = & \text { NA } & + & (100) & \text { NA } & - & 100 & = & (100) \\\hline\end{array}$
B) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline \text { NA } & + & 100 & = & 100 & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$
C) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(100) & + & 100 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$
D) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(100) & + & \text { NA } & = & (100) & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$

Answer 3

$\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(100) & + & 100 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$

Question 4

Select the response that indicates the correct sequence of product cost flows from production to sale.

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

Question 5

Product costs are expensed as cost of goods sold:

A)when production is complete.
B)at the start of production.
C)when the related products are sold.
D)when the related revenue is collected.

Question 6

Which of the following is not an inventory account maintained by a manufacturing company?

A)Finished Goods Inventory
B)Work in Process Inventory
C)Raw Materials Inventory
D)Merchandise Inventory

Question 7

Which of the following statements is false?

A)Under variable costing, the income statement is prepared using a contribution margin approach.
B)Variable costing is not allowed for external financial reporting, but many companies find it useful for internal managerial reports.
C)Under variable costing, an increase in production increases the amount of profit reported on the income statement, even if the additional units are not sold.
D)Under variable costing, fixed manufacturing costs are expensed in the period incurred.

Question 8

Frost Corporation incurred the following transactions during its first year of operations. (Assume all transactions involve cash.)1) Acquired $1,000 of capital from the owners.2) Purchased $300 of direct raw materials.3) Used $100 of these direct raw materials in the production process.4) Paid production workers $400 cash.5) Paid $200 for manufacturing overhead (applied and actual overhead are the same).6) Started and completed 200 units of inventory.7) Sold 50 units at a price of $6 each.8) Paid $40 for selling and administrative expenses.The amount of raw material inventory on the balance sheet at the end of the accounting period would be:

A)$100.
B)$200.
C)$300.
D)$0.

Question 9

Cost information for services or products produced by a company is needed for:

A)determining the company's selling prices.
B)external reporting.
C)managerial decisions.
D)All of these.

Question 10

Select the incorrect statement regarding service companies.

A)Service companies do not maintain a Finished Goods Inventory account.
B)Service companies accumulate their service costs in a Work in Process Inventory account similar to manufacturers.
C)Service companies may have raw material costs.
D)Understanding the cost of providing a service is just as important as knowing the cost of making a product.

Question 11

Orlando Company paid $620 cash to purchase raw materials. How would this transaction affect Orlando's financial statements? $$\begin{array} { | c | c | c | c | c | c | c | c | c | l | l | l | } \hline { \text { Assets } } &&& = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline \text { Cash } & + & \begin{array} { c } \text { Raw } \\\text { Matls. } \\\text { Inv. }\end{array} & & & & & & & & & \\\hline\end{array}$$

A) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline 620 & +& (620)&=& \text { NA } &+& \text { NA } & \text { NA } & - & \text { NA } &=& \text { NA } \\\hline\end{array}$$
B) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline ( 620 ) &+& \text { NA }&= &( 620 )&+& \text { NA } & \text { NA } &-& \text { NA } & =&\text { NA } \\\hline\end{array}$$
C) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline ( 620 ) & + & \text { NA } & = & \text { NA } & + & ( 620 ) & \text { NA } & - & 620 & = & ( 620 ) \\\hline\end{array}$$
D) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline ( 620 ) & + & 620 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$$

Question 12

Fortune Company had beginning raw materials inventory of $16,000. During the period, the company purchased $92,000 of raw materials on account. If the ending balance in raw materials was $10,000, the amount of raw materials transferred to work in process is:

A)$86,000.
B)$98,000.
C)$102,000.
D)$92,000.

Question 13

Purchasing production supplies for cash is a(n):

A)asset source transaction.
B)asset exchange transaction.
C)asset use transaction.
D)claims exchange transaction.

Question 14

Recognizing estimated manufacturing overhead costs at the end of a month is a(n):

A)asset source transaction.
B)asset use transaction.
C)asset exchange transaction.
D)claims exchange transaction.

Question 15

A credit to the Raw Materials Inventory account represents:

A)raw materials added to production.
B)raw materials purchased.
C)raw materials available for use.
D)none of these.

Question 16

Paying for factory utilities used during the current month is a(n):

A)asset exchange transaction.
B)asset use transaction.
C)asset source transaction.
D)claims exchange transaction.

Question 17

The cost of direct materials purchased on account is expensed at the time the:

A)goods made in the manufacturing process are sold.
B)cash is paid to settle the associated accounts payable.
C)manufacturing process is complete.
D)materials are purchased.

Question 18

Orlando Company placed $142 of raw materials into production. How would this transaction affect the company's financial statements? $$\begin{array} { | c | c | c | c | c | c | c | c | c | c | } \hline { \text { Assets } } & = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline \begin{array} { c } \text { Raw } \\\text { Matls. } \\\text { Inv. }\end{array} & + & \text { WIP Inv. } & & & & & & \\\hline\end{array}$$

A) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline ( 142 ) & + & 142 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$$
B) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline 142 & + & ( 142 ) & = & \mathrm { NA } & + & \mathrm { NA } & \mathrm { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$$
C) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline ( 142 ) & + & \text { NA } & = & \text { NA } & + & ( 142 ) & \text { NA } & - & 142 & = & ( 142 ) \\\hline\end{array}$$
D) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(142) & + & (142) & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$

Question 19

All of the following costs are accumulated in the Work in Process Inventory account except:

A)depreciation on factory equipment.
B)direct labor costs.
C)manufacturing overhead costs.
D)direct material costs.

Question 20

Jones Manufacturing Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused the indicated effects on the firm's accounting equation?
$$\begin{array} { | c | c | c | c | c | c | c | c | c | c | c | } \hline { \text { Assets } } && = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline + & - & & \text { NA } & & \text { NA } & \text { NA } & & \text { NA } & & \text { NA } \\\hline\end{array}$$

A)Purchased raw materials on account.
B)Recognized revenue from merchandise sold for cash.
C)Transferred cost of goods manufactured from the Work in Process Inventory to the Finished Goods Inventory account.
D)None of these.

Question 21

Which of the following costs would not increase the Work in Process Inventory account?

A)Cost of direct labor
B)Cost of allocated overhead
C)Cost of direct materials
D)Cost of selling supplies

Question 22

Coleridge Company estimates that its production workers will work 125,000 direct labor hours during the upcoming period and that overhead costs will amount to $750,000. Assume Overhead to be allocated on the basis of direct labor hours. What predetermined overhead rate would be used to apply overhead to production during the period?

A)$6.00 per direct labor hour
B)$0.67 per direct labor hour
C)$0.67 per unit
D)$6.00 per unit

Question 23

Ferguson Company recognized $400 of estimated manufacturing overhead costs at the end of the month. How does this transaction affect the financial statements? $\begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|}\hline&{\text { Assets }} && = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline \begin{array}{c}\text { Mfg. } \\\text { OH }\end{array} & + & \text { WIP Inv. } & & & & & & & & & \\\hline\end{array}$

A) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline ( 400 ) & + & \text { NA } & = & \text { NA } & + & ( 400 ) & \text { NA } & - & 400 & = & ( 400 ) \\\hline\end{array}$$
B) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline \mathbf{( 4 0 0 )} & + & \text { NA } & = & \mathbf{( 4 0 0 )} & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$
C) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(400) & + & 400 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$
D) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline 400 & + & (400) & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$

Question 24

Travis Company had no beginning work in process or finished goods. Its total manufacturing costs for the year were $427,000. If cost of goods manufactured was $332,000 and cost of goods sold was $250,000, the amount of ending work in process would have been:

A)$82,000.
B)$105,000.
C)$95,000.
D)$127,000.

Question 25

Ferguson Company sold goods that had cost $950 to manufacture. How does this transaction affect the financial statements? $\begin{array}{|c|c|c|c|c|c|c|c|c|c|}\hline \text { Assets } & = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline\end{array}$

A) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|}\hline(950) & = & \text { NA } & + & 950 & \text { NA } & - & 950 & = & 950 \\\hline\end{array}$
B) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|}\hline(950) & = & \text { NA } & + & (950) & \text { NA } & - & 950 & = & (950) \\\hline\end{array}$
C) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | } \hline 950 & = & \text { NA } & + & ( 950 ) & \text { NA } & - & 950 & = & ( 950 ) \\\hline\end{array}$$
D) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|}\hline \mathbf{( 9 5 0 )} & = & \mathbf{( 9 5 0 )} & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$

Question 26

Argus Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused the indicated effects on the company's accounting equation?
$$\begin{array} { | c | c | c | c | c | c | c | c | c | c | c | } \hline { \text { Assets } } && = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline + & - & & \text { NA } & & \text { NA } & \text { NA } & & \text { NA } & & \text { NA } \\\hline\end{array}$$

A)Applied manufacturing overhead to work in process
B)Purchased raw materials for cash
C)Paid cash wages of production workers
D)All of these.

Question 27

Jackson Company estimated that its manufacturing employees would work 88,000 direct labor hours during the current year. During the year, its manufacturing employees actually worked 80,000 direct labor hours. Actual manufacturing overhead costs amounted to $344,000. Jackson applies overhead cost on the basis of direct labor hours. The manufacturing overhead account was overapplied by $16,000 during the current year. Based on this information the predetermined overhead rate was:

A)$5.70 per labor hour.
B)$4.10 per labor hour.
C)$4.59 per labor hour.
D)$4.50 per labor hour.

Question 28

The cost of direct materials flow through all of the following accounts except:

A)Manufacturing Overhead.
B)Work in Process Inventory.
C)Finished Goods Inventory.
D)Cost of Goods Sold.

Question 29

Lexington Company's predetermined overhead rate is $4.00 per direct labor hour. Which of the following equations correctly computes the amount of overhead cost that should be applied to work in process assuming a job required 100 hours but was estimated to require 90 hours?

A)100 hours × $4 = $400
B)90 hours × $4 = $360
C)1 job × $4 = $4
D)None of these.

Question 30

All of the following are reasons to assign estimated overhead to inventory except:

A)managers need cost information as soon as possible after production.
B)managers need to know if production costs are higher than expected as soon as possible.
C)managers need to use estimated overhead to control earnings.
D)management reduces the distortions that would come from actual monthly overhead.

Question 31

Which of the following correctly computes cost of goods manufactured?

A)Beginning work in process + Direct materials used + Direct labor + Overhead - Ending work in process
B)Beginning work in process + Cost of goods sold - Ending finished goods
C)Beginning work in process + Direct materials used + Direct labor + Overhead
D)None of these.

Question 32

The Winchester Company estimates that its overhead costs will amount to $595,000 and the company's manufacturing employees will work 85,000 direct labor hours during the current year. If actual overhead costs for the year amounted to $599,000 and actual labor hours amounted to 87,000, then overhead would be:

A)overapplied by $10,000.
B)underapplied by $10,000.
C)overapplied by $14,000.
D)underapplied by $4,000.

Question 33

McDonnell Industries estimated manufacturing overhead for the year at $290,000. Manufacturing overhead for the year was underapplied by $12,000. The company applied $235,000 to work in process. The amount of actual overhead would have been:

A)$247,000.
B)$278,000.
C)$223,000.
D)none of these.

Question 34

Washington Company made the following estimates for the current accounting period: Overhead costs: $250,000
Direct labor hours: 50,000
If 7,000 hours of labor are actually used in February, how much overhead cost would be allocated to work in process during the month? Assume Overhead to be allocated on the basis of direct labor hours.

A)$7,000
B)$35,714
C)$35,000
D)$20,833

Question 35

Ringgold Company had beginning finished goods of $36,000. During the period, the company produced goods that cost $150,000. If the ending balance in the Finished Goods Inventory account was $24,000, the amount of cost of goods sold was:

A)$162,000.
B)$150,000.
C)$138,000.
D)none of these.

Question 36

Oakland Company paid $200 cash for various manufacturing overhead costs, not before recorded. How does this transaction affect the financial statements? $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | } \hline { \text { Assets } } & = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline \text { Cash } & + & \text { Mfg. } \mathrm { OH } & & & & & & & \\\hline\end{array}$$

A) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline ( 200 ) & + & 200 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$$
B) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline ( 200 ) & + & \text { NA }& = &200 & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$$
C) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline ( 200 ) & + & \text { NA } & = & \text { NA } & + & ( 200 ) & \text { NA } & - & 200 & = & ( 200 ) \\\hline\end{array}$$
D) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(200) & + & (200) & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$

Question 37

The cost of indirect labor will initially be charged to:

A)Cost of Goods Sold.
B)Work in Process Inventory.
C)Manufacturing Overhead.
D)Wages Expense.

Question 38

Blair Company transferred the cost of units completed during the month to Finished Goods. The total cost was $1,100. How does this event affect the financial statements? $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline&{\text { Assets }} && = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline \begin{array}{l}\text { WIP } \\\text { Inv. }\end{array} & + & \begin{array}{c}\text { Fin. } \\\text { Goods } \\\text { Inv. }\end{array} & & & & & & & & & \\\hline\end{array}$

A) $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline 1,100 & + & ( 1,100 ) & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$$
B) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(1,100) & + & 1,100 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}$
C) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(1,100) & + & \text { NA } & = & \text { NA } & + & (1,100) & \text { NA } & - & 1,100 & =&1,100) \\\hline\end{array}$
D) $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline \text { NA } & + & (1,100) & = & \text { NA } & + & (1,100) & \text { NA } & - & 1,100 & = & (1,100) \\\hline\end{array}$

Question 39

Which of the following statements is true assuming the manufacturing overhead account is underapplied?

A)The predetermined overhead rate is too high.
B)The amount of costs in work in process is more than actual production costs.
C)Cost of goods sold will be credited at the end of the period when the manufacturing overhead account is adjusted.
D)The manufacturing overhead applied must be less than the manufacturing overhead estimated.

Question 40

Recording depreciation on manufacturing equipment will:

A)decrease total assets, total equity, and net income.
B)not affect total assets or net income.
C)decrease total assets, decrease net income, and increase total equity.
D)not affect total assets, and decrease net income.

Question 41

Which of the following statements is true for a company that uses variable costing?

A)The manufacturing cost per unit decreases when the volume of production increases.
B)Net income is not affected by fluctuations in production.
C)Fixed manufacturing overhead is treated like a product cost.
D)Fixed manufacturing overhead costs incurred in the current period may be recognized as expense in a later period.

Question 42

Lewes Company produced 8,000 units of inventory and sold 6,000. The company incurred the following production costs: Variable manufacturing cost: $12.00 per unit
Fixed manufacturing overhead cost: $60,000
Assuming the company sells its product at a price of $25 per unit, and incurred $10,000 in selling and administrative cost, what is the amount of net income under variable costing?

A)$107,000
B)$68,000
C)$23,000
D)$8,000

Question 43

The accounting records for Poole Manufacturing Company included the following cost information relating to its first year of operations: Assume the company produced 10,000 units of inventory and sold 6,000 of these units for $192,000. What amount of finished goods will be reported on the balance sheet at the end of the year under absorption costing?
$$\begin{array} { | l | c r | } \hline \text { Direct materials } & \$ & 60,000 \\\hline \text { Direct labor } & \$ & 80,000 \\\hline \text { Fixed manufacturing overhead } & \$ & 100,000 \\\hline \text { Variable manufacturing overhead } & \$ & 20,000 \\\hline\end{array}$$

A)$104,000
B)$260,000
C)$96,000
D)$64,000

Question 44

Haas Company paid $48,000 cash to purchase raw materials. The recognition of this event will:

A)not affect total assets, decrease net income, and decrease cash flow.
B)decrease total assets, total equity, and net income.
C)not affect total assets, total equity, or net income.
D)decrease total assets, net income, and net cash flow from investing activities.

Question 45

Which of the following is a valid reason for using variable costing?

A)Fixed production cost should be ignored when costing units of inventory since it is not essential to the production process.
B)Absorption costing recognizes fixed costs as expense regardless of volume of production.
C)Absorption costing may motivate managers to overproduce in order to increase profits.
D)Under variable costing managers can increase profitability by increasing the volume of production.

Question 46

A credit to the Finished Goods Inventory account represents the:

A)cost of goods available for sale.
B)cost of goods manufactured.
C)cost of goods sold.
D)cost of goods used.

Question 47

Warren Company applies overhead based on direct labor cost. Warren Company estimated that it would incur $180,000 in manufacturing overhead costs and $120,000 of direct labor costs during the current year. Actual manufacturing overhead cost totaled $150,000 and actual direct labor costs totaled $110,000 during the current year. If total manufacturing costs were $320,000, what amount of direct materials was used during the year?

A)$60,000
B)$30,000
C)$45,000
D)None of these.

Question 48

The accounting records for Eisner Manufacturing Company included the following cost information relating to its first year of operations: Assume the company produced 10,000 units of inventory and sold 6,000 of these units during the year for $192,000. The cost per unit under variable and absorption costing would be, respectively:
$$\begin{array} { | l | c r | } \hline \text { Direct materials } & \$ & 60,000 \\\hline \text { Direct labor } & \$ & 80,000 \\\hline \text { Fixed manufacturing overhead } & \$ & 100,000 \\\hline \text { Variable manufacturing overhead } & \$ & 20,000 \\\hline\end{array}$$

A)$5.00 and $11.00.
B)$16.00 and $26.00.
C)$14.00 and $10.00.
D)$19.00 and $30.00.

Question 49

Select the response that best illustrates the point that product cost flows are cyclical and occur in a specific sequence.

A)Acquire raw materials, convert raw materials, sell finished goods, collect cash
B)Acquire finished goods, acquire raw materials, convert raw materials, collect cash
C)Sell finished goods, collect cash, acquire raw materials
D)Collect cash, acquire raw materials, sell finished goods

Question 50

Tucker Company's work in process account decreased by $1,000, while its Finished Goods Inventory account increased by $500. Assuming total manufacturing costs were $5,000, what was the company's cost of goods sold amount?

A)$3,500
B)$4,500
C)$4,000
D)$5,500

Question 51

Burke Company produced 8,000 units of inventory and sold 6,000 of them. The company incurred the following production costs: Variable manufacturing cost: $6.00 per unit
Fixed manufacturing overhead cost: $24,000
Assuming the company sells its product at a price of $15 per unit, and incurred $10,000 in selling and administrative costs, what is the amount of net income under absorption costing?

A)$38,000
B)$14,000
C)$24,000
D)$26,000

Question 52

A credit to the work in process account represents the:

A)cost of goods manufactured.
B)cost of goods available for sale.
C)cost of overhead applied.
D)cost of goods sold.

Question 53

Tisdale Company started the year with the following beginning account balances: Raw Materials Inventory, $42,000; Work in Process Inventory, $90,000; and Finished Goods Inventory, $20,000. During the year, the company purchased $60,000 of raw materials and ended the year with $16,000 of raw materials. Direct labor costs for the year were $120,000 and a total of $36,000 of manufacturing overhead costs was allocated to work in process. There was no over- or underapplied overhead. Ending work in process was $82,000 and ending finished goods was $35,000. Goods were sold to customers during the year for $360,000. How much gross margin would be reported for the year?

A)$110,000
B)$145,000
C)$125,000
D)$171,000

Question 54

The accounting records for Grant Manufacturing Company included the following cost information relating to its first year of operations: Assume the company produced 10,000 units of inventory and sold 6,000 of these units during the year for $192,000. Under variable costing, what is the contribution margin for the year? (Ignore selling and administrative expenses.) $$\begin{array} { | l | c r | } \hline \text { Direct materials } & \$ & 60,000 \\\hline \text { Direct labor } & \$ & 80,000 \\\hline \text { Fixed manufacturing overhead } & \$ & 100,000 \\\hline \text { Variable manufacturing overhead } & \$ & 20,000 \\\hline\end{array}$$

A)$100,000.
B)$40,000.
C)$32,000.
D)None of these.

Question 55

Ting Company started the accounting period with the following beginning balances: Raw Materials Inventory, $21,000; Work in Process Inventory, $45,000; and Finished Goods Inventory, $10,000. During the accounting period, the company purchased $30,000 of raw materials and ended the period with $8,000 in raw material inventory. Direct labor costs for the period were $60,000 and $63,000 of manufacturing overhead costs was allocated to work in process. There was no over- or underapplied overhead. Ending work in process was $41,000 and ending finished goods was $17,500. Goods were sold during the period for $162,500. The amount of cost of goods manufactured (i.e., amount transferred from work in process to finished goods) would be:

A)$117,500.
B)$170,000.
C)$221,000.
D)$166,000.

Question 56

Newton Corporation entered into the following transactions during its first year of operations. (Assume all transactions involve cash.)1) Acquired $2,000 of capital from the owners.2) Purchased $600 of direct raw materials.3) Used $400 of these direct raw materials in the production process.4) Paid production workers $800 cash.5) Paid $400 for manufacturing overhead (applied and actual overhead are the same).6) Started and completed 200 units of inventory.7) Sold 50 units at a price of $12 each.8) Paid $80 for selling and administrative expenses.The amount of net income for the year was:

A)$100.
B)$75.
C)$50.
D)$120.

Question 57

Johnson Company estimates that its production workers will work 88,000 direct labor hours to produce 8,800 units during the upcoming period and that overhead costs will amount to $880,000. During the year, its manufacturing employees actually worked 100,000 direct labor hours to produce 10,000 units and incurred $1,100,000 of overhead costs. Because the goods made by Johnson are homogeneous (that is, they are identical), the company has decided it makes sense to use number of units as the allocation base for overhead. Based on this information the predetermined overhead rate is:

A)$110.00 per unit.
B)$10.00 per direct labor hour.
C)$100.00 per unit.
D)$11.00 per direct labor hour.

Question 58

Which of the following statements is true?

A)Under absorption costing some fixed manufacturing costs are deferred in ending inventory if production is lower than sales.
B)When production and sales are equal, net income will be greater under variable costing than it will be under absorption costing.
C)Under absorption costing only the fixed manufacturing cost associated with inventory produced are expensed.
D)Under variable costing fixed manufacturing costs are expensed in the period in which they are incurred regardless of when the inventory is sold.

Question 59

The Juarez Corporation incurred the following transactions during its first year of operations. (Assume all transactions involve cash).1) Acquired $1,000 of capital from the owners.2) Purchased $400 of direct raw materials.3) Used $300 of these direct raw materials in the production process.4) Paid production workers $400 cash.5) Paid $200 for manufacturing overhead (applied and actual overhead are the same).6) Started and completed 200 units of inventory.7) Sold 50 units at a price of $6 each.8) Paid $40 for selling and administrative expenses.The amount of cost of goods manufactured would be:

A)$1,000.
B)$900.
C)$800.
D)$600.

Question 60

The accounting records for Moss Manufacturing Company included the following cost information relating to its first year of operations: Assume the company produced 10,000 units of inventory and sold 6,000 of these units for $196,000. What amount of finished goods will be reported on the balance sheet at the end of the year under variable costing?
$$\begin{array} { | l | c r | } \hline \text { Direct materials } & \$ & 60,000 \\\hline \text { Direct labor } & \$ & 80,000 \\\hline \text { Fixed manufacturing overhead } & \$ & 100,000 \\\hline \text { Variable manufacturing overhead } & \$ & 20,000 \\\hline\end{array}$$

A)$100,000
B)$96,000
C)$64,000
D)None of these.

Question 61

Bates Company recognized $16,000 of estimated manufacturing overhead costs at the end of the month. As a result of this transaction the:

A)temporary account Manufacturing Overhead increases and the Work in Process account decreases.
B)temporary account Manufacturing Overhead decreases and the Work in Process account increases.
C)temporary account Manufacturing Overhead decreases and the Wages Expense account increases.
D)none of these.

Question 62

Guest Corporation estimated that total overhead cost would be $23,000 for the current year, but actual overhead costs were $25,500; as a result, Guest spent $2,500 more than expected for overhead cost. This type of variance is known as a(n):

A)material variance.
B)activity variance.
C)volume variance.
D)spending variance.

Question 63

For a manufacturing business, cost of indirect materials is first recorded in the:

A)Raw Materials Inventory account.
B)Supplies Inventory account.
C)Work In Process Inventory account.
D)Manufacturing Overhead account.

Question 64

If manufacturing overhead is underapplied, the entry to close the overhead account at the end of the accounting period will:

A)decrease net income.
B)not effect total assets.
C)increase net income.
D)decrease cash flow from operating activities.

Question 65

In a manufacturing business, the cost of direct materials being used is recorded in the:

A)Supplies Inventory account.
B)Work In Process Inventory account.
C)Raw Materials Inventory account.
D)Manufacturing Overhead account.

Question 66

Carolina Company placed $26,500 of raw materials into production. The recognition of this event will:

A)decrease net income.
B)not effect total assets.
C)increase revenue.
D)decrease cash flow from investing activities.

Question 67

Which of the following statements regarding the schedule of cost of goods manufactured and sold is correct?

A)The schedule is an internal document, which is not presented with the company's financial statements.
B)The schedule of cost of goods manufactured and sold shows the amount of cash paid for raw materials.
C)The schedule of cost of goods manufactured and sold reports the amount of direct raw materials used during the period.
D)The schedule is an internal document, which is not presented with the company's financial statements, and, in addition, the schedule of cost of goods manufactured and sold reports the amount of direct raw materials used during the period.

Question 68

Grimes Company sold 2,500 units that had cost $12,000 to produce. The recording of the sale would include an increase to:

A)Cost of Goods Sold.
B)Finished Goods Inventory.
C)Cost of Goods Manufactured.
D)Manufacturing Overhead.

Question 69

Kelly Company's manufacturing overhead costs totaled $2,871,400 during the year. At the end of the year, manufacturing overhead had been underapplied by $5,310. As a result:

A)cost of goods sold increases.
B)manufacturing overhead increases.
C)cost of goods sold decreases.
D)none of these.

Question 70

A product costing system is needed to determine the amount of product costs that should be reported on the income statement as selling and administrative expenses.

Question 71

Furst Company pays production workers' salaries on account. The cost will be recognized as an expense when:

A)the goods made by the production workers are sold.
B)the manufacturing process is complete.
C)the cash is paid to settle the associate account payable.
D)none of these.

Question 72

Virginia Company paid $7,500 cash for various manufacturing overhead costs. As a result of this transaction:

A)total assets increase.
B)total assets, total equity, and net income are not affected.
C)total assets, total equity, and net income decrease.
D)none of these.

Question 73

The reporting method that includes in the cost of inventory (and cost of goods sold) all product costs, including both fixed and variable costs is known as:

A)variable costing.
B)total costing.
C)direct costing.
D)absorption costing.

Question 74

Pinkston Company completed 12,000 units of product at a total cost of $28,000. The recording of the product completed would include a decrease to:

A)Manufacturing Overhead.
B)Cost of Goods Manufactured.
C)Finished Goods Inventory.
D)Work In Process Inventory.

Question 75

Company X manufactures 3-ring notebooks. All of the following are considered indirect costs except:

A)cardboard used in production of the notebooks.
B)depreciation on manufacturing equipment.
C)factory utilities.
D)salaries for production supervisors.

Question 76

In which account is the actual amount of costs such as factory utilities and maintenance initially recorded?

A)Work in Process Inventory
B)Manufacturing Overhead
C)Raw Materials Inventory
D)Supplies Inventory

Question 77

Herald Company paid $2,800 cash for production supplies. The recognition of this event will:

A)not impact total assets.
B)increase expenses.
C)decrease equity.
D)None of these.

Question 78

Which of the following statement(s) is/are correct? I. A predetermined overhead rate is used to assign estimated overhead costs to work in process.II. The predetermined overhead rate is calculated by dividing estimated overhead cost by the estimated volume or level of activity.III. The most common means of allocating overhead costs is to calculate a predetermined overhead rate at the end of the period.

A)I
B)I and III
C)II
D)I and II

Question 79

Cost of goods sold is equal to the cost of goods:

A)manufactured minus ending finished goods.
B)available for sale minus beginning finished goods.
C)available for sale minus ending finished goods.
D)manufactured minus beginning finished goods.

Question 80

Hughes Company paid production workers $25,550 cash. These wages will be classified as:

A)manufacturing overhead.
B)work in process.
C)cost of goods sold.
D)salary expense.