Question 1

Which of the following replaces the retailing component "Purchases" in computing Cost of Goods Sold for a manufacturing company?
A) direct material used
B) cost of goods manufactured
C) total prime cost
D) cost of goods available for sale

Accepted Answer

Cost of Goods Manufactured replaces the retailing component "Purchases" in computing Cost of Goods Sold for a manufacturing company, as it represents the total cost of producing goods that are finished and ready for sale.

Question 2

Mitchell Company The following information has been taken from the cost records of Mitchell Company for the past year:
 $\begin{array}{ll}
\underline{\text {Inventries}}&\underline{\text { Beginning }} &\underline{ \text { Ending }} \
\text {Raw Material}&\$ 75 & \$ 85 \
\text {Wotk in Process}&80 & 30 \
\text { Finished Goods }&90 & 110
\end{array}$  Refer to Mitchell Company. The cost of raw material purchased during the year was
A) $316.
B) $336.
C) $360.
D) $411.

Accepted Answer

The answer of Mitchell Company The following information has been...

Question 3

Mitchell Company The following information has been taken from the cost records of Mitchell Company for the past year:
 $\begin{array}{ll}
\underline{\text {Inventries}}&\underline{\text { Beginning }} &\underline{ \text { Ending }} \
\text {Raw Material}&\$ 75 & \$ 85 \
\text {Wotk in Process}&80 & 30 \
\text { Finished Goods }&90 & 110
\end{array}$

Refer to Mitchell Company. Cost of Goods Sold was
A) $691.
B) $716.
C) $736.
D) $801.

Accepted Answer

The answer of Mitchell Company The following information has been...

Question 4

Legend Company manufacturers tables. If raw material used was $80,000 and Raw Material Inventory at the beginning and end of the period, respectively, was $17,000 and $21,000, what was amount of raw material was purchased?
A) $76,000
B) $118,000
C) $84,000
D) $101,000

Accepted Answer

The answer of Legend Company manufacturers tables. If raw material...

Question 5

Costs that are incurred to preclude defects and improper processing are:
A) prevention costs
B) detection costs
C) appraisal costs
D) failure costs

Accepted Answer

Prevention costs are those costs that are incurred to prevent defects or issues before they even occur. This can include investing in training for employees, implementing quality control measures, and conducting regular maintenance on equipment. By investing in prevention costs, a company can reduce the likelihood of having to spend money on detection or failure costs later on.

Question 6

The formula for cost of goods sold for a manufacturer is
A) beginning Finished Goods Inventory plus Cost of Goods Manufactured minus ending Finished Goods Inventory.
B) beginning Work in Process Inventory plus Cost of Goods Manufactured minus ending Work in Process Inventory.
C) direct material plus direct labor plus applied overhead.
D) direct material plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

Accepted Answer

Cost of goods sold for a manufacturer is calculated by adding the cost of goods manufactured during the period to the beginning finished goods inventory and then subtracting the ending finished goods inventory. This formula takes into account the cost of goods that were completed during the period but were not sold and the cost of goods that were sold during the period. Option B is incorrect because it is the formula for calculating the cost of goods manufactured. Option C and D are incorrect because they only calculate the cost of materials, labor, and overhead, but do not take into account the inventory levels of finished goods.

Question 7

Davis Company. Davis Company manufactures wood file cabinets. The following information is available for June 2008:
$\begin{array}{ll}
&\underline{\text { Beginning }} &\underline{ \text { Ending }} \
\text {Raw Material Inventory}&\$6,000& \$ 7,500 \
\text {Wotk in Process Inventory}&17,300 & 11,700 \
\text { Finished Goods Inventory }&21,000 & 16,300
\end{array}$ 
 Refer to Davis Company. Direct labor is paid $9.60 per hour and overhead for the month was $9,600. If there were 1,500 direct labor hours and $21,000 of raw material purchased, Cost of Goods Manufactured is:
A) $49,100.
B) $45,000.
C) $51,000.
D) $49,500.

Accepted Answer

Cost of Goods Manufactured = Beginning Work in Process Inventory + Direct Material Used + Direct Labor + Overhead - Ending Work in Process Inventory= 17,300 + 21,000 + (1,500 * 9.60) + 9,600 - 11,700= 17,300 + 21,000 + 14,400 + 9,600 - 11,700= 49,100

Question 8

The final figure in the Schedule of Cost of Goods Manufactured represents the
A) cost of goods sold for the period.
B) total cost of manufacturing for the period.
C) total cost of goods started and completed this period.
D) total cost of goods completed for the period.

Accepted Answer

The final figure in the Schedule of Cost of Goods Manufactured represents the total cost of goods completed for the period. This amount includes all the direct materials, direct labor, and overhead costs incurred in the production of the finished goods. Once these costs are added up, the total represents the full cost of the goods that have been completed during the period.

Question 9

Costs that are incurred for monitoring and inspecting are:
A) prevention costs
B) detection costs
C) appraisal costs
D) failure costs

Accepted Answer

Appraisal costs are costs incurred for activities such as inspection, testing, and measuring to ensure that the product or service meets the required quality standards. Monitoring and inspecting fall under this category. Prevention costs are incurred to prevent defects from occurring in the first place, detection costs are incurred to detect defects after they occur, and failure costs are incurred due to defects in the product or service.

Question 10

Davis Company. Davis Company manufactures wood file cabinets. The following information is available for June 2008:
$\begin{array}{ll}
&\underline{\text { Beginning }} &\underline{ \text { Ending }} \
\text {Raw Material Inventory}&\$6,000& \$ 7,500 \
\text {Wotk in Process Inventory}&17,300 & 11,700 \
\text { Finished Goods Inventory }&21,000 & 16,300
\end{array}$ 
 Refer to Davis Company. Direct labor is paid $9.60 per hour and overhead for the month was $9,600. What are prime costs and conversion costs, respectively if there were 1,500 direct labor hours and $21,000 of raw material was purchased?
A) $29,100 and $33,900
B) $33,900 and $24,000
C) $33,900 and $29,100
D) $24,000 and $33,900

Accepted Answer

The answer of Davis Company. Davis Company manufactures wood file...

Question 11

Costs that are incurred when customers complain are:
A) prevention costs
B) detection costs
C) appraisal costs
D) failure costs

Accepted Answer

Costs that are incurred when customers complain are considered failure costs. These are costs that result from defects or quality issues in the product or service that have already been delivered to the customer. Examples of these costs include warranty claims, returns or exchanges, and customer support or service requests.

Question 12

Mitchell Company The following information has been taken from the cost records of Mitchell Company for the past year:
 $\begin{array}{ll}
\underline{\text {Inventries}}&\underline{\text { Beginning }} &\underline{ \text { Ending }} \
\text {Raw Material}&\$ 75 & \$ 85 \
\text {Wotk in Process}&80 & 30 \
\text { Finished Goods}&90 & 110
\end{array}$ 
 Refer to Mitchell Company. Cost of Goods Manufactured was
A) $636.
B) $716.
C) $736.
D) $766.

Accepted Answer

The answer of Mitchell Company The following information has been...

Question 13

Davis Company. Davis Company manufactures wood file cabinets. The following information is available for June 2008:
$\begin{array}{ll}
&\underline{\text { Beginning }} &\underline{ \text { Ending }} \
\text {Raw Material Inventory}&\$6,000& \$ 7,500 \
\text {Wotk in Process Inventory}&17,300 & 11,700 \
\text { Finished Goods Inventory }&21,000 & 16,300
\end{array}$  Refer to Davis Company. Direct labor is $9.60 per hour and overhead for the month was $9,600. Compute total manufacturing costs for June, if there were 1,500 direct labor hours and $21,000 of raw material was purchased.
A) $58,500
B) $46,500
C) $43,500
D) $43,100

Accepted Answer

The answer of Davis Company. Davis Company manufactures wood file...

Question 14

Davis Company. Davis Company manufactures wood file cabinets. The following information is available for June 2008:
$\begin{array}{ll}
&\underline{\text { Beginning }} &\underline{ \text { Ending }} \
\text {Raw Material Inventory}&\$6,000& \$ 7,500 \
\text {Wotk in Process Inventory}&17,300 & 11,700 \
\text { Finished Goods Inventory }&21,000 & 16,300
\end{array}$ 
 Refer to Davis Company. Direct labor is paid $9.60 per hour and overhead for the month was $9,600. If there were 1,500 direct labor hours and $21,000 of raw material purchased, how much is Cost of Goods Sold?
A) $64,500.
B) $59,800.
C) $38,800.
D) $53,800.

Accepted Answer

The Cost of Goods Sold is calculated as follows: 1. Calculate the cost of raw materials used: Beginning Raw Material Inventory + Purchases - Ending Raw Material Inventory = $6,000 + $21,000 - $7,500 = $19,500.2. Calculate total manufacturing costs: Raw Materials Used + Direct Labor + Overhead = $19,500 + (1,500 hours * $9.60) + $9,600 = $19,500 + $14,400 + $9,600 = $43,500.3. Calculate the cost of goods manufactured: Total Manufacturing Costs + Beginning Work in Process Inventory - Ending Work in Process Inventory = $43,500 + $17,300 - $11,700 = $49,100.4. Calculate Cost of Goods Sold: Cost of Goods Manufactured + Beginning Finished Goods Inventory - Ending Finished Goods Inventory = $49,100 + $21,000 - $16,300 = $53,800.

Question 15

Mitchell Company The following information has been taken from the cost records of Mitchell Company for the past year:
 $\begin{array}{ll}
\underline{\text {Inventries}}&\underline{\text { Beginning }} &\underline{ \text { Ending }} \
\text {Raw Material}&\$ 75 & \$ 85 \
\text {Wotk in Process}&80 & 30 \
\text { Finished Goods }&90 & 110
\end{array}$ 
 Refer to Mitchell Company. Direct labor cost charged to production during the year was
A) $135.
B) $216.
C) $225.
D) $360.

Accepted Answer

The answer of Mitchell Company The following information has been...

Question 16

Conversion of inputs to outputs is recorded in the
A) Work in Process Inventory account.
B) Finished Goods Inventory account.
C) Raw Material Inventory account.
D) both a and b.

Accepted Answer

Conversion of inputs to outputs is part of the production process, therefore it is recorded in the Work in Process Inventory account. The Finished Goods Inventory account only records completed goods ready for sale, while the Raw Material Inventory account records materials that have not yet been used in production.

Question 17

In a perpetual inventory system, the sale of items for cash consists of two entries. One entry is a debit to Cash and a credit to Sales. The other entry is a debit to
A) Work in Process Inventory and a credit to Finished Goods Inventory.
B) Finished Goods Inventory and a credit to Cost of Goods Sold.
C) Cost of Goods Sold and a credit to Finished Goods Inventory.
D) Finished Goods Inventory and a credit to Work in Process Inventory.

Accepted Answer

In a perpetual inventory system, when an item is sold, the cost of the goods sold is recognized by debiting Cost of Goods Sold and crediting Finished Goods Inventory, reflecting the reduction in inventory and the expense of the sold goods.

Question 18

Steelman Company manufacturers desks. The beginning balance of Raw Material Inventory was $4,500; raw material purchases of $29,600 were made during the month. At month end, $7,700 of raw material was on hand. Raw material used during the month was
A) $26,400.
B) $34,100.
C) $37,300.
D) $29,600.

Accepted Answer

The raw material used is calculated as: Beginning Inventory ($4,500) + Purchases ($29,600) - Ending Inventory ($7,700) = $26,400.

Question 19

The formula to compute cost of goods manufactured is
A) beginning Work in Process Inventory plus purchases of raw material minus ending Work in Process Inventory.
B) beginning Work in Process Inventory plus direct labor plus direct material used plus overhead incurred minus ending Work in Process Inventory.
C) direct material used plus direct labor plus overhead incurred.
D) direct material used plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

Accepted Answer

The cost of goods manufactured is the total cost incurred to produce goods that are ready for sale. It includes direct materials, direct labor, and manufacturing overhead incurred during the production process. To calculate the cost of goods manufactured, we need to start with the beginning inventory of Work in Process, add the cost of direct materials, direct labor and overhead incurred during the period, and then subtract the ending inventory of Work in Process. Therefore, the best choice is B.

Question 20

Morris Company manufacturers computer stands. What is the beginning balance of Finished Goods Inventory if Cost of Goods Sold is $107,000; the ending balance of Finished Goods Inventory is $20,000; and Cost of Goods Manufactured is $50,000 less than Cost of Goods Sold?
A) $70,000
B) $77,000
C) $157,000
D) $127,000

Accepted Answer

The beginning balance of Finished Goods Inventory is $70,000. This is calculated by adding the ending balance of Finished Goods Inventory ($20,000) to the Cost of Goods Sold ($107,000) and then subtracting the Cost of Goods Manufactured ($50,000 less than Cost of Goods Sold).

Quiz 1: Cost Terminology and Cost Behaviors

Which of the following replaces the retailing component "Purchases" in computing Cost of Goods Sold for a manufacturing company?

Legend Company manufacturers tables. If raw material used was $80,000 and Raw Material Inventory at the beginning and end of the period, respectively, was $17,000 and $21,000, what was amount of raw material was purchased?

Costs that are incurred to preclude defects and improper processing are:

The formula for cost of goods sold for a manufacturer is

The final figure in the Schedule of Cost of Goods Manufactured represents the

Costs that are incurred for monitoring and inspecting are:

Costs that are incurred when customers complain are:

Conversion of inputs to outputs is recorded in the

In a perpetual inventory system, the sale of items for cash consists of two entries. One entry is a debit to Cash and a credit to Sales. The other entry is a debit to

Steelman Company manufacturers desks. The beginning balance of Raw Material Inventory was $4,500; raw material purchases of $29,600 were made during the month. At month end, $7,700 of raw material was on hand. Raw material used during the month was

The formula to compute cost of goods manufactured is

Morris Company manufacturers computer stands. What is the beginning balance of Finished Goods Inventory if Cost of Goods Sold is $107,000; the ending balance of Finished Goods Inventory is $20,000; and Cost of Goods Manufactured is $50,000 less than Cost of Goods Sold?