Cost of goods manufactured will usually include

 

A. some period costs as well as some product costs.

B. only direct labor and direct materials costs.

C. some costs incurred during the prior period as well as costs incurred during the current period.

D. only costs incurred during the current period.

 

 

The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just-completed year.

 

Sales

$910

 

Raw materials, inventory, beginning

$80

 

Raw materials, inventory, ending

$20

 

Purchases of raw materials

$100

 

Direct labor

$130

 

Manufacturing overhead

$200

 

Administrative expenses

$160

 

Selling expenses

$140

 

Work in process inventory, beginning

$40

 

Work in process inventory, ending

$10

 

Finished goods inventory, beginning

$130

 

Finished goods inventory, ending

$150

 

 

 

The cost of goods sold for the year (in thousands of dollars) was

 

A. $650.

B. $500.

C. $540.

D. $670.

 

 

 

The management of Baggerly Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The company’s controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine hours, and the estimated amount of the allocation base for the upcoming year is 81,000 machine hours. In addition, capacity is 95,000 machine hours, and the actual level of activity for the year is 84,900 machine hours. All of the manufacturing overhead is fixed and is $6,617,700 per year. For simplicity, it’s assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It’s further assumed that this is also the actual amount of manufacturing overhead for the year. If the company bases its predetermined overhead rate on capacity, by how much was manufacturing overhead underapplied or overapplied?

 

A. $703,566 underapplied

B. $318,630 overapplied

C. $703,566 overapplied

D. $318,630 underapplied

 

 

The following cost data pertain to the operations of Lefthand Department Stores, Inc., for the month of December.

 

Corporate legal office salaries

$74,000

 

Shoe Department cost of sales,

Brentwood Store

$35,000

 

Corporate headquarters building lease

$78,000

 

Store manager’s salary

Brentwood Store

$14,000

 

Shoe Department sales commissions,

Brentwood Store

$5,000

 

Store utilities,

Brentwood Store

$14,000

 

Shoe Department manager’s salary,

Brentwood Store

$3,000

 

Central warehouse lease cost

$10,000

 

Janitorial costs, Brentwood Store

$8,000

 

 

The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood Store. The central warehouse serves all of the company’s stores.

 

 What is the total amount of the costs listed above that are direct costs of the Shoe Department?

 

A. $43,000

B. $35,000

C. $79,000

D. $40,000

An operation costing system is

 

A. identical to a job-order costing system, except that actual manufacturing overhead costs are traced to units of product.

B. the same as a job-order system, except that direct materials costs are accounted for in the same way as in process costing.

C. identical to a process-costing system, except that actual manufacturing overhead costs are traced to units of product.

D. the same as a process-costing system, except that direct materials costs are accounted for in the same way as in job-order costing.

 

 

6. Which situation always results in underapplied overhead?

 

A. Actual overhead is greater than applied overhead.

B. Estimated overhead is less than actual overhead.

C. Actual overhead is less than applied overhead.

D. Estimated overhead is greater than actual overhead.

 

 

7. Malaviya Corporation uses the FIFO method in its process-costing system. Operating data for the Casting Department for the month of September appear below:

 Units Percent Complete

with Respect to

Conversion

Beginning work in process inventory 17,000 40%

Transferred in from the prior department

 during September 72,000

Ending work in process inventory 18,000 30%

According to the company’s records, the conversion cost in the beginning work-in-process inventory was $63,104 at the beginning of September. Additional conversion costs of $654,240 were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs for September? (Round off to three decimal places.)

 

 

A. $9.280

B. $8.060

C. $9.400

D. $9.087

 

 

Use the following information to answer this question.

Sanker Inc. has provided the following data for the month of August. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.

 

 Work In

Process Finished

Goods Cost of

Goods Sold Total

Direct materials $2,790 $7,680 $18,240 $28,710

Direct labor 9,700 19,200 45,600 74,500

Manufacturing

 overhead applied 5,440 8,000 18,560 32,000

Total $17,930 $34,880 $82,400 $135,210

Manufacturing overhead for the month was overapplied by $5,000. The company allocates any underapplied or overapplied overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.

 

 

8. The work-in-process inventory at the end of August after allocation of any underapplied or overapplied overhead for the month is closest to

 

A. $17,267.

B. $18,593.

C. $18,780.

D. $17,080.

 

 

9. Which of the following is not one of the five steps in the lean-thinking model discussed in the text?

 

A. Organize work arrangements around the flow of the business process.

B. Identify the business process that delivers value.

C. Automate the business process.

D. Create a pull system that responds to customer orders.

 

 

10. When would the direct method and the step-down method of service department cost allocation result in identical allocations being made to the operating departments?

 

A. The only time is when all costs in the service departments are fixed costs.

B. The only time is when there is just one service department.

C. That can happen if there is only one service department or, if the company has more than one service department, if all the costs in those departments are fixed costs.

D. That can happen only if there’s an equal amount of service departments and operating departments.

 

 

11. Dewey Company uses the weighted-average method in its process-costing system. The first processing department, the Welding Department, started the month with 15,000 units in its beginning work-in-process inventory that were 20% complete with respect to conversion costs. The conversion cost in this beginning work-in-process inventory was $19,200. An additional 86,000 units were started into production during the month. There were 13,000 units in the ending work-in-process inventory of the Welding Department that were 60% complete with respect to conversion costs. A total of $575,360 in conversion costs were incurred in the department during the month.

The cost per equivalent unit for conversion costs is closest to

 

A. $6.400.

B. $5.812.

C. $6.206.

D. $6.690.