Exam 061681RR - THE COSTING OF PRODUCTS

Abis Corporation uses the weighted-average method in its process-costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were

Cost Percent Complete

Material costs $6,000 50%

Conversion costs $9,900 30%

A total of 9,200 units were started, and 8,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

Cost

Material costs $113,900

Conversion costs $322,500

The ending inventory was 80% complete with respect to materials and 20% complete with respect to conversion costs.

Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that's the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.

Answer Question 1 and 2 from above details:

1. The cost per equivalent unit for materials for the month in the first processing department is closest to

A. $11.82.

B. $12.44.

C. $11.99.

D. $11.39.

2. What are the equivalent units for conversion costs for the month in the first processing department?

A. 8,560

B. 10,000

C. 8,200

D. 360

3. Becky works on the assembly line of a manufacturing company where she installs a component part for one of the company's products. She's paid $16 per hour for regular time, and time and a half for all work in excess of 40 hours per week. Becky's employer offers fringe benefits that cost the company $3 for each hour of employee time (both regular and overtime). During a given week, Becky works 42 hours but is idle for 3 hours due to material shortages. The company treats all fringe benefits relating to direct labor as added direct labor cost and the remainder as part of manufacturing overhead. The allocation of Becky's wages and fringe benefits for the week between direct labor cost and manufacturing overhead would be which of the following?

A. Direct Labor: $672 / Manufacturing Overhead: $142

B. Direct Labor: $624 / Manufacturing Overhead: $190

C. Direct Labor: $741 / Manufacturing Overhead: $73

D. Direct Labor: $688 / Manufacturing Overhead: $126

4. The Sarbanes-Oxley Act of 2002 contains all of the following provisions except which one?

A. Severe penalties are established for altering or destroying documents that may eventually be used in an official proceeding.

B. Both the CEO and CFO must certify in writing that their company's financial statements and accompanying disclosures fairly represent the results of operations.

C. A CFO must be a CPA or CMA.

D. The audit committee of the board of directors of a company must hire, compensate, and terminate the public accounting firm that audits the company's financial reports.

5. Cost of goods manufactured will usually include

A. only costs incurred during the current period.

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

C. some period costs as well as some product costs.

D. only direct labor and direct materials costs.

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

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

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

D. 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.

7. Assume there's no beginning work-in-process inventory and that the ending work-in-process inventory is 100% complete with respect to materials costs. The number of equivalent units with respect to materials costs under the weighted-average method is

A. less than the number of units put into production.

B. the same as the number of units completed.

C. the same as the number of units put into production.

D. less than the number of units completed.

8. In September, one of the processing departments at Shenkel Corporation has a beginning work – in_Process inventory of $25,000 and an ending work-in-process inventory of $18,000. During the month the cost of units transferred out from the department was $304,000. In the department’s cost reconciliation report for September, the total cost accounted for would be

a. $43,000

b. $322,000

c. $619,000

d. $644,000

9. Which person would occupy a line position in a department store?

I. Sales manager

II. Manager, furniture department

III. Manager, advertising department

IV. Manager, personnel department

A. Only I

B. Only I, II, III

C. I, II, III, IV

D. Only I and II

Use the following information to answer question No. 10 & 11.

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

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

A. $500.

B. $650.

C. $540.

D. $670

11. The net operating income for the year (in thousands of dollars) was

A. $110.

B. $180.

C. $40.

D. $410.

Abis Corporation uses the weighted-average method in its process-costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were

Cost Percent Complete

Material costs $6,000 50%

Conversion costs $9,900 30%

A total of 9,200 units were started, and 8,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

Cost

Material costs $113,900

Conversion costs $322,500

The ending inventory was 80% complete with respect to materials and 20% complete with respect to conversion costs.

Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that's the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.

12. The total cost transferred from the first processing department to the next processing department during the month is closest to

A. $420,414.

B. $452,300.

C. $436,400.

D. $512,700

Use the following information to answer this question.

The Lee Company uses a job-order costing system. The following data were recorded for June:

Added During June-

June 1

Work in

Job Process Direct Direct

Number Inventory Materials Labor

235 $2,500 $600 $400

236 $1,500 $800 $1,000

237 $1,000 $1,200 $1,750

238 $800 $1,500 $2,250

Overhead is charged to production at 80% of direct materials cost. Jobs 235, 237, and 238 were completed during June and transferred to finished goods. Jobs 235 and 238 have been delivered to customers.

13. Lee Company's cost of goods sold for June was

A. $9,730.

B. $15,520.

C. $10,170.

D. $14,640

14. 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. $6.690.

C. $5.812.

D. $6.206.

Use the following information to answer this question.

The following cost data pertain to the operations of Brentwood Stores., 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.

15. What is the total amount of the costs listed above that are not direct costs of the Brentwood Store?

A. $162,000

B. $78,000

C. $43,000

D. $36,000

16. Melillo Corporation has provided data concerning the company's manufacturing overhead account for the month of October. Prior to the closing of the overapplied or underapplied balance to cost of goods sold, the total of the debits to the manufacturing overhead account was $67,000, and the total of the credits to the account was $57,000.

Which statement is true?

A. Manufacturing overhead applied to work in process for the month was $67,000.

B. Actual manufacturing overhead for the month was $67,000.

C. Manufacturing overhead transferred from finished goods to cost of goods sold during the month was $57,000.

D. Manufacturing overhead for the month was overapplied by $10,000.

17. 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 overapplied

B. $318,630 underapplied

C. $703,566 underapplied

D. $318,630 overapplied

Use the following information to answer this question.

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

18. The cost of the raw materials used in production during the year (in thousands of dollars) was

A. $160

B. $40.

C. $120.

D. $180

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

A. Automate the business process.

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

C. Identify the business process that delivers value.

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

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 Finished Cost of

Process Goods 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.

20. 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