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Chapter 2Cost Terminology and Cost Behaviors

MULTIPLE CHOICE 1. a. b. c. d. The term "relevant range" as used in cost accounting means the range over which costs may fluctuate. cost relationships are valid. production may vary. relevant costs are incurred.

ANS: B PTS: 1 DIF: Easy OBJ: 2-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 2. Which of the following defines variable cost behavior? Total cost reaction to increase in activity a. b. c. d. remains constant remains constant increases increases Cost per unit reaction to increase in activity remains constant increases increases remains constant

ANS: D PTS: 1 DIF: Easy OBJ: 2-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 3. When cost relationships are linear, total variable prime costs will vary in proportion to changes in a. direct labor hours. b. total material cost. c. total overhead cost. d. production volume. ANS: D PTS: 1 DIF: Easy OBJ: 2-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

4.

Which of the following would generally be considered a fixed factory overhead cost? Straight-line depreciation a. b. c. d.
no yes yes no

Factory insurance
no no yes yes

Units-of-production depreciation
no yes no no

ANS: C PTS: 1 DIF: Easy OBJ: 2-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 5. a. b. c. d. An example of a fixed cost is total indirect material cost. total hourly wages. cost of electricity. straight-line depreciation.

ANS: D PTS: 1 DIF: Easy OBJ: 2-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 6. A cost that remains constant in total but varies on a per-unit basis with changes in activity is called a(n) a. expired cost. b. fixed cost. c. variable cost. d. mixed cost. ANS: B PTS: 1 DIF: Easy OBJ: 2-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 7. a. b. c. d. A(n) ____ cost increases or decreases in intervals as activity changes. historical cost fixed cost step cost budgeted cost

ANS: C PTS: 1 DIF: Easy OBJ: 2-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 8. When the number of units manufactured increases, the most significant change in unit cost will be reflected as a(n) a. increase in the fixed element. b. decrease in the variable element. c. increase in the mixed element. d. decrease in the fixed element. ANS: D PTS: 1 DIF: Easy OBJ: 2-2

NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 9. Which of the following always has a direct cause-effect relationship to a cost? Predictor a. b. c. d.
yes yes no no

Cost driver
yes no yes no

ANS: C PTS: 1 DIF: Moderate OBJ: 2-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 10. a. b. c. d. A cost driver causes fixed costs to rise because of production changes. has a direct cause-effect relationship to a cost. can predict the cost behavior of a variable, but not a fixed, cost. is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume.

ANS: B PTS: 1 DIF: Easy OBJ: 2-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 11. a. b. c. d. Product costs are deducted from revenue as expenditures are made. when production is completed. as goods are sold. to minimize taxable income.

ANS: C PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 12. A selling cost is a(n) product cost a. b. c. d.
yes yes no no

period cost
yes no yes yes

inventoriable cost
no no no yes

ANS: C PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

13. a. b. c. d.

Which of the following is not a product cost component? rent on a factory building indirect production labor wages janitorial supplies used in a factory commission on the sale of a product

ANS: D PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 14. a. b. c. d. Period costs are expensed in the same period in which they are incurred. are always variable costs. remain unchanged over a given period of time. are associated with the periodic inventory method.

ANS: A PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 15. Period costs include distribution costs a. b. c. d.
yes no no yes

outside processing costs


no yes no yes

sales commissions
yes yes no yes

ANS: A PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 16. a. b. c. d. The three primary inventory accounts in a manufacturing company are Merchandise Inventory, Supplies Inventory, and Finished Goods Inventory. Merchandise Inventory, Work in Process Inventory, and Finished Goods Inventory. Supplies Inventory, Work in Process Inventory, and Finished Goods Inventory. Raw Material Inventory, Work in Process Inventory, and Finished Goods Inventory.

ANS: D PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 17. a. b. c. d. Cost of Goods Sold is an unexpired product cost. expired product cost. unexpired period cost. expired period cost.

ANS: B PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

18. a. b. c. d.

The indirect costs of converting raw material into finished goods are called period costs. prime costs. overhead costs. conversion costs.

ANS: C PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 19. a. b. c. d. Which of the following would need to be allocated to a cost object? direct material direct labor direct production costs indirect production costs

ANS: D PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 20. a. b. c. d. Conversion cost does not include direct labor. direct material. factory depreciation. supervisors' salaries.

ANS: B PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 21. a. b. c. d. The distinction between direct and indirect costs depends on whether a cost is controllable or non-controllable. is variable or fixed. can be conveniently and physically traced to a cost object under consideration. will increase with changes in levels of activity.

ANS: C PTS: 1 DIF: Moderate OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 22. Moore Company is a construction company that builds greenhouses on special request. What is the proper classification of the carpenters' wages? Product a. b. c. d.
yes yes no no

Period
yes no no yes

Direct
no yes no yes

ANS: B PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

23.

Moore Company is a construction company that builds greenhouses on special request. What is the proper classification of the cost of the cement building slab used? Direct a. b. c. d.
no no yes yes

Fixed
no yes yes no

ANS: D PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 24. Moore Company is a construction company that builds greenhouses on special request. What is the proper classification of indirect material used? Prime a. b. c. d.
no no yes yes

Conversion
no yes yes no

Variable
no yes yes no

ANS: B PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 25. Which of the following costs would be considered overhead in the production of chocolate chip cookies? a. flour b. chocolate chips c. sugar d. oven electricity ANS: D PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 26. a. b. c. d. All costs related to the manufacturing function in a company are prime costs. direct costs. product costs. conversion costs.

ANS: C PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

27.

Prime cost consists of direct material a. b. c. d.


no yes yes no

direct labor
yes yes no yes

overhead
no no yes yes

ANS: B PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 28. Plastic used to manufacture dolls is a prime cost a. b. c. d.
no yes yes yes

product cost
yes no yes yes

direct cost
yes yes no yes

fixed cost
yes no yes no

ANS: D PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 29. a. b. c. d. The term "prime cost" refers to all manufacturing costs incurred to produce units of output. all manufacturing costs other than direct labor and raw material costs. raw material purchased and direct labor costs. the raw material used and direct labor costs.

ANS: D PTS: 1 DIF: Easy OBJ: 2-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 30. a. b. c. d. Conversion of inputs to outputs is recorded in the Work in Process Inventory account. Finished Goods Inventory account. Raw Material Inventory account. both a and b.

ANS: A PTS: 1 DIF: Easy OBJ: 2-5 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

31.

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. ANS: C PTS: 1 DIF: Easy OBJ: 2-5 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

32.

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. ANS: B PTS: 1 DIF: Easy OBJ: 2-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

33. a. b. c. d.

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

ANS: D PTS: 1 DIF: Easy OBJ: 2-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 34. 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. ANS: A PTS: 1 DIF: Easy OBJ: 2-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

35.

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 ANS: B PTS: 1 DIF: Easy OBJ: 2-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

36. a. b. c. d.

Costs that are incurred to preclude defects and improper processing are: prevention costs detection costs appraisal costs failure costs

ANS: A PTS: 1 DIF: Moderate OBJ: 2-5 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 37. a. b. c. d. Costs that are incurred for monitoring and inspecting are: prevention costs detection costs appraisal costs failure costs

ANS: C PTS: 1 DIF: Moderate OBJ: 2-5 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 38. a. b. c. d. Costs that are incurred when customers complain are: prevention costs detection costs appraisal costs failure costs

ANS: D PTS: 1 DIF: Moderate OBJ: 2-5 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

Jordan Company The following information has been taken from the cost records of Jordan Company for the past year: Raw material used in production Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 60% of direct labor cost) Cost of goods available for sale Selling and Administrative expenses Inventories Raw Material Work in Process Finished Goods 39. a. b. c. d. Beginning
$75 80 90 $326 686 826 25

Ending
$ 85 30 110

Refer to Jordan Company. The cost of raw material purchased during the year was $316. $336. $360. $411. 75 336 411 (85) 326

ANS: B Beginning Inventory +Purchases =Materials Available for Use -Ending Inventory Materials Used in Production

PTS: 1 DIF: Moderate OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 40. a. b. c. d. Refer to Jordan Company. Direct labor cost charged to production during the year was $135. $216. $225. $360. $686 $326 $360

ANS: C Total production costs - Raw materials Conversion Costs Let x = Direct Labor Let .60x = Factory Overhead x + .60x x PTS: 1 Skills DIF: Easy OBJ: 2-5

$360 $225 NAT: AACSB: Analytical

LOC: AICPA Functional Competencies: Measurement, Reporting

41. a. b. c. d.

Refer to Jordan Company. Cost of Goods Manufactured was $636. $716. $736. $766. $ 80 686 (30) $736 ====

ANS: C Beginning WIP Inventory Costs of Production less: Ending WIP Inventory Cost of Goods Manufactured

PTS: 1 DIF: Moderate OBJ: 2-6 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 42. a. b. c. d. Refer to Jordan Company. Cost of Goods Sold was $691. $716. $736. $801. $ 90 736 (110) $716 ====

ANS: B Beginning Finished Goods Inventory Cost of Goods Manufactured less: Ending Finished Goods Inventory Cost of Goods Manufactured

PTS: 1 DIF: Moderate OBJ: 2-6 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Horner Corporation The following information has been taken from the cost records of Horner Corporation for the past year: Raw material used in production Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 50% of direct labor cost) Cost of goods available for sale Selling and Administrative expenses Inventories Raw Material Work in Process Finished Goods Beginning
$80 85 80 $336 711 851 35

Ending
$ 90 25 105

43. a. b. c. d.

Refer to Horner Corporation. The cost of raw material purchased during the year was $326. $346 $375 $426 80 346 426 (90) 336

ANS: B Beginning Inventory +Purchases =Materials Available for Use -Ending Inventory Materials Used in Production

PTS: 1 DIF: Moderate OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 44. a. b. c. d. Refer to Horner Company. Direct labor cost charged to production during the year was $125 $188 $250 $375. $711 $336 $375

ANS: C Total production costs - Raw materials Conversion Costs Let x = Direct Labor Let .50x = Factory Overhead x + .50x x

$375 $250

PTS: 1 DIF: Easy OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 45. a. b. c. d. Refer to Horner Company. Cost of Goods Manufactured was $651 $736 $771 $796 $ 85 711 (25) $771 ==== OBJ: 2-6 NAT: AACSB: Analytical

ANS: C Beginning WIP Inventory Costs of Production less: Ending WIP Inventory Cost of Goods Manufactured

PTS: 1 Skills

DIF: Moderate

LOC: AICPA Functional Competencies: Measurement, Reporting

46. a. b. c. d.

Refer to Horner Company. Cost of Goods Sold was $711 $746 $796 $816 $80 771 $851 (105) $746 ====

ANS: B Beginning Finished Goods Inventory Cost of Goods Manufactured Goods Available for Sale less: Ending Finished Goods Inventory Cost of Goods Sold

PTS: 1 DIF: Moderate OBJ: 2-6 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Perry Company. Perry Company manufactures wood file cabinets. The following information is available for June of the current year. Beginning Raw Material Inventory Work in Process Inventory Finished Goods Inventory
$ 6,000 17,300 21,000

Ending
$ 7,500 11,700 16,300

The direct labor rate is $9.60 per hour and overhead for the month was $9,600. 47. Refer to Perry Company. 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 ANS: C
Raw Materials Direct Labor Overhead Begin Inv $6,000 Purch $21,000 Rate $ 9.60 Ending Inv $(7,500) Hours 1,500 $19,500 14,400 9,600 $43,500

PTS: 1 DIF: Moderate OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

48.

Refer to Perry Company. 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 ANS: B
Raw Materials Direct Labor Overhead Begin Inv $6,000.00 Purch $21,000 Rate $ 9.60 Ending Inv $(7,500) Hours 1,500 $19,500 14,400 9,600

Prime Costs = Raw Materials + Direct Labor-- $19,500 + 14,400 = $33,900 Conversion Costs = Direct Labor + Factory Overhead--$14,400 + 9,600 = $24,000

PTS: 1 DIF: Moderate OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 49. Refer to Perry Company. 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. ANS: A
Beginning WIP Inventory Raw Materials Direct Labor Factory Overhead Ending WIP Inventory Cost of Goods Manufactured $ 19,500 14,400 9,600 $ 17,300

43,500 (11,700) $ 49,100

PTS: 1 DIF: Moderate OBJ: 2-6 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

50.

Refer to Perry Company. 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. ANS: D
Beginning WIP Inventory Raw Materials Direct Labor Factory Overhead Ending WIP Inventory Cost of Goods Manufactured Beginning Finished Goods Inventory Ending Finished Goods Inventory $ 19,500 14,400 9,600 $ 17,300

43,500 (11,700) $ 49,100 21,000 (16,300) $ 53,800

PTS: 1 DIF: Moderate OBJ: 2-6 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 51. Roberson Company manufactures 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. ANS: A Beginning RM Inventory + Purchases - Ending RM Inventory = Raw Materials Used $4,500 + 29,600 - 7,700 = X X = $26,400 PTS: 1 DIF: Easy OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 52. Gallagher Company manufactures tables. The beginning balance of Raw Material Inventory was $5,500; raw material purchases of $31,500 were made during the month. At month end, $8,200 of raw material was on hand. Raw material used during the month was a. $28,800 b. $31,500 c. $37,000. d. $39,200 ANS: A Beginning RM Inventory + Purchases - Ending RM Inventory = Raw Materials Used $5,500 + 31,500 - 8,200 = X X = $28,800

PTS: 1 DIF: Easy OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 53. Marley Company manufactures 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 ANS: C Beginning RM Inventory + Purchases - Ending RM Inventory = Raw Materials Used $17,000 + X - 21,000 = $80,000 X = $84,000 PTS: 1 DIF: Easy OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 54. Sheets Company manufactures chairs. If raw material used was $100,000 and Raw Material Inventory at the beginning and end of the period, respectively, was $27,000 and $31,000, what was amount of raw material was purchased? a. $ 96,000 b. $104,000 c. $158,000 d. $131,000 ANS: B Beginning RM Inventory + Purchases - Ending RM Inventory = Raw Materials Used $27,000 + X - 31,000 = $100,000 X = $104,000 PTS: 1 DIF: Easy OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 55. Terrell Company manufactures 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 ANS: A Beg Fin Goods Invy + Cost of Goods Manufactured - Ending Fin Goods Invy = COGS X + $57,000 - $20,000 = $107,000 X = $70,000

PTS: 1 DIF: Easy OBJ: 2-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

Anderson Enterprises Inventories: Raw material Work in process Finished goods Additional information for March: Raw material purchased Direct labor payroll Direct labor rate per hour Overhead rate per direct labor hour 56. a. b. c. d. March 1
$18,000 9,000 27,000 $42,000 $30,000 $ 7.50 $ 10.00

March 31
$15,000 6,000 36,000

Refer to Anderson Enterprises. For March, prime cost incurred was $75,000. $69,000. $45,000. $39,000.
Begin Inv $18,000 Purch $42,000 Rate $ 7.50 Ending Inv $(15,000) Hours 4,000* *$(30,000/7.50)

ANS: A
Raw Materials Direct Labor $45,000 30,000 $75,000

PTS: 1 DIF: Easy OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 57. a. b. c. d. Refer to Anderson Enterprises. For March, conversion cost incurred was $30,000. $40,000. $70,000. $72,000.
Begin Inv Direct Labor Rate Overhead $ Purch $ 7.50 Ending Inv 4,000* Hours 10.00 4,000* *$(30,000/7.50)

ANS: C
30,000 40,000 $70,000

PTS: 1 DIF: Easy OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

58. a. b. c. d.

Refer to Anderson Enterprises. For March, Cost of Goods Manufactured was $118,000. $115,000. $112,000. $109,000.
$ $ 45,000 30,000 40,000 9,000

ANS: A
Beginning WIP Inventory Raw Materials Direct Labor Factory Overhead Ending WIP Inventory

115,000 (6,000) $ 118,000

PTS: 1 DIF: Easy OBJ: 2-6 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Goodwin Enterprises Inventories: Raw material Work in process Finished goods Additional information for April: Raw material purchased Direct labor payroll Direct labor rate per hour Overhead rate per direct labor hour 59. a. b. c. d. April 1
$20,000 12,000 30,000 $45,000 $36,000 $ 8.00 $ 10.00

April 30
$17,000 8,000 39,000

Refer to Goodwin Enterprises. For April, prime cost incurred was $78,000. $84,000 $51,000. $45,000.
Begin Inv $20,000 Purch $45,000 Rate $ 8.00 Ending Inv $(17,000) Hours 4,500

ANS: B
Raw Materials Direct Labor $48,000 36,000 $84,000

PTS: 1 DIF: Easy OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

60. a. b. c. d.

Refer to Goodwin Enterprises. For April, conversion cost incurred was $36,000 $45,000. $81,000. $84,000.

ANS: C
Direct Labor Rate Overhead $ 10.00 $ 8.00 Hours 4,500 45,000 $81,000 4,500 36,000

PTS: 1 DIF: Easy OBJ: 2-5 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 61. a. b. c. d. Refer to Goodwin Enterprises. For April, Cost of Goods Manufactured was $141,000 $133,000. $125,000. $121,000.
$ $ 48,000 36,000 45,000 12,000

ANS: B
Beginning WIP Inventory Raw Materials Direct Labor Factory Overhead Goods Available for Sale Ending WIP Inventory

129,000 141,000 (8,000) $ 133,000

PTS: 1 DIF: Easy OBJ: 2-6 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

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