4.

________ Inventories consisting of units of product that are only partially complete are called
_______________.
A. finished goods
B. raw materials
C. work in process
D. none of these

5. ________ Managerial accounting:

A. has its primary emphasis on the future.
B. is required by regulatory bodies such as the SEC.
C. focuses on the organization as a whole, rather than on the organization's segments.
D. Responses a, b, and c are all correct.

6. ________ The corporate controller's salary would be considered a(n):

A. manufacturing cost.
B. product cost.
C. administrative cost.
D. selling expense.

7. _________ The costs of direct materials are classified as:

A. Choice A
B. Choice B
C. Choice C
D. Choice D

8. _________ The three basic elements of manufacturing cost are direct materials, direct labor,
and:
A. cost of goods manufactured.
B. cost of goods sold.
C. work in process.
D. manufacturing overhead.
9. _________ Prime cost consists of direct materials combined with:
A. direct labor.
B. manufacturing overhead.
C. indirect materials.
D. cost of goods manufactured.
10. _________ An example of a period cost is:
A. fire insurance on a factory building.
B. salary of a factory supervisor.
C. direct materials.
D. rent on a headquarters building.

11. _________ Micro Computer Company has set up a toll-free telephone line for customer
inquiries regarding computer hardware produced by the company. The cost of this toll-free line
would be classified as which of the following?
A. Product cost
B. Manufacturing overhead
C. Direct labor
D. Period cost

12. __________ Cost of goods manufactured will usually include:

A. only costs incurred during the current period.
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. some period costs as well as some product costs.

13. __________ Within the relevant range, the difference between variable costs and fixed costs
is:
A. variable costs per unit fluctuate and fixed costs per unit remain constant.
B. variable costs per unit are constant and fixed costs per unit fluctuate.
C. both total variable costs and total fixed costs are constant.
D. both total variable costs and total fixed costs fluctuate.

14. __________ Each of the following would be classified as variable in terms of cost behavior
except:
A. cost of shipping goods to customers via express mail.
B. sales commissions.
C. plant manager's salary.
D. direct materials.
15. __________ Which one of the following costs should NOT be considered an indirect cost of
serving a particular customer at a Dairy Queen fast food outlet?
A. the cost of the hamburger patty in the burger they ordered.
B. the wages of the employee who takes the customer's order.
C. the cost of heating and lighting the kitchen.
D. the salary of the outlet's manager.

17. __________ In job-order costing, all of the following statements are correct with respect to
labor time and cost except:
A. time tickets are kept by employees showing the amount of work on specific jobs.
B. the job cost sheet for a job will contain all direct labor charges to that particular job.
C. labor cost that can be traced to a job only with a great deal of effort is treated as part of
manufacturing overhead.
D. a machine operator performing routine annual maintenance work on a piece of equipment
would charge the maintenance time to a specific job.

18. __________ Choice of allocation base should be made based on:

A. the relative size of the base.
B. the base's relation to direct labor.
C. the base's activity.
D. whether the base actually drives the cost being allocated.

19. __________ When applying manufacturing overhead to jobs, the formula to calculate the
amount is as follows:
A. Predetermined overhead rate divided by the actual manufacturing overhead incurred on the
particular job.
B. Predetermined overhead rate times the actual manufacturing overhead incurred on the
particular job.
C. Predetermined overhead rate divided by the actual units of allocation base charged to the
particular job.
D. Predetermined overhead rate times the actual units of allocation base charged to the particular
job.

20. __________ Which of the following situations always results in underapplied overhead?
A. actual overhead is greater than applied overhead
B. actual overhead is less than applied overhead
C. estimated overhead is greater than actual overhead
D. estimated overhead is less than actual overhead
13. ____________ A cost that would be included in product costs under both absorption costing
and variable costing would be:
A. supervisory salaries.
B. equipment depreciation.
C. variable manufacturing costs.
D. variable selling expenses.

14. ______________ Assuming that direct labor is a variable cost, product costs under variable
costing include only:
A. direct materials and direct labor.
B. direct materials, direct labor, and variable manufacturing overhead.
C. direct materials, direct labor, variable manufacturing overhead, and variable selling and
administrative expenses.
D. direct material, variable manufacturing overhead, and variable selling and administrative
expenses.

1. _________ When the level of activity increases within the relevant range, how does each of
the following change?

A. Choice A
B. Choice B
C. Choice C
D. Choice D

2. _________ Within the relevant range, the variable cost per unit:
A. remains constant as activity changes.
B. increases as activity increases.
C. decreases as activity increases.
D. can increase or decrease as the activity changes.
3. __________ An example of a discretionary fixed cost is:
A. insurance.
B. taxes on real estate.
C. management training.
D. depreciation of buildings and equipment.

4. _________ A cost driver is:

A. the largest single category of cost in a company.
B. a fixed cost that cannot be avoided.
C. a factor that causes variations in a cost.
D. an indirect cost that is essential to the business.

5. __________ Contribution margin is the excess of revenues over:

A. cost of goods sold.
B. manufacturing cost.
C. all direct costs.
D. all variable costs.
Henri Masque Designs has the following information for the first 4 months of the year:
Fill in the missing amounts
January
Inventory Beginning Ending Account Amount
Raw Materials 425 397 Purchases 22,450

Works in 110 174 Direct Labor 2,350

Process
Finished Goods 66 59 Manufacturing 175
Overhead

Account Amount
Materials Used (425+22,450)-397=$22,478

Cost of Goods Manufactured (110+22,478++2350+175)-174=$24,939

Cost of Goods Sold (66+24,939)-59=$24,946

February
Inventory Beginning Ending Account Amount
Raw Materials 397 370 Purchases 22,900

Works in 174 210 Direct Labor 2,425

Process
Finished Goods 59 63 Manufacturing 184
Overhead

Account Amount
Materials Used (397+22,900)-370= $22,927

Cost of Goods Manufactured (174+22,927+ 2,425+184)-210=25,500

Cost of Goods Sold (59+25,500)-63=$25,496

March
Inventory Beginning Ending Account Amount
Raw Materials 403 Purchases 24,025

Works in 193 Direct Labor 2,625

Process
Finished Goods 55 Manufacturing 205
Overhead

Account Amount
Materials Used

Cost of Goods Manufactured

Cost of Goods Sold

April
Inventory Beginning Ending Account Amount
Raw Materials 365 Purchases 24,620

Works in 181 Direct Labor 2,740

Process
Finished Goods 48 Manufacturing 220
Overhead

Account Amount
Materials Used

Cost of Goods Manufactured

Cost of Goods Sold

What is the total for the 4 months?:

Materials Used _____________________________

Cost of Goods Manufactured _________________________________

Cost of Goods Sold ___________________________________

PB Industries has the following information for the past 3 jobs they have done:

Materials Used
Job Material 1 Material 2 Material 3 Material 4
167 677 2,420 925 1,300
173 927 1,555 820 2,220
195 833 3,675 1,020 1,780

Hours Worked
Job/Worker # 10 20 30
167 66 80 90
173 79 73 84
195 71 68 54

Cost Rates
Material Cost per Unit Worker # Hourly Rate
Material 1 23.00 10 24.00
Material 2 9.00 20 19.00
Material 3 18.00 30 21.00
Thread 7.00

Overhead Predetermined Rate - $3.50 per Direct Labor Dollar ($)

Calculate the Direct Material Cost, Direct Labor Cost, and Overhead Allocated for each job
individually and total for each job.

Job Direct Materials Direct Labor Overhead Total Cost

(677X23)=(2420X9) (66X24)+(80X19)+(90 $3.50X4,994 63,101+4,994+
16 +(925XX18)+1300X7) X21) =$17,479 17,479
77 =$63,101 =$4,994 =$85,574

17 (927x23)+1559x9)+820x1 (79x24)+(73x10)+(84x 3.50x5777=20, 91,612.50

3 8)+(2220x 21)=5,777 219.50
19 14000
5
51,698

If actual overhead for these 3 jobs was $50,000 has the overhead been over or under allocated
and by how much?

Over Allocated or Under Allocated _______________________________

Over allocated, 1698

Mini Thunder Earth Works has $25,000 of over allocated overhead. Cost of Goods Sold is
$1,500,000, Ending Finished Goods Inventory is $400,000, and Ending Works in Process is
$600,000. If the company uses the method of assigning over and under allocated overhead to
cost of goods sold what are the balances of Cost of Goods Sold, Finished Goods, and Works in
Process? If the Company uses the percentage allocation method what are the balances of Cost of
Goods Sold, Finished Goods, and Works in Process?

Cost of Goods Sold Method

Cost of Goods Sold _____________1,5000,000-25,000=1,475.000_________________

Finished Goods ____400,000_____________________________

Works in Process ___________600,000____________________

Percentage Allocation Method

Cost of Goods Sold _____1,485,000_________________________

Finished Goods ______396,000___________________________

Works in Process ______594,000__________________________

Energetic Human Shoes make three models of running shoes: High Energy, Long Distance, and
Front Runner. The Following information is for the month of February.

High Energy shoes had total variable costs of $262,650 and 3,400 pairs of shoes were produced.
What is the variable cost per pair of High Energy?

Variable cost per pair of High Energy $ ______77.25__________________

Tvc=#units x variable cost per unit

Long Distance shoes has variable cost per pair of $81.50 and 3,650 pairs were produced. What is
the total variable cost for all the pairs of Long Distance?

Total Variable cost for Long Distance $ ____297,475_____________________

Front Runner shoes had total variable cost of $232,440 and a variable cost per pair of shoes of
$74.50. How many pairs of Front Runner were produced?
Pairs of Front Runner Produced _____3,120____________________

Super X-Ray Specs has monthly fixed costs of $120,000 and the fixed cost per pair of glasses is
$0.40. How many pairs of glasses did X-Ray produced?

Number of Pairs Produced ______300,000________________

What would be the fixed cost per unit if X-Ray produced 200,000 pairs? How about 300,000,
400,000, 500,000, 600,000?

Fixed Cost per pair 200,000 $ ____120/200=0.60c____________ Fixed Cost per pair 300,000
______0.40c_______

Fixed Cost per pair 400,000 _____120,000/400,000=0.30c___________ Fixed Cost per pair
500,000 _______120,000/500,000=0.24c______

Fixed Cost per pair 600,000 _______=0.20c_________

Tyrannosaurus Arms Brewing estimated $460,000 as overhead for the year and use direct labor
hours as the cost driver. If estimated direct labor hours are 80,000 and actual direct labor hours
are 81,240, what is the predetermined overhead rate? How much overhead was allocated?
Est total oh
460,000/80,000=$5.75 per DL hour
applied allocated oh-5.75 x 81,240=467,130

Tyrannosaurus Arms makes 2 types of beer, Stumpy Leg Ale and Heavy Load Porter. Stumpy
Leg Ale used 41,000 direct labor hours and Heavy Load Porter used the rest of the labor. How
much overhead was allocated to each beer?

Ale oh=5.75 per DL hour X 41,000 hours= 235,750

Porter oh= 5.75 per DL hour X (81,240 hours-41,000) hours=$231,380
Couch Lounger Snacks uses a process costing system. Beginning inventory for January consisted
of 730 units that were 60% completed. 74,000 units were started into the process during the 1st
quarter. On March 31, the inventory consisted of 910 units that were 20% completed. How many
units were completed during the period?

Comptleted units=(beg WIP units + unitsstarted-End WIP units)

(730+74,000)=

Yogi’s Picnic Supplies uses a process costing system in the manufacture of picnic baskets.
Yogi’s worked on 2,500 baskets the past month, 2,120 of which were completed during the
period. The remaining baskets were 35% complete. Each basket requires $12 in direct materials
that are included in the process when a basket is started. During the month the direct labor and
manufacturing overhead for the period was $67,000 and there were $590 direct labor and
manufacturing overhead at the beginning of the period in the works in process account. Using the
weighted average method, what was the total cost of baskets transferred to finished goods at the
end of the month?

2,120=(2,500-End WIP= End WIP-2,500-2,120=380

Equiv units dm=2,120+(380x100%)=2,500 units

Equiv units CC=2,120+(380x35)=2,253

Cost per quiv CC= (590+67,000)/2,253=$30

TRANSFERRED OUT COST=2,120(12+30)=$89,040

What is the total cost of what is still in works in process?

Edn WIP =(380X100%)X12 ) +((380x35%)x30)) = (380x12)+(133x30) = 8,550

Notes
- Allocating overhead (Chapter 3)
Total est OH/total est act base (cost driver)

Things to know

35MPC Questions
Chapter 2- types of cost we are need to know (fixed and variable cost, direct and indirect cost,
manufacturing and non- manufacturing, product cost and period cost, relevant cost vs irrelevant
cost.)
What are prime cost, what are conversion costs.

Chapter
Know how total variable cost changes
Chapter 6
Know how to use the high low method in order to estimate variable cost per unit and total fixed
costs.
Know how to interpret the regression output from excel.
Know how to calculate gross profit sales-cogs= individual unit bases= selling price-
manufacturing cost=gross profit
Know how to calculate contribution margin.
Chapter 3
Know why a company use job order costing system because custom products, makming one
offs each time
Know how to calculate cost flows
Know why overhead is either over or under applied.
Chapters 3 and 4
Know how to calculate cost of single unit
Chapter 4
What companies would use process costing system
Know what the relationship between physical units and equivalent units are in process costing
system