Solved by verified expert :Managerial Accounting- Online
EXAM I – Chapters 1, 2, 3 & 4
Name:___________________________
PART I (20 Points, 2 Points each)
Multiple Choice:
Indicate the answer that best completes the opening statement.
1. Cost of goods manufactured during
a period is obtained by taking the total manufacturing costs incurred during
the period and adding and subtracting the following inventories.
Adding
Subtracting
a. Beginning work in process
inventory
Ending work in process inventory
b. Beginning work in process
inventory
Ending finished goods inventory
c. Beginning raw materials
inventory
Ending finished goods inventory
d. Beginning finished goods
inventory
Ending finished goods inventory
2. Raw materials that can be
physically and conveniently associated with the finished product are called
a. indirect materials.
b. direct materials.
c. conversion costs.
d. finished materials.
3. Which one of the following would NOT
be classified as a component of conversion costs?
a. Indirect materials
b. Direct labor
c. Indirect labor
d. Direct materials
4. In a process cost system,
equivalent units of production are the
a.
units completed and transferred to finished goods.
b. units that are transferred
to the next processing department.
c. work done on physical units
expressed in fully completed units.
d. units that are incomplete at the end of a period.
Use the following information for
questions 5 and 6.
In the month of April, a department
had 500 units in the beginning work in process inventory that were 60%
complete. These units had $4,000 of materials cost and $3,000 of conversion
costs. Materials are added at the beginning of the process and conversion costs
are added uniformly throughout the process. During April, 10,000 units were completed
and transferred to the finished goods inventory and there were 2,000 units that
were 25% complete in the ending work in process inventory on April 30. During
April, manufacturing costs charged to the department were: Materials $92,000;
Conversion costs $102,000.
5. The cost assigned to the units
transferred to finished goods during April was
a. $171,000.
b. $180,000.
c. $187,000.
d. $170,000.
6. The cost assigned to the units in
the ending work in process inventory on April 30 was
a. $36,000.
b. $21,000.
c. $16,000.
d. $31,000.
7. An appropriate cost driver for
ordering and receiving materials cost is the
a. direct labor hours.
b. machine hours.
c. number of purchase orders.
d. number of parts.
8. Benefits of activity-based
costing include all of the following except
a. more accurate product costing.
b. fewer cost pools used to assign
overhead costs to products.
c. enhanced control over overhead
costs.
d. better management decisions.
9. An example of a value-added
activity in a manufacturing operation is
a. machine repair.
b. engineering design.
c. building maintenance.
d. inventory control.
10. Assigning manufacturing costs to
work in process results in credits to all of the following accounts except
a. Work in Process Inventory.
b. Manufacturing Overhead.
c. Raw Materials Inventory.
d. Factory Labor.
PART II (20 Points)— Cost of Goods Manufactured and Sold
Selected account balances of Downing
Manufacturing Company appear below for the current year:
Beginning
of Year
End
of Year
Finished Goods Inventory
$25,000
$
32,000
Work In Process Inventory
30,000
35,000
Raw Materials Inventory
46,000
26,000
Sales
380,000
Direct Labor
45,000
Factory Supervisory Salaries
18,000
Income Tax Expense
25,000
Factory Insurance
12,000
Raw Material Purchases
75,000
Administrative Expenses
17,000
Sales Returns and Allowances
15,000
Factory Depreciation
22,000
Indirect Labor
11,000
Selling Expenses
35,000
Instructions
Using the above information for
Downing Manufacturing Company, answer the following questions. Support your
answers with clearly identified computations.
1. What was the amount of direct
materials used in production?
2. What was the total conversion
costs incurred?
3. What was the cost of goods
manufactured?
4. What was the cost of goods sold?
5. What was the amount of net
income?
PART III (20 Points) — Job Order Cost Accounting
Wilkins Manufacturing uses a job
order cost accounting system. On December 1, the company has a balance in Work
in Process Inventory of $5,500 and two jobs in process: Job No. 429, $3,000 and
Job No. 430, $2,500. During December, a summary of source documents reveals the
following:
For
Materials
Requisition Slips
Labor
Time Tickets
Job No. 429
$
3,200
$
4,100
Job No. 430
2,600
3,400
Job No. 431
3,400
4,200
Job No. 432
3,000
4,000
General Use
1,000
1,500
$13,200
$17,200
Wilkins Manufacturing applies
manufacturing overhead to jobs at an overhead rate of 70% of direct labor cost.
Job No. 429 is completed during the month.
Instructions
(a)
Prepare
summary journal entries to record the requisition slips, time tickets, the
assignment of manufacturing overhead to jobs, and the completion of Job No.
429. Show computations.
(b)
Answer the following questions.
1. What is the balance in Work in Process Inventory at
December 31?
2.
If Wilkins Manufacturing incurred $6,000 of manufacturing overhead in addition
to indirect materials and indirect labor, was overhead over- or underapplied in
December and by how much?
3.
Without regard to your answer in (2) above, assume manufacturing overhead was
underapplied in December. How would this amount be reported in the company’s
financial statements at December 31?
PART IV (25 Points) — Process Cost Accounting
The Painting Department of the
Garner Manufacturing Company has the following production and manufacturing
cost data for September.
Production: Beginning inventory 4,000 units; units started into
production 16,000; ending inventory of 5,000 units 20% complete as to
conversion costs.
Manufacturing
Costs: Beginning work in process
inventory of $80,000, comprised of $49,000 of materials and $31,000 of
conversion costs. Materials added during the month, $231,000; labor and
overhead applied during the month, $94,400 and $50,600, respectively.
Instructions
(a) Compute the equivalent units of
production for materials and conversion costs for the month of September.
(b) Compute the unit costs for
materials and conversion costs.
(c) Determine the costs to be
assigned to the units transferred out and ending work in process.
PART V
(15 Points) — Activity-Based
Costing
Modine Manufacturing Company
manufactures two products: radiators and gas tanks. During March, 200 radiators
and 400 gas tanks were produced and overhead costs of $54,000 were incurred.
The following information related to overhead costs was available:
Activity
Cost Driver
Total Cost
Materials handling
Number of requisitions
$20,000
Machine setup
Number of setups
18,000
Quality inspections
Number of inspections
16,000
The cost driver volume for each
product was as follows:
Cost Driver
Radiators
Gas Tanks
Total
Number of requisitions
600
400
1,000
Number of setups
120
180
300
Number of inspections
190
210
400
Instructions
(a) Compute the overhead rate for each activity.
(b)
Assign the manufacturing overhead costs for March to the two products using
activity-based costing and show manufacturing overhead cost per unit for Radiators
and Gas Tanks.
