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CHAPTER 2: AN INTRODUCTION TO COST TERMS AND PURPOSES TRUE/FALSE 1. Products, services, departments, and customers may be cost objects.

Answer: 2. True Difficulty: 1 Objective: 1

Costs are accounted for in two basic stages: assignment followed by accumulation. Answer: False Difficulty: 1 Objective: 1 Costs are accounted for in two basic stages: accumulation followed by assignment.

!ctual costs and budgeted costs are two different terms referring to t"e same t"ing. Answer: False Difficulty: 1 Objective: 1 #udgeted costs are w"at is planned before t"e beginning of t"e accounting period, w"ile actual costs are t"ose costs compiled at t"e end of t"e accounting period.

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T"e same cost may be direct for one cost object and indirect for anot"er cost object. Answer: True Difficulty: Objective: 2

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!ssigning direct costs poses more problems t"an assigning indirect costs. Answer: False Difficulty: 2 Objective: 2 Tracing direct costs is &uite straig"tforward, w"ereas assigning indirect costs to a number of different cost objects can be very c"allenging.

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(mprovements in information)gat"ering tec"nologies are ma*ing it possible to trace more costs as direct. Answer: True Difficulty: 2 Objective: 2

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,isallocated indirect costs may lead to promoting products t"at are not profitable. Answer: True Difficulty: 2 Objective: 2

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T"e materiality of t"e cost is a factor in classifying t"e cost as a direct or indirect cost. Answer: True Difficulty: 2 Objective: 2

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T"e cost of a customi/ed mac"ine only used in t"e production of a single product would be classified as a direct cost. Answer: True Difficulty: 1 Objective: 2

10.

1ome fi2ed costs may be classified as direct manufacturing costs. Answer: True Difficulty: 1 Objective: 2

C"apter 2

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11.

Fi2ed costs "ave no cost driver in t"e s"ort run, but may "ave a cost driver in t"e long run. Answer: True Difficulty: 2 Objective:

12.

Costs t"at are difficult to c"ange over t"e s"ort run are always variable over t"e long run. Answer: True Difficulty: 2 Objective:

1 .

3nowing w"et"er a cost is a period or a product cost "elps to estimate total costs at a new level of activity. Answer: False Difficulty: 2 Objective: 3nowing w"et"er a cost is a variable or a fixed cost "elps to estimate total costs at a new level of activity.

1$.

! decision ma*er cannot adjust capacity over t"e s"ort run. Answer: True Difficulty: 1 Objective:

1%.

Fi2ed costs vary wit" t"e level of production or sales volume. Answer: False Difficulty: 1 Objective: Variable costs vary wit" t"e level of production or sales volume.

1'.

Currently, most administrative personnel costs would be classified as fi2ed costs. Answer: True Difficulty: 1 Objective:

1+.

Fi2ed costs depend on t"e resources used, not t"e resources ac&uired. Answer: False Difficulty: 2 Objective: Fi2ed costs depend on t"e resources acquired, and not w"et"er t"e resources are used or not.

1-.

4"en ma*ing decisions using fi2ed costs, t"e focus s"ould be on total costs and not unit costs. Answer: True Difficulty: 2 Objective: $

1..

4"en %0,000 units are produced t"e fi2ed cost is 510 per unit. T"erefore, w"en 100,000 units are produced fi2ed costs will remain at 510 per unit. Answer: False Difficulty: Objective: 4"en 100,000 units are produced fi2ed costs will decrease to 5% per unit. $

C"apter 2

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20.

1ervice)sector companies provide services or intangible products to t"eir customers. Answer: True Difficulty: 1 Objective: %

21.

(nventoriable costs are reported as an asset w"en incurred and e2pensed on t"e income statement w"en t"e product is sold. Answer: True Difficulty: 2 Objective: '

22.

Cost of goods sold refers to t"e products broug"t to completion, w"et"er t"ey were started before or during t"e current accounting period. Answer: False Difficulty: 1 Objective: ' Cost of goods manufactured refers to t"e products broug"t to completion, w"et"er t"ey were started before or during t"e current accounting period.

2 .

6perating income is sales revenue minus cost of goods manufactured. Answer: False Difficulty: 1 Objective: ' 6perating income 7 sales revenue ) cost of goods sold ) operating e2penses

2$.

!ll manufacturing costs are inventoriable costs. Answer: True Difficulty: 2 Objective: +

2%.

!ll costs reported on t"e income statement of a service)sector company are period costs. Answer: True Difficulty: 1 Objective: +

2'.

Period costs are never included as part of inventory. Answer: True Difficulty: 1 Objective: +

2+.

Conversion costs include all direct manufacturing costs. Answer: False Difficulty: 1 Prime costs include all direct manufacturing costs. Objective: +

2-.

(nventory of a manufacturing firm includes goods partially wor*ed on but not yet fully completed. Answer: True Difficulty: 1 Objective: +

C"apter 2

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2..

T"e classification of product and period costs is particularly valuable in management accounting. Answer: False Difficulty: 2 Objective: + T"e classification of variable and fixed costs is particularly valuable in management accounting.

0.

T"e wages of a plant supervisor would be classified as a period cost. Answer: False Difficulty: 2 Objective: T"e wages of a plant supervisor would be classified as a product cost. +

1.

For e2ternal reporting, 8!!P re&uires t"at costs be classified as eit"er variable or fi2ed. Answer: False Difficulty: 2 Objective: + For e2ternal reporting, 8!!P re&uires t"at costs be classified as eit"er product or period costs.

2.

6vertime premium consists of t"e wages paid to all wor*ers 9for bot" direct labor and indirect labor: in e2cess of t"eir straig"t)time wage rates. Answer: True Difficulty: 1 Objective: -

! product cost t"at is useful for one decision may not be useful information for anot"er decision. Answer: True Difficulty: 2 Objective: -

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For e2ternal reporting purposes, indirect manufacturing costs must be allocated to individual units. Answer: True Difficulty: 2 Objective: -

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T"e role of t"e cost accountant is to tailor t"e cost calculation to fit t"e current decision situation. Answer: True Difficulty: 1 Objective: .

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Cost accounting and cost management include calculating various costs, obtaining financial and nonfinancial information, and analy/ing relevant information for decision)ma*ing. Answer: True Difficulty: 1 Objective: .

C"apter 2

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MULTIPLE CHOICE +. Cost objects include a. products. b. customers. c. departments. d. all of t"e above. Answer: -. d Difficulty: 2 Objective: 1

!ctual costs are a. t"e costs incurred. b. budgeted costs. c. estimated costs. d. forecasted costs. Answer: a Difficulty: 1 Objective: 1

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T"e general term used to identify bot" t"e tracing and t"e allocation of accumulated costs to a cost object is a. cost accumulation. b. cost assignment. c. cost tracing. d. conversion costing. Answer: b Difficulty: 1 Objective: 1

$0.

T"e collection of accounting data in some organi/ed way is a. cost accumulation. b. cost assignment. c. cost tracing. d. conversion costing. Answer: a Difficulty: 1 Objective: 1

$1.

Cost tracing is a. t"e assignment of direct costs to t"e c"osen cost object. b. a function of cost allocation. c. t"e process of trac*ing bot" direct and indirect costs associated wit" a cost object. d. t"e process of determining t"e actual cost of t"e cost object. Answer: a Difficulty: 2 Objective: 2

C"apter 2

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$2.

Cost allocation is a. t"e process of trac*ing bot" direct and indirect costs associated wit" a cost object. b. t"e process of determining t"e actual cost of t"e cost object. c. t"e assignment of indirect costs to t"e c"osen cost object. d. a function of cost tracing. Answer: c Difficulty: 2 Objective: 2

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T"e determination of a cost as being eit"er direct or indirect depends upon a. t"e accounting system. b. t"e allocation system. c. t"e cost tracing system. d. t"e cost object c"osen. Answer: d Difficulty: 2 Objective: 2

$$.

Classifying a cost as eit"er direct or indirect depends upon a. t"e be"avior of t"e cost in response to volume c"anges. b. w"et"er t"e cost is e2pensed in t"e period in w"ic" it is incurred. c. w"et"er t"e cost can be easily identified wit" t"e cost object. d. w"et"er an e2penditure is avoidable or not in t"e future. Answer: c Difficulty: 2 Objective: 2

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! manufacturing plant produces two product lines: football e&uipment and "oc*ey e&uipment. ;irect costs for t"e football e&uipment line are t"e a. beverages provided daily in t"e plant brea* room. b. mont"ly lease payments for a speciali/ed piece of e&uipment needed to manufacture t"e football "elmet. c. salaries of t"e clerical staff t"at wor* in t"e company administrative offices. d. utilities paid for t"e manufacturing plant. Answer: b Difficulty: 2 Objective: 2

$'.

! manufacturing plant produces two product lines: football e&uipment and "oc*ey e&uipment. !n indirect cost for t"e "oc*ey e&uipment line is t"e a. material used to ma*e t"e "oc*ey stic*s. b. labor to bind t"e s"aft to t"e blade of t"e "oc*ey stic*. c. s"ift supervisor for t"e "oc*ey line. d. plant supervisor. Answer: d Difficulty: 2 Objective: 2

C"apter 2

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$+.

4"ic" one of t"e following items is a direct cost< a. Customer)service costs of a multiproduct firm= Product ! is t"e cost object. b. Printing costs incurred for payroll c"ec* processing= payroll c"ec* processing is t"e cost object. c. T"e salary of a maintenance supervisor in a multiproduct manufacturing plant= Product # is t"e cost object. d. >tility costs of t"e administrative offices= t"e accounting department is t"e cost object. Answer: b Difficulty: 2 Objective: 2

$-.

(ndirect manufacturing costs a. can be traced to t"e product t"at created t"e costs. b. can be easily identified wit" t"e cost object. c. generally include t"e cost of material and t"e cost of labor. d. may include bot" variable and fi2ed costs. Answer: d Difficulty: 2 Objective: 2

$..

!ll of t"e following are true ?@C?PT t"at indirect costs a. may be included in prime costs. b. are not easily traced to products or services. c. vary wit" t"e selection of t"e cost object. d. may be included in manufacturing over"ead. Answer: a Difficulty: 2 Objective: 2

%0.

4"ic" statement is TA>?< a. !ll variable costs are direct costs. b. #ecause of a cost)benefit tradeoff, some direct costs may be treated as indirect costs. c. !ll fi2ed costs are indirect costs. d. !ll direct costs are variable costs. Answer: b Difficulty: Objective: 2

%1.

Cost be"avior refers to a. "ow costs react to a c"ange in t"e level of activity. b. w"et"er a cost is incurred in a manufacturing, merc"andising, or service company. c. classifying costs as eit"er inventoriable or period costs. d. w"et"er a particular e2pense "as been et"ically incurred. Answer: a Difficulty: 2 Objective:

C"apter 2

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%2.

!n understanding of t"e underlying be"avior of costs "elps in all of t"e following ?@C?PT a. costs can be better estimated as volume e2pands and contracts. b. true costs can be better evaluated. c. process inefficiencies can be better identified and as a result improved. d. sales volume can be better estimated. Answer: d Difficulty: 2 Objective:

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!t a plant w"ere a union agreement sets annual salaries and conditions, annual labor costs usually a. are considered a variable cost. b. are considered a fi2ed cost. c. depend on t"e sc"eduling of floor wor*ers. d. depend on t"e sc"eduling of production runs. Answer: b Difficulty: 2 Objective:

%$.

Bariable costs a. are always indirect costs. b. increase in total w"en t"e actual level of activity increases. c. include most personnel costs and depreciation on mac"inery. d. can always be traced directly to t"e cost object. Answer: b Difficulty: 2 Objective:

%%.

Fi2ed costs a. may include eit"er direct or indirect costs. b. vary wit" production or sales volumes. c. include parts and materials used to manufacture a product. d. can be adjusted in t"e s"ort run to meet actual demands. Answer: a Difficulty: 2 Objective:

%'.

Fi2ed costs depend on a. t"e amount of resources used. b. t"e amount of resources ac&uired. c. t"e volume of production. d. t"e volume of sales. Answer: b Difficulty: Objective:

%+.

4"ic" one of t"e following is a variable cost in an insurance company< a. Aent b. PresidentCs salary c. 1ales commissions d. Property ta2es Answer: c Difficulty: 1 Objective:

C"apter 2

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%-.

4"ic" of t"e following is a fi2ed cost in an automobile manufacturing plant< a. !dministrative salaries b. ?lectricity used by assembly)line mac"ines c. 1ales commissions d. 4indows for eac" car produced Answer: a Difficulty: 2 Objective:

%..

(f eac" furnace re&uired a "ose t"at costs 520 and 2,000 furnaces are produced for t"e mont", t"e total cost for "oses is a. considered to be a direct fi2ed cost. b. considered to be a direct variable cost. c. considered to be an indirect fi2ed cost. d. considered to be an indirect variable cost. Answer: b Difficulty: Objective:

'0.

T"e ,61T li*ely cost driver of distribution costs is a. t"e number of parts wit"in t"e product. b. t"e number of miles driven. c. t"e number of products manufactured. d. t"e number of production "ours. Answer: b Difficulty: 2 Objective:

'1.

T"e ,61T li*ely cost driver of direct material costs is a. t"e number of parts wit"in t"e product. b. t"e number of miles driven. c. t"e number of products manufactured. d. t"e number of production "ours. Answer: c Difficulty: 2 Objective:

'2.

4"ic" of t"e following statements is F!D1?< a. T"ere is a cause)and)effect relations"ip between t"e cost driver and t"e level of activity. b. Fi2ed costs "ave cost drivers over t"e s"ort run. c. 6ver t"e long run all costs "ave cost drivers. d. Bolume of production is a cost driver of direct manufacturing costs. Answer: b Difficulty: 2 Objective:

C"apter 2

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' .

! band of normal activity or volume in w"ic" specific cost)volume relations"ips are maintained is referred to as a. t"e average range. b. t"e cost)allocation range. c. t"e cost driver range. d. t"e relevant range. Answer: d Difficulty: 1 Objective:

'$.

4it"in t"e relevant range, if t"ere is a c"ange in t"e level of t"e cost driver t"en a. total fi2ed costs and total variable costs will c"ange. b. total fi2ed costs and total variable costs will remain t"e same. c. total fi2ed costs will remain t"e same and total variable costs will c"ange. d. total fi2ed costs will c"ange and total variable costs will remain t"e same. Answer: c Difficulty: 2 Objective:

'%.

4it"in t"e relevant range, if t"ere is a c"ange in t"e level of t"e cost driver t"en a. fi2ed and variable costs per unit will c"ange. b. fi2ed and variable costs per unit will remain t"e same. c. fi2ed costs per unit will remain t"e same and variable costs per unit will c"ange. d. fi2ed costs per unit will c"ange and variable costs per unit will remain t"e same. Answer: d Difficulty: 2 Objective:

''.

4"en 10,000 units are produced, fi2ed costs are 51$ per unit. T"erefore, w"en 20,000 units are produced fi2ed costs a. will increase to 52- per unit. b. will remain at 51$ per unit. c. will decrease to 5+ per unit. d. will total 52-0,000. Answer: c Difficulty: Objective: $

'+.

4"en 10,000 units are produced, variable costs are 5' per unit. T"erefore, w"en 20,000 units are produced a. variable costs will total 5120,000. b. variable costs will total 5'0,000. c. variable unit costs will increase to 512 per unit. d. variable unit costs will decrease to 5 per unit. Answer: a Difficulty: Objective: $

C"apter 2

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'-.

C"risti ,anufacturing provided t"e following information for last mont". 1ales 510,000 Bariable costs ,000 Fi2ed costs %,000 6perating income 52,000 (f sales double ne2t mont", w"at is t"e projected operating income< a. 5$,000 b. 5+,000 c. 5.,000 d. 512,000 Answer: c Difficulty: 910,000 2 2: ) 95 ,000 2 2: ) 5%,000 7 5.,000 Objective: $

'..

3ym ,anufacturing provided t"e following information for last mont". 1ales 512,000 Bariable costs $,000 Fi2ed costs 1,000 6perating income 5+,000 (f sales double ne2t mont", w"at is t"e projected operating income< a. 51$,000 b. 51%,000 c. 51-,000 d. 51.,000 Answer: b Difficulty: 912,000 2 2: ) 95$,000 2 2: ) 51,000 7 51%,000 Objective: $

+0.

4"eel and Tire ,anufacturing currently produces 1,000 tires per mont". T"e following per unit data apply for sales to regular customers: ;irect materials ;irect manufacturing labor Bariable manufacturing over"ead Fi2ed manufacturing over"ead Total manufacturing costs 520 ' 10 5 .

T"e plant "as capacity for ,000 tires and is considering e2panding production to 2,000 tires. 4"at is t"e total cost of producing 2,000 tires< a. 5 .,000 b. 5+-,000 c. 5'-,000 d. 5'2,000 Answer: c Difficulty: 2 Objective: E9520 F 5 F 5': 2 2,000 unitsG F 9510 2 1,000 units: 7 5'-,000
C"apter 2 Page 11

+1.

Tire and 1po*e ,anufacturing currently produces 1,000 bicycles per mont". T"e following per unit data apply for sales to regular customers: ;irect materials ;irect manufacturing labor Bariable manufacturing over"ead Fi2ed manufacturing over"ead Total manufacturing costs 5%0 % 1$ 10 5+.

T"e plant "as capacity for ,000 bicycles and is considering e2panding production to 2,000 bicycles. 4"at is t"e per unit cost of producing 2,000 bicycles< a. 5+. per unit b. 51%- per unit c. 5+$ per unit d. 51 $ per unit Answer: c Difficulty: Objective: $ E95%0 F 5% F 51$: 2 2,000 unitsG F 9510 2 1,000 units: 7 51$-,000 H 2,000 units 7 5+$ TI? F6DD64(J8 (JF6A,!T(6J !PPD(?1 T6 K>?1T(6J1 +2 !J; + . !2le and 4"eel ,anufacturing currently produces 1,000 a2les per mont". T"e following per unit data apply for sales to regular customers: ;irect materials ;irect manufacturing labor Bariable manufacturing over"ead Fi2ed manufacturing over"ead Total manufacturing costs +2 5 0 % 10 $0 5-%

T"e plant "as capacity for 2,000 a2les and is considering e2panding production to 1,%00 a2les. 4"at is t"e total cost of producing 1,%00 a2les< a. 5-%,000 b. 51+0,000 c. 510+,%00 d. 5102,%00 Answer: c Difficulty: 2 Objective: E95 0 F 5% F 510: 2 1,%00 unitsG F 95$0 2 1,000 units: 7 510+,%00 $

+ .

4"at is t"e per unit cost w"en producing 1,%00 a2les< a. 5+1.'+ b. 510+.%0 c. 5-%.00 d. 51+0.00 Answer: a 510+,%00 H 1,%00 7 5+1.'+ Difficulty: 2 Objective: $

C"apter 2

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TI? F6DD64(J8 (JF6A,!T(6J !PPD(?1 T6 K>?1T(6J1 +$ TIA6>8I +'. Pederson Company reported t"e following: ,anufacturing costs >nits manufactured >nits sold #eginning inventory +$. 52,000,000 %0,000 $+,000 units sold for 5+% per unit 0 units

4"at is t"e average manufacturing cost per unit< a. 5$0.00 b. 5$2.%% c. 500.02% d. 5+%.00 Answer: a Difficulty: 52,000,000 H %0,000 7 5$0.00 1 Objective: $

+%.

4"at is t"e amount of ending finis"ed goods inventory< a. 51,--0,000 b. 5120,000 c. 522%,000 d. 510%,000 Answer: b Difficulty: 9%0,000 ) $+,000: 2 5$0.00 7 5120,000 2 Objective: $

+'.

4"at is t"e amount of gross margin< a. 51,+%0,000 b. 5 ,%2%,000 c. 5%,$0%,000 d. 51,'$%,000 Answer: d Difficulty: $+,000 2 95+% ) 5$0: 7 51,'$%,000 Objective: +

TI? F6DD64(J8 (JF6A,!T(6J !PPD(?1 T6 K>?1T(6J1 ++ TIA6>8I +.. T"e following information pertains to !lleig"Ls ,anne&uins: ,anufacturing costs 51,%00,000 >nits manufactured 0,000 >nits sold 2.,%00 units sold for 5-% per unit #eginning inventory 0 units ++. 4"at is t"e average manufacturing cost per unit< a. 5%0.00 b. 5%0.-% c. 51+.'% d. 5-%.00 Answer: a Difficulty: 51,%00,000 H 0,000 7 5%0.00
C"apter 2

Objective:

Page 1

+-.

4"at is t"e amount of ending finis"ed goods inventory< a. 5$2,%00 b. 52%,$2$ c. 52%,000 d. 51,$+%,000 Answer: c Difficulty: 9 0,000 ) 2.,%00: 2 5%0.00 7 52%,000 2 Objective: $

+..

4"at is t"e amount of gross margin< a. 51,$+%,000 b. 51,%00,000 c. 52,%0+,%00 d. 51,0 2,%00 Answer: d Difficulty: 2.,%00 2 95-% ) 5%0: 7 51,0 2,%00 Objective: +

-0.

4"ic" of t"e following companies is part of t"e service sector of our economy< a. 4al),art b. #an* of !merica c. 8eneral ,otors d. !ma/on.com Answer: b Difficulty: 1 Objective: %

-1.

4"ic" of t"e following companies is part of t"e merc"andising sector of our economy< a. 8eneral ,otors b. (ntel c. T"e 8!P d. Aobert ,eyer !ccounting Firm Answer: c Difficulty: 1 Objective: %

-2.

4"ic" of t"e following companies is part of t"e manufacturing sector of our economy< a. Ji*e b. #arnes M Joble c. Corvette Daw Firm d. 1ears, Aoebuc*, and Company Answer: a Difficulty: 1 Objective: %

C"apter 2

Page 1$

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1ervice)sector companies report a. only merc"andise inventory. b. only finis"ed goods inventory. c. direct materials inventory, wor*)in)process inventory, and finis"ed goods inventory accounts. d. no inventory accounts. Answer: d Difficulty: 1 Objective: '

-$.

,anufacturing)sector companies report a. only merc"andise inventory. b. only finis"ed goods inventory. c. direct materials inventory, wor*)in)process inventory, and finis"ed goods inventory accounts. d. no inventory accounts. Answer: c Difficulty: 1 Objective: '

-%.

For a manufacturing company, direct material costs may be included in a. direct materials inventory only. b. merc"andise inventory only. c. bot" wor*)in)process inventory and finis"ed goods inventory. d. direct materials inventory, wor*)in)process inventory, and finis"ed goods inventory accounts. Answer: d Difficulty: Objective: '

-'.

For a manufacturing company, direct labor costs may be included in a. direct materials inventory only. b. merc"andise inventory only. c. bot" wor*)in)process inventory and finis"ed goods inventory. d. direct materials inventory, wor*)in)process inventory, and finis"ed goods inventory accounts. Answer: c Difficulty: Objective: '

-+.

For a manufacturing company, indirect manufacturing costs may be included in a. direct materials inventory only. b. merc"andise inventory only. c. bot" wor*)in)process inventory and finis"ed goods inventory. d. direct materials inventory, wor*)in)process inventory, and finis"ed goods inventory accounts. Answer: c Difficulty: Objective: '

C"apter 2

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--.

For a manufacturing)sector company, t"e cost of factory insurance is classified as a a. direct material cost. b. direct manufacturing labor cost. c. manufacturing over"ead cost. d. period cost. Answer: c Difficulty: 1 Objective: '

-..

For a printing company, t"e cost of paper is classified as a a. direct material cost. b. direct manufacturing labor cost. c. manufacturing over"ead cost. d. period cost. Answer: a Difficulty: 1 Objective: '

.0.

4ages paid to mac"ine operators on an assembly line are classified as a a. direct material cost. b. direct manufacturing labor cost. c. manufacturing over"ead cost. d. period cost. Answer: b Difficulty: 1 Objective: '

.1.

,anufacturing over"ead costs in an automobile manufacturing plant ,61T li*ely include a. labor costs of t"e painting department. b. indirect material costs suc" as lubricants. c. sales commissions. d. steering w"eel costs. Answer: b Difficulty: 1 Objective: '

.2.

,anufacturing over"ead costs are also referred to as a. indirect manufacturing costs. b. prime costs. c. period costs. d. conversion costs. Answer: a Difficulty: 1 Objective: '

C"apter 2

Page 1'

TI? F6DD64(J8 (JF6A,!T(6J !PPD(?1 T6 K>?1T(6J1 . TIA6>8I .+. 8illey (ncorporated reported t"e following information: 6n Nanuary 1, 202 : Nob O101 was t"e only job in process wit" accumulated costs of 5 ,000. ;uring February t"e following costs were added to production: Nob O101 510,000 Nob O102 5 -,000 Nob O10 5 +,000 6n February 2-, 202 : Nob O101 was completed and sold for 51-,000. Nob O102 was completed but not sold. Nob O10 remains in production. . . 4"at is wor*)in)process inventory on February 2-, 202 < a. 5+,000 b. 5-,000 c. 52%,000 d. 5 ,000 Answer: Nob O10 .$. a 5+,000 Difficulty: 1 Objective: '

4"at is finis"ed goods inventory on February 2-, 202 < a. 5+,000 b. 5-,000 c. 521,000 d. 510,000 Answer: b Nob O102 5-,000 Difficulty: 1 Objective: '

.%.

4"at is cost of goods manufactured for February< a. 510,000 b. 5-,000 c. 51 ,000 d. 521,000 Answer: d Difficulty: 9Nob O101 51 ,000: F 9Nob O102 5-,000: Objective: +

.'.

4"at is cost of goods sold for February< a. 51-,000 b. 510,000 c. 51 ,000 d. 521,000 Answer: c Nob O101 51 ,000 Difficulty: 2 Objective: +

C"apter 2

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.+.

4"at is gross margin for February< a. 5%,000 b. 51-,000 c. 5-,000 d. 51 ,000 Answer: a 51-,000 ) 51 ,000 7 5%,000 Difficulty: Objective: +

.-.

T"e income statement of a manufacturing firm reports a. period costs only. b. inventoriable costs only. c. bot" period and inventoriable costs. d. period and inventoriable costs but at different times, t"e reporting varies. Answer: c Difficulty: 2 Objective: +

...

T"e income statement of a service)sector firm reports a. period costs only. b. inventoriable costs only. c. bot" period and inventoriable costs. d. period and inventoriable costs but at different times, t"e reporting varies. Answer: a Difficulty: 2 Objective: +

100. ,anufacturing costs include all ?@C?PT a. costs incurred inside t"e factory. b. bot" direct and indirect costs. c. bot" variable and fi2ed costs. d. bot" inventoriable and period costs. Answer: d Difficulty: 2 Objective: +

101. (nventoriable costs a. include administrative and mar*eting costs. b. are e2pensed in t"e accounting period sold. c. are particularly useful in management accounting. d. are also referred to as nonmanufacturing costs. Answer: b Difficulty: 2 Objective: +

102. (nventoriable costs are e2pensed on t"e income statement a. w"en direct materials for t"e product are purc"ased. b. after t"e products are manufactured. c. w"en t"e products are sold. d. not at any particular time, it varies. Answer: c Difficulty: 2 Objective: +

C"apter 2

Page 1-

10 . Costs t"at are initially recorded as assets and e2pensed w"en sold are referred to as a. period costs. b. inventoriable costs. c. variable costs. d. fi2ed costs. Answer: b Difficulty: 2 Objective: +

10$. For merc"andising companies, inventoriable costs include a. t"e cost of t"e goods t"emselves. b. incoming freig"t costs. c. insurance costs for t"e goods. d. all of t"e above. Answer: d Difficulty: 2 Objective: +

10%. For manufacturing firms, inventoriable costs include a. plant supervisor salaries. b. researc" and development costs. c. costs of dealing wit" customers after t"e sale. d. distribution costs. Answer: a Difficulty: 2 Objective: +

10'. ! plant manufactures several different products. T"e wages of t"e plant supervisor can be classified as a9n: a. direct cost. b. inventoriable cost. c. variable cost. d. period cost. Answer: b Difficulty: 2 Objective: +

10+. T"e cost of inventory reported on t"e balance s"eet may include all of t"e following ?@C?PT a. customer)service costs. b. wages of t"e plant supervisor. c. depreciation of t"e factory e&uipment. d. t"e cost of parts used in t"e manufacturing process. Answer: a Difficulty: 2 Objective: +

10-. For a computer manufacturer, period costs include t"e cost of a. t"e *eyboard. b. labor used for assembly and pac*aging. c. distribution. d. assembly)line e&uipment. Answer: c Difficulty:
C"apter 2

Objective:

Page 1.

10.. Period costs a. include only fi2ed costs. b. seldom influence financial success or failure. c. include t"e cost of selling, delivering, and after)sales support for customers. d. s"ould be treated as an indirect cost rat"er t"an as a direct manufacturing cost. Answer: c Difficulty: 2 Objective: +

110. Period costs a. are treated as e2penses in t"e period t"ey are incurred. b. are directly traceable to products. c. include direct labor. d. are also referred to as manufacturing over"ead costs. Answer: a Difficulty: 2 Objective: +

111. 4"ic" of t"e following is J6T a period cost< a. ,ar*eting costs b. 8eneral and administrative costs c. Aesearc" and development costs d. ,anufacturing costs Answer: d Difficulty: 1 Objective: +

112. Costs e2pensed on t"e income statement in t"e accounting period incurred are referred to as a. direct costs. b. indirect costs. c. period costs. d. inventoriable costs. Answer: c Difficulty: 1 Objective: +

11 . Prime costs include a. direct materials and direct manufacturing labor costs. b. direct manufacturing labor and manufacturing over"ead costs. c. direct materials and manufacturing over"ead costs. d. only direct materials. Answer: a Difficulty: 1 Objective: +

11$. Conversion costs include a. direct materials and direct manufacturing labor costs. b. direct manufacturing labor and manufacturing over"ead costs. c. direct materials and manufacturing over"ead costs. d. only direct materials. Answer: b Difficulty: 1 Objective: +

C"apter 2

Page 20

11%. Total manufacturing costs e&ual a. direct materials F prime costs. b. direct materials F conversion costs. c. direct manufacturing labor costs F prime costs. d. direct manufacturing labor costs F conversion costs. Answer: b Difficulty: 2 Objective: +

11'. T"e cost classification system used by manufacturing firms include all of t"e following ?@C?PT a. direct materials costs and conversion costs. b. direct materials costs, direct manufacturing labor costs, and manufacturing over"ead costs. c. indirect materials costs, indirect manufacturing labor costs, and manufacturing over"ead costs. d. prime costs and manufacturing over"ead costs. Answer: c Difficulty: 2 Objective: +

11+. ,anufacturing over"ead costs may include all ?@C?PT a. salaries of t"e plant janitorial staff. b. labor t"at can be traced to individual products. c. wages paid for unproductive time due to mac"ine brea*downs. d. overtime premiums paid to plant wor*ers. Answer: b Difficulty: Objective: +

11-. ;ebated items t"at some companies include as direct manufacturing labor include a. fringe benefits. b. vacation pay. c. training time. d. all of t"e above. Answer: d Difficulty: 2 Objective: +

11.. #renda Iic*s is paid 510 an "our for straig"t)time and 51% an "our for overtime. 6ne wee* s"e wor*ed $2 "ours, w"ic" included 2 "ours of overtime. Compensation would be reported as a. 5$00 of direct labor and 5 0 of manufacturing over"ead. b. 5$00 of direct labor and 5/ero of manufacturing over"ead. c. 5$20 of direct labor and 510 of manufacturing over"ead. d. 5$ 0 of direct labor and 5/ero of manufacturing over"ead. Answer: c Difficulty: 2 Objective: ;irect labor 9$2 "ours 2 510: F 6vertime premium 92 "rs 2 5%: 7 5$ 0 +

C"apter 2

Page 21

120. Aodney 4ors"am is paid 510 an "our for straig"t)time and 51% an "our for overtime. 6ne wee* "e wor*ed $% "ours, w"ic" included % "ours of overtime, and "ours of idle time caused by material s"ortages. Compensation would be reported as a. 5 +0 of direct labor and 510% of manufacturing over"ead. b. 5$20 of direct labor and 5%% of manufacturing over"ead. c. 5$%0 of direct labor and 52% of manufacturing over"ead. d. 5$$% of direct labor and 5 0 of manufacturing over"ead. Answer: b Difficulty: Objective: + ;irect labor 9$2 "ours 2 510: F (dle time 9 "rs 2 510: F 6vertime premium 9% "rs 2 5%: 7 5$+% 121. 4"ic" of t"e following formulas determine cost of goods sold in a merc"andising entity< a. #eginning inventory F Purc"ases F ?nding inventory 7 Cost of goods sold b. #eginning inventory F Purc"ases ) ?nding inventory 7 Costs of goods sold c. #eginning inventory ) Purc"ases F ?nding inventory 7 Cost of goods sold d. #eginning inventory ) ?nding inventory ) Purc"ases 7 Cost of goods sold Answer: b Difficulty: 1 Objective: +

122. 4"ic" of t"e following formulas determine cost of goods sold in a manufacturing entity< a. #eginning wor*)in)process inventory F Cost of goods manufactured ) ?nding wor*)in)process inventory 7 Cost of goods sold b. #eginning wor*)in)process inventory F Cost of goods manufactured F ?nding wor*)in)process inventory 7 Cost of goods sold c. Cost of goods manufactured ) #eginning finis"ed goods inventory ) ?nding finis"ed goods inventory 7 Cost of goods sold. d. Cost of goods manufactured F #eginning finis"ed goods inventory ) ?nding finis"ed goods inventory 7 Cost of goods sold. Answer: d Difficulty: 2 Objective: +

12 . T"e following information pertains to t"e Cannady Corporation: #eginning wor*)in)process inventory ?nding wor*)in)process inventory #eginning finis"ed goods inventory ?nding finis"ed goods inventory Cost of goods manufactured 4"at is cost of goods sold< a. 51,2 %,000 b. 51,20%,000 c. 51,21-,000 d. 51,222,000 Answer: b Difficulty: 51-0,000 F 51,220,000 ) 51.%,000 7 51,20%,000 Objective: + 5 %0,000 $-,000 1-0,000 1.%,000 1,220,000

C"apter 2

Page 22

12$. T"e following information pertains to t"e ;uggan Corporation: #eginning wor*)in)process inventory ?nding wor*)in)process inventory #eginning finis"ed goods inventory ?nding finis"ed goods inventory Cost of goods manufactured 4"at is cost of goods sold< a. 52$$,000 b. 52$-,000 c. 52$ ,000 d. 52$.,000 Answer: b Difficulty: 5 ',000 F 52$',000 ) 5 $,000 7 52$-,000 2 Objective: + 5 20,000 2 ,000 ',000 $,000 2$',000

TI? F6DD64(J8 (JF6A,!T(6J !PPD(?1 T6 K>?1T(6J1 12% TIA6>8I 12+. T"e following information pertains to Iarding Company: #eginning finis"ed goods, 1H1H202 ?nding finis"ed goods, 12H 1H202 Cost of goods sold 1ales revenue 6perating e2penses 12%. 4"at is cost of goods manufactured for 202 < a. 52 0,000 b. 52%+,000 c. 52- ,000 d. 5 %%,000 Answer: b Difficulty: 52+0,000 F 5'+,000 ) 5-0,000 7 52%+,000 12'. 4"at is gross margin for 202 < a. 52- ,000 b. 5 %%,000 c. 52 0,000 d. 52%+,000 Answer: c Difficulty: 5%00,000 ) 52+0,000 7 52 0,000 12+. 4"at is operating income for 202 < a. 5-%,000 b. 5112,000 c. 5'2,000 d. 52 0,000 Answer: a Difficulty: 5%00,000 ) 52+0,000 ) 1$%,000 7 5-%,000
C"apter 2

5 -0,000 '+,000 2+0,000 %00,000 1$%,000

Objective:

Objective:

Objective:

Page 2

TI? F6DD64(J8 (JF6A,!T(6J !PPD(?1 T6 K>?1T(6J1 12- TIA6>8I 1 0. T"e following information pertains to 1cottLs Production Company: #eginning finis"ed goods, 1H1H202 ?nding finis"ed goods, 12H 1H202 Cost of goods sold 1ales revenue 6perating e2penses 12-. 4"at is cost of goods manufactured for 202 < a. 52%+,000 b. 5 %0,000 c. 52$ ,000 d. 52%0,000 Answer: c 52%0,000 F 5 Difficulty: ,000 ) 5$0,000 7 52$ ,000 2 Objective: + 5 $0,000 ,000 2%0,000 '00,000 120,000

12.. 4"at is gross margin for 202 < a. 52$ ,000 b. 5%2+,000 c. 5 %+,000 d. 5 %0,000 Answer: d Difficulty: 5'00,000 ) 52%0,000 7 5 %0,000 1 0. 4"at is operating income for 202 < a. 52 0,000 b. 512 ,000 c. 510+,000 d. 51%+,000 Answer: a Difficulty: 2 5'00,000 ) 52%0,000 ) 120,000 7 52 0,000 Objective: + 2 Objective: +

C"apter 2

Page 2$

TI? F6DD64(J8 (JF6A,!T(6J !PPD(?1 T6 K>?1T(6J1 1 1 TIA6>8I 1 $. T"e 1inger Company manufactures several different products. >nit costs associated wit" Product (CT101 are as follows: ;irect materials 5 '0 ;irect manufacturing labor 10 Bariable manufacturing over"ead 1Fi2ed manufacturing over"ead 2 1ales commissions 92P of sales: $ !dministrative salaries 1' Total 51$0 1 1. 4"at are t"e variable costs per unit associated wit" Product (CT101< a. 51b. 522 c. 5-d. 5.2 Answer: d 5'0 F 510 F 51- F 5$ 7 5.2 Difficulty: 2 Objective:

1 2. 4"at are t"e fi2ed costs per unit associated wit" Product (CT101< a. 5102 b. 5$c. 5%2 d. 5 2 Answer: b 5 2 F 1' 7 5$1 Difficulty: 2 Objective:

. 4"at are t"e inventoriable costs per unit associated wit" Product (CT101< a. 5120 b. 51$0 c. 5%0 d. 5-Answer: a Difficulty: 5'0 F 510 F 51- F 5 2 7 5120 2 Objective: +

1 $. 4"at are t"e period costs per unit associated wit" Product (CT101< a. 5$ b. 51' c. 520 d. 5%2 Answer: c 5$ F 1' 7 520 Difficulty: 2 Objective: +

C"apter 2

Page 2%

TI? F6DD64(J8 (JF6A,!T(6J !PPD(?1 T6 K>?1T(6J1 1 % TIA6>8I 1 -. T"e 4est Company manufactures several different products. >nit costs associated wit" Product 6A;20 are as follows: ;irect materials 5 $0 ;irect manufacturing labor Bariable manufacturing over"ead 12 Fi2ed manufacturing over"ead 2 1ales commissions 92P of sales: ' !dministrative salaries . Total 5.1 %. 4"at are t"e variable costs per unit associated wit" Product 6A;20 < a. 5'0 b. 5c. 5'' d. 5$Answer: c 5$0 F 5- F 512 F 5' 7 5'' Difficulty: 2 Objective:

1 '. 4"at are t"e fi2ed costs per unit associated wit" Product 6A;20 < a. 52 b. 5 2 c. 5 % d. 5$$ Answer: b 52 F . 7 5 2 Difficulty: 2 Objective:

1 +. 4"at are t"e inventoriable costs per unit associated wit" Product 6A;20 < a. 5'0 b. 5'' c. 5$d. 5Answer: d 5$0 F 5- F 512 F 52 7 5Difficulty: 2 Objective: +

1 -. 4"at are t"e period costs per unit associated wit" Product 6A;20 < a. 51% b. 5' c. 5. d. 52+ Answer: a 5' F . 7 51% Difficulty: 2 Objective: +

C"apter 2

Page 2'

1 .. Product costs may refer to a. inventoriable costs for e2ternal reporting. b. design costs plus manufacturing costs for government contracts. c. all costs incurred along t"e value c"ain for pricing decisions. d. all of t"e above refer to product costs, it varies. Answer: d Difficulty: Objective: -

1$0. Product costs used for pricing and product)mi2 decisions generally include a. manufacturing costs only. b. design costs plus manufacturing costs. c. all costs incurred along t"e value c"ain. d. distribution costs only. Answer: c Difficulty: Objective: -

1$1. Product costs used for government contracts generally include a. manufacturing costs only. b. design costs plus manufacturing costs. c. all costs incurred along t"e value c"ain. d. distribution costs only. Answer: b Difficulty: Objective: -

1$2. Product costs used for e2ternal reporting generally include a. manufacturing costs only. b. design costs plus manufacturing costs. c. all costs incurred along t"e value c"ain. d. all of t"e above definitions of cost, it varies. Answer: a Difficulty: 2 Objective: -

1$ . (nventoriable costs for e2ternal reporting purposes are also referred to as a. product costs. b. period costs. c. variable costs. d. direct manufacturing costs. Answer: a Difficulty: 1 Objective: -

1$$. For e2ternal reporting a. costs are classified as eit"er inventoriable or period costs. b. costs reflect current values. c. t"ere are no prescribed rules since no one is e2actly sure "ow investors and creditors will use t"ese numbers. d. costs include amounts t"at reflect bot" current and future benefits. Answer: a Difficulty:
C"apter 2

Objective:

Page 2+

1$%. 4"ic" of t"e following statements is F!D1?< a. Product costs and inventoriable costs are interc"angeable terms. b. (nventoriable costs are important for 8!!P. c. (nventoriable costs are a special case of product costs. d. QProduct costsQ refers to t"e particular costs of a product for t"e purpose at "and. Answer: a Difficulty: Objective: -

1$'. 4"en ma*ing decisions, a. it is best to use average costs. b. it is best to use unit costs. c. it is best to use total costs rat"er t"an unit costs. d. all of t"e above types of costs can be used for decision ma*ing, it varies depending on t"e decision. Answer: d Difficulty: 2 Objective: .

C"apter 2

Page 2-

EXERCISES AND PROBLEMS 1$+. Ducas ,anufacturing "as t"ree cost objects t"at it uses to accumulate costs for its manufacturing plants. T"ey are: Cost object O1: Cost object O2: Cost object O : T"e p"ysical buildings and e&uipment T"e use of buildings and e&uipment T"e availability and use of manufacturing labor

T"e following manufacturing over"ead cost categories are found in t"e accounting records: a. b. c. d. e. f. g. ;epreciation on buildings and e&uipment Dubricants for mac"ines Property insurance 1upervisorsL salaries Fringe benefits Property ta2es >tilities

Required: !ssign eac" of t"e above costs to t"e most appropriate cost object. Answer: Cost object O 1 includes categories a, c, and f. Cost object O 2 includes categories b and g. Cost object O Difficulty: 2 includes categories d and e. Objective: 1

C"apter 2

Page 2.

1$-. !rc"ambeau Products Company manufactures office furniture. Aecently, t"e company decided to develop a formal cost accounting system and classify all costs into t"ree categories. Categori/e eac" of t"e following items as being appropriate for 91: cost tracing to t"e finis"ed furniture, 92: cost allocation of an indirect manufacturing cost to t"e finis"ed furniture, or 9 : as a nonmanufacturing item. Item Carpenter wages ;epreciation ) office building 8lue for assembly Dat"e department supervisor Dat"e depreciation Dat"e maintenance Dat"e operator wages Dumber 1amples for trade s"ows ,etal brac*ets for drawers Factory was"room supplies Answer: Item Carpenter wages ;epreciation ) office building 8lue for assembly Dat"e department supervisor Dat"e depreciation Dat"e maintenance Dat"e operator wages Dumber 1amples for trade s"ows ,etal brac*ets for drawers Factory was"room supplies Difficulty: 2 Objective: 2 Cost Tra in! @ @ @ @ @ @ @ @ @ @ @ Cost NonmanuA""o ation #a turin! Cost Tra in! RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR Cost A""o ation RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR Nonmanu#a turin! RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR RRRRRRRR

C"apter 2

Page 0

1$.. #utler Iospital wants to estimate t"e cost for eac" patient stay. (t is a general "ealt" care facility offering only basic services and not speciali/ed services suc" as organ transplants. Required: a. b. Classify eac" of t"e following costs as eit"er direct or indirect wit" respect to eac" patient. Classify eac" of t"e following costs as eit"er fi2ed or variable wit" respect to "ospital costs per day. Dire t ?lectronic monitoring ,eals for patients JursesC salaries Par*ing maintenance 1ecurity Answer: Dire t ?lectronic monitoring ,eals for patients Jurses salaries Par*ing maintenance 1ecurity Difficulty: 2 @ @ @ @ @ Objectives: 2, @ @ @ Indire t $i%ed &aria'"e @ @ RRRRRR RRRRRR RRRRRR RRRRRR RRRRRR Indire t RRRRRR RRRRRR RRRRRR RRRRRR RRRRRR $i%ed RRRRRR RRRRRR RRRRRR RRRRRR RRRRRR &aria'"e RRRRRR RRRRRR RRRRRR RRRRRR RRRRRR

1%0. Combs, (nc. reports t"e following information for 1eptember sales: 1ales Bariable costs Fi2ed costs 6perating income Required: (f sales double in 6ctober, w"at is t"e projected operating income< Answer: 91%,000 2 2: ) 95 ,000 2 2: ) 5$,000 7 520,000 Difficulty: 2 Objective: $ 51%,000 ,000 $,000 5 -,000

C"apter 2

Page 1

1%1. !2le and 4"eel ,anufacturing currently produces 1,000 a2les per mont". T"e following per unit data apply for sales to regular customers: ;irect materials ;irect manufacturing labor Bariable manufacturing over"ead Fi2ed manufacturing over"ead Total manufacturing costs T"e plant "as capacity for 2,000 a2les. Required: a. b. c. 4"at is t"e total cost of producing 1,000 a2les< 4"at is t"e total cost of producing 1,%00 a2les< 4"at is t"e per unit cost w"en producing 1,%00 a2les< 5200 0 '0 $0 5 0

Answer: a. b. c. E95200 F 5 0 F 5'0: 2 1,000 unitsG F 95$0 2 1,000 units: 7 5 E95200 F 5 0 F 5'0: 2 1,%00 unitsG F 5$0,000 7 5$+%,000 5$+%,000 H 1,%00 7 5 1'.'+ per unit Objective: $ 0,000

Difficulty: 2

1%2. T"e following information pertains to #all Company: ,anufacturing costs >nits manufactured #eginning inventory 52,$00,000 $0,000 0 units

.,-00 units are sold during t"e year for 5100 per unit. Required: a. b. c. 4"at is t"e average manufacturing cost per unit< 4"at is t"e amount of ending finis"ed goods inventory< 4"at is t"e amount of gross margin<

Answer: a. b. c. 52,$00,000 H $0,000 7 5'0.00 9$0,000 S .,-00: 2 5'0 7 512,000 .,-00 2 95100 ) 5'0: 7 51,%.2,000 2 Objectives: , $, +

Difficulty:

C"apter 2

Page 2

1% . C"eaney (ncorporated reports t"e following information. 6n Nanuary 1, 2021, Nob O101 was t"e only job in process wit" accumulated costs of: ;irect materials 52,000 ;irect manufacturing labor 1,000 ,anufacturing over"ead 1,000 Total 5$,000 ;uring February, Nob O102 and Nob O10 were started and t"e following costs were added: (o' )*+* (o' )*+2 (o' )*+, ;irect materials 5$,000 5%,000 5',000 ;irect manufacturing labor 1,000 2,000 ,000 ,anufacturing over"ead 2,000 ,000 $,000 Total 5+,000 510,000 51 ,000 6n February 2-, 2021: Nob O101 was completed and sold for 520,000. Nob O102 was completed but not sold. Nob O10 remains in production. Required: >sing t"e above information, determine t"e following amounts: a. b. c. d. e f. 4or*)in)process inventory on February 1, 2021. 4or*)in)process inventory on February 2-, 2021. Finis"ed goods inventory on February 2-, 2021. Cost of goods manufactured for February. Cost of goods sold for February. 8ross margin for February.

Answer: a. b. c. d. e. f. 5$,000 Nob O10 51 ,000 Nob O102 510,000 9Nob O101 511,000: F 9Nob O102 510,000: 7 521,000 Nob O101 511,000 520,000 ) 511,000 7 5.,000 2 Objectives: ', +

Difficulty:

C"apter 2

Page

1%$. ?vans (nc. "ad t"e following activities during 2021: ;irect materials: #eginning inventory Purc"ases ?nding inventory ;irect manufacturing labor ,anufacturing over"ead #eginning wor*)in)process inventory ?nding wor*)in)process inventory #eginning finis"ed goods inventory ?nding finis"ed goods inventory Required: a. b. c. d. e. 4"at is t"e cost of direct materials used during 2021< 4"at is cost of goods manufactured for 2021< 4"at is cost of goods sold for 2021< 4"at amount of prime costs was added to production during 2021< 4"at amount of conversion costs was added to production during 2021< 5 $0,000 12 ,200 20,-00 2,000 2$,000 1,'00 -,000 $-,000 2,000

Answer: a. b. c. d. e. 5$0,000 F 512 ,200 ) 520,-00 7 51$2,$00 51$2,$00 F 5 2,000 F 52$,000 F 51,'00 ) 5-,000 7 51.2,000 51.2,000 F 5$-,000 ) 5 2,000 7 520-,000 51$2,$00 F 5 2,000 7 51+$,$00 5 2,000 F 52$,000 7 5%',000 Objectives: ', +

Difficulty: 2

C"apter 2

Page $

1%%. Ielmer 1porting 8oods Company manufactured 100,000 units in 202 and reported t"e following costs: 1andpaper ,aterials "andling Coolants M lubricants (ndirect manufacturing labor ;irect manufacturing labor ;irect materials, 1H1H2 Finis"ed goods, 1H1H2 Finis"ed goods, 12H 1H2 4or*)in)process, 1H1H2 4or*)in)process, 12H 1H2 Ae&uired: a. b. c. d. 4"at is t"e amount of direct materials used during 202 < 4"at manufacturing costs were added to 4(P during 202 < 4"at is cost of goods manufactured for 202 < 4"at is cost of goods sold for 202 < 5 2,000 20,000 22,$00 2+%,200 2,1+',000 -$,000 '+2,000 1,2-0,000 .',000 '$,000 Deasing costs ) plant 5 -$,000 ;epreciation ) e&uipment 22$,000 Property ta2es ) e&uipment 2,000 Fire insurance ) e&uipment 1',000 ;irect material purc"ases ,1 ',000 ;irect materials, 12H 1H2 2+%,200 1ales revenue 12,-00,000 1ales commissions '$0,000 1ales salaries %+',000 !dvertising costs $-0,000 !dministration costs -00,000

Answer: a. b. c. d. 5 -$,000 F 5 ,1 ',000 ) 52+%,200 7 5 ,2$$,-00 5 ,2$$,-00 F 52,1+',000 F 5 2,000 F 5 20,000 F 522,$00 F 52+%,200 F 5 -$,000 F 522$,000 F 5 2,000 F 51',000 7 5',+2',$00 5',+2',$00 F 5.',000 ) 5'$,000 7 5',+%-,$00 5',+%-,$00 F 5'+2,000 ) 51,2-0,000 7 5',1%0,$00 Objectives: ', +

Difficulty:

C"apter 2

Page %

1%'. ,essinger ,anufacturing Company "ad t"e following account balances for t"e &uarter ending ,arc" 1, unless ot"erwise noted: 4or*)in)process inventory 9Nanuary 1: 4or*)in)process inventory 9,arc" 1: Finis"ed goods inventory 9Nanuary 1: Finis"ed goods inventory 9,arc" 1: ;irect materials used (ndirect materials used ;irect manufacturing labor (ndirect manufacturing labor Property ta2es on manufacturing plant building 1alespersonsC company ve"icle costs ;epreciation of manufacturing e&uipment ;epreciation of office e&uipment ,iscellaneous plant over"ead Plant utilities 8eneral office e2penses ,ar*eting distribution costs Required: a. b. Prepare a cost of goods manufactured sc"edule for t"e &uarter. Prepare a cost of goods sold sc"edule for t"e &uarter. 5 1$0,$00 1+1,000 %$0,000 %10,000 +-,000 -$,000 $-0,000 1-',000 2-,-00 12,000 2'$,000 12 ,'00 1 %,000 .2,$00 0%,$00 0,000

Answer: a. Messin!er Manu#a turin! Com-an. Cost o# /oods Manu#a tured S 0edu"e $or quarter endin! Mar 0 ,* ;irect materials used ;irect manufacturing labor ,anufacturing over"ead ;epreciation of manufacturing e&uipment (ndirect manufacturing labor (ndirect materials ,iscellaneous plant over"ead Plant utilities Property ta2es on building ,anufacturing costs incurred !dd beginning wor*)in)process inventory Total manufacturing costs Dess ending wor*)in)process inventory Cost of goods manufactured 5 52'$,000 1-',000 -$,000 1 %,000 .2,$00 2-,-00 +-,000 $-0,000

+.0,200 51,'$-,200 1$0,$00 51,+--,'00 1+1,000 51,'1+,'00

C"apter 2

Page '

b.

Messin!er Manu#a turin! Com-an. Cost o# /oods So"d S 0edu"e $or t0e quarter endin! Mar 0 ,* 5 %$0,000 1,'1+,'00 2,1%+,'00 %10,000 51,'$+,'00

#eginning finis"ed goods inventory Cost of goods manufactured Cost of goods available for sale ?nding finis"ed goods inventory Cost of goods sold Difficulty: 2 Objectives: ', +

1%+. >sing t"e following information find t"e un*nown amounts. !ssume eac" set of information is an independent case. a. ,erc"andise (nventory Purc"ases Cost of goods sold #eginning balance ?nding balance #eginning balance ?nding balance Purc"ases ;irect materials used ?nding balance Cost of goods manufactured #eginning balance Current manufacturing costs Cost of goods manufactured ?nding balance Cost of goods sold #eginning balance 5$20,000 $$',000 -2,000 < 5 1$,000 2-,000 .',000 < 5 $$,000 $2,000 1',000 < 512$,000 $0,000 122,000 <

b. ;irect ,aterials

c. 4or*)in)process (nventory

d. Finis"ed 8oods (nventory

Answer: a. ?nding balance of merc"andise inventory: 5-2,000 F 5$20,000 ) 5$$',000 7 5%',000 b. ;irect materials used: 51$,000 F 5.',000 ) 52-,000 7 5-2,000 c. Current manufacturing costs: 5$2,000 F 5$$,000 ) 51',000 7 5+0,000 d. #eginning balance of finis"ed goods inventory: 5$0,000 F 5122,000 ) 512$,000 7 5 -,000 Difficulty: 2 Objectives: ', +

C"apter 2

Page +

1%-. Cynt"ia ?vans is paid 520 an "our for straig"t)time and 5 0 an "our for overtime. 6ne wee* s"e wor*ed $ "ours, w"ic" included "ours of overtime. Required: a. b. c. 4"at is Cynt"iaLs total compensation for t"e wee*< 4"at amount of compensation would be reported as direct manufacturing labor< 4"at amount of compensation would be reported as manufacturing over"ead<

Answer: a. b. c. ;irect labor 9$ "ours 2 520: F 6vertime premium 9 "rs 2 510: 7 5-.0 ;irect manufacturing labor 9$ "ours 2 520: 7 5-'0 ,anufacturing over"ead costs 7 6vertime premium 9 "rs 2 510: 7 5 0 Objective: +

Difficulty: 2

1%.. Deslie 8rant is paid 520 an "our for straig"t)time and 5 0 an "our for overtime. 6ne wee* s"e wor*ed $' "ours, w"ic" included ' "ours of overtime, and $ "ours of idle time caused by material s"ortages. Required: a. b. c. 4"at is DeslieLs total compensation for t"e wee*< 4"at amount of compensation would be reported as direct manufacturing labor< 4"at amount of compensation would be reported as manufacturing over"ead<

Answer: a. b. c. ;irect manufacturing labor 9$2 "ours 2 520: F (dle time 9$ "rs 2 520: F 6vertime premium 9' "rs 2 510: 7 5.-0 ;irect manufacturing labor 9$2 "ours 2 520: 7 5-$0 ,anufacturing over"ead costs 7 (dle time 9$ "rs 2 520: F 6vertime premium 9' "rs 2 510: 7 51$0 Objective: +

Difficulty: 2

C"apter 2

Page -