Cost Accounting

QE

___

McCoy Company has the following information available for October when 3,500 units were produced (round answers to the nearest dollar). Standards: Material 3.5 pounds per unit @ $4.50 per pound Labor 5.0 hours per unit @ $10.25 per hour Actual: Material purchased 12,300 pounds @ $4.25 Material used 11,750 pounds 17,300 direct labor hours @ $10.20 per hour What is the labor rate variance? a. $875 F b. $865 F c. $865 U d. $875 U Western Co. has total budgeted fixed costs of $72,000. Actual production of 5,500 units resulted in a $6,000 unfavorable volume variance. What normal capacity was used to determine the fixed overhead rate? a. 5,000 b. 5,500 c. 6,000 d. Cannot be determined without further information. The term "relevant range" as used in cost accounting means the range over which a. costs may fluctuate. b. cost relationships are valid. c. production may vary. d. relevant costs are incurred. Which of the following is not a valid method for determining product cost? a. arbitrary assignment b. direct measurement c. systematic allocation d. cost-benefit measurement Denver Enterprises recently used 14,000 labor hours to produce 7,500 completed units. According to manufacturing specifications, each unit is anticipated to take two hours to complete. The company's actual payroll cost amounted to $158,200. If the standard labor cost per hour is $11, Denver's labor efficiency variance is: A. $11,000U. B. $11,000F. C. $11,300U. D. $11,300F. E. none of the above. The following July information is for Marley Company: Standards: Material 3.0 feet per unit @ Labor 2.5 hours per unit @

___

___ ___ ___

3 4 5

___

$4.20 per foot $7.50 per hour

Actual: Production 2,750 units produced during the month Material 8,700 feet used; 9,000 feet purchased @ $4.50 per foot Labor 7,000 direct labor hours @ $7.90 per hour (Round all answers to the nearest dollar.) What is the material price variance (calculated at point of purchase)? a. $2,700 U b. $2,700 F c. $2,610 F d. $2,610 U ___ 7 Benchmarking allows a company to a. identify its strengths and weaknesses. c. improve on methods in use by others. b. imitate those ideas that are readily transferable. d. all of the above.

___

___

Which of the following journal entries definitely contains an error? A. Raw-Material Inventory 200,000 Direct-Material Price Variance 5,000 Accounts Payable 205,000 B. Raw-Material Inventory 38,000 Direct-Material Price Variance 2,000 Accounts Payable 36,000 C. Raw-Material Inventory 156,000 Direct-Material Price Variance 8,000 Work-in-Process Inventory 148,000 D. Work-in-Process Inventory 67,000 Direct-Material Quantity Variance 3,000 Raw-Material Inventory 70,000 E. Work-in-Process Inventory 79,000 Direct-Material Quantity Variance 4,000 Raw-Material Inventory 75,000 At the end of the last fiscal year, Roberts Company had the following account balances: Overapplied overhead Cost of Goods Sold Work in Process Inventory Finished Goods Inventory $ 6,000 $980,000 $ 38,000 $ 82,000

___

10

___

11

If the most common treatment of assigning overapplied overhead were used, the final balance in Cost of Goods Sold is: a. $974,000. b. $974,660. c. $985,340. d. $986,000. Value reflects the ability of a product to a. provide the best quality at any price. b. have all possible product and service characteristics. c. meet the majority of a customer's needs at the lowest possible price. d. have the longest technical or service life and the best warranty. Injection Molding, Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through Department A and Department B. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Data for Department A for February 2010 are: Work in process, beginning inventory,40% converted Units started during February Work in process, ending inventory: 30% complete as to conversion costs 100% complete as to materials

200 units 600 units 100 units

What were the equivalent units of direct materials and conversion costs, respectively, at the end of February? Assume Injection Molding, Inc., uses the weighted-average process costing method. a. 800, 730 b. 800, 800 c. 800, 700 d. 600, 500

___

12

Forrest Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for August when Forrest made 4,500 units: Standard: DLH per unit Variable overhead per DLH Fixed overhead per DLH Budgeted variable overhead Budgeted fixed overhead Actual: Direct labor hours Variable overhead Fixed overhead

2.50 $1.75 $3.10 $21,875 $38,750

10,000 $26,250 $38,000

Using the one-variance approach, what is the total overhead variance? a. $6,062.50 U b. $3,625.00 U c. $9,687.50 U d. $6,562.50 U ___ 13 Which of the following is not a step in benchmarking procedures? a. analyze the "positive gap" b. engage in continuous improvement c. analyze the "negative gap" d. identify "best-in-class" companies The following March information is available for Scott Manufacturing Company when it produced 2,100 units: Standard: Material 2 pounds per unit @ $5.80 per pound Labor 3 direct labor hours per unit @ $10.00 per hour Actual: Material 4,250 pounds purchased and used @ $5.65 per pound Labor 6,300 direct labor hours at $9.75 per hour What is the material quantity variance? a. $275 F b. $290 F c. $290 U d. $275 U A criticism of variable costing for managerial accounting purposes is that it a. is not acceptable for product line segmented reporting. b. does not reflect cost-volume-profit relationships. c. overstates inventories. d. might encourage managers to emphasize the short term at the expense of the long term. The addition or removal of product or service characteristics to satisfy additional needs, especially price, reflect the ________ of a product or service. a. Value b. Grade c. Quality d. Durability An all-inclusive definition of quality views it as the ability of products/services to a. only meet internal design specifications. b. meet the customer's stated or implied needs. c. be produced using all value-added production activities. d. be produced with no rework costs. Broadly speaking, cost accounting can be defined as a(n) a. external reporting system that is based on activity-based costs. b. system used for providing the government and creditors with information about a company's internal operations. c. internal reporting system that provides product costing and other information used by managers in performing their functions. d. internal reporting system needed by manufacturers to be in compliance with Cost Accounting Standards Board pronouncements.

___

14

___

15

___

16

___

17

___

18

___

19

Alpha Co. uses a job order costing system. At the beginning of January, the company had two jobs in process with the following costs: Direct Material $3,400 1,100 Direct Labor $510 289 Overhead $255 ?

Job #456 Job #461

Alpha pays its workers $8.50 per hour and applies overhead on a direct labor hour basis. What is the overhead application rate per direct labor hour? a. $ 0.50 b. $ 2.00 c. $ 4.25 d. $30.00 ___ 20 Kerry Company makes small metal containers. The company began December with 250 containers in process that were 30 percent complete as to material and 40 percent complete as to conversion costs. During the month, 5,000 containers were started. At month end, 1,700 containers were still in process (45 percent complete as to material and 80 percent complete as to conversion costs). Using the weighted average method, what are the equivalent units for conversion costs? a. 3,450 b. 4,560 c. 4,610 d. 4,910 Gamma Corporation has total budgeted fixed costs of $150,000. Actual production was 8,000 units; normal capacity is 7,500 units. What was the volume variance? a. $10,000 favorable b. $15,000 favorable c. $15,000 unfavorable d. $10,000 unfavorable Courtney purchased and consumed 50,000 gallons of direct material that was used in the production of 11,000 finished units of product. According to engineering specifications, each finished unit had a manufacturing standard of five gallons. If a review of Courtney's accounting records at the end of the period disclosed a material price variance of $5,000U and a material quantity variance of $3,000F, determine the actual price paid for a gallon of direct material. A. $0.50. B. $0.60. C. $0.70. D. An amount other than those shown above. E. Not enough information to judge. Oxygen Company uses a standard cost system. Overhead cost information for October is as follows: Total actual overhead incurred Fixed overhead budgeted Total standard overhead rate per MH Variable overhead rate per MH Standard MHs allowed for actual production What is the total overhead variance? a. $1,200 F b. $1,200 U c. $1,400 F ___ 24 $12,600 $3,300 $4 $3 3,500

___

21

___

22

___

23

d. $1,400 U

Quest Co. is a print shop that produces jobs to customer specifications. During January 20X6, Job #3051 was worked on and the following information is available: Direct material used Direct labor hours worked Machine time used Direct labor rate per hour Overhead application rate per hour of machine time $2,500 15 6 $7 $18

What was the total cost of Job #3051 for January? a. $2,713 b. $2,770 c. $2,812 d. $3,052

___

25

Jackson Company uses a job order costing system and the following information is available from its records. The company has three jobs in process: #6, #9, and #13. Raw material used Direct labor per hour Overhead applied based on direct labor cost $120,000 $8.50 120%

Direct material was requisitioned as follows for each job respectively: 30 percent, 25 percent, and 25 percent; the balance of the requisitions was considered indirect. Direct labor hours per job are 2,500; 3,100; and 4,200; respectively. Indirect labor is $33,000. Other actual overhead costs totaled $36,000. What is the prime cost of Job #6? a. $42,250 b. $57,250 ___ 26

c. $73,250

d. $82,750

The Holiday Company makes wreaths in two departments: Forming and Decorating. Forming began the month with 500 wreaths in process that were 100 percent complete as to material and 40 percent complete as to conversion. During the month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were still in process that were 100 percent complete as to material and 50 percent complete as to conversion. Assume Forming uses the weighted average method of process costing. Costs in the Forming Department are as follows: The Decorating Department had 600 wreaths in process at the beginning of the month that were 80 percent complete as to material and 90 percent complete as to conversion. The department had 300 units in ending Work in Process that were 50 percent complete as to material and 75 percent complete as to conversion. Decorating uses the FIFO method of process costing, and costs associated with Decorating are: How many units were transferred to Decorating during the month? a. 600 b. 4,900 c. 5,950 d. 7,000

___

27

Cajun Company. uses a job order costing system. During April 2010, the following costs appeared in the Work in Process Inventory account: Beginning balance Direct material used Direct labor incurred Applied overhead Cost of goods manufactured $ 24,000 7 0,000 60,000 48,000 185,000

___

28

Cajun Company applies overhead on the basis of direct labor cost. There was only one job left in Work in Process at the end of April which contained $5,600 of overhead. What amount of direct material was included in this job? a. $4,400 b. $4,480 c. $6,920 d. $8,000 The following information pertains to Beta Company for September 2010. Direct Material $3,200 ? 5,670 Direct Labor $4,500 5,000 ? Overhead ? ? $5,550

Job #323 Job #325 Job #401

Beta Company applies overhead for Job #323 at 140 percent of direct labor cost and at 150 percent of direct labor cost for Jobs #325 and #401. The total cost of Jobs #323 and #325 is identical. What amount of overhead is applied to Job #323? a. $4,800 b. $5,550 c. $6,300

d. $7,500

___

29

Rainbow Company uses a standard cost system for its production process. Rainbow Company applies overhead based on direct labor hours. The following information is available for July: Standard: Direct labor hours per unit Variable overhead per hour Fixed overhead per hour (based on 11,990 DLHs) Actual: Units produced Direct labor hours Variable overhead Fixed overhead

2.20 $2.50 $3.00

4,400 8,800 $29,950 $42,300

Using the four-variance approach, what is the variable overhead spending variance? a. $7,950 U b. $25 F c. $7,975 U d. $10,590 U ___ 30 Julia Company makes fabric-covered hatboxes. The company began September with 500 boxes in process that were 100 percent complete as to cardboard, 80 percent complete as to cloth, and 60 percent complete as to conversion costs. During the month, 3,300 boxes were started. On September 30, 350 boxes were in process (100 percent complete as to cardboard, 70 percent complete as to cloth, and 55 percent complete as to conversion costs). Using the FIFO method, what are equivalent units for cloth? a. 3,295 b. 3,395 c. 3,450 d. 3,595 ABC had the same activity in 2010 as in 2009 except that production was higher in 2010 than in 2009. ABC will show a. higher income in 2010 than in 2009. b. the same income in both years. c. the same income in both years under variable costing. d. the same income in both years under absorption costing. Lafayette Savings and Loan had the following activities, traceable costs, and physical flow of driver units: Traceable Costs $50,000 36,000 15,000 27,000 Physical flow of Driver Units 1,000 accounts 400,000 deposits 200,000 withdrawals 900 applications

___

31

___

32

Activities Open new accounts Process deposits Process withdrawals Process loan applications

What is the cost per driver unit for new account activity? a. $0.09 c. $30.00 b. $0.075 d. $50.00 ___ 33 ABC had $400,000 budgeted fixed overhead costs and based its standard on normal activity of 40,000 units. Actual fixed overhead costs were $430,000, actual production was 36,000 units, and sales were 30,000 units. The volume variance was a. $30,000. b. $40,000. c. $70,000. d. $77,777. Which of the following defines variable cost behavior? Total cost reaction to increase in activity a. remains constant b. remains constant c. increases d. increases Cost per unit reaction to increase in activity remains constant increases increases remains constant

___

34

___

35

___

36

Long Company transferred 5,500 units to Finished Goods Inventory during September. On September 1, the company had 300 units on hand (40 percent complete as to both material and conversion costs). On June 30, the company had 800 units (10 percent complete as to material and 20 percent complete as to conversion costs). The number of units started and completed during September was: a. 5,200. b. 5,380. c. 5,500. d. 6,300. Maxwell Company adds material at the start of production. The following production information is available for June: Beginning Work in Process Inventory (45% complete as to conversion) Started this period Ending Work in Process Inventory (80% complete as to conversion)

10,000 units 120,000 units 8,200 units

How many units must be accounted for? a. 118,200 b. 128,200 c. 130,000 ___ 37

d. 138,200

___

38

Tiger Company has a job order costing system and an overhead application rate of 120 percent of direct labor cost. Job #63 is charged with direct material of $12,000 and overhead of $7,200. Job #64 has direct material of $2,000 and direct labor of $9,000. What amount of direct labor cost has been charged to Job #63? a. $ 6,000 b. $ 7,200 c. $ 8,640 d. $14,400 The Swiss Clock Shop manufactures clocks on a highly automated assembly line. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Swiss Clock Shop uses weighted-average costing. Data for the Assembly Department for June 2010 are: Work in process, beginning inventory Direct materials (100% complete) Conversion costs (50% complete) Units started during June Work in process, ending inventory: Direct materials (100% complete) Conversion costs (75% complete)

250 units

800 units 150 units

What are the equivalent units for direct materials and conversion costs, respectively, for June? a. 1,200.5 units; 1,160.64 units b. 1,050 units; 1,012.5 units c. 1,050 units; 1,050 units ___ 39 Cherub Co. Beginning inventory (30% complete as to Material B and 60% complete for conversion) Started this cycle Ending inventory (50% complete as to Material B and 80% complete for conversion) Beginning inventory costs: Material A $14,270 Material B 5,950 Conversion 5,640

d. 962 units; 990 units

700 units 2,000 units 500 units

___

40

Current Period costs: Material A $40,000 Material B 70,000 Conversion 98,100 Material A is added at the start of production, while Material B is added uniformly throughout the process. Assuming a weighted average method of process costing, compute the average cost per EUP for conversion. a. $39.90 b. $45.00 c. $43.03 d. $47.59 _____________ is a philosophy of increasing a firm's performance by involving all workers. a. Open-book management b. Data mining c. Diversity d.Strategic alliance