Professional Documents
Culture Documents
Chapter 3 Part 1
Chapter 3 Part 1
Chapter 3 Part 1
Chapter 3 – Part 1
First: MCQs
4) Which of the following costs will be treated as period costs under absorptioncosting?
A) raw materials used in the production
B) sales commission paid on sale of product
C) depreciation on factory equipment
D) rent for factory building
Answer: B
Section No.4 Cost Accounting (1) Level 2
Tuesday 24/8/2021
5) AAA Manufacturing Inc, makes a product with the following costs per unit:
Direct materials $180
Direct labor $20
Manufacturing overhead (variable) $30
Manufacturing overhead (fixed) $130
Marketing costs $75
What would be the inventoriable cost per unit under absorption costing?
A) $350
B) $305
C) $360
D) $300
Answer: C
Explanation: Absorption costing: $180 + $20 + $30 + $130 = $360
6) Time Again LLC produces and sells a mantel clock for $100 per unit. In 2017, 41,000
clocks were produced and 37,000 were sold. Other information for the year includes:
7) For 2017, Rockford, Inc., had sales of 150,000 units and production of 200,000units.
Other information for the year included:
Required:
a. Compute the ending finished goods inventory under absorption costing.
b. Compute the cost of goods sold under absorption costing.
Answer:
a. Absorption
Direct materials $160,000
Direct manufacturing labor 197,500
Variable manufacturing overhead 100,000
Fixed manufacturing overhead 250,000
Total $707,500
Unit cost:
$707,500/200,000 units $3.5375
Ending inventory:
50,000 units × $3.5375 $176,875
10) Jean Peck's Furniture manufactures tables for hospitality sector. It takes only bulk
orders and each table is sold for $400 after negotiations. In the month of January, it
manufactures 3,200 tables and sells 2,400 tables. Actual fixed costs are the same as the
amount of fixed costs budgeted for the month.
At the end of the month Jean Peck's Furniture has an ending inventory of finished
goods of 800 units. The company also incurs a sales commission of $11 per unit.
What is the cost of goods sold per unit when using absorption costing?
A) $130.00
B) $101.87
C) $158.13
D) $169.13
Answer: C
Explanation: The variable manufacturing costs per unit is $130.
Fixed manufacturing costs attributable to 3,200 tables is $90,000. Therefore, the fixed
manufacturing cost per unit = ($90,000/3,200) = $28.13
The total cost of goods sold per unit = ($130.00 + $28.13) = $158.13
Section No.4 Cost Accounting (1) Level 2
Tuesday 24/8/2021
Answer:
Revenues (2,500 × $925) $2,312,500
Cost of Goods Sold
Beginning inventory $0
Second: T& F
1) Under absorption costing, research and development costs are period costs.
Answer: TRUE