Exam 9: Absorption Cost Systems

Duff's Baking Company (DBC)produces Monster cookies.DBC's beginning inventory has 22,000 Monster cookies that are 100% complete as to materials and 30% complete as to conversion costs.During the month,380,000 Monster cookies were started into production.Ending inventory is 35,000 cookies which are 100% complete as to materials and 40% complete as to conversion costs.Beginning work in process inventory consisted of $78,450 of which $31,600 was materials and $46,850 was conversion costs.Materials added during the month were $290,000 while conversion costs during the month totaled $353,200.Which is not true for DBC for the month?

Hercules Hair Restorer Inc.(HHRI)makes many varieties of hair restoration products which are sold under well-known marketing labels.A single batch contains 10,000 8-oz.bottles and takes two days to make.Typically 15 batches are completed per month,for different brands.Basic cost data for the month of January appears below. The firm uses absorption costing and allocates overhead on the basis of January's actual expenses and direct labor hours.For batches made in January,which is true? (Do not round your intermediate calculations. )

Hercules Hair Restorer Inc.(HHRI)makes many varieties of hair restoration products which are sold under well-known marketing labels.A single batch contains 10,000 8-oz.bottles and takes two days to make.Typically 15 batches are completed per month,for different brands.Basic cost data for the month of January appears below. Hercules Hair Restorer Inc.(HHRI)appoints a new CEO,who decides to increase production targets to 200 batches per year.She also hires a management accountant who decides to apply fixed overhead based on normal capacity and does some research into cost behavior.Basic product data still applies.New information appears below. Estimated overhead for year \% fixed Supervision \ 96,000 100\% Indirect materials \ 30,800 60\% Equipment depreciation \ 126,240 100\% Equipment repairs \ 48,000 30\% Plant manager's salary \ 84,500 100\% Utilities 20\% The new CEO has decided that 25% of the production target of 200 batches per year will be a new product,whose information appears below. If HHRI uses for overhead allocation a dual rate system,whereby fixed overhead is allocated on the basis of direct labor hours and variable overhead is allocated on the basis of machine hours,which is true? (Do not round your intermediate calculations. )

Which of the following statements is incorrect?

Micro Enterprises planned to produce 120,000 lerts per year.Annual overhead,of which 32.5% is variable,is estimated at $320,400.Each lert takes 1.2 machine hours and 3 labor hours to produce.The firm allocates overhead by direct labor hours. In February,when 11,000 lerts were produced,32,000 direct labor hours were recorded and expenditures on overhead amounted to $29,650.Which is true for this month? (Do not round your intermediate calculations. )

Hercules Hair Restorer Inc.(HHRI)makes many varieties of hair restoration products which are sold under well-known marketing labels.A single batch contains 10,000 8-oz.bottles and takes two days to make.Typically 15 batches are completed per month,for different brands.Basic cost data for the month of January appears below. Hercules Hair Restorer Inc.(HHRI)appoints a new CEO,who decides to increase production targets to 200 batches per year.She also hires a management accountant who decides to apply fixed overhead based on normal capacity and does some research into cost behavior.Basic product data still applies.New information appears below. Estimated overhead for year \% fixed Supervision \ 96,000 100\% Indirect materials \ 30,800 60\% Equipment depreciation \ 126,240 100\% Equipment repairs \ 48,000 30\% Plant manager's salary \ 84,500 100\% Utilities 20\% The new CEO has decided that 25% of the production target of 200 batches per year will be a new product,whose information appears below. If HHRI makes 204 batches in the planned sales mix,which is true (to nearest $)? (Do not round your intermediate calculations. )

Micro Enterprises planned to produce 120,000 lerts per year.Annual overhead,of which 32.5% is variable,is estimated at $320,400.Each lert takes 1.2 machine hours and 3 labor hours to produce.The firm allocates overhead by direct labor hours. In March,when 11,500 lerts were produced,33,500 direct labor hours were recorded and expenditures on overhead amounted to $31,200.Which is true for this month?

Hercules Hair Restorer Inc.(HHRI)makes many varieties of hair restoration products which are sold under well-known marketing labels.A single batch contains 10,000 8-oz.bottles and takes two days to make.Typically 15 batches are completed per month,for different brands.Basic cost data for the month of January appears below. If overhead for January is calculated per machine hour,which is false? (Do not round your intermediate calculations. )

Micro Enterprises planned to produce 120,000 lerts per year.Annual overhead,of which 32.5% is variable,is estimated at $320,400.Each lert takes 1.2 machine hours and 3 labor hours to produce.The firm allocates overhead by direct labor hours. You review the accounting records at the end of the year.You learn that Micro made 125,000 lerts in the year,using 356,000 direct labor hours.Actual overhead expenditures totaled $333,333.Which is true with respect to Under/Over-applied overhead?

Barbara Karloff Inc.recently set up as a microbrewery to manufacture a variety of beers,ales and stouts to customer specifications.The standard sizes per batch are as follows: stout,5,000 gallons;ale,8,000 gallons;and beer,10,000 gallons.A beer batch takes six days to process,ale ten days and stout 14 days,the difference primarily attributable to the number of steps in the brewing process and the amount of time needed to mature the brew to the intended flavor specifications.By tradition,a new batch is started at 7 a.m. ,the start of a work day.It costs $1,800 in labor and variable overhead to set up each batch.The brewery's monthly fixed overhead is $220,000,which is allocated to products based on gallons.Other costing data appears below. Per galon of output Beer Ale Stout Basic direct materials \ 0.40 \ 0.60 \ 0.90 Variable conversion costs \ 0.80 \ 1.00 \ 1.20 Bottle Label Case/Crate/Pacl Other direct materials \ 0.05 \ 0.03 \ 0.25 Basic direct materials are applied at the start of the process.Direct materials costs are charged when used in production and variable conversion costs are applied evenly throughout the production process.All products are sold in 12-ounce bottles.Beer is sold with 24 bottles per case,but ale is packed by the dozen in mini-crates,and stout in 6-packs. In April,the first month of operations,BKI finished five batches of beer,three of ale and one of stout.Dribbles of liquids from one batch that do not completely fill a bottle are poured away.Bottles from a batch that do not make up a complete case,crate or pack are donated to the company monthly picnic.In reviewing the production records,you find that a batch of stout was started on the 23^rd,a batch of ale on the 27^th,and a batch of beer on the 29^th.These batches constitute ending work in process (EWIP). With respect to conversion costs,which is true for the first month of operations? (Do not round your intermediate calculations. )

Hercules Hair Restorer Inc.(HHRI)makes many varieties of hair restoration products which are sold under well-known marketing labels.A single batch contains 10,000 8-oz.bottles and takes two days to make.Typically 15 batches are completed per month,for different brands.Basic cost data for the month of January appears below. Hercules Hair Restorer Inc.(HHRI)appoints a new CEO,who decides to increase production targets to 200 batches per year.She also hires a management accountant who decides to apply fixed overhead based on normal capacity and does some research into cost behavior.Basic product data still applies.New information appears below. Estimated overhead for year \% fixed Supervision \ 96,000 100\% Indirect materials \ 30,800 60\% Equipment depreciation \ 126,240 100\% Equipment repairs \ 48,000 30\% Plant manager's salary \ 84,500 100\% Utilities 20\% If HHRI uses for overhead allocation a dual rate system,whereby fixed overhead is allocated on the basis of direct labor hours and variable overhead is allocated on the basis of machine hours,which is true? (Do not round your intermediate calculations. )

Hercules Hair Restorer Inc.(HHRI)makes many varieties of hair restoration products which are sold under well-known marketing labels.A single batch contains 10,000 8-oz.bottles and takes two days to make.Typically 15 batches are completed per month,for different brands.Basic cost data for the month of January appears below. HHRI appoints a new CEO,who decides to increase production targets to 200 batches per year.She also hires a management accountant who decides to apply fixed overhead based on normal capacity and does some research into cost behavior.Basic product data still applies.New information appears below. Estimated overhead for year \% fixed Supervision \ 96,000 100\% Indirect materials \ 30,800 60\% Equipment depreciation \ 126,240 100\% Equipment repairs \ 48,000 30\% Plant manager's salary \ 84,500 100\% Utilities 20\% If HHRI uses a plant-wide rate based on a single cost pool,which of the following statements is true? (Do not round your intermediate calculations. )

Barbara Karloff Inc.recently set up as a microbrewery to manufacture a variety of beers,ales and stouts to customer specifications.The standard sizes per batch are as follows: stout,5,000 gallons;ale,8,000 gallons;and beer,10,000 gallons.A beer batch takes six days to process,ale ten days and stout 14 days,the difference primarily attributable to the number of steps in the brewing process and the amount of time needed to mature the brew to the intended flavor specifications.By tradition,a new batch is started at 7 a.m. ,the start of a work day.It costs $1,800 in labor and variable overhead to set up each batch.The brewery's monthly fixed overhead is $220,000,which is allocated to products based on gallons.Other costing data appears below. Per galon of output Beer Ale Stout Basic direct materials \ 0.40 \ 0.60 \ 0.90 Variable conversion costs \ 0.80 \ 1.00 \ 1.20 Bottle Label Case/Crate/Pacl Other direct materials \ 0.05 \ 0.03 \ 0.25 Basic direct materials are applied at the start of the process.Direct materials costs are charged when used in production and variable conversion costs are applied evenly throughout the production process.There are 128 fluid ounces in a gallon and all products are sold in 12-ounce bottles.Beer is sold with 24 bottles per case,but ale is packed by the dozen in mini-crates,and stout in 6-packs. In April,the first month of operations,BKI finished five batches of beer,three of ale and one of stout.Dribbles of liquids from one batch that do not completely fill a bottle are poured away.Bottles from a batch that do not make up a complete case,crate or pack are donated to the company monthly picnic.In reviewing the production records,you find that a batch of stout was started on the 23^rd,a batch of ale on the 27^th,and a batch of beer on the 29^th.These batches constitute ending work in process (EWIP). Which is true as far as equivalent units of output are concerned? (Do not round your intermediate calculations. )

Which of the following statements is incorrect?

Barbara Karloff Inc.recently set up as a microbrewery to manufacture a variety of beers,ales and stouts to customer specifications.The standard sizes per batch are as follows: stout,5,000 gallons;ale,8,000 gallons;and beer,10,000 gallons.A beer batch takes six days to process,ale ten days and stout 14 days,the difference primarily attributable to the number of steps in the brewing process and the amount of time needed to mature the brew to the intended flavor specifications.By tradition,a new batch is started at 7 a.m. ,the start of a work day.It costs $1,800 in labor and variable overhead to set up each batch.The brewery's monthly fixed overhead is $220,000,which is allocated to products based on gallons.Other costing data appears below. Per prillan af autput Beer Ale Stout Basic direct materials \ 0.40 \ 0.60 \ 0.90 Variable conversion costs \ 0.80 \ 1.00 \ 1.20 Batte Labe CaseCratePack Othe direct materials \ 0.05 \ 0.03 \ 0.25 Basic direct materials are applied at the start of the process.Direct materials costs are charged when used in production and variable conversion costs are applied evenly throughout the production process.There are 128 fluid ounces in a gallon and all products are sold in 12-ounce bottles.Beer is sold with 24 bottles per case,but ale is packed by the dozen in mini-crates,and stout in 6-packs. In April,the first month of operations,BKI finished five batches of beer,three of ale and one of stout.Dribbles of liquids from one batch that do not completely fill a bottle are poured away.Bottles from a batch that do not make up a complete case,crate or pack are donated to the company monthly picnic.In reviewing the production records,you find that a batch of stout was started on the 23^rd,a batch of ale on the 27^th,and a batch of beer on the 29^th.These batches constitute ending work in process (EWIP). With respect to direct materials,which is true for the first month of operations? (Do not round your intermediate calculations. )