Exam 13: Cost Accounting and Reporting

Nautical Creations manufactures high-end boat accessories for large custom yachts.Nautical has always applied manufacturing overhead using a traditional predetermined overhead rate based on direct labor hours, this year it is $45 per DLH.Nautical is currently evaluating the use of activity-based driver rates to apply manufacturing overhead cost and has assembled the following budgeted amounts and actual activity required to produce Job #258. Budgeted Activity used Activity Driver Budgeted Cost Activity on Job \#258 Machining time \ 200,000 5,000 hours 600 hours Direct labor time \ 220,000 10,000 hours 800 hours Quality inspection time \ 30,000 2,000 hours 200 hours Using the traditional method of applying manufacturing overhead, the amount of overhead applied to Job #258 would be:

In order to achieve higher quality cost information from the assignment of overhead costs to products manufactured, the use of a predetermined overhead rate is being replaced by:

Common costs pertain to costs that:

Baja Industries has recently switched its method of applying manufacturing overhead from a single predetermined overhead rate based on direct labor hours to activity-based costing (ABC).Assume that the direct labor rate is $18.00 per hour and that there were no beginning inventories.The following cost drivers and rates have been developed for allocating manufacturing overhead costs: Activity Cost Driver Rate Material handling Number of parts used \ 2.00 per part Assembly and inspection Number of direct labor hours \ 25.00 per DLH Testing Number of units tested \ 5.00 per unit The following production, costs, and activities occurred during the month of August: Units Praduced Direct Material Cast Number uf Parts Used Direct Labar Hours 6,400 \ 208,600 142,000 26,480 (a.)Calculate the total manufacturing cost and the cost per unit for the month of August. (b.)Assume instead that Baja Industries applies manufacturing overhead on the basis of $40.00 per direct labor hours (rather than the ABC method).Calculate the total manufacturing overhead cost applied for the month of August. (c.)Which method of applying overhead do you think provides better information for manufacturing managers?

Great Bay Co.manufactures cordless telephones.During 2019, total costs associated with manufacturing 18,500 of the AB-2000 model (introduced this year)were as follows: Raw materials \ 195,175 Direct labor 115,625 Variable manufacturing overhead 85,100 Fixed manufacturing overhead 114,700 (a.)Calculate the cost per phone under both direct (or variable)costing and absorption costing. (b.)If 2,800 of these phones were in finished goods inventory at the end of 2019, by how much and in what direction (higher or lower)would 2019 operating income be different under direct (or variable)costing than under absorption costing? (c.)Express the phone cost in a cost formula.What does this formula suggest the total cost of making an additional 1,600 phones would be?

The three sections of a statement of cost of goods manufactured include:

Erca, Inc.produces automobile bumpers.Overhead is applied on the basis of machine hours required for cutting and fabricating.A predetermined overhead application rate of $15.00 per machine hour was established for 2019. (a.)If 9,000 machine hours were expected to be used during 2019, how much overhead was expected to be incurred? (b.)Actual overhead incurred during 2019 totaled $135,000, and 9,200 machine hours were used during 2019.Calculate the amount of over- or underapplied overhead for 2019. (c.)Explain the accounting necessary for the over- or underapplied overhead for the year.

SurfsUp Specialty Products has the following inventory account balances and related manufacturing cost flow information for the month of October: Raw Materials, October 1 \ 20,000 Raw Materials, October 31 \ 25,000 Work in Process, October 1 \ 45,000 Work in Process, October 31 \4 0,000 Finished Goods, October 1 \ 68,000 Finished Goods, October 31 \ 62,000 Raw materials purchased ? Raw materials used \7 5,000 Direct labor incurred ? Manufacturing overhead incurred \1 20,000 Cost of goods manufactured \3 00,000 Cost of goods sold ? Direct labor incurred in October is:

An example of a product cost is:

Erber, Inc.produces men's neckties and dress socks.Manufacturing overhead is assigned to production using an application rate based on direct labor hours. (a.)For 2019, the company's cost accountant estimated that total overhead costs incurred would be $184,500, and that a total of 24,600 direct labor hours would be worked.Calculate the amount of overhead to be applied for each direct labor hour worked on a production run. (b.)A production run of 500 neckties required raw materials that cost $3,120, and 140 direct labor hours at a cost of $8.00 per hour.Calculate the cost of each necktie produced. (c.)At the end of February 2019, 420 neckties made in the above production run had been sold, and the rest were in ending inventory.Calculate the cost of the neckties sold that would have been reported in the income statement and the cost included in the February 28, 2019, finished goods inventory.

SKM Innovations, Inc., anticipates producing 40,000 units and incurring the following manufacturing costs for the coming year: raw material, $35 per unit; direct labor, $50 per unit; manufacturing overhead, $1,200,000 + $40 per unit.Using direct costing, the unit cost for the coming year will be:

The change in the amount of manufacturing overhead costs applied to a company's mix of products that are produced when using a single cost driver rate as compared to using activity-based cost driver rates is known as:

Which of the following costs would be classified as a period cost?

For each of the following costs, check the columns that most likely apply.

In the T-account cost flow diagram of balance sheet inventory accounts and the income statement cost of goods sold account:

An example of a direct cost in the production of a computer is:

The term "cost" means:

If all units produced during March are sold, and there is no change in the number of units in the beginning finished goods inventory, then:

Which of the following activities is not included in the organization's value chain?

The use of activity-based costing information to support the decision-making process is known as: