Exam 2: Cost Concepts and Behavior

Which of the following statements is (are) true? (1) An asset is a cost that will be matched with revenues in a future accounting period. (2) Opportunity costs are recorded as intangible assets in the current accounting period.

A company had beginning inventories as follows: Direct Materials, $300; Work-in-Process, $500; Finished Goods, $700. It had ending inventories as follows: Direct Materials, $400; Work-in-Process, $600; Finished Goods, $800. Material Purchases net were $1,400, Direct Labor $1,500, and Manufacturing Overhead $1,600. What is the Cost of Goods Sold for the period?

The cost of fire insurance for a manufacturing plant is generally considered to be a:

The cost of direct labor will be treated as an expense on the income statement when the resulting:

Explain the difference between direct materials inventory, work in process inventory, finished goods inventory, and cost of goods sold.

Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected. Product L Product W Direct materials \ 44 \ 36 Machining labor ( \1 2hour) 18 15 Assembly labor ( \1 0/hour) 30 10 Variable overhead ( \8 /hour) 36 18 Fixed overhead (4/hour) 18 9 Total Manufacturing Cost \ 146 \ 88 Estimated selling \1 70 \1 00 Actual research and development costs \ 240,000 \ 175,000 Estimated advertising costs \ 500,000 \ 350,000 Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products. - The advertising costs for the product selected by Mountainburg will be

Information from the records of the Navaho Industries for the month of July is as follows: Purchases of direct materials 24,000 Indirect labor 6,500 Direct labor 13,200 Depreciation on factory machinery 3,600 Sales 75,300 Selling and administrative expenses 8,900 Rent on factory building 8,400 Irventories: July 1 July 31 Direct materials \ 8,000 \ 6,700 Work-in-process 1,100 1,600 Finished goods 9,000 6,800 Required: (a) Prepare a statement of cost of goods manufactured and sold for the month of July. (b) Prepare a gross margin income statement for the month of July.

Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected. Product L Product W Direct materials \ 44 \ 36 Machining labor ( \1 2hour) 18 15 Assembly labor ( \1 0/hour) 30 10 Variable overhead ( \8 /hour) 36 18 Fixed overhead (4/hour) 18 9 Total Manufacturing Cost \ 146 \ 88 Estimated selling \1 70 \1 00 Actual research and development costs \ 240,000 \ 175,000 Estimated advertising costs \ 500,000 \ 350,000 Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products. - The total overhead cost of $27 for Mountainburg's Product W is a(n)

The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows: Estimated Cost Item Unit Cos Direct material \ 32 Direct labor 20 Variable manfacturing overhead 15 Fixed manfacturing overhead 6 Variable selling expenses 3 Fixed selling expenses 4 - What are the estimated variable costs per unit?

A company which manufactures custom-made machinery routinely incurs sizable telephone costs in the process of taking sales orders from customers. Which of the following is a proper classification of this cost?

Required: Using the table below as a reference, describe whether the following costs incurred in a manufacturing company are (a) fixed or variable and (b) product or period. The first cost item is presented in the table as an example. *Straight-line depreciation method used.

For a manufacturing company, which of the following is an example of a period cost rather than a product cost?

The range within which fixed costs remain constant as volume of activity varies is known as the relevant range.

Styling Toys, Inc. (STI) manufactures a variety of electronic toys for children aged 3 to 14 years. The company started as a Ma & Pa basement operation, and grew steadily over the last nine years. It now employs over 100 people and has sales revenue of over $250 million. Samantha Marks, the CEO of STI also recognizes that competition has increased during this period; therefore future growth will not be easy. Marks recognizes that one of the areas of weakness is the accounting and costing system. Marks' maternal uncle, Zack, had maintained the accounts for the company. He meticulously kept track of all the invoices that were received, payments made, and painstakingly prepared crude annual reports. With Zack passing away at the age of 85, Marks decided to hire a professional cost management expert to keep track of the company's costs. She hired Dona FalconWright, who had just completed her CMA. After acquainting Falcon with the company and its people, Marks decided to get down to business. She called Falcon to her office to have a serious conversation about accounting and costing, in particular. Marks: Dona, I would like you to pay particular attention to developing an official costing system. Currently, we don't have one. I believe this should be your first priority because competition is rising and if we do not understand our costs, we might start losing sales to our rivals. Falcon: I understand your point very well, Ms. Marks. Marks: Call me Sam. Falcon: Very well, Sam. I have a few ideas that I picked up from my CMA courses that I think are worth implementing. However, it looks like we need to start with the basics. Required: Assume the role of Dona Falcon. Write a brief report outlining the basics of a cost management information system. Include in your report the following: ∙ Resources and costs ∙ Supply of resources vs. the use of resources ∙ Classification of costs (three dimensions of resources) ∙ Alternative costing systems

Total variable costs change inversely with changes in the volume of activity.

Direct labor would be part of the cost of the ending inventory for which of these accounts?

The following information applies to the Garden Master Company for the year ended December 31, 2019: Factory Rent \ 80,000 Direct Materials Inventory, Beginning 50,000 Direct Materials Inventory, Ending 45,000 Direct Materials Purchases 325,000 Direct Labor-Wages 550,000 Indirect Labor-Wages 25,000 Finished Goods Inventory, Beginning 50,000 Finished Goods Inventory, Ending 75,000 Indirect Materials 50,000 Plant Utilities 25,000 General and Administrative 130,000 Work-in-Process Inventory, Beginning 50,000 Work-in-Process Inventory, Ending 55,000 Marketing Expenses 180,000 Sales Revenue 1,825,000 Required: Prepare a statement of cost of goods manufactured and an income statement for the year ended December 31, 2019.

A product cost is deducted from revenue when

Which of the following statements is (are) false? (1) In general, the term expense is used for managerial purposes, while the term cost refers to external financial reports. (2) An opportunity cost is the benefit forgone by selecting one alternative over another.

Razor Corporation produces and sells a single product at $40 per unit. During 2019, the company produced 200,000 units, 160,000 of which were sold during the year. All ending inventory was in finished goods inventory; there was no inventory on hand at the beginning of the year. The following data relate to the company's production process: Direct materials \ 550,000 Direct labor 400,000 Variable Manufacturing overhead 100,000 Fixed manufacturing overhead 300,000 Variable marketing and administrative 160,000 Fixed marketing and administrative 110,000 Required: Calculate the following. (a) The unit cost of ending inventory on the balance sheet prepared for stockholders. (b) The unit cost of ending inventory on a variable costing balance sheet. (c) The operating income using absorption costing. (d) The operating income using variable costing. (e) The ending inventory using absorption costing. (f) The ending inventory using variable costing. (g) A reconciliation of the difference in operating income between absorption costing and variable costing using the shortcut method.