Exam 2: Cost Concepts and Behavior

Under full absorption costing, which of the following are included in product costs?

Which of the following should be considered part of a manufacturing company's direct labor cost?

Fowler Retail has collected the following information for August: Sales revenue \ 1,155,000 Storerent 58,800 Utilities 40,400 Sales commissions 173,300 Merchandise inventory, 8/1 87,220 Merchandise inventory, 8/31 82,740 Freight-in 30,300 Administrative costs 80,600 Merchandise purchases 763,700 Required: Prepare a gross margin income statement for the month of August.

Explain the difference between a cost, a cost object, and a cost pool.

Manufacturing overhead:

The Foxboro Manufacturing Company provided you with the following information for the fiscal year ended December 31. Work-in-process irventory, 12/31 57,900 Finished goods irventory, 1/1 307,400 Direct labor costs incurred 1,004,300 Marnfacturing overhead costs 2,693,400 Direct materials irventory, 1/1 250,800 Finished goods irventory, 12/31 511,000 Direct materials purchased 1,750,200 Work-in-process irventory, 1/1 101,000 Direct materials irventory, 12/31 169,400 Required: (a) Compute the total manufacturing costs incurred during the year. (b) Compute the total work-in-process during the year. (c) Compute the cost of goods manufactured during the year. (d) Compute the cost of goods sold during the year. (e) Compute the total prime costs for the year. (f) Compute the total conversion costs for the year.

Which of the following statements is (are) true? (1) The term full cost refers to the cost of manufacturing and selling a unit of product and includes both fixed and variable costs. (2) The fixed cost per unit is considered constant despite changes in volume of activity within the relevant range.

The Younce Equipment Company provided you with the following information for the fiscal year ended December 31. Work-in-process inventory, 12/31 \ 28,950 Finished goods inventory, 1/1 153,700 Direct labor costs incurred 502,150 Manufacturing overhead costs 1,364,700 Direct materials inventory, 1/1 125,400 Finished goods inventory, 12 / 31 255,500 Direct materials purchased 875,100 Work-in-process inventory, 1/1 50,500 Direct materials inventory, 12/31 84,700 Required: (a) Compute the total manufacturing costs incurred during the year. (b) Compute the total work-in-process during the year. (c) Compute the cost of goods manufactured during the year. (d) Compute the cost of goods sold during the year.

An example of a period cost is:

Consider the following cost and production information for Darrell Building Components, Inc. Additional information: ∙ Sales revenue: $5,200,000. ∙ Beginning inventory: $275,000. ∙ The only spending increase was for materials cost due to increased production. All other spending as shown above was unchanged. ∙ Sales of all parts are the same as the number of units produced. Darrell Building Components, Inc. uses the absorption costing method. Required: (a) Compute the (1) gross margin, (2) operating income, and (3) ending inventory for Darrell Building Components, Inc. (b) Assume that production of part D-1251 increases by 25 units during the given period (sales remain constant). Re-compute the above amounts. (c) Thane Smith, the cost manager of Darrell Building Components, argues with the controller that variable costing is a better method for product costing. Using the information in part (b) above, re-compute the operating income for Darrell Building Components using variable costing. Explain any differences in the operating incomes obtained under the two different methods.

An expense is a cost charged against revenue in an accounting period.

The information below has been taken from the cost records of Toro Corp. for the past year: Raw materials used in production \5 72 Total manufacturing costs charged to production during the year (includes \ 255 of factory overhead) 1,095 Cost of goods available for sale 1,415 Selling administrative expenses 255 Inventories: Beginning Ending Direct materials 175 155 Work in process 220 190 Finished goods 290 310 Required: (a) Calculate the cost of direct materials purchased during the year. (b) Calculate the direct labor costs charged to production during the year. (c) Calculate the cost of goods manufactured during the year. (d) Calculate the cost of goods sold for the year.

During the year, a manufacturing company had the following operating results: Beginning work-in-process inventory \ 45,000 Beginning finished goods inventory \ 190,000 Direct materials used in production \ 308,000 Direct labor \ 475,000 Manufacturing overhead incurred \ 250,000 Ending work-in-process inventory \ 67,000 Ending finished goods inventory \ 89,000 What is the cost of goods manufactured for the year?

The three categories of product costs are direct materials, direct labor, and manufacturing overhead.

The beginning Finished Goods Inventory plus the cost of goods manufactured equals

During April, the Meade Enterprises had the following operating results: Sales revernue \ 1,500,000 Gross margin \ 600,000 Ending work-in-process inventory \ 50,000 Beginning work-in-process inventory \ 80,000 Ending finished goods inventory \ 100,000 Beginnirng finished goods inventory \ 125,000 Marketing costs \ 250,000 Administrative costs \ 150,000 What is the cost of goods manufactured for April?

Cost of goods sold includes the actual costs of the goods sold and the costs required to sell them to the customer.

A cost allocation rule is the method or process used to assign the costs in the ________ to the ________.

The following information is available for the Crossover Company: Sales: 25,000 units per year at $45 per unit Production: 30,000 units in 2019 and 20,000 units in 2020 At the beginning of 2019 there was no inventory Variable manufacturing costs are $30.00 per unit Fixed manufacturing costs are $150,000 per year Marketing costs are all fixed at $75,000 per year Required: (a) Prepare a gross margin income statement under absorption costing for 2019 and 2020. Include a column for each year and a total column. (b) Prepare a contribution margin income statement under variable costing for 2019 and 2020. Include a column for each year and a total column. (c) Comment on the results and reconcile any differences in income.

A number of costs and measures of activity are listed below. Required: For each item above, indicate whether the cost is MAINLY fixed or variable with respect to the possible measure of activity listed next to it.