Exam 2: Product Costing Systems: Concepts and Design Issues

Which of the following is not a conversion resource?

Use the following to answer questions: Crowley Company has gathered the following data related to its production process of two of its products for the week ended April 30: -If the cost behaviors exhibited in this chart continue and the company produces 90 units of product 100B during May, the expected total unit-level material cost of product 100 B would be:

Employees who handle materials in the factory of a manufacturing plant are considered direct labor costs.

Facility-level costs are incurred to maintain the organization's overall facility and infrastructure.

Use the following to answer questions: Crowley Company has gathered the following data related to its production process of two of its products for the week ended April 30: -The absorption cost per unit for product 250C was:

Absorption costing uses sales less variable costs to measure the contribution to profit.

All variable costs are unit-level costs.

The identification of a cost as fixed or variable is valid only within a specified range of output volume.

Which of the following statements is True?

(a) Compute the gross margin, operating income, and ending inventory for Dover Automotive 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 figures. (c) Ernest Murphy, the cost manager of Dover Automotive 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 Dover Automotive Components using variable costing. Explain any differences in the operating incomes obtained under the two different methods. Additional information: ● Sales revenue: $5,200,000 ● Beginning inventory: $275,000 ● The only spending increase was for material 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. Dover Automotive Components, Inc. uses the absorption costing method. Required Consider the following cost and production information for Dover Automotive Components, Inc.

(a) Compute the contribution margin, operating income, and ending inventory for Bedell Metal Company (b) Assume that sales of part D-1340 increases by 30 units to 110 units during the given period (production remains constant). Re-compute the above figures. (c) Mary Keenan, the controller of Bedell Metal Company., is considering the use of absorption costing instead of variable costing to be in line with financial reporting requirements. She knows that the use of a different costing method will give rise to different incentives. Explain to her how alternative methods of calculating product costs create different incentives. Additional information: ● Sales revenue: $20,000,000 ● Beginning inventory: $1,150,000 ● Sales of part D-1340: 80 units ● Sales of all other parts are the same as the number of units produced. ● Sales price of part D-1340: $35,500 per unit ● The only spending increase was for material cost due to increased production. All other spending as shown above was unchanged. Bedell Metal Company uses the variable costing method. Required Consider the following cost and production information for Bedell Metal Company, Inc.

The difference in the amount of fixed overhead cost that is expensed to the income statement under absorption and variable costing is solely attributable to the difference between the number of units produced during the period and the number of units sold. AASCB: Analytic

Fixed costs per unit remain the same as volume of production increases.

Consider the following cost and production information for Keenan Electronic Components, Inc. Additional information: ? Sales revenue: $10,400,000 ? Beginning inventory: $575,000 ? The only spending increase was for material 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. (a) Compute the contribution margin, operating income, and ending inventory for Keenan Electronic 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 figures. (c) Charles Simek, the cost manager of Keenan Electronic Components, argues with the controller that throughput costing is a better method for product costing. Using the information in part b above, re-compute the operating income for Hi-tec using throughput costing. Explain any differences in the operating incomes obtained under the two different methods.

Classify each of the following costs as inventoriable (I) or period (P) and indicate whether the cost is a variable cost (V) or a fixed cost (F).

Cost of goods sold does not include the costs of selling merchandise.

Marketing costs are considered period costs for retailers and product costs for manufacturers.

Oliveira''s operating income under absorption costing will be: In its first month of operations, Oliveira Corporation produced 100,000 units. 80,000 units were sold. The manufacturing cost per unit was as follows:

Which of the following best describes a fixed cost?

Theoretically, overtime premium paid to a machine operator should be accounted for as: