Question 1

Variable costing includes all variable costs-both manufacturing and nonmanufacturing-in inventory.

Accepted Answer

A) True 
 B)False

Question 2

Absorption costing is required by GAAP (Generally Accepted Accounting Principles)for external reporting.

Accepted Answer

A) True 
 B)False

Question 3

To smooth fluctuating levels of output,separate indirect-cost rates should be calculated for each month.

Accepted Answer

A) True 
 B)False

Question 4

The last step in a process-costing system is to determine the equivalent units for the period.

Accepted Answer

A) True 
 B)False

Question 5

The Morgan Models company manufactures replica plastic airplane and motorised vehicle models.During October,the firm's Assembly Department started production of 60 000 models.During the month,the firm completed 66 000 models,and transferred them to the Finishing Department.The firm ended the month with 22 000 models in ending inventory.There were 28 000 models in beginning inventory.All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process.The FIFO method of process costing is used by Morgan.Beginning work in process was 25% complete as to conversion costs,while ending work in process was 50% complete as to conversion costs.
Beginning inventory:
 $$\begin{array}{l}
\begin{array} { l l } 
\text { Direct materials costs } & \$ 39200 \
\text { Conversion costs } & \$ 30800
\end{array}\\
\text { Manufacturing costs added during the acounting period: }\\
\begin{array} { l c } 
\text { Direct materials costs } & \$ 90000 \
\text { Conversion costs } & \$ 280000
\end{array}
\end{array}$$
-What were the equivalent units for conversion costs during October?

Accepted Answer

A) 62 000 
B) 87 000 
C) 70 000 
D) 21 000 
A) 62 000 
B) 87 000 
C) 70 000 
D) 21 000

Question 6

Why does the manufacturing overhead control account (debit)need to equal the manufacturing overhead allocated account (credit)?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

If these accounts do not equal,then over

Question 7

Annual cost rates are preferred over actual cost rates for all of the following reasons EXCEPT:

Accepted Answer

A) budgeted indirect-cost rates are known prior to the inception of a new job. 
B) budgeted costs allow managers to have cost information on a timely basis. 
C) budgeted-cost rates can be used to allocate direct or indirect costs 
D) budgeted costs may be subject to short-run fluctuations. 
A) budgeted indirect-cost rates are known prior to the inception of a new job. 
B) budgeted costs allow managers to have cost information on a timely basis. 
C) budgeted-cost rates can be used to allocate direct or indirect costs 
D) budgeted costs may be subject to short-run fluctuations.

Question 8

Answer the following questions using the information below:
For 20X5,Irwin's Animal Supply Manufacturing uses machine-hours as the only overhead cost-allocation base.The accounting records contain the following information:
 $$\begin{array} { l c c } 
& \text { Estimated } & \text { Actual } \
\text { Manufacturing overhead costs } & \$ 150000 & \$ 180000 \
\text { Machine-hours } & 30000 & 35000
\end{array}$$
-Using normal costing,the amount of manufacturing overhead costs allocated to jobs during 20X5 is:

Accepted Answer

A) $150 000. 
B) $175 000. 
C) $200 000. 
D) $180 000. 
A) $150 000. 
B) $175 000. 
C) $200 000. 
D) $180 000.

Question 9

Which of the following statements is FALSE?

Accepted Answer

A) Operating profit under absorption costing is higher than operating profit under variable costing when production units exceed sales units. 
B) Absorption costing allocates fixed manufacturing overhead to actual units produced during the period. 
C) Nonmanufacturing costs are expensed in the future under variable costing. 
D) Fixed manufacturing costs in ending inventory are expensed in the future under absorption costing. 
A) Operating profit under absorption costing is higher than operating profit under variable costing when production units exceed sales units. 
B) Absorption costing allocates fixed manufacturing overhead to actual units produced during the period. 
C) Nonmanufacturing costs are expensed in the future under variable costing. 
D) Fixed manufacturing costs in ending inventory are expensed in the future under absorption costing.

Question 10

An assumption of the FIFO process-costing method is that:

Accepted Answer

A) the units in beginning inventory are assumed to be completed first. 
B) the units in beginning inventory are not necessarily assumed to be completed by the end of the period. 
C) ending inventory will always be completed in the next accounting period. 
D) no calculation of conversion costs is possible. 
A) the units in beginning inventory are assumed to be completed first. 
B) the units in beginning inventory are not necessarily assumed to be completed by the end of the period. 
C) ending inventory will always be completed in the next accounting period. 
D) no calculation of conversion costs is possible.

Question 11

Crows Nest Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to products.Manufacturing overhead costs are applied on the basis of machine-hours in the Machining Department and on the basis of direct labour-hours in the Assembly Department.At the beginning of 2013,the following estimates were provided for the coming year:
 $$\begin{array} { l l l } 
& \text { Machining } & \text { Assembly } \
\text { Direct labour-hours } & 10000 \mathrm { dlh } & 90000 \mathrm { dlh } \
\text { Machine-hours } & 100000 \mathrm { mh } & 5000 \mathrm { mh } \
\text { Direct labour cost } & \$ 80000& \$ 720000 \
\text { Manufacturing overhead costs } & \$ 250000 & \$ 360000
\end{array}$$ 
The accounting records of the company show the following data for Job #846:
 $$\begin{array} { l l l } 
& \text { Machining } & \text { Assembly } \
\text { Direct labour-hours } & 100 \mathrm { dlh } &170 \mathrm { dlh } & \
\text { Machine-hours } & 270 \mathrm { mh } &30 \mathrm { mh } & \
\text { Direct material cost } & \$ 3700 & \$ 2600 \
\text { Direct labour cost } & \$ 800 & \$ 1900
\end{array}$$ 
Required:
a.Compute the manufacturing overhead allocation rate for each department.
b.Compute the total cost of Job #846.
c.Provide possible reasons why Crows Nest Manufacturing uses two different cost-allocation rates.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.Machining Department cost-allocation r

Question 12

Equivalent units in beginning work in process + equivalent units of work done in the current period equals equivalent units completed and transferred out in the current period minus equivalent units in ending work in process.

Accepted Answer

A) True 
 B)False

Question 13

What is the difference between a weighted-average method of process costing and a first-in,first-out method of process costing?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The weighted-average method computes uni

Question 14

Indirect manufacturing costs should be allocated equally to each job.

Accepted Answer

A) True 
 B)False

Question 15

Woods Golf Company sells a special putter for $20 each.In March,it sold 28 000 putters while manufacturing 30 000.There was no beginning inventory on March 1.Production information for March was:$\begin{array}{lr}
\text { Direct manufacturing labour per unit } & 15 \text { minutes } \
\text { Fixed selling and administrative costs } & \$ 40000 \
\text { Fixed manufacturing overhead } & 132000\
\text { Direct materials cost per unit } & 2 \
\text { Direct manufacturing labour per hour } & 24 \
\text { Variable manufacturing overhead per unit } & 4 \
\text { Variable slling expenses per unit } & 2
\end{array}$

a. Compute the cost per unit under both absorption and variable costing.
b. Compute the ending inventories under both absorption and variable costing.
c. Compute operating profit under both absorption and variable costing.

Accepted Answer

The answer of Woods Golf Company sells a special putter...

Question 16

Surf Products Company uses an automated process to clean and polish its souvenir items.For March,the company had the following activities:
 $$\begin{array} { | l | r | } 
\hline \text { Beginning work-in-process inventory } &  3 0 0 0 \text { items, 1/3 complete } \
\hline \text { Units placed in production } & 12000 \text { units } \
\hline \text { Units completed } & \text { 9000 units } \
\hline \text { Ending work-in-process inventory } & 6000 \text { items, 1/2 complete } \
\hline & \
\hline \text { Cost of beginning work in process } & \$ 2500 \
\hline \text { Direct material costs, current } & \$ 9000 \
\hline \text { Conversion costs, curent } &\$ 7 7 0 0  \
\hline
\end{array}$$ 
Direct materials are placed into production at the beginning of the process and conversion costs are incurred evenly throughout the process.
Required:
Prepare a production cost worksheet using the FIFO method.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

PRODUCTION

Question 17

Answer the following questions using the information below:
The Sleepyhead Chair Company manufactures a standard recliner.During February,the firm's Assembly Department started production of 75 000 chairs.During the month,the firm completed 85 000 chairs and transferred them to the Finishing Department.The firm ended the month with 10 000 chairs in ending inventory.All direct materials costs are added at the beginning of the production cycle.Weighted-average costing is used by Sleepyhead.
-Mt.Iron Steel processes a single type of steel.For the current period the following information is given:
$$\begin{array} { | l | r | r | r | } 
\hline & \text { Units } & \text { Material Costs } & \text { Conversion Costs } \
\hline \text { Beginning Inventory } & 3000 & \$ 4500 & \$ 5400 \
\hline \text { Started During the Current Period } & 20000 &  3 2 0 0 0 & 7 8 0 200 \
\hline \text { Ending Inventory } &2 5 0 0& & \
\hline
\end{array}$$
All materials are added at the beginning of the production process.The beginning inventory was 40% complete as to conversion,while the ending inventory was 30% completed for conversion purposes.
Weighty uses the weighted-average costing method.
What is the total cost assigned to the units completed and transferred this period?

Accepted Answer

A) $120 100 
B) $107 010 
C) $113 160 
D) $109 440 
A) $120 100 
B) $107 010 
C) $113 160 
D) $109 440

Question 18

A production cost worksheet is used to calculate output in terms of equivalent units,summarise total costs to account for,and compute cost per equivalent unit.

Accepted Answer

A) True 
 B)False

Question 19

Answer the following questions using the information below:
The Townsend Tractor Company manufactures small garden tractors on a highly automated assembly line.Its costing system uses two cost categories,direct materials and conversion costs.Each tractor must pass through the Assembly Department and the Testing Department.Direct materials are added at the beginning of the production process.
Conversion costs are allocated evenly throughout production.Townsend Tractor uses weighted-average costing.
Data for the Assembly Department for April 2018 are:
  
-What is the direct materials cost per equivalent unit during April?

Accepted Answer

A) $1241.94 
B) $1250.00 
C) $575.00 
D) $581.25 
A) $1241.94 
B) $1250.00 
C) $575.00 
D) $581.25

Question 20

The production costs of a job are available much earlier under a(n)______________ costing system.

Accepted Answer

A) actual 
B) target 
C) normal 
D) costing 
A) actual 
B) target 
C) normal 
D) costing

Variable costing includes all variable costs-both manufacturing and nonmanufacturing-in inventory.

Absorption costing is required by GAAP (Generally Accepted Accounting Principles)for external reporting.

To smooth fluctuating levels of output,separate indirect-cost rates should be calculated for each month.

The last step in a process-costing system is to determine the equivalent units for the period.

Why does the manufacturing overhead control account (debit)need to equal the manufacturing overhead allocated account (credit)? _ _

Annual cost rates are preferred over actual cost rates for all of the following reasons EXCEPT:

Which of the following statements is FALSE?

An assumption of the FIFO process-costing method is that:

Equivalent units in beginning work in process + equivalent units of work done in the current period equals equivalent units completed and transferred out in the current period minus equivalent units in ending work in process.

What is the difference between a weighted-average method of process costing and a first-in,first-out method of process costing? _ _

Indirect manufacturing costs should be allocated equally to each job.

A production cost worksheet is used to calculate output in terms of equivalent units,summarise total costs to account for,and compute cost per equivalent unit.

The production costs of a job are available much earlier under a(n)______________ costing system.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

Exam 6: Estimating the Costs of Products and Inventory

Variable costing includes all variable costs-both manufacturing and nonmanufacturing-in inventory.

Absorption costing is required by GAAP (Generally Accepted Accounting Principles)for external reporting.

To smooth fluctuating levels of output,separate indirect-cost rates should be calculated for each month.

The last step in a process-costing system is to determine the equivalent units for the period.

Annual cost rates are preferred over actual cost rates for all of the following reasons EXCEPT:

Which of the following statements is FALSE?

An assumption of the FIFO process-costing method is that:

Equivalent units in beginning work in process + equivalent units of work done in the current period equals equivalent units completed and transferred out in the current period minus equivalent units in ending work in process.

Indirect manufacturing costs should be allocated equally to each job.

A production cost worksheet is used to calculate output in terms of equivalent units,summarise total costs to account for,and compute cost per equivalent unit.

The production costs of a job are available much earlier under a(n)______________ costing system.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters