Exam 19: Cost Concepts and Cost Allocation

Product unit cost is computed by dividing cost of goods sold by the number of units sold.

The presentation of merchandise inventory and cost of goods sold in the financial statements of merchandising companies most nearly resembles the presentation of __________ inventory and cost of goods sold in the financial statements of manufacturing companies.

Property taxes and equipment depreciation are examples of indirect manufacturing costs.

Prime costs consist of

If Company G uses an overhead rate of $3.50 per direct labor dollar, and 63,500 hours of direct labor at $9.00 per hour are actually incurred, $222,250 of overhead costs are allocated for that period.

Job 29 consists of 300 units and has total manufacturing costs of direct materials, $4,500; direct labor, $7,500; and overhead, $3,600. a. What is the unit product cost? b. What are the prime costs per unit? c. What are the conversion costs per unit?

At the end of an accounting period, the balance in the Finished Goods Inventory account is made up of the costs of products completed but not sold as of that date.

An understated cost driver level will cause an understatement of the predetermined overhead rate.

Accounting personnel utilize estimates when deriving product unit costs in order to determine product pricing.

At the beginning of 2010, Zuir Company's accounting department calculated the following estimates for the coming year's production: Estimated overhead \ 441,600 Direct labor hours 9,200 During the year, Zuir Company experienced $440,000 in actual overhead costs and actually worked 9,100 direct labor hours. Zuir applies overhead to production using a predetermined overhead rate based on direct labor hours. a. Calculate the predetermined overhead rate Zuir uses to apply overhead. (Show your computations.) b. By what amount was overhead over- or underapplied for 2010? (Show your computations.) c. Assuming the amount of over- or underapplied overhead is not significant, will the Cost of Goods Sold account be increased or decreased to correct the application of overhead?

The Sorrel Pharmaceuticals Corporation manufactures a variety of drugs that are marketed internationally. Inventories on May 31 and June 30 were as follows: May 31 June 30 Materials Inventory \ 354,100 \ 327,400 Work in Process Inventory 112,600 116,400 Finished Goods Inventory 138,500 142,800 Purchases of materials for June were $142,600. Direct labor costs were incurred and computed on the basis of 27,000 hours at $8 per hour. Actual overhead costs incurred in June were as follows: operating supplies used, $5,700; janitorial and materials handling labor, $38,100; employee benefits, $110,800; heat, light, and power, $50,000; factory depreciation, $8,400; property taxes, $8,000; and expired portion of insurance premiums, $12,000. Net sales for June were $992,700. Selling and administrative expenses were $165,000. Prepare a statement of cost of goods manufactured for the month ended June 30.

The amount for cost of goods manufactured should be the same as the amount transferred from the Work in Process Inventory account to the Finished Goods Inventory account during the year.

When the amount of underapplied or overapplied overhead is small, it usually is written off to

Which of the following is a collection of overhead costs related to a cost object?

The costs of marketing and delivering a product are not included in its inventory valuation.

Another term for product cost is

The two primary types of cost behavior are fixed and variable.

Materials costs flow from the Materials Inventory to the Work in Process Inventory to the Cost of Goods Sold account.

Which of the following is not included in the purchase cost of merchandise inventory?

Period costs are consumed entirely in the current reporting period.