Managerial Accounting- Online
EXAM I - Chapters 1, 2, 3 & 4
Name:___________________________
Multiple Choice: Indicate the answer that best completes the opening statement.
1. Cost of goods manufactured during a period is obtained by taking the total manufacturing costs incurred during the period and adding and subtracting the following inventories.
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Adding
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Subtracting
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a. Beginning work in process inventory
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Ending work in process inventory
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b. Beginning work in process inventory
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Ending finished goods inventory
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c. Beginning raw materials inventory
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Ending finished goods inventory
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d. Beginning finished goods inventory
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Ending finished goods inventory
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2. Raw materials that can be physically and conveniently associated with the finished product are called
a. indirect materials.
b. direct materials.
c. conversion costs.
d. finished materials.
3. Which one of the following would NOT be classified as a component of conversion costs?
a. Indirect materials
b. Direct labor
c. Indirect labor
d. Direct materials
4. In a process cost system, equivalent units of production are the
a. units completed and transferred to finished goods.
b. units that are transferred to the next processing department.
c. work done on physical units expressed in fully completed units.
d. units that are incomplete at the end of a period.
Use the following information for questions 5 and 6.
In the month of April, a department had 500 units in the beginning work in process inventory that were 60% complete. These units had $4,000 of materials cost and $3,000 of conversion costs. Materials are added at the beginning of the process and conversion costs are added uniformly throughout the process. During April, 10,000 units were completed and transferred to the finished goods inventory and there were 2,000 units that were 25% complete in the ending work in process inventory on April 30. During April, manufacturing costs charged to the department were: Materials $92,000; Conversion costs $102,000.
5. The cost assigned to the units transferred to finished goods during April was
a. $171,000.
b. $180,000.
c. $187,000.
d. $170,000.
6. The cost assigned to the units in the ending work in process inventory on April 30 was
a. $36,000.
b. $21,000.
c. $16,000.
d. $31,000.
7. An appropriate cost driver for ordering and receiving materials cost is the
a. direct labor hours.
b. machine hours.
c. number of purchase orders.
d. number of parts.
8. Benefits of activity-based costing include all of the following except
a. more accurate product costing.
b. fewer cost pools used to assign overhead costs to products.
c. enhanced control over overhead costs.
d. better management decisions.
9. An example of a value-added activity in a manufacturing operation is
a. machine repair.
b. engineering design.
c. building maintenance.
d. inventory control.
10. Assigning manufacturing costs to work in process results in credits to all of the following accounts except
a. Work in Process Inventory.
b. Manufacturing Overhead.
c. Raw Materials Inventory.
d. Factory Labor.
PART II (20 Points) — Cost of Goods Manufactured and Sold
Selected account balances of Downing Manufacturing Company appear below for the current year:
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Beginning of Year
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End of Year
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Finished Goods Inventory
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$25,000
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$ 32,000
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Work In Process Inventory
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30,000
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35,000
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Raw Materials Inventory
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46,000
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26,000
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Sales
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380,000
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Direct Labor
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45,000
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Factory Supervisory Salaries
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18,000
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Income Tax Expense
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25,000
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Factory Insurance
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12,000
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Raw Material Purchases
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75,000
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Administrative Expenses
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17,000
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Sales Returns and Allowances
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15,000
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Factory Depreciation
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22,000
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Indirect Labor
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11,000
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Selling Expenses
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35,000
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Instructions
Using the above information for Downing Manufacturing Company, answer the following questions. Support your answers with clearly identified computations.
1. What was the amount of direct materials used in production?
2. What was the total conversion costs incurred?
3. What was the cost of goods manufactured?
4. What was the cost of goods sold?
5. What was the amount of net income?
PART III (20 Points) — Job Order Cost Accounting
Wilkins Manufacturing uses a job order cost accounting system. On December 1, the company has a balance in Work in Process Inventory of $5,500 and two jobs in process: Job No. 429, $3,000 and Job No. 430, $2,500. During December, a summary of source documents reveals the following:
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For
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Materials Requisition Slips
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Labor Time Tickets
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Job No. 429
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$ 3,200
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$ 4,100
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Job No. 430
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2,600
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3,400
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Job No. 431
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3,400
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4,200
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Job No. 432
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3,000
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4,000
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General Use
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1,000
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1,500
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$13,200
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$17,200
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Wilkins Manufacturing applies manufacturing overhead to jobs at an overhead rate of 70% of direct labor cost. Job No. 429 is completed during the month.
Instructions
Prepare summary journal entries to record the requisition slips, time tickets, the assignment of manufacturing overhead to jobs, and the completion of Job No. 429. Show computations.
(b) Answer the following questions.
1. What is the balance in Work in Process Inventory at December 31?
2. If Wilkins Manufacturing incurred $6,000 of manufacturing overhead in addition to indirect materials and indirect labor, was overhead over- or underapplied in December and by how much?
3. Without regard to your answer in (2) above, assume manufacturing overhead was underapplied in December. How would this amount be reported in the company's financial statements at December 31?
PART IV (25 Points) — Process Cost Accounting
The Painting Department of the Garner Manufacturing Company has the following production and manufacturing cost data for September.
Production: Beginning inventory 4,000 units; units started into production 16,000; ending inventory of 5,000 units 20% complete as to conversion costs.
Manufacturing Costs: Beginning work in process inventory of $80,000, comprised of $49,000 of materials and $31,000 of conversion costs. Materials added during the month, $231,000; labor and overhead applied during the month, $94,400 and $50,600, respectively.
Instructions
(a) Compute the equivalent units of production for materials and conversion costs for the month of September.
(b) Compute the unit costs for materials and conversion costs.
(c) Determine the costs to be assigned to the units transferred out and ending work in process.
PART V (15 Points) — Activity-Based Costing
Modine Manufacturing Company manufactures two products: radiators and gas tanks. During March, 200 radiators and 400 gas tanks were produced and overhead costs of $54,000 were incurred. The following information related to overhead costs was available:
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Activity
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Cost Driver
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Total Cost
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Materials handling
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Number of requisitions
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$20,000
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Machine setup
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Number of setups
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18,000
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Quality inspections
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Number of inspections
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16,000
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The cost driver volume for each product was as follows:
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Cost Driver
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Radiators
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Gas Tanks
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Total
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Number of requisitions
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600
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400
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1,000
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Number of setups
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120
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180
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300
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Number of inspections
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190
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210
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400
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Instructions
(a) Compute the overhead rate for each activity.
(b) Assign the manufacturing overhead costs for March to the two products using activity-based costing and show manufacturing overhead cost per unit for Radiators and Gas Tanks.