E 1. The tiein between general accounts and cost accounts is often discussed with accounting procedures. An example of a general account is:
A. Materials
B. Work in Process
C. Factory Overhead Control
D. Finished Goods
E. Accumulated Depreciation
C 2. One feature of a standard cost system is that:
A. selection of the cost unit becomes simplified
B. predetermined amounts are ignored
C. an analysis of cost variances is facilitated
D. historical costs are recorded as they are incurred
E. reports are delayed until operations have been performed
A 3. An industry that would most likely use job order costing procedures is:
A. road building
B. fertilizer manufacturing
C. flour milling
D. petroleum refining
E. textile manufacturing
D 4. An industry that would most likely use process costing procedures is:
A. musical instrument manufacturing
B. construction
C. aircraft
D. chemicals
E. office equipment
A 5. Supplies needed for use in the factory are issued on the basis of:
A. materials requisitions
B. time tickets
C. factory overhead analysis sheets
D. clock cards
E. purchase invoices
D 6. Finished Goods is debited and Work in Process is credited for a:
A. transfer of materials to the factory
B. return of unused materials from the factory
C. purchase of goods on account
D. transfer of completed production
E. transfer of completed goods out of the factory
B 7. The best cost accumulation procedure to use when many batches, each differing as to product specifications, are produced is:
A. absorption
B. job order
C. process
D. actual
E. standard
A 8. Job order costs are most useful for:
A. determining the cost of a specific project
B. determining the labor cost involved in production
C. determining inventory valuation using lifo
D. estimating overhead costs
E. controlling indirect costs of future production
E 9. Under a job order cost system, the dollar amount of the entry to transfer the inventory from Finished Goods to Cost of Goods Sold is the sum of the costs charged to all jobs:
A. completed during the period
B. started in process during the period
C. in process during the period
D. completed and sold during the period
E. sold during the period
A 10. The industry most likely to use job order costing in accounting for costs is:
A. accounting firms
B. textile manufacturer
C. paint manufacturer
D. oil refinery
E. none of the above
A 11. Job order cost accounting systems and process accounting systems differ in the way:
A. costs are traced to cost objects
B. orders are taken and in the number of units in the orders
C. product profitability is determined and compared with planned costs
D. manufacturing processes can be accomplished and in the number of production runs that may be performed in a year
E. none of the above
D 12. In a job order cost system, the distribution of direct labor costs usually are recorded as an increase in:
A. Cost of Goods Sold
B. Factory Overhead Control
C. Finished Goods
D. Work in Process
E. none of the above
C 13. Process costing techniques should be used in assigning costs to products:
A. if the product is manufactured on the basis of each order received
B. when production is only partially completed during the accounting period
C. if the product is composed of massproduced homogeneous units
D. whenever standard costing techniques should not be used
E. none of the above
A 14. A characteristic of a process costing system is:
A. partially processed inventory is restated in terms of completed units
B. costs are accumulated by order
C. it is used by a company manufacturing custom machinery
D. standard costs are not applicable
E. none of the above
C 15. The industry most likely to use process costing in accounting for costs is:
A. road builder
B. electrical contractor
C. airlines
D. automobile repair shop
E. none of the above
B 16. In the computation of manufacturing cost per equivalent unit, the weighted average method of process costing considers:
A. current costs only
B. current costs plus cost of beginning work in process inventory
C. current costs plus cost of ending work in process inventory
D. current costs less cost of beginning work in process inventory
E. none of the above
B 17. The element of manufacturing cost that supports time tickets is:
A. materials
B. labor
C. factory overhead
D. all of the above
E. none of the above
C 18. The element of manufacturing cost that supports depreciation schedules is:
A. materials
B. labor
C. factory overhead
D. all of the above
E. none of the above
D 19. Work in Process is debited and Materials is credited for:
A. indirect materials requisitioned to production
B. the completion of work in process
C. the sale of completed product
D. direct materials requisitioned to production
E. materials returned to the storeroom
E 20. Factory Overhead Control is debited and Work in Process is credited for:
A. indirect materials requisitioned to production
B. the completion of work in process
C. the sale of completed product
D. direct materials requisitioned to production
E. none of the above
A 21. Products, operations, and processes costed on the basis of predetermined quantities of resources to be used and predetermined prices of those resources are distinguishing characteristics of which:
A. standard cost system
B. historical cost system
C. process cost system
D. job order cost system
E. backflush cost system
D 22. The tax requirement that certain purchasing and storage costs be allocated to inventory is known as:
A. backflush costing
B. postdeduction
C. justintime
D. super absorption
E. none of the above
C 23. The manufacturing systems characterized by short setup times, moderate to low lead times, and very low direct labor cost is:
A. manual systems
B. fixed automation systems
C. flexible manufacturing systems
D. process cost systems
E. job order cost systems
E 24. The cost accounting system noted for its lack of detailed tracking of work in process during the accounting period is:
A. process costing
B. job order costing
C. standard costing
D. actual costing
E. backflush costing
D 25. Ziffel Company had the following account balances and results from operations for the month of July: direct materials consumed, $10,400; direct labor, $8,000; factory overhead, $8,800; July 1, work in process inventory, $2,400; July 31, work in process inventory, $1,800; finished goods inventory, July 1, $1,200; finished goods inventory, July 31, $1,000. The total manufacturing cost for the month of July was:
A. $27,800
B. $28,000
C. $18,400
D. $27,200
E. none of the above
SUPPORTING CALCULATION: $10,400 + $8,000 + $8,800 = $27,200
C 26. Ziffel Company had the following account balances and results from operations for the month of July: direct materials consumed, $10,400; direct labor, $8,000; factory overhead, $8,800; July 1, work in process inventory, $2,400; July 31, work in process inventory, $1,800; finished goods inventory, July 1, $1,200; finished goods inventory, July 31, $1,000. The cost of goods manufactured was:
A. $27,200
B. $28,000
C. $27,800
D. $26,600
E. none of the above
SUPPORTING CALCULATION: $27,200 + $2,400 - $1,800 = $27,800
B 27. Ziffel Company had the following account balances and results from operations for the month of July: direct materials consumed, $10,400; direct labor, $8,000; factory overhead, $8,800; July 1, work in process inventory, $2,400; July 31, work in process inventory, $1,800; finished goods inventory, July 1, $1,200; finished goods inventory, July 31, $1,000. The cost of goods sold was:
A. $27,200
B. $28,000
C. $27,800
D. $27,600
E. none of the above
SUPPORTING CALCULATION: $27,800 + $1,200 - $1,000 = $28,000
A 28. A cost system where only the variable manufacturing costs are allocated to production is:
A. direct costing
B. prime costing
C. absorption costing
D. standard costing
E. none of the above
D 29. A cost system where all manufacturing cost elements are allocated to production is:
A. direct costing
B. prime costing
C. standard costing
D. full absorption costing
E. none of the above
C 30. A cost system where only direct material and direct labor costs are allocated to production is:
A. direct costing
B. standard costing
C. prime costing
D. full absorption costing
E. none of the above
B 31. The manufacturing systems that are characterized by very high setup times, moderate lead times, and high direct labor cost are:
A. flexible manufacturing systems
B. fixed automation systems
C. manual systems
D. backflush systems
E. none of the above
PROBLEMS
PROBLEM
1.
Computation of Total Manufacturing Cost, Cost of Goods Manufactured, and Cost of Goods Sold. During the past year, the Rocco Company incurred these costs: direct labor, $2,500,000; factory overhead, $4,000,000; and direct materials purchases, $1,500,000. Inventories were costed as follows:
Beginning Ending
Finished goods $250,000 $300,000
Work in process 450,000 550,000
Materials 75,000 125,000
Required:
(1) Calculate total manufacturing cost for the year.
(2) Calculate the cost of goods manufactured for the year.
(3) Calculate the cost of goods sold for the year.
SOLUTION
(1) Direct materials:
Materials inventory, beginning $ 75,000
Purchases 1,500,000
Materials available for use $ 1,575,000
Less raw materials inventory, ending 125,000
Direct materials consumed $ 1,450,000
Direct labor 2,500,000
Factory overhead 4,000,000
Total manufacturing costs $ 7,950,000
(2) Total manufacturing costs [from (1)] $ 7,950,000
Add work in process inventory, beginning 450,000
$ 8,400,000
Less work in process inventory, ending 550,000
Cost of goods manufactured $ 7,850,000
(3) Cost of goods manufactured [from (2)] $ 7,850,000
Add finished goods inventory, beginning 250,000
Cost of goods available for sale $ 8,100,000
Less finished goods inventory, ending 300,000
Cost of goods sold $ 7,800,000
PROBLEM
2.
Journal Entries for the Cost Accounting Cycle. On January 1, the ledger of the Phinney Furniture Company contained, among other accounts, the following: Finished Goods, $25,000; Work in Process, $30,000; Materials, $15,000. During January, the following transactions were completed:
(a) Materials were purchased at a cost of $28,000.
(b) Direct materials in the amount of $21,000 were issued from the storeroom.
(c) Storeroom requisitions for indirect materials and supplies amounted to $3,200.
(d) The total payroll for January amounted to $31,000, including marketing salaries of $7,500 and administrative salaries of $5,500. Labor time tickets show that $15,500 of the labor cost was direct labor.
(e) Various factory overhead costs were incurred for $12,000 on account.
(f) Total factory overhead is charged to the work in process account.
(g) Cost of production completed in January totaled $58,000, and finished goods in the shipping room on January 31 totaled $18,000.
(h) Customers to whom shipments were made during the month were billed for $88,000. (Also record entry for cost of goods sold.)
Required: Prepare journal entries for the transactions, including the recording, payment, and distribution of the payroll.
SOLUTION
(a) Materials 28,000
Accounts Payable 28,000
(b) Work in Process 21,000
Materials 21,000
(c) Factory Overhead Control 3,200
Materials 3,200
(d) Payroll 31,000
Accrued Payroll 31,000
Accrued Payroll 31,000
Cash 31,000
Work in Process 15,500
Factory Overhead Control 2,500
Marketing Expenses Control 7,500
Administrative Expenses Control 5,500
Payroll 31,000
(e) Factory Overhead Control 12,000
Accounts Payable 12,000
(f) Work in Process 17,700
Factory Overhead Control 17,700
(g) Finished Goods 58,000
Work in Process 58,000
(h) Accounts Receivable 88,000
Sales 88,000
Cost of Goods Sold (25,000 + 58,000 18,000) 65,000
Finished Goods 65,000
PROBLEM
3.
Cost of Goods Manufactured Statement. Cuervo Company manufacturers file cabinets made to consumer specifications. The following information was available at the beginning of March:
Materials inventory $12,800
Work in process inventory 4,700
Finished goods inventory 2,300
During March, materials costing $26,000 were purchased, direct labor cost totaled $19,300, and factory overhead was $12,500 (including $2,500 of indirect materials). March 31 inventories were:
Materials inventory $13,300
Work in process inventory 6,800
Finished goods inventory 2,800
Required: Prepare a cost of goods manufactured statement for March, 19--. (AICPA adapted)
SOLUTION
Cuervo Company
Cost of Goods Manufactured Statement
For the Month Ended March 31, 19--
Direct materials:
Materials inventory, March 1 $ 12,800
Purchases 26,000
Materials available for use $ 38,800
Less: Indirect materials used $ 2,500
Materials inventory, March 31 13,300 15,800
Direct materials consumed $ 23,000
Direct labor 19,300
Factory overhead 12,500
Total manufacturing cost $ 54,800
Add work in process inventory, March 1 4,700
$ 59,500
Less work in process inventory, March 31 6,800
Cost of goods manufactured $ 52,700
PROBLEM
4.
Income Statement Relationships. The following data are available for three companies at the end of their fiscal years:
Company Alpha:
Finished goods, April 1 $ 400,000
Cost of goods manufactured 2,600,000
Sales 3,500,000
Gross profit on sales 35%
Finished goods inventory, March 31 ?
Company Beta:
Freight in $ 12,000
Purchases returns and allowances 22,000
Marketing expense 85,000
Finished goods, December 31 65,000
Cost of goods sold 550,000
Cost of goods available for sale ?
Company Chi:
Gross profit $ 264,000
Cost of goods manufactured 612,000
Finished goods, January 1 34,000
Finished goods, December 31 26,000
Work in process, January 1 18,000
Work in process, December 31 12,000
Sales ?
Required: Determine the amounts indicated by the question marks. (AICPA adapted)
SOLUTION
Company Alpha:
Sales $ 3,500,000
Cost of goods sold:
Finished goods inventory, April 1 $ 400,000
Cost of goods manufactured 2,600,000
Cost of goods available for sale $ 3,000,000
Finished goods inventory, March 31 725,000
Less cost of goods sold 2,275,000
Gross profit (20% of sales) $ 1,225,000
Company Beta:
Cost of goods available for sale $ 615,000
Less finished goods ending inventory 65,000
Cost of goods sold $ 550,000
Company Chi:
Sales $ 884,000
Cost of goods sold:
Cost of goods manufactured $ 612,000
Add beginning finished goods inventory 34,000
Cost of goods available for sale $ 646,000
Less ending finished goods inventory 26,000
Less cost of goods sold 620,000
Gross profit $ 264,000
PROBLEM
5.
Cost of Goods Manufactured; Prime and Conversion Costs. Wyoming Company's purchases of materials during June totaled $25,000, and the cost of goods sold for June was $130,000. Factory overhead was 200% of direct labor cost. Other information pertaining to Wyoming Company's inventories and production for June is as follows:
Inventories Beginning Ending
Finished goods $42,500 $39,000
Work in process 15,500 17,000
Materials 5,000 8,500
Required:
(1) Prepare a schedule of cost of goods manufactured.
(2) Compute the prime cost charged to Work in Process.
(3) Compute the conversion cost charged to Work in Process. (AICPA adapted)
SOLUTION
(1) Wyoming Company
Schedule of Cost of Goods Manufactured
For Month Ended June 30, 19--
Work in process, June 1 $ 15,500
Production costs:
Direct materials 21,500 **
Direct labor 35,500
Factory overhead 71,000 128,000
$ 143,500
Less work in process, June 30 17,000
Cost of goods manufactured $ 126,500 *
Let x = direct labor
3x = $106,500
x = $35,500 direct labor
2x = $71,000 factory overhead
(2) Prime cost:
Direct materials [from (1)] $ 21,500
Direct labor [from (1)] 35,500
$ 57,000
(3) Conversion cost:
Direct labor [from (1)] $ 35,500
Factory overhead [from (1)] 71,000
$ 106,500 ***
* Cost of goods sold ($130,000) + ending finished goods inventory ($39,000) - beginning finished goods inventory ($42,500) = $126,500.
** Purchases of materials during June ($25,000) + beginning materials inventory ($5,000) - ending materials inventory ($8,500) = $21,500.
*** Production costs for June ($128,000) - direct materials ($21,500) = direct labor and factory overhead ($106,500).
PROBLEM
6.
Cost of Goods Manufactured and Sold. For May, Jimbo Inc. had cost of goods manufactured equal to $90,000; direct materials used $30,000; cost of goods sold, $100,000; direct labor, $38,000; purchases of materials, $40,000; cost of goods available for sale, $125,000; and total factory labor, $48,000. Work in process was $25,000 on May 1 and $15,000 on May 31. The company uses a single materials account for direct and indirect materials.
Required: Prepare the following:
(1) A cost of goods sold statement. For brevity, show single-line items for factory overhead and direct materials used.
(2) Summary general journal entries to record:
(a) purchase of materials on account
(b) use of materials, including direct materials of 1,000
(c) accrual of factory payroll, including indirect labor of $10,000 (use a payroll clearing account)
(d) distribution of factory labor cost
(e) transfer of completed work to finished goods
(f) sales on account, at a markup equal to 100% of production cost
SOLUTION
(1) Jimbo Inc.
Cost of Goods Sold Statement
For Month Ended May 31, 19--
(in thousands)
Direct materials consumed $ 30
Direct labor 38
Factory overhead 12
Total manufacturing cost [Note (a)] $ 80
Add work in process inventory, May 1 25
$ 105
Less work in process inventory, May 31 15
Cost of goods manufactured $ 90
Add finished goods inventory, May 1 [Note (b)] 35
Cost of goods available for sale $ 125
Less finished goods inventory, May 31 [Note (c)] 25
Cost of goods sold $ 100
Note (a): Cost of goods manufactured $ 90
Add work in process, ending 15
$ 105
Less work in process, beginning 25
Equals total manufacturing cost $ 80
Note (b): Cost of goods available for sale $ 125
Less cost of goods manufactured 90
Equals finished goods, beginning $ 35
Note (c): Cost of goods available for sale $ 125
Less cost of goods sold 100
Equals finished goods, ending $ 25
(2)
(a) Materials 40,000
Accounts Payable 40,000
(b) Work in Process 30,000
Factory Overhead Control 1,000
Materials 31,000
(c) Payroll ($38,000 + $10,000) 48,000
Accrued Payroll 48,000
(d) Work in Process 38,000
Factory Overhead Control 10,000
Payroll 48,000
(e) Finished Goods 90,000
Work in Process 90,000
(f) Accounts Receivable 200,000
Sales [$100,000 + (100% of $100,000)] 200,000
Cost of Goods Sold 100,000
Finished Goods 100,000
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