Question 1

Which of the following is a valid reason for using variable costing?

Accepted Answer

A)   Fixed production cost should be ignored when costing units of inventory since it is not essential to the production process.
B)   Absorption costing recognizes fixed costs as expense regardless of volume of production.
C)   Absorption costing may motivate managers to overproduce in order to increase profits.
D)   Under variable costing managers can increase profitability by increasing the volume of production.E) B) and C)
F) C) and D)

Question 2

Company X manufactures 3-ring notebooks.All of the following are considered indirect costs except:

Accepted Answer

A)   cardboard used in production of the notebooks.
B)   depreciation on manufacturing equipment.
C)   factory utilities.
D)   salaries for production supervisors.E) A) and D)
F) All of the above

Question 3

Pinkston Company completed 12,000 units of product at a total cost of $28,000.The recording of the product completed would include a decrease to:

Accepted Answer

A)   Manufacturing Overhead.
B)   Cost of Goods Manufactured.
C)   Finished Goods Inventory.
D)   Work In Process Inventory.E) None of the above
F) C) and D)

Question 4

The Work in Process inventory account is debited when raw materials are placed into production.

Accepted Answer

A) True 
 B)False

Question 5

Lewes Company produced 8,000 units of inventory and sold 6,000.The company incurred the following production costs: Variable manufacturing cost: $12.00 per unit
Fixed manufacturing overhead cost: $60,000
Assuming the company sells its product at a price of $25 per unit,and incurred $10,000 in selling and administrative cost,what is the amount of net income under variable costing?

Accepted Answer

A)   $107,000
B)   $68,000
C)   $23,000
D)   $8,000E) B) and C)
F) C) and D)

Question 6

Redmond Manufacturing Company began operations on January 1.The Company was affected by the following events during its first year of operation:
a)Company issued stock to owners for $100,000 cash.
b)Purchased materials,$8,000 for cash.
c)Transferred $4,000 of direct materials to production (Job #1: $3,000;Job #2: $1,000).
d)Paid direct labor costs,$5,000 (Job #1: $2,500;Job #2: $2,500).
e)Paid $3,000 cash for various actual overhead costs.
f)Allocated overhead to work in process at 60% of direct labor cost.
g)Completed Job #1 and transferred it to Finished Goods.
h)Sold Job #1 for $8,400 cash.
i)Paid $200 cash for selling and administrative expenses.
Required:
1)Record the above events in the T-accounts provided.Label your transactions (a)- (i).
2)Determine the ending balance in the work in process account.
3)Prepare a schedule of cost of goods manufactured and sold.
4)Compute the amount of gross profit earned on Job #1.

Accepted Answer

Answers will vary
1)Posted T-accounts:

...

Question 7

Select the incorrect statement regarding service companies.

Accepted Answer

A)   Service companies do not maintain a Finished Goods Inventory account.
B)   Service companies accumulate their service costs in a Work in Process Inventory account similar to manufacturers.
C)   Service companies may have raw material costs.
D)   Understanding the cost of providing a service is just as important as knowing the cost of making a product.E) None of the above
F) A) and B)

Question 8

In which account is the actual amount of costs such as factory utilities and maintenance initially recorded?

Accepted Answer

A)   Work in Process Inventory
B)   Manufacturing Overhead
C)   Raw Materials Inventory
D)   Supplies InventoryE) A) and B)
F) All of the above

Question 9

Paying for factory utilities used during the current month is a(n) :

Accepted Answer

A)   asset exchange transaction.
B)   asset use transaction.
C)   asset source transaction.
D)   claims exchange transaction.E) All of the above
F) None of the above

Question 10

Burke Company produced 8,000 units of inventory and sold 6,000 of them.The company incurred the following production costs: Variable manufacturing cost: $6.00 per unit
Fixed manufacturing overhead cost: $24,000
Assuming the company sells its product at a price of $15 per unit,and incurred $10,000 in selling and administrative costs,what is the amount of net income under absorption costing?

Accepted Answer

A)   $38,000
B)   $14,000
C)   $24,000
D)   $26,000E) All of the above
F) A) and B)

Question 11

Hutton Company reported a $750 unfavorable overhead variance on a recent performance report.This means that factory overhead was underapplied during the period.

Accepted Answer

A) True 
 B)False

Question 12

Most companies initially record the cost of materials acquired in the Raw Materials Inventory account.

Accepted Answer

A) True 
 B)False

Question 13

Kelly Company's manufacturing overhead costs totaled $2,871,400 during the year.At the end of the year,manufacturing overhead had been underapplied by $5,310.As a result:

Accepted Answer

A)   cost of goods sold increases.
B)   manufacturing overhead increases.
C)   cost of goods sold decreases.
D)   none of these.E) B) and C)
F) A) and B)

Question 14

Service companies generally do not have Work in Process and Finished Goods inventory accounts.

Accepted Answer

A) True 
 B)False

Question 15

The reporting method that includes in the cost of inventory (and cost of goods sold) all product costs,including both fixed and variable costs is known as:

Accepted Answer

A)   variable costing.
B)   total costing.
C)   direct costing.
D)   absorption costing.E) None of the above
F) A) and B)

Question 16

Orlando Company paid $100 cash to purchase production supplies.How does this transaction affect the financial statements?   Assets = Liab. + Equity  Rev. − Exp. = Net Inc.  Cash + Prod.  Supplies \begin{array}{|c|c|c|c|c|c|c|c|c|c|}\hline {	ext { Assets }} & = & 	ext { Liab. } & + & 	ext { Equity } & 	ext { Rev. } & - & 	ext { Exp. } & = & 	ext { Net Inc. } \\hline \begin{array}{l|c|c}	ext { Cash } & + & 	ext { Prod. } \&&	ext { Supplies } \\end{array} & & & & & & & & & \\hline\end{array} Assets  Cash ​+​ Prod.  Supplies ​​=​ Liab. ​+​ Equity ​ Rev. ​−​ Exp. ​=​ Net Inc. ​​

Accepted Answer

A)   (100) +NA=NA+(100) NA−100=(100) \begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|}\hline (100) &+&NA &=&NA&+&(100) &NA&-&100&=&(100) \\hline\end{array}(100) ​+​NA​=​NA​+​(100) ​NA​−​100​=​(100) ​​ 
B)   NA+100=100+NANA−NA=NA\begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|}\hline NA&+&100&=&100&+&NA&NA&-&NA&=&NA\\hline\end{array}NA​+​100​=​100​+​NA​NA​−​NA​=​NA​​ 
C)   (100) +100=NA+NANA−NA=NA\begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|}\hline(100) &+&100&=& NA&+&NA&NA&-&NA&=&NA\\hline\end{array}(100) ​+​100​=​NA​+​NA​NA​−​NA​=​NA​​ 
D)   (100) +NA=(100) +NANA−NA=NA\begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|}\hline(100) &+&NA&=& (100) &+&NA&NA&-&NA&=&NA\\hline\end{array}(100) ​+​NA​=​(100) ​+​NA​NA​−​NA​=​NA​​  E) None of the above
F) C) and D)

Question 17

The credit to the Finished Goods Inventory account represents the cost of goods manufactured.

Accepted Answer

A) True 
 B)False

Question 18

Generally accepted accounting principles require that a company use variable costing for financial reporting.

Accepted Answer

A) True 
 B)False

Question 19

During February,Benke Manufacturing Company paid $18,000 in property taxes on one of its factory buildings.This overhead cost should be allocated to units completed during the month it was paid.

Accepted Answer

A) True 
 B)False

Question 20

McDonnell Industries estimated manufacturing overhead for the year at $290,000.Manufacturing overhead for the year was underapplied by $12,000.The company applied $235,000 to work in process.The amount of actual overhead would have been:

Accepted Answer

A)   $247,000.
B)   $278,000.
C)   $223,000.
D)   none of these.E) A) and D)
F) None of the above

Exam 11: Product Costing in Service and Manufacturing Entities

The reporting method that includes in the cost of inventory (and cost of goods sold) all product costs,including both fixed and variable costs is known as:

Correct Answer
verified

Correct Answer
verified

During February,Benke Manufacturing Company paid $18,000 in property taxes on one of its factory buildings.This overhead cost should be allocated to units completed during the month it was paid.

Correct Answer
verified

Generally accepted accounting principles require that a company use variable costing for financial reporting.

Correct Answer
verified

McDonnell Industries estimated manufacturing overhead for the year at $290,000.Manufacturing overhead for the year was underapplied by $12,000.The company applied $235,000 to work in process.The amount of actual overhead would have been:

Correct Answer
verified

Correct Answer
verified
Answers will vary
1)Posted T-accounts: ...
View Answer

Service companies generally do not have Work in Process and Finished Goods inventory accounts.

Correct Answer
verified

Most companies initially record the cost of materials acquired in the Raw Materials Inventory account.

Correct Answer
verified

Correct Answer
verified

The credit to the Finished Goods Inventory account represents the cost of goods manufactured.

Correct Answer
verified

The Work in Process inventory account is debited when raw materials are placed into production.

Correct Answer
verified

Company X manufactures 3-ring notebooks.All of the following are considered indirect costs except:

Correct Answer
verified

Select the incorrect statement regarding service companies.

Correct Answer
verified

Hutton Company reported a $750 unfavorable overhead variance on a recent performance report.This means that factory overhead was underapplied during the period.

Correct Answer
verified

Kelly Company's manufacturing overhead costs totaled $2,871,400 during the year.At the end of the year,manufacturing overhead had been underapplied by $5,310.As a result:

Correct Answer
verified

Correct Answer
verified

Pinkston Company completed 12,000 units of product at a total cost of $28,000.The recording of the product completed would include a decrease to:

Correct Answer
verified

In which account is the actual amount of costs such as factory utilities and maintenance initially recorded?

Correct Answer
verified

Paying for factory utilities used during the current month is a(n) :

Correct Answer
verified

Which of the following is a valid reason for using variable costing?

Correct Answer
verified

Exam 11: Product Costing in Service and Manufacturing Entities

The reporting method that includes in the cost of inventory (and cost of goods sold) all product costs,including both fixed and variable costs is known as:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

During February,Benke Manufacturing Company paid $18,000 in property taxes on one of its factory buildings.This overhead cost should be allocated to units completed during the month it was paid.

Correct AnswerverifiedShow Answer

Generally accepted accounting principles require that a company use variable costing for financial reporting.

Correct AnswerverifiedShow Answer

McDonnell Industries estimated manufacturing overhead for the year at $290,000.Manufacturing overhead for the year was underapplied by $12,000.The company applied $235,000 to work in process.The amount of actual overhead would have been:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedAnswers will vary1)Posted T-accounts: ...View AnswerShow Answer

Service companies generally do not have Work in Process and Finished Goods inventory accounts.

Correct AnswerverifiedShow Answer

Most companies initially record the cost of materials acquired in the Raw Materials Inventory account.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The credit to the Finished Goods Inventory account represents the cost of goods manufactured.

Correct AnswerverifiedShow Answer

The Work in Process inventory account is debited when raw materials are placed into production.

Correct AnswerverifiedShow Answer

Company X manufactures 3-ring notebooks.All of the following are considered indirect costs except:

Correct AnswerverifiedShow Answer

Select the incorrect statement regarding service companies.

Correct AnswerverifiedShow Answer

Hutton Company reported a $750 unfavorable overhead variance on a recent performance report.This means that factory overhead was underapplied during the period.

Correct AnswerverifiedShow Answer

Kelly Company's manufacturing overhead costs totaled $2,871,400 during the year.At the end of the year,manufacturing overhead had been underapplied by $5,310.As a result:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Pinkston Company completed 12,000 units of product at a total cost of $28,000.The recording of the product completed would include a decrease to:

Correct AnswerverifiedShow Answer

In which account is the actual amount of costs such as factory utilities and maintenance initially recorded?

Correct AnswerverifiedShow Answer

Paying for factory utilities used during the current month is a(n) :

Correct AnswerverifiedShow Answer

Which of the following is a valid reason for using variable costing?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Answers will vary
1)Posted T-accounts: ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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