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True/False Questions 1. The sum of all costs of manufacturing costs except direct materials is called manufacturing overhead. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 2. Conversion cost is the sum of direct labor and manufacturing overhead. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 3. Prime cost is the sum of direct labor and manufacturing overhead. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 4. Thread used in the production of mattresses, an indirect material, is classified as manufacturing overhead. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 5. Period costs are also known as inventoriable costs. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy 6. All costs in a merchandising company are period costs. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy 7. The cost of goods sold of a manufacturing company equals beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3 Level: Easy

Ch2 Concept

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True/False Questions 1. The sum of all costs of manufacturing costs except direct materials is called manufacturing overhead. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 2. Conversion cost is the sum of direct labor and manufacturing overhead. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 3. Prime cost is the sum of direct labor and manufacturing overhead. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 4. Thread used in the production of mattresses, an indirect material, is classified as manufacturing overhead. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 5. Period costs are also known as inventoriable costs. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy 6. All costs in a merchandising company are period costs. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy 7. The cost of goods sold of a manufacturing company equals beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3 Level: Easy

8. A variable cost is constant if expressed on a per unit basis but the total dollar amount changes as the number of units increases or decreases. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy 9. As activity increases within the relevant range, fixed costs remain constant on a per unit basis. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy 10. Direct costs are often difficult to trace to the specific cost object under consideration. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy 11. All of the following are examples of opportunity costs: salary given up to start a business; rental income given up when you live in a house you own; interest income that could be earned on money spent for a car. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Medium 12. The amount that was paid by a company for a building to house its operations is an example of a sunk cost. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Easy 13. The most effective way to minimize quality costs while maintaining high quality is to avoid having quality problems in the first place. This is the reason for incurring appraisal costs. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 2B LO: 9 Level: Medium 14. External failure costs are limited to the costs of repairing defective products that are under warranty. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 2B LO: 9 Level: Hard

15. The costs of lost sales arising from poor quality are always included in quality cost reports. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 2B LO: 10 Level: Medium Multiple Choice Questions 16. The cost of the cushions that are used to manufacture sofas is best described as a: A) manufacturing overhead cost. B) period cost. C) variable cost. D) conversion cost. Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,2,5 Level: Medium 17. Chezpere Company manufactures and sells washing machines. In order to make assembly of the machines faster and easier, some of the metal parts in the machines are coated with grease. How should the cost of this grease be classified? A) B) C) D) Direct Material Cost Fixed Cost Yes Yes Yes No No Yes No No

Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,5,6 Level: Hard

18. A security guard's wages at a factory would be an example of: A) B) C) D) Indirect labor Fixed manufacturing overhead No No Yes Yes Yes No No Yes

Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,5 Level: Medium Source: CPA, adapted 19. Manufacturing overhead includes: A) all direct material, direct labor and administrative costs. B) all manufacturing costs except direct labor. C) all manufacturing costs except direct labor and direct materials. D) all selling and administrative costs. Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 20. Materials used in the operation of a factory, such as cleaning supplies, that are not an integral part of the final product should be classified as: A) direct materials. B) a period cost. C) administrative expense. D) manufacturing overhead. Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 21. The one cost that would be classified as part of both prime cost and conversion cost would be: A) indirect material. B) direct labor. C) direct material. D) indirect labor. Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

22. Direct costs: A) are incurred to benefit a particular accounting period. B) are incurred due to a specific decision. C) can be easily traced to a particular cost object. D) are the variable costs of producing a product. Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 23. Prime costs consist of: A) direct materials and the variable portion of manufacturing overhead. B) direct labor and indirect labor. C) indirect labor and the fixed portion of manufacturing overhead. D) direct labor and direct materials. Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Source: CMA, adapted 24. Which of the following is NOT a period cost? A) Monthly depreciation of the equipment in a fitness room used by factory workers. B) Salary of a billing clerk. C) Insurance on a company showroom, where current and potential customers can view new products. D) Cost of a seminar concerning tax law updates that was attended by the company's controller. Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium 25. The annual insurance premium for the factory building would be a: A) fixed cost, period cost, and indirect cost with regard to units of product. B) fixed cost, product cost, and direct cost with regard to units of product. C) variable cost, product cost, direct cost with regard to units of product. D) fixed cost, product cost, indirect cost with regard to units of product. Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,5,6 Level: Medium

26. Factory supplies in a manufacturing plant are most likely: A) sunk costs. B) period costs. C) variable costs. D) excluded from product costs. Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,5,7 Level: Medium 27. All of the following are examples of product costs except: A) depreciation on the company's retail outlets. B) salary of the plant manager. C) insurance on the factory equipment. D) rental costs of the factory facility. Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy 28. Inventoriable (i.e., product) costs that have become expenses can be found in: A) period costs. B) selling expenses. C) cost of goods sold. D) administrative expenses. Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium 29. The fixed portion of the cost of electricity for a manufacturing plant is a: A) B) C) D) Period cost Product cost Yes No Yes Yes No Yes No No

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Source: CPA, adapted

30. Which of the following statements about product costs is true? A) Product costs are deducted from revenue when the production process is completed. B) Product costs are deducted from revenue as expenditures are made. C) Product costs associated with unsold finished goods and work in process appear on the balance sheet as assets. D) Product costs appear on financial statements only when products are sold. Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium 31. Conversion costs consist of: A) direct and indirect labor. B) direct labor and direct materials. C) direct labor and manufacturing overhead. D) prime costs and manufacturing overhead. Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy Source: CMA, adapted 32. Which of the following is an example of a period cost? A) Fabric used to produce men's pants. B) Advertising cost for a new product campaign. C) Factory supervisor's salary. D) Monthly depreciation of production equipment. Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy 33. In the preparation of the schedule of Cost of Goods Manufactured, the accountant incorrectly included as part of manufacturing overhead the rental expense on the firm's retail facilities. This inclusion would: A) overstate period expenses on the income statement. B) overstate the cost of goods sold on the income statement. C) understate the cost of goods manufactured. D) have no effect on the cost of goods manufactured. Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Hard

34. Desco Electronics, Inc. manufactures car radios. The direct material cost assigned to car radios that Desco started during the period but did not fully complete would be found in the ending balance of: A) raw materials inventory. B) work in process inventory. C) finished goods inventory. D) both raw materials inventory and work in process inventory. Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy 35. Rotonga Manufacturing Company leases a vehicle that it uses to deliver its finished products to customers. Which of the following terms could be used to correctly describe the monthly lease payments made on the delivery vehicle? A) B) C) D) Direct Cost Fixed Cost Yes Yes Yes No No Yes No No

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5,6 Level: Medium 36. Within the relevant range, as the number of units produced increases: A) the variable cost per unit remains the same. B) fixed costs in total remain the same. C) variable costs increase in total. D) all of the above. Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy 37. Which of the following production costs, if expressed on a per unit basis, would be most likely to change significantly as the production level varies? A) Direct materials. B) Direct labor. C) Fixed manufacturing overhead. D) Responses A and B are both correct. Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium

38. When the level of activity decreases within the relevant range, the fixed cost per unit will: A) decrease. B) increase. C) remain the same. D) The effect cannot be predicted. Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium 39. Which of the following is correct concerning reactions to INCREASES in activity? A) B) C) D) Total Variable Cost Variable Cost Per Unit Increases Decreases Constant Decreases Decreases Constant Increases Constant

Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy 40. The distinction between indirect and direct costs depends on: A) whether a cost differs between alternatives. B) whether a cost is variable or fixed. C) whether a cost is a product or a period cost. D) whether a cost can be easily traced to the cost object under consideration. Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy 41. An example of a fixed cost that would be considered a direct cost is: A) a cost accountant's salary when the cost object is a unit of product. B) the rental cost of a warehouse to store finished goods when the cost object is the Purchasing Department. C) a production supervisor's salary when the cost objective is the Production Department. D) Board of Directors' fees when the cost object is the Marketing Department. Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Hard Source: CMA, adapted

42. Which of the following statements concerning direct and indirect costs is NOT true? A) Whether a particular cost is classified as direct or indirect does not depend on the cost object. B) A direct cost is one that can be easily traced to the particular cost object. C) The factory manager's salary would be classified as an indirect cost of producing one unit of product. D) A particular cost may be direct or indirect, depending on the cost object. Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium 43. All of the cost categories listed below are usually found in a company's accounting records, except for: A) sunk costs. B) inventoriable costs. C) opportunity costs. D) marketing costs. Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Easy 44. Cobra Mining Company spent $200 million five years ago to develop underground mining and milling operations in a remote area of a western state. Metals prices have since declined precipitously and the company is considering abandoning the operation. The term that would best describe the $200 million expenditure when considering the abandonment decision is: A) sunk cost. B) variable cost. C) differential cost. D) opportunity cost. Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making LO: 7 Level: Medium

45. In a decision-making situation involving an asset, which of the following costs is generally NOT considered relevant to the decision and should be ignored? A) Incremental cost of selecting one alternative over another. B) Opportunity cost of using the asset in an alternative. C) Differential cost between two alternatives. D) The original cost of the asset. Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making LO: 7 Level: Easy Source: CMA, adapted 46. A sunk cost is: A) a cost that is planned to be incurred in the near future. B) irrelevant for decision making. C) a cost connected with drilling for oil. D) affected by changes in the level of activity. Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making LO: 7 Level: Easy 47. The potential benefit that is given up when one alternative is selected over another is called: A) A sunk cost. B) An opportunity cost. C) Both a sunk cost and an opportunity cost. D) Neither a sunk cost nor an opportunity cost. Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making LO: 7 Level: Easy 48. A direct labor overtime premium should be charged to a specific job when the overtime is caused by the: A) increased overall level of activity in the factory. B) customer's requirement for early completion of the job. C) management's failure to include the job in the production schedule. D) management's requirement that the job be completed before the annual factory closure due to vacation. Ans: B AACSB: Reflective Thinking AICPA FN: Reporting Appendix: 2A Source: CPA, adapted AICPA BB: Critical Thinking LO: 8 Level: Medium

49. The idle time cost of assembly line workers in a manufacturing company is usually included as a part of: A) selling cost. B) direct labor cost. C) administrative cost. D) manufacturing overhead cost. Ans: D AACSB: Reflective Thinking AICPA FN: Reporting Appendix: 2A AICPA BB: Critical Thinking LO: 8 Level: Medium

50. In preparing a quality cost report, the cost of employee's time spent in quality circles is part of: A) prevention costs. B) appraisal costs. C) internal failure costs. D) external failure costs. Ans: A AACSB: Reflective Thinking AICPA FN: Reporting Appendix: 2B AICPA BB: Critical Thinking LO: 9,10 Level: Medium

51. Which of the following would be classified as a prevention cost on a quality cost report? A) Net cost of spoilage. B) Supervision of testing and inspection activities. C) Liability arising from defective products. D) Technical support provided to suppliers. Ans: D AACSB: Reflective Thinking AICPA FN: Reporting Appendix: 2B AICPA BB: Critical Thinking LO: 9,10 Level: Medium

52. Which of the following would be classified as an internal failure cost on a quality cost report? A) Systems development. B) Returns and allowances arising from quality problems. C) Net cost of scrap. D) Final product testing and inspection. Ans: C AACSB: Reflective Thinking AICPA FN: Reporting Appendix: 2B AICPA BB: Critical Thinking LO: 9,10 Level: Medium

53. Which of the following would be classified as an external failure cost on a quality cost report? A) Depreciation of test equipment. B) Repairs and replacements beyond the warranty period. C) Supplies used in testing and inspection. D) Re-entering data because of keying errors. Ans: B AACSB: Reflective Thinking AICPA FN: Reporting Appendix: 2B AICPA BB: Critical Thinking LO: 9,10 Level: Medium

54. An increase in appraisal costs in a quality improvement program would usually have the following initial effects on internal and external failure costs: A) B) C) D) Internal failure costs External failure costs Increase Increase Increase Decrease Decrease Increase Decrease Decrease

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 2B LO: 9 Level: Hard 55. The cost of testing incoming materials received from suppliers would be classified as a(n): A) prevention cost. B) appraisal cost. C) internal failure cost. D) external failure cost. Ans: B AACSB: Reflective Thinking AICPA FN: Reporting Appendix: 2B AICPA BB: Critical Thinking LO: 9 Level: Easy

56. In classifying the costs of quality at a company that manufactures sonar equipment, which of the following is considered an external failure cost? A) the net cost of scrap and spoilage incurred during production. B) the cost of repairs and replacements made during the warranty period. C) the cost of debugging software errors found in the sonar equipment during inspection at the plant. D) both B and C above. E) none of the above. Ans: B AACSB: Reflective Thinking AICPA FN: Reporting Appendix: 2B AICPA BB: Critical Thinking LO: 9 Level: Medium

57. The four categories of quality costs in a quality cost report are: A) external failure, product liability, prevention, and carrying. B) external failure, internal failure, prevention, and appraisal. C) warranty, product liability, prevention, and appraisal. D) warranty, product liability, training, and appraisal. Ans: B AACSB: Reflective Thinking AICPA FN: Reporting Appendix: 2B Source: CMA, adapted 58. The following costs were incurred in July: Direct materials.............................. Direct labor.................................... Manufacturing overhead................ Selling expenses............................ Administrative expenses................ Prime costs during the month totaled: A) $48,000 B) $28,000 C) $107,000 D) $63,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,2 Level: Medium $35,000 $13,000 $15,000 $14,000 $30,000 AICPA BB: Critical Thinking LO: 9 Level: Easy

Solution: Direct materials....... Direct labor............. Total........................ $35,000 13,000 $48,000

59. Abel Company's manufacturing overhead is 20% of its total conversion costs. If direct labor is $38,000 and if direct materials are $47,000, the manufacturing overhead is: A) $152,000 B) $11,750 C) $21,250 D) $9,500 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Hard Solution: Conversion costs = Direct labor + Manufacturing overhead Conversion costs = $38,000 + Manufacturing overhead 0.20 Conversion costs = Manufacturing overhead 0.20 ($38,000 + Manufacturing overhead) = Manufacturing overhead $7,600 + 0.20 Manufacturing overhead = Manufacturing overhead $7,600 = 0.80 Manufacturing overhead Manufacturing overhead = $9,500 60. During the month of July, direct labor cost totaled $12,000 and direct labor cost was 30% of prime cost. If total manufacturing costs during July were $86,000, the manufacturing overhead was: A) $46,000 B) $40,000 C) $28,000 D) $74,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Hard

Solution: 0.30 Prime cost = Direct labor 0.30 Prime cost = $12,000 Prime cost = $40,000 Prime cost = Direct materials + Direct labor $40,000 = Direct materials + $12,000 Direct materials = $28,000 Total = manufacturing costs $86,000 = Direct materials $28,000 + + Direct labor $12,000 Manufacturing Overhead Manufacturing + Overhead +

Manufacturing overhead = $46,000 61. In July direct labor was 40% of conversion cost. If the manufacturing overhead cost for the month was $34,000 and the direct materials cost was $23,000, the direct labor cost was: A) $22,667 B) $15,333 C) $51,000 D) $34,500 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Hard Solution: 0.40 Conversion costs = Direct labor 0.60 Conversion costs = Manufacturing overhead 0.60 Conversion costs = $34,000 Conversion costs = $56,667 Conversion costs = Direct labor + Manufacturing overhead $56,667 = Direct labor + $34,000 Direct labor = $22,667

62. Shown below are a number of costs incurred last year at Mecca Publishing Co., a manufacturer of elementary school textbooks: Solvents and cleaners used by the custodians to clean the textbook printing presses........................................... Depreciation on the automobiles used by sales representatives................................................................. Fire insurance on factory building................................... Shipping costs on textbooks sold..................................... What is the total of the manufacturing overhead costs above? A) $500 B) $2,500 C) $6,200 D) $6,700 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium Solution: Solvents and cleaners used by the custodians to clean the textbook printing presses.................................. Fire insurance on factory building................................ Total..............................................................................

$500 $4,20 0 $2,00 0 $3,70 0

63. Mammoser Manufacturing Corporation rents a building for $8,000 per month and uses it for a number of different purposes. The building space is utilized by the various activities as follows: Receiving and storing raw materials......... 5% Production operations................................ 70% Sales offices............................................... 15% Administrative offices............................... 10% How much of the $8,000 monthly rent cost should be classified as manufacturing overhead? A) $5,600 B) $6,000 C) $6,800 D) $7,200 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium Solution: Receiving and storing raw materials (5% $8,000)........ Production operations (70% $8,000)............................ $ 400 5,600 $6,000

64. Consider the following costs: Direct materials.......................................... Depreciation on factory equipment........... Factory janitors salary.............................. Direct labor................................................ Utilities for factory.................................... Selling expenses........................................ Production supervisors salary................... Administrative expenses............................ $33,00 0 $12,00 0 $23,00 0 $28,00 0 $9,000 $16,00 0 $34,00 0 $21,00 0

What is the total amount of manufacturing overhead included above? A) $78,000 B) $139,000 C) $44,000 D) $37,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium Solution: Depreciation on factory equipment........... Factory janitors salary.............................. Utilities for factory.................................... Production supervisors salary................... Total........................................................... $12,00 0 23,000 9,000 34,000 $78,00 0

65. The information below relates to Derby Manufacturing Company's operations for a recent month. (Assume that all raw materials are direct materials.): Purchases of raw materials........................ Direct labor cost......................................... Selling costs (total).................................... Administrative costs (total)....................... Manufacturing overhead costs (total)........ Raw materials inventory, beginning.......... Work in process inventory, beginning....... Finished goods inventory, beginning......... Raw materials inventory, ending............... Work in process inventory, ending............ Finished goods inventory, ending.............. $91,000 $122,00 0 $42,000 $56,000 $340,00 0 $22,000 $27,000 $42,000 $7,000 $35,000 $15,000

What was Derby's cost of goods manufactured for the month? A) $545,000 B) $560,000 C) $568,000 D) $587,000 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement LO: 2,4 Level: Hard Solution: Derby Manufacturing Company Schedule of Cost of Goods Manufactured Direct materials: Beginning raw materials inventory................. $ 22,000 Add: Purchases of raw materials.................... 91,000 Raw materials available for use...................... 113,000 Deduct: Ending raw materials inventory........ 7,000 Raw materials used in production.................. Direct labor......................................................... Manufacturing overhead.................................... Total manufacturing costs.................................. Add: Beginning work in process inventory........ Deduct: Ending work in process inventory........

$106,000 122,000 340,000 568,000 27,000 595,000 35,000

Cost of goods manufactured...............................

$560,000

66. Consider the following costs incurred in a recent period: Direct materials.......................................... Depreciation on factory equipment........... Factory janitors salary.............................. Direct labor................................................ Utilities for factory.................................... Selling expenses........................................ Production supervisors salary................... Administrative expenses............................ $33,00 0 $12,00 0 $23,00 0 $28,00 0 $9,000 $16,00 0 $34,00 0 $21,00 0

What was the total amount of the period costs listed above for the period? A) $78,000 B) $71,000 C) $46,000 D) $37,000 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Solution: Selling expenses........................................ Administrative expenses............................ Total........................................................... $16,00 0 21,00 0 $37,00 0

67. Using the following data for a recent period, calculate the beginning finished goods inventory: Sales........................................................... Beginning finished goods inventory.......... Cost of goods manufactured...................... Ending finished goods inventory............... Cost of goods sold..................................... Gross margin.............................................. Administrative and selling expenses......... Net operating income................................. The beginning finished goods inventory was: A) $24,000 B) $23,000 C) $7,000 D) $12,000 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3,4 Level: Hard Solution: Cost of goods sold = Sales Gross margin Cost of goods sold = $40,000 $17,000 Cost of goods sold = $23,000 Beginning finished Cost of goods Ending finished + = goods inventory manufactured goods inventory Beginning finished + $16,000 $5,000 = goods inventory Beginning finished goods inventory = $12,000 Cost of goods sold $23,000 $40,00 0 ? $16,00 0 $5,000 ? $17,00 0 ? $10,00 0

68. The following data are for a recent period's operations: Beginning finished goods inventory.......... Ending finished goods inventory............... Sales........................................................... Gross margin.............................................. The cost of goods manufactured was: A) $115,275 B) $284,725 C) $275,275 D) $124,725 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3,4 Level: Hard Solution: Sales Cost of goods sold = Gross margin $400,000 Cost of goods sold = $120,000 Cost of goods sold = $280,000 Beginning finished Cost of goods Ending finished + = goods inventory manufactured goods inventory Cost of goods $150,475 + $145,750 = manufactured Cost of goods manufactured = $275,275 Cost of goods sold $280,000 $150,47 5 $145,75 0 $400,00 0 $120,00 0

69. Last month a manufacturing company had the following operating results: Beginning finished goods inventory.......... Ending finished goods inventory............... Sales........................................................... Gross margin.............................................. $77,000 $72,000 $593,00 0 $67,000

What was the cost of goods manufactured for the month? A) $588,000 B) $526,000 C) $521,000 D) $531,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3,4 Level: Hard Solution: Sales Cost of goods sold = Gross margin $593,000 Cost of goods sold = $67,000 Cost of goods sold = $526,000 Beginning finished Cost of goods Ending finished + = goods inventory manufactured goods inventory Cost of goods $77,000 + $72,000 = manufactured Cost of goods manufactured = $521,000 Cost of goods sold $526,000

70. The following data pertain to a recent period's operations: Sales........................................................... ? Beginning finished goods inventory.......... $12,000 Cost of goods manufactured...................... $36,000 Ending finished goods inventory............... $6,000 Cost of goods sold..................................... ? Gross margin.............................................. 40% of Sales Administrative and selling expenses......... $10,000 Net operating income................................. ? Net operating income was: A) $18,000 B) $10,000 C) $14,000 D) $46,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3,4 Level: Hard Solution: Cost of Beginning finished = + goods sold goods inventory Cost of = $12,000 + goods sold Cost of goods sold = $42,000 Sales Cost of goods sold = Gross margin Sales $42,000 = Gross margin Gross margin = 40% Sales Sales $42,000 = 40% Sales 60% Sales = $42,000 Sales = $70,000 Gross margin Administrative and selling expenses = Net operating income Gross margin = 40% Sales Gross margin = $28,000 $28,000 $10,000 = Net operating income Net operating income = $18,000 Cost of goods manufactured $36,000 Ending finished goods inventory $6,000

71. The following inventory balances have been provided for the most recent year: Beginnin g Raw materials.................... Work in process................. Finished goods................... $21,000 $18,000 $57,000 Ending $15,00 0 $29,00 0 $33,00 0

The cost of goods manufactured was $714,000. What was the cost of goods sold? A) $738,000 B) $693,000 C) $714,000 D) $733,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3,4 Level: Medium Solution: Finished goods inventory, beginning......................... Add: Cost of goods manufactured.............................. Goods available for sale............................................. Deduct: Finished goods inventory, ending................. Cost of goods sold...................................................... $57,000 714,000 771,000 33,000 $738,000

72. The cost of goods manufactured for October at Toule Manufacturing Corporation was $907,000. The following changes occurred in Toule inventory accounts during October: Decrease in raw materials inventory.......... Decrease in work in process inventory...... Increase in finished goods inventory......... What was Toule's cost of goods sold for October? A) $869,000 B) $886,000 C) $928,000 D) $945,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3,4 Level: Hard Solution: $24,00 0 $17,00 0 $38,00 0

73. Gabrio Inc. is a merchandising company. Last month the company's merchandise purchases totaled $87,000. The company's beginning merchandise inventory was $19,000 and its ending merchandise inventory was $11,000. What was the company's cost of goods sold for the month? A) $79,000 B) $87,000 C) $95,000 D) $117,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3 Level: Easy Solution: Merchandise inventory, beginning............................. Add: Merchandise purchased..................................... Goods available for sale............................................. Deduct: Finished goods inventory, ending................. Cost of goods sold...................................................... $19,000 87,000 106,000 11,000 $ 95,000

74. Haala Inc. is a merchandising company. Last month the company's cost of goods sold was $68,000. The company's beginning merchandise inventory was $11,000 and its ending merchandise inventory was $17,000. What was the total amount of the company's merchandise purchases for the month? A) $96,000 B) $62,000 C) $68,000 D) $74,000 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3 Level: Medium

Solution: Merchandise inventory, beginning............................. Add: Merchandise purchased..................................... Goods available for sale............................................. Deduct: Finished goods inventory, ending................. Cost of goods sold...................................................... Goods available for sale = $68,000 + $17,000 Goods available for sale = $85,000 Merchandise purchased = $85,000 Merchandise inventory, beginning Merchandise purchased = $85,000 $11,000 Merchandise purchased = $74,000 75. During July, the cost of goods manufactured at Xxis Corporation was $70,000. The beginning finished goods inventory was $19,000 and the ending finished goods inventory was $15,000. What was the cost of goods sold for the month? A) $104,000 B) $74,000 C) $70,000 D) $66,000 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3 Level: Easy Solution: Finished goods inventory, beginning......................... Add: Cost of goods manufactured.............................. Goods available for sale............................................. Deduct: Finished goods inventory, ending................. Cost of goods sold...................................................... $19,000 70,000 89,000 15,000 $74,000 $11,000 ? ? 17,000 $68,000

76. At the beginning of the most recent month's operations, finished goods inventory was $30,000. The cost of goods manufactured was $326,000 and ending finished goods inventory was $42,000. What was the cost of goods sold for the month? A) $320,000 B) $338,000 C) $314,000 D) Cannot be calculated. Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3 Level: Easy Solution: Finished goods inventory, beginning......................... Add: Cost of goods manufactured.............................. Goods available for sale............................................. Deduct: Finished goods inventory, ending................. Cost of goods sold...................................................... $30,000 326,000 356,000 42,000 $314,000

77. Given the following information, calculate the company's manufacturing overhead: Work in process, ending................ Work in process, beginning........... Cost of goods manufactured.......... Direct labor.................................... Direct materials.............................. The manufacturing overhead is: A) $22,000 B) $25,000 C) $28,000 D) $36,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 4 Level: Hard Solution: Schedule of Cost of Goods Manufactured Direct materials............................................................... Direct labor..................................................................... Manufacturing overhead................................................. Total manufacturing costs............................................... Add: Work in process, beginning................................... Deduct: Work in process, ending.................................... Cost of goods manufactured........................................... $20,000 25,000 22,000* 67,000* 11,000 78,000* 8,000 $70,000 $8,000 $11,00 0 $70,00 0 $25,00 0 $20,00 0

* These items must be calculated by working backwards upward through the statements.

78. The following data have been provided for the most recent month's operations: Direct materials.......................................... Direct labor................................................ Manufacturing overhead............................ Total manufacturing costs......................... Beginning work in process inventory........ Ending work in process inventory............. Cost of goods manufactured...................... The beginning work in process inventory is: A) $11,000 B) $42,000 C) $53,000 D) $37,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 4 Level: Hard Solution: Schedule of Cost of Goods Manufactured Direct materials............................................................... Direct labor..................................................................... Manufacturing overhead................................................. Total manufacturing costs............................................... Add: Work in process, beginning................................... Deduct: Work in process, ending.................................... Cost of goods manufactured........................................... $ 8,000 25,000 9,000 42,000 11,000* 53,000* 8,000 $45,000 $8,000 $25,00 0 $9,000 ? ? $8,000 $45,00 0

* These items must be calculated by working backwards upward through the statements.

79. Using the following data for July, calculate the cost of goods manufactured: Direct materials.......................................... Direct labor................................................ Manufacturing overhead............................ Beginning work in process inventory........ Ending work in process inventory............. The cost of goods manufactured was: A) $83,000 B) $96,000 C) $81,000 D) $82,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 4 Level: Medium Solution: Schedule of Cost of Goods Manufactured Direct materials............................................................... Direct labor..................................................................... Manufacturing overhead................................................. Total manufacturing costs............................................... Add: Work in process, beginning................................... Deduct: Work in process, ending.................................... Cost of goods manufactured........................................... $31,000 22,000 29,000 82,000 14,000 96,000 15,000 $81,000 $31,00 0 $22,00 0 $29,00 0 $14,00 0 $15,00 0

80. During the month of April, LTP Company incurred $30,000 of manufacturing overhead, $40,000 of direct labor, and purchased $25,000 of raw materials. Between the beginning and the end of the month, the raw materials and work in process inventories decreased by $4,000 and $3,000, respectively. The total manufacturing costs used in the computation of cost of goods manufactured during the month of April was: A) $88,000 B) $91,000 C) $99,000 D) $102,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 4 Level: Hard Solution: First calculate raw materials used: Beginning inventory + Purchases raw materials By rearranging: Purchases +( Beginning inventory raw materials Ending inventory raw materials )= Raw materials used Ending inventory = raw materials Raw materials used

Since raw material inventory decreased by $4,000, we know that: Beginning inventory raw materials Ending inventory raw materials = $4,000 Substituting into equation: $25,000 + $4,000 = Raw materials used $29,000 = Raw materials used Next, solve for total manufacturing costs: Raw materials Manufacturing + Direct labor + used overhead $29,000 + $40,000 + $30,000 Total manufacturing costs = $99,000 =

81. The following information relates to Mako Manufacturing Company for the month of August: Cost of goods manufactured...................... Cost of goods sold..................................... Total manufacturing costs......................... Cost of goods available for sale................. $78,00 0 $82,00 0 $90,00 0 $95,00 0

What was the balance in Mako's Finished Goods Inventory account at the end of August? A) $4,000 B) $5,000 C) $8,000 D) $13,000 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 4 Level: Hard Solution: Goods available for sale - Ending finished goods inventory = Cost of goods sold Ending finished goods inventory = Goods available for sale - Cost of goods sold Ending finished goods inventory = $95,000 - $82,000 Ending finished goods inventory = $13,000

82. The following inventory balances relate to Komiza Manufacturing Corporation at the beginning and end of the year: Beginnin g Raw materials.................... Work in process................. Finished goods................... $10,000 $5,000 $41,000 Ending $21,00 0 $3,000 $48,00 0

Komiza's cost of goods available for sale was $622,000. What was Komiza's cost of goods manufactured? A) $581,000 B) $615,000 C) $629,000 D) $663,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 4 Level: Hard Solution: Beginning finished Cost of goods Goods available + = goods inventory manufactured for sale Cost of goods $41,000 + = $622,000 manufactured Cost of goods manufactured = $581,000

83. Last year there was no change in either the raw materials or the work in process beginning and ending inventories. However, finished goods, which had a beginning balance of $25,000, increased by $15,000. If the manufacturing costs incurred totaled $600,000 during the year, the cost of goods available for sale must have been: A) $585,000 B) $600,000 C) $610,000 D) $625,000 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 4 Level: Medium Solution: Cost of goods available for sale Beginning finished goods inventory Cost of goods manufactured $600,000

=

+

Cost of goods = $25,000 + available for sale Cost of goods available for sale = $625,000

84. A company has provided the following cost data for its most recent accounting period: Direct labor.................................... Administrative expenses................ Manufacturing overhead................ Direct materials.............................. Selling expenses............................ $98,000 $15,000 $25,000 $200,00 0 $22,000

What was the cost of goods manufactured for the period? Assume there were no beginning or ending inventories. A) $303,000 B) $323,000 C) $338,000 D) $360,000 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 4 Level: Easy Source: CMA, adapted Solution: Direct labor.................................... Manufacturing overhead................ Direct materials.............................. Cost of goods manufactured.......... $ 98,000 25,000 200,00 0 $323,00 0

85. Beginning work in process was $145,000. Manufacturing cost incurred for the month was $810,000. The ending work in process was $200,000. What was the cost of goods manufactured during the month? A) $900,000 B) $810,000 C) $755,000 D) $1,155,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 4 Level: Medium Solution: Beginning work in process inventory................. Add: Manufacturing costs.................................. Deduct: Ending work in process inventory........ Cost of goods manufactured............................... $145,000 810,000 (200,000) $755,000

86. Last year, Vashanda Corporation incurred the following costs to produce 18,000 units: Cost of raw materials used......................... Property taxes on factory building............. $86,40 0 $9,000

What should be the cost per unit for the above costs if 20,000 units of product are produced next year? A) B) C) D) Raw materials Property taxes $4.32 $0.45 $4.32 $0.50 $4.80 $0.45 $4.80 $0.50

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium Solution: Variable manufacturing costs: $86,400 18,000 = $4.80 Property taxes are a fixed cost: $9,000 At 20,000 units, fixed cost per unit = $9,000 20,000 units = $0.45 per unit

87. At a sales volume of 20,000 units, total costs are $55,000. The company's variable cost per unit is $1.50. What should be the total fixed cost at a sales volume of 30,000 units, assuming that is within the relevant range. A) $25,000 B) $30,000 C) $45,000 D) Cannot be determined. Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Hard Solution:

88. A mattress manufacturer has provided the following cost data. The cost of fabric, foam, springs, and lumber is $68,000. The cost of indirect materials is $21,000. Labor cost of assembly workers is $52,000 and for production supervisors is $14,000. How much indirect cost is included in the above costs? A) $21,000 B) $35,000 C) $89,000 D) $103,000 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy Solution: Indirect materials........................... Production supervisors.................. Total indirect costs......................... $21,000 14,000 $35,000

89. How much sunk cost is represented in the following list? Annual operating cost............................................ Fixed operating costs other than depreciation....... Resale value, if sold now....................................... Original cost of current machine........................... A) B) C) D) $80,000 $14,000 $25,000 $68,000 $80,000 $14,000 $25,000 $68,000

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Easy Solution: Only the original cost of the current machine is a sunk cost in the above list. 90. John Adams, an operator of a manufacturing machine, receives time-and-a-half for any time worked in excess of 40 hours per week. His rate of pay is $16 per hour. How much should be charged to direct labor if he worked 48 hours last week and had no idle time? A) $768 B) $640 C) $832 D) $192 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 2A LO: 8 Level: Medium Solution: 48 hours $16 per hour = $768

91. During the last week in October, Harvey worked a total of 45 hours and had no idle time. Harvey is paid $10 per hour for regular time, and is paid time-and-a-half for all hours in excess of 35 hours per week. Given this information: A) $350 should be charged to direct labor B) $50 should be charged to manufacturing overhead C) $150 should be charged to manufacturing overhead D) $500 should be charged to direct labor. Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 2A LO: 8 Level: Medium Solution: Overtime premium = $5 $10 1.5 = $15 overtime rate $15 overtime rate $10 regular rate = $5 overtime premium Total hours Regular work week hours = Overtime hours 45 35 = 10 10 hours $5 per hour = $50 amount to be charged to manufacturing overhead 92. Sandra Pietro installs mufflers at Dethtrapp Motorcycle Company. Sandra is paid $14 per hour and an extra $7 per hour for every hour over 40 that is worked in a given week. Last week Sandra worked 50 hours with 2 of these hours correctly classified as idle time. How much of Sandra's wages last week should be included in manufacturing overhead cost? A) $28 B) $70 C) $98 D) $168 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 2A LO: 8 Level: Hard Solution: Overtime premium charged to manufacturing overhead: (50 total hours 40 regular hours) $7 overtime premium = $70 2 hours of idle time $14 per hour = $28 Total wages to be included in manufacturing overhead = $70 + $28 = $98

Use the following to answer questions 93-96: Mendoza, Inc. manufactures and sells aluminum dishes for camping and outdoor enthusiasts through a mail order catalog operation. Large rectangular sheets of aluminum are purchased by Mendoza. These sheets are cut down into smaller squares and are then fed into a machine where they are trimmed down into a circular shape. These aluminum circles are then fed into a stamping machine where they are formed into plates and bowls. After production, the dishes are shipped to warehouses where they are packed and then shipped to customers. 93. Which of the following terms could be used to correctly describe the cost of the aluminum sheets? A) fixed cost B) period cost C) direct cost D) conversion cost Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,2,5,6 Level: Medium 94. Which of the following terms could be used to correctly describe the wages paid to the machine operator who operates the stamping machine? A) direct labor cost B) administrative cost C) opportunity cost D) manufacturing overhead cost Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,2,5,6 Level: Easy 95. Which of the following terms could be used to correctly describe the cost of electricity used to run the stamping machine? A) variable cost B) indirect cost C) manufacturing overhead cost D) all of the above Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,2,5,6 Level: Medium

96. Which of the following terms could be used to correctly describe the straight-line depreciation cost on the stamping machine? A) period cost B) variable cost C) inventoriable cost D) both A and C above Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,2,5,6 Level: Hard Use the following to answer questions 97-99: A partial listing of costs incurred at Archut Corporation during September appears below: Direct materials................................................... Utilities, factory.................................................. Administrative salaries....................................... Indirect labor....................................................... Sales commissions.............................................. Depreciation of production equipment............... Depreciation of administrative equipment......... Direct labor......................................................... Advertising......................................................... $113,00 0 $5,000 $81,000 $25,000 $48,000 $20,000 $30,000 $129,00 0 $135,00 0

97. The total of the manufacturing overhead costs listed above for September is: A) $586,000 B) $50,000 C) $292,000 D) $30,000 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium Solution: Utilities, factory.................................................. Indirect labor....................................................... Depreciation of production equipment............... Total manufacturing overhead costs................... $ 5,000 25,000 20,000 $50,000

98. The total of the product costs listed above for September is: A) $292,000 B) $294,000 C) $50,000 D) $586,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Solution: Direct materials................................................... Utilities, factory.................................................. Indirect labor....................................................... Depreciation of production equipment............... Direct labor......................................................... Total product costs.............................................. $113,00 0 5,000 25,000 20,000 129,00 0 $292,00 0

99. The total of the period costs listed above for September is: A) $294,000 B) $344,000 C) $292,000 D) $50,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Solution: Administrative salaries....................................... Sales commissions.............................................. Depreciation of administrative equipment......... Advertising......................................................... Total period costs................................................ $ 81,000 48,000 30,000 135,00 0 $294,00 0

Use the following to answer questions 100-102: A partial listing of costs incurred during March at Febbo Corporation appears below: Factory supplies............................................... Administrative wages and salaries.................. Direct materials................................................ Sales staff salaries............................................ Factory depreciation........................................ Corporate headquarters building rent.............. Indirect labor.................................................... Marketing......................................................... Direct labor...................................................... $9,000 $85,000 $126,00 0 $30,000 $33,000 $43,000 $26,000 $65,000 $99,000

100. The total of the period costs listed above for March is: A) $68,000 B) $293,000 C) $291,000 D) $223,000 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Solution: Administrative wages and salaries.................. Sales staff salaries............................................ Corporate headquarters building rent.............. Marketing......................................................... Total period costs............................................. $ 85,000 30,000 43,000 65,00 0 $223,00 0

101. The total of the manufacturing overhead costs listed above for March is: A) $68,000 B) $35,000 C) $516,000 D) $293,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium Solution: Factory supplies............................................... Factory depreciation........................................ Indirect labor.................................................... Total manufacturing overhead......................... $ 9,000 33,000 26,000 $68,000

102. The total of the product costs listed above for March is: A) $516,000 B) $68,000 C) $293,000 D) $223,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Solution: Factory supplies............................................... Direct materials................................................ Factory depreciation........................................ Indirect labor.................................................... Direct labor...................................................... Total product costs........................................... $ 9,000 126,000 33,000 26,000 99,00 0 $293,00 0

Use the following to answer questions 103-105: The following data pertain to Graham Company's operations in May: May 1 Work in process inventory............. Raw materials inventory................ Finished goods inventory............... Other data: Raw materials used........................ Sales............................................... Cost of goods manufactured.......... Manufacturing overhead cost........ Raw materials purchases............... Gross Margin................................. $7,000 $15,00 0 ? $40,000 $200,00 0 $135,00 0 $60,000 $30,000 $60,000 May 31 $12,00 0 ? $20,00 0

103. The ending materials inventory was: A) $5,000 B) $10,000 C) $15,000 D) $20,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 1,3,4 Level: Medium Solution: Beginning raw materials inventory................ Add: Raw materials purchases....................... Raw materials available for use..................... Deduct: Ending raw materials inventory........ Raw materials used........................................ $15,000 30,000 45,000 5,000 * $40,000

*Calculate this item by working backwards, as shown: Raw materials used = Raw materials available Ending raw materials inventory $40,000 = $45,000 Ending raw materials inventory Ending raw materials inventory = $5,000

104. The beginning finished goods inventory was: A) $5,000 B) $15,000 C) $25,000 D) $30,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 1,3,4 Level: Hard Solution: Sales Cost of goods sold = Gross margin Cost of goods sold = Sales Gross margin Cost of goods sold = $200,000 $60,000 Cost of goods sold = $140,000 Next, solve backwards for beginning finished goods inventory: Beginning raw materials inventory...................... $ 25,000 * Add: Cost of goods manufactured........................ 135,000 Cost of goods available for sale........................... 160,000 * Deduct: Ending finished goods inventory............ 20,000 Cost of goods sold................................................ $140,000 * These items must be calculated by working backwards upward through the statements.

105. The direct labor cost for May was: A) $35,000 B) $40,000 C) $30,000 D) $25,000 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,3,4 Level: Hard Solution: Graham Company Schedule of Cost of Goods Manufactured Direct materials............................................................... Direct labor..................................................................... Manufacturing overhead................................................. Total manufacturing costs............................................... Add: Work in process, beginning................................... $40,000 40,000* 60,000 140,000* 7,000 147,000* Deduct: Work in process, ending.................................... 12,000 Cost of goods manufactured........................................... $135,000 * These items must be calculated by working backwards upward through the statements. Use the following to answer questions 106-107: Demeglio Corporation reported the following data for the month of September: Inventories: Raw materials.................... Work in process................. Finished goods................... Beginnin g $30,000 $23,000 $32,000 Ending $34,00 0 $22,00 0 $35,00 0

106. If the raw materials purchased during September totaled $63,000, what was the cost of the raw materials used in production for the month? A) $67,000 B) $63,000 C) $59,000 D) $64,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 1,3 Level: Easy Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw material inventory............... Raw materials used in production........................ $30,000 63,000 93,000 34,000 $59,000

107. If the company transferred $222,000 of completed goods from work in process to finished goods inventory during September, what was the cost of goods sold for the month? A) $219,000 B) $225,000 C) $222,000 D) $221,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 1,3 Level: Easy Solution: Beginning finished goods inventory.................... Add: Cost of goods manufactured........................ Goods available for sale....................................... Deduct: Ending finished inventory....................... Cost of goods sold................................................ $ 32,000 222,000 254,000 35,000 $219,000

Use the following to answer questions 108-109: Boardman Company reported the following data for the month of January: Inventories: Raw materials.................... Work in process................. Finished goods................... Additional information: Sales revenue................................. Direct labor costs........................... Manufacturing overhead costs....... Selling expenses............................ Administrative expenses................ $210,00 0 $40,000 $70,000 $25,000 $35,000 1/1 $32,00 0 $18,00 0 $30,00 0 1/31 $31,00 0 $12,00 0 $35,00 0

108. If raw materials costing $35,000 were purchased during January, the total manufacturing costs for the month would be: A) $145,000 B) $144,000 C) $151,000 D) $146,000 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 1 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Direct labor........................................................... Manufacturing overhead....................................... Total manufacturing costs.................................... $ 32,000 35,000 67,000 31,000 36,000 40,000 70,000 $146,000

109. Boardman Company's total conversion cost for January would be: A) $110,000 B) $170,000 C) $135,000 D) $130,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium Solution: Direct labor.................................... Manufacturing overhead................ Total conversion costs................... Use the following to answer questions 110-111: Fassino Corporation reported the following data for the month of November: Inventories: Raw materials.................... Work in process................. Finished goods................... Beginnin g $23,000 $19,000 $55,000 Ending $30,00 0 $20,00 0 $29,00 0 $ 40,00 0 70,000 $110,00 0

Additional information: Raw materials purchases............... Direct labor cost............................. Manufacturing overhead cost........ Selling expense.............................. Administrative expense.................

$58,000 $54,000 $82,000 $18,000 $42,000

110. The conversion cost for November was: A) $187,000 B) $112,000 C) $136,000 D) $140,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium Solution: Direct labor.................................... Manufacturing overhead................ Total conversion costs................... 111. The prime cost for November was: A) $136,000 B) $60,000 C) $105,000 D) $112,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Direct labor........................................................... Total prime cost.................................................... $ 23,000 58,000 81,000 30,000 51,000 54,000 $105,000 $ 54,00 0 82,000 $136,00 0

Use the following to answer questions 112-113: Management of Mcgibboney Corporation has asked your help as an intern in preparing some key reports for November. The beginning balance in the raw materials inventory account was $25,000. During the month, the company made raw materials purchases amounting to $54,000. At the end of the month, the balance in the raw materials inventory account was $37,000. Direct labor cost was $25,000 and manufacturing overhead cost was $62,000. The beginning balance in the work in process account was $22,000 and the ending balance was $23,000. The beginning balance in the finished goods account was $44,000 and the ending balance was $50,000. Selling expense was $21,000 and administrative expense was $38,000. 112. The conversion cost for November was: A) $116,000 B) $79,000 C) $87,000 D) $129,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium Solution: Direct labor.................................... Manufacturing overhead................ Total conversion costs................... 113. The prime cost for November was: A) $79,000 B) $59,000 C) $67,000 D) $87,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium $25,000 62,000 $87,000

Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Direct labor........................................................... Total prime cost.................................................... Use the following to answer questions 114-116: Yokum Company has provided the following data for the month of August: August 1 August 31 Raw materials inventory................ $8,000 ? Work in process inventory............. ? $14,000 Finished goods inventory............... $25,000 $35,000 Other Data: Sales........................................................... Manufacturing overhead costs................... Direct labor................................................ Purchase of raw materials.......................... Administrative expenses............................ Cost of goods manufactured...................... Raw materials used in production............. Selling expenses........................................ $350,00 0 $44,000 $80,000 $94,000 $40,000 $206,00 0 $87,000 $15,000 $25,000 54,000 79,000 37,000 42,000 25,000 $67,000

114. The ending raw materials inventory was: A) $3,000 B) $11,000 C) $15,000 D) $7,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 2,3,4 Level: Hard Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw materials inventory.............. Raw materials used.............................................. $ 8,000 94,000 102,000 15,000 * $87,000

* This item must be calculated by working backwards upward through the statements. 115. The beginning work in process inventory was: A) $6,000 B) $9,000 C) $15,000 D) $2,000 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 2,3,4 Level: Hard

Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Raw materials used.............................................. Direct labor........................................................... Manufacturing overhead....................................... Total manufacturing costs.................................... Add: Beginning work in process inventory......... Subtotal................................................................ Deduct: Ending work in process inventory.......... Cost of goods manufactured................................. $ 8,000 94,000 102,000 15,000 * $87,000 $ 87,000 80,000 44,000 211,000 9,000 * 220,000 * 14,000 $206,000

* These items must be calculated by working backwards upward through the statements.

116. The cost of goods sold was: A) $196,000 B) $206,000 C) $211,000 D) $190,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 2,3,4 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Raw materials used.............................................. Direct labor........................................................... Manufacturing overhead....................................... Total manufacturing costs.................................... Add: Beginning work in process inventory......... Subtotal................................................................ Deduct: Ending work in process inventory.......... Cost of goods manufactured................................. $ 8,000 94,000 102,000 15,000 * $ 87,000 $ 87,000 80,000 44,000 211,000 9,000 * 220,000 * 14,000 $206,000

* These items must be calculated by working backwards upward through the statements. Beginning finished goods inventory.................... Add: Cost of goods manufactured........................ Goods available for sale....................................... Deduct: Ending finished goods inventory............ Cost of goods sold................................................ $ 25,000 206,000 231,000 35,000 $196,000

Use the following to answer questions 117-120: The following data (in thousands of dollars) have been taken from the accounting records of Karling Corporation for the just completed year. Sales........................................................... Raw materials inventory, beginning.......... Raw materials inventory, ending............... Purchases of raw materials........................ Direct labor................................................ Manufacturing overhead............................ Administrative expenses............................ Selling expenses........................................ Work in process inventory, beginning....... Work in process inventory, ending............ Finished goods inventory, beginning......... Finished goods inventory, ending.............. $99 0 $40 $70 $12 0 $20 0 $23 0 $15 0 $14 0 $70 $50 $12 0 $16 0

117. The cost of the raw materials used in production during the year (in thousands of dollars) was: A) $190 B) $90 C) $150 D) $160 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 2,3,4 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw materials inventory.............. Raw materials used.............................................. $ 40 120 160 70 $90

118. The cost of goods manufactured (finished) for the year (in thousands of dollars) was: A) $540 B) $500 C) $570 D) $590 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 2,3,4 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Raw materials used.............................................. Direct labor........................................................... Manufacturing overhead....................................... Total manufacturing costs.................................... Add: Beginning work in process inventory......... Subtotal................................................................ Deduct: Ending work in process inventory.......... Cost of goods manufactured................................. $ 40 120 160 70 $ 90 $ 90 200 230 520 70 590 50 $540

119. The cost of goods sold for the year (in thousands of dollars) was: A) $700 B) $500 C) $660 D) $580 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 2,3,4 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Raw materials used.............................................. Direct labor........................................................... Manufacturing overhead....................................... Total manufacturing costs.................................... Add: Beginning work in process inventory......... Subtotal................................................................ Deduct: Ending work in process inventory.......... Cost of goods manufactured................................. Beginning finished goods inventory.................... Add: Cost of goods manufactured........................ Goods available for sale....................................... Deduct: Ending finished goods inventory............ Cost of goods sold................................................ $ 40 120 160 70 $90 $ 90 200 230 520 70 590 50 $540 $120 540 660 160 $500

120. The net operating income for the year (in thousands of dollars) was: A) $150 B) $200 C) $490 D) $250 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 2,3,4 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Raw materials used.............................................. Direct labor........................................................... Manufacturing overhead....................................... Total manufacturing costs.................................... Add: Beginning work in process inventory......... Subtotal................................................................ Deduct: Ending work in process inventory.......... Cost of goods manufactured................................. Beginning finished goods inventory.................... Add: Cost of goods manufactured........................ Goods available for sale....................................... Deduct: Ending finished goods inventory............ Cost of goods sold................................................ Sales............................................................. Cost of goods sold........................................ Gross margin................................................ Selling and administrative expenses: Administrative expense.............................$150 Selling expense......................................... 140 Net operating income................................... $ 40 120 160 70 $90 $ 90 200 230 520 70 590 50 $540 $120 540 660 160 $500 $990 500 490 290 $200

Use the following to answer questions 121-125: Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. Accordingly, he has decided to quit his present job and start a company to manufacture and market the device. 121. The salary that Mark earns at his present employ is: A) a variable cost B) a fixed cost C) a product cost D) an opportunity cost Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Easy 122. Mark purchased a machine two years ago to make experimental boards. The machine will be used to manufacture the new board. The cost of this machine is: A) an opportunity cost B) a sunk cost C) a differential cost D) a period cost Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Easy 123. The cost of the raw materials that will be used in manufacturing the computer board is: A) a sunk cost B) a fixed cost C) a period cost D) a variable cost Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,5 Level: Easy 124. Rent on the administrative office space is: A) a variable cost B) an opportunity cost C) a period cost D) a product cost Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,5 Level: Easy

125. Property taxes on the building that will be purchased to house the manufacturing facility are: A) a product cost B) a variable cost C) an opportunity cost D) a period cost Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,5 Level: Easy Use the following to answer questions 126-128: Vignana Corporation manufactures and sells hand-painted clay figurines of popular sports heroes. Shown below are some of the costs incurred by Vignana for last year: Cost of clay used in production....................................... Wages paid to the workers who paint the figurines......... Wages paid to the sales managers secretary................... Cost of junk mail advertising........................................... 126. What is the total of the direct costs above? A) $65,000 B) $112,000 C) $155,000 D) $202,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Cost of clay used in production....................................... Wages paid to the workers who paint the figurines......... Total direct costs.............................................................. $ 65,000 90,000 $155,000 $65,00 0 $90,00 0 $22,00 0 $47,00 0

127. What is the total of the inventoriable (product) costs above? A) $0 B) $69,000 C) $155,000 D) $159,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Solution: Cost of clay used in production....................................... Wages paid to the workers who paint the figurines......... Total product costs........................................................... 128. What is the total of the conversion costs above? A) $65,000 B) $69,000 C) $90,000 D) $155,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Solution: Only the wages paid to the works who paint the figurines ($90,000) are considered to be conversion costs. $ 65,000 90,000 $155,000

Use the following to answer questions 129-132: Gaeddert Corporation reported the following data for the month of July: Inventories: Raw materials.................... Work in process................. Finished goods................... Additional information: Sales..................................................... Raw materials purchases..................... Direct labor cost................................... Manufacturing overhead cost.............. Selling expense.................................... Administrative expense....................... $250,00 0 $76,000 $33,000 $81,000 $24,000 $29,000 Beginnin g $36,000 $13,000 $36,000 Ending $27,00 0 $16,00 0 $42,00 0

129. The total manufacturing cost for July was: A) $190,000 B) $114,000 C) $199,000 D) $81,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 4 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use............................ Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Add: Direct labor costs......................................... Add: Manufacturing overhead............................. Total manufacturing costs.................................... $ 36,000 76,000 112,000 27,000 85,000 33,000 81,000 $199,000

130. The cost of goods manufactured for July was: A) $196,000 B) $190,000 C) $202,000 D) $199,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use............................ Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Add: Direct labor costs......................................... Add: Manufacturing overhead............................. Total manufacturing costs.................................... Total manufacturing costs.................................... Add: Beginning work in process inventory.......... Subtotal................................................................ Deduct: Ending work in process inventory.......... Cost of goods manufactured................................. $ 36,000 76,000 112,000 27,000 85,000 33,000 81,000 $199,000 $199,000 13,000 212,000 16,000 $196,000

131. The cost of goods sold for July was: A) $244,000 B) $138,000 C) $190,000 D) $202,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use............................ Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Add: Direct labor costs......................................... Add: Manufacturing overhead............................. Total manufacturing costs.................................... Total manufacturing costs.................................... Add: Beginning work in process inventory.......... Subtotal................................................................ Deduct: Ending work in process inventory.......... Cost of goods manufactured................................. Beginning finished goods inventory.................... Add: Cost of goods manufactured........................ Cost of goods available for sale........................... Deduct: Ending finished goods inventory............ Cost of goods sold................................................ $ 36,000 76,000 112,000 27,000 85,000 33,000 81,000 $199,000 $199,000 13,000 212,000 16,000 $196,000 $ 36,000 196,000 232,000 42,000 $190,000

132. The net operating income for July was: A) $7,000 B) $60,000 C) $83,000 D) $9,000 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Raw materials used.............................................. Direct labor........................................................... Manufacturing overhead....................................... Total manufacturing costs.................................... Add: Beginning work in process inventory......... Subtotal................................................................ Deduct: Ending work in process inventory.......... Cost of goods manufactured................................. Beginning finished goods inventory.................... Add: Cost of goods manufactured........................ Goods available for sale....................................... Deduct: Ending finished goods inventory............ Cost of goods sold................................................ Sales........................................................ Cost of goods sold................................... Gross margin........................................... Selling and administrative expenses: Administrative expenses......................$29,000 Selling expenses................................... 24,000 Net operating income.............................. $36,000 76,000 112,000 27,000 $85,000 $ 85,000 33,000 81,000 199,000 13,000 212,000 16,000 $196,000 $ 36,000 196,000 232,000 42,000 $190,000 $250,000 190,000 60,000 53,000 $ 7,000

Use the following to answer questions 133-136: Management of Jarva Corporation has asked your help as an intern in preparing some key reports for May. The company started the month with raw materials inventories of $29,000. During the month, the company made raw materials purchases amounting to $72,000. At the end of the month, raw materials inventories totaled $33,000. Direct labor cost was $36,000 and manufacturing overhead cost was $57,000. The beginning balance in the work in process account was $24,000 and the ending balance was $16,000. The beginning balance in the finished goods account was $35,000 and the ending balance was $46,000. Sales totaled $220,000. Selling expense was $14,000 and administrative expense was $36,000. 133. The total manufacturing cost for May was: A) $93,000 B) $57,000 C) $165,000 D) $161,000 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 4 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use............................ Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Add: Direct labor costs......................................... Add: Manufacturing overhead............................. Total manufacturing costs.................................... $ 29,000 72,000 101,000 33,000 68,000 36,000 57,000 $161,000

134. The cost of goods manufactured for May was: A) $161,000 B) $165,000 C) $169,000 D) $153,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 4 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use............................ Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Add: Direct labor costs......................................... Add: Manufacturing overhead............................. Total manufacturing costs.................................... Total manufacturing costs.................................... Add: Beginning work in process inventory.......... Subtotal................................................................ Deduct: Ending work in process inventory.......... Cost of goods manufactured................................. $ 29,000 72,000 101,000 33,000 68,000 36,000 57,000 $161,000 $161,000 24,000 185,000 16,000 $169,000

135. The cost of goods sold for May was: A) $107,000 B) $180,000 C) $158,000 D) $209,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use............................ Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Add: Direct labor costs......................................... Add: Manufacturing overhead............................. Total manufacturing costs.................................... Total manufacturing costs.................................... Add: Beginning work in process inventory.......... Subtotal................................................................ Deduct: Ending work in process inventory.......... Cost of goods manufactured................................. Beginning finished goods inventory.................... Add: Cost of goods manufactured........................ Cost of goods available for sale........................... Deduct: Ending finished goods inventory............ Cost of goods sold................................................ $ 29,000 72,000 101,000 33,000 68,000 36,000 57,000 $161,000 $161,000 24,000 185,000 16,000 $169,000 $ 35,000 169,000 204,000 46,000 $158,000

136. The net operating income for May was: A) $77,000 B) $12,000 C) $62,000 D) $5,000 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 3 Level: Medium Solution: Beginning raw materials inventory...................... Add: Raw materials purchased............................. Raw materials available for use........................... Deduct: Ending raw materials inventory.............. Raw materials used.............................................. Raw materials used.............................................. Direct labor........................................................... Manufacturing overhead....................................... Total manufacturing costs.............