Accounting Cost 1 chapter 1-4 Midterm

1.     Bert's Bottles provided the following expense information for July:

 

Assembly-line workers' wages	$56,800
Depreciation on factory equipment	$35,900
Caps for bottles	$3,100
Plastic bottles	$52,000
Reconfiguring the assembly line	$123,200
Salaries of salespeople	$63,600
Customer support hotline	$12,200
Salaries of research scientists	$65,800
Delivery expenses	$40,500
Customer toll-free order line	$8,400

 

What is the total cost for the production category of the value chain?

A) $461,500

B) $309,300

C) $149,300

D) $147,800

D) $147,800

2. A product support hotline would be considered

A) marketing.

B) distribution.

C) production or purchases.

D) customer service.

D) customer service.

3.     Classify each of the following business costs into one of the six value chain elements.

A.        cost of a commercial during a TV program    

marketing

3.     Classify each of the following business costs into one of the six value chain elements.

 B.        cost of shipping goods to customers

distribution

3.     Classify each of the following business costs into one of the six value chain elements.

 C.        costs associated with repairing products under warranty

customer services

3.     Classify each of the following business costs into one of the six value chain elements.

 D.        costs of developing a new product

R&D

3.     Classify each of the following business costs into one of the six value chain elements.

 E.         cost of making a prototype of a new product

Design

3.     Classify each of the following business costs into one of the six value chain elements.

 F.         cost of labor for machine operator in factory

Production - DL

4.Which statement describes direct materials in a manufacturing setting?

A) Direct materials are used to determine total manufacturing overhead. -Ind mat

B) Direct materials are used to determine total product costs.

C) Direct materials cannot be separately and conveniently traced.

D) Direct materials do not become part of the finished product.

 

B) Direct materials are used to determine total product costs.

5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

 

A) …… rent expense on factory building

3. manufacturing overhead

5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

B)  ________ sales supplies used

2.   period costs

5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

C)  ________ factory supplies used

3.   manufacturing overhead

5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

D) ________ indirect materials used

3.   manufacturing overhead

5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

E)  ________ wages of assembly line personnel

4.   direct labor

5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

F)  _______  cost of primary material used to make product

1.   direct materials

5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

G) _______  depreciation expense on office equipment

2.   period costs

5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

H) ___  rent expense on office facilities

2.   period costs

5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

I)   _______  insurance expired on factory equipment

3.   manufacturing overhead

5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

J) _______    utilities incurred in the office

2.   period costs

5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

K) _______  advertising expense

2.   period costs

5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

L)  _______   taxes paid on factory building

3.   manufacturing overhead

6.Certain materials used in a manufacturing plant cannot be traced to a specific unit. What are these materials called?

A) General materials

B) Direct materials

C) Indirect materials

D) Finished materials

C) Indirect materials

7.Rent on a factory building would be considered to be a ________ cost.

A) product

B) period

C) direct

D) none of the above

A) product

8. State whether each company below would be more likely to use a job costing system or a process costing system.

 

A)   ________ soft drink bottler

Process

8. State whether each company below would be more likely to use a job costing system or a process costing system.

B)    ________       yacht builder

Job

8. State whether each company below would be more likely to use a job costing system or a process costing system.

C)    ______        hospital

Job

8. State whether each company below would be more likely to use a job costing system or a process costing system.

D)   ________   printing firm

Both

8. State whether each company below would be more likely to use a job costing system or a process costing system.

E)    ________ flour mill

Process

9. True or False: For a manufacturing system, inventory flows from raw materials inventory to work in process inventory to finished goods inventory.

True

10.True or False: A job cost record is a document that accumulates direct materials costs, direct labor costs and manufacturing overhead costs assigned to each individual job.

True

11.True or False: Manufacturing overhead may include depreciation on the factory plant and equipment, utilities to run the plant, property taxes and insurance on the plant, and salaries of plant janitors.

True

12.Shoe Biz allocates overhead based on machine hours. Selected data for the most recent year follow.

 

Estimated manufacturing overhead cost	$235,200
Actual manufacturing overhead cost	$244,300
Estimated machine hours	20,900
Actual machine hours	22,700

 

The estimates were made as of the beginning of the year, while the actual results were for the entire year.

The predetermined manufacturing overhead rate per machine hour is closest to ________. (Round your answer to the nearest cent.)

A) $10.36

B) $11.25

C) $10.76

D) $11.69

B) $11.25

13.Cabinets Unlimited uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $50 per machine hour, while the Sanding Department uses a departmental overhead rate of $25 per direct labor hour. Job 603 used the following direct labor hours and machine hours in the two departments:

 

Actual results	Assembly Department	Sanding Department
Direct labor hours used	9	7
Machine hours used	10	8

 

The cost for direct labor is $30 per direct labor hour and the cost of the direct materials used by Job 603 is $1,500.

 

How much manufacturing overhead would be allocated to Job 603 using the departmental overhead rates?

A) $675                         

B) $530                            

C)$920                                                                             D) $480

A) $675

14.Cabinets Unlimited uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $45 per machine hour, while the Sanding Department uses a departmental overhead rate of $25 per direct labor hour. Job 542 used the following direct labor hours and machine hours in the two departments:

 

Actual results	Assembly Department	Sanding Department
Direct labor hours used	7	3
Machine hours used	11	5

                                               

The cost for direct labor is $35 per direct labor hour and the cost of the direct materials used by Job 542 is $1,200.                                                                                                                                                                        

What was the total cost of Job 542 if Lucas Industries used the departmental overhead rates to allocate manufacturing overhead?

A) $1,585

B) $2,055

C) $2,120

D) $1,550

C) $2,120

15.Relax, Don't Do It Company manufactures lawn chairs using an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of June:

 

Activity	Estimated Indirect Activity Costs	Allocation Base	Estimated Quantity of Allocation Base
Materials handling	$15,000	Number of parts	5,600 parts = $2.68
Assembling	$15,500	Number of parts	5,600 parts= $2.77
Packaging	$5,300	Number of lawn chairs	700 lawn chairs = $7.57

 

Each lawn chair consists of 8 parts; the total direct materials cost per lawn chair is $13.

 

What is the total cost of materials handling and assembling for each lawn chair? (Round intermediate and the final answer to the nearest cent.)

A) $64.14                                  

B) $43.57                                            

C) $35.14                                                   

D) $22.14

B) $43.57

16. What is the total manufacturing cost per lawn chair? Compute:  

Ch1-1 A manager has how many primary responsibilities?

3

Ch1-3 Name all 3 of the primary responsibilities required by a manager.

Planning, directing, and controlling

Ch1-4 Cost accounting is also referred to as ____________ accounting.

 

managerial

Ch1-5 The primary responsibility of evaluating results of business ops vs the plan and then making adjustments is _________.

 

controlling

Ch1-6 Setting goals and objectives for the company and determining how to achieve them is ______.

planning

Ch1-7 Overseeing the company’s day to day operations is ____

directing

Ch1-8 Financial vs Managerial: Information is required by an outside group/government agency such as the SEC.

Financial

Ch1-9 Financial vs Manag: Independent CPAs audit and verify information.

Financial

Ch1-10 Fin vs Manag: Reports are prepared as needed by managers

Managerial

Ch1-11 Fin vs Manag: A report is prepared in segments, such as products and/or customers.

Managerial

Ch1-12 Fin vs Manag: The reports are used by internal management.

Managerial

Ch1-13 Fin vs Manag: The information must be relevant.

Managerial

Ch1-14 Business acumen means…

understanding business situations/ knowledge

Ch1-15 The controller reports to the

CFO

Ch1-16 The CFO reports to the

CEO

Ch1-17 The stockholders elect a ________ to oversee the corporation.

 

Board of Directors

Ch1-18 Employees representing various functions of the company are _________ teams.

cross functional

Ch1-19 Ethic Std: Disclose all relevant information and communicate fairly.

Credibility

Ch1-20 Ethic Std: Abstain from engaging in or supporting any activity that might discredit the profession.

Integrity

Ch1-21 Ethic Std: Avoid conflicts of interest and communicate any apparent conflicts of interest.

Integrity

Ch1-22 Ethic Std: Continue to develop your knowledge and skills

Competence

Ch1-23 Ethic Std: Refrain from using or giving out information to your friends or family for unethical or illegal advantage.

Confidentiality

Ch1-24 Ethic Std: Joe, who is an excellent cost accountant, added marketing and sales expenses to Cost of Goods Sold on the income statement.

Competence

Ch1-25 Ethic Std: Jackie does not disclose to her employer that her brother and dad are co-owners of a company that is bidding on a major contract with her company.

Integrity

Ch1-26 Ethic Std: Jenni changed the way MOH is allocated to divisions, from DL hours to DL cost, for the better of the company—however she failed to note this change or disclose this change to all other employees and the management.

Credibility

Ch1-27: Ethic Std: provide decision support information and recommendations that are accurate, clear, concise and timely.

Competence

Ch1-28: The goal of producing near perfection with less than 3.4 defects per one million opportunities is called

Six Sigma

Ch1-29: The ability to meet the needs of the present without compromising the ability of future generations to meet their own needs.

Sustainability

Ch1-30: This was enacted in 2002 to restore trust in publicly traded corporations, their management, their fin stmts and their auditors.

SOX = Sarbannes Oxley Act

Ch1-31: People, Planet or Profit: In 2015-PepsiCo increased its dividend to shareholders

Profit or Economic

Ch1-32: PepsiCo strengthened its Responsible Advertising to Children policy.

People = social

Ch1-33: In 2014, 93% of PepsiCo’s waste was not sent to landfills.

Planet = environmental

Ch2-1: The Value Chain: List the 6 activities in the chain in the correct order.

R&D, Design, Production/purchases, Marketing & Sales, Distribution, Customer Service

Ch2-2: Support provided after the sale (warranty).

Customer service

Ch2-3: Promotion and advertising of products or services.

Marketing/ sales

Ch2-4: The process for new and/or improved products or services.

R&D

Ch2-5: Resources used to mfg a finished product.

Production

Ch2-6: This cost can be traced to the cost object.

Direct cost

Ch2-7: This cost related to the cost object but cannot be specifically traced to it.

Indirect cost

Ch2-8: Product costs appear on which financial statement and in which account.

Product not sold = Finished Goods Inventory on Balance Sheet

Product is Sold = Cost of Goods Sold on Income Statement

Ch2-9: Period costs appear on which financial statement and are classified as?

Income statement as operating expenses

Ch2-10: MOH includes what 3 items and give 4 examples of each one.

Indirect materials: paint, glue, nut, tape

Indirect labor: plant supervisor, plant forklift driver, plant maintenance, plant security

Indirect Other Manufacturing Costs: plant rent, plant insurance, plant depreciation, plant taxes

Ch2-14: Prime costs include.

Direct materials plus Direct labor

Ch2-15: Conversion costs are.

Direct Labor and Manufacturing Overhead cost

Ch2-16: Operating income is simply the company’s earnings BEFORE

Interest and income taxes

Ch2-17: Bar coding is used in which inventory system.

Perpetual

Ch2-18: Name the 3 Inventory accounts a manufacturer’s product costs flow through before they become part of COGS.

Raw materials inventory, WIP inventory, Finished Goods Inventory

Ch2-19: Mfg cost behavior: Direct materials are normally fixed, variable or a mixture of both?

Variable

Ch2-20: Mfg cost behavior: Direct labor is normally fixed, Variable or a mixture of both?

Variable

Ch2-21: Mfg cost behavior: MOH is normally fixed, variable or a mixture of both?

Both

Ch3-1: Which costing system is known as the ‘simple system’? (ABC or Job)

Job costing system

Ch3-2: Mass producing similar units through a series of uniform production steps is known as

Process costing

Ch3-3: List 2 elements of the products produced in a JOB costing system.

Individual units or small batches and Unique items

Ch3-4: Term: A list of all of the raw/direct materials needed to mfg a job.

BOM = Bill of materials

Ch3-5: Term: Products normally kept on hand in order to quickly fill customer orders.

Stock inventory

Ch3-6: Term: Written or electronic document listing the quantity and cost of all units used and received, and the balance currently in stock.

Raw materials record

Ch3-7: Term: Written or electronic document requesting specific materials be transferred to the production floor.

Materials requisition

Ch3-8: Term: Written or electronic document authorizing the purchase of specific raw materials from a specific supplier.

Purchases order

Ch3-10: Term: This report is typically a duplicate of the PO without the quantity pre-listed on the form.

Receiving Report

Ch3-11: Term: Written or electronic document indicating the quantity and types of inventory that will be mfged during a specified time frame.

Production schedule

Ch3-12: (over or under) Amount of MOH allocated to jobs is less than the amount of MOH actually incurred.

Under

Ch3-13: Written or electronic document that lists DM, DL and MOH assigned to each job.

Job cost record

Ch3-14: T/F – A cost-plus price is determined by adding a markup to the cost.

True

Ch3-15: T/F – Job cost information is not useful for assessing the profitability of different products.

True