2024 – The Costing of Products and Services Use the following information to answer questions 1 and 2 At a
ANSWER THE FOLLOWING QUESTIONS USING (A,B,C,D) CORRECTLY – 2024
The Costing of Products and Services
Use the following information to answer questions 1 and 2
Actual overhead costs amounted
At a law firm, overhead is assigned to clients based on direct labor hours. At the beginning of 20X7, estimated overhead costs were $156,000 and estimated direct labor hours were 20,800. Actual overhead costs amounted to $166,400, and 20,904 direct labor hours were worked.
1. What predetermined overhead rate should the law firm use to apply overhead to clients? (Round to the nearest cent)
A. $7.46B. $7.50C. $7.96D. $8.00
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2. How much overhead should be applied to a client whose file notes 120 direct labor hours in 20×7? (Round to the nearest cent)
A. $$895.20B. $900.00C. $955.20D. $960.00
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3. Which of the following statements accurately describes cost flows in a manufacturing firm utilizing JIT?
A. Direct labor and direct materials are maintained in a WIP account for long periods of time.
B. Manufacturing overhead is recorded in the raw materials account.
C. There’s little need to maintain raw materials. WIP, or finished-goods accounts.
D. There’s no need to maintain a cost of goods sold account.
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Use the following information to answer question 4:
Direct materials used — $31,000
Direct labor — $18,000
Factory rent — $12,000
Equipment depreciation –factory –$2,000
Equipment depreciation –office — $750
Marketing expense — $2,500
Administrative expenses — $40,000
Units produced – 35,000
4. What are the total nonmanufacturing costs?
A. $43,250B. $57,250C. $63,000D. $106,250
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5. For a student who is considering housing options for next semester, cost, proximity to campus, and square feet of living area are all examples of
A. alternative solutionsB. relevant variablesC. problemsD. decision objectives
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Use the following information to answer questions 6, 7 and 8:
During 2007, JKL Manufacturing had the following costs:
Equipment depreciation – factory$2,000
Equipment depreciation – office$5,750
Marketing expense$2,500
Direct materials used$31,000
Direct labor$18,000
Administrative expenses$15,000
Factory rent$12,000
3,500 units were produced in 2007
6. What is the product cost per unit, rounded to the nearest dollar?
A. $15B. $18C. $20D. $25
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7. What are the total period costs for 2007?
A. $23,250B. $51,000C. $68,750D. $86,250
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8. What is the net income for 2007 if 3,000 units are sold for $35 each.
A. $23,250B.$27,750C. $51,000D. $105,000
9. Tom’s Thimbles, a manufacturing company, began the month with raw materials costing $9,000 on hand. Purchases during the month totaled $12,000. If $8,000 of raw materials were remaining at the end of the month, what was the amount used for production during the current month?
A. $4,000B. $11,000C. $13,000D. $29,000
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10. An employee who works 40 hours per week spent 3 hours talking about football and had 37 productive hours. The employee is paid $5 per hour and was paid for a full 40-hour week. In a job costing system, how would the labor costs be classified?
A. Direct labor $200B. Direct labor $185, Slack time $15C. Direct labor $185, Overhead $15
D. Overhead $200
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Answer questions 11 and 12 from the following information:
FactorsXenabox T.V.Bigscreen T.V.
Screen size50 inch50 inch
Picture qualitygreatgood
Cost$1,300$1,300
Delivery$50$50
11. Which of the following four factors is relevant to your decision?
A. Screen sizeB. Picture qualityC. CostD. Delivery charge
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12. Which of the following four factors is qualitative?
A. Screen sizeB. Picture qualityC. CostD. Delivery charge
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13. Which of the following statements best reflects the differences between the needs of internal users and the needs of external users of accounting information?
A. Accounting information for external users is more flexible.
B. Accounting information for internal users is more timely.
C. Accounting information for external users is more future-oriented.
D. Accounting information for internal users is more focused on the organization as a whole.
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Use the following information to answer question 14:
All information is for one month, and direct labor hours are the allocation base.
Direct material used-2,500 pounds @ $0.75 per pound
Direct labor-200 hrs; wage rate, $7.50 per hour; benefits, $1.50 per hour
Estimated monthly overhead-$5,000
Estimated monthly direct labor hours -250
Actual expenses:
Factory rent$1,750
Factory utilities$1,550
Advertising$1,250
Factory equipment depreciation$1,500
Sales commissions$1,250
14. What was the actual overhead?
A. $7,600B. $6,350C. $5,100D. $5,000
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15. Peterson Upholstery manufactures custom furniture. Peterson had just completed a job that required 20 yards of fabric at a cost of $15 per yard. Out of the 20 yards of fabric, 18 yards actually became a part of the completed project. The remaining 2 yards were considered normal spoilage in the production process. Which of the following statements is correct regarding the cost for this job?
A. Direct materials cost of $270 should be allocated to the job.
B. Direct materials cost of $300 should be allocated to the job.
C. Indirect materials cost of $270 should be allocated to the job.
D. Indirect materials cost of $300 should be allocated to the job.
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16. In its initial year of operation, Montoya Manufacturing started and completed 4,000 identical widgets and had 1,000 widgets that were 40% complete in work-in-process at the end of the year. Total production costs for the year were $55,000. What is the cost per equivalent unit?
A. $11.00B. $11.96C. $12.50D. $13.75
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17. Which of the following scenarios best describes an operational decision for an auto manufacturer?
A. Building a new assembly facility overseas to capture greater market share
B. Establishing a quality control program to build customer satisfaction and brand loyalty
C. Hiring and training welders to meet an annual production target
D. Diversifying the product line by acquiring a company chip manufacturer
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Use the following information to answer question 18:
Lil Chicken Farm calculates predetermined overhead rates for each department using the number of pens as the cost driver. In the feeding department, total overhead costs were 4,410 in 20×5, and are expected to total $5,060 in 20×6. There were 420 pens in 20×5 and plans for 460 pens in 20×6.
18. If the actual number of pens in 20×6 was 450 and actual overhead was $5,000. what was the amount of under- or overapplied overhead?,
A. $50 underappliedB. $275 underappliedC. $422.50 overappliedD. $684.50 overapplied
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Use the following wage and salary expense information for a dress shop to answer question 19:
Machine Operators$200,000
Quality control supervisors$100,000
Fabric cutters$75,000
Factory janitor$18,000
Company president$150,000
19. What is the amount of indirect labor incurred?
A. $75,000B. $118,000C. $250,000D. $543,000
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Use the following information to answer questions 20,21, and 22
The Drapery Company sells draperies suited for large or small windows and has decided to adopt an activity-based costing system. Last year the company incurred $800,000 in overhead costs related to the following activities:
ActivityAllocation BaseOverhead Cost
Purchasing# of purchase orders$300,000
Receiving# of shipments received$200,000
Sales# of sales orders$300,000
The activities for large and small window draperies were as follows:
LargeSmall
Purchase order5,00010,000
Shipments received7,50012,500
Sales orders6,5008,500
20. What is the overhead rate for sales?
A. $60B. $30C. $20D. $10
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21. How much of the receiving overhead should be assigned to the large draperies?
A. $75,000B. $100,000C. $125,000D. $200,000
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22. If a customer requested a bid on a specially designed drapery that would require five purchase orders, how much purchasing overhead would you include in the bid?
A. $25B. $50C. $100D. $125
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23. Cost of goods manufactured equals
A. beginning direct materials inventory plus all production costs incurred less ending direct material inventory.
B. beginning direct materials inventory plus all production costs incurred less ending work-in-process inventory.
C. beginning work-in-process inventory plus direct materials used plus direct labor used plus manufacturing overhead used less ending work-in-process inventory.
D. beginning work-in-process inventory plus direct materials used plus direct labor used plus manufacturing overhead used plus beginning finished goods inventory.
24. If a company is in the process of implementing an activity-based costing system, which cost driver would a purchasing department manager identify to allocate costs?
A. Amount of materialB. Number of receiptsC. Amount of labor hours D. Number of parts
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25. When considering housing options, if the cost of a dorm room and the cost of an apartment across the street are the same, then cost is
A. sunk B. an opportunity cost C. relevant D. not relevant
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