The Lee Company uses a job-order costing system. The following data were recorded for June:
Added During June—-
JobJune 1 WorkDirect Materials Direct Labor
Numberin Process
Inventory
235 $2,500 $600 $400
236 $1,500 $800 $1,000
237 $1,000 $1,200 $1,750
238 $800 $1,500 $2,250
Overhead is charged to production at 80% of direct materials cost. Jobs 235, 237, and 238 were completed during June and transferred to finished goods. Jobs 235 and 238 have been delivered to customers.
1. Lee Company’s work-in-process inventory balance on June 30 was
A. $9,450.
B. $4,100.
C. $3,300.
D. $3,940.
2. Assume there’s no beginning work-in-process inventory and the ending work-in-process inventory is 70% complete with respect to conversion costs. Under the weighted-average method, the number of equivalent units of production with respect to conversion costs would be
A. the same as the units started during the period.
B. the same as the units completed.
C. less than the units completed.
D. less than the units started during the period.
3. Cost of goods manufactured will usually include
A. some costs incurred during the prior period as well as costs incurred during the current period.
B. some period costs as well as some product costs.
C. only costs incurred during the current period.
D. only direct labor and direct materials costs.
4. An operation costing system is
A. identical to a job-order costing system, except that actual manufacturing overhead costs are traced to units of product.
B. identical to a process-costing system, except that actual manufacturing overhead costs are traced to units of product.
C. the same as a job-order system, except that direct materials costs are accounted for in the same way as in process costing.
D. the same as a process-costing system, except that direct materials costs are accounted for in the same way as in job-order
costing.
Sanker Inc. has provided the following data for the month of August. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.
Work in Finished Cost of GoodsTotal
ProcessGoodsSold
Direct materials $2,790 $7,680 $18,240 $28,710
Direct labor 9,700 19,200 45,600 74,500
Manufacturing
overhead applied 5,440 8,000 18,560 32,000
Total $17,930 $34,880 $82,400 $135,210
Manufacturing overhead for the month was overapplied by $5,000. The company allocates any underapplied or overapplied overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.
5. The work-in-process inventory at the end of August after allocation of any underapplied or overapplied overhead for the month is closest to
A. $18,780.
B. $18,593.
C. $17,080.
D. $17,267.
6. Freeman Company uses a predetermined overhead rate based on direct-labor hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated manufacturing overhead would be $150,000 and direct-labor hours would be 10,000. The actual figures for the year were $186,000 for manufacturing overhead and 12,000 direct-labor hours. The cost records for the year will show
A. overapplied overhead of $30,000.
B. underapplied overhead of $6,000.
C. underapplied overhead of $30,000.
D. overapplied overhead of $6,000.
The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just-completed year.
Sales $910
Raw materials, inventory, beginning $80
Raw materials, inventory, ending $20
Purchases of raw materials $100
Direct labor $130
Manufacturing overhead $200
Administrative expenses $160
Selling expenses $140
Work in process inventory, beginning $40
Work in process inventory, ending $10
Finished goods inventory, beginning $130
Finished goods inventory, ending $150
7. The cost of goods manufactured (finished) for the year (in thousands of dollars) was
A. $460.
B. $530.
C. $500.
D. $520.
Abis Corporation uses the weighted-average method in its process-costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were.
CostPercent Complete
Material costs $6,00050%
Conversion costs $9,90030%
A total of 9,200 units were started, and 8,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
Cost
Material costs$113,900
Conversion$322,500
The ending inventory was 80% complete with respect to materials and 20% complete with respect to conversion costs.
8. The cost per equivalent unit for conversion costs for the first department for the month is closest to
A. $40.77.
B. $37.68.
C. $38.83.
D. $33.24.
The following cost data pertain to the operations of Lefthand Department Stores, Inc., for the month of December.
Corporate legal office salaries $74,000
Shoe Department cost of sales,
Brentwood Store$35,000
Corporate headquarters building lease $78,000
Store manager’s salary
Brentwood Store$14,000
Shoe Department sales commissions,
Brentwood Store$ 5,000
Store utilities,
Brentwood Store$14,000
Shoe Department manager’s salary,
Brentwood Store$ 3,000
Central warehouse lease cost $10,000
Janitorial costs, Brentwood Store $8,000
The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood Store. The central warehouse serves all of the company’s stores.
9. What is the total amount of the costs listed above that are not direct costs of the Brentwood Store?
A. $43,000
B. $162,000
C. $36,000
D. $78,000
10. In September, one of the processing departments at Shenkel Corporation had a beginning work-in process inventory of $25,000 and an ending work-in-process inventory of $18,000. During the month, the cost of units transferred out from the department was $304,000. In the department’s cost reconciliation report for September, the total cost accounted for would be
A. $644,000.
B. $43,000.
C. $322,000.
D. $619,000.
11. The Sarbanes-Oxley Act of 2002 contains all of the following provisions except which one?
A. The audit committee of the board of directors of a company must hire, compensate, and terminate the public accounting firm that audits the company’s financial reports.
B. Severe penalties are established for altering or destroying documents that may eventually be used in an official proceeding.
C. Both the CEO and CFO must certify in writing that their company’s financial statements and accompanying disclosures fairly represent the results of operations.
D. A CFO must be a CPA or CMA.
The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just-completed year.
Sales $910
Raw materials, inventory, beginning $80
Raw materials, inventory, ending $20
Purchases of raw materials $100
Direct labor $130
Manufacturing overhead $200
Administrative expenses $160
Selling expenses $140
Work in process inventory, beginning $40
Work in process inventory, ending $10
Finished goods inventory, beginning $130
Finished goods inventory, ending $150
12. The cost of the raw materials used in production during the year (in thousands of dollars) was
A. $40.
B. $180.
C. $120.
D. $160.
Abis Corporation uses the weighted-average method in its process-costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were
Cost Percent Complete
Material costs $6,000 50%
Conversion costs$9,900 30%
A total of 9,200 units were started, and 8,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
Cost
Material costs $113,900
Conversion costs $322,500
The ending inventory was 80% complete with respect to materials and 20% complete with respect to conversion costs.
13. The total cost transferred from the first processing department to the next processing department during the month is closest to
A. $512,700.
B. $420,414.
C. $452,300.
D. $436,400.
14. The management of Baggerly Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The company’s controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine hours, and the estimated amount of the allocation base for the upcoming year is 81,000 machine hours. In addition, capacity is 95,000 machine hours, and the actual level of activity for the year is 84,900 machine hours.
All of the manufacturing overhead is fixed and is $6,617,700 per year. For simplicity, it’s assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It’s further assumed that this is also the actual amount of manufacturing overhead for the year. If the company bases its predetermined overhead rate on capacity, by how much was manufacturing overhead underapplied or overapplied?
A. $318,630 overapplied
B. $703,566 overapplied
C. $318,630 underapplied
D. $703,566 underapplied
15. Which of the following is not one of the five steps in the lean-thinking model discussed in the text?
A. Create a pull system that responds to customer orders.
B. Organize work arrangements around the flow of the business process.
C. Automate the business process.
D. Identify the business process that delivers value.
Abis Corporation uses the weighted-average method in its process-costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were
Cost Percent Complete
Material costs $6,000 50%
Conversion costs $9,900 30%
A total of 9,200 units were started, and 8,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
Cost
Material costs $113,900
Conversion costs $322,500
The ending inventory was 80% complete with respect to materials and 20% complete with respect to conversion costs.
16. The cost per equivalent unit for materials for the month in the first processing department is closest to
A. $11.82.
B. $11.99.
C. $12.44.
D. $11.39.
17. Assume there’s no beginning work-in-process inventory and that the ending work-in-process inventory is 100% complete with respect to materials costs. The number of equivalent units with respect to materials costs under the weighted-average method is
A. less than the number of units put into production.
B. less than the number of units completed.
C. the same as the number of units completed.
D. the same as the number of units put into production.
Sanker Inc. has provided the following data for the month of August. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.
Work inFinished Costs ofTotal
ProcessGoodsGoods Sold
Direct materials $2,790 $7,680 $18,240 $28,710
Direct labor 9,700 19,200 45,600 74,500
Manufacturing
overhead applied 5,440 8,000 18,560 32,000
Total $17,930 $34,880 $82,400 $135,210
Manufacturing overhead for the month was overapplied by $5,000. The company allocates any underapplied or overapplied overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.
18. The journal entry to record the allocation of any underapplied or overapplied overhead for August would include
A. credit to finished goods of $34,880.
B. debit to finished goods of $1,250.
C. credit to finished goods of $1,250.
D. debit to finished goods of $34,880.
The following cost data pertain to the operations of Lefthand Department Stores, Inc., for the month of December.
Corporate legal office salaries $74,000
Shoe Department cost of sales,
Brentwood Store$35,000
Corporate headquarters building lease $78,000
Store manager’s salary
Brentwood Store$14,000
Shoe Department sales commissions,
Brentwood Store$5,000
Store utilities,
Brentwood Store$14,000
Shoe Department manager’s salary,
Brentwood Store$3,000
Central warehouse lease cost $10,000
Janitorial costs, Brentwood Store $8,000
The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood Store. The central warehouse serves all of the company’s stores.
19. What is the total amount of the costs listed above that are direct costs of the Shoe Department?
A. $35,000
B. $43,000
C. $40,000
D. $79,000
Malaviya Corporation uses the FIFO method in its process-costing system. Operating data for the Casting Department for the month of September appear below:
Units % complete with respect to conversion
Beginning work in process inventory 17,000 40%
Transferred in from prior department
During September 72,000
Ending work in process inventory 18,00030%
20. According to the company’s records, the conversion cost in the beginning work-in-process inventory was $63,104 at the beginning of September. Additional conversion costs of $654,240 were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs for September?
A. $8.060
B. $9.400
C. $9.280
D. $9.087
