Objective 17.6
1) An operation costing system would be applicable to:
A) batches of similar products where each batch is a variation of a single design
B) the construction of a bridge
C) a suit-making operation
D) Both A and C are correct.
2) Managers find operation costing useful in cost management because it:
A) often results in profit maximization
B) results in cost minimization
C) captures the financial impact of the control of physical processes
D) All of these answers are correct.
3) A hybrid-costing system blends characteristics from both job-costing and process costing systems.
4) An operation-costing system is a hybrid-costing system applied to batches of similar, but NOT identical, products.
5) Ford Motor Company is said to use a hybrid costing system. What is a hybrid costing system, and what would be the advantage to Ford of such a system?
Another important part of profitability is making a product different than other vehicles so buyers will be attracted to purchase the vehicle. Vehicles that are different can command a higher price and increase profitability. Costs are accumulated using process costing up to the point where the product is differentiated. Job costing is used from that point forward.
Objective 17.A
Answer the following questions using the information below:
Hudson Dock Company manufactures boat docks on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.
Data for the Assembly Department for May 20X5 are:
Work in process, beginning inventory:70 units
Direct materials (100% complete)
Conversion costs (25% complete)
Units started during May40 units
Work in process, ending inventory:10 units
Direct materials (100% complete)
Conversion costs (50% complete)
Costs for May:
Standard costs for Assembly:
Direct materials$4,000 per unit
Conversion costs$16,000 per unit
Work in process, beginning inventory:
Direct materials$140,000
Conversion costs$260,000
1) What is the balance in ending work-in-process inventory?
A) $82,000
B) $120,000
C) $155,000
D) $170,000
2) Which of the following journal entries records the Assembly Department’s conversion costs for the month, assuming conversion costs are 20% higher than expected?
A) Assembly Department Conversion Cost Control1,680,000
Various accounts1,680,000
B) Materials Inventory1,680,000
Assembly Department Conversion Cost Control1,680,000
C) Assembly Department Conversion Cost Control1,400,000
Materials Inventory1,400,000
D) Materials Inventory1,680,000
Work in Process ? Assembly1,680,000
3) Which of the following journal entries properly records the assignment of conversion costs to work-in-process inventory and the conversion-cost variances of the Assembly Department, assuming that conversion costs are 20% higher than expected?
A) Work in Process ? Assembly1,680,000
Conversion-Cost Variances280,000
Assembly Department Conversion Cost Control1,400,000
B) Work in Process ? Assembly1,680,000
Direct Materials Variances280,000
Testing Department Conversion Cost Control1,400,000
C) Work in Process ? Assembly1,400,000
Conversion-Cost Variances280,000
Assembly Department Conversion Cost Control1,680,000
D) Work in Process ? Testing1,400,000
Assembly Department Conversion Cost Control1,400,000
4) Which of the following journal entries properly records direct materials requisitions for the work-in-process inventory and direct materials variances, assuming that the Assembly Department used 10% less materials than expected?
A) Work in Process ? Assembly160,000
Assembly Department Materials Cost Control160,000
B) Work in Process ? Assembly160,000
Direct Materials Variance16,000
Assembly Department Materials Cost Control144,000
C) Work in Process ? Assembly144,000
Assembly Department Materials Cost Control144,000
D) Work in Process ? Assembly144,000
Direct Materials Variances16,000
Assembly Department Materials Cost Control160,000
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