Exam 2: Pre-Test Questions

BUS 548 SU 2012 Pre-Test #2- Key 1. The use of predetermined overhead rates in a job-order cost system makes it possible to estimate the total cost of a given job as soon as production is completed.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 03 #1
Learning Objective: 03-01 Compute a predetermined overhead rate
Level: Easy 2. The process of assigning overhead cost to jobs is known as overhead application.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 03 #5
Learning Objective: 03-02 Apply overhead cost to jobs using a predetermined overhead rate
Level: Easy 3. The cost of a completed
job in a job-order costing system typically consists of the actual direct materials cost of the job, the actual direct labor cost of the job, and the actual manufacturing overhead cost of the job.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 03 #6
Learning Objective: 03-02 Apply overhead cost to jobs using a predetermined overhead rate
Level: Medium 4. A debit balance in the Manufacturing Overhead account at the end of the year means that manufacturing overhead is overapplied.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 03 #7
Learning Objective: 03-05 Use T-accounts to show the flow of costs in a job-order costing system
Learning Objective: 03-07 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts
Level: Medium 5. Underapplied or overapplied manufacturing overhead represents the difference between actual overhead costs and applied overhead costs.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 03 #11
Learning Objective: 03-07 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts
Level: Easy 6. In a process costing system, overhead costs are traced to units of product as they are incurred.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 04 #2
Learning Objective: 04-01 Record the flow of materials; labor; and overhead through a process costing system
Level: Easy 7.
A process costing system would be best suited for production of a large quantity of a homogeneous product.
TRUE

AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 04 #4
Learning Objective: 04-01 Record the flow of materials; labor; and overhead through a process costing system
Level: Easy 8. When computing the cost per equivalent unit, it is not necessary to consider the percentage completion of the units in beginning inventory under the weighted-average method.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 04 #11
Learning Objective: 04-03 Compute the cost per equivalent unit using the weighted-average method
Level: Medium 9. The weighted-average method of process costing can only be used if materials are added at the beginning of the production process.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms:
Comprehension
Garrison - Chapter 04 #9
Learning Objective: 04-02 Compute the equivalent units of production using the weighted-average method
Level: Medium 10. Under variable costing, all variable costs are treated as product costs.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 06 #1
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Medium 11. The unit product cost under absorption costing does not include fixed manufacturing overhead cost.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 06 #3
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Medium 12. Variable manufacturing overhead costs are treated as period costs under both absorption and variable costing.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 06 #4
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy 13. Contribution margin and segment margin mean the same thing.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 06 #8
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions
Level: Medium 14. The salary paid to a store manager is a traceable fixed expense of the store.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 06 #11
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions
Level: Medium 15. Only those costs that would disappear over time if a segment were eliminated should be considered traceable costs of the segment.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 06 #17
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions
Level: Easy 16. A segment is any portion or activity of an organization about which a manager seeks revenue, cost, or profit data.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 06 #19
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions
Level: Easy 17. Unit-level activities are performed each time a unit is produced.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 07 #1
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Level: Easy 18. Costs classified as batch-level costs should depend on the number of batches processed rather than on the number of units produced, the number of units sold, or other measures of volume.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 07 #3
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Level: Easy 19. Customer-level activities relate to specific customers and are not tied to any specific products.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 07 #4
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Level: Easy 20. In activity-based costing, some manufacturing costs may be excluded from product costs.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 07 #10
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Level: Easy 21. In activity-based costing, there are a number of activity cost pools, each of which is allocated to products and other costing objects using its own unique measure of activity.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 07 #11
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Level: Easy 22. Which of the following is the correct formula to compute the predetermined overhead rate?
A. Estimated total units in the allocation base divided by estimated total manufacturing overhead costs.
B. Estimated total manufacturing overhead costs divided by estimated total units in the allocation base.
C. Actual total manufacturing overhead costs divided by estimated total units in the allocation base.
D. Estimated total manufacturing overhead costs divided by actual total units in the allocation base.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 03 #15
Learning Objective: 03-01 Compute a predetermined overhead rate
Level: Easy 23. Which of the following would probably be the least appropriate allocation base for allocating overhead in a highly automated manufacturer of specialty valves?
A. Machine-hours
B. Power consumption
C. Direct labor-hours
D. Machine setups

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 03 #16
Learning Objective: 03-01 Compute a predetermined overhead rate
Level: Hard 24. What document is used to determine the actual amount of direct labor to record on a job cost sheet?
A. Time ticket
B. Payroll register
C. Production order
D. Wages payable account

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 03 #17
Learning Objective: 03-03 Compute the total cost and average cost per unit of a job
Level: Easy 25. The balance in the Work in Process account equals:
A. the balance in the Finished Goods inventory account.
B. the balance in the Cost of Goods Sold account.
C. the balances on the job cost sheets of uncompleted jobs.
D. the balance in the Manufacturing Overhead account.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 03 #23
Learning Objective: 03-05 Use T-accounts to show the flow of costs in a job-order costing system
Level: Easy 26. In a job-order costing system, indirect materials that have been previously purchased and that are used in production are recorded as a debit to:
A. Work in Process inventory.
B. Manufacturing Overhead.
C. Finished Goods inventory.
D. Raw Materials inventory.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 03 #24
Learning Objective: 03-05 Use T-accounts to show the flow of costs in a job-order costing system
Level: Easy 27. Martinez Aerospace Company uses a job-order costing system. The direct materials for Job #045391 were purchased in July and put into production in August. The job was not completed by the end of August. At the end of August, in what account would the direct material cost assigned to Job #045391 be located?
A. Raw materials inventory
B. Work in process inventory
C. Finished goods inventory
D. Cost of goods manufactured

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Knowledge
Garrison - Chapter 03 #25
Learning Objective: 03-05 Use T-accounts to show the flow of costs in a job-order costing system
Level: Easy 28. Daguio Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $224,580. At the end of the year, actual direct labor-hours for the year were 18,200 hours, manufacturing overhead for the year was underapplied by $12,100, and the actual manufacturing overhead was $219,580. The predetermined overhead rate for the year must have been closest to:
A. $11.40 per machine-hour
B. $12.34 per machine-hour
C. $12.06 per machine-hour
D. $10.53 per machine-hour
Manufacturing overhead applied = Actual overhead - Underapplied overhead
= $219,580 - $12,100
= $207,480

Predetermined overhead rate = Estimated total manufacturing overhead Estimated total amount of the allocation base = $207,480 18,200 direct labor-hours = $11.40 per direct labor-hour

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 03 #29
Learning Objective: 03-01 Compute a predetermined overhead rate
Learning Objective: 03-02 Apply overhead cost to jobs using a predetermined overhead rate
Learning Objective: 03-07 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts
Level: Hard 29. Wert Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. Last year, the company's estimated manufacturing overhead was $1,200,000 and its estimated level of activity was 50,000 direct labor-hours. The company's direct labor wage rate is $12 per hour. Actual manufacturing overhead amounted to $1,240,000, with actual direct labor cost of $650,000. For the year, manufacturing overhead was:
A. overapplied by $60,000
B. underapplied by $60,000
C. overapplied by $40,000
D. underapplied by $44,000
Predetermined overhead rate = Estimated total manufacturing overhead Estimated total amount of the allocation base = $1,200,000 50,000 direct labor-hours
= $24.00 per direct labor-hour

Wage rate per hour = Actual direct labor cost Actual direct labor-hours
Actual direct labor-hours = Actual direct labor cost Wage rate per hour
= $650,000 $12.00 per direct labor-hour
= 54,166.67 direct labor-hours

Manufacturing overhead applied = Predetermined overhead rate Actual direct labor-hours
= $24.00 per direct labor-hour 54,166.67 direct labor-hours
= $1,300,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 03 #30
Level: Medium 30. Crinks Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 11,200 hours and the total estimated manufacturing overhead was $259,840. At the end of the year, actual direct labor-hours for the year were 10,800 hours and the actual manufacturing overhead for the year was $254,840. Overhead at the end of the year was:
A. $4,280 overapplied
B. $9,280 overapplied
C. $9,280 underapplied
D. $4,280 underapplied
Predetermined overhead rate = Estimated total manufacturing overhead Estimated total amount of the allocation base
= $259,840 11,200 direct labor-hours
= $23.20 per direct labor-hour

Manufacturing overhead applied = Predetermined overhead rate Actual direct labor-hours
= $23.20 per direct labor-hour 10,800 direct labor-hours
= $250,560

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 03 #31
Learning Objective: 03-01 Compute a predetermined overhead rate
Learning Objective: 03-02 Apply overhead cost to jobs using a predetermined overhead rate
Learning Objective: 03-07 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts
Level: Medium 31. At the beginning of the year, manufacturing overhead for the year was estimated to be $267,500. At the end of the year, actual direct labor-hours for the year were 22,100 hours, the actual manufacturing overhead for the year was $262,500, and manufacturing overhead for the year was overapplied by $13,750. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:
A. 22,100 direct labor-hours
B. 19,900 direct labor-hours
C. 21,000 direct labor-hours
D. 21,400 direct labor-hours
Manufacturing overhead applied = Actual overhead + Overapplied overhead
= $262,500 + $13,750
= $276,250

Manufacturing overhead applied = Predetermined overhead rate Actual direct labor-hours
Predetermined overhead rate = Manufacturing overhead applied Actual direct labor-hours
= $276,250 22,100 direct labor-hours
= $12.50 per direct labor-hour

Predetermined overhead rate = Estimated total manufacturing overhead Estimated direct labor-hours
Estimated direct labor-hours = Estimated total manufacturing overhead Predetermined overhead rate
= $267,500 $12.50 per direct labor-hour
= 21,400 direct labor-hours

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 03 #32
Learning Objective: 03-01 Compute a predetermined overhead rate
Learning Objective: 03-02 Apply overhead cost to jobs using a predetermined overhead rate
Learning Objective: 03-07 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts
Level: Hard 32. Washtenaw Corporation uses a job-order costing system. The following data are for last year:

Washtenaw applies overhead using a predetermined rate based on direct labor-hours. What predetermined overhead rate was used last year?
A. $3.55 per direct labor-hour
B.
$3.25 per direct labor-hour
C. $3.08 per direct labor-hour
D. $3.36 per direct labor-hour
Predetermined overhead rate = Estimated total manufacturing overhead Estimated total amount of the allocation base
= $39,000 12,000 direct labor-hours
= $3.25 per direct labor-hour

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 03 #37
Learning Objective: 03-01 Compute a predetermined overhead rate
Level: Medium 33. The following data have been recorded for recently completed Job 674 on its job cost sheet. Direct materials cost was $2,039. A total of 32 direct labor-hours and 175 machine-hours were worked on the job. The direct labor wage rate is $14 per labor-hour. The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $15 per machine-hour. The total cost for the job on its job cost sheet would be:
A. $2,967
B. $2,487
C. $2,068
D. $5,112

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 03 #45
Learning Objective: 03-02 Apply overhead cost to jobs using a predetermined overhead rate
Learning Objective: 03-03 Compute the total cost and average cost per unit of a job
Level:
Easy 34. Pinnini Co. uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, Pinnini Company incurred $225,000 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was overapplied $14,500 for the year. If the predetermined overhead rate was $5.00 per direct labor-hour, how many hours did the company work during the year?
A. 45,000 hours
B. 47,900 hours
C. 42,100 hours
D. 44,000 hours
Overapplied manufacturing overhead= Manufacturing overhead applied - Actual manufacturing overhead
Manufacturing overhead applied = Actual manufacturing overhead + Overapplied manufacturing overhead
= $225,000 + $14,500
= $239,500

Manufacturing overhead applied = Predetermined overhead rate Actual direct labor-hours
Actual direct labor-hours = Manufacturing overhead applied Predetermined overhead rate
= $239,500 $5.00 per direct labor-hour
= 47,900 direct labor-hours

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 03 #63
Learning Objective: 03-02 Apply overhead cost to jobs using a predetermined overhead rate
Learning Objective: 03-07 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts
Level: Medium 35. Jurper Corporation used $150,000 of direct materials during April. At the end of April, Jurper's direct materials inventory was $25,000 more than it was at the beginning of the month. Direct materials purchases during the April amounted to:
A. $0
B. $125,000
C. $150,000
D. $175,000
Beginning materials inventory + Direct materials purchases = Ending materials inventory + Direct materials used
Direct material purchases = Direct materials used + Increase in materials inventory
= $150,000 + $25,000
= $175,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 03 #67
Learning Objective: 03-05 Use T-accounts to show the flow of costs in a job-order costing system
Level: Medium 36. Under Lamprey Company's job-order costing system, manufacturing overhead is applied to Work in Process inventory using a predetermined overhead rate. During January, Lamprey's transactions included the following:

Lamprey Company had no beginning or ending inventories. What was the cost of goods manufactured for January?
A. $302,000
B. $310,000
C. $322,000
D. $330,000
Cost of goods manufactured = Direct materials + Direct labor + Manufacturing overhead applied + Beginning work in process inventory- Ending work in process inventory
= $90,000 + $107,000 + $113,000 + $0 - $0
= $310,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 03 #70
Learning Objective: 03-06 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement
Level: Medium
Source: CMA, adapted 37. A process costing system:
A. uses a separate Work in Process account for each processing department.
B. uses a single Work in Process account for the entire company.
C. uses a separate Work in Process account for each type of product produced.
D. does not use a Work in Process account in any form.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 04 #15
Learning Objective: 04-01 Record the flow of materials; labor; and overhead through a process costing system
Level: Medium 38. Equivalent units for a process costing system using the weighted-average method would be equal to:
A. units completed during the period and transferred out.
B. units started and completed during the period plus equivalent units in the ending work in process inventory.
C. units completed during the period less equivalent units in the beginning inventory, plus equivalent units in the ending work in process inventory.
D. units completed during the period plus equivalent units in the ending work in process inventory.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 04 #18
Learning Objective: 04-02 Compute the equivalent units of production using the weighted-average method
Level: Medium 39. The Nichols Company uses the weighted-average method in its process costing system. The company recorded 29,500 equivalent units for conversion costs for November in a particular department. There were 6,000 units in the ending work in process inventory on November 30, 75% complete with respect to conversion costs. The November 1 work in process inventory consisted of 8,000 units, 50% complete with respect to conversion costs. A total of 25,000 units were completed and transferred out of the department during the month. The number of units started during November in the department was:
A. 24,500 units
B. 23,000 units
C. 27,000 units
D. 21,000 units
Beginning work in process inventory + Units started into production = Ending work in process inventory + Units completed and transferred out
Units started into production = Ending work in process inventory + Units completed and transferred out - Beginning work in process inventory
= 6,000 + 25,000 - 8,000 = 23,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #20
Learning Objective: 04-01 Record the flow of materials; labor; and overhead through a process costing system
Level: Medium 40. The following information pertains to Yap Company's Grinding Department for the month of April:

All materials are added at the beginning of the process. Using the weighted-average method, the cost per equivalent unit for materials is closest to:
A. $0.59
B. $0.55
C. $0.45
D. $0.43

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #24
Learning Objective: 04-02 Compute the equivalent units of production using the weighted-average method
Learning Objective: 04-03 Compute the cost per equivalent unit using the weighted-average method
Level: Medium
Source: CMA, adapted 41. Hardouin Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 22,000 units in its beginning work in process inventory that were 20% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $23,320. An additional 97,000 units were started into production during the month and 101,000 units were completed in the Welding Department and transferred to the next processing department. There were 18,000 units in the ending work in process inventory of the Welding Department that were 40% complete with respect to conversion costs. A total of $529,380 in conversion costs were incurred in the department during the month.
What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.)
A. $5.300
B. $5.458
C. $4.603
D. $5.108

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #25
Learning Objective: 04-02 Compute the equivalent units of production using the weighted-average method
Learning Objective: 04-03 Compute the cost per equivalent unit using the weighted-average method
Level: Medium 42. Scheney Company uses the weighted-average method in its process costing system. The company's work in process inventory on March 31 consisted of 20,000 units. The units in the ending work in process inventory were 100% complete with respect to materials and 70% complete with respect to labor and overhead. If the cost per equivalent unit for March was $2.50 for materials and $4.75 for labor and overhead, the total cost in the March 31 work in process inventory was:
A. $145,000
B. $116,500
C. $101,500
D. $78,500

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #27
Learning Objective: 04-02 Compute the equivalent units of production using the weighted-average method
Learning Objective: 04-04 Assign costs to units using the weighted-average method
Level: Medium 43. Sanchez Corporation uses the weighted-average method in its process costing system. The Fitting Department is the second department in its production process. The data below summarize the department's operations in March.

The Fitting Department's cost per equivalent unit for conversion cost for March was $8.66.
How much conversion cost was assigned to the units transferred out of the Fitting Department during March?
A. $480,630
B. $450,320
C. $444,258
D. $510,940
Units transferred to the next department = Units in beginning work in process + Units started into production - Units in ending work in process = 7,000 + 52,000 - 3,500 = 55,500

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #33
Learning Objective: 04-04 Assign costs to units using the weighted-average method
Level: Medium 44. In February, one of the processing departments at Whisenhunt Corporation had beginning work in process inventory of $35,000 and ending work in process inventory of $11,000. During the month, the cost of units transferred out from the department was $410,000. In the department's cost reconciliation report for February, the total cost to be accounted for would be:
A. $46,000
B. $807,000
C. $842,000
D. $421,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #37
Learning Objective: 04-05 Prepare a cost reconciliation report
Level: Medium 45. A company using lean production methods likely would show approximately the same net operating income under both absorption and variable costing because:
A. ending inventory would be valued in the same manner for both methods under lean production.
B. production is geared to sales under lean production and thus there would be little or no ending inventory.
C. under lean production fixed manufacturing overhead costs are charged to the period incurred rather than to the product produced.
D. there is no distinction made under lean production between fixed and variable costs.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 06 #28
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium 46. Net operating income reported under absorption costing will exceed net operating income reported under variable costing for a given period if:
A. production equals sales for that period.
B. production exceeds sales for that period.
C. sales exceed production for that period.
D. the variable manufacturing overhead exceeds the fixed manufacturing overhead.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 06 #30
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
Source: CMA, adapted 47. All other things being equal, if a division's traceable fixed expenses increase:
A. the division's contribution margin ratio will decrease.
B. the division's segment margin ratio will remain the same.
C. the division's segment margin will decrease.
D. the overall company profit will remain the same.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Comprehension
Garrison - Chapter 06 #35
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions
Level: Medium 48. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the net operating income for the month under absorption costing?
A. $5,300
B. $3,000
C. $(12,700)
D. $8,300
Unit product cost under absorption costing:

Absorption costing income statement

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #49
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium 49. A company produces a single product. Last year, fixed manufacturing overhead was $30,000, variable production costs were $48,000, fixed selling and administration costs were $20,000, and variable selling administrative expenses were $9,600. There was no beginning inventory. During the year, 3,000 units were produced and 2,400 units were sold at a price of $40 per unit. Under variable costing, net operating income would be:
A. a profit of $6,000.
B. a profit of $4,000.
C. a loss of $2,000.
D. a loss of $4,400.
Variable costing unit product cost = $48,000 3,000 units produced = $16 per unit

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #51
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium 50. Last year, Heidenescher Corporation's variable costing net operating income was $63,600 and its inventory decreased by 600 units. Fixed manufacturing overhead cost was $1 per unit. What was the absorption costing net operating income last year?
A. $64,200
B. $63,000
C. $63,600
D. $600

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #53
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium 51. Colasuonno Corporation has two divisions: the West Division and the East Division. The corporation's net operating income is $88,800. The West Division's divisional segment margin is $39,500 and the East Division's divisional segment margin is $166,900. What is the amount of the common fixed expense not traceable to the individual divisions?
A. $255,700
B. $206,400
C. $117,600
D. $128,300
Total segment margin = $39,500 + $166,900 = $206,400
Total net operating income = Total segment margin - Common fixed expenses
$88,800 = $206,400 - Common fixed expenses
Common fixed expenses = $206,400 - $88,800 = $117,600

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #65
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions
Level: Medium 52. The ARB Company has two divisions: Electronics and DVD/Video Sales. Electronics has traceable fixed expenses of $146,280 and the DVD/Video Sales has traceable fixed expenses of $81,765. If ARB Company has a total of $322,490 in fixed expenses, what are its common fixed expenses?
A. $94,445
B. $322,490
C. $228,045
D. $47,223
Common fixed expenses = Total fixed expenses - Traceable fixed expenses
= $322,490 - ($146,280 + $81,765) =$94,445

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #70
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions
Level: Medium 53. McCaskey Corporation uses an activity-based costing system with the following three activity cost pools:

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:

The distribution of resource consumption across activity cost pools is given below:

The activity rate for the Fabrication activity cost pool is closest to:
A. $1.65 per machine-hour
B. $4.00 per machine-hour
C. $0.80 per machine-hour
D. $2.40 per machine-hour
Allocations to the Fabrication activity cost pool:

Fabrication: $66,000 40,000 machine-hours = $1.65 per machine-hour

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #24
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
Level: Medium 54. Christiansen Corporation uses an activity-based costing system with the following three activity cost pools:

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:

The distribution of resource consumption across activity cost pools is given below:

The activity rate for the Order Processing activity cost pool is closest to:
A. $676 per order
B. $780 per order
C. $560 per order
D. $312 per order
Allocations to the Order Processing activity cost pool:

Order Processing: $280,000 500 orders = $560 per order

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #25
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
Level: Medium 55. Zee Corporation has provided the following data concerning its overhead costs for the coming year:

The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year:

The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs.
The distribution of resource consumption across activity cost pools is given below:

The activity rate for the Assembly activity cost pool is closest to:
A. $2.70 per labor-hour
B. $4.25 per labor-hour
C. $4.05 per labor-hour
D. $8.10 per labor-hour
Allocations to the Assembly activity cost pool:

Assembly: $85,000 20,000 labor-hours = $4.25 per labor-hour

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #26
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
Level: Medium 56. Tadlock Corporation has provided the following data concerning its overhead costs for the coming year:

The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year:

The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs.
The distribution of resource consumption across activity cost pools is given below:

The activity rate for the Order Processing activity cost pool is closest to:
A. $420 per order
B. $520 per order
C. $490 per order
D. $780 per order
Allocations to the Order Processing activity cost pool:

Order Processing: $294,000 600 orders = $490 per order

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #27
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
Level: Medium Entin Corporation reported the following data for the month of January:

Garrison - Chapter 03 57. The direct materials cost for January is:
A. $59,000
B. $56,000
C. $71,000
D. $65,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 03 #113
Learning Objective: 03-06 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement
Level: Hard 58. The cost of goods manufactured for January is:
A. $202,000
B. $214,000
C. $217,000
D. $199,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 03 #114
Learning Objective: 03-06 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement
Level: Hard Lenci Inc. has provided the following data for the month of May. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.

Manufacturing overhead for the month was overapplied by $3,000.
The company allocates any underapplied or overapplied manufacturing 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.

Garrison - Chapter 03 59. The work in process inventory at the end of May after allocation of any underapplied or overapplied manufacturing overhead for the month is closest to:
A. $12,710
B. $12,732
C. $12,928
D. $12,950
Allocating overapplied manufacturing overhead reduces the balances in the inventory and cost of goods sold accounts.
Work in process inventory at the end of March after allocation of overapplied manufacturing overhead = $12,830 + [($3,920/$98,000) -$3,000] = $12,830 + (4% -$3,000) = $12,710

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 03 #129
Learning Objective: 03-07 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts
Level: Medium Jumper Company uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month:

Garrison - Chapter 04 60. How many units were in the ending work in process inventory?
A. 600 units
B. 1,000 units
C. 800 units
D. 1,400 units
Units in ending work in process = Units in beginning work in process + Units started into production - Units transferred to the next department = 400 + 15,000 - 14,400 = 1,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #38
Learning Objective: 04-02 Compute the equivalent units of production using the weighted-average method
Level: Medium 61. How much cost, in total, was transferred to the next department during the month?
A. $315,200
B. $306,000
C. $312,000
D. $317,100

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #40
Learning Objective: 04-04 Assign costs to units using the weighted-average method
Level: Medium Atwich Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 600 units. The costs and percentage completion of these units in beginning inventory were:

A total of 5,100 units were started and 4,400 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

The ending inventory was 75% complete with respect to materials and 10% complete with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.

Garrison - Chapter 04 62. What are the equivalent units for conversion costs for the month in the first processing department?
A. 4,400
B. 4,530
C. 130
D. 5,700
Units in beginning work in process inventory + Units started into production or transferred in = Units in ending work in process inventory + Units completed and transferred out
600 + 5,100 = Units in ending work in process inventory + 4,400
Units in ending work in process inventory = 600 + 5,100 - 4,400 = 1,300

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #41
Learning Objective: 04-02 Compute the equivalent units of production using the weighted-average method
Level: Medium 63. The cost per equivalent unit for materials for the month in the first processing department is closest to:
A. $21.28
B. $20.07
C. $19.29
D. $18.19
Units in beginning work in process inventory + Units started into production or transferred in = Units in ending work in process inventory + Units completed and transferred out
600 + 5,100 = Units in ending work in process inventory + 4,400
Units in ending work in process inventory = 600 + 5,100 - 4,400 = 1,300

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #42
Learning Objective: 04-03 Compute the cost per equivalent unit using the weighted-average method
Level: Medium 64. The cost per equivalent unit for conversion costs for the first department for the month is closest to:
A. $34.18
B. $39.93
C. $43.00
D. $45.15
Units in beginning work in process inventory + Units started into production or transferred in = Units in ending work in process inventory + Units completed and transferred out
600 + 5,100 = Units in ending work in process inventory + 4,400
Units in ending work in process inventory = 600 + 5,100 - 4,400 = 1,300

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #43
Learning Objective: 04-03 Compute the cost per equivalent unit using the weighted-average method
Level: Medium 65. The total cost transferred from the first processing department to the next processing department during the month is closest to:
A. $366,430
B. $284,600
C. $309,200
D. $282,858

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #44
Learning Objective: 04-04 Assign costs to units using the weighted-average method
Level: Medium 66. The cost of ending work in process inventory in the first processing department according to the company's cost system is closest to:
A. $26,342
B. $62,679
C. $8,357
D. $83,572

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #45
Learning Objective: 04-04 Assign costs to units using the weighted-average method
Level: Medium Byklea Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 200 units. The costs and percentage completion of these units in beginning inventory were:

A total of 7,000 units were started and 6,700 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

The ending inventory was 90% complete with respect to materials and 45% complete with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.

Garrison - Chapter 04 67. The cost of ending work in process inventory in the first processing department according to the company's cost system is closest to:
A. $22,910
B. $15,703
C. $25,455
D. $11,455

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #51
Learning Objective: 04-04 Assign costs to units using the weighted-average method
Level: Medium Froment Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 200 units. The costs and percentage completion of these units in beginning inventory were:

A total of 7,900 units were started and 7,400 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

The ending inventory was 65% complete with respect to materials and 25% complete with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.

Garrison - Chapter 04 68. The cost of ending work in process inventory in the first processing department according to the company's cost system is closest to:
A. $28,359
B. $18,433
C. $7,090
D. $11,809

Weighted-average method:

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #60
Learning Objective: 04-02 Compute the equivalent units of production using the weighted-average method
Learning Objective: 04-03 Compute the cost per equivalent unit using the weighted-average method
Learning Objective: 04-04 Assign costs to units using the weighted-average method
Level: Medium Heller Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below:

Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.

Garrison - Chapter 04 69. The cost per equivalent unit for materials for the month in the first processing department is closest to:
A. $10.51
B. $10.12
C. $9.91
D. $9.54

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #70
Learning Objective: 04-03 Compute the cost per equivalent unit using the weighted-average method
Level: Medium 70. The total cost transferred from the first processing department to the next processing department during the month is closest to:
A. $246,800
B. $270,979
C. $240,400
D. $231,869

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #72
Learning Objective: 04-04 Assign costs to units using the weighted-average method
Level: Medium Jaderston Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below:

Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.

Garrison - Chapter 04 71. The cost per equivalent unit for materials for the month in the first processing department is closest to:
A. $19.55
B. $19.20
C. $20.46
D. $20.09

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 04 #84
Learning Objective: 04-02 Compute the equivalent units of production using the weighted-average method
Learning Objective: 04-03 Compute the cost per equivalent unit using the weighted-average method
Level: Medium Kilihea Corporation produces a single product. The company's absorption costing income statement for July follows:

The company's variable production costs are $20 per unit and its fixed manufacturing overhead totals $80,000 per month.

Garrison - Chapter 06 72. The contribution margin per unit during July was:
A. $17
B. $20
C. $25
D. $6

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #111
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium The Rial Company's income statement for June is given below:

Garrison - Chapter 06 73. A proposal has been made that will lower variable expenses in Division L to 35% of sales. However, this reduction can only be accomplished by a $15,000 increase in Division L's traceable fixed expenses. If this proposal is implemented and if sales remain constant, overall company net operating income should:
A. increase by $15,000
B. increase by $24,000
C. decrease by $15,000
D. decrease by $6,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #153
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions
Level: Medium Ring, Incorporated's income statement for the most recent month is given below.

For each of the following questions, refer back to the original data.

Garrison - Chapter 06 74. A proposal has been made that will lower variable costs in Store P to 65% of sales. However, this reduction can only be accomplished by a $16,000 increase in Store P's traceable fixed costs. If this proposal is implemented and sales remain constant, overall company net operating income should:
A. remain the same
B. decrease by $2,000
C. increase by $2,000
D. increase by $14,000
Proposed variable expense ratio = 0.65
Proposed variable expenses = 0.65 $200,000 = $130,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #158
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions
Level: Medium The Pacific Company manufactures a single product. The following data relate to the year just completed:

During the last year, 5,000 units were produced and 4,800 units were sold. There were no beginning inventories.

Garrison - Chapter 06 75. Under absorption costing, the cost of goods sold for the year would be:
A. $206,400
B. $345,600
C. $278,400
D. $360,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #76
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium Ingerson Company, which has only one product, has provided the following data concerning its most recent month of operations:

Garrison - Chapter 06 76. What is the net operating income for the month under variable costing?
A. $12,000
B. $8,000
C. $(27,600)
D. $4,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 06 #97
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium Ormond Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Machining, $6,800; Order Filling, $10,700; and Other, $4,500. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:

Garrison - Chapter 07 77. What is the overhead cost assigned to Product B6 under activity-based costing?
A. $442
B. $4,722
C. $11,000
D. $4,280
Total MHs = 1,300 MHs + 18,700 MHs = 20,000 MHs
Total orders = 400 orders + 600 orders = 1,000 orders
Machining: $6,800 20,000 MHs = $0.34 per MH
Order Filling: $10,700 1,000 orders = $10.70 per order
Overhead cost for Product B6:

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #112
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Level: Medium Roshannon Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment expense and indirect labor-to three activity cost pools-Processing, Supervising, and Other-based on resource consumption. Data to perform these allocations appear below:

In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:

Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.

Garrison - Chapter 07 78. The activity rate for the Processing activity cost pool under activity-based costing is closest to:
A. $5.33 per MH
B. $0.68 per MH
C. $0.52 per MH
D. $3.00 per MH
Processing: $13,600 20,000 MHs = $0.68 per MH

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #71
Learning Objective: 07-03 Compute activity rates for cost pools.
Level: Medium Ballweg Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:

Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:

Finally, the costs of Machining and Order Filling are combined with the following sales and direct cost data to determine product margins.

Garrison - Chapter 07 79. How much overhead cost is allocated to the Order Filling activity cost pool under activity-based costing?
A. $10,300
B. $9,600
C. $700
D. $16,900
Assign overhead costs to activity cost pools by applying the percentages in the Distribution of Resource Consumption Across Activity Cost Pools table to the respective costs. For example, the second entry in the table is computed as follows: $24,000 0.10 = $2,400.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #98
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Level: Medium 80. The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:
A. $7.00 per order
B. $31.00 per order
C. $14.00 per order
D. $10.30 per order
Order Filling: $10,300 1,000 orders = $10.30 per order

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Application
Garrison - Chapter 07 #99
Learning Objective: 07-03 Compute activity rates for cost pools.
Level: Medium

Pre-Test #2- Spring 2012 Summary Category | # of Questions | AACSB: Analytic | 48 | AACSB: Reflective Thinking | 32 | AICPA BB: Critical Thinking | 79 | AICPA BB: Industry | 1 | AICPA FN: Measurement | 80 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 2 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 2 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 2 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 2 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 2 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Application | 1 | Blooms: Comprehension | 1 | Blooms: Comprehension | 1 | Blooms: Comprehension | 1 | Blooms: Comprehension | 1 | Blooms: Comprehension | 1 | Blooms: Comprehension | 1 | Blooms: Comprehension | 2 | Blooms: Comprehension | 1 | Blooms: Comprehension | 1 | Blooms: Comprehension | 1 | Blooms: Comprehension | 2 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 1 | Blooms: Knowledge | 3 | Garrison - Chapter 03 | 25 | Garrison - Chapter 04 | 30 | Garrison - Chapter 06 | 25 | Garrison - Chapter 07 | 16 | Learning Objective: 03-01 Compute a predetermined overhead rate | 7 | Learning Objective: 03-02 Apply overhead cost to jobs using a predetermined overhead rate | 7 | Learning Objective: 03-03 Compute the total cost and average cost per unit of a job | 2 | Learning Objective: 03-05 Use T-accounts to show the flow of costs in a job-order costing system | 5 | Learning Objective: 03-06 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement | 3 | Learning Objective: 03-07 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts | 7 | Learning Objective: 04-01 Record the flow of materials; labor; and overhead through a process costing system | 4 | Learning Objective: 04-02 Compute the equivalent units of production using the weighted-average method | 9 | Learning Objective: 04-03 Compute the cost per equivalent unit using the weighted-average method | 8 | Learning Objective: 04-04 Assign costs to units using the weighted-average method | 8 | Learning Objective: 04-05 Prepare a cost reconciliation report | 1 | Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method | 5 | Learning Objective: 06-02 Prepare income statements using both variable and absorption costing | 5 | Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ | 4 | Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions | 9 | Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system. | 5 | Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation. | 5 | Learning Objective: 07-03 Compute activity rates for cost pools. | 6 | Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation. | 1 | Level: Easy | 19 | Level: Hard | 5 | Level: Medium | 56 | Source: CMA, adapted | 3 |