Why Is Managerial Accounting Important?

Chapter 01 Managerial Accounting and Cost Concepts Answer Key

True / False Questions

1. Managerial accounting is primarily concerned with the organization as a whole rather than with segments of the organization.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Reporting
Bloom's: Knowledge
Learning Objective: 1
Level: Easy

2. Managerial accounting places less emphasis on nonmonetary data than financial accounting.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Reporting
Bloom's: Comprehension
Learning Objective: 1
Level: Medium

3. Direct labor is a part of both prime cost and conversion cost.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 2
Level: Medium

4. Wages paid to production supervisors would be considered direct labor.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 2
Level: Easy

5. Direct material cost combined with manufacturing overhead cost is known as conversion cost.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 2
Level: Easy

6. Advertising is a product cost as long as it promotes specific products.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 3
Level: Medium

7. Although depreciation is always a period cost in a merchandising firm, it can be a product cost in a manufacturing firm.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 3
Level: Medium

8. In a manufacturing firm, all costs are product costs.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 3
Level: Easy

9. The cost of shipping parts from a supplier is considered a product cost.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 3
Level: Easy

10. If the finished goods inventory increases between the beginning and the end of a period, then the cost of goods manufactured for the period is larger than the cost of goods sold.
TRUE

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 4
Learning Objective: 5
Level: Hard

11. The inventory of finished goods on hand at the end of a period is considered an asset, but inventories of raw materials and work-in-process are not considered assets until production is completed.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Reporting
Bloom's: Comprehension
Learning Objective: 5
Level: Medium

12. The cost of goods manufactured for a period is the amount transferred from work in process inventory to finished goods inventory during the period.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 5
Level: Medium

13. Differential costs can be either fixed or variable.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 6
Learning Objective: 8
Level: Medium

14. A fixed cost is constant per unit of product.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 6
Level: Easy

15. The variable cost per unit is constant and does not depend on how many units are produced.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 6
Level: Easy

16. The cost of napkins put on each person's tray at a fast food restaurant is a fixed cost.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 6
Level: Easy

17.
A factory supervisor's salary would be classified as a direct cost of a unit of product.
FALSE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 7
Level: Easy

Multiple Choice Questions

18. Managerial accounting:
A. has its primary emphasis on the future.
B. is required by regulatory bodies such as the SEC.
C. focuses on the organization as a whole, rather than on the organization's segments.
D. Responses a, b, and c are all correct.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Reporting
Bloom's: Knowledge
Learning Objective: 1
Level: Easy

19. The plans of management are expressed formally in:
A. the annual report to shareholders.
B. Form 10-Q submitted to the Securities and Exchange Commission.
C. performance reports.
D. budgets.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Reporting
Bloom's: Knowledge
Learning Objective: 1
Level: Easy

20. Which of the following IS a characteristic of financial accounting?
A. not mandatory
B. must follow
GAAP
C. emphasis on relevance of data, rather than precision
D. both A and C above

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Reporting
Bloom's: Knowledge
Learning Objective: 1
Level: Easy

21. The corporate controller's salary would be considered a(n):
A. manufacturing cost.
B. product cost.
C. administrative cost.
D. selling expense.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 2
Learning Objective: 3
Level: Easy

22. The costs of direct materials are classified as:

[pic]
A. A
B. B
C. C
D. D

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 2
Level: Medium

23. Manufacturing overhead:
A. can be either a variable cost or a fixed cost.
B. includes the costs of shipping finished goods to customers.
C. includes all factory labor costs.
D. includes all fixed costs.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 2
Level: Easy

24. The three basic elements of manufacturing cost are direct materials, direct labor, and:
A. cost of goods manufactured.
B. cost of goods sold.
C. work in process.
D. manufacturing overhead.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 2
Level: Easy

25. Prime cost consists of direct materials combined with:
A. direct labor.
B. manufacturing overhead.
C. indirect materials.
D. cost of goods manufactured.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 2
Level: Easy

26. Which terms below correctly describe the cost of the black paint used to paint the dots on a pair of dice?

[pic]
A. A
B. B
C. C
D. D

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 3
Learning Objective: 6
Level: Medium

27. The cost of fire insurance for a manufacturing plant is generally considered to be a:
A. product cost.
B. period cost.
C. variable cost.
D. all of the above.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 3
Learning Objective: 6
Level: Medium

28. An example of a period cost is:
A. fire insurance on a factory building.
B. salary of a factory supervisor.
C. direct materials.
D. rent on a headquarters building.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 3
Level: Easy

29. Transportation costs incurred by a manufacturing company to ship its product to its customers would be classified as which of the following?
A. Product cost
B. Manufacturing overhead
C. Period cost
D. Administrative cost

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 3
Level: Easy

30. Micro Computer Company has set up a toll-free telephone line for customer inquiries regarding computer hardware produced by the company. The cost of this toll-free line would be classified as which of the following?
A. Product cost
B. Manufacturing overhead
C. Direct labor
D. Period cost

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 3
Level: Easy

31. Rossiter Company failed to record a credit sale at the end of the year, although the reduction in finished goods inventories was correctly recorded when the goods were shipped to the customer. Which one of the following statements is correct?

[pic]
A. A
B. B
C. C
D. D

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 4
Level: Hard
Source: CMA, adapted

32. Cost of goods manufactured will usually include:

[pic]
A. A
B. B
C. C
D. D

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 5
Level: Hard

33. Which two terms below describe the wages paid to security guards that monitor a factory 24 hours a day?
A. variable cost and direct cost
B. fixed cost and direct cost
C. variable cost and indirect cost
D. fixed cost and indirect cost

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 6
Learning Objective: 7
Level: Medium

34. Within the relevant range, the difference between variable costs and fixed costs is:
A. variable costs per unit fluctuate and fixed costs per unit remain constant.
B. variable costs per unit are constant and fixed costs per unit fluctuate.
C. both total variable costs and total fixed costs are constant.
D. both total variable costs and total fixed costs fluctuate.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 6
Level: Medium

35. Each of the following would be classified as variable in terms of cost behavior except:
A. cost of shipping goods to customers via express mail.
B. sales commissions.
C. plant manager's salary.
D. direct materials.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 6
Level: Easy

36. A lawnmower manufacturer computed a cost per unit of $53 by adding together last month's direct labor, direct materials, and manufacturing overhead and dividing that total by the 10,000 units produced last month. (There were no beginning or ending inventories.) If 9,000 units are going to be manufactured this month, we would expect that the:
A. cost per unit will remain the same.
B. cost per unit will decrease.
C. direction of change in unit costs cannot be determined.
D. cost per unit will increase.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 6
Level: Hard

37. Which one of the following costs should NOT be considered an indirect cost of serving a particular customer at a Dairy Queen fast food outlet?
A. the cost of the hamburger patty in the burger they ordered.
B. the wages of the employee who takes the customer's order.
C. the cost of heating and lighting the kitchen.
D. the salary of the outlet's manager.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 7
Level: Medium

38. An opportunity cost is:
A. the difference in total costs which results from selecting one alternative instead of another.
B. the benefit forgone by selecting one alternative instead of another.
C. a cost which may be saved by not adopting an alternative.
D. a cost which may be shifted to the future with little or no effect on current operations.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Bloom's: Knowledge
Learning Objective: 8
Level: Easy

39. Buford Company rents out a small unused portion of its factory to another company for $1,000 per month. The rental agreement will expire next month, and rather than renew the agreement Buford Company is thinking about using the space itself to store materials. The term to describe the $1,000 per month is:
A. sunk cost.
B. period cost.
C. opportunity cost.
D. variable cost.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Bloom's: Comprehension
Learning Objective: 8
Level: Medium

40. The following costs were incurred in August:

[pic]

Conversion costs during the month totaled:
A. $127,000
B. $51,000
C. $52,000
D. $75,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 2
Learning Objective: 3
Level: Medium

41. The following costs were incurred in August:

[pic]

Prime costs during the month totaled:
A. $39,000
B. $59,000
C. $96,000
D. $38,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 2
Learning Objective: 3
Level: Medium

42. During the month of August, direct labor cost totaled $13,000 and direct labor cost was 20% of prime cost. If total manufacturing costs during August were $88,000, the manufacturing overhead was:
A. $75,000
B. $23,000
C. $65,000
D. $52,000

[pic]

[pic]

Manufacturing overhead = $23,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Analysis
Learning Objective: 2
Level: Hard

43. In August direct labor was 60% of conversion cost. If the manufacturing overhead for the month was $54,000 and the direct materials cost was $34,000, the direct labor cost was:
A. $36,000
B. $22,667
C. $51,000
D. $81,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Analysis
Learning Objective: 2
Level: Hard

44. Williams Company's direct labor cost is 25% of its conversion cost. If the manufacturing overhead for the last period was $45,000 and the direct materials cost was $25,000, the direct labor cost was:
A. $15,000
B. $60,000
C. $33,333
D. $20,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Analysis
Learning Objective: 2
Level: Hard

45. Green Company's costs for the month of August were as follows: direct materials, $27,000; direct labor, $34,000; selling, $14,000; administrative, $12,000; and manufacturing overhead, $44,000. The beginning work in process inventory was $16,000 and the ending work in process inventory was $9,000. What was the cost of goods manufactured for the month?
A. $105,000
B. $132,000
C. $138,000
D. $112,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 3
Learning Objective: 5
Level: Medium

46. Consider the following costs incurred in a recent period:

[pic]

What was the total amount of the period costs listed above for the period?
A. $78,000
B. $71,000
C. $46,000
D. $37,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 3
Level: Medium

47. The Lyons Company's cost of goods manufactured was $120,000 when its sales were $360,000 and its gross margin was $220,000. If the ending inventory of finished goods was $30,000, the beginning inventory of finished goods must have been:
A. $20,000
B. $50,000
C. $110,000
D. $150,000

Cost of goods sold = Sales - Gross margin
Cost of goods sold = $360,000 - $220,000
Cost of goods sold = $140,000

[pic]

Beginning finished goods inventory = $50,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Analysis
Learning Objective: 4
Learning Objective: 5
Level: Hard

48. Last month a manufacturing company had the following operating results:

[pic]

What was the cost of goods manufactured for the month?
A. $350,000
B. $385,000
C. $377,000
D. $323,000

[pic]

[pic]

Cost of goods manufactured = $323,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Analysis
Learning Objective: 4
Learning Objective: 5
Level: Hard

49. The following inventory balances relate to Lequin Manufacturing Corporation at the beginning and end of the year:

[pic]

Lequin's total manufacturing cost was $543,000. What was Lequin's cost of goods sold?
A. $517,000
B. $545,000
C. $569,000
D. $567,000

[pic]

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Analysis
Learning Objective: 4
Learning Objective: 5
Level: Hard

50. Gabrisch Inc. is a merchandising company. Last month the company's merchandise purchases totaled $90,000. The company's beginning merchandise inventory was $13,000 and its ending merchandise inventory was $22,000. What was the company's cost of goods sold for the month?
A. $90,000
B. $99,000
C. $125,000
D. $81,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Level: Easy

51. Haan Inc. is a merchandising company. Last month the company's cost of goods sold was $66,000. The company's beginning merchandise inventory was $14,000 and its ending merchandise inventory was $16,000. What was the total amount of the company's merchandise purchases for the month?
A. $68,000
B. $96,000
C. $64,000
D. $66,000

[pic]

Goods available for sale = Cost of goods sold + Finished goods inventory, ending
Goods available for sale = $66,000 + $16,000
Goods available for sale = $82,000

Merchandise purchased = $82,000 - Merchandise inventory, beginning
Merchandise purchased = $82,000 - $14,000
Merchandise purchased = $68,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Level: Medium

52. During August, the cost of goods manufactured was $73,000. The beginning finished goods inventory was $15,000 and the ending finished goods inventory was $21,000. What was the cost of goods sold for the month?
A. $79,000
B. $109,000
C. $67,000
D. $73,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Level: Easy

53. Walton Manufacturing Company gathered the following data for the month.

[pic]

How much net operating income will be reported for the period?
A. $54,000
B. $17,000
C. $52,000
D. Cannot be determined.

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
Bloom's: Analysis
Learning Objective: 4
Level: Easy

54. Using the following data for August, calculate the cost of goods manufactured:

[pic]

The cost of goods manufactured was:
A. $106,000
B. $92,000
C. $95,000
D. $89,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Medium

55. The following inventory balances relate to Bharath Manufacturing Corporation at the beginning and end of the year:

[pic]

Bharath's cost of goods sold was $653,000. What was Bharath's cost of goods manufactured?
A. $660,000
B. $670,000
C. $682,000
D. $689,000

[pic]

Goods available for sale = Cost of goods sold + Finished goods inventory, ending
Goods available for sale = $653,000 + $36,000 = $689,000
Finished goods inventory, beginning + Cost of goods manufactured
= Goods available for sale
$29,000 + Cost of goods manufactured = $689,000
Cost of goods manufactured = $689,000 - $29,000 = $660,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Hard

56. The following data have been provided by a company for a recent accounting period:

[pic]

The cost of goods manufactured for the period was:
A. $147,000
B. $151,000
C. $153,000
D. $154,000

[pic]

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Medium

57. Direct materials used in production totaled $330,000. Direct labor was $415,000 and manufacturing overhead was $220,000. What were the total manufacturing costs incurred for the month?
A. $530,000
B. $965,000
C. $745,000
D. $635,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Easy

58. How much opportunity cost is represented in the following information concerning a machine?

[pic]
A. $80,000
B. $14,000
C. $25,000
D. $68,000

$25,000: Only the resale value of the current machine is an opportunity cost in the above list.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Bloom's: Application
Learning Objective: 8
Level: Easy

Corcetti Company manufactures and sells prewashed denim jeans. Large rolls of denim cloth are purchased and are first washed in a giant washing machine. After the cloth is dried, it is cut up into jean pattern shapes and then sewn together. The completed jeans are sold to various retail chains.

59. Which of the following terms could be used to correctly describe the cost of the soap used to wash the denim cloth?

[pic]
A. A
B. B
C. C
D. D

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 3
Learning Objective: 7
Level: Hard

60. Which of the following terms could be used to correctly describe the wages paid to the workers that cut up the cloth into the jean pattern shapes?

[pic]
A. A
B. B
C. C
D. D

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 2
Learning Objective: 6
Level: Medium

61. Which of the following terms could be used to correctly describe the cost of the thread used to sew the jeans together?

[pic]
A. A
B. B
C. C
D. D

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 2
Learning Objective: 6
Level: Hard

62. Which of the following terms could be used to correctly describe the wages paid to the data entry clerk who enters customer order information into the company's computer system?

[pic]
A. A
B. B
C. C
D. D

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 3
Level: Medium

A partial listing of costs incurred at Peggs Corporation during September appears below:

[pic]

63. The total of the manufacturing overhead costs listed above for September is:
A. $71,000
B. $351,000
C. $669,000
D. $40,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 2
Level: Medium

64. The total of the product costs listed above for September is:
A. $351,000
B. $669,000
C. $71,000
D. $318,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 3
Level: Medium

65. The total of the period costs listed above for September is:
A. $389,000
B. $318,000
C. $71,000
D. $351,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 3
Level: Medium

A partial listing of costs incurred during February at Urfer Corporation appears below:

[pic]

66. The total of the period costs listed above for February is:
A. $379,000
B. $277,000
C. $61,000
D. $318,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 3
Level: Medium

67. The total of the manufacturing overhead costs listed above for February is:
A. $61,000
B. $595,000
C. $277,000
D. $33,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 2
Level: Medium

68. The total of the product costs listed above for February is:
A. $277,000
B. $595,000
C. $318,000
D. $61,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 3
Level: Medium

Nadell Corporation reported the following data for the month of April:

[pic]

69. If the raw materials purchased during April totaled $63,000, what was the cost of the raw materials used in production for the month?
A. $63,000
B. $61,000
C. $62,000
D. $65,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 2
Learning Objective: 4
Level: Easy

70. If the company transferred $234,000 of completed goods from work in process to finished goods inventory during April, what was the cost of goods sold for the month?
A. $234,000
B. $235,000
C. $220,000
D. $248,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 2
Learning Objective: 4
Level: Easy

Tart Corporation reported the following data for the month of September:

[pic]

71. The conversion cost for September was:
A. $150,000
B. $103,000
C. $117,000
D. $86,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 2
Level: Medium

72. The prime cost for September was:
A. $50,000
B. $83,000
C. $86,000
D. $103,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 2
Level: Medium

Management of Solman Corporation has asked your help as an intern in preparing some key reports for June. The beginning balance in the raw materials inventory account was $20,000. During the month, the company made raw materials purchases amounting to $69,000. At the end of the month, the balance in the raw materials inventory account was $32,000. Direct labor cost was $24,000 and manufacturing overhead was $71,000. The beginning balance in the work in process account was $24,000 and the ending balance was $19,000. The beginning balance in the finished goods account was $53,000 and the ending balance was $58,000. Selling expense was $20,000 and administrative expense was $35,000.

73.
The conversion cost for June was:
A. $95,000
B. $140,000
C. $93,000
D. $152,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 2
Level: Medium

74. The prime cost for June was:
A. $95,000
B. $93,000
C. $81,000
D. $55,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 2
Level: Medium

The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just completed year.

[pic]

75. The cost of the raw materials used in production during the year (in thousands of dollars) was:
A. $180
B. $40
C. $120
D. $160

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 3
Learning Objective: 4
Learning Objective: 5
Level: Medium

76. The cost of goods manufactured (finished) for the year (in thousands of dollars) was:
A. $530
B. $520
C. $500
D. $460

[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN:
Measurement
Bloom's: Application
Learning Objective: 3
Learning Objective: 4
Learning Objective: 5
Level: Medium

77. The cost of goods sold for the year (in thousands of dollars) was:
A. $670
B. $500
C. $540
D. $650

[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 3
Learning Objective: 4
Learning Objective: 5
Level: Medium

78. The net operating income for the year (in thousands of dollars) was:
A. $410
B. $110
C. $40
D. $180

[pic]
[pic]
[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 3
Learning Objective: 4
Learning Objective: 5
Level: Medium

Lavell Corporation reported the following data for the month of February:

[pic]

79. The total manufacturing cost for February was:
A. $174,000
B. $171,000
C. $70,000
D. $108,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

80. The cost of goods manufactured for February was:
A. $171,000
B. $174,000
C. $183,000
D. $159,000

[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

81. The cost of goods sold for February was:
A. $225,000
B. $134,000
C. $184,000
D. $127,000

[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

82. The net operating income for February was:
A. $20,000
B. $116,000
C. $86,000
D. $60,000

[pic]
[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

Management of Parrent Corporation has asked your help as an intern in preparing some key reports for April. The company started the month with raw materials inventories of $32,000. During the month, the company made raw materials purchases amounting to $68,000. At the end of the month, raw materials inventories totaled $35,000. Direct labor cost was $43,000 and manufacturing overhead was $62,000. The beginning balance in the work in process account was $19,000 and the ending balance was $12,000. The beginning balance in the finished goods account was $35,000 and the ending balance was $58,000. Sales totaled $240,000. Selling expense was $18,000 and administrative expense was $42,000.

83. The total manufacturing cost for April was:
A. $170,000
B. $173,000
C. $62,000
D. $105,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

84. The cost of goods manufactured for April was:
A. $177,000
B. $173,000
C. $170,000
D. $163,000

[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

85. The cost of goods sold for April was:
A. $123,000
B. $200,000
C. $217,000
D. $154,000

[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

86. The net operating income for April was:
A. $26,000
B. $86,000
C. $75,000
D. $7,000

[pic]
[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

The following data pertain to Harriman Company's operations during July:

[pic]

87. The beginning work in process inventory was:
A. $10,000
B. $14,000
C. $1,000
D. $4,000

[pic]

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Hard

88. The ending finished goods inventory was:
A. $17,000
B. $12,000
C. $7,000
D. $2,000

[pic]

* Cost of goods sold = $210,000 - $100,000 = $110,000

[pic]
**$117,000 - $110,000 = $7,000 = Ending finished goods inventory

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Hard

Derflinger Corporation reported the following data for the month of January:

[pic]

89. The total manufacturing cost for January was:
A. $176,000
B. $74,000
C. $106,000
D. $172,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

90. The cost of goods manufactured for January was:
A. $176,000
B. $172,000
C. $175,000
D. $177,000

[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

91. The cost of goods sold for January was:
A. $126,000
B. $180,000
C. $255,000
D. $170,000

[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

92. The net operating income for January was:
A. $79,000
B. $70,000
C. $13,000
D. $5,000

[pic]
[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

Tator Corporation reported the following data for the month of April:

[pic]

93. The cost of goods sold for April was:
A. $178,000
B. $146,000
C. $126,000
D. $234,000

[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

94. The net operating income for April was:
A. $22,000
B. $81,000
C. $46,000
D. $104,000

[pic]
[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

Weygandt Corporation reported the following data for the month of February:

[pic]

95. The total manufacturing cost for February was:
A. $90,000
B. $158,000
C. $67,000
D. $162,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

96. The net operating income for February was:
A. $48,000
B. $6,000
C. $68,000
D. -$4,000

[pic]
[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

Management of Berndt Corporation has asked your help as an intern in preparing some key reports for August. The beginning balance in the raw materials inventory account was $33,000. During the month, the company made raw materials purchases amounting to $62,000. At the end of the month, the balance in the raw materials inventory account was $30,000. Direct labor cost was $46,000 and manufacturing overhead was $74,000. The beginning balance in the work in process account was $13,000 and the ending balance was $19,000. The beginning balance in the finished goods account was $54,000 and the ending balance was $50,000. Sales totaled $270,000. Selling expense was $18,000 and administrative expense was $49,000.

97. The total manufacturing cost for August was:
A. $185,000
B. $182,000
C. $120,000
D. $74,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

98. The cost of goods manufactured for August was:
A. $191,000
B. $185,000
C. $182,000
D. $179,000

[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

99. The cost of goods sold for August was:
A. $175,000
B. $183,000
C. $138,000
D. $274,000

[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

100. The net operating income for August was:
A. $20,000
B. $21,000
C. $87,000
D. $83,000

[pic]
[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

The CFO of Stoffer Corporation has provided the following data for October. The beginning balance in the raw materials inventory account was $39,000. During the month, the company made raw materials purchases amounting to $68,000. At the end of the month, the balance in the raw materials inventory account was $28,000. Direct labor cost was $29,000 and manufacturing overhead was $78,000. The beginning balance in the work in process account was $11,000 and the ending balance was $13,000. The beginning balance in the finished goods account was $37,000 and the ending balance was $47,000. Sales totaled $240,000. Selling expense was $21,000 and administrative expense was $27,000.

101. The cost of goods sold for October was:
A. $194,000
B. $230,000
C. $128,000
D. $174,000

[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

102. The net operating income for October was:
A. $85,000
B. $18,000
C. $17,000
D. $66,000

[pic]
[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Learning Objective: 5
Level: Medium

Cromuel Corporation has provided the following data for January. The beginning balance in the raw materials inventory account was $27,000. During the month, the company made raw materials purchases amounting to $50,000. At the end of the month, the balance in the raw materials inventory account was $24,000. Direct labor cost was $53,000 and manufacturing overhead was $70,000. The beginning balance in the work in process account was $14,000 and the ending balance was $12,000. The beginning balance in the finished goods account was $33,000 and the ending balance was $51,000. Sales totaled $270,000. Selling expense was $21,000 and administrative expense was $48,000.

103. The total manufacturing cost for January was:
A. $70,000
B. $123,000
C. $176,000
D. $173,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Medium

104. The net operating income for January was:
A. $41,000
B. $78,000
C. $110,000
D. $28,000

[pic]

[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Level: Medium

Gluth Corporation has provided the following data for the month of July. The beginning balance in the finished goods inventory account was $56,000 and the ending balance was $49,000. Sales totaled $290,000. Cost of goods manufactured was $147,000, selling expense was $17,000, and administrative expense was $68,000.

105. The cost of goods sold for July was:
A. $232,000
B. $140,000
C. $154,000
D. $147,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Level: Easy

106. The net operating income for July was:
A. $58,000
B. $143,000
C. $150,000
D. $51,000

[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Level: Easy

Twichell Inc., a local retailer, has provided the following data for the month of December:

[pic]

107. The cost of goods sold for December was:
A. $131,000
B. $128,000
C. $134,000
D. $200,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Level: Easy

108. The net operating income for December was:
A. $93,000
B. $159,000
C. $90,000
D. $156,000

[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 4
Level: Easy

Geneva Steel Corporation produces large sheets of heavy gauge steel. The company showed the following amounts relating to its production for the year just completed:

[pic]

109. The balance of the finished goods inventory at the end of the year was:
A. $95,000
B. $50,000
C. $193,000
D. $45,000

Cost of goods available for sale - Cost of goods sold = Balance of finished goods inventory at end of year
$288,000 - $238,000 = $50,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Hard

110. Manufacturing overhead for the year was:
A. $84,000
B. $78,000
C. $56,000
D. $72,000

Cost of goods available for sale - Cost of goods sold = Balance of finished goods inventory at end of year
$288,000 - $238,000 = $50,000

Cost of goods sold - Beginning finished goods inventory + Ending finished goods inventory = Cost of goods manufactured
$238,000 - $45,000 + $50,000 = $243,000

[pic]

*These items must be calculated by working backwards upwards through the statements.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Analysis
Learning Objective: 5
Level: Hard

111. Cost of goods manufactured for the year was:
A. $171,000
B. $160,000
C. $243,000
D. $244,000

Cost of goods available for sale - Cost of goods sold = Balance of finished goods inventory at end of year
$288,000 - $238,000 = $50,000

Cost of goods sold - Beginning finished goods inventory + Ending finished goods inventory = Cost of goods manufactured
$238,000 - $45,000 + $50,000 = $243,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Hard

Dagg Corporation reported the following data for the month of October: [pic]

112. The total manufacturing cost for October was:
A. $84,000
B. $114,000
C. $176,000
D. $165,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Medium

113. The cost of goods manufactured for October was:
A. $176,000
B. $168,000
C. $162,000
D. $165,000

[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Medium

Ruggeri Corporation reported the following data for the month of July:

[pic]

114. The cost of goods manufactured for July was:
A. $152,000
B. $172,000
C. $177,000
D. $162,000

[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Medium

115. The cost of goods sold for July was:
A. $196,000
B. $120,000
C. $148,000
D. $244,000

[pic]
[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Medium

Dodridge Corporation has provided the following data for February. The beginning balance in the raw materials inventory account was $23,000. During the month, the company made raw materials purchases amounting to $59,000. At the end of the month, the balance in the raw materials inventory account was $33,000. Direct labor cost was $28,000 and manufacturing overhead was $74,000. The beginning balance in the work in process account was $12,000 and the ending balance was $17,000. The beginning balance in the finished goods account was $48,000 and the ending balance was $54,000.

116. The total manufacturing cost for February was:
A. $74,000
B. $151,000
C. $102,000
D. $161,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Medium

117. The cost of goods manufactured for February was:
A. $156,000
B. $146,000
C. $151,000
D. $161,000

[pic]
[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 5
Level: Medium

At a sales volume of 36,000 units, Quale Corporation's sales commissions (a cost that is variable with respect to sales volume) total $187,200.

118. To the nearest whole dollar, what should be the total sales commissions at a sales volume of 38,300 units? (Assume that this sales volume is within the relevant range.)
A. $199,160
B. $175,958
C. $193,180
D. $187,200

$187,200 ( 36,000 = $5.20 per unit
38,300 units ( $5.20 = $199,160

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 6
Level: Easy

119. To the nearest whole cent, what should be the average sales commission per unit at a sales volume of 36,400 units? (Assume that this sales volume is within the relevant range.)
A. $5.20
B. $4.89
C. $5.17
D. $5.14

$187,200 ( 36,000 = $5.20 per unit average cost

Since sales commission is a variable cost, the average per unit cost is the same at any volume level within the relevant range.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 6
Level: Easy

At a sales volume of 37,000 units, Bonham Corporation's property taxes (a cost that is fixed with respect to sales volume) total $555,000.

120. To the nearest whole dollar, what should be the total property taxes at a sales volume of 34,900 units? (Assume that this sales volume is within the relevant range.)
A. $539,250
B. $588,395
C. $523,500
D. $555,000

Fixed costs do not change with changes in volume; therefore, fixed costs will total $555,000 at a sales volume of 34,900 units.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 6
Level: Easy

121. To the nearest whole cent, what should be the average property tax per unit at a sales volume of 38,600 units? (Assume that this sales volume is within the relevant range.)
A. $15.00
B. $14.38
C. $15.90
D. $14.69

$555,000 ( 38,600 units = $14.38 per unit (rounded)

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 6
Level: Easy

Mire Corporation staffs a helpline to answer questions from customers. The costs of operating the helpline are variable with respect to the number of calls in a month. At a volume of 29,000 calls in a month, the costs of operating the helpline total $171,100.

122. To the nearest whole dollar, what should be the total cost of operating the helpline costs at a volume of 31,200 calls in a month? (Assume that this call volume is within the relevant range.)
A. $171,100
B. $177,590
C. $184,080
D. $159,035

$171,100 ( 29,000 calls = $5.90 per call
$5.90 ( 31,200 calls = $184,080

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 6
Level: Easy

123. To the nearest whole cent, what should be the average cost of operating the helpline per call at a volume of 27,500 calls in a month? (Assume that this call volume is within the relevant range.)
A. $5.48
B. $5.90
C. $6.22
D. $6.06

$171,100 ( 29,000 calls = $5.90 per call (average)

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 6
Level: Easy

Henscheid Corporation leases its corporate headquarters building. This lease cost is fixed with respect to the company's sales volume. In a recent month in which the sales volume was 33,000 units, the lease cost was $283,800.

124. To the nearest whole dollar, what should be the total lease cost at a sales volume of 35,300 units in a month? (Assume that this sales volume is within the relevant range.)
A. $283,800
B. $293,690
C. $303,580
D. $265,309

Fixed costs do not change with changes in volume; therefore, fixed costs will total $283,800 at all sales levels within the relevant range.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 6
Level: Easy

125. To the nearest whole cent, what should be the average lease cost per unit at a sales volume of 31,600 units in a month? (Assume that this sales volume is within the relevant range.)
A. $8.04
B. $8.98
C. $8.79
D. $8.60

$283,800 ( 31,600 units = $8.98 (rounded)

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 6
Level: Easy

The following cost data pertain to the operations of Lefthand Department Stores, Inc., for the month of December.

[pic]

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.

126. What is the total amount of the costs listed above that are direct costs of the Shoe Department?
A. $43,000
B. $35,000
C. $79,000
D. $40,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 7
Level: Easy

127. What is the total amount of the costs listed above that are NOT direct costs of the Brentwood Store?
A. $78,000
B. $43,000
C. $162,000
D. $36,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 7
Level: Medium

The following cost data pertain to the operations of Polek Department Stores, Inc., for the month of March.

[pic]

The Northridge Store is just one of many stores owned and operated by the company. The Cosmetics Department is one of many departments at the Northridge Store. The central warehouse serves all of the company's stores.

128. What is the total amount of the costs listed above that are direct costs of the Cosmetics Department?
A. $66,000
B. $105,000
C. $62,000
D. $56,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 7
Level: Easy

129. What is the total amount of the costs listed above that are NOT direct costs of the Northridge Store?
A. $39,000
B. $66,000
C. $79,000
D. $147,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 7
Level: Medium

Lucena Corporation purchased a machine 7 years ago for $339,000 when it launched product X05K. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 360 machine costing $353,000 or by a new model 280 machine costing $332,000. Management has decided to buy the model 280 machine. It has less capacity than the model 360 machine, but its capacity is sufficient to continue making product X05K. Management also considered, but rejected, the alternative of dropping product X05K and not replacing the old machine. If that were done, the $332,000 invested in the new machine could instead have been invested in a project that would have returned a total of $426,000.

130. In making the decision to buy the model 280 machine rather than the model 360 machine, the differential cost was:
A. $21,000
B. $87,000
C. $7,000
D. $14,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Bloom's: Application
Learning Objective: 8
Level: Easy

131. In making the decision to buy the model 280 machine rather than the model 360 machine, the sunk cost was:
A. $426,000
B. $339,000
C. $332,000
D. $353,000

The original cost of $339,000 is a sunk cost.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Bloom's: Application
Learning Objective: 8
Level: Easy

132. In making the decision to invest in the model 280 machine, the opportunity cost was:
A. $426,000
B. $353,000
C. $332,000
D. $339,000

The opportunity cost is the proceeds from the project that would have yielded $426,000.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Bloom's: Application
Learning Objective: 8
Level: Easy

Management of Sourwine Corporation is considering whether to purchase a new model 320 machine costing $389,000 or a new model 280 machine costing $318,000 to replace a machine that was purchased 6 years ago for $376,000. The old machine was used to make product C78P until it broke down last week. Unfortunately, the old machine cannot be repaired.

Management has decided to buy the new model 280 machine. It has less capacity than the new model 320 machine, but its capacity is sufficient to continue making product C78P.

Management also considered, but rejected, the alternative of simply dropping product C78P. If that were done, instead of investing $318,000 in the new machine, the money could be invested in a project that would return a total of $405,000.

133. In making the decision to buy the model 280 machine rather than the model 320 machine, the sunk cost was:
A. $376,000
B. $318,000
C. $405,000
D. $389,000

The original cost of $376,000 is a sunk cost.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Bloom's: Application
Learning Objective: 8
Level: Easy

134. In making the decision to buy the model 280 machine rather than the model 320 machine, the differential cost was:
A. $58,000
B. $13,000
C. $29,000
D. $71,000

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Bloom's: Application
Learning Objective: 8
Level: Easy

135. In making the decision to invest in the model 280 machine, the opportunity cost was:
A. $376,000
B. $389,000
C. $405,000
D. $318,000

The opportunity cost is the proceeds from the project that would have yielded $405,000.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Bloom's: Application
Learning Objective: 8
Level: Easy

Essay Questions 136. Sid Freeman has developed a new electronic device that he has decided to produce and market. The production facility will be in a nearby industrial park which Sid will rent for $4,000 per month. Utilities will cost about $500 per month. He will use his personal computer, which he purchased for $2,000 last year, to monitor the production process. The computer will become obsolete before it wears out from use. The computer will be depreciated at the rate of $1,000 per year. He will rent production equipment at a monthly cost of $8,000. Sid estimates the material cost per finished unit of product to be $50, and the labor cost to be $10. He will hire workers, and spend his time promoting the product. To do this he will quit his job which pays $4,500 per month. Advertising will cost $2,000 per month. Sid will not draw a salary from the new company until it gets well established.

Required: Complete the chart below by placing an "X" under each heading that helps to identify the cost involved. There can be "Xs" placed under more than one heading for a single cost; e.g., a cost might be a sunk cost, an overhead cost, and a product cost. There would be an "X" placed under each of these headings opposite the cost.

[pic]

*Between the alternatives of producing and not producing the device.

[pic]

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Bloom's: Comprehension
Learning Objective: 2
Learning Objective: 3
Learning Objective: 6
Learning Objective: 8
Level: Medium

137. The following data (in thousands of dollars) have been taken from the accounting records of Larsen Corporation for the just completed year.

[pic]

Required: a. Prepare a Schedule of Cost of Goods Manufactured in good form.
b. Compute the Cost of Goods Sold.
c. Using data from your answers above as needed, prepare an Income Statement in good form.

a. Schedule of cost of goods manufactured

[pic]

b. Computation of cost of goods sold

[pic]

c. Income statement

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Analysis
Learning Objective: 2
Learning Objective: 4
Learning Objective: 5
Level: Medium

138. Beauchesne Corporation, a manufacturing company, has provided the following data for the month of May:

[pic]

Raw materials purchased during May totaled $69,000 and the cost of goods manufactured totaled $146,000.
Required: a. What was the cost of raw materials used in production during May? Show your work.
b. What was the cost of goods sold for May? Show your work.

a. [pic]

b. [pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 2
Learning Objective: 4
Level: Easy

139. During the month of January, Fisher Corporation, a manufacturing company, purchased raw materials costing $76,000. The cost of goods manufactured for the month was $129,000. The beginning balance in the raw materials account was $26,000 and the ending balance was $21,000. The beginning balance in the finished goods account was $52,000 and the ending balance was $35,000.
Required: a. What was the cost of raw materials used in production during January? Show your work.
b. What was the cost of goods sold for January? Show your work.

a. [pic]
b. [pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 2
Learning Objective: 4
Level: Easy

140. Joe Ringworth, factory supervisor at Winger Enterprises, had been attending night classes to earn a degree in business. He was particularly puzzled by what one of his accounting professors had said in class the previous evening. The professor, who knew that Joe worked as a factory supervisor, had said that some of Joe's salary could end up on the company's balance sheet at the end of the month. This didn't make any sense to Joe since he gets the salary, not the company.
Required: Explain to Joe why some of his salary could end up on the company's balance sheet at the end of the month.

The key here is to understand the distinction between period and product costs. Product costs are initially assigned to inventories. That is, product costs are added to inventory accounts that appear on the balance sheet. These costs become expenses only when the inventories are sold. For external financial reports, all manufacturing costs must be included in product costs. Since Joe is a factory supervisor, his salary is considered to be part of manufacturing cost. Therefore, his salary is a product cost and some of it may still be in unsold inventories at the end of the month.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 3
Level: Medium

141. A partial listing of costs incurred at Rust Corporation during August appears below:

[pic]

Required: a. What is the total amount of product cost listed above? Show your work.
b. What is the total amount of period cost listed above? Show your work.

a. Product costs consist of direct materials, direct labor, and manufacturing overhead:

[pic]

b. Period costs consist of all costs other than product costs:

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 3
Level: Medium

142. Machowski Corporation has provided the following partial listing of costs incurred during November:

[pic]

Required: a. What is the total amount of product cost listed above? Show your work.
b. What is the total amount of period cost listed above? Show your work.

a. Product costs consist of direct materials, direct labor, and manufacturing overhead:

[pic]

b. Period costs consist of all costs other than product costs:

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 3
Level: Medium

143. Standford Corporation has provided the following data for the month of February:

[pic]

[pic]

Required: a. Prepare a Schedule of Cost of Goods Manufactured in good form for February.
b. Prepare an Income Statement in good form for February.

a. Schedule of Cost of Goods Manufactured

[pic]
b. Income Statement

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Analysis
Learning Objective: 4
Learning Objective: 5
Level: Medium

144. In October, Ringler Corporation had sales of $273,000, selling expenses of $26,000, and administrative expenses of $47,000. The cost of goods manufactured was $183,000. The beginning balance in the finished goods inventory account was $45,000 and the ending balance was $34,000.
Required: Prepare an Income Statement in good form for October.

Income Statement

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Analysis
Learning Objective: 4
Level: Easy

145. In July, Neidich Inc., a merchandising company, had sales of $295,000, selling expenses of $24,000, and administrative expenses of $29,000. The cost of merchandise purchased during the month was $215,000. The beginning balance in the merchandise inventory account was $25,000 and the ending balance was $30,000.
Required: Prepare an Income Statement in good form for July.

Income Statement

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Analysis
Learning Objective: 4
Level: Easy

146. Dinius Corporation has provided the following data for the month of December:

[pic]

[pic]
Required: Prepare a Schedule of Cost of Goods Manufactured for December.

Schedule of Cost of Goods Manufactured

[pic]

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Analysis
Learning Objective: 5
Level: Medium

147. A number of costs and measures of activity are listed below.

[pic]

Required: For each item above, indicate whether the cost is MAINLY fixed or variable with respect to the possible measure of activity listed next to it.

[pic]

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 6
Level: Easy

148. A number of costs and measures of activity are listed below.

[pic]

Required: For each item above, indicate whether the cost is MAINLY fixed or variable with respect to the possible measure of activity listed next to it.

[pic]

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 6
Level: Easy

149. A number of costs are listed below.

[pic]

Required: For each item above, indicate whether the cost is direct or indirect with respect to the cost object listed next to it.

[pic]

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 7
Level: Easy