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Exam 16: Cost Concepts and Cost Allocation

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Question 41

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In a manufacturing environment,direct labor costs initially flow

A) into the Materials Inventory account.
B) directly to Cost of Goods Sold.
C) into the Work in Process Inventory account.
D) into the Finished Goods Inventory account.

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Question 42

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Which of the following represents normal cost measurement?

A) Actual Direct Materials + Actual Direct Labor + Actual Overhead
B) Actual Direct Materials + Actual Direct Labor + Estimated Overhead
C) Estimated Direct Materials + Estimated Direct Labor + Actual Overhead
D) Actual Direct Materials + Estimated Direct Labor + Estimated Overhead

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Question 43

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The Overhead account is used to accumulate actual overhead costs.

Because it is invisible,direct labor cannot be traced to products.

Identify the document needed to support each of the following activities in a manufacturing organization: __________ a. Placing an order for direct materials with a supplier __________ b. Recording direct labor time at the beginning and end of each work shift __________ c. Issuing direct materials into production __________ d. Recording the costs of a specific job requiring direct materials, direct labor, and overhead __________ e. Billing a customer for a completed order __________ __________ f. Receiving direct materials at the shipping dock

All labor costs can be directly traced to finished products.

Which of the following results in a predetermined overhead rate?

Which of the following should not be included in the computation of cost of goods manufactured?

Variable costs per unit change in an inversely proportional rate to changes in volume.

As units are completed,their costs are transferred from the Work in Process Inventory account to the Finished Goods Inventory account.

The amount for cost of goods manufactured should be the same as the amount transferred from the Work in Process Inventory account to the Finished Goods Inventory account during the year.

The income statement for a manufacturing company usually contains a detailed computation of the

Fill in the missing data for Company C: $\begin{array}{|l|c|}\hline & \text { Company C } \\\hline \text { Direct materials used } & \$ 6,000 \\\hline \text { Direct labor cost } & \text { (a) } \\\hline \text { Overhead } &7 , 000 \\\hline \text { Total manufacturing costs } & 18,000 \\\hline \text { Work in process inventory, Jan. } 1 & 2,000 \\\hline \text { Work in process inventory, Dec. } 31 & \text { (b) } \\\hline \text { Sales revenue } & 30,000 \\\hline \text { Finished goods inventory, Jan. } 1 & 7,000 \\\hline \text { Cost of goods manufactured } & \text { (c) } \\\hline \text { Cost of goods available for sale } & 23,000 \\\hline \text { Finished goods inventory, Dec. } 31 & \text { (d) } \\ \hline \text { Cost of goods sold } & 18,000 \\\hline \text { Gross margin } & \text { (e) } \\\hline \text { Operating expenses } & \text { (f) } \\\hline \text { Operating income } & 3,000\\\hline\end{array}$

When the amount of underapplied or overapplied overhead is small,it usually is written off to

Period costs flow through three types of inventory accounts before becoming part of the cost of goods sold amount.

Costs that are identified with and traced to one product or a batch of products are called

Which of the following is a value-adding cost?

Which of the following documents initiates the purchasing of materials?

Depreciation on factory equipment is a value-adding cost.

The Finished Goods Inventory and Cost of Goods Sold for a manufacturing company for the year 20xx are as follows: January 1 Finished Goods Inventory,$382,500; December 31 Finished Goods Inventory,$270,000; Cost of Goods Sold for the year,$1,488,000.The cost of goods manufactured for the year was