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Exam 19: Cost Concepts and Cost Allocation

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Question 1

Multiple Choice

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Recorded costs for the DC5 Division, which manufactured 6,000 units of Product DC5 during the month, are as follows: The per-unit cost of manufacturing Product DC5 this month is

A) $163.
B) $152.
C) $170.
D) $150.

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Question 2

Multiple Choice

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The following are costs for a selected period: direct materials put into production, $97,000.00; direct labor cost of converting materials into product, $200,000; total indirect costs of manufacturing the product, $40,000. What is the per unit cost of manufacturing 20,000 units in this period?

A) $4.85
B) $16.85
C) $8.85
D) $12.85

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Question 3

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Wages of machine operators and other workers involved in actually shaping the product are classified as direct labor costs.

Which of the following is a typical example of a variable cost?

If overhead is applied on the basis of direct labor hours, and actual hours worked are less than budgeted, which of the following is true, assuming estimated overhead is correct?

Cost of goods manufactured decreases the Work in Process Inventory account.

The controller for Drisau Company has gathered the following overhead data on the company's two products: estimated total overhead, $180,000 (consisting of the $70,000 for setups and $110,000 for assembly); estimated direct labor hours (Product A, 6,000; Product B, 3,000); estimated number of setups (Product A, 750; Product B, 1,250); estimated number of machine hours used in assembly (Product A, 3,000; Product B, 5,000); estimated number of units produced (Product A, 500; Product B, 200). Using the traditional approach: a. Calculate the predetermined overhead rate using direct labor hours as the cost driver. b. Compute the amount of overhead costs applied to each product in total and per unit.

Direct materials, direct labor, and overhead costs will most likely become part of the Cost of Goods Sold account balance in case of manufacturing companies.

A cost pool is a collection of overhead costs related to a cost object.

Equipment depreciation is an example of a direct product cost in a manufacturing company.

Minor materials and other production supplies that cannot be conveniently or economically traced to specific products are accounted for as indirect materials.

Total estimated overhead costs should be divided by actual direct labor hours to compute an overhead rate per direct labor hour.

Which of the following contains period costs?

The beginning finished goods inventory for Boston Co. was $401,050. Goods completed during the year were costed at $783,700. The ending finished goods inventory was dangerously low, having been reduced to $124,400. The cost of goods sold for the year for Boston Co. was

Overhead costs decrease the Work in Process Inventory account.

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

When a company uses a single predetermined overhead rate to assign overhead to production, only one cost pool is used.

Nonvalue-adding costs increase the cost of a product.

Which of the following financial statements is unique to a production-oriented company?

Direct materials are the only materials in a product.