chapter01 (1)

Chapter 1An Introduction to Managerial Accounting and Cost Concepts

True/False

1. Manufacturing overhead is an indirect cost with respect to units of product.Level: Medium LO: 1 Ans: T

2. Depreciation on office equipment would not be included in the cost of goods manufactured.Level: Easy LO: 2,4 Ans: T

3. Rent on a factory building used in the production process would be classified as a period cost and as a fixed cost.Level: Medium LO: 2,5 Ans: F

4. Period costs are found only in manufacturing companies, not in merchandising companies.Level: Medium LO: 2 Ans: F

5. Depreciation on equipment a company uses in its selling and administrative activities would be classified as a product cost.Level: Medium LO: 2 Ans: F

6. If the finished goods inventory increases between the beginning and the end of a period, then the cost of goods manufactured is smaller than the cost of goods sold.Level: Hard LO: 3,4 Ans: F

7. The cost of goods manufactured is calculated by adding the amount of work in process at the end of the year to the cost of raw materials used, direct labor worked, and manufacturing overhead incurred for the year and then subtracting work in process at the beginning of the year.Level: Medium LO: 4 Ans: F

8. A publisher that sells its books through agents who are paid a constant percentage commission on each book sold would classify the commissions as a fixed cost.Level: Medium LO: 5 Ans: F

9. Variable costs per unit are affected by changes in activity.Level: Easy LO: 5 Ans: F

Brewer, Introduction to Managerial Accounting, 3/e 1

10. A cost is either direct or indirect. The classification will not change if the cost object changes.Level: Medium LO: 6 Ans: F

11. The amount that a manufacturing company could earn by renting unused portions of its warehouse is an example of an opportunity cost.Level: Easy LO: 7 Ans: T

Multiple Choice

12. Indirect labor is a part of:A) Prime cost.B) Conversion cost.C) Period cost.D) Nonmanufacturing cost.Source: CPA, adaptedLevel: Medium LO: 1,2 Ans: B

13. The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n):A) period cost.B) direct material cost.C) indirect material cost.D) none of the above.Level: Easy LO: 1,2 Ans: C

14. The salary paid to the president of King Company would be classified on the income statement as a(n):A) administrative expense.B) direct labor cost.C) manufacturing overhead cost.D) selling expense.Level: Easy LO: 1 Ans: A

Brewer, Introduction to Managerial Accounting, 3/e2

15. Direct labor cost is a part of:

A) A aboveB) B aboveC) C aboveD) D aboveSource: CPA, adaptedLevel: Easy LO: 1 Ans: C

16. Direct material cost is a:

A) A aboveB) B aboveC) C aboveD) D aboveSource: CPA, adaptedLevel: Medium LO: 1 Ans: B

17. Prime cost and conversion cost share what common element of total cost?A) Direct materials.B) Direct labor.C) Variable overhead.D) Fixed overhead.Source: CPA, adaptedLevel: Easy LO: 1 Ans: B

18. Prime cost consists of:A) direct labor and manufacturing overhead.B) direct materials and manufacturing overhead.C) direct materials and direct labor.D) direct materials, direct labor and manufacturing overhead.Level: Easy LO: 1 Ans: C


19. Wages paid to a timekeeper in a factory are a:

A) A aboveB) B aboveC) C aboveD) D aboveSource: CPA, adaptedLevel: Medium LO: 1 Ans: D

20. Property taxes on a company’s factory building would be classified as a(n):A) product cost.B) opportunity cost.C) period cost.D) variable cost.Level: Easy LO: 2,5,7 Ans: A

21. Depreciation on a personal computer used in the marketing department of a manufacturing firm would be classified as:A) a product cost that is fixed with respect to the company’s output.B) a period cost that is fixed with respect to the company’s output.C) a product cost that is variable with respect to the company’s output.D) a period cost that is varaible with respect to the company’s output.Level: Medium LO: 2,5 Ans: B

22. The nursing station on the fourth floor of Central Hospital is responsible for the care of patients who have undergone orthopedic surgery. The costs of drugs administered by the nursing station to patients would be classified as:A) direct costs of the patients.B) indirect costs of the patients.C) overhead costs of the nursing station.D) period costs of the hospital.Level: Hard LO: 2,6 Ans: A

23. All of the following would be classified as product costs except:A) property taxes on production equipment.B) insurance on factory machinery.C) salaries of the advertising staff.D) wages of machine operators.Level: Easy LO: 2 Ans: C


24. Product costs appear on the balance sheet:A) only if goods are partially completed at the end of the period.B) only if goods are unsold at the end of a period.C) only if goods are partially completed or are unsold at the end of a period.D) only in merchandising firms.Level: Medium LO: 2 Ans: C

25. Ross Corporation shipped finished goods to a customer on credit, but the sale was not recorded and the costs of the finished goods were incorrectly included on the period’s balance sheet as part of the finished goods inventory. Which one of the following statements is correct concerning the effects of this error?A) Accounts receivable was not affected, inventory was overstated, sales were understated, and cost of goods sold was understated.B) Accounts receivable was understated, inventory was not affected, sales were understated, and cost of goods sold was understated.C) Accounts receivable was understated, inventory was overstated, sales were understated, and cost of goods sold was overstated.D) Accounts receivable was understated, inventory was overstated, sales were understated, and cost of goods sold was understated.Source: CMA, adaptedLevel: Easy LO: 3 Ans: D

26. Data for Cost A and Cost B are as follows:

Which of the above best describes the behavior of Costs A and B?A) Cost A is fixed, Cost B is variable.B) Cost A is variable, Cost B is fixed.C) Both Cost A and Cost B are variable.D) Both Cost A and Cost B are fixed.Level: Medium LO: 5 Ans: B


27. Fixed costs expressed on a per unit basis:A) will increase with increases in activity.B) will decrease with increases in activity.C) are not affected by activity.D) should be ignored in making decisions since they cannot change.Level: Medium LO: 5 Ans: B

28. The costs of staffing and operating the accounting department at Central Hospital would be considered by the Department of Surgery to be:A) direct costs.B) indirect costs.C) incremental costs.D) opportunity costs.Level: Hard LO: 6,7 Ans: B

29. A cost incurred in the past that is not relevant to any current decision is classified as a(n):A) period cost.B) opportunity cost.C) sunk cost.D) differential cost.Level: Easy LO: 7 Ans: C

30. Differential costs can:A) only be fixed costs.B) only be variable costs.C) be either fixed or variable.D) be incremental but not decremental.Level: Easy LO: 7 Ans: C

31. John Johnson decided to leave his former job where he earned $12 per hour to go to a new job where he will earn $13 per hour. In the decision process, the former wage of $12 per hour would be classified as a(n):A) sunk cost.B) direct cost.C) fixed cost.D) opportunity cost.Level: Easy LO: 7 Ans: D

32. The term that refers to costs incurred in the past that are not relevant to a decision is:A) marginal cost.B) indirect cost.C) period cost.D) sunk cost.Level: Easy LO: 7 Ans: D


33. The following costs were incurred in January:

Conversion costs during the month totaled:A) $97,000B) $167,000C) $102,000D) $61,000Level: Medium LO: 1,2 Ans: A

34. The following costs were incurred in February:

Conversion costs during the month totaled:A) $59,000B) $80,000C) $53,000D) $139,000Level: Medium LO: 1,2 Ans: C

35. The following costs were incurred in March:

Conversion costs during the month totaled:A) $88,000B) $38,000C) $136,000D) $84,000Level: Medium LO: 1,2 Ans: D


36. The following costs were incurred in January:

Prime costs during the month totaled:A) $86,000B) $65,000C) $47,000D) $127,000Level: Medium LO: 1,2 Ans: B

37. The following costs were incurred in February:

Prime costs during the month totaled:A) $71,000B) $32,000C) $113,000D) $57,000Level: Medium LO: 1,2 Ans: D

38. The following costs were incurred in March:

Prime costs during the month totaled:A) $63,000B) $107,000C) $38,000D) $77,000Level: Medium LO: 1,2 Ans: A


39. Aable Company’s manufacturing overhead is 20% of its total conversion costs. If direct labor is $45,000 and if direct materials are $53,000, the manufacturing overhead is:A) $11,250B) $13,250C) $180,000D) $24,500Level: Hard LO: 1 Ans: A

40. Abair Company’s manufacturing overhead is 20% of its total conversion costs. If direct labor is $38,000 and if direct materials are $35,000, the manufacturing overhead is:A) $18,250B) $9,500C) $8,750D) $152,000Level: Hard LO: 1 Ans: B

41. Abbey Company’s manufacturing overhead is 60% of its total conversion costs. If direct labor is $35,000 and if direct materials are $55,000, the manufacturing overhead is:A) $135,000B) $23,333C) $82,500D) $52,500Level: Hard LO: 1 Ans: D

42. During the month of January, direct labor cost totaled $17,000 and direct labor cost was 60% of prime cost. If total manufacturing costs during January were $82,000, the manufacturing overhead was:A) $11,333B) $53,667C) $28,333D) $65,000Level: Hard LO: 1 Ans: B

43. During the month of February, direct labor cost totaled $13,000 and direct labor cost was 40% of prime cost. If total manufacturing costs during February were $80,000, the manufacturing overhead was:A) $32,500B) $19,500C) $67,000D) $47,500Level: Hard LO: 1 Ans: D


44. During the month of March, direct labor cost totaled $17,000 and direct labor cost was 70% of prime cost. If total manufacturing costs during March were $88,000, the manufacturing overhead was:A) $24,286B) $71,000C) $63,714D) $7,286Level: Hard LO: 1 Ans: C

45. Knowel Company’s direct labor is 40 percent of its conversion cost. If the manufacturing overhead cost for the last period was $60,000 and the direct materials cost was $30,000, the direct labor cost was:A) $90,000B) $20,000C) $60,000D) $40,000Level: Hard LO: 1 Ans: D

46. In January direct labor was 40% percent of conversion cost. If the manufacturing overhead cost for the month was $78,000 and the direct materials cost was $22,000, the direct labor cost was:A) $14,667B) $52,000C) $33,000D) $117,000Level: Hard LO: 1 Ans: B

47. In February direct labor was 60% percent of conversion cost. If the manufacturing overhead cost for the month was $78,000 and the direct materials cost was $22,000, the direct labor cost was:A) $52,000B) $14,667C) $117,000D) $33,000Level: Hard LO: 1 Ans: C

48. In March direct labor was 60% percent of conversion cost. If the manufacturing overhead cost for the month was $38,000 and the direct materials cost was $32,000, the direct labor cost was:A) $21,333B) $48,000C) $25,333D) $57,000Level: Hard LO: 1 Ans: D


49. Crossland Company’s direct labor cost is 30% of its conversion cost. If the manufacturing overhead cost for the last period was $49,000 and the direct materials cost was $20,000, the direct labor cost was:A) $ 6,000B) $14,700C) $21,000D) $34,000Level: Hard LO: 1 Ans: C

50. CF Company manufactures wooden rocking chairs. CF identified the following three material costs in its production process for July: $100,000 for springs for the rocking mechanism; two springs at a cost of $10 each are used in each chair; $1,700 for glue used as needed from one gallon containers; and $500 for stain used to touch up spots on the chairs. The total cost that should have been assigned to indirect material for July was:A) $102,200B) $500C) $2,200D) $1,700Level: Medium LO: 1 Ans: C

51. Fab Co. manufactures textiles. Fab’s manufacturing costs last year included the following salaries and wages:

What is the amount of direct labor included in this list?A) $195,000B) $165,000C) $150,000D) $120,000Source: CPA, adaptedLevel: Medium LO: 1 Ans: D

52. A manufacturing company has provided the following cost data for a recent period:

Prime cost for the period was:A) $18,000B) $26,000C) $30,000D) $34,000Source: CIMA, adaptedLevel: Medium LO: 1 Ans: A


53. A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $3,000 and is paid at the beginning of the first year. Three-fourths of the premium applies to factory operations and one-fourth applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage?

A) A aboveB) B aboveC) C aboveD) D aboveLevel: Hard LO: 2 Ans: D

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

What was the cost of goods manufactured for the month?A) $371,000B) $459,000C) $383,000D) $377,000Level: Hard LO: 3,4 Ans: A

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

What was the cost of goods manufactured for the month?A) $375,000B) $414,000C) $399,000D) $351,000Level: Hard LO: 3,4 Ans: D


56. Gabert Inc. is a merchandising company. Last month the company’s merchandise purchases totaled $68,000. The company’s beginning merchandise inventory was $17,000 and its ending merchandise inventory was $13,000. What was the company’s cost of goods sold for the month?A) $72,000B) $68,000C) $98,000D) $64,000Level: Easy LO: 3 Ans: A

57. Haag Inc. is a merchandising company. Last month the company’s cost of goods sold was $86,000. The company’s beginning merchandise inventory was $20,000 and its ending merchandise inventory was $21,000. What was the total amount of the company’s merchandise purchases for the month?A) $86,000B) $127,000C) $87,000D) $85,000Level: Medium LO: 3 Ans: C

58. During February, the cost of goods manufactured was $83,000. The beginning finished goods inventory was $14,000 and the ending finished goods inventory was $13,000. What was the cost of goods sold for the month?A) $83,000B) $110,000C) $82,000D) $84,000Level: Easy LO: 3 Ans: D

59. During March, the cost of goods manufactured was $62,000. The beginning finished goods inventory was $11,000 and the ending finished goods inventory was $19,000. What was the cost of goods sold for the month?A) $70,000B) $92,000C) $54,000D) $62,000Level: Easy LO: 3 Ans: C


60. The following information is taken from the records of CL Company for last year:

What are the correct amounts for direct labor and ending work in process inventory?

A) A aboveB) B aboveC) C aboveD) D aboveLevel: Hard LO: 4 Ans: D

61. The following information is taken from the records of DW Company for last year:

The amount of beginning work in process inventory is:A) $24,000B) $2,000C) $22,000D) $3,000Level: Hard LO: 4 Ans: B


62. Using the following data for February, calculate the cost of goods manufactured:

The cost of goods manufactured was:A) $78,000B) $85,000C) $72,000D) $75,000Level: Medium LO: 4 Ans: C

63. Using the following data for March, calculate the cost of goods manufactured:

The cost of goods manufactured was:A) $74,000B) $86,000C) $76,000D) $75,000Level: Medium LO: 4 Ans: A

Use the following information to answer 64-65Clyde Company has provided the following data for the month of November:


64. The ending raw materials inventory was:A) $11,000B) $23,000C) $10,000D) $12,000Level: Hard LO: 2,4 Ans: A

65. If the net operating income was $40,000, then the beginning finished goods inventory was:A) $22,000B) $9,000C) $42,000D) $1,000Level: Hard LO: 2,3,4 Ans: D

Use the following for questions 66-69The following data (in thousands of dollars) have been taken from the accounting records of Karsen Corporation for the just completed year.

Use these data to answer the following series of questions.

66. The cost of the raw materials used in production during the year (in thousands of dollars) was:A) $230B) $220C) $160D) $260Level: Medium LO: 2,3,4 Ans: B


67. The cost of goods manufactured (finished) for the year (in thousands of dollars) was:A) $590B) $650C) $660D) $570Level: Medium LO: 2,3,4 Ans: A

68. The cost of goods sold for the year (in thousands of dollars) was:A) $680B) $540C) $640D) $730Level: Medium LO: 2,3,4 Ans: B

69. The net operating income for the year (in thousands of dollars) was:A) $180B) $170C) $390D) $190Level: Medium LO: 2,3,4 Ans: A

Use the following information to answer 70-73The following data (in thousands of dollars) have been taken from the accounting records of Karsten Corporation for the just completed year.

Use these data to answer the following series of questions.


70. The cost of the raw materials used in production during the year (in thousands of dollars) was:A) $130B) $170C) $140D) $60Level: Medium LO: 2,3,4 Ans: C

71. The cost of goods manufactured (finished) for the year (in thousands of dollars) was:A) $530B) $540C) $470D) $570Level: Medium LO: 2,3,4 Ans: C

72. The cost of goods sold for the year (in thousands of dollars) was:A) $490B) $450C) $620D) $600Level: Medium LO: 2,3,4 Ans: A

73. The net operating income for the year (in thousands of dollars) was:A) $170B) $140C) $500D) $200Level: Medium LO: 2,3,4 Ans: A

Use the following information to answer 74-77The following data (in thousands of dollars) have been taken from the accounting records of Karstone Corporation for the just completed year.


74. The cost of the raw materials used in production during the year (in thousands of dollars) was:A) $180B) $140C) $160D) $170Level: Medium LO: 2,3,4 Ans: B

75. The cost of goods manufactured (finished) for the year (in thousands of dollars) was:A) $580B) $600C) $500D) $630Level: Medium LO: 2,3,4 Ans: B

76. The cost of goods sold for the year (in thousands of dollars) was:A) $620B) $580C) $720D) $700Level: Medium LO: 2,3,4 Ans: A

77. The net operating income for the year (in thousands of dollars) was:A) $260B) $30C) $90D) ($30)Level: Medium LO: 2,3,4 Ans: B

Use the following information to answer 78-79The manufacturing operations of QC Company had the following inventory balances for the month of March:

78. If the company purchased $18,000 of raw materials during March, what was the cost of raw materials used in production?A) $16,000B) $20,000C) $41,000D) $19,000Level: Medium LO: 4 Ans: A


79. If the company transferred $38,000 of completed goods from work in process to finished goods during March, what was the amount of the cost of goods sold?A) $38,000B) $43,000C) $30,000D) $46,000Level: Medium LO: 3 Ans: D

Use the following information to answer 80-81Servix, Inc., produces water pumps. Each water pump contains a small valve that costs $5. During May, 600 valves were drawn from the supply room and installed in water pumps in the production process. Eighty percent of these units were completed and transferred into finished goods warehouses. Of the units completed, thirty percent were still unsold at the end of the month. There were no beginning inventories.

80. The cost of valves in work in process at the end of May would be:A) $2,400B) $3,000C) $600D) $720Level: Easy LO: 4 Ans: C

81. The cost of valves in cost of goods sold for May would be:A) $1,680B) $2,100C) $900D) $720Level: Easy LO: 3 Ans: A

Use the following information to answer 82-83The manufacturing operations of Jones Company had the following inventory balances for the month of March:

82. If the company purchased $20,000 of raw materials during March, what was the cost of raw materials used in production?A) $24,000B) $22,000C) $32,000D) $18,000Level: Medium LO: 4 Ans: D


83. If the company transferred $40,000 of completed goods from work in process to finished goods during March, what was the amount of the cost of goods sold?A) $47,000B) $40,000C) $33,000D) $44,000Level: Medium LO: 4 Ans: A

Use the following information to answer 84-85At a sales volume of 30,000 units, Carne Company’s total fixed costs are $30,000 and total variable costs are $45,000. The relevant range is 20,000 to 40,000 units.

84. If Carne Company were to sell 32,000 units, the total expected cost would be:A) $75,000B) $78,000C) $80,000D) $77,000Level: Easy LO: 5 Ans: B

85. If Carne Company were to sell 40,000 units, the total expected cost per unit would be:A) $2.50B) $2.25C) $2.13D) $1.88Level: Easy LO: 5 Ans: B

Use the following information to answer 86-88A partial listing of costs incurred at Gilhooly Corporation during September appears below:

86. The total of the manufacturing overhead costs listed above for September is:A) $669,000B) $366,000C) $34,000D) $59,000


Level: Medium LO: 1 Ans: D


87. The total of the product costs listed above for September is:A) $59,000B) $366,000C) $669,000D) $303,000Level: Medium LO: 2 Ans: B

88. The total of the period costs listed above for September is:A) $303,000B) $59,000C) $366,000D) $362,000Level: Medium LO: 2 Ans: A

Use the following information to answer 89-91A partial listing of costs incurred during December at Rooks Corporation appears below:

89. The total of the period costs listed above for December is:A) $82,000B) $340,000C) $389,000D) $307,000Level: Medium LO: 2Refer To: 01_10 Ans: D

90. The total of the manufacturing overhead costs listed above for December is:A) $30,000B) $82,000C) $647,000D) $340,000Level: Medium LO: 1 Ans: B


91. The total of the product costs listed above for December is:A) $340,000B) $82,000C) $647,000D) $307,000Level: Medium LO: 2 Ans: A

Use the following information to answer 92-93Cohill Corporation reported the following data for the month of July:

92. If the raw materials purchased during July totaled $66,000, what was the cost of the raw materials used in production for the month?A) $49,000B) $67,000C) $66,000D) $65,000Level: Easy LO: 1,3 Ans: D

93. If the company transferred $225,000 of completed goods from work in process to finished goods inventory during July, what was the cost of goods sold for the month?A) $231,000B) $208,000C) $242,000D) $225,000Level: Easy LO: 3 Ans: B


Use the following information to answer 94-95Abare Corporation reported the following data for the month of December:

Additional information:

94. The conversion cost for December was:A) $134,000B) $109,000C) $192,000D) $129,000Level: Medium LO: 1 Ans: D

95. The prime cost for December was:A) $129,000B) $115,000C) $109,000D) $62,000Level: Medium LO: 1 Ans: B

Use the following information to answer 96-97Management of Lewallen Corporation has asked your help as an intern in preparing some key reports for September. The beginning balance in the raw materials inventory account was $25,000. During the month, the company made raw materials purchases amounting to $60,000. At the end of the month, the balance in the raw materials inventory account was $28,000. Direct labor cost was $43,000 and manufacturing overhead cost was $71,000. The beginning balance in the work in process account was $23,000 and the ending balance was $11,000. The beginning balance in the finished goods account was $29,000 and the ending balance was $45,000. Selling expense was $15,000 and administrative expense was $32,000.

96. The conversion cost for September was:A) $114,000B) $131,000C) $171,000D) $103,000Level: Medium LO: 1 Ans: A


97. The prime cost for September was:A) $114,000B) $100,000C) $103,000D) $47,000Level: Medium LO: 1 Ans: B

Use the following information to answer 98-101Dullea Corporation reported the following data for the month of May:


98. The total manufacturing cost for May was:A) $187,000B) $76,000C) $121,000D) $194,000Level: Medium LO: 3,4 Ans: A

99. The cost of goods manufactured for May was:A) $194,000B) $121,000C) $180,000D) $187,000Level: Medium LO: 3,4 Ans: A

100. The cost of goods sold for May was:A) $261,000B) $149,000C) $165,000D) $223,000Level: Medium LO: 3,4 Ans: C


101. The net operating income for May was:A) $125,000B) $55,000C) $33,000D) $99,000Level: Medium LO: 3,4 Ans: B

Use the following information to answer 102-105Management of Melendes Corporation has asked your help as an intern in preparing some key reports for October. The company started the month with raw materials inventories of $38,000. During the month, the company made raw materials purchases amounting to $71,000. At the end of the month, raw materials inventories totaled $22,000. Direct labor cost was $45,000 and manufacturing overhead cost was $79,000. The beginning balance in the work in process account was $16,000 and the ending balance was $22,000. The beginning balance in the finished goods account was $38,000 and the ending balance was $49,000. Sales totaled $250,000. Selling expense was $24,000 and administrative expense was $31,000.

102. The total manufacturing cost for October was:A) $79,000B) $195,000C) $211,000D) $124,000Level: Medium LO: 3,4 Ans: C

103. The cost of goods manufactured for October was:A) $217,000B) $211,000C) $195,000D) $205,000Level: Medium LO: 3,4 Ans: D

104. The cost of goods sold for October was:A) $216,000B) $194,000C) $148,000D) $239,000Level: Medium LO: 3,4 Ans: B

105. The net operating income for October was:A) $56,000B) $0C) $71,000D) $1,000Level: Medium LO: 3,4 Ans: D


Use the following information to answer 106-109Henley Corporation reported the following data for the month of July:


106. The total manufacturing cost for July was:A) $54,000B) $90,000C) $145,000D) $147,000Level: Medium LO: 3,4 Ans: C

107. The cost of goods manufactured for July was:A) $148,000B) $142,000C) $147,000D) $145,000Level: Medium LO: 3,4 Ans: A

108. The cost of goods sold for July was:A) $134,000B) $162,000C) $106,000D) $224,000Level: Medium LO: 3,4 Ans: B

109. The net operating income for July was:A) $79,000B) $48,000C) $7,000D) $22,000Level: Medium LO: 3,4 Ans: C


Use the following information to answer 110-111Lambertson Corporation reported the following data for the month of March:


110. The cost of goods sold for March was:A) $110,000B) $177,000C) $215,000D) $147,000Level: Medium LO: 3,4 Ans: D

111. The net operating income for March was:A) $79,000B) $25,000C) $83,000D) $2,000Level: Medium LO: 3,4 Ans: B


Use the following information to answer 112-113Nives Corporation reported the following data for the month of January:


112. The total manufacturing cost for January was:A) $86,000B) $198,000C) $121,000D) $187,000Level: Medium LO: 3,4 Ans: B

113. The net operating income for January was:A) $14,000B) $16,000C) $91,000D) $82,000Level: Medium LO: 3,4 Ans: A

Use the following information to answer 114-117Management of Shandley 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 $21,000. 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 $22,000. Direct labor cost was $39,000 and manufacturing overhead cost was $71,000. The beginning balance in the work in process account was $12,000 and the ending balance was $18,000. The beginning balance in the finished goods account was $30,000 and the ending balance was $54,000. Sales totaled $220,000. Selling expense was $11,000 and administrative expense was $34,000.


114. The total manufacturing cost for August was:A) $168,000B) $169,000C) $71,000D) $110,000Level: Medium LO: 3,4 Ans: A

115. The cost of goods manufactured for August was:A) $169,000B) $168,000C) $174,000D) $162,000Level: Medium LO: 3,4 Ans: D

116. The cost of goods sold for August was:A) $186,000B) $196,000C) $138,000D) $121,000Level: Medium LO: 3,4 Ans: C

117. The net operating income for August was:A) $6,000B) $65,000C) $82,000D) $37,000Level: Medium LO: 3,4 Ans: D

Use the following information to answer 118-119The CFO of Carl Corporation has provided the following data for September. The beginning balance in the raw materials inventory account was $32,000. During the month, the company made raw materials purchases amounting to $56,000. At the end of the month, the balance in the raw materials inventory account was $34,000. Direct labor cost was $46,000 and manufacturing overhead cost was $68,000. The beginning balance in the work in process account was $13,000 and the ending balance was $10,000. The beginning balance in the finished goods account was $53,000 and the ending balance was $31,000. Sales totaled $270,000. Selling expense was $15,000 and administrative expense was $50,000.

118. The cost of goods sold for September was:A) $129,000B) $193,000C) $292,000D) $149,000Level: Medium LO: 3,4 Ans: B


119. The net operating income for September was:A) $77,000B) $91,000C) $12,000D) $35,000Level: Medium LO: 3,4 Ans: C

Use the following information to answer 120-121Berthelot Corporation has provided the following data for June. The beginning balance in the raw materials inventory account was $34,000. 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 $28,000. Direct labor cost was $47,000 and manufacturing overhead cost was $81,000. The beginning balance in the work in process account was $11,000 and the ending balance was $10,000. The beginning balance in the finished goods account was $25,000 and the ending balance was $59,000. Sales totaled $270,000. Selling expense was $14,000 and administrative expense was $43,000.

120. The total manufacturing cost for June was:A) $81,000B) $178,000C) $184,000D) $128,000Level: Medium LO: 3,4 Ans: C

121. The net operating income for June was:A) $35,000B) $62,000C) $85,000D) $119,000Level: Medium LO: 3,4 Ans: B

Use the following information to answer 122-123Okey Corporation has provided the following data for the month of April. The beginning balance in the finished goods inventory account was $37,000 and the ending balance was $34,000. Sales totaled $250,000. Cost of goods manufactured was $123,000, selling expense was $17,000, and administrative expense was $62,000.

122. The cost of goods sold for April was:A) $202,000B) $126,000C) $123,000D) $120,000Level: Easy LO: 3 Ans: B


123. The net operating income for April was:A) $45,000B) $127,000C) $48,000D) $130,000Level: Easy LO: 3 Ans: A

Use the following information to answer 124-125Nieman Inc., a local retailer, has provided the following data for the month of March:

124. The cost of goods sold for March was:A) $146,000B) $150,000C) $142,000D) $237,000Level: Easy LO: 3 Ans: C

125. The net operating income for March was:A) $130,000B) $134,000C) $43,000D) $47,000Level: Easy LO: 3 Ans: D


Use the following information to answer 126-127Varland Corporation reported the following data for the month of June:


126. The total manufacturing cost for June was:A) $164,000B) $79,000C) $107,000D) $161,000Level: Medium LO: 4 Ans: D

127. The cost of goods manufactured for June was:A) $153,000B) $161,000C) $164,000D) $169,000Level: Medium LO: 4 Ans: A

Use the following information to answer 128-129Sherr Corporation reported the following data for the month of March:



128. The cost of goods manufactured for March was:A) $185,000B) $199,000C) $181,000D) $190,000Level: Medium LO: 4 Ans: B

129. The cost of goods sold for March was:A) $180,000B) $218,000C) $241,000D) $124,000Level: Medium LO: 4 Ans: A

Use the following information to answer 130-131Nahass Corporation has provided the following data for September. The beginning balance in the raw materials inventory account was $28,000. During the month, the company made raw materials purchases amounting to $70,000. At the end of the month, the balance in the raw materials inventory account was $34,000. Direct labor cost was $35,000 and manufacturing overhead cost was $53,000. The beginning balance in the work in process account was $18,000 and the ending balance was $11,000. The beginning balance in the finished goods account was $57,000 and the ending balance was $31,000.

130. The total manufacturing cost for September was:A) $152,000B) $88,000C) $158,000D) $53,000Level: Medium LO: 4 Ans: A

131. The cost of goods manufactured for September was:A) $152,000B) $145,000C) $158,000D) $159,000Level: Medium LO: 4 Ans: D

Use the following information to answer 132-133At a sales volume of 35,000 units, Cly Corporation’s sales commissions (a cost that is variable with respect to sales volume) total $525,000.


132. To the nearest whole dollar, what should be the total sales commissions at a sales volume of 36,100 units? (Assume that this sales volume is within the relevant range.)A) $525,000B) $509,003C) $533,250D) $541,500Level: Easy LO: 5 Ans: D

133. To the nearest whole cent, what should be the average sales commission per unit at a sales volume of 33,600 units? (Assume that this sales volume is within the relevant range.)A) $14.54B) $15.00C) $15.63D) $15.32Level: Easy LO: 5 Ans: B

Use the following information to answer 134-135At a sales volume of 37,000 units, Maks Corporation’s property taxes (a cost that is fixed with respect to sales volume) total $802,900.

134. To the nearest whole dollar, what should be the total property taxes at a sales volume of 39,700 units? (Assume that this sales volume is within the relevant range.)A) $802,900B) $748,295C) $832,195D) $861,490Level: Easy LO: 5 Ans: A

135. To the nearest whole cent, what should be the average property tax per unit at a sales volume of 40,300 units? (Assume that this sales volume is within the relevant range.)A) $21.70B) $20.22C) $19.92D) $20.81Level: Easy LO: 5 Ans: C

Use the following information to answer 136-137Kodama 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 30,000 calls in a month, the costs of operating the helpline total $369,000.


136. To the nearest whole dollar, what should be the total cost of operating the helpline costs at a volume of 33,800 calls in a month? (Assume that this call volume is within the relevant range.)A) $369,000B) $327,515C) $392,370D) $415,740Level: Easy LO: 5 Ans: D

137. To the nearest whole cent, what should be the average cost of operating the helpline per call at a volume of 31,300 calls in a month? (Assume that this call volume is within the relevant range.)A) $12.30B) $11.79C) $10.92D) $12.05Level: Easy LO: 5 Ans: A

Use the following information to answer 138-139Emerton 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 32,000 units, the lease cost was $716,800.

138. To the nearest whole dollar, what should be the total lease cost at a sales volume of 30,900 units in a month? (Assume that this sales volume is within the relevant range.)A) $742,317B) $692,160C) $704,480D) $716,800Level: Easy LO: 5 Ans: D

139. To the nearest whole cent, what should be the average lease cost per unit at a sales volume of 34,400 units in a month? (Assume that this sales volume is within the relevant range.)A) $23.20B) $21.62C) $20.84D) $22.40Level: Easy LO: 5 Ans: C


Use the following information to answer 140-141The following cost data pertain to the operations of Bouffard Department Stores, Inc., for the month of May.

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.

140. What is the total amount of the costs listed above that are direct costs of the Shoe Department?A) $38,000B) $29,000C) $70,000D) $34,000Level: Easy LO: 6 Ans: A

141. What is the total amount of the costs listed above that are NOT direct costs of the Brentwood Store?A) $161,000B) $86,000C) $32,000D) $38,000Level: Medium LO: 6 Ans: A


Use the following information to answer 142-143The following cost data pertain to the operations of Rademaker Department Stores, Inc., for the month of March.

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.

142. What is the total amount of the costs listed above that are direct costs of the Cosmetics Department?A) $83,000B) $94,000C) $90,000D) $127,000Level: Easy LO: 6 Ans: B

143. What is the total amount of the costs listed above that are NOT direct costs of the Northridge Store?A) $172,000B) $33,000C) $80,000D) $94,000Level: Medium LO: 6 Ans: A

Use the following information to answer 144-146Dechico Corporation purchased a machine 3 years ago for $456,000 when it launched product G92L. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 330 machine costing $474,000 or by a new model 260 machine costing $418,000. Management has decided to buy the model 260 machine. It has less capacity than the model 330 machine, but its capacity is sufficient to continue making product G92L. Management also considered, but rejected, the alternative of dropping product G92L and not replacing the old machine. If that were done, the $418,000 invested in the new machine could instead have been invested in a project that would have returned a total of $496,000.


144. In making the decision to buy the model 260 machine rather than the model 330 machine, the differential cost was:A) $18,000B) $56,000C) $38,000D) $40,000Level: Easy LO: 7 Ans: B

145. In making the decision to buy the model 260 machine rather than the model 330 machine, the sunk cost was:A) $418,000B) $456,000C) $474,000D) $496,000Level: Easy LO: 7 Ans: B

146. In making the decision to invest in the model 260 machine, the opportunity cost was:A) $418,000B) $456,000C) $474,000D) $496,000Level: Easy LO: 7 Ans: D

Use the following information to answer 147-149Management of Childers Corporation is considering whether to purchase a new model 380 machine costing $278,000 or a new model 230 machine costing $207,000 to replace a machine that was purchased 3 years ago for $266,000. The old machine was used to make product R16K until it broke down last week. Unfortunately, the old machine cannot be repaired.Management has decided to buy the new model 230 machine. It has less capacity than the new model 380 machine, but its capacity is sufficient to continue making product R16K.Management also considered, but rejected, the alternative of simply dropping product R16K. If that were done, instead of investing $207,000 in the new machine, the money could be invested in a project that would return a total of $305,000.

147. In making the decision to buy the model 230 machine rather than the model 380 machine, the sunk cost was:A) $305,000B) $266,000C) $278,000D) $207,000Level: Easy LO: 7 Ans: B


148. In making the decision to buy the model 230 machine rather than the model 380 machine, the differential cost was:A) $71,000B) $59,000C) $12,000D) $39,000Level: Easy LO: 7 Ans: A

149. In making the decision to invest in the model 230 machine, the opportunity cost was:A) $278,000B) $305,000C) $207,000D) $266,000Level: Easy LO: 7 Ans: B

Essay

150. The Plastechnics Company began operations several years ago. The company purchased a building and, since only half of the space was needed for operations, the remaining space was rented to another firm for rental revenue of $20,000 per year. The success of Plastechnics Company’s product has resulted in the company needing more space. The renter’s lease will expire next month and Plastechnics will not renew the lease in order to use the space to expand operations and meet demand.The company’s product requires materials that cost $25 per unit. The company employs a production supervisor whose salary is $2,000 per month. Production line workers are paid $15 per hour to manufacture and assemble the product. The company rents the equipment needed to produce the product at a rental cost of $1,500 per month. Additional equipment will be needed as production is expanded and the monthly rental charge for this equipment will be $900 per month. The building is depreciated on the straight-line basis at $9,000 per year.The company spends $40,000 per year to market the product. Shipping costs for each unit are $20 per unit.The company plans to liquidate several investments in order to expand production. These investments currently earn a return of $8,000 per year.Required:Complete the answer sheet above by placing an "X" under each heading that identifies the cost involved. The "Xs" can be 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. An "X" can thus be placed under each of these headings opposite the cost.


Level: Medium LO: 1,2,5,7Ans:


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

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 formLevel: Medium LO: 1,3,4 Ans:


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

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 formLevel: Medium LO: 1,3,4


Ans:

153. Ruise Corporation, a manufacturing company, has provided the following data for the month of August:

Raw materials purchased during August totaled $73,000 and the cost of goods manufactured totaled $146,000.Required:(a.) What was the cost of raw materials used in production during August? Show your work.(b.) What was the cost of goods sold for August? Show your work.Level: Easy LO: 1,3


Ans:

154. During the month of February, Cumber Corporation, a manufacturing company, purchased raw materials costing $79,000. The cost of goods manufactured for the month was $109,000. The beginning balance in the raw materials account was $21,000 and the ending balance was $39,000. The beginning balance in the finished goods account was $31,000 and the ending balance was $51,000.Required:(a.) What was the cost of raw materials used in production during February? Show your work.(b.) What was the cost of goods sold for February? Show your work.Level: Easy LO: 1,3 Ans:


155. A partial listing of costs incurred at Falkenberg Corporation during October appears below:

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.Level: Medium LO: 2 Ans: (a.) Product costs consist of direct materials, direct labor, and manufacturing overhead:

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


156. Sobota Corporation has provided the following partial listing of costs incurred during August:

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.Level: Medium LO: 2 Ans: (a.) Product costs consist of direct materials, direct labor, and manufacturing overhead:

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


157. Star Corporation has provided the following data for the month of July:

Required:(a.) Prepare a Schedule of Cost of Goods Manufactured in good form for July.(b.) Prepare an Income Statement in good form for July.Level: Medium LO: 3,4 Ans: (a.) Schedule of Cost of Goods Manufactured


(b.) Income Statement

158. In October, Holecek Corporation had sales of $238,000, selling expenses of $12,000, and administrative expenses of $35,000. The cost of goods manufactured was $130,000. The beginning balance in the finished goods inventory account was $40,000 and the ending balance was $47,000.Required:Prepare an Income Statement in good form for October.Level: Easy LO: 3 Ans:

159. In November, Stiman Inc., a merchandising company, had sales of $221,000, selling expenses of $14,000,and administrative expenses of $22,000. The cost of merchandise purchased during the month was $186,000. The beginning balance in the merchandise inventory account was $42,000 and the ending balance was $52,000.Required:Prepare an Income Statement in good form for November.Level: Easy LO: 3


Ans: Income Statement

160. Leibowitz Corporation has provided the following data for the month of August:

Required:Prepare a Schedule of Cost of Goods Manufactured in good form for August.Level: Medium LO: 4


Ans: Schedule of Cost of Goods Manufactured

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

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.Level: Easy LO: 5 Ans: (1.) Cost of cement used to produce cinder blocks; Cinder blocks produced; Variable(2.) Cost of leasing checkout equipment on a monthly basis at a hardware store; Dollar sales; Fixed(3.) Cost of vaccine used at a clinic; Vaccines administered; Variable(4.) Salary of the staff chaplain at a hospital; Number of patients; Fixed(5.) Windshield wiper blades installed on autos at an auto assembly plant; Number of autos assembled;


Variable(6.) Lease cost of equipment at a dentist’s office; Number of patients; Fixed(7.) Interest expense on corporate debt; Dollar sales; Fixed(8.) Cost of renting production equipment on a monthly basis at a snowboard manufacturer; Snowboards produced; Fixed(9.) Cost of advertising at a snowboard company; Snowboards sold; Fixed(10.) Cook’s wages at a taco shop; Dollar sales; Fixed

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

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.Level: Easy LO: 5 Ans: (1.) Cost of renting production equipment on a monthly basis at a surfboard manufacturer; Surfboards produced; Fixed(2.) Cost of shipping bags of garden mulch to a retail garden store; Bags shipped; Variable(3.) Building rent at a coffee shop; Dollar sales; Fixed(4.) Cost of hard disk installed in a computer; Number of computers assembled; Variable(5.) Cost of fresh vegetables used at a coffee shop; Dollar sales; Variable(6.) Janitorial wages at a surfboard manufacturer; Surfboards produced; Fixed(7.) Cost of advertising at a surfboard company; Surfboards sold; Fixed(8.) Clinical supplies at a doctor’s office; Number of patients; Variable(9.) Cost of leasing checkout equipment on a monthly basis at an electronics store; Dollar sales; Fixed(10.) Cost of heating an electronics store; Dollar sales; Fixed


163. A number of costs are listed below.

Required:For each item above, indicate whether the cost is direct or indirect with respect to the cost object listed next to it.Level: Easy LO: 6 Ans: (1.) Cost of a measles vaccine administered at an outpatient clinic at a hospital; The outpatient clinic; Direct(2.) Cost of a replacement battery installed in a car at the auto repair shop of an automobile dealer; The auto repair shop; Direct(3.) Accounting professor’s salary; A particular class; Indirect(4.) Cost of electronic navigation system installed in a yacht at a yacht manufacturer; A particular yacht; Direct(5.) Cost of wiring used in making a personal computer; A particular personal computer; Indirect(6.) Supervisor’s wages in a computer manufacturing facility; A particular personal computer; Indirect(7.) Cost of lubrication oil used at the auto repair shop of an automobile dealer; The auto repair shop; Direct(8.) Cost of heating a hotel run by a chain of hotels; A particular hotel guest; Indirect(9.) Cost of heating a hotel run by a chain of hotels; The particular hotel; Direct(10.) Cost of tongue depressors used in an outpatient clinic at a hospital; A particular patient; Indirect


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