COMPREHENSIVE EXAMINATION A (Chapters 1 - 4)
Points
Approximate Minutes
Multiple Choice.............................................
20
20
A - II
Cost of Goods Manufactured and Sold ........
20
15
A - III
Job Order Cost Accounting ..........................
20
15
A - IV
Process Cost Accounting .............................
25
20
A-V
Activity-Based Costing .................................
15
15
100
85
Problem
Topic
A-I
Checking Work ............................................
5 90
A-2
Test Bank for Managerial Accounting, Fourth Edition
Problem A - I — Multiple Choice (20 points) Circle the one best answer. 1.
Cost of goods manufactured during a period is obtained by taking the total manufacturing costs incurred during the period and adding and subtracting the following inventories: a. b. c. d.
Adding Beginning finished goods inventory Beginning work in process inventory Beginning raw materials inventory Beginning work in process inventory
Subtracting Ending finished goods inventory Ending finished goods inventory Ending work in process inventory Ending work in process inventory
2.
Cost of goods sold is equal to a. total manufacturing costs plus beginning work in process less ending work in process. b. cost of goods sold plus beginning work in process less ending work in process. c. total manufacturing costs plus ending work in process less beginning work in process. d. cost of goods manufactured plus beginning finished goods less ending finished goods.
3.
Inventory accounts for a manufacturer consists of a. direct materials, work in process, and finished goods. b. direct labor, work in process, and finished goods. c. manufacturing overhead, direct materials, and direct labor. d. work in process, direct labor, and manufacturing overhead.
4.
In a process cost system, equivalent units of production are the a. work done on physical units expressed in fully completed units. b. units that are transferred to the next processing department. c. units completed and transferred to finished goods. d. units that are incomplete at the end of a period.
Use the following information for questions 5 and 6. In the month of November, a department had 500 units in the beginning work in process inventory that were 60% complete. These units had $16,000 of materials cost and $12,000 of conversion costs. Materials are added at the beginning of the process and conversion costs are added uniformly throughout the process. During November, 10,000 units were completed and transferred to the finished goods inventory and there were 2,000 units that were 25% complete in the ending work in process inventory on November 30. During November, manufacturing costs charged to the department were: Materials $368,000; Conversion costs $408,000. 5.
The cost assigned to the units transferred to finished goods during November was a. $720,000. b. $724,000. c. $752,000. d. $716,000.
6.
The cost assigned to the units in the ending work in process inventory on November 30 was a. $144,000. b. $84,000. c. $64,000. d. $116,000.
Comprehensive Examination A
7.
An appropriate cost driver for ordering and receiving materials cost is the a. direct labor hours. b. machine hours. c. number of parts. d. number of purchase orders.
8.
Benefits of activity-based costing include all of the following except a. more accurate product costing. b. fewer cost pools used to assign overhead costs to products. c. enhanced control over overhead costs. d. better management decisions.
9.
An example of a value-added activity in a manufacturing operation is a. machine repair. b. inventory control. c. engineering design. d. building maintenance.
10.
A-3
Assigning manufacturing costs to work in process results in credits to all of the following accounts except a. Factory Labor. b. Manufacturing Overhead. c. Raw Materials Inventory. d. Work in Process Inventory.
A-4
Test Bank for Managerial Accounting, Fourth Edition
Problem A - II — Cost of Goods Manufactured and Sold (20 points) Selected account balances of Heedy Manufacturing Company appear below for 2008: Finished Goods Inventory Work In Process Inventory Raw Materials Inventory Sales Direct Labor Factory Supervisory Salaries Income Tax Expense Factory Insurance Raw Material Purchases Administrative Expenses Sales Returns and Allowances Factory Depreciation Indirect Labor Selling Expenses
Beginning of Year $25,000 30,000 46,000
End of Year $ 32,000 35,000 26,000 360,000 45,000 18,000 25,000 12,000 75,000 17,000 15,000 22,000 11,000 35,000
Instructions Using the above information for Heedy Manufacturing Company, answer the following questions. Support your answers with clearly identified computations. 1. What was the amount of direct materials used in production? 2. What were the total manufacturing costs incurred? 3. What was the cost of goods manufactured? 4. What was the cost of goods sold? 5. What was the amount of net income?
Comprehensive Examination A
A-5
Problem A - III — Job Order Cost Accounting (20 points) Battle Manufacturing uses a job order cost accounting system. On October 1, the company has a balance in Work in Process Inventory of $5,500 and two jobs in process: Job No. 429, $3,000 and Job No. 430, $2,500. During October, a summary of source documents reveals the following: For Job No. 429 Job No. 430 Job No. 431 Job No. 432 General Use
Materials Requisition Slips $ 3,500 2,600 3,400 3,000 1,000 $13,500
Labor Time Tickets $ 4,400 3,400 4,200 4,000 1,500 $17,500
Battle Manufacturing applies manufacturing overhead to jobs at an overhead rate of 70% of direct labor cost. Job No. 429 is completed during the month. Instructions (a) Prepare summary journal entries to record the requisition slips, time tickets, the assignment of manufacturing overhead to jobs, and the completion of Job No. 429. Show computations. (b)
Answer the following questions. 1. What is the balance in Work in Process Inventory at October 31? 2. If Battle Manufacturing incurred $8,000 of manufacturing overhead in addition to indirect materials and indirect labor, was overhead over- or underapplied in October and by how much?
A-6
Test Bank for Managerial Accounting, Fourth Edition
Problem A - IV — Process Cost Accounting (25 points) The Mixing Department of Cherry Manufacturing Company has the following production and manufacturing cost data for January. Production: Beginning inventory 8,000 units that are 100% complete as to materials and 40% complete as to conversion costs; units started into production 27,000; ending inventory of 12,000 units 20% complete as to conversion costs. Manufacturing Costs: Beginning work in process inventory of $40,000, comprised of $30,000 of materials and $10,000 of conversion costs. Materials added during the month, $110,000; labor and overhead applied during the month, $62,000 and $55,000, respectively. Instructions (a) Compute the equivalent units of production for materials and conversion costs for the month of January. (b)
Compute the unit costs for materials and conversion costs.
(c)
Determine the costs to be assigned to the units transferred out and ending work in process.
Problem A - V — Activity-Based Costing (15 points) Tuttle Manufacturing Company manufactures two products: radiators and gas tanks. During June, 200 radiators and 400 gas tanks were produced and overhead costs of $66,000 were incurred. The following information related to overhead costs was available: Activity Materials handling Machine setups Quality inspections
Cost Driver Number of requisitions Number of setups Number of inspections
Total Cost $28,000 18,000 20,000
The cost driver volume for each product was as follows: Cost Driver Number of requisitions Number of setups Number of inspections
Radiators 300 140 200
Gas Tanks 500 220 300
Total 800 360 500
Instructions (a) Compute the overhead rate for each activity. (b) Assign the manufacturing overhead costs for June to the two products using activity-based costing.
Comprehensive Examination A
A-7
Solutions — Comprehensive Examination A Problem A - I — Solution 1. 2. 3. 4. 5.
d d a a a
6. 7. 8. 9. 10.
b d b c d
Problem A - II — Solution 1. Direct materials Raw materials inventory, Jan. 1 ........................................................................ Raw material purchases.................................................................................... Raw materials available for use ........................................................................ Raw materials inventory, Dec. 31 ..................................................................... Direct materials used ........................................................................................ 2. Direct materials used ....................................................................... Direct labor....................................................................................... Manufacturing overhead Factory supervisory salaries ...................................................... Factory insurance....................................................................... Factory depreciation................................................................... Indirect labor .............................................................................. Total manufacturing costs .......................................................... 3. Work in process inventory, Jan. 1 .................................................... Direct materials used ....................................................................... Direct labor....................................................................................... Manufacturing overhead .................................................................. Total work in process ....................................................................... Work in process inventory, Dec. 31 ................................................. Cost of goods manufactured ............................................................
$ 46,000 75,000 121,000 26,000 $ 95,000 $ 95,000 45,000
$18,000 12,000 22,000 11,000
63,000 $203,000 $ 30,000
$95,000 45,000 63,000
4. Finished goods inventory, Jan. 1 ..................................................... Cost of goods manufactured ............................................................ Cost of goods available for sale ....................................................... Finished goods inventory, Dec. 31................................................... Cost of goods sold ........................................................................... 5. Sales. ............................................................................................... $360,000 Less sales returns and allowances .................................................. 15,000 Expenses Cost of goods sold ..................................................................... 191,000 Selling expenses ........................................................................ 35,000 Administrative expenses ............................................................ 17,000 Income tax expense ................................................................... 25,000 Net income .......................................................................................
203,000 233,000 35,000 $198,000 $ 25,000 198,000 223,000 32,000 $191,000 $345,000
268,000 $ 77,000
A-8
Test Bank for Managerial Accounting, Fourth Edition
Problem A - III — Solution (a) Requisition slips Oct. 31 Work In Process Inventory ..................................................... Manufacturing Overhead ........................................................ Raw Materials Inventory ................................................
12,500 1,000
Time tickets Work in Process Inventory...................................................... Manufacturing Overhead ........................................................ Factory Labor.................................................................
16,000 1,500
Assignment of overhead Work in Process Inventory ($16,000 × 70%) .......................... Manufacturing Overhead ...............................................
11,200
Completion of Job 429 Finished Goods Inventory....................................................... Work in Process Inventory............................................. ($3,000 + $3,500 + $4,400 + $3,080) (b)
1. Work in Process Inventory balance: October 1 balance Costs added in October Completed jobs October 31 balance 2. Under- or overapplied overhead: Overhead incurred ($1,000 + 1,500 + $8,000) Overhead applied Overhead overapplied
13,500
17,500
11,200 13,980 13,980
$ 5,500 39,700 45,200 13,980 $31,220 $10,500 11,200 $ 700
Problem A - IV — Solution (a) Transferred out Work in process, January 31 Total *(8,000 + 27,000) – 12,000 (b)
Physical Units 23,000* 12,000 35,000
Equivalent Units Materials Conversion Costs 23,000 23,000 12,000 2,400** 35,000 25,400
**(12,000 × .20)
Materials: [($30,000 + $110,000) ÷ 35,000] ................................................ Conversion Costs: [($10,000 + $62,000 + $55,000) ÷ 25,400] ...................
$4 5 $9
Comprehensive Examination A
(c)
Costs accounted for Transferred out (23,000 × $9) Work in process, 1/31 Materials (12,000 × $4) Conversion costs (2,400 × $5)
A-9
$207,000 48,000 12,000
60,000 $267,000
Problem A - V — Solution (a) The overhead rates are: Activity Materials handling Machine setups Quality inspections
Total Cost $28,000 18,000 20,000
Total Driver Volume 800 360 500
Overhead Rate $35 50 40
(b) The assignment of the overhead costs to products is as follows: Cost Requisitions ($35) Setups ($50) Inspections ($40) Total costs (a) Total units (b) Cost per unit (a) ÷ (b)
Radiators Number Cost 300 $10,500 140 7,000 200 8,000 $25,500
Gas Tanks Number Cost 500 $17,500 220 11,000 300 12,000 $40,500
200
400
$127.50
$101.25
Total Cost $28,000 18,000 20,000 $66,000
