BEC Flashcards
According to the Committee of Sponsoring Organizations (COSO) of the Treadway Commission, which of the following components of enterprise risk management addresses an entity’s assignment of authority and responsibility?
Internal environment.
According to the Committee of Sponsoring Organizations (COSO) of the Treadway Commission, which of the following components of enterprise risk management addresses an entity’s reporting deficiencies?
Monitoring.
According to the Committee of Sponsoring Organizations (COSO) of the Treadway Commission, which of the following components of the internal control integrated framework addresses an entity’s timely reporting of identified internal control deficiencies?
Monitoring.
A company that retains a CPA with the appropriate knowledge, skills and abilities to prepare timely and effective financial reporting is applying the ideas from which principle of effective internal control over financial reporting?
Financial reporting competencies.
The Sarbanes-Oxley Act of 2002 requires that the members of the audit committee be independent with regard to the issuer. Within the meaning of the law, which of the following corporate officers would be considered independent?
Board Member
Independent Auditor
Board Member = Yes
Independent Auditor = No
According to the Sarbanes-Oxley Act of 2002, which of the following statements is correct regarding an issuer’s audit committee financial expert?
If an issuer does not have an audit committee financial expert, the issuer must disclose the reason why the role is not filled.
The Sarbanes-Oxley Act of 2002 was enacted in response to corporate scandals that largely centered on the quality of corporate financial disclosure and highlighted the inadequate oversight of management, auditors and the Board of Directors. The Sarbanes-Oxley Act addresses the problems related to inadequate board oversight by requiring public companies to have an:
Audit committee.
The Sarbanes-Oxley Act of 2002 requires that one or more members of the audit committee be a financial expert and that the financial reports disclose:
The existence of financial expert(s) on the audit committee or the reasons why the audit committee does not have a financial expert.
The primary benefit of having a financial expert on a company’s audit committee is:
The enhanced level of financial sophistication of the financial expert can serve as a resource for the audit committee.
Arnold Astor, CPA, is a local tax practitioner who has been asked to sit on the Board of BigLarge Corporation, a multinational issuer. Astor has never had any involvement either as an employee or as an auditor with publically traded companies but does teach an accounting principles class at the community college. Under the provisions of Sarbanes-Oxley Act of 2002:
The Board of Directors would likely evaluate Astor’s qualifications to serve on the audit committee and be designated as a financial expert based on mix of knowledge and experience.
The Sarbanes-Oxley Act of 2002 requires that the officers of a corporation be held accountable to a code of ethics. According to the Act, codifications of ethical standards should include provisions for all of the following, except:
Prompt internal reporting of code provisions and accountability for adherence to the code.
The Sarbanes-Oxley Act of 2002 requires that the management report on internal control include all of the following, except:
A statement that there are no disagreements between management and the auditor as to the effectiveness of internal controls.
The Sarbanes-Oxley Act of 2002 seeks to improve investor confidence by providing greater transparency for all of the following issues, except:
Means and methods for balancing risk and growth.
The Gotham Corporation regularly produces budget vs. actual data for its managers. The company is particularly sensitive to personnel costs, and division variances of greater than five percent for any period are promptly investigated to determine if budgeted postions have not been filled or if there has been extraordinary overtime. Timely exception resolution of this character illustrates the information and communication principles typically associated with:
Internal Control Information.
The external auditors for the Horace Company assess the achievement of internal control objectives each year and communicate the assessment to management and the Board. Communication by the external auditor illustrates which principle of the information and communication component of the Committee on Sponsoring Organization’s Integrated Framework?
External Communication.
The Instafab Corporation regularly assesses whether the financial statements of the company fairly state the financial position, results of operations and cash flows associated with the underlying transactions. Leases, for example are regularly evaluated for their status as a capital or operating lease and, if capital, the valuations of both the asset and liability are evaluated for fairness, the depreciation methods used and interest rates used are assessed for proper computation or application, and inclusion or exclusion of lease-related cash activity from the statement of cash flows is carefully evaluated. The regular evaluation of transactions as part of the risk assessment component of the Committee on Sponsoring Organization’s Framework reflects the principle of:
Financial Reporting Objectives.
Jasper International considers cash receipting and cash disbursement processes as part of their risk assessment. The consideration of processes relates to the:
Financial Reporting Risks.
The Treadway Commission was established to study factors that lead to fraudulent financial reporting. The Treadway Commission was established by:
Private sponsoring organizations.
The Committee on Sponsoring Organizations prepared the Internal Control Integrated Framework:
To help businesses assess internal control.
Able Corporation owns numerous businesses along the coast of Florida. The company’s management has identified business interruption events as a potential risk resulting from storm damages caused by hurricanes. Management is so fearful of the possibility of storm damage that they elect to divest the company of virtually all properties on the Florida coast. Able’s response to potential risks is known as:
Avoidance.
Able Corporation owns numerous businesses along the coast of Florida. The company’s management has identified business interruption events as a potential risk resulting from storm damages caused by hurricanes. The company elects to not only insure its properties but to “buy down” standard deductibles with additional premium. Able’s response to potential risks is known as:
Sharing.
Able Corporation owns numerous businesses along the coast of Florida. The company’s management has identified business interruption events as a potential risk resulting from storm damages caused by hurricanes. The company elects to balance its portfolio of risk with property investments on the coast of other states and in Florida’s interior. Able’s response to potential risks is known as:
Reduction.
Able Corporation owns numerous businesses along the coast of Florida. The company’s management has identified business interruption events as a potential risk resulting from storm damages caused by hurricanes. The company elects to treat the potential damages from hurricanes as part of their business model. Able’s response to potential risks is known as:
Acceptance.
Barker Healthcare Corporation’s management is developing their risk assessment as they review plans to expand their nursing home chain into various states in the southeast. The management team has consulted published industry sources to evaluate both population trends and affluence in the region as a means of evaluating both demand, the ability to pay and the risk that populations may either not seek healthcare or may not be able to afford it. Barker’s listing of risks from industry sources is a technique for risk assessment known as a(n):
Event Inventory.
Kamp Sporting Goods seeks to establish a code of conduct that will communicate the “tone at the top” to all employees. The contents of the code will likely include all of the following, except:
Definitions of common sense approaches to software piracy to ensure that the company is competitive.
Dollar Bus Company has set an objective to fully comply with published bus schedules to ensure consistent on-time service. The company knows that shorter routes per bus minimize delays caused by unforeseen issues. Shorter routes require a greater investment in the fleet. The company currently achieves an 83% compliance rate with the schedule and does not expect a significant increase or decrease in ridership or revenue as compliance improves to 100% but does see revenues fall off significantly when buses are late more that 20% of time. The company’s objective setting would logically develop as follows:
Compliance with the bus schedule would be reviewed in relation to the risk of lost ridership within tolerable compliance percentages above 80%.
Extra Edge Sporting Goods has set a strategic objective of being in the upper quartile of sporting goods retailers. The company identified a related objective of increasing its sales force by 50 new staff members while maintaining staff cost at .194 cents per sales dollar. Events identified by the management of Extra Edge that might interfere with achievement of their related objective would include all of the following, except:
Product demand may fall if sporting goods become less popular.
Management has carefully evaluated the likelihood and impact of events on its foreign operations. In the event of a 3% variation in exchange rate, the impact is estimated at $10 million without any action taken by management and $4 million if the company purchases a hedge instrument. The impact of the inherent risk of changes in foreign currency exchange on achieving company’s business objectives is:
$10 million.
Management has carefully evaluated the likelihood and impact of events on its foreign operations. In the event of a 3% variation in exchange rate, the impact is estimated at $10 million without any action taken by management and $4 million if the company purchases a hedge instrument. The impact of the residual risk of changes in foreign currency exchange on achieving company’s business objectives is:
$ 4 million.
Control activities are most closely related to:
Risk responses.
For the components of Enterprise Risk Management to be functioning effectively, there cannot be:
Material weaknesses in internal control.
The criteria for evaluating the effectiveness of enterprise risk management are:
The components of the enterprise risk management framework.
According to COSO, which of the following components of enterprise risk management addresses an entity’s integrity and ethical values?
Internal environment.
The Daphne Corporation evaluates employees with responsibilities for financial reporting for fulfillment of those responsibilities for compensation and promotion purposes. The company’s policies support the idea that:
Human resources practices should be designed to facilitate effective internal control over financial reporting.
In order to comply with a director’s duty of loyalty to a corporation, what action(s) should a director take when presented with a corporate opportunity?
Offer the opportunity to the corporation and accept it if the corporation rejects it.
Each of the following is a limitation of enterprise risk management (ERM), except:
ERM can provide absolute assurance with respect to objective categories.
A manufacturing firm identified that it would have difficulty sourcing raw materials locally, so it decided to relocate its production facilities. According to COSO, this decision represents which of the following responses to the risk?
Risk reduction.
According to COSO, the use of ongoing and separate evaluations to identify and address changes in internal control effectiveness can best be accomplished in which of the following stages of the monitoring-for-change continuum?
Change identification.
Which of the following is necessary to be an audit committee financial expert according to the criteria specified in the Sarbanes-Oxley Act of 2002?
Experience with internal accounting controls.
Which of the following positions best describes the nature of the Board of Directors of XYZ Co.’s relationship to the company?
Fiduciary.
The Committee on Sponsoring Organizations (COSO) recommends that the number of organizational layers between the Chief Financial Officer and those involved in financial reporting should not exceed:
Three.
As a matter of policy, all correspondence to or from regulatory auditors received by the management of the Barclay Corporation is provided to the Barclay Corporation audit committee and the corporation’s full board as needed. In assessing entity wide controls, management might conclude:
The Board of Directors understands and exercises oversight responsibility related to financial reporting and related internal control.
Auburndale Corporation has a corporate compliance program that allows employees the option of anonymously reporting violations of laws, rules, regulations, policies or other issues of abuse through a hotline. Reported issues are reviewed by the internal auditor and either immediately forwarded to the CEO or summarized and reported to the CEO each month. The program also provides opportunities to report through supervisory channels and includes a biannual training class that all employees must complete. The corporate compliance program demonstrates that:
Sound integrity and ethical values are developed and understood and set the standard of conduct for financial reporting.
The Carlton Corporation publishes an Employee Handbook that contains employee responsibilities for moral behavior including a code of conduct. Each year, employees must acknowledge their receipt of the handbook, their understanding of the code, and if they have any awareness of non-compliance within the company. The policies would indicate:
Sound integrity and ethical values are developed and understood and set the standard of conduct for financial reporting.
The Barstan Corporation has adopted the internal control integrated framework and regularly surveys local employers and uses national services to ensure that the accounting staff is appropriately compensated. The principle of the control environment most closely related to this practice is:
Human resources.
All of the following management activities of the Falco Insurance Group, Inc. are evidence of the ongoing monitoring of internal controls built into the company’s system, except:
The CFO updates the audit committee on status of internal control.
Corbin Corporation is evaluating the sample sizes associated with periodic tests of the existence of a fleet of taxis. Cash receipts associated with fares deposited daily are periodically reconciled to both the fares charged and the taxi’s odometer readings. With respect to monitoring controls over cash vs. vehicles, Corbin will likely:
Review cash on an ongoing basis and fixed assets on a less frequent periodic basis.
A not-for-profit organization periodically conducts focus groups of employees, service beneficiaries and governance board members to reevaluate its mission vision and values to determine the accuracy of the strategic statements to refine them where necessary. This activity relates to which component of internal control?
Monitoring.
Generally, an organization will not operate beyond the limits of their risk appetite. Risk appetite has generally been exceeded when:
The likelihood and impact of negative events significantly exceeds residual risks.
Strategic objectives for the mission and vision of the organization are generally linked to related objectives. All of the following objectives are typically regarded as related objectives, except:
Information technology objectives.
A significant component of risk assessment is the identification of events that might impede the achievement of objectives. The technique characterized by the development of a listing of potential events common to a specific industry or functional area is known as a(n):
Event inventory
Consensus Corporation routinely seeks to identify the events that are most likely to pose a risk to the company. The company generally hires an experienced facilitator to stimulate a discussion from a cross-functional group representing different areas throughout the company. This method of event identification is most like referred to as a(an):
Event workshop
The Glassman Company completed its annual retreat of board members and senior management and produced a document that links the organization’s mission and vision with strategic and related objectives. The document includes a commitment to establish an ethics hotline and assign a corporate officer to conduct ethics training and monitor reports through the hotline. That commitment would most likely be a:
Related compliance objective.
The Hartman Conglomerate completed its annual retreat of board members and senior management and produced a document that links the organization’s mission and vision with strategic and related objectives. The document includes a commitment to develop a uniform chart of accounts for all divisions of the conglomerate. That commitment would most likely be a:
Related reporting objective.
The Justco Corporation completed its annual retreat of board members and senior management and produced a document that links the organization’s mission and vision with strategic and related objectives. The document includes a commitment to conduct focus groups with customers and suppliers to determine the responsiveness of Justco to the needs of various parties. That commitment would most likely be a:
Related operations objective.
The Knight Corporation completed its annual retreat of board members and senior management and produced a document that links the organization’s mission and vision with strategic and related objectives. The document includes an objective that the Knight Corporation will rank in the top quartile of quality for its industry. That objective would most likely be a:
Strategic objective.
Establishing objectives that will support the mission and vision of an organization generally involve supporting the mission with:
Strategic objectives, supported by strategies and related objectives.
Davis, a director of Active Corp., is entitled to:
Rely on information provided by a corporate officer.
Knox, president of Quick Corp., contracted with Tine Office Supplies, Inc. to supply Quick’s stationery on customary terms and at a cost less than that charged by any other supplier. Knox later informed Quick’s board of directors that Knox was a majority stockholder in Tine. Quick’s contract with Tine is:
Valid because the contract is fair to Quick.
The principle that protects corporate directors from personal liability for acts performed in good faith on behalf of the corporation is known as:
The business judgment rule.
The business judgment rule is a rule that immunizes corporate:
Management from liability for actions that result in corporate losses or damages if the actions are undertaken in good faith and are within both the power of the corporation and the authority of management to make.
Which of the following is not a goal of an Enterprise Risk Management Framework (ERM)?
Avoid adverse publicity and damage to the entity’s reputation.
The Enterprise Risk Management Integrated Framework states that an organization must identify events, both positive and negative, as part of its risk management program. Which of the following is true with regard to events?
Event identification occurs after the development of objectives.
Conflict of interest provisions of the Sarbanes-Oxley Act of 2002 generally prohibit the directors or executive officers of an issuer from:
Receiving a personal loan from the issuer not in the ordinary course of business.
A company that maintains a strong internal audit function that reports directly to the Board of Directors is applying the ideas from which principle of effective internal control over financial reporting?
Organizational structure.
A company that routinely performs background checks on its employees to ensure that there is no criminal history is applying the ideas from which principle of effective internal control over financial reporting?
Human resources.
According to the Sarbanes-Oxley Act of 2002, a chief executive officer or chief financial officer who misrepresents the company’s finances may be penalized by being:
Fined and imprisoned.
Which of the following items is one of the eight components of COSO’s enterprise risk management framework?
Monitoring.
Management of a company has a lack of segregation of duties within the application environment, with programmers having access to development and production. The programmers have the ability to implement application code changes into production without monitoring or a quality assurance function. This is considered a deficiency in which of the following areas?
Change control.
Big Box Retailers is a cost leader that offers the lowest possible prices on consumer goods. The marketing practice that best describes Big Box Retailer’s approach would be:
Transaction marketing.
Quality programs normally include a number of techniques to find and analyze problems. The technique commonly used to determine zero defects and goalpost conformance is called a:
Control Chart.
Quality programs normally include a number of techniques to find and analyze problems. The technique commonly used to analyze the source of potential problems and their locations within a process is called a:
Fishbone Diagram
The management of a company would do which of the following to compare and contrast its financial information to published information reflecting optimal amounts?
Benchmark.
Which of the following is a true statement regarding nonfinancial measures of a process?
They are best viewed as attention directors
Which of the following incentive designs will most likely encourage the use of nonfinancial measures by a manager?
Tying incentives to the manager’s individual effort.
Which of the following is true regarding Productivity Ratios?
Total productivity ratios (TPRs) consider all inputs simultaneously as well as the prices of the inputs.
Which of the following is true regarding Pareto diagrams?
They display the individual and cumulative frequency of quality issues, defects, or problems.
Which of the following is not an element of the manufacturing process typically presented on a cause and effect (Fishbone) diagram?
Manufacturing Overhead.
Which of the following design choices for management incentive compensation would most likely emphasize future performance?
Restricted stock option programs.
Which of the following is not a characteristic of effective performance measures?
The measure emphasizes long-term over short-term issues.
Good Stuff Vitamin Corporation is trying to locate customers that will likely be interested in their range of health related products. The company is promoting their products to active adults and active seniors and has obtained a list of older adults from retirement associations and the names of individuals using other health related products such as athletic footwear. Future promotions are tailored to individual needs based on past orders. Good Stuff’s marketing practices could best be characterized as:
Database marketing.
Executive perks are often criticized since the compensation provided to the manager:
Can be excessive.
Nonfinancial performance measures are often preferable to financial performance measures as a means of constructively motivating operational managers since:
Nonfinancial measures are more easily associated with operational objectives.
Fabro, Inc. produced 1,500 units of Product RX-6 last week. The inputs to the production process for Product RX-6 were as follows.
450 pounds of Material A at a cost of $1.50 per pound.
300 pounds of Material Z at a cost of $2.75 per pound.
300 labor hours at a cost of $15.00 per hour.
What is the best productivity measure for the first-line supervisor in Fabro, Inc.’s production plant?
5.00 units per labor hour.
The quality control tool used to evaluate error rates and process improvement issues in a manner that combines both a histogram and a line graph is referred to as a:
Pareto diagram.
Quality programs normally include a number of techniques to find and analyze problems. The technique commonly used to rank and analyze the individual and cumulative causes of defects is called a:
Pareto Diagram.
Huron Industries has recently developed two new products, a cleaning unit for laser discs and a tape duplicator for reproducing home movies taken with a video camera. However, Huron has only enough plant capacity to introduce one of these products during the current year. The company controller has gathered the following data to assist management in deciding which product should be selected for production. Huron's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to products. Tape Duplicator Cleaning Unit Raw materials $ 44.00 $ 36.00 Machining @ $12/hr. 18.00 15.00 Assembly @ $10/hr. 30.00 10.00 Variable overhead @ $8/hr. 36.00 18.00 Fixed overhead @ $4/hr. 18.00 9.00 $ 146.00 $ 88.00
Suggested selling price $169.95 $99.98
Actual research and development costs $240,000 $175,000
Proposed advertising and promotion costs $500,000 $350,000
The total overhead cost of $27.00 for Huron’s laser disc cleaning unit is a:
Mixed cost.
Lankip Company produces two main products and a byproduct out of a joint process. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. Lankip has employed the physical-volume method to allocate joint production costs to the two main products. The net realizable value of the byproduct is used to reduce the joint production costs before the joint costs are allocated to the main products. Data regarding Lankip's operations for the current month are presented in the chart below. During the month, Lankip incurred joint production costs of $2,520,000. The main products are not marketable at the split-off point and, thus, have to be processed further. First Main Product Second Main Product Byproduct Monthly output in pounds 90,000 150,000 60,000 Selling price per pound $30 $14 $2 Process costs $540,000 $660,000 The amount of joint production cost that Lankip would allocate to the Second Main Product by using the physical-volume method to allocate joint production costs would be:
$1,500,000
Joint costs $ 2,520,000
Less net realizable value of byproduct (60,000 × $2) (120,000)
Net joint costs to be allocated $ 2,400,000
For purposes of allocating joint costs to joint products, the sales price at point of sale, reduced by cost to complete after split-off, is assumed to be equal to the:
Net sales value at split-off.
Kode Co. manufactures a major product that gives rise to a by-product called May. May’s only separable cost is a $1 selling cost when a unit is sold for $4. Kode accounts for May’s sales by deducting the $3 net amount from the cost of goods sold of the major product. There are no inventories. If Kode were to change its method of accounting for May from a by-product to a joint product, what would be the effect on Kode’s overall gross margin?
Gross margin increases by $1 for each unit of May sold.
For purposes of allocating joint costs to joint products, the sales price at point of sale, reduced by cost to complete after split-off, is assumed to be equal to the:
Relative sales value at split-off.
Fab Co. manufactures textiles. Among Fab's Year 1 manufacturing costs were the following salaries and wages: Loom operators $ 120,000 Factory foremen 45,000 Machine mechanics 30,000 What was the amount of Fab's Year 1 direct labor?
$120,000
Sonimad Sawmill manufactures two lumber products from a joint milling process. The two products developed are mine support braces (MSB) and unseasoned commercial building lumber (CBL). A standard production run incurs joint costs of $300,000 and results in 60,000 units of MSB and 90,000 units of CBL. Each MSB sells for $2 per unit, each CBL sells for $4 per unit.
Assuming no further processing work is done after the split-off point, the amount of joint cost allocated to commercial building lumber (CBL) on a physical quantity allocation basis would be:
$180,000
Sonimad Sawmill manufactures two lumber products from a joint milling process. The two products developed are mine support braces (MSB) and unseasoned commercial building lumber (CBL). A standard production run incurs joint costs of $300,000 and results in 60,000 units of MSB and 90,000 units of CBL. Each MSB sells for $2 per unit, each CBL sells for $4 per unit.
If there are no further processing costs incurred after the split-off point, the amount of joint cost allocated to the mine support braces (MSB) on a relative sales value basis would be:
$75,000
Sonimad Sawmill manufactures two lumber products from a joint milling process. The two products developed are mine support braces (MSB) and unseasoned commercial building lumber (CBL). A standard production run incurs joint costs of $300,000 and results in 60,000 units of MSB and 90,000 units of CBL. Each MSB sells for $2 per unit, each CBL sells for $4 per unit.
Continuing with the previous data, assume the commercial building lumber is not marketable at split-off but must be further planed and sized at a cost of $200,000 per production run. During this process, 10,000 units are unavoidably lost; these spoiled units have no discernable value. The remaining units of commercial building lumber are saleable at $10.00 per unit. The mine support braces, although saleable immediately at the split-off point, are coated with a tar-like preservative that costs $100,000 per production run. The braces are then sold for $5 each.
Using the net realizable value (NRV) basis, the completed cost assigned to each unit of commercial building lumber would be:
$5.625
Sonimad Sawmill manufactures two lumber products from a joint milling process. The two products developed are mine support braces (MSB) and unseasoned commercial building lumber (CBL). A standard production run incurs joint costs of $300,000 and results in 60,000 units of MSB and 90,000 units of CBL. Each MSB sells for $2 per unit, each CBL sells for $4 per unit.
Assume the commercial building lumber is not marketable at split-off but must be further planed and sized at a cost of $200,000 per production run. During this process, 10,000 units are unavoidably lost; these spoiled units have no discernable value. The remaining units of commercial building lumber are saleable at $10.00 per unit. The mine support braces, although saleable immediately at the split-off point, are coated with a tar-like preservative that costs $100,000 per production run. The braces are then sold for $5 each.
If Sonimad Sawmill chose not to process the mine support braces beyond the split-off point, the contribution from the joint milling process would be:
$80,000 lower.
Mighty, Inc. processes chickens for distribution to major grocery chains. The two major products resulting from the production process are white breast meat and legs. Joint costs of $600,000 are incurred during standard production runs each month, which produce a total of 100,000 pounds of white breast meat and 50,000 pounds of legs. Each pound of white breast meat sells for $2 and each pound of legs sells for $1. If there are no further processing costs incurred after the split-off point, what amount of the joint costs would be allocated to the white breast meat on a relative sales value basis?
$480,000
Which of the following types of costs are prime costs?
Direct materials and direct labor.
A company manufactures two products, X and Y, through a joint process. The joint (common) costs incurred are $500,000 for a standard production run that generates 240,000 gallons of X and 160,000 gallons of Y. X sells for $4.00 per gallon, while Y sells for $6.50 per gallon. If there are no additional processing costs incurred after the split-off point, what is the amount of joint cost for each production run allocated to X on a physical-quantity basis?
$300,000
Which of the following is assigned to goods that were either purchased or manufactured for resale?
Product cost.
Which of the following costs would decrease if production levels were increased within the relevant range?
Fixed costs per unit.
Gram Co. develops computer programs to meet customers’ special requirements. How should Gram categorize payments to employees who develop these programs?
Direct costs
Value adding costs
Direct costs = yes
Value adding costs = yes
Which of the following topics is the focus of managerial accounting?
The needs of the organization’s internal parties.
Under Pick Co.'s job order costing system manufacturing overhead is applied to work in process using a predetermined annual overhead rate. During January Year 1, Pick's transactions included the following: Direct materials issued to production $ 90,000 Indirect materials issued to production 8,000 Manufacturing overhead incurred 125,000 Manufacturing overhead applied 113,000 Direct labor costs 107,000 Pick had neither beginning nor ending work-in-process inventory. What was the cost of jobs completed in January Year 1?
$310,000
COGM = $90,000 + $107,000 + $113,000 + $0 − $0 = $310,000
Kerner Manufacturing uses a process cost system to manufacture laptop computers. The following information summarizes operations relating to laptop computer model #KJK20 during the quarter ending March 31: Units Direct Labor Work-in-process inventory, January 1 100 $50,000 Started during the quarter 500 Completed during the quarter 400 Work-in-process inventory, March 31 200 Costs added during the quarter $720,000 Beginning work-in-process inventory was 50% complete for direct labor costs. Ending work-in-process inventory was 75% complete for direct labor costs. What is the total value of direct labor costs in ending work-in-process inventory using the weighted-average unit cost inventory valuation method?
$210,000
Compute equivalent units of production Compute the unit cost of production Apply unit costs to the equivalent units in ending inventory Compute equivalent units of production Total units to account for: Units accounted for as follows: Beginning WIP 100 Units completed 400 Units started 500 Ending WIP (75% complete) 200 Total 600 Total 600 Equivalent units of production for the quarter are 550 computed as follows: Units completed + completed portion of WIP (400 + (200 × 75%)) = 550 Compute the unit cost of production Total costs are computed as follows: Prior month cost 50,000 Current month cost 720,000 Total 770,000 Cost per unit is computed as follows: $770,000 ÷ 550 units = $1,400 per unit Apply unit costs to the equivalent units in ending inventory Total units in ending inventory 200 Percent complete × 75% Equivalent units 150 Equivalent units × cost per unit equals value of direct labor costs in ending inventory 150 units × $1,400 = $210,000 Proof: B Beginning inventory $50,000 A Add: Costs added during quarter 720,000 S Subtract: Costs of goods completed (400 × $1,400) (560,000) E Ending Inventory $210,000
Kerner Manufacturing uses a process cost system to manufacture laptop computers. The following information summarizes operations relating to laptop computer model #KJK20 during the quarter ending March 31: Units Direct Materials Work-in-process inventory, January 1 100 $50,000 Started during the quarter 500 Completed during the quarter 400 Work-in-process inventory, March 31 200 Costs added during the quarter $720,000 Beginning work-in-process inventory was 50% complete for direct materials. Ending work-in-process inventory was 75% complete for direct materials. What is the total value of material costs in ending work-in-process inventory using the weighted-average unit cost inventory valuation method?
$210,000
Compute equivalent units of production Compute the unit cost of production Apply unit costs to the equivalent units in ending inventory Compute equivalent units of production Total units to account for: Units accounted for as follows: Beginning WIP 100 Units completed 400 Units started 500 Ending WIP (75% complete) 200 Total 600 Total 600 Equivalent units of production for the quarter are 550 computed as follows: Units completed + completed portion of WIP (400 + (200 × 75%)) = 550 Compute the unit cost of production Total costs are computed as follows: Prior month cost 50,000 Current month cost 720,000 Total 770,000 Cost per unit is computed as follows: $770,000 ÷ 550 units = $1,400 per unit Apply unit costs to the equivalent units in ending inventory Total units in ending inventory 200 Percent complete × 75% Equivalent units 150 Equivalent units × cost per unit equals value of direct material costs in ending inventory 150 units × $1,400 = $210,000 Proof: B Beginning inventory $50,000 A Add: Costs added during quarter 720,000 S Subtract: Costs of goods completed (400 × $1,400) (560,000) E Ending Inventory $210,000
Which of the following is true about activity-based costing?
It can be used with either process or job costing.
Kerner Manufacturing uses a process cost system to manufacture laptop computers. The following information summarizes operations relating to laptop computer model #KJK20 during the quarter ending March 31: Units Direct Materials Work-in-process inventory, January 1 100 $50,000 Started during the quarter 500 Completed during the quarter 400 Work-in-process inventory, March 31 200 Costs added during the quarter $720,000 Beginning work-in-process inventory was 50% complete for direct materials. Ending work-in-process inventory was 75% complete for direct materials. What is the total value of material costs in ending work-in-process inventory using the FIFO unit cost, inventory valuation method?
$216,000
Under the FIFO method, ending inventory is priced at the cost of manufacturing during the period. Equivalent units are composed of three parts: the completion of units on hand at the beginning of the period, units started and completed during the period, and units partially completed at the end of the period. Applying these principles to the given fact pattern, the total equivalent units of production for the quarter is detemined as follows: Equivalent units for the first quarter: Work in process, beginning (100 units × 50% to complete) 50 Units started and completed: Units completed and transferred out 400 Units in beginning inventory (100) 300 Work in process, ending (200 units × 75% complete) 150 Equivalent units of production 500 Costs associated with first quarter production January 1 Work-in-process −− First quarter costs added $720,000 Total costs $720,000 Cost per unit ($720,000/500) 1,440 Ending inventory (150 × $1,440) $216,000
A basic assumption of activity-based costing (ABC) is that:
Products or services require the performance of activities, and activities consume resources.
Madtack Company's beginning and ending inventories for the month of November Year 1 are: November 1 November 30 Direct materials $67,000 $62,000 Work-in-process 145,000 171,000 Finished goods 85,000 78,000 Production data for the month of November follows. Direct labor $200,000 Actual factory overhead 132,000 Direct materials purchased 163,000 Transportation in 4,000 Purchase returns and allowances 2,000 Madtack uses one factory overhead control account and charges factory overhead to production at 70 percent of direct labor cost. The company does not formally recognize over/underapplied overhead until year-end. Madtack Company's prime cost for November is:
$370,000
Beginning balance direct materials $67,000 Plus purchases 163,000 Plus transportation in 4,000 Less purchase returns and allowances 2,000 Materials available 232,000 Less cost of materials used 170,000 ← SQUEEZE Ending balance direct materials $62,000 Direct materials $170,000 Direct labor (given) 200,000 Prime cost $370,000
Madtack Company's beginning and ending inventories for the month of November Year 1 are: November 1 November 30 Direct materials $67,000 $62,000 Work-in-process 145,000 171,000 Finished goods 85,000 78,000 Production data for the month of November follows. Direct labor $200,000 Actual factory overhead 132,000 Direct materials purchased 163,000 Transportation in 4,000 Purchase returns and allowances 2,000 Madtack uses one factory overhead control account and charges factory overhead to production at 70 percent of direct labor cost. The company does not formally recognize over/underapplied overhead until year-end. Madtack Company's total manufacturing cost for November is:
$510,000
Direct material $170,000 [Note A] Direct labor 200,000 Overhead (70% of DL) 140,000 Total manufacturing cost $510,000 Note A: Beginning balance direct materials $67,000 Plus purchases 163,000 Plus transportation in 4,000 Less purchase returns and allowances 2,000 Materials available 232,000 Less cost of materials used (170,000) ← SQUEEZE Ending balance direct materials $62,000
Madtack Company's beginning and ending inventories for the month of November Year 1 are: November 1 November 30 Direct materials $67,000 $62,000 Work-in-process 145,000 171,000 Finished goods 85,000 78,000 Production data for the month of November follows. Direct labor $200,000 Actual factory overhead 132,000 Direct materials purchased 163,000 Transportation in 4,000 Purchase returns and allowances 2,000 Madtack uses one factory overhead control account and charges factory overhead to production at 70 percent of direct labor cost. The company does not formally recognize over/underapplied overhead until year-end. Madtack Company's cost of goods transferred to finished goods inventory for November is:
$484,000
Beginning balance of WIP $145,000 Plus total manufacturing cost 510,000 [Note A] Goods available to transfer 655,000 Goods transferred to finished goods 484,000 ← SQUEEZE Ending balance of WIP $171,000 Note A: Direct material $170,000 [Note B] Direct labor 200,000 Overhead (70% of DL) 140,000 Total manufacturing cost $510,000 Note B: Beginning balance direct materials $67,000 Plus purchases 163,000 Plus transportation in 4,000 Less purchase returns and allowances 2,000 Materials available 232,000 Less cost of materials used (170,000) ← SQUEEZE Ending balance direct materials $62,000
Madtack Company's beginning and ending inventories for the month of November Year 1 are: November 1 November 30 Direct materials $67,000 $62,000 Work-in-process 145,000 171,000 Finished goods 85,000 78,000 Production data for the month of November follows. Direct labor $200,000 Actual factory overhead 132,000 Direct materials purchased 163,000 Transportation in 4,000 Purchase returns and allowances 2,000 Madtack uses one factory overhead control account and charges factory overhead to production at 70 percent of direct labor cost. The company does not formally recognize over/underapplied overhead until year-end. Madtack Company's cost of goods sold for November is:
$491,000
Beginning balance of finished goods $85,000 Plus goods transferred to finished goods 484,000 [Note A] Finished goods available 569,000 Cost of goods sold 491,000 ← SQUEEZE Ending balance of finished goods $78,000 Note A: Beginning balance of WIP $145,000 Plus total manufacturing cost 510,000 [Note B] Goods available to transfer 655,000 Goods transferred to finished goods 484,000 ← SQUEEZE Ending balance of WIP $171,000 Note B: Direct material $170,000 [Note C] Direct labor 200,000 Overhead (70% of DL) 140,000 Total manufacturing cost $510,000 Note C: Beginning balance direct materials $67,000 Plus purchases 163,000 Plus transportation in 4,000 Less purchase returns and allowances 2,000 Materials available 232,000 Less cost of materials used (170,000) ← SQUEEZE Ending balance direct materials $62,000
Madtack Company's beginning and ending inventories for the month of November Year 1 are: November 1 November 30 Direct materials $67,000 $62,000 Work-in-process 145,000 171,000 Finished goods 85,000 78,000 Production data for the month of November follows. Direct labor $200,000 Actual factory overhead 132,000 Direct materials purchased 163,000 Transportation in 4,000 Purchase returns and allowances 2,000 Madtack uses one factory overhead control account and charges factory overhead to production at 70 percent of direct labor cost. The company does not formally recognize over/underapplied overhead until year-end. Madtack Company's net charge to factory overhead control for the month of November is:
$8,000 credit, overapplied.
Factory overhead applied (70% of direct labor) $ 140,000
Actual overhead incurred 132,000
Amount of factory overhead overapplied $ 8,000
Because overhead was overapplied, there was a larger amount of cost that went to WIP. Therefore, applied overhead was credited by $8,000 too much in November.
In its April Year 1 production, Hern Corp., which does not use a standard cost system, incurred total production costs of $900,000, of which Hern attributed $60,000 to normal spoilage and $30,000 to abnormal spoilage. Hern should account for this spoilage as:
Inventoriable cost of $60,000 and period cost of $30,000.
In an activity-based costing system, what should be used to assign a department’s manufacturing overhead costs to products produced in varying lot sizes?
Multiple cause and effect relationships.
Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May:
Units
Beginning work-in-process inventory, May 1
16,000
Started in production during May
100,000
Completed production during May
92,000
Ending work-in-process inventory, May 31
24,000
The beginning inventory was 60 percent complete for materials and 20 percent complete for conversion costs. The ending inventory was 90 percent complete for materials and 40 percent complete for conversion costs.
Costs pertaining to the month of May are as follows:
Beginning inventory costs are: materials, $54,560; direct labor $20,320; and factory overhead, $15,240.
Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160.
Using the first-in, first-out (FIFO) method, the equivalent units of production for materials are:
104,000 units.
Equivalent units for the first quarter: Work in process, beginning (16,000 units × 40% to complete) 6,400 Units started and completed: Units completed and transferred out 92,000 Units in beginning inventory (16,000) 76,000 Work in process, ending (24,000 units × 90% complete) 21,600 Equivalent units of production 104,000
Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May:
Units
Beginning work-in-process inventory, May 1
16,000
Started in production during May
100,000
Completed production during May
92,000
Ending work-in-process inventory, May 31
24,000
The beginning inventory was 60 percent complete for materials and 20 percent complete for conversion costs. The ending inventory was 90 percent complete for materials and 40 percent complete for conversion costs.
Costs pertaining to the month of May are as follows:
Beginning inventory costs are: materials, $54,560; direct labor $20,320; and factory overhead, $15,240.
Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160.
Using the FIFO method, the equivalent units of production for conversion costs are:
98,400 units.
Equivalent units for the first quarter: Work in process, beginning (16,000 units × 80% to complete) 12,800 Units started and completed: Units completed and transferred out 92,000 Units in beginning inventory (16,000) 76,000 Work in process, ending (24,000 units × 40% complete) 9,600 Equivalent units of production 98,400
Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May:
Units
Beginning work-in-process inventory, May 1
16,000
Started in production during May
100,000
Completed production during May
92,000
Ending work-in-process inventory, May 31
24,000
The beginning inventory was 60 percent complete for materials and 20 percent complete for conversion costs. The ending inventory was 90 percent complete for materials and 40 percent complete for conversion costs.
Costs pertaining to the month of May are as follows:
Beginning inventory costs are: materials, $54,560; direct labor $20,320; and factory overhead, $15,240.
Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160.
Using the FIFO method, the equivalent unit cost of materials for May is:
$4.50
$4.50 equivalent unit cost of materials using the FIFO method. Cost of materials used $468,000 Equivalent units ÷ 104,000 [Note A] Equivalent unit cost of materials $4.50 Note A: Under the FIFO method, the equivalent units of production is comprised of three parts: the completion of units on hand at the beginning of the period, the units started and completed during the period, and the units partially completed at the end of the period. Applying these principles to the given fact pattern, the total equivalent units of production for materials is determined as follows: Equivalent units for the first quarter: Work in process, beginning (16,000 units × 40% to complete) 6,400 Units started and completed: Units completed and transferred out 92,000 Units in beginning inventory (16,000) 76,000 Work in process, ending (24,000 units × 90% complete) 21,600 Equivalent units of production 104,000
Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May:
Units
Beginning work-in-process inventory, May 1
16,000
Started in production during May
100,000
Completed production during May
92,000
Ending work-in-process inventory, May 31
24,000
The beginning inventory was 60 percent complete for materials and 20 percent complete for conversion costs. The ending inventory was 90 percent complete for materials and 40 percent complete for conversion costs.
Costs pertaining to the month of May are as follows:
Beginning inventory costs are: materials, $54,560; direct labor $20,320; and factory overhead, $15,240.
Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160.
Using the FIFO method, the equivalent unit conversion cost for May is:
$5.83
$5.83 equivalent unit conversion cost using the FIFO method. Direct labor costs incurred $182,880 Factory overhead incurred 391,160 Conversion costs incurred $574,040 Equivalent units ÷ 98,400 [Note A] Equivalent unit cost of materials $5.83 Note A: Under the FIFO method, the equivalent units of production is comprised of three parts: the completion of units on hand at the beginning of the period, the units started and completed during the period, and the units partially completed at the end of the period. Applying these principles to the given fact pattern, the total equivalent units of production for conversion costs is determined as follows: Equivalent units for the first quarter: Work in process, beginning (16,000 units × 80% to complete) 12,800 Units started and completed: Units completed and transferred out 92,000 Units in beginning inventory (16,000) 76,000 Work in process, ending (24,000 units × 40% complete) 9,600 Equivalent units of production 98,400
Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May:
Units
Beginning work-in-process inventory, May 1
16,000
Started in production during May
100,000
Completed production during May
92,000
Ending work-in-process inventory, May 31
24,000
The beginning inventory was 60 percent complete for materials and 20 percent complete for conversion costs. The ending inventory was 90 percent complete for materials and 40 percent complete for conversion costs.
Costs pertaining to the month of May are as follows:
Beginning inventory costs are: materials, $54,560; direct labor $20,320; and factory overhead, $15,240.
Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160.
Using the FIFO method, the total cost of units in the ending work-in-process inventory at May 31 is:
$153,168
$153,168 total cost of units in ending work-in-process inventory using the FIFO method. Ending Work-In-Process Inventory - FIFO Actual Units × % Compl. = Equiv. Units × Unit Cost = Total Cost Materials 24,000 90% 21,600 4.50 $97,200 Conversion Costs 24,000 40% 9,600 5.83 $55,968 Ending Inventory 24,000 $153,168 Note that the unit costs for materials ($4.50) and conversion costs ($5.83) are calculated below in Notes A and B. Note A: Cost of materials used $468,000 Equivalent units ÷ 104,000 [Note 1] Equivalent unit cost of materials $4.50 Note 1: Under the FIFO method, the equivalent units of production is comprised of three parts: the completion of units on hand at the beginning of the period, the units started and completed during the period, and the units partially completed at the end of the period. Applying these principles to the given fact pattern, the total equivalent units of production for materials is determined as follows: Equivalent units for the first quarter: Work in process, beginning (16,000 units × 40% to complete) 6,400 Units started and completed: Units completed and transferred out 92,000 Units in beginning inventory (16,000) 76,000 Work in process, ending (24,000 units × 90% complete) 21,600 Equivalent units of production 104,000 Note B: Direct labor costs incurred $182,880 Factory overhead incurred 391,160 Conversion costs incurred $574,040 Equivalent units ÷ 98,400 [Note 2] Equivalent unit cost of materials $5.83 Note 2: Under the FIFO method, the equivalent units of production is comprised of three parts: the completion of units on hand at the beginning of the period, the units started and completed during the period, and the units partially completed at the end of the period. Applying these principles to the given fact pattern, the total equivalent units of production for conversion costs is determined as follows: Equivalent units for the first quarter: Work in process, beginning (16,000 units × 80% to complete) 12,800 Units started and completed: Units completed and transferred out 92,000 Units in beginning inventory (16,000) 76,000 Work in process, ending (24,000 units × 40% complete) 9,600 Equivalent units of production 98,400
Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May:
Units
Beginning work-in-process inventory, May 1
16,000
Started in production during May
100,000
Completed production during May
92,000
Ending work-in-process inventory, May 31
24,000
The beginning inventory was 60 percent complete for materials and 20 percent complete for conversion costs. The ending inventory was 90 percent complete for materials and 40 percent complete for conversion costs.
Costs pertaining to the month of May are as follows:
Beginning inventory costs are: materials, $54,560; direct labor $20,320; and factory overhead, $15,240.
Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160.
Using the weighted-average method, the equivalent unit cost of materials for May is:
$4.60
$4.60 equivalent unit cost of materials using the weighted-average method ($54,560 beg. inv. + $468,000 additions = $522,560 ÷ 113,600 total avail. equivalent units). Materials Actual Units % Compl. Equiv. Units Total Cost Unit Cost Beginning Inventory 16,000 60% 9,600 $ 54,560 Add: Started 100,000 SQZ 104,000 468,000 $ 4.50 FIFO Total Available 116,000 113,600 522,560 $ 4.60 wtd-avg Less: Completed (92,000) 100% (92,000) Ending Inventory 24,000 90% 21,600 $ 97,200 $ 4.50 FIFO
Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May:
Units
Beginning work-in-process inventory, May 1
16,000
Started in production during May
100,000
Completed production during May
92,000
Ending work-in-process inventory, May 31
24,000
The beginning inventory was 60 percent complete for materials and 20 percent complete for conversion costs. The ending inventory was 90 percent complete for materials and 40 percent complete for conversion costs.
Costs pertaining to the month of May are as follows:
Beginning inventory costs are: materials, $54,560; direct labor $20,320; and factory overhead, $15,240.
Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160.
Using the weighted-average method, the equivalent unit conversion cost for May is:
$6.00
$6.00 equivalent unit conversion cost using the weighted-average method ($35,560 beg. inv. + $574,040 additions = $609,600 ÷ 101,600 total avail. equivalent units). Conversion Costs Actual Units % Compl. Equiv. Units Total Cost Unit Cost Beginning Inventory 16,000 20% 3,200 $ 35,560 Add: Started 100,000 SQZ 98,400 574,040 $ 5.83 FIFO Total Available 116,000 101,600 609,600 $ 6.00 wtd-avg Less: Completed (92,000) 100% (92,000) Ending Inventory 24,000 40% 9,600 $ 55,968 $ 5.83 FIFO
Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May:
Units
Beginning work-in-process inventory, May 1
16,000
Started in production during May
100,000
Completed production during May
92,000
Ending work-in-process inventory, May 31
24,000
The beginning inventory was 60 percent complete for materials and 20 percent complete for conversion costs. The ending inventory was 90 percent complete for materials and 40 percent complete for conversion costs.
Costs pertaining to the month of May are as follows:
Beginning inventory costs are: materials, $54,560; direct labor $20,320; and factory overhead, $15,240.
Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160.
Using the weighted-average method, the total cost of the units in the ending work-in-process inventory at May 31, 1995, is:
$156,960
Ending Work-In-Process Inventory - Wtd. Avg. Actual Units % Compl. Equiv. Units Total Cost Unit Cost Materials 24,000 90% 21,600 $ 99,360 $ 4.60 wtd-avg. Conversion Costs 24,000 40% 9,600 57,600 $ 6.00 wtd-avg. 24,000 $ 156,960
The following information pertains to Lap Co.'s Palo Division for the month of April: Number of units Cost of materials Beginning work-in-process 15,000 $5,500 Started in April 40,000 18,000 Units completed 42,500 Ending work-in-process 12,500 All materials are added at the beginning of the process. Using the weighted-average method, the cost per equivalent unit for materials is:
$0.43
Units Cost
Beg inv.
15,000 $5,500
Started
40,000 18,000
Available
55,000 $23,500
In an activity-based costing system, cost reduction is accomplished by identifying and eliminating:
All cost drivers
Nonvalue adding activities
All cost drivers = No
Nonvalue adding activities = Yes
In a traditional job order cost system, the issue of indirect materials to a production department increases:
Factory overhead control.
Alex Company had the following inventories at the beginning and end of the month of January.
January 1 January 31
Finished Goods $ 125,000 $ 117,000
Work-in-process 235,000 251,000
Direct materials 134,000 124,000
The following additional manufacturing data was available for the month of January.
Direct materials purchased $ 189,000
Purchase returns and allowances 1,000
Transportation in 3,000
Direct labor 300,000
Actual factory overhead 175,000
Alex Company applies factory overhead at a rate of 60 percent of direct labor cost, and any overapplied or underapplied factory overhead is deferred until the end of the year, December 31.
Alex Company’s balance in factory overhead control for January was:
$5,000 credit-overapplied.
$5,000 overapplied.
Actual factory overhead $ 175,000
Applied (300,000 × .6) (180,000)
Overapplied $ (5,000)
Black, Inc. employs a weighted average method in its process costing system. Black’s work in process inventory on June 30 consists of 40,000 units. These units are 100% complete with respect to materials and 60% complete with respect to conversion costs. The equivalent unit costs are $5.00 for materials and $7.00 for conversion costs. What is the total cost of the June 30 work in process inventory?
$368,000
Materials Conversion Total June 30 40,000 40,000 Percent Complete × 100% × 60% Equivalent Units 40,000 24,000 Equivalent Unit Costs × $ 5.00 × $ 7.00 Total $ 200,000 $ 168,000 $ 368,000
Jonathon Mfg. adopted a job-costing system. For the current year, budgeted cost driver activity levels for direct labor hours and direct labor costs were 20,000 and $100,000, respectively. In addition, budgeted variable and fixed factory overhead were $50,000 and $25,000, respectively.
Actual costs and hours for the year were as follows:
Direct labor hours
21,000
Direct labor costs
$ 110,000
Machine hours
35,000
For a particular job, 1,500 direct-labor hours were used. Using direct-labor hours as the cost driver, what amount of overhead should be applied to this job?
$5,625
Variable overhead rate = $50,000 / 20,000 hours = $2.50 per direct labor hour
Fixed overhead rate = $25,000 / 20,000 hours = $1.25 per direct labor hour
Total overhead rate = $2.50 + $1.25 = $3.75
Overhead applied to the job = $3.75 × 1,500 = $5,625
What is the cost of ending inventory given the following factors? Beginning inventory $ 5,000 Total production costs 60,000 Cost of goods sold 55,000 Direct labor 40,000
$10,000
Beginning inventory $ 5,000 Add: Production costs* 60,000 Total Manufacturing costs available 65,000 Subtract: Cost of good sold (55,000) Ending inventory $ 10,000
The following is selected information from the records of Ray, Inc.: Purchases of raw materials $ 6,000 Raw materials, beginning 500 Raw materials, ending 800 Work-in-process, beginning 0 Work-in-process, ending 0 Cost of goods sold 12,000 Finished goods, beginning 1,200 Finished goods, ending 1,400 What is the total amount of conversion costs?
$6,500
Beginning ($1,200) and ending ($1,400) finished goods inventory and cost of goods sold ($12,000) are used to squeeze costs of goods manufactured of $12,200
Cost of goods manufactured ($12,200) is then used in combination with beginning and ending WIP inventories of $0 to derive total costs incurred ($12,200) and then, in combination with materials ($5,700) the conversion costs of $6,500 as follows:
Which of the following nonvalue-added costs associated with manufactured work in process inventory is most significant?
The cost of moving, handling, and storing any individual product.
Merry Co. has two major categories of factory overhead: material handling and quality control. The costs expected for these categories for the coming year are as follows:
Material handling
$ 120,000
Quality inspection
200,000
The plant currently applies overhead based on direct labor hours. The estimated direct labor hours are 80,000 per year. The plant manager is asked to submit a bid and assembles the following data on a proposed job:
Direct materials
$ 4,000
Direct labor (2,000 hours)
6,000
What amount is the estimated product cost on the proposed job?
$18,000
Prime costs are the sum of direct labor and direct material: Direct labor $6,000 Direct material 4,000 Subtotal, prime costs $10,000 Applied overhead is equal to the overhead rate times the estimated hours: Computations of rate − total overhead: Material handling $120,000 Quality inspection 200,000 Total overhead $320,000 Total cost driver 80,000 Rate $4.00 Applied overhead: Estimated hours 2,000 Rate × $4.00 Applied overhead 8,000 Estimated costs $18,000
