Cost accounting Part 2 Flashcards
The formula for cost of jobs completed (or cost of goods manufactured) is:
cost of jobs completed (or cost of goods manufactured) =
direct materials used + direct labor + overhead applied + beginning WIP − ending WIP.
MCQ-03586
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 90,00
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?
A. $302,000
B. $310,000
C. $322,000
D. $330,000
Choice “B” is correct. Cost of jobs completed (or cost of goods manufactured) equals
direct materials used + direct labor + overhead applied + beginning WIP − ending WIP.
In this case, the calculation is:
COGM = $90,000 + $107,000 + $113,000 + $0 − $0
= $310,000
Indirect materials ($8,000) are included in the actual overhead incurred. COGM uses applied overhead, not actual overhead. The underapplied overhead of $12,000 ($125,000 − $113,000) would normally be closed out to cost of goods sold unless considered material and then it would be allocated pro rata to the ending balances of WIP, finished goods inventory, and cost of goods sold.
MCQ-03616
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
note: 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:
A. $502,000
B. $503,000
C. $495,000
D. $510,000
Choice “D” is correct. $510,000
Total manufacturing cost is the sum of DM + DL + Overhead APPLIED
STEP 1
To get direct material costs:
Beg balance direct materials $67,000
+
plus DM Purchases $163,000
+
plus Transport in $4000
-
minus purchase returns and allowances $2000
= MATERIALS AVAILABLE –> $232,000
Materials Avail [232,000] - Cost of materials used = Ending Balance DM [$62,000]
SQUEEZE –> Cost of Materials used = Materials Avail [232,000] - Ending Balance DM [62,000]
= $170,000
STEP 2
TO GET THE ANSWER
DM, aka Cost of Materials Used of 170,000 <see>
\+
plus Direct Labor, given 200,000
\+
plus Overhead $140,000 (note: This company calculates Applied overhead at 70% of Direct Labor and adjusts at end of year. Do NOT use actual, ALWAYS use applied/calculated)</see>
= $510,000 Total Manufacturing cost
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:
A. $469,000
B. $495,000
C. $484,000
D. $476,000
Choice “C” is correct.
The cost of goods transferred to finished goods is the total manufacturing cost adjusted for the changes in the WIP account.
Using the account analysis format.
Beginning WIP $145,000
+
plus Total Mfc. cost $510,000 [NOTE A]
=Goods avail to transfer $655,000
- Ending Balance of WIP $171,000
= Goods Transferred to finished goods $484,000
<ACTUAL FORMULA: Goods avail to transfer - Goods transferred to finished goods = Ending Balance of WIP>
NOTE A:
DM $170,000 [SEE NOTE B]
+
plus DL $200,000
+
plus Overhead $140,000 [70 % of DL]
= $510,000 Total Mfc. Cost
NOTE B:
Beg balance direct materials 67000
+
plus Purchases 163000
+
plus Transportation In 4000
-
minus purchase returns and allowances 2000
= Materials Available $232,000
Materials Avail $232,000 - Cost of Materials Used = Ending Balance Direct materials $62,000
Cost of materials Used = Mat Avail 232000 - Ending balance DM 62000 = $170,000
MCQ-11043
Below are data from the income statement of Brown Inc.:
Beginning inventory, finished goods $16,000
Ending inventory, finished goods 21,000
Cost of goods sold 43,000
Gross margin from sales 39,000
Operating expenses—marketing and selling 20,000
Net income 19,000
What was Brown’s cost of goods manufactured?.
A. $37,000
B. $38,000
C. $48,000
D. $50,000
Choice “C” is correct.
$48,000
For a manufacturer, cost of goods manufactured (COGM) is a byproduct of cost of goods sold (COGS) and the change in beginning and ending finished
goods inventory.
COGM = COGS + chg. in finished goods
aka
COGM = COGS + Ending Finished goods - Beg. Finished inventory
43000 + 21000 - 16000 = 48000
Formula for net income in relation to sales is:
Net income = Sales - COG sold - Marketing/Admin Expenses
Formula for Cost of Goods Sold is:
Beg finished goods inventory
+
COG manufactured
-
Ending Finished Goods
= COG SOLD
MCQ-08754
Based on the following data, what is the net income for the company?
Sales $1,000,000
Net purchases of raw materials 600,000
Cost of goods manufactured 800,000
Marketing and administrative expenses 250,000
Indirect manufacturing costs 500,000
Beginning Inventory Ending Inventory
Work in process $500,000 $400,000
Finished goods 100,000 400,000
A. $150,000
B. $250,000
C. $350,000
D. $500,000
Choice “B” is correct.
$250,000
Net income for this question will be equal to sales less cost of goods sold and marketing and administrative expenses. The net purchases of raw materials and indirect (overhead) manufacturing costs are each components of cost of
goods manufactured.
Beg. Finished Goods 100,000 + COGM 800,000 - Ending Finished Goods 400,000 =
$500,000 Cost of Goods Sold
Net income = Sales 1,000,000 - COG sold 500,000 - Mkt/Admin 250,000 = $250,000
MCQ-08280
On January 1 Maples had two jobs in process: #506 with assigned costs of $10,500 and
#507 with assigned costs of $14,250. During January three new jobs, #508 through #510,
were started and three jobs, #506, #507, and #508, were completed. Materials and labor
costs added during January were as follows:
Job number Materials Labor
506 0 2000
507 0 1,500
508 4,000 3,600
509 3,800 2,000
510 2,600 3,100
Manufacturing overhead is assigned at the rate of 200 percent of labor. What is the January
cost of goods manufactured and transferred from work-in-process?
A. $25,300
B. $35,850
C. $42,950
D. $50,050
Choice “D” is correct. The cost of goods manufactured is $50,050 and can be
computed based on beginning and ending inventory balances and manufacturing costs
incurred. The CGM includes the cost of all jobs finished in January. Jobs 506 and 507
were finished in January, and Job 508 was started and finished in January. The total
costs for each of these jobs is as follows:
Job 506: $10,500 (beg. WIP) + $2,000 (labor) + $4,000 (O’h) = 16500
Job 507: $14,250 (beg. WIP) + $1,500 (labor) + $3,000 (O’h) = 18,750
Job 508: $4,000 (materials) + $3,600 (labor) + $7,200 (O’h) = 14,800
Choices “A”, “B”, and “C” are incorrect based on the above analysis.
$(50,050)
What is the formula to calculate ENDING INVENTORY in a manufacturing environment?
Beg inventory + TOTAL Production Costs = Total Manufacturing Costs Avail.
Total MFC costs - COG sold = Ending inventory
__________ costing is a method of allocating production costs to products and services that are identifiable as separate units and require greater or
lesser amounts of work to complete.
Job order
Examples of industries that use job order costing
include furniture manufacturing, special-order printing, shipbuilding, and many types of
service organizations
_______________ is a method of allocating production costs to products and services by averaging the cost over the total units produced. Costs are usually accumulated by department rather than by job.
Process costing
Process costing is commonly used in industries that
manufacture homogeneous products, such as soda or paper, on a continuous basis.
A print shop would use ___________ costing due to the nature of its work that is customer specific.
JOB
A beverage drink producer would use ___________ costing due to the homogeneous nature of its product.
PROCESS
