Horngren Accounting The Managerial Chapters Nobles 10th Edition Test Bank

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Horngren Accounting The Managerial Chapters Nobles 10th Edition Test Bank

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Horngrens Accounting, The Managerial Chapters, 10e (Nobles/Mattison/Matsumura)
Chapter 18 Introduction to Managerial Accounting

Learning Objective 18-1

1) Managerial accounting focuses on providing information for internal planning and control.
Answer: TRUE
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

2) Financial accounting prepares reports for internal purposes, whereas managerial accounting provides information to external stakeholders.
Answer: FALSE
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

3) The IMA standards of ethical practice require managerial accountants to maintain their professional competence.
Answer: TRUE
Diff: 1
LO: 18-1
AACSB: Ethical Understanding
AICPA Functional: Reporting

4) The accountant for Myra Lido deliberately deferred cash payments for business expenses in order to record a higher operating cash flow for the company. As long as the amount was not material, this would not be considered unethical behavior.
Answer: FALSE
Diff: 1
LO: 18-1
AACSB: Ethical Understanding
AICPA Functional: Reporting

5) Financial statements prepared for investors and creditors often include forward-looking information because they make decisions based on a companys future prospects.
Answer: FALSE
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

6) Management accounting reporting by a public firm is required to follow the rules of GAAP and guidelines of the Securities Exchange Commission.
Answer: FALSE
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

7) A budget is a managerial accounting tool used in the planning process.
Answer: TRUE
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

8) Financial reporting is typically much more detailed than managerial accounting.
Answer: FALSE
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

9) The IMA Standards of Ethical Practice include confidentiality, competence, credibility, and integrity.
Answer: TRUE
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

10) ERP systems can integrate all of a companys functions, departments, and data into a single system.
Answer: TRUE
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

11) Which of the following is an objective of management accounting?
A) to generate financial statements of a company for tax reporting
B) to provide information to business managers to assist them in controlling their business
C) to provide information to shareholders to assist them with their investment decisions
D) to ensure that the reports produced for internal and external business purposes are GAAP compliant
Answer: B
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

12) Which of the following statements is true of management accounting?
A) The primary users of management accounting are the external stakeholders of a company.
B) Management accounting information is used to help managers plan and control their operations.
C) Management accounting information requires an external audit by an independent CPA.
D) Management accounting information must comply with Generally Accepted Accounting Principles.
Answer: B
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

13) Management accounting information of a company is primarily used by:
A) its customers to understand the pricing of the product.
B) its creditors to understand the credibility of the business.
C) its employees to plan and control operations.
D) its investors to make their investment decisions.
Answer: C
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

14) Which of the following statements is true of financial accounting?
A) It provides information to investors needed for their investment decisions.
B) It provides forward-looking information needed for managing and delegating operations.
C) It focuses on detailed reports for parts of the company rather than the whole company.
D) It focuses on planning and controlling day-to-day operations.
Answer: A
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

15) Managements accountability to its suppliers and vendors is to:
A) provide products to customers that are safe and free of defects.
B) obey laws and pay taxes timely.
C) provide a return on shareholders investment.
D) make timely payments and comply with contract terms.
Answer: D
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

16) How is the management of a company accountable to its employees?
A) The management must provide products that are safe and free of defects.
B) The management must provide a safe workplace.
C) The management must ensure that it earns a net positive return on its investments.
D) The management must ensure the business is environmentally responsible to its community.
Answer: B
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

17) Management of a company is accountable to ________ for obeying laws and paying taxes.
A) the natural environment
B) its asset vendors
C) the securities exchange
D) the government
Answer: D
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

18) In which of the following ways is the management of a company accountable to its communities?
A) making timely interest payments to creditors and dividend payments to investors
B) ensuring the companys environmental impact is not harmful to its area of operations
C) providing a capital return on the shareholders investment
D) repaying principal and interest to the suppliers
Answer: B
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

19) Managerial accounting includes the planning function. Which of the following items would be part of the planning function of a businesss managerial accounting?
A) comparing actual performance to previously budgeted amounts
B) creating detailed budgets
C) implementing operational plans
D) evaluating results of operations
Answer: B
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

20) Comparing actual performance to previously budgeted amounts is part of the:
A) controlling function of managerial accounting.
B) planning function of managerial accounting.
C) reporting function of managerial accounting.
D) organizing function of managerial accounting.
Answer: A
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

21) Which of the following is the primary objective of managerial accounting?
A) providing information that managers need to make operational decisions
B) providing historical data to investors and creditors
C) providing summarized results of operations
D) providing information to comply with laws and regulations of government bodies
Answer: A
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

22) Which of the following is the primary focus of financial accounting?
A) providing information that managers need to make operational decisions
B) providing summarized information on operational results to investors and creditors
C) providing budgets for future periods
D) providing highly detailed information on product lines, regions, divisions, etc.
Answer: B
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

23) ________ is a philosophy of continuous improvement of products and processes.
A) Just-in-time (JIT) management
B) Enterprise resource planning (ERP)
C) Supply chain management
D) Total quality management (TQM)
Answer: D
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

24) Which of the following describes a system in which suppliers deliver materials at the time they are needed and finished units are completed when customer orders need to be filled?
A) Supply chain management
B) Just-in-time (JIT) management
C) Enterprise resource planning (ERP)
D) Total quality management (TQM)
Answer: B
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

25) What is total quality management (TQM)?
A) a philosophy of supplying customers with superior products and services
B) an exchange of information with suppliers and customers to create efficient and effective processes
C) a software system that integrates a companys functions, departments and data into a single system
D) a system which speeds the transformation of raw materials into finished products
Answer: A
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

26) An enterprise resource planning system (ERP):
A) is a cost management system in which a company produces products just in time to satisfy needs.
B) requires the implementation of total quality management.
C) integrates all worldwide functions, departments and data of a company into a single system.
D) cannot be implemented in service companies.
Answer: C
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

27) Which of the following correctly describes just-in-time (JIT) inventory management?
A) It is a production approach that maintains surplus goods at each stage of manufacture.
B) It is an inventory purchase approach that seeks purchase discounts on buying large quantities.
C) It is a cost management approach that focuses on maintaining lean inventory levels.
D) It is an inventory approach which stockpiles raw materials to protect against supply interruptions.
Answer: C
Diff: 2
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

28) Which of the following is true of just-in-time (JIT) inventory management?
A) It results in more storage and insurance cost.
B) It is a system in which the company produces product only after receiving an order.
C) It promotes surplus inventory to prevent production shut-down in case of supply interruptions.
D) It requires a surplus inventory of finished goods to ensure timely, or just-in-time, delivery to customers.
Answer: B
Diff: 2
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

29) Which of the following is a philosophy designed to integrate all organizational areas in order to provide customers with superior products and services, while meeting organizational goals throughout the value chain?
A) Supply chain management
B) Just-in-time (JIT) management
C) Enterprise resource planning (ERP)
D) Total quality management (TQM)
Answer: D
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

30) The whole sequence of activities that add value to a companys products and services is called:
A) the value chain.
B) the planning process.
C) TQM production chain.
D) enterprise resource planning (ERP).
Answer: A
Diff: 1
LO: 18-1
AACSB: Concept
AICPA Functional: Reporting

31) Which of the following is one of the key standards of ethical practice published by the IMA?
A) Objectivity
B) Environmental sensitivity
C) Technicality
D) Confidentiality
Answer: D
Diff: 1
LO: 18-1
AACSB: Ethical Understanding
AICPA Functional: Reporting

32) Joshua is the accountant of Seria Inc. Seria has received a bulk order from an overseas client. As a result, the reported earnings of this year will be significantly higher than the estimates of financial analysts. Joshua tells this to one of his friends. Which of the IMA standards has Joshua violated?
A) Objectivity
B) Competence
C) Confidentiality
D) Technicality
Answer: C
Diff: 1
LO: 18-1
AACSB: Reflective Thinking
AICPA Functional: Reporting

33) You did not understand what the term accrual meant and failed to accrue the interest due at the end of the year on the companys bonds. Which of the IMA standards appears to have been violated here?
A) Integrity
B) Confidentiality
C) Competence
D) Objectivity
Answer: C
Diff: 1
LO: 18-1
AACSB: Reflective Thinking
AICPA Functional: Reporting

Learning Objective 18-2

1) Product costs, such as direct materials, are expensed in the period they were paid.
Answer: FALSE
Diff: 1
LO: 18-2
AACSB: Application
AICPA Functional: Reporting

2) Unlike merchandising companies, income statements of service companies include cost of goods sold as a line item.
Answer: FALSE
Diff: 1
LO: 18-2
AACSB: Application
AICPA Functional: Reporting

3) Manufacturing businesses have inventory accounts, but merchandising businesses do not.
Answer: FALSE
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting
4) Manufacturing businesses produce their own products, but merchandising businesses do not.
Answer: TRUE
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

5) If Royal Ltd. purchases each unit of product X for $100 and can sell it in the market for $135, the selling price of the product for Royal would be $100.
Answer: FALSE
Diff: 1
LO: 18-2
AACSB: Application
AICPA Functional: Reporting

6) Merchandising companies, like service companies, do not have a Cost of Goods Sold account.
Answer: FALSE
Diff: 1
LO: 18-2
AACSB: Application
AICPA Functional: Reporting

7) Selling and administrative expenses are subtracted from the cost of goods sold to obtain operating profit.
Answer: TRUE
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

8) For external reporting purposes, GAAP requires companies to treat period costs as assets.
Answer: FALSE
Diff: 1
LO: 18-2
AACSB: Application
AICPA Functional: Reporting

9) The primary activity of manufacturing businesses is to purchase goods from a wholesaler and resell them.
Answer: FALSE
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

10) Service companies include companies that provide health care, communication, banking, and other important benefits to society.
Answer: TRUE
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

11) The income statement of a service company will most likely include:
A) salary expense.
B) factory overhead.
C) cost of goods sold.
D) direct materials.
Answer: A
Diff: 1
LO: 18-2
AACSB: Application
AICPA Functional: Reporting

12) Which of the following is true of service companies?
A) All of service companies costs are product costs.
B) Service companies modify and resell products they buy from manufacturers.
C) Revenues of service companies are only recorded on cash receipt.
D) Service companies carry no inventories of products for sale.
Answer: D
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

13) For a manufacturing company, which of the following is a period cost?
A) Direct materials
B) Office rent
C) Wages expense of factory workers
D) Indirect materials
Answer: B
Diff: 1
LO: 18-2
AACSB: Application
AICPA Functional: Reporting

14) One of the primary activities of Rex Inc. is to purchase hats from Viva Inc. in Texas and sell them to its customers in Washington for a profit. It is likely that Rex is a:
A) manufacturing company.
B) hybrid company.
C) service company.
D) merchandising company.
Answer: D
Diff: 1
LO: 18-2
AACSB: Application
AICPA Functional: Reporting

15) Which of the following is most likely a service company?
A) a law firm
B) a car manufacturer
C) a fruit seller
D) a baker
Answer: A
Diff: 1
LO: 18-2
AACSB: Application
AICPA Functional: Reporting

16) A company that uses labor, equipment, supplies, and facilities to convert raw materials into finished products is a:
A) merchandising company.
B) manufacturing company.
C) service company.
D) trading company.
Answer: B
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

17) Goods that have been started in the manufacturing process but are not yet complete are included in:
A) the Finished Goods Inventory account.
B) the Work-in-Process Inventory account.
C) the Raw Materials Inventory account.
D) the Cost of Goods Sold account.
Answer: B
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

18) Which of the following would appear as a line item on the income statements of both, a merchandiser and a manufacturer?
A) Direct Labor
B) Cost of Goods Manufactured
C) Direct Materials
D) Cost of Goods Sold
Answer: D
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

19) Damsel Inc. is a large manufacturer of auto tires. Damsel has provided the following information:

Sales Revenue $45,500
Beginning Finished Goods Inventory 1,500
Cost of Goods Sold 32,500
Cost of Goods Manufactured 35,000

Calculate the amount of ending finished goods inventory reported in Damsels balance sheet.
A) $10,500
B) $36,500
C) $4,000
D) $3,500
Answer: C
Explanation: C)
Beginning Finished Goods Inventory $1,500
+ Cost of Goods Manufactured 35,000
= Cost of Goods Available for Sale 36,500
Cost of Goods Sold 32,500
Ending Finished Goods Inventory $4,000
Diff: 2
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

20) The balance sheet of a ________ company will show Work-in-Process Inventory as a line item.
A) manufacturing
B) merchandising
C) service
D) trading
Answer: A
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

21) Partial income statements of Company A and Company B are provided below:

Which of the following statements is true?
A) Company A is a merchandising company.
B) Company B is a manufacturing company.
C) Company A is a manufacturing company.
D) Company A is a service company.
Answer: D
Diff: 1
LO: 18-2
AACSB: Application
AICPA Functional: Reporting

22) Product costs are expensed:
A) when the products are consumed or sold.
B) at the end of the accounting period they are incurred in.
C) when the products are transferred to Work-in-Process Inventory account.
D) when the market value of products goes above the recorded value.
Answer: A
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

23) The Work-in-Process Inventory account includes the:
A) goods that are ready to be sold.
B) goods that are partially completed.
C) goods that have been sold in the market.
D) goods that are damaged during production.
Answer: B
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

24) Which of the following is true of finished goods inventory?
A) Finished Goods Inventory is an account used by a manufacturer and includes completed goods that have not yet been sold.
B) Finished Goods Inventory is an account used by a merchandiser and includes completed goods that have not yet been sold.
C) Finished Goods Inventory is an account used by service companies in lieu of raw materials inventory.
D) Finished Goods Inventory is an account used by a manufacturer in lieu of raw materials inventory.
Answer: A
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

25) Which of the following is true of product costs?
A) They are expensed in the period they are paid.
B) For external reporting, GAAP requires that they be expensed before the products are sold.
C) They are first recorded in an inventory account.
D) For merchandising companies, product costs do not include freight costs.
Answer: C
Diff: 1
LO: 18-2
AACSB: Concept
AICPA Functional: Reporting

26) Crystal Inc. is a merchandiser of stone ornaments. It sold 15,000 units in 2015. The company has provided the following information:

Sales Revenue $557,000
Purchases (excluding freight in) 300,000
Selling and Administrative Expenses 69,000
Freight In 15,000
Beginning Merchandise Inventory 45,000
Ending Merchandise Inventory 55,700

How much is the gross profit for 2015?
A) $183,700
B) $304,300
C) $252,700
D) $257,000
Answer: C
Explanation: C)
$304,300 (Cost of Goods Sold) = $45,000 (Beginning Merchandise Inventory) + $300,000 (Purchases) + $15,000 (Freight In) $55,700 (Ending Merchandise Inventory)
$557,000 (Sales Revenue) $304,300 (Cost of Goods Sold) = $252,700 (Gross Profit)
Diff: 2
LO: 18-2
AACSB: Application
AICPA Functional: Measurement
27) Which of the following formulas represents cost of goods sold for a merchandising business?
A) Beginning Inventory Ending Inventory = Cost of Goods Sold
B) Purchases and Freight In Ending Inventory = Cost of Goods Sold
C) Ending Inventory + Purchases and Freight In Beginning Inventory = Cost of Goods Sold
D) Beginning Inventory + Purchases and Freight In Ending Inventory = Cost of Goods Sold
Answer: D
Diff: 1
LO: 18-2
AACSB: Application
AICPA Functional: Reporting

28) Amber Corporation has provided the following information of its operating activities for 2015:

Merchandise Inventory, January 1, 2015 $150,000
Merchandise Inventory, December 31, 2015 75,000
Purchases 854,000
Selling and Administrative Expenses 65,000
Sales Revenue 1,000,000

Required: Prepare Ambers income statement for the year ended December 31, 2015. Use the format provided below:

Sales Revenue
Cost of Goods Sold
Beginning Inventory
Purchases
Cost of Goods Available for Sale
Ending Inventory
Cost of Goods Sold
Gross Profit
Selling and Administrative Expenses
Operating Income

Answer: AMBER CORPORATION
Income Statement
Year Ended December 31, 2015
Sales Revenue $1,000,000
Cost of Goods Sold
Beginning Inventory $150,000
Purchases 854,000
Cost of Goods Available for Sale $1,004,000
Ending Inventory -75,000
Cost of Goods Sold 929,000
Gross Profit 71,000
Selling and Administrative Expenses 65,000
Operating Income $6,000
Diff: 2
LO: 18-2
AACSB: Application
AICPA Functional: Measurement

29) Excellent Company sells accounting textbooks. The following information summarizes Excellents operating activities for 2015:

Merchandise Inventory, January 1, 2015 $10,000
Merchandise Inventory, December 31, 2015 7,000
Purchases 95,000
Selling and Administrative Expenses 65,000
Sales Revenue 180,000

Required: Prepare Excellent Companys income statement for the year ended December 31, 2015.
Answer:
EXCELLENT COMPANY
Income Statement
Year Ended December 31, 2015
Sales Revenue $180,000
Cost of Goods Sold
Beginning Inventory $10,000
Purchases 95,000
Cost of Goods Available for Sale 105,000
Ending Inventory -7,000
Cost of Goods Sold 98,000
Gross Profit 82,000
Selling and Administrative Expenses 65,000
Operating Income $17,000
Diff: 2
LO: 18-2
AACSB: Application
AICPA Functional: Measurement

30) Simons Company sells plastic ware. The following information summarizes Simons operating activities for 2015:

Utilities Expense $ 65,000
Rent Expense 10,000
Sales Commissions Expense 32,500
Purchases of Merchandise 260,000
Inventory on January 1, 2015 65,000
Inventory on December 31, 2015 97,500
Sales Revenue 650,000

Prepare an income statement for Simons Company, a merchandiser, for the year ended December 31, 2015 using the format below:

Sales Revenue
Cost of Goods Sold
Beginning Inventory
Purchases
Cost of Goods Available for Sale
Ending Inventory
Cost of Goods Sold
Gross Profit
Selling Expenses
Sales Commissions Expense
Administrative Expenses
Rent Expense
Utilities Expense
Total Operating Expenses
Operating Income

Answer: SIMONS COMPANY
Income Statement
Year Ended December 31, 2015
Sales Revenue $650,000
Cost of Goods Sold
Beginning Inventory $65,000
Purchases 260,000
Cost of Goods Available for Sale 325,000
Ending Inventory -97,500
Cost of Goods Sold 227,500
Gross Profit 422,500
Selling Expenses
Sales Commissions Expense 32,500
Administrative Expenses
Rent Expense 10,000
Utilities Expense 65,000 75,000
Total Operating Expenses
107,500
Operating Income $315,000
Diff: 2
LO: 18-2
AACSB: Application
AICPA Functional: Measurement

31) Best Company, a merchandiser, sells office supplies. The following information summarizes Bests operating activities during 2015:

Utilities Expense $6,000
Rent for Store Expense 8,000
Sales Commissions Expense 4,500
Purchases of Merchandise 54,000
Inventory on January 1, 2015 30,000
Inventory on December 31, 2015 20,500
Sales Revenue 108,000

Required: Prepare an income statement for Best Company for the year ended December 31, 2015, using the format below.

Sales Revenue
Cost of Goods Sold
Beginning Inventory
Purchases
Cost of Goods Available for Sale
Ending Inventory
Cost of Goods Sold
Gross Profit
Selling Expenses
Sales Commissions Expense
Administrative Expenses
Rent Expense
Utilities Expense
Total Operating Expenses
Operating Income

Answer:
Sales Revenue $108,000
Cost of Goods Sold
Beginning Inventory $30,000
Purchases 54,000
Cost of Goods Available for Sale 84,000
Ending Inventory -20,500
Cost of Goods Sold 63,500
Gross Profit 44,500
Selling Expenses
Sales Commissions Expense 4,500
Administrative Expenses
Rent Expense 8,000
Utilities Expense 6,000
Total Operating Expenses 18,500
Operating Income $26,000
Diff: 3
LO: 18-2
AACSB: Application
AICPA Functional: Measurement
Learning Objective 18-3

1) Product costs, such as factory overhead, should be treated as an asset until the product is sold.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Reporting

2) Manufacturing overhead includes all manufacturing costs, such as direct labor and direct materials.
Answer: FALSE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Reporting

3) Manufacturing overhead includes indirect manufacturing costs, such as insurance and depreciation on the factory building.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Reporting

4) All costs incurred in the manufacture of final products are product costs.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Reporting

5) The cost of direct materials cannot easily be traced to the manufactured product, and therefore it is a component of manufacturing overhead.
Answer: FALSE
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

6) Wages and benefits of assembly line workers are period costs.
Answer: FALSE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement
7) Wages and benefits of assembly line workers are included in manufacturing overhead.
Answer: FALSE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

8) Wages and benefits of factory managers are considered as product costs.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

9) The three categories of period costs are direct materials, direct labor, and manufacturing overhead.
Answer: FALSE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

10) Salary of a factory manager will be included in manufacturing overhead.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

11) Direct costs and indirect costs can be easily traced directly to a cost object.
Answer: FALSE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

12) In a manufacturing firm, the salary of sales staff is an example of period cost.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

13) Wages of factory janitors is considered non-manufacturing overhead, as these are not directly related to the manufacturing process.
Answer: FALSE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement
14) Indirect materials costs such as lubes and cleaning fluids are product costs.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

15) Indirect materials costs are included in manufacturing overhead.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

16) For a manufacturer, rent paid for an office building is an example of a period cost.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

17) Factory rent, taxes, and insurance are included in manufacturing overhead.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

18) Transportation costs paid to ship raw materials to a company warehouse are considered product costs.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

19) Sales commissions are included in manufacturing overhead.
Answer: FALSE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

20) In a manufacturing firm, advertising and marketing costs are examples of period costs.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement
21) In a manufacturing firm, advertising and marketing costs are included in manufacturing overhead.
Answer: FALSE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

22) In a manufacturing firm, accounting, legal, and administrative costs are typical examples of product costs.
Answer: FALSE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

23) In a manufacturing firm, administrative costs are included in period costs.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

24) Repair and maintenance costs for factory equipment are product costs.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

25) Repair and maintenance costs for factory equipment are included in manufacturing overhead.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

26) Repair and maintenance costs of vehicles used to deliver products to customers are product costs.
Answer: FALSE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement
27) Repair and maintenance costs of vehicles used to deliver products to the customers are included in manufacturing overhead.
Answer: FALSE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

28) Direct materials and direct labor are prime costs.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

29) In manufacturing, the cost objects are often units of product.
Answer: TRUE
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Measurement

30) Period costs are the:
A) current assets and liabilities reported on the balance sheet.
B) costs that are incurred and expensed during the same accounting period.
C) costs related to production of products the company purchases and sells.
D) same as manufacturing overhead costs.
Answer: B
Diff: 2
LO: 18-3
AACSB: Concept
AICPA Functional: Reporting

31) In a manufacturing firm, which of the following is an example of a period cost?
A) Advertising expense
B) Depreciation on factory equipment
C) Indirect materials
D) Property taxes for the factory
Answer: A
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Reporting
32) Which of the following is a part of manufacturing overhead?
A) Cost of raw materials
B) Wages of assembly line workers
C) Factory insurance
D) Depreciation on office furniture
Answer: C
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Reporting

33) For a manufacturing firm, which of the following is a product cost?
A) Salary of administrative staff
B) Wages paid to factory janitor
C) Commissions paid to sales staff
D) Depreciation on corporate building
Answer: B
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Reporting

34) For a manufacturing firm, which of the following is a period cost?
A) Office rent
B) Wages of factory janitor
C) Insurance cost of production equipment
D) Raw materials
Answer: A
Diff: 2
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

35) Which of the following is an example of direct labor cost in a factory?
A) Wages of assembly line personnel
B) Salary of vice president of production
C) Wages of factory security guard
D) Salary of production manager
Answer: A
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting
36) Which of the following will be included in manufacturing overhead costs?
A) Indirect labor and indirect materials
B) Salaries of salesmen
C) Direct materials and direct labor
D) Delivery costs to ship goods to customers
Answer: A
Diff: 2
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

37) Manufacturing overhead is also referred to as:
A) indirect manufacturing costs.
B) direct costs.
C) prime costs.
D) period costs.
Answer: A
Diff: 2
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

38) Anything for which managers want a separate measurement of cost is called:
A) a responsibility center.
B) a cost object.
C) a profit object.
D) a conversion cost.
Answer: B
Diff: 1
LO: 18-3
AACSB: Concept
AICPA Functional: Reporting

39) Kyanite Corporation, a manufacturer reports costs for 2015 as follows:

Raw Materials $50,000
Wages to Line Workers 25,000
Office Rent 14,000
Indirect Materials 30,000

How much is the total period costs of Kyanite?
A) $30,000
B) $80,000
C) $39,000
D) $14,000
Answer: D
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Measurement

40) Kyanite Corporation reports costs for 2015 as follows:

Raw Materials $50,000
Wages to Line Workers 25,000
Office Rent 14,000
Indirect Materials 30,000

How much is the total product costs for 2015?
A) $30,000
B) $105,000
C) $119,000
D) $75,000
Answer: B
Explanation: B) $105,000 (Total product costs) = $50,000 (Raw Materials) + $25,000 (Wages to Line Workers) + $30,000 (Indirect Materials)
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Measurement

41) Which of the following is a product cost?
A) Sales commissions
B) CEOs salary
C) Delivery van depreciation
D) Depreciation on production equipment
Answer: D
Diff: 2
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

42) Which of the following correctly describes the accounting for indirect labor costs?
A) Indirect labor costs are product costs and are expensed as incurred.
B) Indirect labor costs are period costs and are expensed as incurred.
C) Indirect labor costs are product costs and are expensed when the manufactured product is sold.
D) Indirect labor costs are period costs and are expensed when the manufactured product is sold.
Answer: C
Diff: 2
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

43) Which of the following correctly describes the accounting for factory depreciation?
A) Factory depreciation is a product cost and is expensed as incurred.
B) Factory depreciation is a period cost and is expensed as incurred.
C) Factory depreciation is a product cost and is expensed when the manufactured product is sold.
D) Factory depreciation is a period cost and is expensed when the manufactured product is sold.
Answer: C
Diff: 2
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

44) Which of the following correctly describes the accounting for administrative expenses of a manufacturing company?
A) Administrative expenses are product costs and are expensed as incurred.
B) Administrative expenses are period costs and are expensed as incurred.
C) Administrative expenses are product costs and are expensed when the manufactured product is sold.
D) Administrative expenses are period costs and are expensed when the manufactured product is sold.
Answer: B
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

45) Which of the following correctly describes the accounting for advertising costs?
A) Advertising costs are product costs and are expensed as incurred.
B) Advertising costs are period costs and are expensed as incurred.
C) Advertising costs are product costs and are expensed when the manufactured product is sold.
D) Advertising costs are period costs and are expensed when the manufactured product is sold.
Answer: B
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

46) The following information relates to Webster Inc.:

Advertising Costs $10,270
Administrative Salaries 24,700
Delivery Vehicle Depreciation 1,027
Factory Repair and Maintenance 910
Indirect Labor 11,700
Indirect Materials 9,360
Manufacturing Equipment Depreciation 2,080
Office Rent 61,100
Presidents Salary 40,300
Sales Revenue 450,000
Sales Salary 4,500

How much were Websters period costs?
A) $141,897
B) $474,050
C) $615,947
D) $61,503
Answer: A
Explanation: A)
Advertising Costs $10,270
Presidents Salary 40,300
Office Rent 61,100
Sales Salary 4,500
Delivery Vehicle Depreciation 1,027
Administrative Salaries 24,700
Total Period Cost $141,897
Diff: 2
LO: 18-3
AACSB: Application
AICPA Functional: Measurement

47) The following information relates to Webster Inc.:

Advertising Costs $10,270
Sales Salary 4,500
Sales Revenue 450,000
Presidents Salary 40,300
Office Rent 61,100
Manufacturing Equipment Depreciation 2,080
Indirect Materials 9,360
Indirect Labor 11,700
Factory Repair and Maintenance 910
Direct Materials 28,080
Direct Labor 35,100
Delivery Vehicle Depreciation 1,027
Administrative Salaries 24,700

How much were Websters product costs?
A) $141,897
B) $697,127
C) $229,127
D) $87,230
Answer: D
Explanation: D)
Indirect Labor $11,700
Indirect Materials 9,360
Factory Repair and Maintenance 910
Manufacturing Equipment Depreciation 2,080
Direct Materials 28,080
Direct Labor 35,100
Total Product Cost $87,230
Diff: 2
LO: 18-3
AACSB: Application
AICPA Functional: Measurement

48) The following information relates to Webster Inc.:

Advertising Costs $10,270
Sales Salary 4,500
Sales Revenue 450,000
Presidents Salary 40,300
Office Rent 61,100
Manufacturing Equipment Depreciation 2,080
Indirect Materials 9,360
Indirect Labor 11,700
Factory Repair and Maintenance 910
Direct Materials 28,080
Direct Labor 35,100
Delivery Vehicle Depreciation 1,027
Administrative Salaries 24,700

How much was Websters manufacturing overhead?
A) $21,060
B) $21,970
C) $24,050
D) $141,897
Answer: C
Explanation: C)
Indirect Labor $11,700
Indirect Materials 9,360
Factory Repair and Maintenance 910
Manufacturing Equipment Depreciation 2,080
Total Manufacturing Overhead $24,050
Diff: 2
LO: 18-3
AACSB: Application
AICPA Functional: Measurement

49) The following information was obtained from Fizz Company:

Advertising Costs $9,900
Indirect Labor 11,000
CEOs Salary 49,000
Direct Labor 41,000
Indirect Materials 7,900
Direct Materials Used 61,000
Factory Utilities 700
Factory Janitorial Costs 2,300
Manufacturing Equipment Depreciation 2,100
Delivery Vehicle Depreciation 1,100
Administrative Wages and Salaries 21,000

How much were Fizzs period costs?
A) $60,000
B) $81,000
C) $92,000
D) $79,900
Answer: B
Explanation: B)
Advertising Costs $9,900
CEOs Salary 49,000
Delivery Vehicle Depreciation 1,100
Administrative Wages and Salaries 21,000
Total Period Costs $81,000
Diff: 2
LO: 18-3
AACSB: Application
AICPA Functional: Measurement

50) The following information was obtained from Fizz Company:

Advertising Costs $9,900
Indirect Labor 11,000
CEOs Salary 49,000
Direct Labor 41,000
Indirect Materials 7,900
Direct Materials Used 61,000
Factory Utilities 700
Factory Janitorial Costs 2,300
Manufacturing Equipment Depreciation 2,100
Delivery Vehicle Depreciation 1,100
Administrative Wages and Salaries 21,000

Calculate Fizzs total product costs.
A) $126,000
B) $104,100
C) $127,100
D) $115,000
Answer: A
Explanation: A)
Indirect labor $11,000
Direct Labor 41,000
Indirect Materials 7,900
Direct Materials Used 61,000
Factory Utilities 700
Factory Janitorial Costs 2,300
Manufacturing Equipment Depreciation 2,100
Total Product Costs $126,000
Diff: 2
LO: 18-3
AACSB: Application
AICPA Functional: Measurement

51) For a manufacturing business, which of the following would be considered a product cost?
A) Research and development
B) Property taxes on the factory
C) Advertising
D) Delivery costs
Answer: B
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

52) For a manufacturing business, which of the following would be considered a product cost?
A) Salary of the sales manager
B) Salary of the CEO
C) Salaries of the accounting staff
D) Salary of the production manager
Answer: D
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

53) For a manufacturing business, which of the following would be considered a product cost?
A) Depreciation on delivery vehicles
B) Depreciation on administrative building furniture and fixtures
C) Depreciation on manufacturing equipment
D) Depreciation on the accounting departments computer equipment
Answer: C
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

54) For a manufacturing business, which of the following would be considered a direct labor cost?
A) Wages of the assembly line staff
B) Wages of the factory janitors
C) Wages of the factory manager
D) Salaries of the internal auditors
Answer: A
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

55) For a manufacturing business, which of the following would be included as indirect manufacturing costs?
A) Sales commissions
B) Fuel and maintenance for delivery vehicles
C) Wages of the assembly line workers
D) Wages of the factory manager
Answer: D
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

56) For decision-making purposes, ________ costs are often divided into prime costs and conversion costs.
A) fixed costs
B) product costs
C) period costs
D) sunk costs
Answer: B
Diff: 2
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

57) For a manufacturing business, which of the following would be included as manufacturing overhead?
A) Direct materials cost
B) Indirect materials cost
C) Direct labor
D) Advertising
Answer: B
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

58) For a manufacturing business, which of the following would be considered a period cost?
A) Indirect materials
B) Factory utilities
C) Direct labor
D) Sales salaries
Answer: D
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

59) Which of the following is both a prime cost and a conversion cost?
A) Manufacturing overhead
B) Direct materials
C) Direct labor
D) Selling expenses
Answer: C
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

60) Which of the following represents the combined sum of direct labor and manufacturing overhead?
A) Conversion costs
B) Period costs
C) Prime costs
D) Fixed costs
Answer: A
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

61) Which of the following represents the combined sum of direct materials and direct labor?
A) Conversion costs
B) Period costs
C) Prime costs
D) Fixed costs
Answer: C
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

62) Which of the following will be classified as a conversion cost?
A) Cost of raw materials
B) Depreciation on factory equipment
C) Salary of sales personnel
D) Depreciation on office furniture
Answer: B
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

63) Which of the following would be classified as a prime cost?
A) Cost of raw materials
B) Depreciation on factory equipment
C) Salary of sales personnel
D) Depreciation on office furniture
Answer: A
Diff: 1
LO: 18-3
AACSB: Application
AICPA Functional: Reporting

Learning Objective 18-4

1) The cost of goods manufactured includes selling expenses, administrative expenses, and manufacturing overhead.
Answer: FALSE
Diff: 1
LO: 18-4
AACSB: Concept
AICPA Functional: Reporting

2) Merchandisers inventory consists of raw materials inventory, work-in-process inventory, and finished goods inventory.
Answer: FALSE
Diff: 1
LO: 18-4
AACSB: Concept
AICPA Functional: Reporting

3) Total manufacturing costs to account for during the year minus the ending work-in-process inventory equals the cost of goods manufactured.
Answer: TRUE
Diff: 1
LO: 18-4
AACSB: Concept
AICPA Functional: Reporting

4) Which of the following statements is true of the flow of product and period costs for a manufacturer?
A) When the manufacturing process is completed, the costs are transferred to the Work-in-Process Inventory account.
B) The cost of the finished goods that the manufacturer sells becomes its Cost of Goods Sold on the income statement.
C) Period costs remain in inventory accounts on the balance sheet until the product is sold.
D) All product costs that have been paid are expensed and shown on the income statement at the end of the accounting period.
Answer: B
Diff: 2
LO: 18-4
AACSB: Concept
AICPA Functional: Reporting

5) Goods that are produced by a manufacturing company and are ready to sell are recorded in the:
A) Materials Inventory account.
B) Work-in-Process Inventory account.
C) Manufacturing Overhead account.
D) Finished Goods Inventory account.
Answer: D
Diff: 1
LO: 18-4
AACSB: Concept
AICPA Functional: Reporting

6) At the beginning of 2015, Swift Companys Work-in-Process Inventory account had a balance of $120,000. During 2015, $250,000 of direct materials were used in production, and $75,000 of direct labor costs were incurred. Manufacturing overhead amounted to $850,000. The cost of goods manufactured was $675,000. What is the balance in the Work-in-Process Inventory account on December 31, 2015?
A) $230,000
B) $1,295,000
C) $675,000
D) $620,000
Answer: D
Explanation: D)
Beginning Work-in-Process Inventory $120,000
Direct Materials Used 250,000
Direct Labor 75,000
Manufacturing Overhead 850,000
Total Manufacturing Costs To account for 1,295,000
Cost of Goods Manufactured -675,000
Ending Work-in-Process Inventory $620,000
Diff: 2
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

7) Selected data for Lemon Grass Company for 2015 is provided below:

Factory Utilities $ 1,500
Indirect Materials Used 37,500
Direct Materials Used 300,000
Property Taxes on Factory Building 6,900
Sales Commissions 85,000
Indirect Labor Incurred 25,000
Direct Labor Incurred 150,000
Depreciation on Factory Equipment 6,500

What is the total factory overhead?
A) $450,000
B) $612,000
C) $77,400
D) $62,400
Answer: C
Explanation: C)
Factory Utilities $1,500
Indirect Materials Used 37,500
Property Taxes on Factory Building 6,900
Indirect Labor Incurred 25,000
Depreciation on Factory Equipment 6,500
Total Factory Overhead $77,400
Diff: 2
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

8) Which of the following describes the cost of goods manufactured?
A) the cost of the goods that were sold during the period
B) the total cost of all goods that were completed, or partially completed during the period
C) the cost of those goods which were completed during the period
D) total costs in inventory at the end of the period
Answer: C
Diff: 2
LO: 18-4
AACSB: Concept
AICPA Functional: Measurement

9) Fireox Companys selected cost data for 2015 are shown below:

Cost of Goods Manufactured $145,200
Work-in-Process Inventory, Jan. 1, 2015 18,500
Work-in-Process Inventory, Dec. 31, 2015 22,500
Direct Materials Used 15,800

What is the total of manufacturing costs incurred by Fireox Company in 2015?
A) $149,200
B) $158,300
C) $139,800
D) $117,100
Answer: A
Explanation: A) $149,200 (Total manufacturing costs incurred) = $22,500 (Ending Work-in-Process Inventory) + $145,200 (Cost of Goods Manufactured) $18,500 (Beginning Work-in-Process Inventory)
Diff: 2
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

10) Fireox Companys selected cost data for 2015 are shown below:

Work-in-Process Inventory, Jan. 1, 2015 $5,640
Direct Materials Used 105,000
Work-in-Process Inventory, Dec. 31, 2015 2,870
Cost of Goods Manufactured 193,200

Assuming manufacturing overhead costs of $27,850, what is the amount of direct labor incurred by Fireox Company in 2015?
A) $63,120
B) $190,430
C) $57,580
D) $79,690
Answer: C
Explanation: C)
$190,430 (Cost of goods sold) = $2,870 (Ending Work-in-Process Inventory) + $193,200 (Cost of Goods Manufactured) $5,640 (Beginning Work-in-Process Inventory)
$57,580 (Direct labor costs) = $190,430 (Cost of goods sold) $27,850 (Manufacturing overhead costs) $105,000 (Direct Materials Used)
Diff: 3
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

11) Jasper Inc. reports the following cost information for March:

Cost of Goods Manufactured $75,000
Manufacturing Overhead 18,250
Finished Goods Inventory, March 1 4,500
Finished Goods Inventory, March 31 2,650
Work-in-Process Inventory, March 1 9,670
Work-in-Process Inventory, March 31 1,250
Direct Materials Used 25,300

What is the cost of goods sold for March?
A) $83,420
B) $73,150
C) $76,850
D) $82,150
Answer: C
Explanation: C)
Finished Goods Inventory, March 1 $4,500
+ Cost of Goods Manufactured 75,000
Finished Goods Inventory, March 31 -2,650
= Cost of Goods Sold $76,850
Diff: 2
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

12) Jasper Inc. reports the following cost information for March:

Cost of Goods Manufactured $75,000
Manufacturing Overhead 18,250
Finished Goods Inventory, March 1 4,500
Finished Goods Inventory, March 31 2,650
Work-in-Process Inventory, March 1 9,670
Work-in-Process Inventory, March 31 1,250
Direct Materials Used 25,300

What is the amount of direct labor incurred by Jasper in March?
A) $29,600
B) $39,870
C) $126,970
D) $23,030
Answer: D
Explanation: D)
Cost of Goods Manufactured $75,000
Direct Materials Used -25,300
Manufacturing Overhead -18,250
Work-in-Process Inventory, March 1 -9,670
+ Work-in-Process Inventory, March 31 1,250
= Direct Labor $23,030
Diff: 3
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

13) Jasper Corporation reports the following cost information for March:

Cost of Goods Manufactured $75,000
Manufacturing Overhead 18,250
Finished Goods Inventory, March 1 4,500
Finished Goods Inventory, March 31 2,650
Work-in-Process Inventory, March 1 9,670
Work-in-Process Inventory, March 31 1,250
Direct Labor 36,300

What is the amount of direct materials used by Jasper in March?
A) $12,030
B) $18,600
C) $28,870
D) $137,970
Answer: A
Explanation: A)
Cost of Goods Manufactured $75,000
Direct Labor -36,300
Manufacturing Overhead -18,250
Work-in-Process Inventory, March 1 -9,670
+ Work-in-Process Inventory, March 31 1,250
= Direct Material Used $12,030
Diff: 3
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

14) Jasper Corporation reports the following cost information for March:

Cost of Goods Manufactured $75,000
Direct Materials Used 16,850
Finished Goods Inventory, March 1 4,500
Finished Goods Inventory, March 31 2,650
Work-in-Process Inventory, March 1 9,670
Work-in-Process Inventory, March 31 1,250
Direct Labor 36,300

What is the amount of manufacturing overhead incurred by Jasper in March?
A) $20,000
B) $30,270
C) $13,430
D) $136,570
Answer: C
Explanation: C)
Cost of Goods Manufactured $75,000
Direct Labor -36,300
Direct Material Used -16,850
Work-in-Process Inventory, March 1 -9,670
+ Work-in-Process Inventory, March 31 1,250
Manufacturing Overhead $13,430
Diff: 3
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

15) A company used $35,000 of direct materials, incurred $73,000 in direct labor cost, and $114,000 in manufacturing overhead costs during the period. If beginning and ending Work-in-Process Inventories were $28,000 and $21,000 respectively, what is the cost of goods manufactured?
A) $250,000
B) $229,000
C) $215,000
D) $222,000
Answer: B
Explanation: B) $229,000 (Cost of goods manufactured) = $28,000 (Beginning Work-in-Process Inventory) + $35,000 (Direct Materials) + $73,000 (Direct Labor Cost) + $114,000 (Manufacturing Overhead Costs) $21,000 (Ending Work-in-Process Inventory)
Diff: 2
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

16) Given the following information, determine the cost of goods manufactured.

Direct Labor Incurred $63,000
Manufacturing Overhead Incurred 179,500
Direct Materials Used 150,000
Finished Goods Inventory, 1/1/2015 197,500
Finished Goods Inventory, 12/31/2015 221,000
Work-in-Process Inventory, 1/1/2015 96,500
Work-in-Process Inventory, 12/31/2015 109,000

A) $243,000
B) $380,000
C) $867,000
D) $160,000
Answer: B
Explanation: B)
Work-in-Process Inventory, 1/1/2015 $96,500
Direct Materials Used 150,000
Direct Labor Incurred 63,000
Manufacturing Overhead Incurred 179,500
Work-in-Process Inventory, 12/31/2015 -109,000
Cost of Goods Manufactured 380,000
Diff: 2
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

17) Given the following information, determine the cost of goods sold.

Direct Labor Incurred $63,000
Manufacturing Overhead Incurred 179,500
Direct Materials Used 150,000
Finished Goods Inventory, 1/1/2015 197,500
Finished Goods Inventory, 12/31/2015 221,000
Work-in-Process Inventory, 1/1/2015 96,500
Work-in-Process Inventory, 12/31/2015 109,000

A) $380,000
B) $1,016,500
C) $356,500
D) $414,000
Answer: C
Explanation: C)
Work-in-Process Inventory, 1/1/2015 $96,500
Direct Materials Used 150,000
Direct Labor Incurred 63,000
Manufacturing Overhead Incurred 179,500
Work-in-Process Inventory, 12/31/2015 -109,000
Cost of Goods Manufactured $380,000

Finished Goods Inventory, 1/1/2015 $197,500
Cost of Goods Manufactured 380,000
Finished Goods Inventory, 12/31/2015 -221,000
Cost of Goods Sold $356,500
Diff: 3
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

18) The cost of goods sold for Frye Manufacturing in 2015 was $233,000. The January 1, 2015, finished goods inventory balance was $31,600, and the December 31, 2015, finished goods inventory balance was $24,200. Calculate the cost of goods manufactured during 2015.
A) $288,800
B) $233,000
C) $225,600
D) $240,400
Answer: C
Explanation: C) $225,600 (Cost of goods manufactured) = $233,000 (Cost of goods sold) + $24,200 (Ending finished goods inventory) $31,600 (Beginning finished goods inventory)
Diff: 2
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

19) Which of the following will most likely be considered an indirect material cost for a bakery?
A) Spices
B) Flour
C) Milk
D) Eggs
Answer: A
Diff: 2
LO: 18-4
AACSB: Application
AICPA Functional: Reporting

20) The following information has been provided by Squash Corporation:

Direct Labor $6,500
Direct Materials Used 2,550
Raw Materials Purchased 5,000
Cost of Goods Manufactured 10,500
Ending Work-in-Process Inventory 1,200
Corporate Headquarters Property taxes 350
Manufacturing Overhead 510

The beginning balance of Work-in-Process Inventory account was:
A) $2,400.
B) $2,140.
C) $18,860.
D) $9,560.
Answer: B
Explanation: B)
Cost of Goods Manufactured $10,500
Direct Labor -6,500
Direct Materials Used -2,550
Manufacturing Overhead -510
Ending Work-in-Process Inventory 1,200
Beginning Work-in-Process Inventory $2,140
Diff: 2
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

21) Barricades Corporation provided the following information for the year 2015:

Beginning BalanceWork-in-Process Inventory $24,000
Ending BalanceWork-in-Process Inventory 56,000
Beginning BalanceRaw Materials Inventory 84,000
Ending BalanceRaw Materials Inventory 60,000
PurchasesRaw Materials 360,000
Direct Labor 470,000
Indirect Materials 47,000
Indirect Labor 19,000
Depreciation on Factory Plant & Equipment 24,000
Plant Utilities & Insurance 270,000

What was the amount of direct materials used in production during 2015?
A) $360,000
B) $504,000
C) $384,000
D) $328,000
Answer: C
Explanation: C)
Beginning balanceRaw Materials Inventory $84,000
PurchasesRaw Materials 360,000
Ending BalanceRaw Materials Inventory -60,000
Direct Materials Used $384,000
Diff: 1
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

22) Barricades Corporation provided the following information for the year 2015:

Beginning BalanceWork-in-Process Inventory $24,000
Ending BalanceWork-in-Process Inventory 56,000
Beginning BalanceRaw Materials Inventory 84,000
Ending BalanceRaw Materials Inventory 60,000
PurchasesRaw Materials 360,000
Direct Labor 470,000
Indirect Materials 47,000
Indirect Labor 19,000
Depreciation on Factory Plant & Equipment 24,000
Plant Utilities & Insurance 270,000

What was the amount of manufacturing overhead costs?
A) $360,000
B) $313,000
C) $90,000
D) $336,000
Answer: A
Explanation: A)
Plant utilities & Insurance $270,000
Depreciation on Factory Plant & Equipment 24,000
Indirect Labor 19,000
Indirect Materials 47,000
Total Manufacturing Overhead Costs $360,000
Diff: 1
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

23) Barricades Corporation provided the following information for the year 2015:

Beginning BalanceWork-in-Process Inventory $24,000
Ending BalanceWork-in-Process Inventory 56,000
Beginning BalanceRaw Materials Inventory 84,000
Ending BalanceRaw Materials Inventory 60,000
PurchasesRaw Materials 360,000
Direct Labor 470,000
Indirect Materials 47,000
Indirect Labor 19,000
Depreciation on Factory Plant & Equipment 24,000
Plant Utilities & Insurance 270,000

What was the total manufacturing cost incurred during the year 2015?
A) $744,000
B) $360,000
C) $1,414,000
D) $1,214,000
Answer: D
Explanation: D)
Beginning BalanceRaw Materials Inventory $84,000
PurchasesRaw Materials 360,000
Ending BalanceRaw Materials Inventory -60,000
Direct Materials Used $384,000

Plant Utilities & Insurance $270,000
Depreciation on Factory Plant & Equipment 24,000
Indirect Labor 19,000
Indirect Materials 47,000
Total Manufacturing Overhead Costs $360,000

Direct Materials Used $384,000
Direct Labor 470,000
Manufacturing Overhead 360,000
Total Manufacturing Cost Incurred During Year $1,214,000
Diff: 2
LO: 18-4
AACSB: Application
AICPA Functional: Measurement

24) Barricades Corporation provided the following information for the year 2015:

Beginning BalanceWork-in-Process Inventory $24,000
Ending BalanceWork-in-Process Inventory 56,000
Beginning BalanceRaw Materials Inventory 84,000
Ending BalanceRaw Materials Inventory 60,000
PurchasesRaw Materials 360,000
Direct Labor 470,000
Indirect Materials 47,000
Indirect Labor 19,000
Depreciation on Factory Plant & Equipment 24,000
Plant Utilities & Insurance 270,00

What was the amount of the cost of goods manufactured for the year 2015?
A) $1,414,000
B) $1,214,000
C) $1,182,000
D) $1,246,000
Answer: C
Explanation: C)
Beginning BalanceRaw Materials Inventory $84,000
PurchasesRaw Materials 360,000
Ending BalanceRaw Materials Inventory -60,000
Direct Materials Used $384,000

Plant Utilities & Insurance $270,000
Depreciation on Factory Plant & Equipment 24,000
Indirect Labor 19,000
Indirect Materials 47,000
Total Manufacturing Overhead Costs $360,000

Direct Materials Used $384,000
Direct Labor 470,000
Manufacturing Overhead 360,000
Total Manufacturing Cost Incurred During Year $1,214,000

Beginning BalanceWork-in-Process Inventory $24,000
Total Manufacturing Cost Incurred During Year 1,214,000
Ending BalanceWork-in-Process Inventory -56,000
Cost of Goo

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