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Exam 11: Product Costing in Service and Manufacturing Entities

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Question 71

True/False

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At the end of the period,the balance remaining in Work in Process is reported on the balance sheet.

A) True
B) False

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Question 72

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Grimes Company sold 2,500 units that had cost $12,000 to produce.The recording of the sale would include an increase to:

A) Cost of Goods Sold.
B) Finished Goods Inventory.
C) Cost of Goods Manufactured.
D) Manufacturing Overhead.

E) B) and C)
F) None of the above

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Question 73

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Newton Corporation entered into the following transactions during its first year of operations.(Assume all transactions involve cash.) 1) Acquired $2,000 of capital from the owners. 2) Purchased $600 of direct raw materials. 3) Used $400 of these direct raw materials in the production process. 4) Paid production workers $800 cash. 5) Paid $400 for manufacturing overhead (applied and actual overhead are the same) . 6) Started and completed 200 units of inventory. 7) Sold 50 units at a price of $12 each. 8) Paid $80 for selling and administrative expenses. The amount of net income for the year was:

Which of the following statements regarding the schedule of cost of goods manufactured and sold is correct?

Use of absorption costing allows a company to increase its profits by increasing the level of production of its products.

Many companies use variable costing for internal reporting and evaluation of managers.

Indicate whether each of the following statements is true or false. Overapplied overhead means the amount of estimated overhead cost applied to products exceeded the actual overhead cost incurred.______ If the amount of overapplied or underapplied overhead is significant,it must be assigned to work in process.______ If the amount of overapplied or underapplied overhead is fairly small,it should be assigned to work in process.______ Using estimated overhead costs during an accounting period reduces the distortions that would occur if actual monthly costs were used.______ Actual overhead costs are recorded as debits to the manufacturing overhead account.______

Tisdale Company started the year with the following beginning account balances: Raw Materials Inventory,$42,000; Work in Process Inventory,$90,000; and Finished Goods Inventory,$20,000. During the year,the company purchased $60,000 of raw materials and ended the year with $16,000 of raw materials.Direct labor costs for the year were $120,000,and a total of $36,000 of manufacturing overhead costs were allocated to work in process.There was no over- or underapplied overhead.Ending work in process was $82,000 and ending finished goods was $35,000.Goods were sold to customers during the year for $360,000.How much gross margin would be reported for the year?

Recording depreciation on manufacturing equipment will:

Indicate whether each of the following statements is true or false. Purchase of raw materials on account is an asset exchange transaction.______ Placing raw materials into production is an asset use transaction.______ When raw materials are placed into production,total assets are not affected.______ When raw materials are placed into production,the balance in the Work in Process Inventory account increases.______ Purchasing manufacturing supplies for cash is an asset use transaction.______

Select the term from the list that best matches the description or definition.Enter the number of the best answer in the "Your Answer" column.

Product cost information for manufacturing companies affects the income statement but does not affect the balance sheet.

Indicate whether each of the following statements is true or false. Most manufacturers use three accounts to report inventory on the balance sheet.______ The Work in Process Inventory account includes completed units that are ready for sale.______ For a manufacturer,the cost of materials received is recorded in the Work in Process Inventory account.______ For a manufacturer,the costs of materials,labor,and estimated overhead are recorded in the Work in Process Inventory account.______ At the end of the period,the balances that remain in the Raw Materials Inventory,Work in Process Inventory,and Finished Goods Inventory accounts are reported on the balance sheet.______

The reporting method that includes in the cost of inventory (and cost of goods sold) all product costs,including both fixed and variable costs,is known as:

Which of the following correctly computes cost of goods manufactured?

Orlando Company paid $620 cash to purchase raw materials.How would this transaction affect Orlando's financial statements?

Selected accounts from Madison Company are provided below: Required: Determine the following: $\begin{array} { |l | l | l | } \hline & \text { Item } & \text { Amount } \\\hline 1 & \text { Actual overhead costs } & \\\hline 2 & \text { Cost of poods marufactured } & \\\hline 3 & \text { Cost of goods sold } & \\\hline 4 & \text { Direct labor cost incured } & \\\hline 5 & \text { Direct materials used } & \\\hline 6 & \text { Estirnated overhead charged to production } & \\\hline 7 & \text { Finished goods ending inventory } & \\\hline 8 & \text { Grossmargin } & \\\hline 9 & \text { Income } & \\\hline 10 & \text { Indirect materials used in production } & \\\hline 11 & \text { Over- or winder-applied (show dollar amount and whether over-or } & \\&\text { under-applied) }\\\hline 12 & \text { Raw materials purchased } & \\\hline 13 & \text { Raw materials ending inventory } & \\\hline 14 & \text { Work in process ending inventory } & \\\hline\end{array}$

Which of the following is a valid reason for using variable costing?

Hutton Company reported a $750 unfavorable overhead variance on a recent performance report.This means that factory overhead was underapplied during the period.

Travis Company had no beginning work in process or finished goods.Its total manufacturing costs for the year were $427,000.If cost of goods manufactured was $332,000 and cost of goods sold was $250,000,the amount of ending work in process would have been: