Size: px
Start display at page:



1 COMPREHENSIVE EXAMINATION A (Chapters 1-4) Approximate Problem Topic Points Minutes A - I Multiple Choice A - II Cost of Goods Manufactured and Sold A - III Job Order Cost Accounting A - IV Process Cost Accounting A - V Activity-Based Costing Checking Work

2 A - 2 Test Bank for Managerial Accounting, Fourth Edition Problem A - I Multiple Choice (20 points) Circle the one best answer. 1. Cost of goods manufactured during a period is obtained by taking the total manufacturing costs incurred during the period and adding and subtracting the following inventories: Adding Subtracting a. Beginning finished goods inventory Ending finished goods inventory b. Beginning work in process inventory Ending finished goods inventory c. Beginning raw materials inventory Ending work in process inventory d. Beginning work in process inventory Ending work in process inventory 2. Cost of goods sold is equal to a. total manufacturing costs plus beginning work in process less ending work in process. b. cost of goods sold plus beginning work in process less ending work in process. c. total manufacturing costs plus ending work in process less beginning work in process. d. cost of goods manufactured plus beginning finished goods less ending finished goods. 3. Inventory accounts for a manufacturer consists of a. direct materials, work in process, and finished goods. b. direct labor, work in process, and finished goods. c. manufacturing overhead, direct materials, and direct labor. d. work in process, direct labor, and manufacturing overhead. 4. In a process cost system, equivalent units of production are the a. work done on physical units expressed in fully completed units. b. units that are transferred to the next processing department. c. units completed and transferred to finished goods. d. units that are incomplete at the end of a period. Use the following information for questions 5 and 6. In the month of November, a department had 500 units in the beginning work in process inventory that were 60% complete. These units had $16,000 of materials cost and $12,000 of conversion costs. Materials are added at the beginning of the process and conversion costs are added uniformly throughout the process. During November, 10,000 units were completed and transferred to the finished goods inventory and there were 2,000 units that were 25% complete in the ending work in process inventory on November 30. During November, manufacturing costs charged to the department were: Materials $368,000; Conversion costs $408, The cost assigned to the units transferred to finished goods during November was a. $720,000. b. $724,000. c. $752,000. d. $716, The cost assigned to the units in the ending work in process inventory on November 30 was a. $144,000. b. $84,000. c. $64,000. d. $116,000.

3 Comprehensive Examination A A An appropriate cost driver for ordering and receiving materials cost is the a. direct labor hours. b. machine hours. c. number of parts. d. number of purchase orders. 8. Benefits of activity-based costing include all of the following except a. more accurate product costing. b. fewer cost pools used to assign overhead costs to products. c. enhanced control over overhead costs. d. better management decisions. 9. An example of a value-added activity in a manufacturing operation is a. machine repair. b. inventory control. c. engineering design. d. building maintenance. 10. Assigning manufacturing costs to work in process results in credits to all of the following accounts except a. Factory Labor. b. Manufacturing Overhead. c. Raw Materials Inventory. d. Work in Process Inventory.

4 A - 4 Test Bank for Managerial Accounting, Fourth Edition Problem A - II Cost of Goods Manufactured and Sold (20 points) Selected account balances of Heedy Manufacturing Company appear below for 2008: Beginning of Year End of Year Finished Goods Inventory $25,000 $ 32,000 Work In Process Inventory 30,000 35,000 Raw Materials Inventory 46,000 26,000 Sales 360,000 Direct Labor 45,000 Factory Supervisory Salaries 18,000 Income Tax Expense 25,000 Factory Insurance 12,000 Raw Material Purchases 75,000 Administrative Expenses 17,000 Sales Returns and Allowances 15,000 Factory Depreciation 22,000 Indirect Labor 11,000 Selling Expenses 35,000 Instructions Using the above information for Heedy Manufacturing Company, answer the following questions. Support your answers with clearly identified computations. 1. What was the amount of direct materials used in production? 2. What were the total manufacturing costs incurred? 3. What was the cost of goods manufactured? 4. What was the cost of goods sold? 5. What was the amount of net income?

5 Comprehensive Examination A A - 5 Problem A - III Job Order Cost Accounting (20 points) Battle Manufacturing uses a job order cost accounting system. On October 1, the company has a balance in Work in Process Inventory of $5,500 and two jobs in process: Job No. 429, $3,000 and Job No. 430, $2,500. During October, a summary of source documents reveals the following: For Materials Requisition Slips Labor Time Tickets Job No. 429 $ 3,500 $ 4,400 Job No ,600 3,400 Job No ,400 4,200 Job No ,000 4,000 General Use 1,000 1,500 $13,500 $17,500 Battle Manufacturing applies manufacturing overhead to jobs at an overhead rate of 70% of direct labor cost. Job No. 429 is completed during the month. Instructions (a) Prepare summary journal entries to record the requisition slips, time tickets, the assignment of manufacturing overhead to jobs, and the completion of Job No Show computations. (b) Answer the following questions. 1. What is the balance in Work in Process Inventory at October 31? 2. If Battle Manufacturing incurred $8,000 of manufacturing overhead in addition to indirect materials and indirect labor, was overhead over- or underapplied in October and by how much?

6 A - 6 Test Bank for Managerial Accounting, Fourth Edition Problem A - IV Process Cost Accounting (25 points) The Mixing Department of Cherry Manufacturing Company has the following production and manufacturing cost data for January. Production: Beginning inventory 8,000 units that are 100% complete as to materials and 40% complete as to conversion costs; units started into production 27,000; ending inventory of 12,000 units 20% complete as to conversion costs. Manufacturing Costs: Beginning work in process inventory of $40,000, comprised of $30,000 of materials and $10,000 of conversion costs. Materials added during the month, $110,000; labor and overhead applied during the month, $62,000 and $55,000, respectively. Instructions (a) Compute the equivalent units of production for materials and conversion costs for the month of January. (b) Compute the unit costs for materials and conversion costs. (c) Determine the costs to be assigned to the units transferred out and ending work in process. Problem A - V Activity-Based Costing (15 points) Tuttle Manufacturing Company manufactures two products: radiators and gas tanks. During June, 200 radiators and 400 gas tanks were produced and overhead costs of $66,000 were incurred. The following information related to overhead costs was available: Activity Cost Driver Total Cost Materials handling Number of requisitions $28,000 Machine setups Number of setups 18,000 Quality inspections Number of inspections 20,000 The cost driver volume for each product was as follows: Cost Driver Radiators Gas Tanks Total Number of requisitions Number of setups Number of inspections Instructions (a) Compute the overhead rate for each activity. (b) Assign the manufacturing overhead costs for June to the two products using activity-based costing.

7 Problem A - I Solution 1. d 6. b 2. d 7. d 3. a 8. b 4. a 9. c 5. a 10. d Comprehensive Examination A A - 7 Solutions Comprehensive Examination A Problem A - II Solution 1. Direct materials Raw materials inventory, Jan $ 46,000 Raw material purchases... 75,000 Raw materials available for use ,000 Raw materials inventory, Dec ,000 Direct materials used... $ 95, Direct materials used... $ 95,000 Direct labor... 45,000 Manufacturing overhead Factory supervisory salaries... $18,000 Factory insurance... 12,000 Factory depreciation... 22,000 Indirect labor... 11,000 63,000 Total manufacturing costs... $203, Work in process inventory, Jan $ 30,000 Direct materials used... $95,000 Direct labor... 45,000 Manufacturing overhead... 63, ,000 Total work in process ,000 Work in process inventory, Dec ,000 Cost of goods manufactured... $198, Finished goods inventory, Jan $ 25,000 Cost of goods manufactured ,000 Cost of goods available for sale ,000 Finished goods inventory, Dec ,000 Cost of goods sold... $191, Sales.... $360,000 Less sales returns and allowances... 15,000 $345,000 Expenses Cost of goods sold ,000 Selling expenses... 35,000 Administrative expenses... 17,000 Income tax expense... 25, ,000 Net income... $ 77,000

8 A - 8 Test Bank for Managerial Accounting, Fourth Edition Problem A - III Solution (a) Requisition slips Oct. 31 Work In Process Inventory... 12,500 Manufacturing Overhead... 1,000 Raw Materials Inventory... 13,500 Time tickets Work in Process Inventory... 16,000 Manufacturing Overhead... 1,500 Factory Labor... 17,500 Assignment of overhead Work in Process Inventory ($16,000 70%)... 11,200 Manufacturing Overhead... 11,200 Completion of Job 429 Finished Goods Inventory... 13,980 Work in Process Inventory... 13,980 ($3,000 + $3,500 + $4,400 + $3,080) (b) 1. Work in Process Inventory balance: October 1 balance $ 5,500 Costs added in October 39,700 45,200 Completed jobs 13,980 October 31 balance $31, Under- or overapplied overhead: Overhead incurred ($1, ,500 + $8,000) $10,500 Overhead applied 11,200 Overhead overapplied $ 700 Problem A - IV Solution (a) Equivalent Units Physical Units Materials Conversion Costs Transferred out 23,000* 23,000 23,000 Work in process, January 31 12,000 12,000 2,400** Total 35,000 35,000 25,400 *(8, ,000) 12,000 **(12,000.20) (b) Materials: [($30,000 + $110,000) 35,000]... $4 Conversion Costs: [($10,000 + $62,000 + $55,000) 25,400]... 5 $9

9 Comprehensive Examination A A - 9 (c) Costs accounted for Transferred out (23,000 $9) $207,000 Work in process, 1/31 Materials (12,000 $4) 48,000 Conversion costs (2,400 $5) 12,000 60,000 $267,000 Problem A - V Solution (a) The overhead rates are: Activity Total Cost Total Driver Volume Overhead Rate Materials handling $28, $35 Machine setups 18, Quality inspections 20, (b) The assignment of the overhead costs to products is as follows: Radiators Gas Tanks Cost Number Cost Number Cost Total Cost Requisitions ($35) 300 $10, $17,500 $28,000 Setups ($50) 140 7, ,000 18,000 Inspections ($40) 200 8, ,000 20,000 Total costs (a) $25,500 $40,500 $66,000 Total units (b) Cost per unit (a) (b) $ $101.25