COMPREHENSIVE EXAMINATION A
(Chapters 1 - 4)
Points
Approximate
Minutes
Multiple Choice.............................................
20
20
A - II
Cost of Goods Manufactured and Sold ........
20
15
A - III
Job Order Cost Accounting ..........................
20
15
A - IV
Process Cost Accounting .............................
25
20
A-V
Activity-Based Costing .................................
15
15
100
85
Problem
Topic
A-I
Checking Work ............................................
5
90
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:
a.
b.
c.
d.
Adding
Beginning finished goods inventory
Beginning work in process inventory
Beginning raw materials inventory
Beginning work in process inventory
Subtracting
Ending finished goods inventory
Ending finished goods inventory
Ending 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 $408,000.
5.
The cost assigned to the units transferred to finished goods during November was
a. $720,000.
b. $724,000.
c. $752,000.
d. $716,000.
6.
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.
Comprehensive Examination A
7.
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.
A-3
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.
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:
Finished Goods Inventory
Work In Process Inventory
Raw Materials Inventory
Sales
Direct Labor
Factory Supervisory Salaries
Income Tax Expense
Factory Insurance
Raw Material Purchases
Administrative Expenses
Sales Returns and Allowances
Factory Depreciation
Indirect Labor
Selling Expenses
Beginning of Year
$25,000
30,000
46,000
End of Year
$ 32,000
35,000
26,000
360,000
45,000
18,000
25,000
12,000
75,000
17,000
15,000
22,000
11,000
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?
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
Job No. 429
Job No. 430
Job No. 431
Job No. 432
General Use
Materials Requisition Slips
$ 3,500
2,600
3,400
3,000
1,000
$13,500
Labor Time Tickets
$ 4,400
3,400
4,200
4,000
1,500
$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. 429. 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?
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
Materials handling
Machine setups
Quality inspections
Cost Driver
Number of requisitions
Number of setups
Number of inspections
Total Cost
$28,000
18,000
20,000
The cost driver volume for each product was as follows:
Cost Driver
Number of requisitions
Number of setups
Number of inspections
Radiators
300
140
200
Gas Tanks
500
220
300
Total
800
360
500
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.
Comprehensive Examination A
A-7
Solutions — Comprehensive Examination A
Problem A - I — Solution
1.
2.
3.
4.
5.
d
d
a
a
a
6.
7.
8.
9.
10.
b
d
b
c
d
Problem A - II — Solution
1. Direct materials
Raw materials inventory, Jan. 1 ........................................................................
Raw material purchases....................................................................................
Raw materials available for use ........................................................................
Raw materials inventory, Dec. 31 .....................................................................
Direct materials used ........................................................................................
2. Direct materials used .......................................................................
Direct labor.......................................................................................
Manufacturing overhead
Factory supervisory salaries ......................................................
Factory insurance.......................................................................
Factory depreciation...................................................................
Indirect labor ..............................................................................
Total manufacturing costs ..........................................................
3. Work in process inventory, Jan. 1 ....................................................
Direct materials used .......................................................................
Direct labor.......................................................................................
Manufacturing overhead ..................................................................
Total work in process .......................................................................
Work in process inventory, Dec. 31 .................................................
Cost of goods manufactured ............................................................
$ 46,000
75,000
121,000
26,000
$ 95,000
$ 95,000
45,000
$18,000
12,000
22,000
11,000
63,000
$203,000
$ 30,000
$95,000
45,000
63,000
4. Finished goods inventory, Jan. 1 .....................................................
Cost of goods manufactured ............................................................
Cost of goods available for sale .......................................................
Finished goods inventory, Dec. 31...................................................
Cost of goods sold ...........................................................................
5. Sales. ............................................................................................... $360,000
Less sales returns and allowances ..................................................
15,000
Expenses
Cost of goods sold ..................................................................... 191,000
Selling expenses ........................................................................
35,000
Administrative expenses ............................................................
17,000
Income tax expense ...................................................................
25,000
Net income .......................................................................................
203,000
233,000
35,000
$198,000
$ 25,000
198,000
223,000
32,000
$191,000
$345,000
268,000
$ 77,000
A-8
Test Bank for Managerial Accounting, Fourth Edition
Problem A - III — Solution
(a)
Requisition slips
Oct. 31 Work In Process Inventory .....................................................
Manufacturing Overhead ........................................................
Raw Materials Inventory ................................................
12,500
1,000
Time tickets
Work in Process Inventory......................................................
Manufacturing Overhead ........................................................
Factory Labor.................................................................
16,000
1,500
Assignment of overhead
Work in Process Inventory ($16,000 × 70%) ..........................
Manufacturing Overhead ...............................................
11,200
Completion of Job 429
Finished Goods Inventory.......................................................
Work in Process Inventory.............................................
($3,000 + $3,500 + $4,400 + $3,080)
(b)
1. Work in Process Inventory balance:
October 1 balance
Costs added in October
Completed jobs
October 31 balance
2. Under- or overapplied overhead:
Overhead incurred ($1,000 + 1,500 + $8,000)
Overhead applied
Overhead overapplied
13,500
17,500
11,200
13,980
13,980
$ 5,500
39,700
45,200
13,980
$31,220
$10,500
11,200
$ 700
Problem A - IV — Solution
(a)
Transferred out
Work in process, January 31
Total
*(8,000 + 27,000) – 12,000
(b)
Physical Units
23,000*
12,000
35,000
Equivalent Units
Materials
Conversion Costs
23,000
23,000
12,000
2,400**
35,000
25,400
**(12,000 × .20)
Materials: [($30,000 + $110,000) ÷ 35,000] ................................................
Conversion Costs: [($10,000 + $62,000 + $55,000) ÷ 25,400] ...................
$4
5
$9
Comprehensive Examination A
(c)
Costs accounted for
Transferred out (23,000 × $9)
Work in process, 1/31
Materials (12,000 × $4)
Conversion costs (2,400 × $5)
A-9
$207,000
48,000
12,000
60,000
$267,000
Problem A - V — Solution
(a) The overhead rates are:
Activity
Materials handling
Machine setups
Quality inspections
Total Cost
$28,000
18,000
20,000
Total Driver Volume
800
360
500
Overhead Rate
$35
50
40
(b) The assignment of the overhead costs to products is as follows:
Cost
Requisitions ($35)
Setups ($50)
Inspections ($40)
Total costs (a)
Total units (b)
Cost per unit (a) ÷ (b)
Radiators
Number
Cost
300
$10,500
140
7,000
200
8,000
$25,500
Gas Tanks
Number
Cost
500
$17,500
220
11,000
300
12,000
$40,500
200
400
$127.50
$101.25
Total Cost
$28,000
18,000
20,000
$66,000