Chapter 02 Practice Questions PDF

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Accounting 2102 Chapters 1 & 2 Practice (Managerial Accounting Concepts and Cost Flows) Dr. J. Matthews

Wolfpack, LLC The following information was extracted from the accounting records of Wolfpack, LLC, a manufacturer of cowboy hats: Raw materials used Direct labor Indirect labor Selling and administrative salaries Building depreciation (70% of building devoted to production, 30% of building devoted to selling and administrative) Other selling and administrative expenses Other factory costs (includes $15,000 of indirect materials requisitioned from Raw Materials Inventory)

$279,00 0 185,000 35,000 200,000 300,000 75,000 600,000

Wolfpack uses a job order costing system and allocates actual manufacturing overhead to production. The company’s beginning and ending Work in Process inventories were $245,000 and $290,000, respectively. The company's beginning and ending finished goods inventories were $475,000 and $450,000, respectively A. Calculate Cost of Goods Manufactured. B. Calculate Cost of Goods Sold. C. Based solely on the above information, calculate gross profit assuming a sales level of $1,500,000

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Accounting 2102 Chapters 1 & 2 Practice (Managerial Accounting Concepts and Cost Flows) Dr. J. Matthews

Wolfpack, LLC – Solution

RM used Indirect Material (IM) used Direct Material (DM) used

$

DM DL MOH (= 35,000 + (300,000 x 70%) + 600,000) total manufacturing costs B WIP (E WIP) CGM B FG (E FG) COGS

$

$

$

279,000 ( 15,000 ) 264,000 264,000 185,000 845,000 1,294,000 245,000 (290,000) 1,249,000 475,000 (450,000) 1,274,000

a. $1,249,000 b. $1,274,000 c. sales COGS GP

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$ $

1,500,000 1,274,000 226,000

Accounting 2102 Chapters 1 & 2 Practice (Managerial Accounting Concepts and Cost Flows) Dr. J. Matthews

1. On the Schedule of Cost of Goods Manufactured, the Cost of Goods Manufactured figure represents: a. the cost charged to Work in Process during the period. b. the cost transferred from Finished Goods to Cost of Goods Sold during the period. c. the cost placed into production during the period. d. the cost of goods completed during the current period. e. the amount subtracted from Sales to arrive at Gross Profit. 2. Financial and Managerial accounting are similar in that both: a. primarily emphasize future operating results and goals. b. use information provided by the internal accounting system. c. are regulated by outside regulatory agencies and commissions. d. provide information primarily to external users. e. are designed to meet the needs of managers. 3. Champagne of the South, Inc., a manufacturer of bottled sweet tea, had the following beginning and ending inventories for the year ended December 31, 2007: January 1 December 31 Raw Materials Inventory $10,000 $8,000 Work in Process Inventory $18,000 $17,000 Finished Goods Inventory $21,000 $16,500 In addition, direct labor costs of $30,000 were incurred, manufacturing overhead totaled $42,000, materials purchased were $27,000, and selling and administrative costs were $22,000. Champagne sold 25,000 units of product during the year at a sales price of $5.00 per unit. What were the total manufacturing costs for the year? a. $102,000. b. $99,000. c. $101,000. d. $103,500. e. $120,000. 4.

Haala Inc. is a merchandising company. Last month the company's cost of goods sold was $68,000. The company's beginning merchandise inventory was $11,000 and its ending merchandise inventory was $17,000. What was the total amount of the company's merchandise purchases for the month? A) $96,000 B) $62,000 C) $68,000 D) $74,000

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Accounting 2102 Chapters 1 & 2 Practice (Managerial Accounting Concepts and Cost Flows) Dr. J. Matthews

1. 2. 3.

d. b. c.

B RM purchases E RM RM used DL MOH total mfg. costs B WIP E WIP CGM B FG E FG COGS

10,000 27,000 (8,000) 29,000 30,000 42,000 101,000 18,000 (17,000) 102,000 21,000 (16,500) 103,500

4.d. Solution Merchandise inventory, beginning............................................. $11,000 Add: Merchandise purchased..................................................... ? Goods available for sale............................................................. ? Deduct: Finished goods inventory, ending................................. 17,000 Cost of goods sold...................................................................... $68,000 Goods available for sale = $68,000 + $17,000 Goods available for sale = $85,000 Merchandise purchased = $85,000 − Merchandise inventory, beginning Merchandise purchased = $85,000 − $11,000 Merchandise purchased = $74,000

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