COST Accounting 5 - Answer PDF

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CHAPTER 3 COST ACCOUNTING CYCLEMultiple Choice – Theories Cost of goods sold is a. An expense b. A period cost c. Is an asset d. None of the above Answer: A For a manufacturing company, the cost of goods sold available for sale during a given accounting period is a. The beginning inventory of finish...

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CHAPTER 3 COST ACCOUNTING CYCLE Multiple Choice – Theories 1. Cost of goods sold is a. An expense b. A period cost c. Is an asset d. None of the above Answer:

A

2. For a manufacturing company, the cost of goods sold available for sale during a given accounting period is a. The beginning inventory of finished goods b. The cost of goods manufactured during the period c. The sum of the above d. None of the above Answer:

C

3. Which of the following would not be classified as manufacturing overhead? a. Indirect labor b. Direct materials c. Insurance on factory building d. Indirect material Answer:

B

4. The wage of a timekeeper in the factory would be classified as a. prime cost b. direct labor c. indirect labor d. administrative expense Answer:

C

5. As current technology changes manufacturing processes, it is likely that direct a. labor will increase b. labor will decrease c. materials will increase d. material will decrease Answer:

B

6. Sales commissions are classified as a. prime costs b. period costs c. product costs d. indirect labor Answer:

B

7. For inventoriable costs to become expenses under the matching principle, a. the must be finished and in stock b. the product must be expensed based on its percentage of completion c. the product to which they attach must be sold d. all accounts must be settled Answer:

C

8. A manufacturing company reports cost of goods manufactured as a. a current asset on the balance sheet b. an administrative expense on the income statement c. a component in the calculation of cost of goods sold d. a component of the raw materials inventory on the balance sheet Answer:

C

9. Costs of goods manufactured in a manufacturing company is analogous to a. Ending inventory in a merchandising company b. Beginning inventory in a merchandising company c. Cost of goods available for sale in a merchandising company d. Cost of goods purchased in a merchandising company Answer:

D

10. If the amount of “Cost of goods manufactured” during a period exceeds the amount of the “Total manufacturing costs” for the period, then a. Ending work in process inventory is greater than or equal to the amount of the beginning work in process inventory b. Ending work in process is greater than the amount of the beginning work in process inventory c. Ending work in process is equal to the cost of goods manufactured d. Ending work in process is less than the amount of the beginning work in process inventory Answer: D

Multiple Choice - Problems 1. For the year 2011, the gross margin of Jumbo Co. was P96,000; the cost of goods manufactured was P340,000; the beginning inventories of work in process and finished goods were P28,000 and P45,000, respectively; and the ending inventories of work in process and finished goods were P38,000 and P52,000, respectively. The sales of Jumbo Co. for 2011, must have been a. 419,000 b. 429,000 c. 434,000 d. 436,000 Answer:

B

Solution: Cost of Goods Manufactured Finished Goods, Beginning Total Goods available for Sale Finished Goods, ending Cost of Goods Sold Sales (SQUEEZE) COGS Gross Profit

P 340,000 45,000 385,000 (52,000) 333,000 P 429,000 333,000 96,000

2. The following information was taken from Jeric Comapany’s accounting records for the year ended December 31, 2011. Increase in raw materials inventory P 15,000 Decrease in finished goods inventory 35,000 Raw materials purchased 430,000 Direct labor payroll 200,000 Factory overhead 300,000 There was no work-in-process inventory at the beginning or end of the year. Jeric’s 2011 cost of goods sold is a. b. c. d.

P 950,000 P 965,000 P 975,000 P 995,000

Answer:

A

Solution: Direct Materials Purchases Less: Increase in raw materials Direct Labor Factory Overhead Manufacturing Cost Add: Decrease in Finished Goods Cost of Goods Sold

430,000 15,000

415,000 200,000 300,000 915,000 35,000 950,000

Items 3 through 5 are based on the following information pertaining to Glenn Company’s manufacturing operations.

Inventories Direct Materials Work-in-process Finished goods

3/1/11 3/31/11 P 36,000 P 30,000 18,000 12,000 54,000 72,000

Additional Information for the month of March 2011 Direct materials purchased P 84,000 Direct labor payroll 60,000 Direct labor rate per hour 7.50 Factory overhead rate/direct labor 10.00 hour 3. For the month of March 2011, prime cost was a. b. c. d.

P 90,000 P 120,000 P 144,000 P 150,000

Answer:

D

Solution: Direct Materials Direct Mats. – Beg. Add: Purchases Less: Direct Mats. – End. Direct Labor Prime Cost

36,000 84,000 (30,000)

90,000 60,000 150,000

4. For the month of March 2011, conversion cost was a. b. c. d.

P 90,000 P 140,000 P 144,000 P 170,000

Answer:

B

Solution: Direct Labor Factory Overhead (60,000/7.50)=8000*10 Conversion Cost

60,000 80,000 140,000

5. For the month of March 2011, cost of goods manufactured was a. b. c. d.

P 218,000 P 224,000 P 230,000 P 236,000

Answer:

D

Solution: Direct Materials used Direct Materials, 3/1/11 Add: Purchases Total available for use Less: Direct Materials, 3/31/11

36,000 84,000 120,000 30,000

90,000 60,000

Direct Labor Factory Overhead Total Manufacturing Costs Add: Work in process, 3/1/11 Cost of Goods put into process Less: Work in process, 3/31/11 Cost of Goods manufactured

80,000 230,000 18,000 248,000 12,000 236,000

Items 6 and 7 are based on the following data of Matatag Company for the month of March 2011.

Materials Work in Process Finished Goods

March 1 40,000 25,000 60,000

March 31 50,000 35,000 70,000

March 1 to 31, 2011 Direct Labor Cost FOH-Applied Cost of Goods Sold

120,000 108,000 378,000

6. The total amount of direct materials purchased during March was: a. 50,000 b. 170,000 c. 180,000 d. 220,000 Answer:

C

7. The cost of goods manufactured during March, 2011 was: a. 378,000 b. 388,000 c. 398,000 d. 428,000 Answer:

B

Solution: Direct materials used Materials, Beg. 40,000 Purchases (SQUEEZE) No. 6 180,000 Less: Materials, End. (50,000) 170,000 Direct Labor 120,000 Factory Overhead 108,000 Manufacturing Costs 398,000 Add: Work in process, Beg. 25,000 Cost of goods put into process 423,000 Less: Work in process, End (35,000) Cost of goods manufactured 388,000 (SQUEEZE) No. 7 Add: Finished goods, Beg. 60,000 Goods Available for Sale 448,000 Less: Finished goods, End. (70,000) Cost of Goods Sold 378,000 Some selected sales and cost data for Alcid Manufacturing Company are given below: Direct materials used Direct labor Factory overhead (40% variable) Selling and administrative expenses (50% direct, 60% variable)

P

100,000 150,000 75,000 120,000

8. Prime cost was: a. b. c. d.

P 175,000 P 250,000 P 130,000 P 225,000

Answer:

B

Solution: Direct materials Direct labor Prime cost

P 100,000 P 150,000 P 250,000

9. Conversion cost was: a. b. c. d.

P 150,000 P 225,000 P 250,000 P 270,000

Answer:

B

Solution: Direct labor Factory overhead Conversion cost

P 150,000 P 75,000 P 225,000

10. Direct cost was: a. b. c. d.

P 225,000 P 250,000 P 310,000 P 325,000

Answer:

C

Solution: Direct Selling and administrative Expense (P 120,000 x 50%) Direct materials Direct labor Direct cost

P 60,000 100,000 150,000 P 310,000

11. Indirect cost was: a. b. c. d.

P 75,000 P 135,000 P 195,000 P 325,000

Answer:

B

Solution: Indirect Selling and Administrative Expense (P 120,000 x 50%) Factory overhead Indirect cost

P 60,000 75,000 P 135,000

12. Product cost was: a. b. c. d.

P 135,000 P 250,000 P 325,000 P 370,000

Answer:

C

Solution: Direct materials Direct labor Factory overhead Product cost

P 100,000 150,000 75,000 P 325,000

13. Variable cost was: a. b. c. d.

P 250,000 P 280,000 P 352,000 P 370,000

Answer:

C

Solution: Variable Selling and Administrative Expense (P 120,000 x 60%) Direct materials Direct labor Variable factory overhead (P 75,000 x 40%) Variable cost

P 72,000 100,000 150,000 30,000 P 352,000

During 2011, there was no change in either the raw material or the work in process beginning and ending inventories. However, finished goods, which had a beginning balance of P 25,000, increased by P 15,000. 14. If the manufacturing costs incurred totaled P 600,000 during 2011, the goods available for sale must have been: a. b. c. d.

P 585,000 P 600,000 P 610,000 P 625,000

Answer:

D

Solution: Manufacturing costs Add: Finished goods, beginning Goods available for sale

P 600,000 25,000 P 625,000

During the month of May, 2011, Candid Manufacturing Co. incurred P 30,000, P 40,000, and P 20,000 of direct material, direct labor and factory overhead costs respectively. 15. If the cost of goods manufactured was P 95,000 in total and the ending work in process inventory was P 15,000, the beginning inventory of work in process must have been a. b. c. d.

P 10,000 P 20,000 P 110,000 P 25,000

Answer:

B

Solution: 30,000 Direct Materials Direct Labor 40,000 Factory Overhead 20,000 Manufacturing Costs 90,000 Add: Work in process, Beg. 20,000 (SQUEEZE) Cost of goods put into process 110,000 Less: Work in process, End. 15,000 Cost of Goods Manufactured 95,000

The Lion Company’s cost of goods manufactured was P 120,000 when it sales were P 360,000 and its gross margin was P 220,000. 16. If the ending inventory of finished goods was P 30,000, the beginning inventory of finished goods must have been: a. b. c. d.

P 10,000 P 50,000 P 130,000 P 150,000

Answer:

B

Solution: Sales 360,000 Cost of Goods Sold Cost of goods manufactured 120,000 Add: Finished goods, beg. 50,000 (SQUEEZE) Goods available for sale 170,00 Less: Finished goods, end. 30,000 140,000 Gross Margin 220,000 The gross margin for Cruise Company for 2011 was P 325,000 when sales were P 700,000. The FG inventory was P 60,000 and the FG inventory, end was P 35,000. 17. The cost of goods manufactured was: a. b. c. d.

P 300,000 P 350,000 P 230,000 P 375,000

Answer:

B

Solution: Sales Less: Gross Margin Cost of Goods Sold Add: Finished Goods, end Less: Finished Goods, beginning Cost of Goods Manufactured

P 700,000 (325,000) P 375,000 35,000 (65,000) P 350,000

During the month of January, F Co.’s direct labor cost totaled P 36,000, and the direct labor cost was 60% of prime cost. 18. If total mfg. costs during January were P 85,000, the factory overhead was: a. b. c. d.

P 24,000 P 25,000 P 49,000 P 60,000

Answer:

B

Solution: Manufacturing Costs Less: Prime Cost (P 36,000 / 60%) Factory overhead

P 85,000 (60,000) P 25,000

During 2011, there was no change in the beginning or ending balance in the Materials inventory account for the DL Co. However, the WP inventory account increased by P 15,000, and the FG inventory account decreased by P 10,000. 19. If purchases of raw materials were P 100,000 for the year, direct labor costs was P 150,000, and manufacturing overhead cost was P 200,000, the cost of goods sold for the year would be: a. b. c. d.

P 435,000 P 445,000 P 465,000 P 475,000

Answer:

B

Solution: Direct materials Direct labor Factory overhead Total Manufacturing Costs Work in process (increase) Cost of goods Manufactured Finished Goods (decrease) Cost of Goods Sold

P 100,000 150,000 200,000 450,000 (15,000) 435,000 10,000 P 445,000

During the month of March, 2011, Nape Co. used P 300,000 of direct materials. At March 31, 2011, Nape’s direct materials inventory was P 50,000 more than it was at March 1, 2011. 20.

Direct material purchases during the month of March 2011 amounted to: a. b. c. d.

P0 P 250,000 P 300,000 P 350,000

Answer:

D

Solution: Direct materials, beginning Add: Direct materials, End Direct Material Purchases

P 300,000 50,000 P 350,000

21. Calculate the manufacturing overhead incurred for F&B Co. Direct labor cost incurred Direct materials used Beginning work in process Ending work in process Finished goods completed a. b. c. d.

P P P P

P 250 110 50 300 170

60 410 560 580

Answer:

A

Solution: Direct labor cost incurred Direct Materials Used Factory Overhead Total manufacturing cost Add: Work in process, beg. Cost of Goods put into process Less: Work In Process, end *Finished goods Completed

250 110 60 SQUEEZE 420 50 470 300 170

* Finished goods completed is equal to cost of goods manufactured.

22. Determine the sales for the year. Gross profit Ending inventory Goods available for sale a. b. c. d.

P P P P

P 280,000 120,000 180,000

300,000 340,000 400,000 460,000

Answer:

B

Solution: Goods Available for Sale Less: Inventory,end Cost of Goods Sold Add: Gross Profit Sales

P

180,000 120,000 60,000 280,000 340,000

*Gross profit is attained by getting the difference between Sales and Cost of Goods Sold. Using the SQUEEZE method we are able to get the number of sales by adding COGS and Gross Profit. Given the following information: Finished goods beginning Finished goods ending Cost of goods manufactured

P

26,000 37,000 127,000

23. What is the cost of goods sold? a. b. c. d. e.

P P P P P

115,500 138,500 153,000 190,500 116,000

Answer:

E

Solution: Cost of Goods Manufactured Add: Finished Goods, beg. Total Goods Available for Sale Less: Finished Goods, end Cost of Goods Sold

127,000 26,000 153,000 37,000 116,000

* The above solution is based on the Cost Goods Sold Statement formula. Uniflo Manufacturing Company developed the following data for the current year. Work in process inventory, January 1 Direct materials used Actual factory overhead Applied factory overhead Cost of goods manufactured Total manufacturing costs

P

40,000 24,000 48,000 36,000 44,000 120,000

24. Uniflo Company’s direct labor cost for the year is a. b. c. d.

P P P P

12,000 60,000 36,000 48,000

Answer:

B

Solution: Direct Materials used Factory Overhead Applied Direct Labor Total Manufacturing Cost

24,000 36,000 (60,000) SQUEEZE 120,000

*Factory overhead applied is used in determining the total manufacturing cost and not the actual overhead. 25. Uniflo Company’s work in process inventory, December 31 is a. b. c. d.

P P P P

116,000 80,000 76,000 36,000

Answer:

A

Solution:

Total Manufacturing Cost Work in process, beg Cost of goods put into process Less: Work in process, end Cost of Goods Manufactured

120,000 40,000 160,000 116,000 SQUEEZE 44,000

The following data relate to Maxine Manufacturing Company for the period: Direct labor Factory overhead Work in process inventory, beginning Work in process inventory, end Cost of goods manufactured Sales Finished goods inventory, beginning Finished goods inventory, end Total selling, general, and administrative costs

P

2,400 1,700 11,000 5,000 16,000 50,000 9,000 8,000 14,000

26. The amount of direct materials put into production during the period a. b. c. d.

P P P P

6,700 5,600 4,800 5,900

Answer:

D

Solution: Direct materials Direct Labor Factory overhead Total Manufacturing Cost Work in process, beg Cost of goods put into process Less: Work in process, end Cost of goods manufactured Add: Finished goods, beg Total goods available for sale Less: Finished goods, end Cost of goods sold

5,900 SQUEEZE 2,400 1,700 10,000 11,000 21,000 5,000 16,000 9,000 25.000 8,000 17,000

27. The amount of increase in retained earnings during the period a. b. c. d.

P P P P

14,000 33,000 25,000 19,000

Answer:

D

Solution: Sales 50,000 Cost of Goods Sold (17,000) Gross Profit 33,000 Total selling, general, and administrative costs (14,000) Net Income 19,000 * Net Income is the increase in the retained earnings. Arizona Manufacturing Company reported the following year-end information Work in process inventory, January 1 Raw materials inventory, January 1 Work in process inventory, December 31 Raw materials inventory, December 31 Raw materials purchased Direct labor Factory overhead applied Factory overhead control

180,000 50,000 150,000 80,000 160,000 150,000 100,000 120,000

28. Cost of goods manufactured for the year is a. P 380,000 b. P 410,000 c. P 350,000 d. P 440,000

Answer:

B

Solution: Materials Used: Raw Materials, beg Add: Purchases Total Available for use Less: Materials, end Direct Labor Factory Overhead Applied Total Manufacturing Cost Add: Work in process, beg. Cost of goods put into process Less: Work in process, end. Cost of goods manufactured

50,000 160,000 210,000 80,000

130,000 150,000 100,000 380,000 180,000 560,000 150,000 410,000

* Used Cost of Goods Sold Statement to determine the value.

Alabama Corporation reported the following for the year. WP inventory, beg – P 90,000; cost of goods manufactured – P 258,000; FG inventory, beg – P 126,000; WP inventory, end – P 110,000; FG inventory, end – P 132,000 29. Cost of goods sold for Alabama Corporation during the year a. P 252,000 b. P 264,000 c. P 232,000 d. P 126,000 Answer:

A

Solution: Cost of goods manufactured Add: Finished goods, beg. Total goods available for sale Less: Finished goods, end Cost of goods sold

258,000 126,000 384,000 132,000 252,000

30. Total manufacturing costs for Alabama Corporation a. P 278,000 b. P 368,000 c. P 298,000 d. P 238,000 Answer:

A

Solution: Cost of goods manufactured Work in process, end Less: Work in process, beg. Total manufacturing cost

258,000 110,000 90,000 278,000

CHAPTER 6 ACCOUNTING FOR MATERIALS True – False Questions 1. When price are rising, higher income will be reported using FIFO as compared with using LIFO. Answer:

TRUE

2. Inventory Methods can be changed at will to control reported net income. (cost of goods sold) Answer:

FALSE

3. An overstated ending inventory leads to understated net income. (understated); (overstated) Answer:

FALSE

*When an ending inventory overstatement occurs, the cost of goods sold is stated too low, which means that net income before taxes is overstated by the amount of the inventory overstatement; vice versa. 4. An error in determining the cost of the ending inventory of a period gene...