FOREIGN TRADE UNIVERSITY
KARAN
ACCT 201 B
EXAM 1
January 2014
VERSION 1
NAME___________________________________________
NOTE:
1There are 15 pages in this test, including the cover page. Please make sure that you have all pages BEFORE
you begin.
2.There are 33 multiple choice Questions and 3 problems. Mark your answers to the multiple choice
questions on SCANTRON FORM 882, with a No. 2 Pencil. Make sure your answers correspond to the
appropriate question numbers. Answer the problems on the space provided.
Marks
Marks obtained
Multiple choice (33 x 2) 66
_________
34
12
_________
35
10
_________
36
12
_________
Total 100
_________
1
Version #1
1. Departmental overhead rates may not correctly assign overhead costs due to:
A. the use of direct labor hours in allocating overhead costs to products rather than machine time or quantity of
materials used.
B. the high correlation between direct labor-hours and the incurrence of overhead costs.
C. overreliance on volume as a basis for allocating overhead costs where products differ regarding the number
of units produced, lot size, or complexity of production.
D. difficulties associated with identifying cost pools for the first stage of the allocation process.
2. Which of the following statements about product costs is true?
A. Product costs are deducted from revenue when the production process is completed.
B. Product costs are deducted from revenue as expenditures are made.
C. Product costs associated with unsold finished goods and work in process appear on the balance sheet as
assets.
D. Product costs appear on financial statements only when products are sold.
3. Setting up a machine to fill an order for a particular product is an example of a:
A. Unit-level activity.
B. Batch-level activity.
C. Product-level activity.
D. Facility-level activity.
2
Addison Company has two products: A and B. The annual production and sales of Product A is 800 units and
of Product B is 700 units. The company has traditionally used direct labor-hours as the basis for applying all
manufacturing overhead to products. Product A requires 0.2 direct labor-hours per unit and Product B requires
0.6 direct labor-hours per unit. The total estimated overhead for next period is $71,286.
The company is considering switching to an activity-based costing system for the purpose of computing unit
product costs for external reports. The new activity-based costing system would have three overhead activity
cost pools–Activity 1, Activity 2, and General Factory–with estimated overhead costs and expected activity as
follows:
(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor-hours.)
4. The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is
closest to:
A. $22.60
B. $54.84
C. $58.76
D. $36.73
5. The overhead cost per unit of Product B under the traditional costing system is closest to:
A. $22.38
B. $13.56
C. $73.74
D. $15.20
6. The overhead cost per unit of Product B under the activity-based costing system is closest to:
A. $73.74
B. $56.62
C. $22.38
D. $47.52
3
7. The predetermined overhead rate under the traditional costing system is closest to:
A. $25.34
B. $22.60
C. $37.30
D. $122.91
8. The following inventory balances relate to Komiza Manufacturing Corporation at the beginning and end of
the year:
Komiza's cost of goods available for sale was $622,000. What was Komiza's cost of goods manufactured?
A. $581,000
B. $615,000
C. $629,000
D. $663,000
9. Huang Aerospace Corporation manufactures aviation control panels in two departments, Fabrication and
Assembly. In the Fabrication department, Huang uses a predetermined overhead rate of $30 per machine-hour.
In the Assembly department, Huang uses a predetermined overhead rate of $12 per direct labor-hour. During the
current year, Job #X2984 incurred the following number of hours in each department:
What is the total amount of manufacturing overhead that Huang should have applied to Job #X2984 during the
current year?
A. $1,200
B. $1,500
C. $1,560
D. $1,734
10. Which of the following types of firms typically would use process costing rather than job-order costing?
A. A small appliance repair shop.
B. A manufacturer of commercial passenger aircraft.
C. A specialty equipment manufacturer.
D. A breakfast cereal manufacturer.
4
11. In activity-based costing, unit product costs computed for external financial reports do NOT include:
A. direct materials.
B. direct labor.
C. manufacturing overhead.
D. selling costs.
12. In a job-order costing system, the incurrence of indirect labor costs would usually be recorded as a debit to:
A. Manufacturing Overhead.
B. Finished Goods.
C. Work in Process.
D. Cost of Goods Sold.
13. Which of the following is NOT a period cost?
A. Monthly depreciation of the equipment in a fitness room used by factory workers.
B. Salary of a billing clerk.
C. Insurance on a company showroom, where current and potential customers can view new products.
D. Cost of a seminar concerning tax law updates that was attended by the company's controller.
14. Materials used in the operation of a factory, such as cleaning supplies, that are not an integral part of the
final product should be classified as:
A. direct materials.
B. a period cost.
C. administrative expense.
D. manufacturing overhead.
15. In a job-order costing system, the cost of a completed but unsold job is:
A. closed to Cost of Goods Sold.
B. part of the Work in Process inventory balance.
C. adjusted to exclude any applied overhead.
D. part of the Finished Goods inventory balance.
5
16. At the beginning of June, Varetoni Manufacturing Company had a $320 balance in its Work in Process
inventory account. At the end of June, Varetoni's Work in Process inventory account had a balance of $970.
During June, Varetoni made the following journal entries:
Based on the information above, what is Varetoni's cost of goods manufactured for June?
A. $5,180
B. $5,510
C. $6,160
D. $6,480
Yokum Company has provided the following data for the month of August:
17. The cost of goods sold was:
A. $196,000
B. $206,000
C. $211,000
D. $190,000
6
18. The ending raw materials inventory was:
A. $3,000
B. $11,000
C. $15,000
D. $7,000
19. The beginning work in process inventory was:
A. $6,000
B. $9,000
C. $15,000
D. $2,000
Cavalerio Corporation uses the weighted-average method in its process costing system. This month, the
beginning inventory in the first processing department consisted of 700 units. The costs and percentage
completion of these units in beginning inventory were:
A total of 7,200 units were started and 6,400 units were transferred to the second processing department during
the month. The following costs were incurred in the first processing department during the month:
The ending inventory was 80% complete with respect to materials and 70% complete with respect to conversion
costs.
Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer
that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least
three decimal places.
7
20. How many units are in ending work in process inventory in the first processing department at the end of the
month?
A. 800
B. 1,500
C. 900
D. 6,500
21. The total cost transferred from the first processing department to the next processing department during the
month is closest to:
A. $291,900
B. $307,318
C. $248,966
D. $277,400
22. What are the equivalent units for conversion costs for the month in the first processing department?
A. 7,900
B. 7,450
C. 6,400
D. 1,050
23. The cost per equivalent unit for materials for the month in the first processing department is closest to:
A. $12.72
B. $13.92
C. $13.39
D. $12.24
24. Job 910 was recently completed. The following data have been recorded on its job cost sheet:
The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate
is $15 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 910 would be:
A. $3,220
B. $3,760
C. $5,935
D. $3,445
8
25. Annika Company uses activity-based costing. The company has two products: A and B. The annual
production and sales of Product A is 4,000 units and of Product B is 1,000 units. There are three activity cost
pools, with estimated total cost and expected activity as follows:
The cost per unit of Product A under activity-based costing is closest to:
A. $20.40
B. $10.00
C. $18.15
D. $17.00
26. In process costing, a separate work in process account is kept for each:
A. individual order.
B. equivalent unit.
C. processing department.
D. cost category (i.e., materials, conversion cost).
27. Faughn Corporation has provided the following data concerning manufacturing overhead for July:
The company's Cost of Goods Sold was $243,000 prior to closing out its Manufacturing Overhead account. The
company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following
statements is true?
A. Manufacturing overhead was underapplied by $10,000; Cost of Goods Sold after closing out the
Manufacturing Overhead account is $233,000
B. Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the
Manufacturing Overhead account is $233,000
C. Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the
Manufacturing Overhead account is $253,000
D. Manufacturing overhead was underapplied by $10,000; Cost of Goods Sold after closing out the
Manufacturing Overhead account is $253,000
9
28. The following information relates to Zamudio Manufacturing Company:
How much manufacturing overhead cost did Zamudio actually incur?
A. $103,500
B. $119,600
C. $120,400
D. $129,600
29. Wayne Company's beginning and ending inventories for the month of June were as follows:
Production data for the month follow:
Wayne applies manufacturing overhead cost to jobs based on direct labor-hours, and the predetermined rate is
$5.75 per direct labor-hour. The company does not close underapplied or overapplied manufacturing overhead
to Cost of Goods Sold until the end of the year. What is the amount of cost of goods manufactured?
A. $508,750
B. $502,000
C. $585,000
D. $487,750
10
30. Avery Co. uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead
to jobs. For the month of October, Avery's estimated manufacturing overhead cost was $300,000 based on an
estimated activity level of 100,000 direct labor-hours. Actual overhead amounted to $325,000 with actual direct
labor-hours totaling 110,000 for the month. How much was the overapplied or underapplied overhead?
A. $25,000 overapplied
B. $25,000 underapplied
C. $5,000 overapplied
31. The information below was obtained from the records of one of the departments of
Cushing Company for the month of August. The company uses the FIFO method in its
process costing system.
All materials are added at the beginning of the process.
The equivalent units for materials for the month of August are:
A. 75,000 units
B. 85,000 units
C. 87,500 units
D. 95,000 units
32. The information below was obtained from the records of one of the departments of
Cushing Company for the month of August. The company uses the FIFO method in its
process costing system.
All materials are added at the beginning of the process.
The equivalent units for labor and overhead for the month of August are:
A. 85,000 units
B. 95,000 units
C. 87,500 units
D. 82,500 units
11
33. In February, one of the processing departments at Grosz Corporation had beginning work
in process inventory of $18,000 and ending work in process inventory of $11,000. During the
month, the cost of units transferred out from the department was $204,000. The company
uses the FIFO method in its process costing system.
In the department's cost reconciliation report for February, the costs added to production in
the department would be:
A. $211,000
B. $197,000
C. $186,000
D. $193,000
12
34. Glazener Corporation uses the FIFO method in its process costing. The following data
pertain to its Assembly Department for June.
Required:
Determine the equivalent units of production for Materials and Conversion costs
for the Assembly Department for June using the FIFO method.
13
35. Alam Company is a manufacturing firm that uses job-order costing. At the beginning of the year, the
company's inventory balances were as follows:
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the
beginning of the year, the company estimated that it would work 45,000 machine-hours and incur $180,000 in
manufacturing overhead cost. The following transactions were recorded for the year:
a. Raw materials were purchased, $416,000.
b. Raw materials were requisitioned for use in production, $420,000 ($380,000 direct and $40,000 indirect).
c. The following employee costs were incurred: direct labor, $414,000; indirect labor, $60,000; and
administrative salaries, $212,000.
d. Selling costs, $141,000.
e. Factory utility costs, $20,000.
f. Depreciation for the year was $81,000 of which $73,000 is related to factory operations and $8,000 is related
to selling, general, and administrative activities.
g. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 48,000 machinehours.
h. The cost of goods manufactured for the year was $1,004,000.
i. Sales for the year totaled $1,416,000 and the costs on the job cost sheets of the goods that were sold totaled
$989,000.
j. The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.
Required:
Prepare the appropriate journal entry for each of the items above (a. through j.). You can assume that all
transactions with employees, customers, and suppliers were conducted in cash.
1
36. Babb Company is a manufacturing firm that uses job-order costing. The company's inventory balances were
as follows at the beginning and end of the year:
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the
beginning of the year, the company estimated that it would work 17,000 machine-hours and incur $272,000 in
manufacturing overhead cost. The following transactions were recorded for the year:
• Raw materials were purchased, $416,000.
• Raw materials were requisitioned for use in production, $412,000 $(376,000 direct and $36,000 indirect).
• The following employee costs were incurred: direct labor, $330,000; indirect labor, $69,000; and
administrative salaries, $157,000.
• Selling costs, $113,000.
• Factory utility costs, $29,000.
• Depreciation for the year was $121,000 of which $114,000 is related to factory operations and $7,000 is
related to selling, general, and administrative activities.
• Manufacturing overhead was applied to jobs. The actual level of activity for the year was 15,000 machinehours.
• Sales for the year totaled $1,282,000.
Required:
a. Cost of goods manufactured.
b. Was the overhead underapplied or overapplied? By how much?
c. Income for the year. The company closes any underapplied or overapplied manufacturing overhead to Cost of
Goods Sold.
2
3