Posted: November 29th, 2022

Cost Terms / Inventory Flow / Overhead Allocation quiz

Cost Terms / Inventory Flow / Overhead Allocation quiz

Question 1

The following costs were incurred by a manufacturing company during their latest fiscal year:
1. State Income Taxes
2. Insurance on the manufacturing facility
3. Supplies used in manufacturing
4. Wages for employees in the assembly department (i.e. part of the production process)
5. Wages for employees who drive the company’s customer delivery trucks
6. Interest on notes payable
7. Raw materials used in the production process
8. Rent for the sales outlet in Sacramento
9. Electricity for all manufacturing equipment
10. Depreciation expense on the customer delivery trucks
11. Wages for the sales staff
12. Factory supervisor’s salaries
13. Company president’s salary
14. Advertising Expense
15. Phone & Internet expense for the Marketing Department
16. Office supplies used in the Raw Materials Purchasing Department
From the 16 costs just listed, which grouping reflects all the indirect product costs incurred by the company?
Group of answer choices

a) Insurance on mfg facility, electricity for mfg equipment, depreciation on customer delivery trucks, & office supplies used in raw mat’ls purchasing dep’t

b) Wages for employees in assembly, wages for employees who drive company’s customer delivery trucks, wages for the sales staff, & factory supervisory salaries

c) Insurance on the mfg facility, supplies used in manufacturing, electricity for all mfg equipment, factory supervisors salaries, & office supplies used in the raw mat’s purchasing deparment

d) Wages for employees in assembly, wages for employees who drive company’s customer delivery trucks, raw materials used in the production process, & depreciation expense on the customer delivery trucks.

e) interest on notes payable, rent for sales outlet in Sacramento, wages for the sales staff, advertising expense, & phone & internet expense for the marketing department

f) Supplies used in manufacturing, wages for employees who drive the company’s customer delivery trucks, & depreciation expense on the customer delivery trucks

g) None of the above

Question 2
Acme Manufacturing had the following data for the fiscal year ending December 31st.
Raw Materials Inventory, January 1st $30,000
Raw Material Purchases 350,000
Raw Materials issued to production 345,000
Fixed factory overhead 480,000
Total factory overhead 560,000
Total Manufacturing Costs 1,085,000
Work in process inventory, January 1st 42,000
Work in process inventory, December 31st 45,000
Finished Goods Inventory, January 1st 36,000
Goods available for sale 1,076,000
Cost of Goods Sold 1,043,000
Based on the financial data above, what is the:
• Raw Materials Inventory on December 31st,
• Finished Goods Inventory on December 31st,
• Direct Labor for the year,
• Variable factory overhead costs for the year, and the
• Cost of goods manufactured fore the year.
Group of answer choices

a) $25,000, $42,000, $525,000, $525,000, $1,076,000

b) $5,000, $9,000, $80,000, $135,000, $1,043,000

c) $380,000, $78,000, $740,000, $80,000, $1,040,000

d) $35,000 $33,000, $180,000, $80,000, $1,040,000

e) $35,000, $33,000, $180,000, $45,000, $1,085,000

f) None of the above

Question 3
La Patisserie is a small bakery that provides cakes and breads to small grocery shops in the town of Soquel, California. It is housed in a single building. The ovens and mixing areas occupy 65% of the space, 5% is used for storing and mailing marketing literature and the rest is occupied by the office staff. The bakery operates 360 days per year, 8 hours per day. It employs two cake bakers who are paid $22 per hour and two bread bakers who are paid $12 per hour and has a small staff of helpers who account for 30% of the other employee salaries. Approximately 60% of its materials, flour, eggs, sugar and oil, are used for cakes; the remaining 40% are used for bread. Indirect manufacturing costs are allocated to products on the basis of direct labor hours. During the current year, it started and completed 108,000 cakes and 144,000 loaves of bread at a selling price of $6 per unit and $1.50 per unit respectively.

Annual costs incurred by La Patisserie:
Flour, Eggs, Sugar and Oil $140,300
Office staff salaries $89,500
Rent utilities and insurance $124,700
Baker’s wages $214,000
Salaries of other employees $106,000
Sales commissions (5%) $50,000
Delivery cost to customers $4,500
Other baking materials & supplies $23,900
Office equipment & supplies $15,250
Total cost $768,150

What is the total manufacturing overhead for this period?
Group of answer choices

a) $350,755

b) $136,755

c) $112,855

d) $186,755

e) $130.210

f) None of the above

Question 4

Which of the following statements regarding freight costs is correct?
Group of answer choices

a) Freight costs incurred on raw material purchases, transfers of inventory between production facilities, and delivery of products sold to customer are all classified as period costs.

b) Freight costs incurred on raw material purchases are classified as product costs and included in the cost of raw materials. Freight costs incurred on transfers of inventory between production facilities and delivery of products sold to customers are classified as period costs.

c) Freight costs incurred on raw material purchases and delivery of products sold to customers are classified as period costs. Freight costs incurred on transfers of inventory between production facilities are classified as manufacturing overhead and are treated as product costs.

d) Freight costs incurred on raw material purchases are classified as product costs and included in the cost of raw materials. Freight costs incurred on delivery of products sold to customers are classified as period costs. Freight costs incurred on transfers of inventory between production facilities are classified as product costs and included manufacturing overhead.

e) None of the above.

Question 5
When production levels are expected to increase within a relevant range, what effects would be anticipated with respect to each of the following?
Fixed Costs (per Unit) Variable Costs (per Unit)
(A) increase no change
(B) decrease increase
(C) decrease no change
(D) no change increase
(E) no change no change
(F) increase increase
Group of answer choices

A Above.

B Above.

C Above.

D Above.

E) Above

F) Above

Question 6
The Gym Company produces weights in different sizes and sells them to gym equipment distribution companies who in turn sell them to various gyms such as Boston Sports Club or Gold’s Gym. The manufacturing plant occupies 75% of the total buildings and grounds. Approximately 80% of the utilities are for the manufacturing plant. External vendors provide all of the materials and supplies. The sales force is paid entirely on commissions. Advertising spending is set by contract at beginning of the year. At full capacity, the plant is capable of producing 500,000 units per year, but 2006 production volumes are below this maximum capacity level. Total 2006 Product Cost per unit was $3.10, $0.60 of which was variable. Information on their 2006 costs and related inventory balances are listed in the table below.
Item 1-Jan-2006 31-Dec-2006 During the Year
Raw materials inventory $60,000 $20,000
Work-in-process inventory 72,000 88,000
Finished goods inventory 40,000 50,000
Total manufacturing costs $1,310,250
Goods available for sale 1,334,250
Cost of goods sold 1,284,250
Purchases of raw materials 164,500
Marketing salaries 236,500
Non factory administrative salaries 235,000
Factory maintenance staff salaries 154,000
Direct labor ???
Building rental 250,000
Advertising 148,000
Utilities (Electricity, water, phone…) 120,000
Indirect labor 110,000
Sales commissions (5% of sales) 98,400
Factory equipment depreciation 490,250
What is the Cost of Goods Manufactured for 2006?
Group of answer choices

a) $1,310,250

b) $1,284,250

c) $1,334,250

d) $1,294,250

e) $1,326,250

f) None of the above

Question 7
This question uses the same financial data as Question 6, but it is a separate question.
The Gym Company produces weights in different sizes and sells them to gym equipment distribution companies who in turn sell them to various gyms such as Boston Sports Club or Gold’s Gym. The manufacturing plant occupies 75% of the total buildings and grounds. Approximately 80% of the utilities are for the manufacturing plant. External vendors provide all of the materials and supplies. The sales force is paid entirely on commissions. Advertising spending is set by contract at beginning of the year. At full capacity, the plant is capable of producing 500,000 units per year, but 2006 production volumes are below this maximum capacity level. Total 2006 Product Cost per unit was $3.10, $0.60 of which was variable. Information on their 2006 costs and related inventory balances are listed in the table below.
Item 1-Jan-2006 31-Dec-2006 During the Year
Raw materials inventory $60,000 $20,000
Work-in-process inventory 72,000 88,000
Finished goods inventory 40,000 50,000
Total manufacturing costs $1,310,250
Goods available for sale 1,334,250
Cost of goods sold 1,284,250
Purchases of raw materials 164,500
Marketing salaries 236,500
Non factory administrative salaries 235,000
Factory maintenance staff salaries 154,000
Direct labor ???
Building rental 250,000
Advertising 148,000
Utilities (Electricity, water, phone…) 120,000
Indirect labor 110,000
Sales commissions (5% of sales) 98,400
Factory equipment depreciation 490,250
What were total units manufactured and the total fixed manufacturing cost incurred in 2006?
Group of answer choices

a) 422,661 & $1,025,250

b) 414,274 & $870,688

c) 430,403 & $1,044,250

d) 427,823 & $902,688

e) 417,500 & $1,043,750

f) None of the above

Question 8
This question uses the same financial data as Questions 6 & 7, but it is a separate question.
The Gym Company produces weights in different sizes and sells them to gym equipment distribution companies who in turn sell them to various gyms such as Boston Sports Club or Gold’s Gym. The manufacturing plant occupies 75% of the total buildings and grounds. Approximately 80% of the utilities are for the manufacturing plant. External vendors provide all of the materials and supplies. The sales force is paid entirely on commissions. Advertising spending is set by contract at beginning of the year. At full capacity, the plant is capable of producing 500,000 units per year, but 2006 production volumes are below this maximum capacity level. Total 2006 Product Cost per unit was $3.10, $0.60 of which was variable. Information on their 2006 costs and related inventory balances are listed in the table below.
Item 1-Jan-2006 31-Dec-2006 During the Year
Raw materials inventory $60,000 $20,000
Work-in-process inventory 72,000 88,000
Finished goods inventory 40,000 50,000
Total manufacturing costs $1,310,250
Goods available for sale 1,334,250
Cost of goods sold 1,284,250
Purchases of raw materials 164,500
Marketing salaries 236,500
Non factory administrative salaries 235,000
Factory maintenance staff salaries 154,000
Direct labor ???
Building rental 250,000
Advertising 148,000
Utilities (Electricity, water, phone…) 120,000
Indirect labor 110,000
Sales commissions (5% of sales) 98,400
Factory equipment depreciation 490,250
The company anticipates 2007 production volumes to increase by 10% over 2006.
If total fixed costs and the variable product cost per unit in 2006 remain the same in 2007, what are the anticipated total manufacturing costs to be incurred and the anticipated total unit production volume in 2007?
Group of answer choices

a) $1,319,300 & 459,250

b) $1,325,300 & 469,250

c) $1,294,750 & 417,500

d) $1,276,350,& 418,500

e) $1,319,600 & 459,750

f) None of the above

Question 9
Why are predetermined factory overhead rates used to apply factory overhead to units of production instead of actual overhead costs?
Group of answer choices

a) Predetermine factory overhead rates can be applied on a more-timely basis than actual overhead rates, permitting product cost and profitability to be reported and analyzed within days or even hours after each month-end.

b) Actual overhead and actual production volumes can vary by month due seasonal changes in certain factory overhead costs, and production scheduling. Thus, applying these fluctuating costs to short term changes in production volumes would distort product costs during periods when these fluctuations took place.

c) Actual factory overhead is easier to accumulate and apply. Predetermined factory overhead is more methodical, which results in a more accurate set of product costs.

d) Predetermined factory overhead rates are more accurate than actual overhead rates and therefore are the preferred technique for applying to units of production.

e) All of the above

f) A & B only

g) C & D only

h) A & D only

i) B & C only

Question 10

Lucy Sportswear (LS) manufactures specialty t-shirts. LS uses a job-order cost system to cost t-shirts.
During August, LS manufactured Job # 2022-X200, an order requesting 5,000 t-shirts. The following costs were incurred: Actual Cotton and thread: $14,000. Actual Direct Labor: $4,500, at a rate of $15.00 per hour. Manufacturing Overhead was applied at a rate of $20.00 per Direct Labor hour incurred. Actual automated sewing machine hours incurred for the job was 600. 5,000 t-shirts were manufactured. Actual administrative costs for August were $20,000. Actual marketing costs for August were $15,000. Actual Manufacturing Overhead for August was $3,000.
What was total product cost per t-shirt for Job 2022-X200 using normal costing?
Group of answer choices

a) $7.70

b) $10.10

c) $4.90

d) 4.30

e) $21.70

f) None of the above

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