1.The management of Baggerly Corporation would like to investigate the possibility of basing its
predetermined overhead rate on activity at capacity. The company’s controller has provided an example to
illustrate how this new system would work. In this example, the allocation base is machine hours, and the
estimated amount of the allocation base for the upcoming year is 81,000 machine hours. In addition,
capacity is 95,000 machine hours, and the actual level of activity for the year is 84,900 machine hours. All
of the manufacturing overhead is fixed and is $6,617,700 per year. For simplicity, it’s assumed that this is
the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It’s
further assumed that this is also the actual amount of manufacturing overhead for the year. If the company
bases its predetermined overhead rate on capacity, by how much was manufacturing overhead
underapplied or overapplied?
A.$318,630 underapplied
B.$703,566 overapplied
C.$703,566 underapplied
D.$318,630 overapplied
Use the following information to answer this question.
The following data (in thousands of dollars) have been taken from the accounting records of Karlana
Corporation for the just completed year.
Sales $910
Raw materials, inventory, beginning $80
Raw materials, inventory, ending $20
Purchases of raw materials $100
Direct labor $130
Manufacturing overhead $200
Administrative expenses $160
Selling expenses $140
Work in process inventory, beginning $40
Work in process inventory, ending $10
Finished goods inventory, beginning $130
Finished goods inventory, ending $150
2.The cost of the raw materials used in production during the year (in thousands of dollars) was
A.$40.
B.$120.
C.$160.
D.$180.
3.When would the direct method and the step down method of service department cost allocation result
in identical allocations being made to the operating departments?
A.The only time is when all costs in the service departments are fixed costs.
B.That can happen if there is only one service department or, if the company has more than one service department, if all the
costs in those departments are fixed costs.
C.The only time is when there is just one service department.
D.That can happen only if there’s an equal amount of service departments and operating departments.
4.Assume there’s no beginning work in process inventory and that the ending work in process inventory
is 100% complete with respect to materials costs. The number of equivalent units with respect to materials
costs under the weighted average method is
A.less than the number of units put into production.
B.less than the number of units completed.
C.the same as the number of units put into production.
D.the same as the number of units completed.
Use the following information to answer this question.
Abis Corporation uses the weighted average method in its process costing system. This month, the
beginning inventory in the first processing department consisted of 800 units. The costs and percentage
completion of these units in beginning inventory were
A total of 9,200 units were started, and 8,200 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 20% 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’s the closest to the answer you computed. To reduce rounding error, carry out all
computations to at least three decimal places.
Cost Percent Complete
Material costs $6,000 50%
Conversion costs $9,900 30%
Cost
Material costs $113,900
Conversion costs $322,500
5.The cost per equivalent unit for materials for the month in the first processing department isclosestto
A.$12.44.
B.$11.99.
C.$11.82.
D.$11.39.
Use the following information to answer this question.
Abis Corporation uses the weighted average method in its process costing system. This month, the
beginning inventory in the first processing department consisted of 800 units. The costs and percentage
completion of these units in beginning inventory were
A total of 9,200 units were started, and 8,200 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 20% 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’s the closest to the answer you computed. To reduce rounding error, carry out all
computations to at least three decimal places.
Cost Percent Complete
Material costs $6,000 50%
Conversion costs $9,900 30%
Cost
Material costs $113,900
Conversion costs $322,500
6.The cost per equivalent unit for conversion costs for the first department for the month isclosestto
A.$33.24.
B.$38.83.
C.$40.77.
D.$37.68.
7.Which situationalwaysresults in underapplied overhead?
A.Estimated overhead is greater than actual overhead.
B.Actual overhead is less than applied overhead.
C.Actual overhead is greater than applied overhead.
D.Estimated overhead is less than actual overhead.
8.Dewey Company uses the weighted average method in its process costing system. The first processing
department, the Welding Department, started the month with 15,000 units in its beginning work in process
inventory that were 20% complete with respect to conversion costs. The conversion cost in this beginning
work in process inventory was $19,200. An additional 86,000 units were started into production during
the month. There were 13,000 units in the ending work in process inventory of the Welding Department
that were 60% complete with respect to conversion costs. A total of $575,360 in conversion costs were
incurred in the department during the month.
The cost per equivalent unit for conversion costs isclosestto
A.$6.690.
B.$6.206.
C.$6.400.
D.$5.812.
9.Malaviya Corporation uses the FIFO method in its process costing system. Operating data for the
Casting Department for the month of September appear below:
According to the company’s records, the conversion cost in the beginning work in process inventory was
$63,104 at the beginning of September. Additional conversion costs of $654,240 were incurred in the
department during the month. What would be the cost per equivalent unit for conversion costs for
September? (Round off to three decimal places.)
Units
Percent Complete
with Respect to
Conversion
Beginning work in process inventory 17,000 40%
Transferred in from the prior department
during September 72,000
Ending work in process inventory 18,000 30%
A.$9.400
B.$8.060
C.$9.280
D.$9.087
Use the following information to answer this question.
The following data (in thousands of dollars) have been taken from the accounting records of Karlana
Corporation for the just completed year.
Sales $910
Raw materials, inventory, beginning $80
Raw materials, inventory, ending $20
Purchases of raw materials $100
Direct labor $130
Manufacturing overhead $200
Administrative expenses $160
Selling expenses $140
Work in process inventory, beginning $40
Work in process inventory, ending $10
Finished goods inventory, beginning $130
Finished goods inventory, ending $150
10.The net operating income for the year (in thousands of dollars) was
A.$40.
B.$410.
C.$180.
D.$110.
11.Becky works on the assembly line of a manufacturing company where she installs a component part
for one of the company’s products. She’s paid $16 per hour for regular time, and time and a half for all
work in excess of 40 hours per week. Becky’s employer offers fringe benefits that cost the company $3
for each hour of employee time (both regular and overtime). During a given week, Becky works 42 hours
but is idle for 3 hours due to material shortages. The company treats all fringe benefits relating to direct
labor as added direct labor cost and the remainder as part of manufacturing overhead. The allocation of
Becky’s wages and fringe benefits for the week between direct labor cost and manufacturing overhead
would be which of the following?
A.Direct Labor:$741/ Manufacturing Overhead:$73
B.Direct Labor:$672/ Manufacturing Overhead:$142
C.Direct Labor:$688/ Manufacturing Overhead:$126
D.Direct Labor:$624/ Manufacturing Overhead:$190
Use the following information to answer this question.
The following data (in thousands of dollars) have been taken from the accounting records of Karlana
Corporation for the just completed year.
Sales $910
Raw materials, inventory, beginning $80
Raw materials, inventory, ending $20
Purchases of raw materials $100
Direct labor $130
Manufacturing overhead $200
Administrative expenses $160
Selling expenses $140
Work in process inventory, beginning $40
Work in process inventory, ending $10
Finished goods inventory, beginning $130
Finished goods inventory, ending $150
12.The cost of goods sold for the year (in thousands of dollars) was
A.$500.
B.$670.
C.$650.
D.$540.
13.Which of the following isnotone of the five steps in the lean thinking model discussed in the text?
A.Automate the business process.
B.Organize work arrangements around the flow of the business process.
C.Identify the business process that delivers value.
D.Create a pull system that responds to customer orders.
14.Assume there’s no beginning work in process inventory and the ending work in process inventory is
70% complete with respect to conversion costs. Under the weighted average method, the number of
equivalent units of production with respect to conversion costs would be
A.the same as the units completed.
B.the same as the units started during the period.
C.less than the units completed.
D.less than the units started during the period.
Use the following information to answer this question.
The Lee Company uses a job order costing system. The following data were recorded for June:
Overhead is charged to production at 80% of direct materials cost. Jobs 235, 237, and 238 were
completed during June and transferred to finished goods. Jobs 235 and 238 have been delivered to
customers.
Added During June
Job
Number
June 1
Work in
Process
Inventory
Direct
Materials
Direct
Labor
235 $2,500 $600 $400
236 $1,500 $800 $1,000
237 $1,000 $1,200 $1,750
238 $800 $1,500 $2,250
15.Lee Company’s work in process inventory balance on June 30 was
A.$4,100.
B.$9,450.
C.$3,940.
D.$3,300.
Use the following information to answer this question.
The following cost data pertain to the operations of Brentwood Store, Inc., for the month of December.
Corporate legal office salaries $74,000
Shoe Department cost of sales,
Brentwood Store
$35,000
Corporate headquarters building lease $78,000
Store manager’s salary
Brentwood Store
$14,000
Shoe Department sales commissions,
Brentwood Store
$5,000
Store utilities,
Brentwood Store
$14,000
Shoe Department manager’s salary,
Brentwood Store
$3,000
Central warehouse lease cost $10,000
Janitorial costs, Brentwood Store $8,000
The Brentwood Store is just one of many stores owned and operated by the company. The Shoe
Department is one of many departments at the Brentwood Store. The central warehouse serves all
of the company’s stores.
16.What is thetotalamount of the costs listed above that are direct costs of the Shoe Department?
A.$79,000
B.$35,000
C.$40,000
D.$43,000
Use the following information to answer this question.
The following data (in thousands of dollars) have been taken from the accounting records of Karlana
Corporation for the just completed year.
Sales $910
Raw materials, inventory, beginning $80
Raw materials, inventory, ending $20
Purchases of raw materials $100
Direct labor $130
Manufacturing overhead $200
Administrative expenses $160
Selling expenses $140
Work in process inventory, beginning $40
Work in process inventory, ending $10
Finished goods inventory, beginning $130
Finished goods inventory, ending $150
17.The cost of goods manufactured (finished) for the year (in thousands of dollars) was
A.$460.
B.$500.
C.$530.
D.$520.
18.Which person would occupy a line position in a department store?
I. Sales manager
II. Manager, furniture department
III. Manager, advertising department
IV. Manager, personnel department
A.Only I, II, III
B.Only I and II
C.I, II, III, IV
D.Only I
Use the following information to answer this question.
The following cost data pertain to the operations of Brentwood Stores., for the month of December.
Corporate legal office salaries $74,000
Shoe Department cost of sales,
Brentwood Store
$35,000
Corporate headquarters building lease $78,000
Store manager’s salary
Brentwood Store
$14,000
Shoe Department sales commissions,
Brentwood Store
$5,000
Store utilities,
Brentwood Store
$14,000
Shoe Department manager’s salary,
Brentwood Store
$3,000
Central warehouse lease cost $10,000
Janitorial costs, Brentwood Store $8,000
The Brentwood Store is just one of many stores owned and operated by the company. The Shoe
Department is one of many departments at the Brentwood Store. The central warehouse serves all of
the company’s stores.
19.What is thetotalamount of the costs listed above that are not direct costs of the Brentwood
Store?
A.$43,000
B.$36,000
C.$162,000
D.$78,000
Use the following information to answer this question.
Abis Corporation uses the weighted average method in its process costing system. This month, the
beginning inventory in the first processing department consisted of 800 units. The costs and
percentage completion of these units in beginning inventory were
Cost Percent Complete
Material costs $6,000 50%
Conversion costs $9,900 30%