Chapter 01

Chapter 1
An Introduction to Managerial Accounting and Cost Concepts

True/False
1.Manufacturing overhead is an indirect cost with respect to units of product.
Level: Medium LO: 1 Ans: T
2. Depreciation on office equipment would not be included in the cost of goods manufactured.
Level: Easy LO: 2,4 Ans: T
3. Rent on a factory building used in the production process would be classified as a period cost and as a
fixed cost.
Level: Medium LO: 2,5 Ans: F
4. Period costs are found only in manufacturing companies, not in merchandising companies.
Level: Medium LO: 2 Ans: F
5. Depreciation on equipment a company uses in its selling and administrative activities would be
classified as a product cost.
6. If the finished goods inventory increases between the beginning and the end of a period, then the cost
of goods manufactured is smaller than the cost of goods sold.
Level: Hard LO: 3,4 Ans: F
7. The cost of goods manufactured is calculated by adding the amount of work in process at the end of the
year to the cost of raw materials used, direct labor worked, and manufacturing overhead incurred for the
year and then subtracting work in process at the beginning of the year.
8. A publisher that sells its books through agents who are paid a constant percentage commission on each
book sold would classify the commissions as a fixed cost.
9. Variable costs per unit are affected by changes in activity.
Level: Easy LO: 5 Ans: F
Brewer,IntroductiontoManagerialAccounting,3/e
10. A cost is either direct or indirect. The classification will not change if the cost object changes.
11. The amount that a manufacturing company could earn by renting unused portions of its warehouse is
an example of an opportunity cost.
Level: Easy LO: 7 Ans: T
MultipleChoice
12.Indirect labor is a part of:
A) Prime cost.
B) Conversion cost.
C) Period cost.
D) Nonmanufacturing cost.
Source: CPA, adapted
Level: Medium LO: 1,2 Ans: B
13. The cost of lubricants used to grease a production machine in a manufacturing company is an example
of a(n):
A) period cost.
B) direct material cost.
C) indirect material cost.
D) none of the above.
Level: Easy LO: 1,2 Ans: C
14. The salary paid to the president of King Company would be classified on the income statement as
a(n):
A) administrative expense.
B) direct labor cost.
C) manufacturing overhead cost.
D) selling expense.
Level: Easy LO: 1 Ans: A
15. Direct labor cost is a part of:
A) A above
B) B above
C) C above
D) D above
Level: Easy LO: 1 Ans: C
16. Direct material cost is a:
A) A above
B) B above
C) C above
D) D above
Level: Medium LO: 1 Ans: B
17. Prime cost and conversion cost share what common element of total cost?
A) Direct materials.
B) Direct labor.
C) Variable overhead.
D) Fixed overhead.
Level: Easy LO: 1 Ans: B
18. Prime cost consists of:
A) direct labor and manufacturing overhead.
B) direct materials and manufacturing overhead.
C) direct materials and direct labor.
D) direct materials, direct labor and manufacturing overhead.
19. Wages paid to a timekeeper in a factory are a:
A) A above
B) B above
C) C above
D) D above
Level: Medium LO: 1 Ans: D
20. Property taxes on a companys factory building would be classified as a(n):
A) product cost.
B) opportunity cost.
C) period cost.
D) variable cost.
Level: Easy LO: 2,5,7 Ans: A
21. Depreciation on a personal computer used in the marketing department of a manufacturing firm would
be classified as:
A) a product cost that is fixed with respect to the companys output.
B) a period cost that is fixed with respect to the companys output.
C) a product cost that is variable with respect to the companys output.
D) a period cost that is varaible with respect to the companys output.
22. The nursing station on the fourth floor of Central Hospital is responsible for the care of patients who
have undergone orthopedic surgery. The costs of drugs administered by the nursing station to patients
would be classified as:
A) direct costs of the patients.
B) indirect costs of the patients.
C) overhead costs of the nursing station.
D) period costs of the hospital.
Level: Hard LO: 2,6 Ans: A
23. All of the following would be classified as product costs except:
A) property taxes on production equipment.
B) insurance on factory machinery.
C) salaries of the advertising staff.
D) wages of machine operators.
24. Product costs appear on the balance sheet:

A) only if goods are partially completed at the end of the period.
B) only if goods are unsold at the end of a period.
C) only if goods are partially completed or are unsold at the end of a period.
D) only in merchandising firms.
Level: Medium LO: 2 Ans: C
25. Ross Corporation shipped finished goods to a customer on credit, but the sale was not recorded and
the costs of the finished goods were incorrectly included on the periods balance sheet as part of the
finished goods inventory. Which one of the following statements is correct concerning the effects of this
error?
A) Accounts receivable was not affected, inventory was overstated, sales were understated, and cost of
goods sold was understated.
B) Accounts receivable was understated, inventory was not affected, sales were understated, and cost of
C) Accounts receivable was understated, inventory was overstated, sales were understated, and cost of
goods sold was overstated.
D) Accounts receivable was understated, inventory was overstated, sales were understated, and cost of
Source: CMA, adapted
Level: Easy LO: 3 Ans: D
26. Data for Cost A and Cost B are as follows:
Which of the above best describes the behavior of Costs A and B?

A) Cost A is fixed, Cost B is variable.
B) Cost A is variable, Cost B is fixed.
C) Both Cost A and Cost B are variable.
D) Both Cost A and Cost B are fixed.
27. Fixed costs expressed on a per unit basis:

A) will increase with increases in activity.
B) will decrease with increases in activity.
C) are not affected by activity.
D) should be ignored in making decisions since they cannot change.
28. The costs of staffing and operating the accounting department at Central Hospital would be
considered by the Department of Surgery to be:
A) direct costs.
B) indirect costs.
C) incremental costs.
D) opportunity costs.
Level: Hard LO: 6,7 Ans: B
29. A cost incurred in the past that is not relevant to any current decision is classified as a(n):
A) period cost.
B) opportunity cost.
C) sunk cost.
D) differential cost.
30. Differential costs can:
A) only be fixed costs.
B) only be variable costs.
C) be either fixed or variable.
D) be incremental but not decremental.
31. John Johnson decided to leave his former job where he earned $12 per hour to go to a new job where
he will earn $13 per hour. In the decision process, the former wage of $12 per hour would be classified as
a(n):
A) sunk cost.
B) direct cost.
C) fixed cost.
D) opportunity cost.
32. The term that refers to costs incurred in the past that are not relevant to a decision is:
A) marginal cost.
B) indirect cost.
C) period cost.
D) sunk cost.
33. The following costs were incurred in January:
Conversion costs during the month totaled:

A) $97,000
B) $167,000
C) $102,000
D) $61,000
Level: Medium LO: 1,2 Ans: A
34. The following costs were incurred in February:

A) $59,000
B) $80,000
C) $53,000
D) $139,000
Level: Medium LO: 1,2 Ans: C
35. The following costs were incurred in March:

A) $88,000
B) $38,000
C) $136,000
D) $84,000
Level: Medium LO: 1,2 Ans: D
36. The following costs were incurred in January:
Prime costs during the month totaled:

A) $86,000
B) $65,000
C) $47,000
D) $127,000
37. The following costs were incurred in February:

A) $71,000
B) $32,000
C) $113,000
D) $57,000
Level: Medium LO: 1,2 Ans: D
38. The following costs were incurred in March:

A) $63,000
B) $107,000
C) $38,000
D) $77,000
Level: Medium LO: 1,2 Ans: A
39. Aable Companys manufacturing overhead is 20% of its total conversion costs. If direct labor is
$45,000 and if direct materials are $53,000, the manufacturing overhead is:
A) $11,250
B) $13,250
C) $180,000
D) $24,500
Level: Hard LO: 1 Ans: A
40. Abair Companys manufacturing overhead is 20% of its total conversion costs. If direct labor is
A) $18,250
B) $9,500
C) $8,750
D) $152,000
Level: Hard LO: 1 Ans: B
41. Abbey Companys manufacturing overhead is 60% of its total conversion costs. If direct labor is
A) $135,000
B) $23,333
C) $82,500
D) $52,500
Level: Hard LO: 1 Ans: D
42. During the month of January, direct labor cost totaled $17,000 and direct labor cost was 60% of prime
cost. If total manufacturing costs during January were $82,000, the manufacturing overhead was:
A) $11,333
B) $53,667
C) $28,333
D) $65,000
43. During the month of February, direct labor cost totaled $13,000 and direct labor cost was 40% of
prime cost. If total manufacturing costs during February were $80,000, the manufacturing overhead was:
A) $32,500
B) $19,500
C) $67,000
D) $47,500
44. During the month of March, direct labor cost totaled $17,000 and direct labor cost was 70% of prime
cost. If total manufacturing costs during March were $88,000, the manufacturing overhead was:
A) $24,286
B) $71,000
C) $63,714
D) $7,286
Level: Hard LO: 1 Ans: C
45. Knowel Companys direct labor is 40 percent of its conversion cost. If the manufacturing overhead
cost for the last period was $60,000 and the direct materials cost was $30,000, the direct labor cost was:
A) $90,000
B) $20,000
C) $60,000
D) $40,000
46. In January direct labor was 40% percent of conversion cost. If the manufacturing overhead cost for
the month was $78,000 and the direct materials cost was $22,000, the direct labor cost was:
A) $14,667
B) $52,000
C) $33,000
D) $117,000
47. In February direct labor was 60% percent of conversion cost. If the manufacturing overhead cost for
the month was $78,000 and the direct materials cost was $22,000, the direct labor cost was:
A) $52,000
B) $14,667
C) $117,000
D) $33,000
48. In March direct labor was 60% percent of conversion cost. If the manufacturing overhead cost for the
month was $38,000 and the direct materials cost was $32,000, the direct labor cost was:
A) $21,333
B) $48,000
C) $25,333
D) $57,000
10
49. Crossland Companys direct labor cost is 30% of its conversion cost. If the manufacturing overhead
cost for the last period was $49,000 and the direct materials cost was $20,000, the direct labor cost was:
A) $ 6,000
B) $14,700
C) $21,000
D) $34,000
50. CF Company manufactures wooden rocking chairs. CF identified the following three material costs in
its production process for July: $100,000 for springs for the rocking mechanism; two springs at a cost of
$10 each are used in each chair; $1,700 for glue used as needed from one gallon containers; and $500 for
stain used to touch up spots on the chairs. The total cost that should have been assigned to indirect
material for July was:
A) $102,200
B) $500
C) $2,200
D) $1,700
51. Fab Co. manufactures textiles. Fabs manufacturing costs last year included the following salaries and
wages:
What is the amount of direct labor included in this list?

A) $195,000
B) $165,000
C) $150,000
D) $120,000
Level: Medium LO: 1 Ans: D
52. A manufacturing company has provided the following cost data for a recent period:
Prime cost for the period was:

A) $18,000
B) $26,000
C) $30,000
D) $34,000
Source: CIMA, adapted
11
Level: Medium LO: 1 Ans: A
12
53. A manufacturing company prepays its insurance coverage for a three-year period. The premium for
the three years is $3,000 and is paid at the beginning of the first year. Three-fourths of the premium
applies to factory operations and one-fourth applies to selling and administrative activities. What amounts
should be considered product and period costs respectively for the first year of coverage?
A) A above
B) B above
C) C above
D) D above
54. Last month a manufacturing company had the following operating results:
What was the cost of goods manufactured for the month?

A) $371,000
B) $459,000
C) $383,000
D) $377,000
Level: Hard LO: 3,4 Ans: A
55. Last month a manufacturing company had the following operating results:
What was the cost of goods manufactured for the month?

A) $375,000
B) $414,000
C) $399,000
D) $351,000
Level: Hard LO: 3,4 Ans: D
13
56. Gabert Inc. is a merchandising company. Last month the companys merchandise purchases totaled
$68,000. The companys beginning merchandise inventory was $17,000 and its ending merchandise
inventory was $13,000. What was the companys cost of goods sold for the month?
A) $72,000
B) $68,000
C) $98,000
D) $64,000
Level: Easy LO: 3 Ans: A
57. Haag Inc. is a merchandising company. Last month the companys cost of goods sold was $86,000.
The companys beginning merchandise inventory was $20,000 and its ending merchandise inventory was
$21,000. What was the total amount of the companys merchandise purchases for the month?
A) $86,000
B) $127,000
C) $87,000
D) $85,000
58. During February, the cost of goods manufactured was $83,000. The beginning finished goods
inventory was $14,000 and the ending finished goods inventory was $13,000. What was the cost of goods
sold for the month?
A) $83,000
B) $110,000
C) $82,000
D) $84,000
59. During March, the cost of goods manufactured was $62,000. The beginning finished goods inventory
was $11,000 and the ending finished goods inventory was $19,000. What was the cost of goods sold for
the month?
A) $70,000
B) $92,000
C) $54,000
D) $62,000
14
60. The following information is taken from the records of CL Company for last year:
What are the correct amounts for direct labor and ending work in process inventory?
A) A above
B) B above
C) C above
D) D above
61. The following information is taken from the records of DW Company for last year:
The amount of beginning work in process inventory is:

A) $24,000
B) $2,000
C) $22,000
D) $3,000
15
62. Using the following data for February, calculate the cost of goods manufactured:
The cost of goods manufactured was:

A) $78,000
B) $85,000
C) $72,000
D) $75,000
63. Using the following data for March, calculate the cost of goods manufactured:
The cost of goods manufactured was:

A) $74,000
B) $86,000
C) $76,000
D) $75,000
Level: Medium LO: 4 Ans: A
Use the following information to answer 64-65
Clyde Company has provided the following data for the month of November:
16
17
64. The ending raw materials inventory was:

A) $11,000
B) $23,000
C) $10,000
D) $12,000
Level: Hard LO: 2,4Ans:A
65. If the net operating income was $40,000, then the beginning finished goods inventory was:
A) $22,000
B) $9,000
C) $42,000
D) $1,000
Level: Hard LO: 2,3,4Ans:D
Use the following for questions 66-69
The following data (in thousands of dollars) have been taken from the accounting records of Karsen
Corporation for the just completed year.
Use these data to answer the following series of questions.

66. The cost of the raw materials used in production during the year (in thousands of dollars) was:
A) $230
B) $220
C) $160
D) $260
Level: Medium LO: 2,3,4Ans:B
18
67. The cost of goods manufactured (finished) for the year (in thousands of dollars) was:
A) $590
B) $650
C) $660
D) $570
Level: Medium LO: 2,3,4 Ans:A
68. The cost of goods sold for the year (in thousands of dollars) was:
A) $680
B) $540
C) $640
D) $730
69. The net operating income for the year (in thousands of dollars) was:
A) $180
B) $170
C) $390
D) $190
Level: Medium LO: 2,3,4 Ans:A
The following data (in thousands of dollars) have been taken from the accounting records of Karsten
Use these data to answer the following series of questions.
19
A) $130
B) $170
C) $140
D) $60
Level: Medium LO: 2,3,4Ans:C
A) $530
B) $540
C) $470
D) $570
Level: Medium LO: 2,3,4Ans:C
A) $490
B) $450
C) $620
D) $600
Level: Medium LO: 2,3,4Ans:A
A) $170
B) $140
C) $500
D) $200
The following data (in thousands of dollars) have been taken from the accounting records of Karstone
20
A) $180
B) $140
C) $160
D) $170
Level: Medium LO: 2,3,4 Ans:B
A) $580
B) $600
C) $500
D) $630
A) $620
B) $580
C) $720
D) $700
A) $260
B) $30
C) $90
D) ($30)
The manufacturing operations of QC Company had the following inventory balances for the month of
March:
78. If the company purchased $18,000 of raw materials during March, what was the cost of raw materials
used in production?
A) $16,000
B) $20,000
C) $41,000
D) $19,000
Level: Medium LO: 4Ans:A
21
79. If the company transferred $38,000 of completed goods from work in process to finished goods
during March, what was the amount of the cost of goods sold?
A) $38,000
B) $43,000
C) $30,000
D) $46,000
Level: Medium LO: 3Ans:D
Servix, Inc., produces water pumps. Each water pump contains a small valve that costs $5. During May,
600 valves were drawn from the supply room and installed in water pumps in the production process.
Eighty percent of these units were completed and transferred into finished goods warehouses. Of the units
completed, thirty percent were still unsold at the end of the month. There were no beginning inventories.
80. The cost of valves in work in process at the end of May would be:
A) $2,400
B) $3,000
C) $600
D) $720
Level: Easy LO: 4Ans:C
81. The cost of valves in cost of goods sold for May would be:
A) $1,680
B) $2,100
C) $900
D) $720
Level: Easy LO: 3Ans:A
The manufacturing operations of Jones Company had the following inventory balances for the month of
March:
82. If the company purchased $20,000 of raw materials during March, what was the cost of raw materials
used in production?
A) $24,000
B) $22,000
C) $32,000
D) $18,000
Level: Medium LO: 4Ans:D
22
83. If the company transferred $40,000 of completed goods from work in process to finished goods
during March, what was the amount of the cost of goods sold?
A) $47,000
B) $40,000
C) $33,000
D) $44,000
Level: Medium LO: 4Ans:A
At a sales volume of 30,000 units, Carne Companys total fixed costs are $30,000 and total variable costs
are $45,000. The relevant range is 20,000 to 40,000 units.
84. If Carne Company were to sell 32,000 units, the total expected cost would be:
A) $75,000
B) $78,000
C) $80,000
D) $77,000
Level: Easy LO: 5 Ans:B
85. If Carne Company were to sell 40,000 units, the total expected cost per unit would be:
A) $2.50
B) $2.25
C) $2.13
D) $1.88
Level: Easy LO: 5Ans:B
ApartiallistingofcostsincurredatGilhoolyCorporationduringSeptemberappearsbelow:
86.ThetotalofthemanufacturingoverheadcostslistedaboveforSeptemberis:
A)$669,000
B)$366,000
C)$34,000
D)$59,000
23
Level:MediumLO:1Ans:D
24
87.ThetotaloftheproductcostslistedaboveforSeptemberis:
A)$59,000
B)$366,000
C)$669,000
D)$303,000
Level:MediumLO:2Ans:B
88.ThetotaloftheperiodcostslistedaboveforSeptemberis:
A)$303,000
B)$59,000
C)$366,000
D)$362,000
Level:MediumLO:2Ans:A
ApartiallistingofcostsincurredduringDecemberatRooksCorporationappearsbelow:
89.ThetotaloftheperiodcostslistedaboveforDecemberis:
A)$82,000
B)$340,000
C)$389,000
D)$307,000
Level:MediumLO:2
ReferTo:01_10Ans:D
90.ThetotalofthemanufacturingoverheadcostslistedaboveforDecemberis:
A)$30,000
B)$82,000
C)$647,000
D)$340,000
25
91.ThetotaloftheproductcostslistedaboveforDecemberis:
A)$340,000
B)$82,000
C)$647,000
D)$307,000
CohillCorporationreportedthefollowingdataforthemonthofJuly:
92.IftherawmaterialspurchasedduringJulytotaled$66,000,whatwasthecostoftherawmaterials
usedinproductionforthemonth?
A)$49,000
B)$67,000
C)$66,000
D)$65,000
Level:EasyLO:1,3Ans:D
93.Ifthecompanytransferred$225,000ofcompletedgoodsfromworkinprocesstofinishedgoods
inventoryduringJuly,whatwasthecostofgoodssoldforthemonth?
A)$231,000
B)$208,000
C)$242,000
D)$225,000
Level:EasyLO:3Ans:B
26

AbareCorporationreportedthefollowingdataforthemonthofDecember:
Additionalinformation:
94.TheconversioncostforDecemberwas:
A)$134,000
B)$109,000
C)$192,000
D)$129,000
95.TheprimecostforDecemberwas:
A)$129,000
B)$115,000
C)$109,000
D)$62,000
ManagementofLewallenCorporationhasaskedyourhelpasaninterninpreparingsomekeyreportsfor
September.Thebeginningbalanceintherawmaterialsinventoryaccountwas$25,000.Duringthe
month,thecompanymaderawmaterialspurchasesamountingto$60,000.Attheendofthemonth,the
balanceintherawmaterialsinventoryaccountwas$28,000.Directlaborcostwas$43,000and
manufacturingoverheadcostwas$71,000.Thebeginningbalanceintheworkinprocessaccountwas
$23,000andtheendingbalancewas$11,000.Thebeginningbalanceinthefinishedgoodsaccountwas
$29,000andtheendingbalancewas$45,000.Sellingexpensewas$15,000andadministrativeexpense
was$32,000.
96.TheconversioncostforSeptemberwas:
A)$114,000
B)$131,000
C)$171,000
27
D)$103,000
28
97.TheprimecostforSeptemberwas:
A)$114,000
B)$100,000
C)$103,000
D)$47,000
DulleaCorporationreportedthefollowingdataforthemonthofMay:
98.ThetotalmanufacturingcostforMaywas:
A)$187,000
B)$76,000
C)$121,000
D)$194,000
Level:MediumLO:3,4Ans:A
99.ThecostofgoodsmanufacturedforMaywas:
A)$194,000
B)$121,000
C)$180,000
D)$187,000
100.ThecostofgoodssoldforMaywas:
A)$261,000
B)$149,000
C)$165,000
D)$223,000
29
Level:MediumLO:3,4Ans:C
30
101.ThenetoperatingincomeforMaywas:
A)$125,000
B)$55,000
C)$33,000
D)$99,000
Level:MediumLO:3,4Ans:B
ManagementofMelendesCorporationhasaskedyourhelpasaninterninpreparingsomekeyreportsfor
October.Thecompanystartedthemonthwithrawmaterialsinventoriesof$38,000.Duringthemonth,
thecompanymaderawmaterialspurchasesamountingto$71,000.Attheendofthemonth,rawmaterials
inventoriestotaled$22,000.Directlaborcostwas$45,000andmanufacturingoverheadcostwas$79,000.
Thebeginningbalanceintheworkinprocessaccountwas$16,000andtheendingbalancewas$22,000.
Thebeginningbalanceinthefinishedgoodsaccountwas$38,000andtheendingbalancewas$49,000.
Salestotaled$250,000.Sellingexpensewas$24,000andadministrativeexpensewas$31,000.
102.ThetotalmanufacturingcostforOctoberwas:
A)$79,000
B)$195,000
C)$211,000
D)$124,000
103.ThecostofgoodsmanufacturedforOctoberwas:
A)$217,000
B)$211,000
C)$195,000
D)$205,000
Level:MediumLO:3,4Ans:D
104.ThecostofgoodssoldforOctoberwas:
A)$216,000
B)$194,000
C)$148,000
D)$239,000
105.ThenetoperatingincomeforOctoberwas:
A)$56,000
B)$0
C)$71,000
D)$1,000
31
32

HenleyCorporationreportedthefollowingdataforthemonthofJuly:
106.ThetotalmanufacturingcostforJulywas:
A)$54,000
B)$90,000
C)$145,000
D)$147,000
107.ThecostofgoodsmanufacturedforJulywas:
A)$148,000
B)$142,000
C)$147,000
D)$145,000
108.ThecostofgoodssoldforJulywas:
A)$134,000
B)$162,000
C)$106,000
D)$224,000
109.ThenetoperatingincomeforJulywas:
A)$79,000
B)$48,000
C)$7,000
D)$22,000
33
34

LambertsonCorporationreportedthefollowingdataforthemonthofMarch:
110.ThecostofgoodssoldforMarchwas:
A)$110,000
B)$177,000
C)$215,000
D)$147,000
111.ThenetoperatingincomeforMarchwas:
A)$79,000
B)$25,000
C)$83,000
D)$2,000
35

NivesCorporationreportedthefollowingdataforthemonthofJanuary:
112.ThetotalmanufacturingcostforJanuarywas:
A)$86,000
B)$198,000
C)$121,000
D)$187,000
113.ThenetoperatingincomeforJanuarywas:
A)$14,000
B)$16,000
C)$91,000
D)$82,000
ManagementofShandleyCorporationhasaskedyourhelpasaninterninpreparingsomekeyreportsfor
August.Thebeginningbalanceintherawmaterialsinventoryaccountwas$21,000.Duringthemonth,
thecompanymaderawmaterialspurchasesamountingto$59,000.Attheendofthemonth,thebalance
intherawmaterialsinventoryaccountwas$22,000.Directlaborcostwas$39,000andmanufacturing
overheadcostwas$71,000.Thebeginningbalanceintheworkinprocessaccountwas$12,000andthe
endingbalancewas$18,000.Thebeginningbalanceinthefinishedgoodsaccountwas$30,000andthe
endingbalancewas$54,000.Salestotaled$220,000.Sellingexpensewas$11,000andadministrative
expensewas$34,000.
36
114.ThetotalmanufacturingcostforAugustwas:
A)$168,000
B)$169,000
C)$71,000
D)$110,000
115.ThecostofgoodsmanufacturedforAugustwas:
A)$169,000
B)$168,000
C)$174,000
D)$162,000
116.ThecostofgoodssoldforAugustwas:
A)$186,000
B)$196,000
C)$138,000
D)$121,000
117.ThenetoperatingincomeforAugustwas:
A)$6,000
B)$65,000
C)$82,000
D)$37,000
TheCFOofCarlCorporationhasprovidedthefollowingdataforSeptember.Thebeginningbalancein
therawmaterialsinventoryaccountwas$32,000.Duringthemonth,thecompanymaderawmaterials
purchasesamountingto$56,000.Attheendofthemonth,thebalanceintherawmaterialsinventory
accountwas$34,000.Directlaborcostwas$46,000andmanufacturingoverheadcostwas$68,000.The
beginningbalanceintheworkinprocessaccountwas$13,000andtheendingbalancewas$10,000.The
beginningbalanceinthefinishedgoodsaccountwas$53,000andtheendingbalancewas$31,000.Sales
totaled$270,000.Sellingexpensewas$15,000andadministrativeexpensewas$50,000.
118.ThecostofgoodssoldforSeptemberwas:
A)$129,000
B)$193,000
C)$292,000
D)$149,000
37
38
119.ThenetoperatingincomeforSeptemberwas:
A)$77,000
B)$91,000
C)$12,000
D)$35,000
Usethefollowinginformationtoanswer120121
BerthelotCorporationhasprovidedthefollowingdataforJune.Thebeginningbalanceintheraw
materialsinventoryaccountwas$34,000.Duringthemonth,thecompanymaderawmaterialspurchases
amountingto$50,000.Attheendofthemonth,thebalanceintherawmaterialsinventoryaccountwas
$28,000.Directlaborcostwas$47,000andmanufacturingoverheadcostwas$81,000.Thebeginning
balanceintheworkinprocessaccountwas$11,000andtheendingbalancewas$10,000.Thebeginning
balanceinthefinishedgoodsaccountwas$25,000andtheendingbalancewas$59,000.Salestotaled
$270,000.Sellingexpensewas$14,000andadministrativeexpensewas$43,000.
120.ThetotalmanufacturingcostforJunewas:
A)$81,000
B)$178,000
C)$184,000
D)$128,000
121.ThenetoperatingincomeforJunewas:
A)$35,000
B)$62,000
C)$85,000
D)$119,000
OkeyCorporationhasprovidedthefollowingdataforthemonthofApril.Thebeginningbalanceinthe
finishedgoodsinventoryaccountwas$37,000andtheendingbalancewas$34,000.Salestotaled
$250,000.Costofgoodsmanufacturedwas$123,000,sellingexpensewas$17,000,andadministrative
expensewas$62,000.
122.ThecostofgoodssoldforAprilwas:
A)$202,000
B)$126,000
C)$123,000
D)$120,000
Level:EasyLO:3Ans:B
39
40
123.ThenetoperatingincomeforAprilwas:
A)$45,000
B)$127,000
C)$48,000
D)$130,000
Level:EasyLO:3Ans:A
NiemanInc.,alocalretailer,hasprovidedthefollowingdataforthemonthofMarch:
A)$146,000
B)$150,000
C)$142,000
D)$237,000
Level:EasyLO:3Ans:C
125.ThenetoperatingincomeforMarchwas:
A)$130,000
B)$134,000
C)$43,000
D)$47,000
Level:EasyLO:3Ans:D
41

VarlandCorporationreportedthefollowingdataforthemonthofJune:
126.ThetotalmanufacturingcostforJunewas:
A)$164,000
B)$79,000
C)$107,000
D)$161,000
127.ThecostofgoodsmanufacturedforJunewas:
A)$153,000
B)$161,000
C)$164,000
D)$169,000
SherrCorporationreportedthefollowingdataforthemonthofMarch:
42
43
128.ThecostofgoodsmanufacturedforMarchwas:
A)$185,000
B)$199,000
C)$181,000
D)$190,000
A)$180,000
B)$218,000
C)$241,000
D)$124,000
NahassCorporationhasprovidedthefollowingdataforSeptember.Thebeginningbalanceintheraw
materialsinventoryaccountwas$28,000.Duringthemonth,thecompanymaderawmaterialspurchases
amountingto$70,000.Attheendofthemonth,thebalanceintherawmaterialsinventoryaccountwas
$34,000.Directlaborcostwas$35,000andmanufacturingoverheadcostwas$53,000.Thebeginning
balanceintheworkinprocessaccountwas$18,000andtheendingbalancewas$11,000.Thebeginning
balanceinthefinishedgoodsaccountwas$57,000andtheendingbalancewas$31,000.
130.ThetotalmanufacturingcostforSeptemberwas:
A)$152,000
B)$88,000
C)$158,000
D)$53,000
131.ThecostofgoodsmanufacturedforSeptemberwas:
A)$152,000
B)$145,000
C)$158,000
D)$159,000
Atasalesvolumeof35,000units,ClyCorporationssalescommissions(acostthatisvariablewith
respecttosalesvolume)total$525,000.
44
132.Tothenearestwholedollar,whatshouldbethetotalsalescommissionsatasalesvolumeof36,100
units?(Assumethatthissalesvolumeiswithintherelevantrange.)
A)$525,000
B)$509,003
C)$533,250
D)$541,500
Level:EasyLO:5Ans:D
133.Tothenearestwholecent,whatshouldbetheaveragesalescommissionperunitatasalesvolumeof
33,600units?(Assumethatthissalesvolumeiswithintherelevantrange.)
A)$14.54
B)$15.00
C)$15.63
D)$15.32
Level:EasyLO:5Ans:B
Atasalesvolumeof37,000units,MaksCorporationspropertytaxes(acostthatisfixedwithrespectto
salesvolume)total$802,900.
134.Tothenearestwholedollar,whatshouldbethetotalpropertytaxesatasalesvolumeof39,700
units?(Assumethatthissalesvolumeiswithintherelevantrange.)
A)$802,900
B)$748,295
C)$832,195
D)$861,490
Level:EasyLO:5Ans:A
135.Tothenearestwholecent,whatshouldbetheaveragepropertytaxperunitatasalesvolumeof
40,300units?(Assumethatthissalesvolumeiswithintherelevantrange.)
A)$21.70
B)$20.22
C)$19.92
D)$20.81
Level:EasyLO:5Ans:C
KodamaCorporationstaffsahelplinetoanswerquestionsfromcustomers.Thecostsofoperatingthe
helplinearevariablewithrespecttothenumberofcallsinamonth.Atavolumeof30,000callsina
month,thecostsofoperatingthehelplinetotal$369,000.
45
136.Tothenearestwholedollar,whatshouldbethetotalcostofoperatingthehelplinecostsatavolume
of33,800callsinamonth?(Assumethatthiscallvolumeiswithintherelevantrange.)
A)$369,000
B)$327,515
C)$392,370
D)$415,740
Level:EasyLO:5Ans:D
137.Tothenearestwholecent,whatshouldbetheaveragecostofoperatingthehelplinepercallata
volumeof31,300callsinamonth?(Assumethatthiscallvolumeiswithintherelevantrange.)
A)$12.30
B)$11.79
C)$10.92
D)$12.05
Level:EasyLO:5Ans:A
EmertonCorporationleasesitscorporateheadquartersbuilding.Thisleasecostisfixedwithrespectto
thecompanyssalesvolume.Inarecentmonthinwhichthesalesvolumewas32,000units,theleasecost
was$716,800.
138.Tothenearestwholedollar,whatshouldbethetotalleasecostatasalesvolumeof30,900unitsina
month?(Assumethatthissalesvolumeiswithintherelevantrange.)
A)$742,317
B)$692,160
C)$704,480
D)$716,800
Level:EasyLO:5Ans:D
139.Tothenearestwholecent,whatshouldbetheaverageleasecostperunitatasalesvolumeof34,400
unitsinamonth?(Assumethatthissalesvolumeiswithintherelevantrange.)
A)$23.20
B)$21.62
C)$20.84
D)$22.40
Level:EasyLO:5Ans:C
46

ThefollowingcostdatapertaintotheoperationsofBouffardDepartmentStores,Inc.,forthemonthof
May.
TheBrentwoodStoreisjustoneofmanystoresownedandoperatedbythecompany.TheShoe
DepartmentisoneofmanydepartmentsattheBrentwoodStore.Thecentralwarehouseservesallofthe
companysstores.
140.WhatisthetotalamountofthecostslistedabovethataredirectcostsoftheShoeDepartment?
A)$38,000
B)$29,000
C)$70,000
D)$34,000
Level:EasyLO:6Ans:A
141.WhatisthetotalamountofthecostslistedabovethatareNOTdirectcostsoftheBrentwoodStore?
A)$161,000
B)$86,000
C)$32,000
D)$38,000
47

ThefollowingcostdatapertaintotheoperationsofRademakerDepartmentStores,Inc.,forthemonthof
March.
TheNorthridgeStoreisjustoneofmanystoresownedandoperatedbythecompany.TheCosmetics
DepartmentisoneofmanydepartmentsattheNorthridgeStore.Thecentralwarehouseservesallofthe
companysstores.
142.WhatisthetotalamountofthecostslistedabovethataredirectcostsoftheCosmeticsDepartment?
A)$83,000
B)$94,000
C)$90,000
D)$127,000
Level:EasyLO:6Ans:B
143.WhatisthetotalamountofthecostslistedabovethatareNOTdirectcostsoftheNorthridgeStore?
A)$172,000
B)$33,000
C)$80,000
D)$94,000
DechicoCorporationpurchasedamachine3yearsagofor$456,000whenitlaunchedproductG92L.
Unfortunately,thismachinehasbrokendownandcannotberepaired.Themachinecouldbereplacedbya
newmodel330machinecosting$474,000orbyanewmodel260machinecosting$418,000.
Managementhasdecidedtobuythemodel260machine.Ithaslesscapacitythanthemodel330machine,
butitscapacityissufficienttocontinuemakingproductG92L.Managementalsoconsidered,butrejected,
thealternativeofdroppingproductG92Landnotreplacingtheoldmachine.Ifthatweredone,the
$418,000investedinthenewmachinecouldinsteadhavebeeninvestedinaprojectthatwouldhave
returnedatotalof$496,000.
48
144.Inmakingthedecisiontobuythemodel260machineratherthanthemodel330machine,the
differentialcostwas:
A)$18,000
B)$56,000
C)$38,000
D)$40,000
Level:EasyLO:7Ans:B
145.Inmakingthedecisiontobuythemodel260machineratherthanthemodel330machine,thesunk
costwas:
A)$418,000
B)$456,000
C)$474,000
D)$496,000
Level:EasyLO:7Ans:B
146.Inmakingthedecisiontoinvestinthemodel260machine,theopportunitycostwas:
A)$418,000
B)$456,000
C)$474,000
D)$496,000
Level:EasyLO:7Ans:D
ManagementofChildersCorporationisconsideringwhethertopurchaseanewmodel380machine
costing$278,000oranewmodel230machinecosting$207,000toreplaceamachinethatwaspurchased
3yearsagofor$266,000.TheoldmachinewasusedtomakeproductR16Kuntilitbrokedownlast
week.Unfortunately,theoldmachinecannotberepaired.
Managementhasdecidedtobuythenewmodel230machine.Ithaslesscapacitythanthenewmodel380
machine,butitscapacityissufficienttocontinuemakingproductR16K.
Managementalsoconsidered,butrejected,thealternativeofsimplydroppingproductR16K.Ifthatwere
done,insteadofinvesting$207,000inthenewmachine,themoneycouldbeinvestedinaprojectthat
wouldreturnatotalof$305,000.
147.Inmakingthedecisiontobuythemodel230machineratherthanthemodel380machine,thesunk
costwas:
A)$305,000
B)$266,000
C)$278,000
D)$207,000
Level:EasyLO:7Ans:B
49
148.Inmakingthedecisiontobuythemodel230machineratherthanthemodel380machine,the
differentialcostwas:
A)$71,000
B)$59,000
C)$12,000
D)$39,000
Level:EasyLO:7Ans:A
149.Inmakingthedecisiontoinvestinthemodel230machine,theopportunitycostwas:
A)$278,000
B)$305,000
C)$207,000
D)$266,000
Level:EasyLO:7Ans:B
Essay
150.The Plastechnics Company began operations several years ago. The company purchased a building
and, since only half of the space was needed for operations, the remaining space was rented to another
firm for rental revenue of $20,000 per year. The success of Plastechnics Companys product has resulted
in the company needing more space. The renters lease will expire next month and Plastechnics will not
renew the lease in order to use the space to expand operations and meet demand.
The companys product requires materials that cost $25 per unit. The company employs a production
supervisor whose salary is $2,000 per month. Production line workers are paid $15 per hour to
manufacture and assemble the product. The company rents the equipment needed to produce the product
at a rental cost of $1,500 per month. Additional equipment will be needed as production is expanded and
the monthly rental charge for this equipment will be $900 per month. The building is depreciated on the
straight-line basis at $9,000 per year.
The company spends $40,000 per year to market the product. Shipping costs for each unit are $20 per
unit.
The company plans to liquidate several investments in order to expand production. These investments
currently earn a return of $8,000 per year.
Required:
Complete the answer sheet above by placing an "X" under each heading that identifies the cost involved.
The "Xs" can be placed under more than one heading for a single cost, e.g., a cost might be a sunk cost,
an overhead cost, and a product cost. An "X" can thus be placed under each of these headings opposite the
cost.
50
Level: Medium LO: 1,2,5,7

Ans:
51
151. The following data (in thousands of dollars) have been taken from the accounting records of Larder
Required:
(a.) Prepare a Schedule of Cost of Goods Manufactured in good form.
(b.) Compute the Cost of Goods Sold.
(c.) Using data from your answers above as needed, prepare an Income Statement in good form
Level: Medium LO: 1,3,4
Ans:
52
152. The following data (in thousands of dollars) have been taken from the accounting records of Larop
Required:
(a.) Prepare a Schedule of Cost of Goods Manufactured in good form.
(b.) Compute the Cost of Goods Sold.
(c.) Using data from your answers above as needed, prepare an Income Statement in good form
Level: Medium LO: 1,3,4
53
Ans:
153. RuiseCorporation,amanufacturingcompany,hasprovidedthefollowingdataforthemonthof
August:
RawmaterialspurchasedduringAugusttotaled$73,000andthecostofgoodsmanufacturedtotaled
$146,000.
Required:
(a.)WhatwasthecostofrawmaterialsusedinproductionduringAugust?Showyourwork.
(b.)WhatwasthecostofgoodssoldforAugust?Showyourwork.
54
Level:EasyLO:1,3
55
Ans:
154.DuringthemonthofFebruary,CumberCorporation,amanufacturingcompany,purchasedraw
materialscosting$79,000.Thecostofgoodsmanufacturedforthemonthwas$109,000.Thebeginning
balanceintherawmaterialsaccountwas$21,000andtheendingbalancewas$39,000.Thebeginning
balanceinthefinishedgoodsaccountwas$31,000andtheendingbalancewas$51,000.
Required:
(a.)WhatwasthecostofrawmaterialsusedinproductionduringFebruary?Showyourwork.
(b.)WhatwasthecostofgoodssoldforFebruary?Showyourwork.
Level:EasyLO:1,3
Ans:
56
155.ApartiallistingofcostsincurredatFalkenbergCorporationduringOctoberappearsbelow:
Required:
(a.)Whatisthetotalamountofproductcostlistedabove?Showyourwork.
(b.)Whatisthetotalamountofperiodcostlistedabove?Showyourwork.
Level:MediumLO:2
Ans:
(a.)Productcostsconsistofdirectmaterials,directlabor,andmanufacturingoverhead:
(b.)Periodcostsconsistofallcostsotherthanproductcosts:
57
156.SobotaCorporationhasprovidedthefollowingpartiallistingofcostsincurredduringAugust:
Required:
(a.)Whatisthetotalamountofproductcostlistedabove?Showyourwork.
(b.)Whatisthetotalamountofperiodcostlistedabove?Showyourwork.
Level:MediumLO:2
Ans:
(a.)Productcostsconsistofdirectmaterials,directlabor,andmanufacturingoverhead:
(b.)Periodcostsconsistofallcostsotherthanproductcosts:
58
157.StarCorporationhasprovidedthefollowingdataforthemonthofJuly:
Required:
(a.)PrepareaScheduleofCostofGoodsManufacturedingoodformforJuly.
(b.)PrepareanIncomeStatementingoodformforJuly.
Level:MediumLO:3,4
Ans:
(a.)ScheduleofCostofGoodsManufactured
59
(b.)IncomeStatement
158.InOctober,HolecekCorporationhadsalesof$238,000,sellingexpensesof$12,000,and
administrativeexpensesof$35,000.Thecostofgoodsmanufacturedwas$130,000.Thebeginning
balanceinthefinishedgoodsinventoryaccountwas$40,000andtheendingbalancewas$47,000.
Required:
PrepareanIncomeStatementingoodformforOctober.
Level:EasyLO:3
Ans:
159.InNovember,StimanInc.,amerchandisingcompany,hadsalesof$221,000,sellingexpensesof
$14,000,andadministrativeexpensesof$22,000.Thecostofmerchandisepurchasedduringthemonth
was$186,000.Thebeginningbalanceinthemerchandiseinventoryaccountwas$42,000andtheending
balancewas$52,000.
Required:
PrepareanIncomeStatementingoodformforNovember.
Level:EasyLO:3
60
Ans:
IncomeStatement
160.LeibowitzCorporationhasprovidedthefollowingdataforthemonthofAugust:
Required:
PrepareaScheduleofCostofGoodsManufacturedingoodformforAugust.
Level:MediumLO:4
61
Ans:
ScheduleofCostofGoodsManufactured
161.Anumberofcostsandmeasuresofactivityarelistedbelow.
Required:
Foreachitemabove,indicatewhetherthecostisMAINLYfixedorvariablewithrespecttothepossible
measureofactivitylistednexttoit.
Level:EasyLO:5
Ans:
(1.)Costofcementusedtoproducecinderblocks;Cinderblocksproduced;Variable
(2.)Costofleasingcheckoutequipmentonamonthlybasisatahardwarestore;Dollarsales;Fixed
(3.)Costofvaccineusedataclinic;Vaccinesadministered;Variable
(4.)Salaryofthestaffchaplainatahospital;Numberofpatients;Fixed
(5.)Windshieldwiperbladesinstalledonautosatanautoassemblyplant;Numberofautosassembled;
62
Variable
(6.)Leasecostofequipmentatadentistsoffice;Numberofpatients;Fixed
(7.)Interestexpenseoncorporatedebt;Dollarsales;Fixed
(8.)Costofrentingproductionequipmentonamonthlybasisatasnowboardmanufacturer;Snowboards
produced;Fixed
(9.)Costofadvertisingatasnowboardcompany;Snowboardssold;Fixed
(10.)Cookswagesatatacoshop;Dollarsales;Fixed
162.Anumberofcostsandmeasuresofactivityarelistedbelow.
Required:
Foreachitemabove,indicatewhetherthecostisMAINLYfixedorvariablewithrespecttothepossible
measureofactivitylistednexttoit.
Level:EasyLO:5
Ans:
(1.)Costofrentingproductionequipmentonamonthlybasisatasurfboardmanufacturer;Surfboards
produced;Fixed
(2.)Costofshippingbagsofgardenmulchtoaretailgardenstore;Bagsshipped;Variable
(3.)Buildingrentatacoffeeshop;Dollarsales;Fixed
(4.)Costofharddiskinstalledinacomputer;Numberofcomputersassembled;Variable
(5.)Costoffreshvegetablesusedatacoffeeshop;Dollarsales;Variable
(6.)Janitorialwagesatasurfboardmanufacturer;Surfboardsproduced;Fixed
(7.)Costofadvertisingatasurfboardcompany;Surfboardssold;Fixed
(8.)Clinicalsuppliesatadoctorsoffice;Numberofpatients;Variable
(9.)Costofleasingcheckoutequipmentonamonthlybasisatanelectronicsstore;Dollarsales;Fixed
(10.)Costofheatinganelectronicsstore;Dollarsales;Fixed
63
163.Anumberofcostsarelistedbelow.
Required:
Foreachitemabove,indicatewhetherthecostisdirectorindirectwithrespecttothecostobjectlisted
nexttoit.
Level:EasyLO:6
Ans:
(1.)Costofameaslesvaccineadministeredatanoutpatientclinicatahospital;Theoutpatientclinic;
Direct
(2.)Costofareplacementbatteryinstalledinacarattheautorepairshopofanautomobiledealer;The
autorepairshop;Direct
(3.)Accountingprofessorssalary;Aparticularclass;Indirect
(4.)Costofelectronicnavigationsysteminstalledinayachtatayachtmanufacturer;Aparticularyacht;
Direct
(5.)Costofwiringusedinmakingapersonalcomputer;Aparticularpersonalcomputer;Indirect
(6.)Supervisorswagesinacomputermanufacturingfacility;Aparticularpersonalcomputer;Indirect
(7.)Costoflubricationoilusedattheautorepairshopofanautomobiledealer;Theautorepairshop;
Direct
(8.)Costofheatingahotelrunbyachainofhotels;Aparticularhotelguest;Indirect
(9.)Costofheatingahotelrunbyachainofhotels;Theparticularhotel;Direct
(10.)Costoftonguedepressorsusedinanoutpatientclinicatahospital;Aparticularpatient;Indirect
64

Chapter 01

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 01

Uploaded by

Copyright:

Available Formats

Chapter 1

An Introduction to Managerial Accounting and Cost Concepts

15. Direct labor cost is a part of:

19. Wages paid to a timekeeper in a factory are a:

24. Product costs appear on the balance sheet:

Which of the above best describes the behavior of Costs A and B?

27. Fixed costs expressed on a per unit basis:

33. The following costs were incurred in January:

Conversion costs during the month totaled:

Conversion costs during the month totaled:

Conversion costs during the month totaled:

36. The following costs were incurred in January:

Prime costs during the month totaled:

Prime costs during the month totaled:

Prime costs during the month totaled:

What is the amount of direct labor included in this list?

Prime cost for the period was:

Level: Medium LO: 1 Ans: A

What was the cost of goods manufactured for the month?

What was the cost of goods manufactured for the month?

The amount of beginning work in process inventory is:

The cost of goods manufactured was:

The cost of goods manufactured was:

64. The ending raw materials inventory was:

Use these data to answer the following series of questions.

Use these data to answer the following series of questions.

Use the following information to answer 94-95

Use the following information to answer 106-109

Use the following information to answer 110-111

Use the following information to answer 112-113

Use the following information to answer 126-127

Use the following information to answer 140-141

Use the following information to answer 142-143

Level: Medium LO: 1,2,5,7

You might also like