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Exam 13: Cost Accounting and Reporting

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Question 21

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Direct costing may be used for:

A) internal reporting purposes.
B) external financial reporting purposes.
C) income tax reporting purposes.
D) all of these.

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Question 22

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Which of the following items would not be reported on the statement of cost of goods manufactured?

A) cost of goods sold.
B) purchases.
C) total manufacturing costs.
D) contribution margin.

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Question 23

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For each of the following costs, check the columns that most likely apply.

Which of the following is NOT an account that over/under applied overhead is transferred to at the end of an accounting period?

The three components of product costs are:

Great Bay Co. manufactures cordless telephones. During 2013, total costs associated with manufacturing 18,500 of the AB-2000 model (introduced this year) were as follows: $\begin{array} { l r } \text { Raw materials } & \$ 195,175 \\\text { Direct labor } & 115,625 \\\text { Variable manufacturing overhead } & 85,100 \\\text { Fixed manufacturing overhead } & 114,700\end{array}$ (a.) Calculate the cost per phone under both direct (or variable) costing and absorption costing. (b.) If 2,800 of these phones were in finished goods inventory at the end of 2013, by how much and in what direction (higher or lower) would 2013 operating income be different under direct (or variable) costing than under absorption costing? (c.) Express the phone cost in a cost formula. What does this formula suggest the total cost of making an additional 1,600 phones would be?

An activity-based costing system involves identifying the activity that causes the incurrence of a cost; this activity is known as a:

A predetermined overhead rate is used to:

Which of the following costs would be classified as a period cost:

The production cost of a single unit of a manufactured product is determined by:

Direct costs pertain to costs that:

An example of a cost that is likely to have a direct relationship with products being manufactured is:

Which of the following costs are included in the "for cost accounting purposes" classification?

An example of a product cost is:

Cost accounting is a subset of:

Erber, Inc. produces men's neckties and dress socks. Manufacturing overhead is assigned to production using an application rate based on direct labor hours. (a.) For 2013, the company's cost accountant estimated that total overhead costs incurred would be $184,500, and that a total of 24,600 direct labor hours would be worked. Calculate the amount of overhead to be applied for each direct labor hour worked on a production run. (b.) A production run of 500 neckties required raw materials that cost $3,120, and 140 direct labor hours at a cost of $8.00 per hour. Calculate the cost of each necktie produced. (c.) At the end of February 2013, 420 neckties made in the above production run had been sold, and the rest were in ending inventory. Calculate the cost of the neckties sold that would have been reported in the income statement and the cost included in the February 28, 2013, finished goods inventory.

Which of the following will cause income determined with absorption costing to be higher than income determined with direct costing?

The sequence of activities that add value to the organization are:

Baja Industries has recently switched its method of applying manufacturing overhead from a single predetermined overhead rate based on direct labor hours to activity-based costing (ABC). Assume that the direct labor rate is $18.00 per hour and that there were no beginning inventories. The following cost drivers and rates have been developed for allocating manufacturing overhead costs: $\begin{array}{lll} \underline{\text { Activity }} & \underline{ \text { Cost Driver} } & \underline{ \text { Rate }}\\\text { Material handling } & \text { Number of parts used } & \$ 2.00 \text { per part } \\\text { Assembly and inspection } & \text { Number of direct labor hours } & \$ 25.00 \text { per DLH } \\\text { Testing } & \text { Number of units tested } & \$ 5.00 \text { per unit }\end{array}$ The following production, costs, and activities occurred during the month of August: (a.) Calculate the total manufacturing cost and the cost per unit for the month of August. (b.) Assume instead that Baja Industries applies manufacturing overhead on the basis of $40.00 per direct labor hours (rather than the ABC method). Calculate the total manufacturing overhead cost applied for the month of August. (c.) Which method of applying overhead do you think provides better information for manufacturing managers?

In the T-account cost flow diagram of balance sheet inventory accounts and the income statement cost of goods sold account: