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Exam 16: Cost Concepts and Cost Allocation

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Question 91

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Lubrication used for machines is an example of a direct material.

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Question 92

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The following information has been made available to you.Assume that overhead is applied on the basis of direct labor hours. $\begin{array}{ll}\text { Actual overhead } & \$ 47,400 \\\text { Estimated overhead } & \$ 48,300 \\& \\\text { Actual direct labor hours } & 8,900 \\\text { Estimated direct labor hours } & 9,200\end{array}$ a. Compute the predetermined overhead rate. b. Compute overhead applied. c. Compute over- or underapplied overhead (indicate amount and direction). d. Indicate whether cost of goods sold should be increased or decreased to adjust the balance to actual costs.

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a.$48,300 ÷ 9,200 direct labor hours = $...

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Question 93

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Use the information below for the year ended December 31,20xx,to prepare the statement of cost of goods manufactured. $\begin{array}{lr}\text { Inventories } & \text { Beginning } & \text { Ending }\\\text { Materials inventory } & \$ 41,000 & \$ 51,000 \\\text { Work in process inventory } & 62,000 & 78,000 \\\text { Direct materials purchased } & & 258,000 \\\text { Total direct labor costs } & & 372,000 \\\text { Total indirect labor costs } & & 67,000\\\text { Utilities } && 41,000 \\\text { Depreciation } && 54,000 \\\text { Small tools } && 5,000 \\\text { Factory insurance } && 3,000 \\\text { Factory supervision } && 66,000 \\\text { Miscellaneous overhead costs } && 11,000\end{array}$

Period costs are consumed entirely in the current reporting period.

As the management accountant for Bynami Enterprises,Inc.,you have been asked to prepare a statement of cost of goods manufactured at the end of the first quarter.Account balances at that time were as follows: $\begin{array} { l r r } \text { Materials inventory, January 1, 20xx } & 510,500 \\\text { Work in proces5 inventory, January 1, 20ax } & 697,300 \\\text { Finished goods inventory, January 1, 20xx } & 701,200 \\\text { Direct materials purchased during the quarter } & 1,105,400 \\\text { Direct labor costs } & 154,800 \\\text { Depreciation expense, plant and equipment } & 16,200 \\\text { Plant supervisors' salaries } & 50,600 \\\text { Insurance exgense, plant and equipment } & 1,100 \\\text { Utilities exgense, plant } & 4,000 \\\text { Indirect labor costs } & 16,800 \\\text { Manufacturing Supplies exgense } & 3,400 \\\text { Small tools expense } & 1,500 \\\end{array}$ March 31 inventories were as follows: materials,$540,200; work in process,$795,400; and finished goods,$604,100.Prepare the statement of cost of goods manufactured for the first quarter of 20xx.

The costs of marketing and delivering a product are not included in its inventory valuation.

A cost is classified as an overhead cost if it is not directly traceable to an end product or a cost object.

In a manufacturing environment,costs of materials initially flow

Cost allocation is the process of assigning which of the following costs to specific cost objects?

The following budget data are available for Howers Company: $\begin{array} { l r } \text { Estimated direct labor hours } & 16,000 \\\text { Estimated direct labor dollars } &\$ 170,000 \\\text { Estimated } & \$ 207,200\end{array}$ If overhead is to be applied based on direct labor hours,the predetermined overhead rate per hour (rounded) is

Which of the following represents the overhead applied to a product?

Wages of machine operators and other workers involved in actually shaping the product are classified as direct labor costs.

If overhead has been overapplied during the period,the adjusting entry could include a credit to the Cost of Goods Sold account.

Manufacturing costs behave as variable or fixed costs.

A manufacturing company applies overhead based on direct labor hours.At the beginning of the year,it estimated that overhead costs would be $720,000 and direct labor hours would be 90,000.Actual overhead costs incurred were $754,400,and actual direct labor hours were 92,000.The entry to assign overhead costs during the year would be

Fixed costs per unit are constant along a defined range of activity.

A manufacturing company applies overhead based on direct labor hours.At the beginning of the year,it estimated that overhead costs would be $720,000 and direct labor hours would be 90,000.Actual overhead costs incurred were $754,400,and actual direct labor hours were 92,000.Compute the predetermined overhead rate per direct labor hour.

Complete the following chart by placing an "X" under the applicable column headings.Classify each cost as a fixed cost or a variable cost and as either a direct or indirect product cost or a period cost.

Consider the following information: direct materials used totaled $134,400; direct labor amounted to $396,800; overhead was computed to be $789,600; Work in Process Inventory on January 1,2010,was $378,200; and Work in Process Inventory on December 31,2010,was $385,200.What was the cost of goods manufactured?

The cost of goods manufactured is added to the beginning balance of Finished Goods Inventory to obtain the total cost of goods available for sale during the period.