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Burke Company produced 8,000 units of inventory and sold 6,000 of them. The company incurred the following production costs: Variable manufacturing cost: $6.00 per unit Fixed manufacturing overhead cost: $24,000 Assuming the company sells its product at a price of $15 per unit, and incurred $10,000 in selling and administrative costs, what is the amount of net income under absorption costing?


A) $38,000
B) $14,000
C) $24,000
D) $26,000

E) A) and B)
F) C) and D)

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Kelly Company's manufacturing overhead costs totaled $2,871,400 during the year. At the end of the year, manufacturing overhead had been underapplied by $5,310. As a result:


A) cost of goods sold increases.
B) manufacturing overhead increases.
C) cost of goods sold decreases.
D) none of these.

E) A) and D)
F) All of the above

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Describe how firms use service and product cost information.

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Product and service co...

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All of the following costs are accumulated in the Work in Process Inventory account except:


A) depreciation on factory equipment.
B) direct labor costs.
C) manufacturing overhead costs.
D) direct material costs.

E) None of the above
F) All of the above

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Service companies accumulate information about the cost of services provided, and they report those costs in an inventory account.

A) True
B) False

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Why does a service company need cost information about the services it provides?

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A service company woul...

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Orlando Company placed $142 of raw materials into production. How would this transaction affect the company's financial statements?  Assets = Liab. + Equity  Rev. − Exp. = Net Inc.  Raw  Matls.  Inv. + WIP Inv. \begin{array} { | c | c | c | c | c | c | c | c | c | c | } \hline { \text { Assets } } & = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline \begin{array} { c } \text { Raw } \\\text { Matls. } \\\text { Inv. }\end{array} & + & \text { WIP Inv. } & & & & & & \\\hline\end{array}


A) (142) +142= NA + NA  NA − NA = NA \begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline ( 142 ) & + & 142 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}
B) 142+(142) =NA+NANA− NA = NA \begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline 142 & + & ( 142 ) & = & \mathrm { NA } & + & \mathrm { NA } & \mathrm { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}
C) (142) + NA = NA +(142)  NA −142=(142) \begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline ( 142 ) & + & \text { NA } & = & \text { NA } & + & ( 142 ) & \text { NA } & - & 142 & = & ( 142 ) \\\hline\end{array}
D) (142) +(142) = NA + NA  NA − NA = NA \begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(142) & + & (142) & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}

E) None of the above
F) A) and B)

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Product costs flow through the manufacturer's inventory accounts in the following order: raw materials, finished goods, and cost of goods sold.

A) True
B) False

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Product costs are expensed as cost of goods sold:


A) when production is complete.
B) at the start of production.
C) when the related products are sold.
D) when the related revenue is collected.

E) B) and D)
F) A) and D)

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Use of absorption costing allows a company to increase its profits by increasing the level of production of its products.

A) True
B) False

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What is a volume variance, and what is its cause? Under what circumstances is the volume variance unfavorable?

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A volume variance occu...

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Carolina Company placed $26,500 of raw materials into production. The recognition of this event will:


A) decrease net income.
B) not effect total assets.
C) increase revenue.
D) decrease cash flow from investing activities.

E) B) and D)
F) None of the above

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Warren Company applies overhead based on direct labor cost. Warren Company estimated that it would incur $180,000 in manufacturing overhead costs and $120,000 of direct labor costs during the current year. Actual manufacturing overhead cost totaled $150,000 and actual direct labor costs totaled $110,000 during the current year. If total manufacturing costs were $320,000, what amount of direct materials was used during the year?


A) $60,000
B) $30,000
C) $45,000
D) None of these.

E) All of the above
F) None of the above

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Which of the following is a valid reason for using variable costing?


A) Fixed production cost should be ignored when costing units of inventory since it is not essential to the production process.
B) Absorption costing recognizes fixed costs as expense regardless of volume of production.
C) Absorption costing may motivate managers to overproduce in order to increase profits.
D) Under variable costing managers can increase profitability by increasing the volume of production.

E) A) and B)
F) A) and C)

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Ferguson Company recognized $400 of estimated manufacturing overhead costs at the end of the month. How does this transaction affect the financial statements?  Assets = Liab. + Equity  Rev. − Exp. = Net Inc.  Mfg.  OH + WIP Inv. \begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|}\hline&{\text { Assets }} && = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline \begin{array}{c}\text { Mfg. } \\\text { OH }\end{array} & + & \text { WIP Inv. } & & & & & & & & & \\\hline\end{array}


A) (400) + NA = NA +(400)  NA −400=(400) \begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } \hline ( 400 ) & + & \text { NA } & = & \text { NA } & + & ( 400 ) & \text { NA } & - & 400 & = & ( 400 ) \\\hline\end{array}
B) (400) + NA =(400) + NA  NA − NA = NA \begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline \mathbf{( 4 0 0 ) } & + & \text { NA } & = & \mathbf{( 4 0 0 ) } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}
C) (400) +400= NA + NA  NA − NA = NA \begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline(400) & + & 400 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}
D) 400+(400) = NA + NA  NA − NA = NA \begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}\hline 400 & + & (400) & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \\\hline\end{array}

E) C) and D)
F) All of the above

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Which of the following statements is true for a company that uses variable costing?


A) The manufacturing cost per unit decreases when the volume of production increases.
B) Net income is not affected by fluctuations in production.
C) Fixed manufacturing overhead is treated like a product cost.
D) Fixed manufacturing overhead costs incurred in the current period may be recognized as expense in a later period.

E) None of the above
F) B) and C)

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A credit to the Raw Materials Inventory account represents:


A) raw materials added to production.
B) raw materials purchased.
C) raw materials available for use.
D) none of these.

E) None of the above
F) B) and C)

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Select the response that best illustrates the point that product cost flows are cyclical and occur in a specific sequence.


A) Acquire raw materials, convert raw materials, sell finished goods, collect cash
B) Acquire finished goods, acquire raw materials, convert raw materials, collect cash
C) Sell finished goods, collect cash, acquire raw materials
D) Collect cash, acquire raw materials, sell finished goods

E) C) and D)
F) B) and D)

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The cost of goods completed during a period is transferred from the Finished Goods Inventory account to Cost of Goods Sold.

A) True
B) False

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Which of the following statement(s) is/are correct? I. A predetermined overhead rate is used to assign estimated overhead costs to work in process.II. The predetermined overhead rate is calculated by dividing estimated overhead cost by the estimated volume or level of activity.III. The most common means of allocating overhead costs is to calculate a predetermined overhead rate at the end of the period.


A) I
B) I and III
C) II
D) I and II

E) A) and D)
F) A) and B)

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Showing 81 - 100 of 134

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