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Cost Accounting
Practice Questions
Page 1
AMIS 525
Cost Accounting
Global Defense uses the FIFO method of process costing. Data for the Assembly
Department for October 2007 are:
Physical
Units
Direct
Conversion
(Missiles)
Materials
Costs
Work in process, October 1a
Completed during October 2007
20
90
10
460,000
$ 120,000
$ 2,000,000
$ 935,000
Required
1. For each cost category, compute equivalent units in the Assembly Department.
2. For each cost category, calculate cost per equivalent unit.
3. Summarize total Assembly Department costs for October 2007, and assign total costs to
units completed and transferred out and to units in ending work in process.
Problem 2
The controller for Knoxsville Photographic Supply Company has established the following
activity cost pools and cost drivers.
Budgeted
Overhead
Cost
$250,000
75,000
25,000
75,000
200,000
$625,000
Cost Driver
Number of Setups
Weight of raw material
Weight of hazardous
chemicals used
Number of Inspections
Machine hours.....
Budgeted
Level for
Cost Driver
125
37,500 lb.
5,000 lb.
1,000
20,000
An order for 1,000 boxes of film development chemicals has the following production
requirements.
Machine setups.. 5 setups
Raw material. 10,000 pounds
Hazardous materials.. 2,000 pounds
Inspections. 10 inspections
Machine hours... 500 machine hours
Exam #1
Practice Questions
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AMIS 525
Cost Accounting
Required:
1. Compute the total overhead that should be assigned to the development-chemical order.
2. What is the overhead cost per box of chemicals?
3. Suppose Knoxville Photographic Supply Company were to use a single predetermined
overhead rate based on machine hours. Compute the rate per hour.
4. Under the approach in requirement (3), how much overhead would be assigned to the
development chemical order?
a. In total.
b. Per box of chemicals.
5. Explain why these two product-costing systems result in such widely differing
costs. Which system do you recommend? Why?
Problem 3
Fidelity Sound, Inc., which uses a job-order costing system, had two jobs in process at the start
of 20x1: job no. 64 ($84,000) and job no. 65 ($53,500). The following information is available:
a. The company applies manufacturing overhead on the basis of machine hours. Budgeted
overhead and machine activity for the year were anticipated to be $840,000 and 16,000
hours, respectively.
b. The company worked on four jobs during the first quarter. Direct Materials used, direct
labor incurred, and machine hours consumed were as follows:
Job
No.
64
65
66
67
Direct Material
$21,000
44,000
15,000
Direct Labor
$35,000
22,000
65,000
8,800
Machine Hours
1,200
700
2,000
500
c.
Manufacturing overhead during the first quarter included charges for depreciation
($34,000), indirect labor ($60,000), indirect materials used ($5,000), and other factory
costs ($139,500).
d. During the first quarter, Fidelity Sound completed job no. 64 and job no. 65. Also, Job
no. 65 was sold on account, producing a gross profit (margin) of $34,700 for the firm.
Required:
1. Determine the companys predetermined overhead application rate.
2. Prepare journal entries for the first quarter to record the following:
Exam #1
Practice Questions
Page 3
AMIS 525
a.
b.
c.
d.
e.
Cost Accounting
The issuance of direct material to production and the direct labor incurred.
The manufacturing overhead incurred during the quarter.
The application of manufacturing overhead to production.
The completion of jobs no. 64 and no. 65.
The sale of job no. 65
5. Was manufacturing overhead under- or overapplied for the first quarter of the year? By
how much?
Exam #1
Practice Questions
Page 4
AMIS 525
Cost Accounting
7. Extron, Inc., has only variable costs and fixed costs. A review of the company's records
disclosed that when 100,000 units were produced, fixed manufacturing costs amounted to
$200,000 and the cost per unit manufactured totaled $5. On the basis of this information,
how much cost would the firm anticipate at an activity level of 97,000 units?
Answer: ____________
5,000
800
5,800
5,200
Materials Conversion
$ 2,900
$ 4,680
71,050
131,040
$73,950 $135,720
All materials at Pelican are added at the beginning of the production process. Conversion
costs are incurred uniformly over the production process. What total amount of cost should
be assigned to the units in work in process at the end of March?
a.
b.
c.
d.
$14,840
$15,420
$24,920
$25,860
10. In producing cellular phones, Sonya Company incurs three different costs (XX, YY, and
Exam #1
Practice Questions
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AMIS 525
Cost Accounting
ZZ). Per unit costs for two different activity levels are as follows:
5,000 phones
7,500 phones
Type XX
$8
$8
Type YY
$18
$12
Type ZZ
$8
$6
Total
$34
$26
The cost function that expresses the behavior of Sonyas total costs is:
a.
b.
c.
d.
Y = $ 40,000 + $26X
Y = $ 45,000 + $18X
Y = $ 90,000 + $ 8X
Y = $120,000 + $10X
11. Kirk Manufacturing Company uses a job-order costing system. At the beginning of April,
Kirk only had one job in process, Job #898. This job was finished during April by incurring
additional direct costs of $350 for materials and $700 for labor. Also during April, Job #899
was started and finished. The direct costs assigned to this job were $1,200 for materials and
$950 for labor. Job #900 was started during April but was not finished by the end of the
month. The direct costs assigned to this job were $820 for materials and $540 for labor.
Kirk applies manufacturing overhead to its products at a rate of 300% of direct labor cost.
Kirk's cost of goods manufactured for April was $14,570. What was Kirk's work in process
inventory balance at the beginning of April?
a.
b.
c.
d.
$3,440
$6,420
$6,590
$9,570
12. Montgomery Company has a mixed selling cost. If sales volume increases, how will the total mixed
cost and the mixed cost per unit behave?
A.
B.
C.
D.
E.
Total
Mixed Cost
Increase
Increase
Increase
Remain constant
Decrease
Mixed
Cost Per Unit
Increase
Remain constant
Decrease
Decrease
Increase
Exam #1
Practice Questions
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