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Exam 11: Product Costing in Service and Manufacturing Entities

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Question 21

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Newton Corporation entered into the following transactions during its first year of operations. (Assume all transactions involve cash.) 1) Acquired $2,000 of capital from the owners.2) Purchased $600 of direct raw materials.3) Used $400 of these direct raw materials in the production process.4) Paid production workers $800 cash.5) Paid $400 for manufacturing overhead (applied and actual overhead are the same) .6) Started and completed 200 units of inventory.7) Sold 50 units at a price of $12 each.8) Paid $80 for selling and administrative expenses.The amount of net income for the year was:

A) $100.
B) $75.
C) $50.
D) $120.

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

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Question 22

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All of the following are reasons to assign estimated overhead to inventory except:

A) managers need cost information as soon as possible after production.
B) managers need to know if production costs are higher than expected as soon as possible.
C) managers need to use estimated overhead to control earnings.
D) management reduces the distortions that would come from actual monthly overhead.

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

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Question 23

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Furst Company pays production workers' salaries on account. The cost will be recognized as an expense when:

Which of the following statements is true assuming the manufacturing overhead account is underapplied?

Argus Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused the indicated effects on the company's accounting equation? $\begin{array} { | c | c | c | c | c | c | c | c | c | c | c | } \hline { \text { Assets } } && = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline + & - & & \text { NA } & & \text { NA } & \text { NA } & & \text { NA } & & \text { NA } \\\hline\end{array}$

Companies need service and product cost information for both financial reporting and managerial accounting.

Jones Manufacturing Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused the indicated effects on the firm's accounting equation? $\begin{array} { | c | c | c | c | c | c | c | c | c | c | c | } \hline { \text { Assets } } && = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \\\hline + & - & & \text { NA } & & \text { NA } & \text { NA } & & \text { NA } & & \text { NA } \\\hline\end{array}$

Tucker Company's work in process account decreased by $1,000, while its Finished Goods Inventory account increased by $500. Assuming total manufacturing costs were $5,000, what was the company's cost of goods sold amount?

In which account is the actual amount of costs such as factory utilities and maintenance initially recorded?

Describe the flow of costs in a manufacturing company, starting with raw materials inventory. What accounts do the costs flow through?

Under variable costing, all variable production costs are expensed when incurred.

Hutton Company reported a $750 unfavorable overhead variance on a recent performance report. This means that factory overhead was underapplied during the period.

The absorption costing approach uses the contribution margin income statement format.

For the month of January, Year 1, Ghent Corporation had a beginning balance of $103,200 in work in process. During the month, the company added the following costs to work in process: direct materials, $90,900; direct labor, $54,000; and manufacturing overhead, $81,000. The ending amount of work in process was $37,400. What was the cost of goods manufactured for the period? Prepare a schedule that shows the calculation of the cost of goods manufactured.

Manufacturing companies use a predetermined overhead rate; such rates are not used by service companies.

Recognizing estimated manufacturing overhead costs at the end of a month is a(n) :

The Juarez Corporation incurred the following transactions during its first year of operations. (Assume all transactions involve cash) .1) Acquired $1,000 of capital from the owners.2) Purchased $400 of direct raw materials.3) Used $300 of these direct raw materials in the production process.4) Paid production workers $400 cash.5) Paid $200 for manufacturing overhead (applied and actual overhead are the same) .6) Started and completed 200 units of inventory.7) Sold 50 units at a price of $6 each.8) Paid $40 for selling and administrative expenses.The amount of cost of goods manufactured would be:

Fortune Company had beginning raw materials inventory of $16,000. During the period, the company purchased $92,000 of raw materials on account. If the ending balance in raw materials was $10,000, the amount of raw materials transferred to work in process is:

Purchasing raw materials on account is a(n) :

Orlando Company paid $100 cash to purchase production supplies. How does this transaction affect the financial statements?