THE COST OF PRODUCTS - 19744

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Use the following information to answer this question.

The following cost data pertain to the operations of Lefthand Department Stores, Inc., for the month of December.

Corporate legal office salaries \$74,000

Shoe Department cost of sales,

Brentwood Store        \$35,000

Store manager's salary

Brentwood Store        \$14,000

Shoe Department sales commissions,

Brentwood Store        \$5,000

Store utilities,

Brentwood Store        \$14,000

Shoe Department manager's salary,

Brentwood Store        \$3,000

Central warehouse lease cost  \$10,000

Janitorial costs, Brentwood Store       \$8,000

The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood Store. The central warehouse serves all of the company's stores.

1.   What is the total amount of the costs listed above that are direct costs of the Shoe Department?

A. \$79,000

B. \$40,000

C. \$43,000

D. \$35,000

2.   The management of Baggerly Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine hours, and the estimated amount of the allocation base for the upcoming year is 81,000 machine hours. In addition, capacity is 95,000 machine hours, and the actual level of activity for the year is 84,900 machine hours. All of the manufacturing overhead is fixed and is \$6,617,700 per year. For simplicity, it's assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It's further assumed that this is also the actual amount of manufacturing overhead for the year. If the company bases its predetermined overhead rate on capacity, by how much was manufacturing overhead underapplied or overapplied?

A. \$703,566 overapplied

B. \$318,630 overapplied

C. \$703,566 underapplied

D. \$318,630 underapplied

Use the following information to answer this question.

Sanker Inc. has provided the following data for the month of August. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.

Work In

Process            Finished

Goods             Cost of

Goods Sold     Total

Direct materials           \$2,790             \$7,680             \$18,240           \$28,710

Direct labor     9,700   19,200              45,600            74,500

Manufacturing

overhead applied         5,440   8,000   18,560             32,000

Total    \$17,930           \$34,880           \$82,400           \$135,210

Manufacturing overhead for the month was overapplied by \$5,000. The company allocates any underapplied or overapplied overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.

3.   The work-in-process inventory at the end of August after allocation of any underapplied or overapplied overhead for the month is closest to

A. \$17,080.

B. \$18,780.

C. \$17,267.

D. \$18,593.

Use the following information to answer this question.

Abis Corporation uses the weighted-average method in its process-costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were

Cost                 Percent Complete

Material costs \$6,000                         50%

Conversion costs         \$9,900                         30%

A total of 9,200 units were started, and 8,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

Cost

Material costs \$113,900

Conversion costs         \$322,500

The ending inventory was 80% complete with respect to materials and 20% complete with respect to conversion costs.

Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that's the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.

4.   The cost per equivalent unit for materials for the month in the first processing department is closest to

A. \$11.39.

B. \$11.99.

C. \$12.44.

D. \$11.82.

5.   Assume there's no beginning work-in-process inventory and that the ending work-in-process inventory is 100% complete with respect to materials costs. The number of equivalent units with respect to materials costs under the weighted-average method is

A. the same as the number of units put into production.

B. the same as the number of units completed.

C. less than the number of units completed.

D. less than the number of units put into production.

6.   The management of Baggerly Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine hours, and the estimated amount of the allocation base for the upcoming year is 81,000 machine hours. In addition, capacity is 95,000 machine hours, and the actual level of activity for the year is 84,900 machine hours. All of the manufacturing overhead is fixed and is \$6,617,700 per year. For simplicity, it's assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It's further assumed that this is also the actual amount of manufacturing overhead for the year. If the company bases its predetermined overhead rate on capacity, by how much was manufacturing overhead underapplied or overapplied?

A. \$703,566 overapplied

B. \$318,630 overapplied

C. \$703,566 underapplied

D. \$318,630 underapplied

7.   Malaviya Corporation uses the FIFO method in its process-costing system. Operating data for the Casting Department for the month of September appear below:

Units               Percent Complete

with Respect to

Conversion

Beginning work in process inventory             17,000                         40%

Transferred in from the prior department

during September        72,000

Ending work in process inventory      18,000                         30%

According to the company's records, the conversion cost in the beginning work-in-process inventory was \$63,104 at the beginning of September. Additional conversion costs of \$654,240 were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs for September? (Round off to three decimal places.)

A. \$9.400

B. \$9.280

C. \$8.060

D. \$9.087

Use the following information to answer this question.

The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just-completed year.

Sales    \$910

Raw materials, inventory, beginning  \$80

Raw materials, inventory, ending       \$20

Purchases of raw materials      \$100

Direct labor     \$130

Selling expenses          \$140

Work in process inventory, beginning            \$40

Work in process inventory, ending     \$10

Finished goods inventory, beginning  \$130

Finished goods inventory, ending      \$150

8.   The cost of goods manufactured (finished) for the year (in thousands of dollars) was

A. \$530.

B. \$520.

C. \$500.

D. \$460.

Use the following information to answer this question.

The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just-completed year.

Sales    \$910

Raw materials, inventory, beginning  \$80

Raw materials, inventory, ending       \$20

Purchases of raw materials      \$100

Direct labor     \$130

Selling expenses          \$140

Work in process inventory, beginning            \$40

Work in process inventory, ending     \$10

Finished goods inventory, beginning  \$130

Finished goods inventory, ending      \$150

9.   The cost of goods sold for the year (in thousands of dollars) was

A. \$670.

B. \$650.

C. \$540.

D. \$500.

Use the following information to answer this question.

The following cost data pertain to the operations of Lefthand Department Stores, Inc., for the month of December.

Corporate legal office salaries \$74,000

Shoe Department cost of sales,

Brentwood Store        \$35,000

Store manager's salary

Brentwood Store        \$14,000

Shoe Department sales commissions,

Brentwood Store        \$5,000

Store utilities,

Brentwood Store        \$14,000

Shoe Department manager's salary,

Brentwood Store        \$3,000

Central warehouse lease cost  \$10,000

Janitorial costs, Brentwood Store       \$8,000

The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood Store. The central warehouse serves all of the company's stores.

10.   What is the total amount of the costs listed above that are direct costs of the Shoe Department?

A. \$40,000

B. \$35,000

C. \$79,000

D. \$43,000

Solution Description

The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood Store. The central warehouse serves all of the company's stores.

1.   What is the total amount of the costs listed

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