Costing Questions

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Description

A company established a direct
material standard of 2 pounds of material at a cost of $6 per pound for unit produced.
During August the company produced 6,000 units of product. 10,000 pounds of
direct material which cost $6.50 per pound were used in the production process.
Compute the direct material quantity variance for August.

Answers: a.

$5,000 unfavorable.

b.

$12,000 unfavorable.

c.

$5,000 favorable.

d.

$12,000 favorable.

e.

$7,000 favorable.

Question 5

Product A has a sales price of
$10 per unit. Based on a 10,000-unit production level, the variable costs are
$6 per unit and the fixed costs are $3 per unit. Using a flexible budget for
12,500 units, what is the budgeted operating income from Product A?

Answers: a.

$12,500

b.

$25,000

c.

$20,000

d.

$30,000

e.

$35,000

Question 6

Bartels Corp. produces
woodcarvings. It takes 2 hours of direct labor to produce a carving. Bartels’
standard labor cost is $12 per hour. During August, Bartels produced 10,000
carvings and used 21,040 hours of direct labor at a total cost of $250,376. What
is Bartels’ total labor variance for August?

Answers: a.

$10,376 unfavorable.

b.

$2,104 unfavorable.

c.

$2,104 favorable.

d.

$12,480 unfavorable.

e.

$12,480 favorable.

Question 8

Bartels
Corp. produces woodcarvings. It takes 2 hours of direct labor to produce a
carving. Bartels’ standard labor cost is $12 per hour. During August, Bartels
produced 10,000 carvings and used 21,040 hours of direct labor at a total cost
of $250,376. What is Bartels’ labor rate variance for August?

Need answer

Question 9

Actual fixed overhead for Kapok
Company during March was $92,780. The flexible budget for fixed overhead this
period is $89,000 based on a production level of 5,000 units. If the company
actually produced 4,200 units what is the fixed overhead volume variance for
March?

Answers: a.

$3,780 favorable.

b.

$18,020 unfavorable.

c.

$14,240 unfavorable.

d.

$3,780 unfavorable.

e.

$14,240 favorable.

• Question
10

A company’s flexible budget for
12,000 units of production showed sales, $48,000; variable costs, $18,000; and
fixed costs, $16,000. The operating income expected if the company produces and
sells 16,000 units is:

Answers: a.
$2,667

b. $14,000

c.
$18,667

d.
$24,000

e.
$35,000

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costing questions

$18.00

Description

e s t i o n s
LO11–1
1. A manufacturing company has a small production line dedicated to the production of a
particular product. The line has four stations in serial. Inputs arrive at station 1 and the
output from station 1 becomes the input to station 2. The output from station 2 is the input
to station 3 and so on. The output from station 4 is the fi nished product. Station 1 can
process 2,700 units per month, station 2 can process 2,500/month, station 3 can process
2,300/month, and station 4 can process 2,100/month. What station sets the maximum possible
output from this system? What is that maximum output number?

4. You are in a line at the bank drive-through and 10 cars are in front of you. You estimate
that the clerk is taking about fi ve minutes per car to serve. How long do you expect to wait
in line?

10. An enterprising student has set up an internship clearinghouse for business students. Each
student who uses the service fi lls out a form and lists up to 10 companies that he or she
would like to have contacted. The clearinghouse has a choice of two methods to use for processing
the forms. The traditional method requires about 20 minutes to review the form and
arrange the information in the proper order for processing. Once this setup is done, it takes
only two minutes per company requested to complete the processing. The other alternative
uses an optical scan/retrieve system, which takes only a minute to prepare but requires fi ve
minutes per company for completing the processing. If it costs about the same amount per
minute for processing with either of the two methods, when should each be used?
11. Rockness Recycling refurbishes rundown business students. The process uses a moving
belt, which carries each student through the fi ve steps of the process in sequence. The fi ve
steps are as follows:
Time Required
Step Description per Student
1 Unpack and place on belt 1.0 minute
2 Strip off bad habits 1.5 minutes
3 Scrub and clean mind 0.8 minute
4 Insert modern methods 1.0 minute
5 Polish and pack 1.2 minutes
One faculty member is assigned to each of these steps. Faculty members work a
40-hour week and rotate jobs each week. Mr. Rockness has been working on a contract
from General Eclectic, which requires delivery of 2,000 refurbished students per
week. A representative of the human resources department has just called complaining
that the company hasn’t been receiving the agreed-upon number of students. A check
of fi nished goods inventory by Mr. Rockness reveals that there is no stock left. What
is going on?

13. A local market research fi rm has just won a contract for several thousand small projects
involving data gathering and statistical analysis. In the past, the fi rm has assigned each
project to a single member of its highly trained professional staff. This person would both
gather and analyze the data. Using this approach, an experienced person can complete an
average of 10 such projects in an eight-hour day.
The fi rm’s management is thinking of assigning two people to each project in order to
allow them to specialize and become more effi cient. The process would require the data
290 section 2 MANUFACTURING AND SERVICE PROCESSES
gatherer to fi ll out a matrix on the computer, check it, and transmit it to the statistical
analysis program for the analyst to complete. Data can be gathered on one project while
the analysis is being completed on another, but the analysis must be complete before the
statistical analysis program can accept the new data. After some practice, the new process
can be completed with a standard time of 20 minutes for the data gathering and 30 minutes
for the analysis.
a. What is the production (output per hour) for each alternative? What is the productivity
(output per labor hour)?
b. How long would it take to complete 1,000 projects with each alternative? What
would be the labor content (total number of labor hours) for 1,000 projects for each
alternative?

18. I-mart is a discount optical shop that can fi ll most prescription orders in around 1 hour.
The management is analyzing the processes at the store. There currently is one person
assigned to each task below. The optometrist assigned to task B takes an hour off for
lunch and the other employees work the entire day.
Task Time
A. Greet/register the patient 2 minutes/patient
B. Optometrist conducts eye exam 25 minutes/patient
C. Frame/lenses selection 20 minutes/patient
D. Glasses made (process can run 6 pairs of
glasses at the same time) 60 minutes/patient
E. Final fi tting 5 minutes/patient
For a typical 10-hour retail day (10 a.m.–8 p.m.), the manager would like to calculate the
following:
a. What is the current maximum output of the process per day (assuming every patient
requires glasses)?
b. If another person were added, where would be the logical place?
c. What effect would a mail order lab (where the glasses are made off-site and returned in
5–7 days) have on the process?
( Each sheet done separate in Excel only please)

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costing questions

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Description

1.(TCO F) Assume there is no beginning work in process inventory and 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: (Points : 5)

the same as the number of units put into production.

less than the number of units put into production.

the same as the number of units completed.

less than the number of units completed.

Question 2.2.(TCO F) Which of the following companies would be most likely to use a job-order costing system rather than a process costing system? (Points : 5)

Fast food restaurant

Shipbuilding

Crude oil refining

Candy making

Question 3.3.(TCO F) Assume there was no beginning work in process inventory and the ending work in process inventory is 70% complete with respect to conversion costs. Under the weighted-average method, the number of equivalent units of production with respect to conversion costs would be: (Points : 5)

the same as the units completed.

less than the units completed.

the same as the units started during the period.

less than the units started during the period.

Question 4.4.(TCO F) Which of the following accounts is debited when direct labor is recorded? (Points : 5)

Work in process

Salaries and wages expense

Salaries and wages payable

Manufacturing overhead

Question 5.5.(TCO F) During October, Crusan Corporation incurred $62,000 of direct labor costs and $4,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a: (Points : 5)

debit to Work in Process of $66,000.

credit to Work in Process of $66,000.

debit to Work in Process of $62,000.

credit to Work in Process of $62,000.

Question 6.6.(TCO F) Wedd Corporation had $35,000 of raw materials on hand on May 1. During the month, the company purchased an additional $68,000 of raw materials. During May, $92,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $5,000. The debits to the Work in Process account as a consequence of the raw materials transactions in May total: (Points : 5)

$92,000.

$0.

$68,000.

$87,000.

1.(TCO F) Some companies use process costing and some use job-order costing. Which method a company uses depends on its industry. A number of companies in different industries are listed below:

i. Custom boat builder

ii. Frozen cranberry juice processor

iii. Concrete block manufacturer

iv. Winery that produces a number of varietal wines

v. Aluminum refiner that makes aluminum ingots from bauxite ore

For each company, indicate whether the company is most likely to use job-order costing or process costing.

(Points : 15)

Question 2.2.(TCO F) Job 728 was recently completed. The following data have been recorded on its job cost sheet:

Direct materials

$81,000

Direct labor hours

1,220 labor hours

Direct labor wage rate

$15 per labor-hour

Machine Hours

1,520 machine hours

Number of units completed

4,400 units

The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $16 per machine-hour.

Compute the unit product cost that would appear on the job cost sheet for this job. (Points : 15)

Question 3.3.(TCO F) Auger Inc. uses the weighted-average method in its process costing system. The following data concern the operations of the company’s first processing department for a recent month.

Work in process, beginning
Units in process 700
Percent complete with respect to materials 80%
Percent complete with respect to conversion 40%
Costs in the beginning inventory:
Materials cost $1,904
Conversion cost $8,624
Units started into production during the month 29,000
Units completed and transferred out 28,800
Costs added to production during the month:
Materials cost $104,044
Conversion cost $875,266
Work in process, ending:
Units in process 900
Percent complete with respect to materials 70%
Percent complete with respect to conversion 20%

Required:

i. Determine the equivalent units of production.

ii. Determine the costs per equivalent unit.

iii. Determine the cost of ending work in process inventory.

iv. Determine the cost of the units transferred to the next department (Points : 15)

Question 4.4.(TCO F) Hunsicker Corporation has provided the following data for the month of January:

Inventories

Beginning

Ending

Raw materials

$30,000

$33,000

Work In process

$20,000

$18,000

Finished goods

$52,000

$60,000

Additional Information

Raw material purchases

$63,000

Direct labor costs

$92,000

Manufacturing overhead cost incurred

$75,000

Indirect materials included in manufacturing overhead costs incurred

$6,000

Manufacturing overhead cost applied to work in process

$69,000

Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold in good form.

(Points : 15)

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