Chapters 18-25

• Multiple choice (5 pts each) (highlight or clearly mark your answer)

Which of the following is an example of direct labor cost in a factory?

Wages of assembly line personnel

Salary of vice president of production

Wages of factory security guard

Salary of production manager

Which of the following is true of product costs?

They are expensed in the period they are paid.

For external reporting, GAAP requires that they be expensed before the products are sold.

They are first recorded in an inventory account.

For merchandising companies, product costs do not include freight costs.

the variable manufacturing costs are considered period costs

the fixed manufacturing costs are considered period costs

both variable and fixed manufacturing costs are considered product costs

both variable and fixed manufacturing costs are considered period costs

Which of the following would use a process costing system rather than a job order costing system?

a health-care provider

a music production studio

a paint manufacturer

a home remodeling contractor

The procurement manager was able to bring down the cost of direct materials by purchasing materials of a slightly lower grade quality than the company had used previously. The lower grade of materials, however, meant a higher defect rate on the assembly line, and higher wastage of materials during production, which in turn lowered operating income. This situation would have led to a(n):

favorable direct materials cost variance.

unfavorable direct labor cost variance.

unfavorable direct labor efficiency variance.

favorable direct materials efficiency variance.

Which of the following is an example of a labor cost standard?

$40 per direct labor hour

50 square feet per unit

$0.95 per square foot

0.5 direct labor hours per unit

• Problems (10 pts each) (please show your work for partial credit)

In your own words describe the concepts Direct Labor and Overhead.

Amoeba Manufacturing Company provided the following information for the year 2015:

PurchasesRaw Materials	$90,000
Plant Utilities & Insurance	67,500
Indirect Materials	11,750
Indirect Labor	4,750
Direct Materials Used in Production	96,000
Direct Labor	117,500
Depreciation on Factory Plant & Equipment	6,000
Cost of Goods Manufactured	290,850
Cost of Goods Sold	304,550

The inventory account balances as of January 1st2015 are given below.

Raw Materials Inventory	$42,000
Work-in-Process Inventory	12,000
Finished Goods Inventory	49,500

What is the ending balance in the finished goods inventory?

Samson Inc. reported the following information for the year 2015:

Service Revenue	$40,000
Operating Expenses	$23,625
Net Income	$16,375
Number of Services Provided for the Year	10,500

How much was the unit cost per service?

Describe the differences between Fixed Costs and Variable Costs, give 2 examples of each

Antique Works is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen, and collectors. The cost data are as follows:

Price per unit	$720
Variable costs per unit	470
Fixed costs per month	8,000

If Antique expects to sell 40 units per month, what is his margin of safety expressed in units per month?

Jame Company sells glass vases at a wholesale price of $3 per unit. The variable cost of manufacture is $1.75 per unit. The fixed costs are $7,500 per month. Jame sold 5,500 units during this month. Calculate Jame's operating income (loss) for this month.

Wood Designs Company, a custom cabinet manufacturing company, is setting standard costs for one of its products. The main material is cedar wood, sold by the square foot. The current cost of cedar wood is $4.00 per square foot from the supplier. Delivery costs are $0.25 per board foot. Carpenters' wages are $25.00 per hour. Payroll costs are $3.60 per hour and benefits are $5.00 per hour. How much is the direct materials cost standard (per square foot)?