Costing Exercise

1. SNU Manufacturing Inc. makes a single product. For each item listed, identify whether it is a product cost, a period cost, or not an expense.
   1. telephone services
   2. raw materials
   3. finished goods inventory
   4. monthly loan payment on production equipment
   5. rent on the facility
   6. production employee salaries
   7. CEO salary

1. For each item listed, state whether a job order costing system or process costing system would be best.
2. dog food
3. tax returns
4. houses
5. notebooks
6. chocolate bars
7. fitted golf clubs
8. church softball jerseys with player names

1. A company estimates its manufacturing overhead will be $1,000,000 for the next year. What is the predetermined overhead rate given the following independent allocation bases?
2. Budgeted direct labor hours: 70,000
3. Budgeted direct labor expense: $1,750,000
4. Estimated machine hours: 80,000

1. Nazarene Printing Company has estimated its overhead will be $75,000, consisting of 5,000 hours of direct labor. The cost to print SNUs annual report is a combined $35 for the paper, ink, and plastic binding. Additionally, two hours of labor at $15 per hour. Each month, the company incurs $75 in indirect material cost, $125 in administrative labor, $400 in utilities, and $300 in depreciation expense.
2. What is the predetermined overhead rate if direct labor hours are considered the cost driver?
3. What is the cost associated with the annual report job?
4. What is the overhead incurred during the month?

1. Your boss has asked you to determine this months ending inventory if beginning inventory was 20,000 units, 75,000 units were started, and 67,000 units were completed and transferred out?

1. Southern & Company received materials of $20,000 and conversion costs of $15,000 from the prior department. It added material of $27,000 and conversion costs of $75,000. The equivalent units are 25,000 for material and 18,000 for conversion. What is the unit cost for materials and conversion?

1. The following product costs have been determined for your firm that produces pencils: direct materials, $30,000; direct labor, $45,000; manufacturing overhead, $20,500; selling expenses, $19,400; and administrative expenses; $17,200.
2. What are the prime costs?
3. What are the conversion costs?
4. What is the total product cost?
5. What is the total period cost?
6. If 14,600 equivalent units are produced, what is the equivalent material cost per unit?
7. If 16,800 equivalent units are produced, what is the equivalent conversion cost per unit?

1. Trinity Sewing Company estimates its overhead to be $400,000. It expects to have 200,000 direct labor hours costing $5,000,000 in labor and utilizing 16,000 machine hours. Calculate the predetermined overhead rate using:
2. Direct labor hours
3. Direct labor dollars
4. Machine hours

1. J316, Inc. builds bedroom furniture. J316 estimates $175,000 in overhead during the manufacturing of 7500 pine dressers and 5,000 oak dressers. What is the predetermined overhead rate if a pine dresser takes 3 machine hours and an oak dresser takes 4 machine hours?

1. In activity-based accounting (ABC), determining the most appropriate cost driver for each cost pool is critical. Here, choose the best cost driver.

Cost PoolCost Driver OptionsEmployee retirement matchingSquare feetProduct inspectionsDirect labor hoursBuilding mortgageUnits producedMachine maintenance Utilities Payroll taxes

1. J316, Inc. has budgeted these overhead costs:

They are considering activity-based costing and have estimated the cost drivers for each pool as shown:

Recent success has yielded an order for 1,000 oak headboards. Assume direct labor costs per hour of $20. Determine how much the job would cost given the following activities: