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MONTGOMERY COLLEGE Department of Business and Economics, Rockville Campus ACCT 222 - Take Home Exam #1-AB / SPRING 2017 Student Name: ______________________________________ Date: ________________ Part I: Multiple Choice 2 points each - Write Your Answer Choice on line next to question number ___1. Management accounting a. focuses on estimating future revenues, costs, and other measures to forecast activities and their results. b. provides information about the company as a whole. c. reports information that has occurred in the past that is verifiable and reliable. d. provides information that is generally available only on a quarterly or annual basis. ___2. The philosophy and a business strategy of manufacturing without waste is referred to as: a. lean production b. thin manufacturing c. Total Quality Management d. ISO 9001 ___3. Which of the following describes a system in which suppliers deliver materials at the time they are needed? a. ERP b. Just In Time c. Total Quality Management d. ISO 9001 ___4. Managerial accounting information a. Pertains to the entity as a whole and is highly aggregated b. Pertains to subunits of the entity and may be very detailed c. Is prepared only once a year d. Is constrained by the requirements of generally accepted accounting principles ___5. Which one of the following is an example of a period cost? a. A change in benefits for the union workers who work in the New York plant of a Fortune 1000 manufacturer b. Workers' compensation insurance on factory workers' wages allocated to the factory c. A box cost associated with computers d. A manager's salary for work that is done in the corporate head office 1 ___6. How does a manufacturing company report cost of goods manufactured? a. As a current asset on the balance sheet b. As a component of the raw materials inventory on the balance sheet c. As a component in the calculation of cost of goods sold on the income statement d. As an administrative expense on the income statement ___7. The property taxes on the factory building for a manufacturer would be an example of: Prime Conversion Cost Cost a. b. c. d. Yes No Yes No Yes No No Yes ___8. In a job-order cost system, the application of manufacturing overhead usually would be recorded as a debit to: a. Finished Goods inventory. b. Work in Process inventory. c. Cost of Goods Sold. d. Manufacturing Overhead. ___9. How would the insurance premium on Research In Motion's manufacturing plants generally be classified? Prime cost Product cost a. No Yes b. No No c. Yes No d. Yes Yes ___10. What does manufacturing overhead cost consist of? a. All manufacturing costs. b. All manufacturing costs, EXCEPT direct materials and direct labor. c. Indirect materials but NOT indirect labor. d. Indirect labor but NOT indirect materials. ___11. Management functions include a. planning. b. directing. c. controlling. d. all of the above. 2 ___12. Which of the following inventory accounts is not applicable to a manufacturing company? a. Finished Goods Inventory. b. Merchandise Inventory. c. Raw Materials Inventory. d. Work in Process Inventory ___13. A transaction driver is: a. An event that causes a transaction to begin. b. A measure of the amount of time required to perform an activity. c. An event that causes a transaction to end. d. A simple count of the number of times an activity occurs. Use the following information to answer questions 14 and 15: Adams Company has two products: A and B. Annual production and sales are 500 units of Product A and 900 units of Product B. The company has traditionally used direct labor hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor hours per unit and Product B requires 0.5 direct labor hours per unit. The total estimated overhead for next period is $67,522. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools - Activity 1, Activity 2, and General Factory - with estimated overhead costs and expected activity as follows: Expected Activity Product A Product B Total 300 200 500 2,100 700 2,800 200 450 650 Activity Cost Pool Est MOH Activity 1 $6,915 Activity 2 24,948 General Factory 35,659 Total $67,522 (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor hours.) ___14. The predetermined overhead rate (i.e., activity rate) for Activity 1 under the activity-based costing system is closest to: a. $23.05. b. $13.83. c. $34.58. d. $135.04. ___15. The overhead cost per unit of Product A under the activity-based costing system is closest to: a. $67.66 b. $21.94 c. $48.23 d. $41.55 3 Use the following information to answer questions 16 and 17. Harrison Co. produces two products, AB and XY. Information about the current period's production is as follows: AB XY Units Produced 50,000 65,000 Prime Cost $750,000 $650,000 Machine Hours 30,000 60,000 Harrison uses a plantwide rate of $4.00 per machine hour to apply overhead to production. Budgeted overhead was $392,000 but actual overhead was $376,000. ___16. How much of Harrison Company's overhead was applied to product AB? a. $130,000. b. $195,000. c. $120,000. d. $187,500. ___17. What was Harrison Company's total cost to produce product XY? a. $650,000. b. $910,000. c. $900,000. d. $890,000. Use the following information to answer questions 18 and 19. Buchanan Manufacturing uses an activity-based cost system. The company produces Model A and Model D. Information relating to the two products is as follows: Model A Model D Units Produced 20,000 40,000 Machine Hours 8,000 10,000 Direct Labor Hours 14,000 16,000 Engineering Labor (Hours) 1,000 1,400 Setups 40 60 The following costs are reported: Engineering Setups Machine-related Overhead $96,000 200,000 288,000 ___18. Buchanan Manufacturing's pool rate for engineering is a. $68.58. b. $57.00. c. $50.00. d. $40.00. 4 ___19. Buchanan Manufacturing's pool rate for setups is a. $2,240. b. $2,000. c. $1,760. d. $1,680. __20. Ekcer Company uses activity-based costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. Estimated costs totaled $40,000 and expected activity equals 2,500 for this activity cost pool Actual activity for the current year was 2,490. The amount of overhead applied for this activity during the year was closest to: a. $36,300. b. $39,840. c. $40,000 d. $96,190. ___21. In a job-order cost system, a. A traditional approach to overhead is required. b. Activity-Based costing must be used to apply overhead. c. Overhead is treated as a period cost. d. Either a functional or an activity-based cost approach to OH can be used. ___22. Which entry is recorded when materials are moved from storeroom to production? a. Debit Work in Process and Credit Raw Materials b. Debit Raw Materials and Credit Work in Process. c. Debit Manufacturing Overhead and Credit Raw Materials. d. Debit Materials Expense and Credit Raw Materials. ___23. The entry to record the completion of goods would be a. Debit Work in Process and Credit Finished Goods. b. Debit Overhead Control and Credit Finished Goods. c. Debit Cost of Goods Sold and Credit Work in Process. d. Debit Finished Goods and Credit Work in Process. ___24. The underapplied overhead is eliminated with which of the following entries? a. Debit Cost of Goods Sold and Credit Manufacturing Overhead. b. Debit Manufacturing Overhead and Credit Underapplied Overhead. c. Debit Cost of Goods Sold and Credit Underapplied Overhead. d. Debit Net Income and Credit Cost of Goods Sold. 5 ___25. If overhead was overapplied, a. Actual overhead costs exceed applied overhead. b. Actual overhead costs exceed budgeted overhead. c. Applied overhead exceeds actual overhead costs. d. Budgeted overhead exceeds actual overhead costs. ___26. The Bobkim Company uses a predetermined overhead rate of $4 per direct labor hour to apply overhead. During the year, 30,000 direct labor hours were worked. Actual overhead costs for the year were $110,000. Bobkim's overhead variance would be? a. $2,500 Underapplied. b. $2,500 Overapplied. c. $10,000 Underapplied. d. $10,000 Overapplied. ___27. For the accounting period just ended, Abway Company's actual overhead costs equaled estimated overhead. Actual direct labor hours exceeded estimated direct labor hours used to calculate the predetermined overhead rate. If overhead is applied using the predetermined overhead rate, then overhead would be a. Overapplied. b. Underapplied. c. $0. d. Cannot be determined from the information given. Use the following information to answer question 28. The following information is provided for the year: Actual overhead Actual machine hours worked Budgeted machine hours Budgeted overhead $225,000 25,000 20,000 $160,000 ___28. Using the calculated predetermined rate, how much is applied overhead a. $275,000. b. $250,000. c. $225,000. d. $200,000. 6 Use the following information for question 29. The following information was extracted from the job-order cost sheet for Job 9574: Materials requisitioned $2,000 Direct labor cost 1,650 Direct labor hours 10 Budgeted overhead for the year was $35,000 based on 500 direct labor hours. Actual overhead was $35,800 and actual hours worked were 510. ___29. The total cost of Job 9574 was a. $3,650. b. $4,336. c. $4,350. d. $4,366. Use the following information to answer question 30. At the beginning of the current year, Hamilton Manufacturing had jobs totaling $25,000 in process. Manufacturing costs added throughout the year totaled $300,000. At the end of the year three jobs remained in process. They were as follows: Job 9782 $8,000 Job 9790 15,000 Job 9793 12,000 ___30. Hamilton's ending work in process balance is a. $25,000. b. $35,000. c. $290,000. d. Cannot be computed with the information available Part II: Problems (For ALL Problems you MUST write and show all your work, otherwise no points will be given) Problem 1 (15 points -You MUST write and show all your work, otherwise no points will be given) Brentwood Associates uses a job-order costing system and applies overhead on the basis of direct labor hours. At the beginning of the year, management estimated that 26,000 direct labor hours would be worked and $1,300,000 of manufacturing overhead costs would be incurred. During the year, the company actually worked 24,000 direct labor hours and incurred the following manufacturing costs: 7 Direct materials used in production Direct labor Indirect labor Indirect materials Insurance Utilities Repairs and Maintentance Depreciation $1,240,000 1,800,000 280,000 220,000 150,000 190,000 180,000 320,000 Required: 1. Calculate the predetermined overhead application rate for the year. (5 points) 2. Determine the amount of manufacturing overhead applied to work in process during the year. (5 points) 3. Determine the amount of underapplied or overapplied overhead for the year. (5 points) 8 Problem 2 (10 points -You MUST write and show all your work, otherwise no points will be given) The Mahoney Company has two producing departments: assembly and finishing. The company has been using a plantwide predetermined overhead rate based on direct labor hours. The following estimates were made for the current year: Manufacturing Overhead Direct labor hours Machine hours Assembly $200,000 40,000 5,000 Finishing $100,000 35,000 16,000 Total $300,000 75,000 21,000 Mahoney started and completed Job 1512 during the year. The job-order cost sheet indicated the following: Materials Requisitioned Direct labor cost Direct labor hours: Assembly Finishing Machine Hours Assembly Finishing $18,000 16,000 1,700 Hours 1,300 Hours 1,000 Hours 700 Hours A total of 2,000 units were produced on Job 1512. Required: 1. Assume that Mahoney uses a plantwide predetermined overhead based on direct labor hours. Calculate the total cost and the unit cost for each of the 2,000 units produced by Job 1512. 2. Assume that Mahoney uses separate departmental overhead rates based upon direct labor hours for assembly and machine hours for finishing. Calculate the total cost and the unit cost for each of the 2,000 units produced by Job 1512. 9 Problem 3 (5 points - You MUST write and show all your work, otherwise no points will be given) Stover Company uses the weighted-average method in its process costing system. Information concerning Department A for the month of June follows: Work in process, beginning ....... Started in June ............................ Units completed ......................... Work in process, ending ............. Units 17,000 82,000 85,000 14,000 Materials Costs $12,800 69,700 Ending WIP is 100% complete as to materials and 60% complete as to conversion. The cost per equivalent unit for materials costs is closest to which number. A) B) C) D) $0.89. $0.97. $1.01. $0.83. Problem 4 (5 points - You MUST write and show all your work, otherwise no points will be given) The Assembly Department started the month with 83,000 units in its beginning work in process inventory. An additional 334,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 34,000 units in the ending work in process inventory of the Assembly Department. How many units were transferred to the next processing department during the month? A) B) C) D) 417,000 285,000 451,000 383,000 10 Problem 5 (5 points - You MUST write and show all your work, otherwise no points will be given) Bart Co. adds materials at the beginning of the process in Department M. The company uses the weighted-average method in its process costing system. The following information pertains to Department M's work in process during April: Units Work in process, April 1 (conversion 60% complete) Started in April Completed Work in process, April 30 (conversion 75% complete) 3,000 25,000 20,000 8,000 The equivalent units for conversion cost are: A) B) C) D) 26,000 25,000 24,200 21,800 11