Part I

Circle the one best answer.

1. Which one of the following is not a benefit of activity-based costing?

a. More accurate product costing

b. Fewer cost pools used to assign overhead costs to products

c. Enhanced control over overhead costs

d. Better management decisions

2. An example of a value-added activity in a manufacturing operation is

a. machine repair.

b. inventory control.

c. engineering design.

d. building maintenance.

3. Assigning manufacturing costs to work in process results in credits to all of the following accounts except

a. Factory Labor.

b. Manufacturing Overhead.

c. Raw Materials Inventory.

d. Work in Process Inventory.

Use the following information for questions 4 and 5.

In the month of November, a department had 700 units in the beginning work in process inventory that were 45% complete. These units had $42,000 of materials cost and $26,075 of conversion costs. Materials are added at the beginning of the process and conversion costs are added uniformly throughout the process. During November, 12,000 units were completed and transferred to the finished goods inventory and there were 3,000 units that were 25% complete in the ending work in process inventory on November 30. During November, manufacturing costs charged to the department were: Materials $241,500; Conversion costs $184,300.

4. How much is the cost assigned to the units transferred to finished goods during November?

a. $493,875

b. $283,500

c. $424,800

d. $69,075

5. How much is the cost assigned to the units in the ending work in process inventory on November 30?

a. $69,075

b. $56,700

c. $106,200

d. $12,385

6. Cost of goods sold is equal to

a. total manufacturing costs plus beginning work in process less ending work in process.

b. cost of goods sold plus beginning work in process less ending work in process.

c. total manufacturing costs plus ending work in process less beginning work in process.

d. cost of goods manufactured plus beginning finished goods less ending finished goods.

7. Cost of goods manufactured during a period is obtained by taking the total manufacturing costs incurred during the period and adding and subtracting the following inventories:

Adding Subtracting

a. Beginning finished goods inventory Ending finished goods inventory

b. Beginning work in process inventory Ending finished goods inventory

c. Beginning raw materials inventory Ending work in process inventory

d. Beginning work in process inventory Ending work in process inventory

8. Which of the following are inventory accounts for a manufacturer?

a. raw materials, work in process, and finished goods

b. direct labor, work in process, and finished goods

c. manufacturing overhead, raw materials, and direct labor

d. work in process, direct labor, and manufacturing overhead

9. In a process cost system, equivalent units of production are the

a. work done on physical units expressed in fully completed units.

b. units that are transferred to the next processing department.

c. units completed and transferred to finished goods.

d. units that are incomplete at the end of a period.

10. An appropriate cost driver for ordering and receiving materials cost is

a. direct labor hours.

b. machine hours.

c. number of parts.

d. number of purchase orders.

Part II Cost of Goods Manufactured and Sold

Selected account balances of Santana Manufacturing Company appear below for 2014:

Beginning of Year End of Year

Finished Goods Inventory $15,000 $ 17,000

Work In Process Inventory 22,000 21,000

Raw Materials Inventory 13,000 19,000

Sales 380,000

Direct Labor 43,000

Factory Supervisory Salaries 17,000

Income Tax Expense 32,000

Factory Insurance 18,000

Raw Material Purchases 93,000

Administrative Expenses 12,000

Sales Returns and Allowances 3,000

Factory Depreciation 8,000

Indirect Labor 14,000

Selling Expenses 44,000

Instructions

Using the above information for Santana Manufacturing Company, answer the following questions. Support your answers with clearly identified computations.

1. What was the amount of direct materials used in production?

2. What were the total manufacturing costs incurred?

3. What was the cost of goods manufactured?

4. What was the cost of goods sold?

5. What was the amount of net income?

Part A - III Job Order Cost Accounting

Sandro Clean uses a job order cost accounting system. On October 1, the company has a balance in Work in Process Inventory of $4,200 and two jobs in process: Job No. R92, $1,600 and Job No. R93, $2,600. During October, a summary of source documents reveals the following:

For Materials Requisition Slips Labor Time Tickets

Job No. R92 $ 2,200 $ 7,100

Job No. R93 1,700 4,100

Job No. R94 4,700 3,300

Job No. R95 2,200 5,100

General Use 1,800 2,000

$12,600 $21,600

Sandro applies manufacturing overhead to jobs at an overhead rate of 90% of direct labor cost. Job No. R92 was completed during the month.

Instructions

(a) Prepare summary journal entries to record the requisition slips, time tickets, the assignment of manufacturing overhead to jobs, and the completion of Job No. R92. Show computations.

(b) Answer the following questions.

1. What is the balance in Work in Process Inventory at October 31?

2. If Sandro incurred $13,000 of manufacturing overhead in addition to indirect labor and indirect materials, was overhead over- or underapplied in October and by how much?

Part IV Process Cost Accounting

Choco Nibbles produces low calorie chocolate snacks. The Baking Department has the following production and manufacturing cost data for January.

Production: Beginning inventory has 2,200 boxes of Nibbles that are 100% complete as to materials and 30% complete as to conversion costs. A total of 38,000 boxes were started into production. Ending inventory of 3,500 boxes are 40% complete as to conversion costs.

Manufacturing Costs: Beginning work in process inventory was $7,845, comprised of $3,160 of materials and $4,685 of conversion costs. Materials added during the month were $29,000, with labor and overhead applied during the month totaling $19,000 and $16,320, respectively.

Instructions

(a) Compute the equivalent units of production for materials and conversion costs for the month of January.

(b) Compute the unit costs for materials and conversion costs.

(c) Determine the costs to be assigned to the units transferred out and ending work in process.

Part - V Activity-Based Costing

Cenatrac produces two products: hand soap and sanitizer. During June, 8,000 containers of hand soap and 6,000 containers of sanitizer were produced. Total overhead costs of $34,000 were incurred. The following information related to overhead costs was available:

Activity Cost Driver Total Cost

Materials handling Number of requisitions $7,000

Machine setups Number of setups 12,000

Quality inspections Number of inspections 15,000

The cost driver volume for each product was as follows:

Cost Driver Hand soap Sanitizer Total

Number of requisitions 25 15 40

Number of setups 12 13 25

Number of inspections 90 160 250

Instructions

(a) Compute the overhead rate for each activity.

(b) Assign the manufacturing overhead costs for June to the two products using activity-based costing, and determine the overhead cost per unit.