PART I MULTIPLE CHOICE (40 points) -- each correct answer is worth 2 points

Instructions: Designate the best answer for each of the following questions.

1. Which of the following statements about managerial accounting is true?

A) GAAP requires managerial accounting.

B) Internal decision-makers use managerial accounting.

C) CPAs audit managerial accounting reports.

D) Managerial accounting reports are usually prepared on an annual basis.

2. When management uses feedback to take corrective action on the budgets, which of the following management responsibilities are being fulfilled?

A) Controlling

B) Adjusting

C) Directing

D) Planning

3. How would Chevrolet classify its partially completed vehicles?

A) Finished goods inventory

B) Raw materials inventory

C) Work in process inventory

D) Supplies inventory

4. All of the following activities are included in the value chain except

A) customer service.

B) design.

C) safety.

D) production.

5. A customer service representatives salary would be classified as ________ when determining the cost of a manufactured product.

A) a direct cost

B) a period cost

C) an indirect cost

D) none of the above

6. Which of the following would not be considered a direct cost of a mattress?

A) Fabric

B) Lumber

C) Glue

D) Steel

7. What is the cost of making one more unit called?

A) Unit cost

B) Marginal cost

C) Variable cost

D) None of the above

8. Winner's Sporting Equipment manufactures sporting goods. Selected costs from the past year include:

Plastics used to make products	$ 151,000
Heating and lighting costs for factory	$65,000
Factory janitor wages	$67,000
Costs of shipping to customers	$11,000
Lubricants used in factory equipment	$2,000
Lighting costs for sales office	$20,000
Depreciation on factory equipment	$23,000
Office supplies for sales office	$6,000
Insurance costs for factory	$13,000
Maintenance worker wages	$99,000
Freight-in (on plastics)	$7,500
Aluminum used to make products	$ 175,000
Assembly-line worker wages	$ 142,000
Salaries of salespeople	$74,000

Product costs for Winner's Sporting Equipment totaled

A) $724,000.

B) $744,500.

C) $612,000.

D) $806,500.

9. A job costing system can be used by which types of companies?

A) Manufacturing and merchandising businesses

B) Service and manufacturing businesses

C) Service, manufacturing, and merchandising businesses

D) Service and merchandising businesses

10. Allocating manufacturing overhead costs is done

A) during the period.

B) before the period starts.

C) at the end of the period.

D) never

11. Squire Corporation charged Job 110 with $13,400 of direct materials and $11,900 of direct labor. Allocation for manufacturing overhead is 75% of direct labor costs. What is the total cost of Job 110?

A) $34,225

B) $ 8,925

C) $41,167

D) $25,300

12. Overallocated manufacturing overhead results when

A) production is less than last year.

B) estimated overhead is less than actual overhead.

C) actual overhead is less than allocated overhead.

D) actual overhead is less than expected.

13. A manufacturer of plywood would use what type of product costing system?

A) Process costing

B) Job costing

C) Either job or process

D) Both job and process

14. A ________ is a document manufacturing production personnel use to request that the itemized materials be sent from the storeroom into the factory.

A) cost ticket

B) job cost record

C) materials requisition

D) manufacturing ticket

15. Which of the following is not a way in which management can use job cost information?

A) Assessing and comparing the profitability of each product type

B) Using the cost information in determining the bid price for custom orders

C) Preparing the financial statements

D) Determining the balance in raw materials inventory

16. The difference between the sales price and the job cost is

A) gross profit.

B) cost of goods sold.

C) net income.

D) operating income.

17. Which of the following is an example of a fixed cost for a manufacturer?

A) Income Taxes

B) Machine Repair Expense

C) Fire Insurance on buildings

D) Delivery Fuel Expense

18. Which of the following is a result of cost distortion?

A) Overcosting of all products

B) Undercosting of all products

C) Accurate costing of all products

D) Overcosting of some products and undercosting of other products

19. In using an ABC system, all of the following steps are performed before the company's year begins except

A) identify the primary activities and estimate a total cost pool for each.

B) select an allocation base for each activity.

C) allocate the costs to the cost object using the activity cost allocation rates.

D) calculate an activity cost allocation rate for each activity.

20. Which of the following is most likely to be the cost driver for the packaging and shipping activity?

A) Number of setups

B) Number of orders shipped

C) Number of units produced

D) Hours of testing

PART 2 MATCHING (10 points)

Use the correct number to designate each item below. Assume a clothing manufacturer.

1. product costs -- direct materials

2. product costs -- direct labor

3. product costs -- manufacturing overhead

4. period costs

A) _____3 rent expense on the building where the garments are made

B) _____4 supplies used to prepare the trade show booth

C) _____3 wages of quality inspectors

D) _____3 spools of thread

E) _____2 wages of fabric cutters and sewing machine operators

F) _____1 bolts of fabric

G) _____4 depreciation expense on sales office computers

H) _____4 the CEOs salary

I) _____4 advertising expense

J) _____3 sewing machine oil

PART 3 SHORT PROBLEMS (50 points)

Show all work for partial credit.

1. [10 points] London Ceramics makes custom ceramic tiles. During March, the company started and finished Job #266. Job #266 consists of 2,500 tiles; each tile sells for $10.00. The company's records show the following direct materials were requisitioned for Job #266.

Basic terra cotta tiles: 2,500 units

Specialty paint: 5 quarts

High gloss glaze: 4 quarts

Labor time records show the following employees worked on Job #266:

Alice Cooper: 18 hours

Matthew Kline: 20 hours

London Ceramics allocates manufacturing overhead at a rate of $27 per direct labor hour.

A) Complete Job #266's job cost record below to calculate the unit cost of the job.

Job cost per unit =

Manufacturing Cost Information	Cost Detail	Cost Total
Direct Materials:
Basic Terra Cotta Tiles	$4.00 per unit
Specialty Paint	$7.00 per quart
High gloss glaze	$12.00 per quart
Total Direct Materials Cost
Direct Labor:
Cooper	$25 per hour
Kline	$15 per hour
Total Direct Labor
Manufacturing Overhead
Total Job Cost	DM+DL+MOH
Number of Units
Job Cost per Unit

B) What is the gross profit per tile on Job #266?

2. [10 points] Selected financial information for Brookeville Manufacturing is presented in the following table (in $ thousands).

Sales revenue	$ 4,000
Purchases of direct materials	$ 400
Direct labor	$ 450
Manufacturing overhead	$ 620
Operating expenses	$ 650
Beginning raw materials inventory	$ 200
Ending raw materials inventory	$ 180
Beginning work in process inventory	$ 320
Ending work in process inventory	$ 410
Beginning finished goods inventory	$ 250
Ending finished goods inventory	$ 200

A) Calculate direct materials used.

B) Calculate cost of goods manufactured.

C) Calculate cost of goods sold.

D) Calculate operating income.

3. [10 points] Ryan Fabrication produces small electronic components for sale to other manufacturers. There are two fabrication departments. The primary cost driver of the Machining Department is machine hours, and the primary cost driver of the Assembly Department is direct labor hours. Ryan currently uses a plant-wide overhead rate, based on direct labor hours. Ryan is considering switching to the use of departmental overhead rates, and has gathered the following estimates for the year:

Department	Total Estimated Manufacturing Overhead Cost	Total Estimated Direct Labor Hours	Total Estimated Machine Hours
Machining Department	$600,000	3,100	14,500
Assembly Department	$500,000	17,900	0
Total Plant-wide	$1,100,000	21,000	14,500

Job 200, consisting of 1,000 units, was completed at the end of September. The job is priced at $10 per unit. The average labor rate is $20 per hour. Additional information about Job 200:

Department	Actual Direct Materials Used on Job 200	Actual Direct Labor Hours for Job 200	Actual Machine Hours for Job 200
Machining	$1,230	1	1
Assembly	$20	4	0
Total	$1,250	5	1

Compute the amount of manufacturing overhead allocated to Job 200 using the plant-wide overhead rate:

Compute the amount of manufacturing overhead allocated to Job 200 using departmental overhead rates:

Did the use of plant-wide rate over-cost or under-cost Job 200? By how much

What would be the gross profit per unit sold, if the total product cost was calculated using departmental overhead rates

4. [10 points] Kramer Company manufactures a variety of products and is considering switching to an activity-based costing system. They have been using a plant-wide manufacturing overhead rate based upon machine hours. Expected usage and costs for manufacturing overhead activities for the upcoming year are as follows:

Activity	Allocation Base	Total Estimated Cost Pool	Total Estimated Activity	Activity Cost Allocation Rate
Machine maintenance cost	Machine Hours	$130,000	13,000 machine hours
Engineering change orders	Change orders	$240,000	4,000 change orders
Hazardous waste disposal	Pounds of hazardous waste	$1,190,000	3,500 pounds of waste
Total overhead cost	Not applicable	$1,560,000	Not Applicable	Not Applicable

During the year, Job 150 was started and completed. Usage data for this job are as follows:

Cost category	Quantity	Cost per unit	Total Cost
Direct materials	270 pounds of direct materials	$60 per pound
Direct labor hours	50 direct labor hours	$15 per hour
Machine maintenance cost	100 machine hours
Engineering change orders	5 change orders
Hazardous waste disposal	50 pounds of waste

Complete the blank boxes in the tables above for Activity Cost Allocation Rate and Total Cost.

Calculate the total product cost of Job 150 using activity-based costing:

Calculate the plant-wide rate manufacturing overhead (MOH) rate:

Calculate the total product cost of Job 150 using the plant-wide rate:

What is the primary factor that causes the two product costs calculated above to be different?

5. [10 points] Sunrise Enterprises uses a job costing system. Record the following transactions in Sunrise Enterprises general journal for the current month:

a) Purchased raw materials on account, $100,000.

b) Requisitioned $41,300 of direct materials and $7,000 of indirect materials for use in production.

c) Factory payroll incurred, $110,000; 75% direct labor, 25% indirect labor.

d) Recorded depreciation expense on factory equipment $25,000, and paid factory utilities of $56,200 on account.

e) Allocated manufacturing overhead costs based on 120% of direct labor cost.

f) Cost of completed production for the current month, $135,000.

g) Cost of finished goods sold, $112,000; selling price, $162,000 (all sales on account).

ENTRY		ACCOUNTS	DEBIT	CREDIT
1	A
2
3	B
4
5
6	C
7
8
9	D
10
11
12	E
13
14	F
15
16	G
17
18
19

Sunrise Enterprises

Chart of Accounts

Cash

Accounts Receivable

Raw Materials Inventory

Work in Process Inventory

Finished Goods Inventory

Manufacturing Overhead

Office Supplies

Prepaid Insurance

Factory Equipment

Administrative Equipment

Buildings

Accumulated Depreciation Factory Equipment

Accumulated Deprecation Administrative Equipment

Accumulated Depreciation Buildings

Patents

Accounts Payable

Wages Payable

Retained Earnings

Sales Revenue

Cost of Goods Sold

Depreciation Expense

Insurance Expense

Rent Expense

Salaries and Wages Expense

Supplies Expense

Utilities Expense