Cost Concepts and Behavior Chapter 2 6e Complete Test Bank

Fundamentals of Cost Accounting, 6e (Lanen)

Chapter 2 Cost Concepts and Behavior

1) The cost of an item is the sacrifice of resources made to acquire it.

2) An expense is a cost charged against revenue in an accounting period.

3) If a cost is recorded as an asset (for example, prepaid rent for an office building), it becomes an expense when the asset has been consumed.

4) Accounting systems typically record opportunity costs as assets and treat them as intangible items on the financial statements.

5) Total cost of goods purchased minus beginning merchandise inventory plus ending merchandise inventory equals cost of goods sold.

6) Cost of goods sold includes the actual costs of the goods sold and the costs required to sell them to the customer.

7) Period costs are those costs assigned to units of production in the period in which they are incurred.

8) Only direct costs can be classified as product costs; indirect costs are classified as period costs.

9) The three categories of product costs are direct materials, direct labor, and manufacturing overhead.

10) The first step in determining whether a cost is direct or indirect is to specify the cost allocation rule.

11) Total work-in-process during the period is the sum of the beginning work-in-process inventory and the total manufacturing costs incurred during the period.

12) Cost of goods sold plus the ending finished goods inventory minus the beginning finished goods inventory equals the cost of goods manufactured.

13) If the cost of goods manufactured during the period exceeds the cost of goods sold, the ending balance of Finished Goods Inventory account increased.

14) Total variable costs change inversely with changes in the volume of activity.

15) Fixed costs per unit change inversely with changes in the volume of activity.

16) The range within which fixed costs remain constant as volume of activity varies is known as the relevant range.

17) The term full cost refers to the cost of manufacturing and selling a unit of product and includes both fixed and variable costs.

18) Variable marketing and administrative costs are included in determining full absorption costs.

19) Revenue minus cost of goods sold equals contribution margin.

20) The primary goal of the cost accounting system is to provide managers with information to prepare their annual financial statements.

21) An opportunity cost is

A) a cost that is charged against revenue in an accounting period.

B) the foregone benefit from the best alternative course of action.

C) the excess of operating revenues over operating costs.

D) the cost assigned to the products sold during the period.

22) Which of the following statements is (are) true? 

(1) An asset is a cost that will be matched with revenues in a future accounting period.

(2) Opportunity costs are recorded as intangible assets in the current accounting period.

A) Only (1) is true.

B) Only (2) is true.

C) Both of these are true.

D) None of these are true.

23) Which of the following statements is (are) false?

(1) In general, the term expense is used for managerial purposes, while the term cost refers to external financial reports.

(2) An opportunity cost is the benefit forgone by selecting one alternative over another.

A) Only (1) is false.

B) Only (2) is false.

C) Both of these are false.

D) None of these are false.

24) Which of the following best distinguishes an opportunity cost from an outlay cost?

A) Opportunity costs are recorded, whereas outlay costs are not.

B) Outlay costs are speculative in nature, whereas opportunity costs are easily traceable to products.

C) Opportunity costs have very little utility in practical applications, whereas outlay costs are always relevant.

D) Opportunity costs are sacrifices from foregone alternative uses of resources, whereas outlay costs are cash outflows.

25) Which of the following accounts would be a period cost rather than a product cost?

A) Depreciation on manufacturing machinery.

B) Maintenance on factory machines.

C) Production manager's salary.

D) Freight out.

26) A company which manufactures custom-made machinery routinely incurs sizable telephone costs in the process of taking sales orders from customers. Which of the following is a proper classification of this cost?

A) Product cost

B) Period cost

C) Conversion cost

D) Prime cost

27) For a manufacturing company, which of the following is an example of a period cost rather than a product cost?

A) Wages of salespersons.

B) Salaries of machine operators.

C) Insurance on factory equipment.

D) Depreciation of factory equipment.

28) Tallon Company manufactures a single product. The product's prime costs consist of

A) direct materials and direct labor.

B) direct materials and manufacturing overhead.

C) direct labor and manufacturing overhead.

D) direct materials, direct labor and manufacturing overhead.

29) The cost of fire insurance for a manufacturing plant is generally considered to be a:

A) product cost.

B) period cost.

C) variable cost.

D) prime cost.

30) An example of a period cost is:

A) fire insurance on a factory building.

B) salary of a factory supervisor.

C) direct materials.

D) rent on a headquarters building.

31) Transportation costs incurred by a manufacturing company to ship its product to its customers would be classified as which of the following?

A) Product cost

B) Manufacturing overhead

C) Period cost

D) Administrative cost

32) Doran Technical Company has set up a toll-free telephone line for customer inquiries regarding computer hardware produced by the company. The cost of this toll-free line would be classified as which of the following?

A) Product cost

B) Manufacturing overhead

C) Direct labor

D) Period cost

33) Which of the following costs is both a prime cost and a conversion cost?

A) direct materials

B) direct labor

C) manufacturing overhead

D) administrative costs

34) Marketing costs include all of the following except:

A) Advertising.

B) Shipping costs.

C) Sales commissions.

D) Legal and accounting fees.

35) Property taxes on the manufacturing facility are an element of

A) Option A

B) Option B

C) Option C

D) Option D

36) The cost of direct labor will be treated as an expense on the income statement when the resulting:

A) payroll costs are paid.

B) payroll costs are incurred.

C) products are completed.

D) products are sold.

37) Calculate the conversion costs from the following information:

A) $3,000

B) $4,000

C) $4,500

D) $5,000

38) The corporate controller's salary would be considered a(n):

A) manufacturing cost.

B) product cost.

C) administrative cost.

D) selling expense.

39) The costs of direct materials are classified as:

A) Choice A

B) Choice B

C) Choice C

D) Choice D

40) Grover Company has the following data for the production and sale of 2,000 units.

What is the conversion cost per unit?

A) $100

B) $180

C) $280

D) $380

41) Grover Company has the following data for the production and sale of 2,000 units.

What is the prime cost per unit?

A) $100

B) $280

C) $300

D) $480

42) Which one of the following costs is classified as a period cost? (CIA adapted)

A) The wages of the workers on the shipping docks who load completed products onto outgoing trucks.

B) The wages of a worker paid for idle time resulting from a machine breakdown in the molding department.

C) The payments for employee (fringe) benefits paid on behalf of the workers in the manufacturing plant.

D) The wages paid to workers for reworking defective products that failed the quality inspection upon completion.

43) The following cost data for the month of May were taken from the records of the Terrence Manufacturing Company: (CIA adapted)

Based upon this information, the manufacturing cost incurred during the month was:

A) $78,500.

B) $80,000.

C) $80,500.

D) $83,000.

44) Which of the following is not a name for indirect resources?

A) Overhead costs

B) Burden

C) Direct costs

D) Common costs

45) Which of the following should be considered part of a manufacturing company's direct labor cost?

A) Factory supervisor's salary

B) Forklift operator's hourly wages

C) Employer-paid health insurance on factory assemblers' wages

D) Cost of idle time

46) Tulsa Company, (a merchandising co.) has the following data pertaining to the year ended December 31, 2019: (CPA adapted)

What is the cost of goods sold for the year?

A) $385,000

B) $460,000

C) $485,000

D) $536,000

47) The Shoal Company's manufacturing costs for the third quarter of 2019 were as follows: (CPA adapted)

What amount should be considered product costs for external reporting purposes?

A) $700,000

B) $800,000

C) $880,000

D) $898,000

48) The three basic elements of manufacturing cost are direct materials, direct labor, and:

A) cost of goods manufactured.

B) cost of goods sold.

C) work in process.

D) manufacturing overhead.

49) Prime cost consists of direct materials combined with:

A) direct labor.

B) manufacturing overhead.

C) indirect materials.

D) cost of goods manufactured.

50) Classifying a cost as either direct or indirect depends upon

A) whether an expenditure is unavoidable because it cannot be changed regardless of any action taken.

B) whether the cost is expensed in the period in which it is incurred.

C) the behavior of the cost in response to volume changes.

D) the cost object to which the cost is being related.

51) The process of assigning indirect costs to products, services, people, business units, etc., is

A) cost object.

B) cost pool.

C) cost allocation.

D) opportunity cost.

52) A(n) ________ is any end to which a cost is assigned.

A) cost object

B) cost pool

C) cost allocation

D) opportunity cost

53) A cost allocation rule is the method or process used to assign the costs in the ________ to the ________.

A) cost allocation; cost pool

B) cost pool; opportunity cost

C) cost object; cost pool

D) cost pool; cost object

54) The beginning Work-in-Process Inventory plus the total of the manufacturing costs equals

A) total finished goods during the period.

B) cost of goods sold for the period.

C) total work-in-process during the period.

D) cost of goods manufactured for the period.

55) A product cost is deducted from revenue when

A) the finished goods are sold.

B) the expenditure is incurred.

C) the production process takes place.

D) the production process is completed.

56) The amount of direct materials issued to production is found by

A) subtracting ending work in process from total work in process during the period.

B) adding beginning direct materials inventory and the delivered cost of direct materials.

C) subtracting ending direct materials from direct materials available for production.

D) adding delivered cost of materials, labor, and manufacturing overhead.

57) The beginning Finished Goods Inventory plus the cost of goods manufactured equals

A) ending finished goods inventory.

B) cost of goods sold for the period.

C) total work-in-process during the period.

D) cost of goods available for sale for the period.

58) Direct labor would be part of the cost of the ending inventory for which of these accounts?

A) Work-in-Process.

B) Finished Goods.

C) Direct Materials and Work-in-Process.

D) Work-in-Process and Finished Goods.

59) The Work-in-Process Inventory of the Model Fabricating Corp. was $3,000 higher on December 31, 2019 than it was on January 1, 2019. This implies that in 2019:

A) cost of goods manufactured was higher than cost of goods sold.

B) cost of goods manufactured was less than total manufacturing costs.

C) manufacturing costs were higher than cost of goods sold.

D) manufacturing costs were less than cost of goods manufactured.

60) Which of the following is not a product cost under full-absorption costing?

A) Direct materials used in the current period.

B) Rent for the warehouse used to store direct materials.

C) Salaries paid to the top management in the company.

D) Vacation pay accrued for the production workers.

61) The term "gross margin" for a manufacturing firm refers to the excess of sales over:

A) cost of goods sold, excluding fixed indirect manufacturing costs.

B) all variable costs, including variable marketing and administrative costs.

C) cost of goods sold, including fixed indirect manufacturing costs.

D) variable costs, excluding variable marketing and administrative costs.

62) Given the following information for a retail company, what is the total cost of goods purchased for the period?

A) $298,800

B) $290,800

C) $282,100

D) $304,000

63) A company had beginning inventories as follows: Direct Materials, $300; Work-in-Process, $500; Finished Goods, $700. It had ending inventories as follows: Direct Materials, $400; Work-in-Process, $600; Finished Goods, $800. Material Purchases net were $1,400, Direct Labor $1,500, and Manufacturing Overhead $1,600. What is the Cost of Goods Sold for the period?

A) $4,100.

B) $4,200.

C) $4,300.

D) $4,400.

64) Compute the Cost of Goods Sold for 2019 using the following information:

A) $244,000

B) $234,000

C) $211,000

D) $198,000

65) Foxburg Company has the following information:

What was the direct labor for the period?

A) $5,500.

B) $5,800.

C) $6,300.

D) $6,800.

66) Foxburg Company has the following information:

What was the cost of goods available for sale for the period?

A) $16,800

B) $16,500

C) $16,100

D) $15,100

67) During the year, a manufacturing company had the following operating results:

What is the cost of goods manufactured for the year?

A) $1,011,000

B) $1,134,000

C) $1,033,000

D) $1,112,000

68) During April, the Meade Enterprises had the following operating results:

What is the cost of goods manufactured for April?

A) $900,000

B) $875,000

C) $925,000

D) $905,000

69) How would property taxes paid on a factory building be classified in a manufacturing company?

A) Fixed, period cost.

B) Fixed, product cost.

C) Variable, period cost.

D) Variable, product cost.

70) How would miscellaneous supplies used in assembling a product be classified for a manufacturing company?

A) Fixed, period cost.

B) Fixed, product cost.

C) Variable, period cost.

D) Variable, product cost.

71) How would a 5% sales commission paid to sales personnel be classified in a manufacturing company?

A) Fixed, period cost.

B) Fixed, product cost.

C) Variable, period cost.

D) Variable, product cost.

72) The student health center employs one doctor, three nurses, and several other employees. How would you classify (1) the nurses' salary and (2) film and other materials used in radiology to take X-rays? Assume the activity is the number of students visiting the health center.

A) Option A

B) Option B

C) Option C

D) Option D

73) Barton's Taco Tico has four taco makers and ten other employees who take orders from customers and perform other tasks. The four taco makers and the other employees are paid an hourly wage. How would you classify (1) the wages paid to the taco makers and other employees and (2) materials (e.g., cheeses, salsa, tomatoes, lettuce, taco shells, etc.) used to make the tacos? Assume the activity is the number of tacos made.

A) Choice A

B) Choice B

C) Choice C

D) Choice D

74) The difference between variable costs and fixed costs is (CMA adapted)

A) Unit variable costs fluctuate and unit fixed costs remain constant.

B) Unit variable costs are fixed over the relevant range and unit fixed costs are variable.

C) Total variable costs are constant over the relevant range, while fixed costs change in the long-term.

D) Total variable costs are variable over the relevant range but fixed in the long-term, while fixed costs never change.

75) Which terms below correctly describe the cost of the black paint used to paint the dots on a pair of dice?

A) Choice A

B) Choice B

C) Choice C

D) Choice D

76) Manufacturing overhead:

A) can be either a variable cost or a fixed cost.

B) includes the costs of shipping finished goods to customers.

C) includes all factory labor costs.

D) includes all fixed costs.

77) Which of the following statements is (are) true?

(1) The term full cost refers to the cost of manufacturing and selling a unit of product and includes both fixed and variable costs.

(2) The fixed cost per unit is considered constant despite changes in volume of activity within the relevant range.

A) Only (1) is true.

B) Only (2) is true.

C) Both of these are true.

D) None of these are true.

78) The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows:

What are the estimated conversion costs per unit?

A) $35

B) $41

C) $44

D) $48

79) The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows:

What are the estimated prime costs per unit?

A) $73

B) $32

C) $67

D) $52

80) The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows:

What are the estimated variable costs per unit?

A) $70

B) $38

C) $67

D) $52

81) Grover Company has the following data for the production and sale of 2,000 units.

What is the variable manufacturing cost per unit?

A) $380

B) $430

C) $480

D) $730

82) Grover Company has the following data for the production and sale of 2,000 units.

What is the total manufacturing cost per unit?

A) $380

B) $430

C) $480

D) $730

83) Grover Company has the following data for the production and sale of 2,000 units.

What is the full cost per unit of making and selling the product?

A) $430

B) $480

C) $530

D) $730

84) Grover Company has the following data for the production and sale of 2,000 units.

What is the contribution margin per unit?

A) $70

B) $320

C) $370

D) $430

85) The following information was collected from the accounting records of the Part SX9 for 3,000 units:

What is Part SX9's total cost per unit?

A) $180.

B) $200.

C) $210.

D) $250.

86) Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected.

Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products.

For Mountainburg's Product L, the costs for direct materials, machining labor, and assembly labor represent

A) Conversion costs.

B) Period costs.

C) Prime costs.

D) Common costs.

87) Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected.

Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products.

The difference between the $100 estimated selling price for Mountainburg's Product W and its total manufacturing cost of $88 represents

A) Contribution margin per unit.

B) Gross margin per unit.

C) Variable cost per unit.

D) Operating profit per unit.

88) Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected.

Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products.

The total overhead cost of $27 for Mountainburg's Product W is a(n)

A) Sunk cost.

B) Opportunity cost.

C) Variable cost.

D) Mixed cost.

89) Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected.

Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products.

Direct material costs for Mountainburg's two new products are

A) Prime costs.

B) Conversion costs.

C) Opportunity costs.

D) Period costs.

90) Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected.

Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products.

The advertising costs for the product selected by Mountainburg will be

A) Prime costs.

B) Conversion costs.

C) Period costs.

D) Opportunity costs.

91) Under full absorption costing, which of the following are included in product costs?

A) Only direct materials and direct labor.

B) Only variable manufacturing costs.

C) Only conversion costs.

D) All fixed and variable manufacturing costs.

92) Ramos Company has the following unit costs:

What cost per unit would be used for product costs under full absorption costing?

A) $29

B) $42

C) $52

D) $60

93) Ramos Company has the following unit costs:

What cost per unit would be used for product costs under variable costing?

A) $29

B) $42

C) $52

D) $60

94) Vegas Company has the following unit costs:

Vegas produced and sold 10,000 units. If the product sells for $100, what is the gross margin?

A) $170,000

B) $240,000

C) $290,000

D) $360,000

95) Vegas Company has the following unit costs:

Vegas produced and sold 10,000 units. If the product sells for $100, what is the contribution margin?

A) $170,000

B) $240,000

C) $290,000

D) $360,000

96) Vegas Company has the following unit costs:

Vegas produced and sold 10,000 units. If the product sells for $100, what is the operating profit under full absorption costing?

A) $170,000

B) $240,000

C) $290,000

D) $360,000

97) Vegas Company has the following unit costs:

Vegas produced and sold 10,000 units. If the product sells for $100, what is the operating profit using a contribution margin income statement?

A) $170,000

B) $240,000

C) $290,000

D) $360,000

98) The following information is available for Barnes Company for the fiscal year ended December 31:

Cost of goods sold using variable costing is:

A) $110,000

B) $120,000

C) $144,000

D) $40,000

99) The following information is available for Barnes Company for the fiscal year ended December 31:

Cost of goods sold using absorption costing is:

A) $246,667

B) $120,000

C) $180,000

D) $40,000

100) The following information is available for Barnes Company for the fiscal year ended December 31:

The variable costing operating income is:

A) $120,000

B) $140,000

C) $104,000

D) $128,000

101) The following information is available for Barnes Company for the fiscal year ended December 31:

The absorption costing operating income is:

A) $120,000

B) $140,000

C) $128,000

D) $112,000

102)  The following information is available for Barnes Company for the fiscal year ended December 31:

The variable costing ending inventory is:

A) $36,000

B) $8,000

C) $40,000

D) $24,000

103) The following information is available for Barnes Company for the fiscal year ended December 31:

The absorption costing ending inventory is:

A) $40,000

B) $24,000

C) $36,000

D) $8,000

104) The following information is available for Barnes Company for the fiscal year ended December 31:

The difference between the variable costing ending inventory and the absorption costing ending inventory is:

A) 800 units times $15 per unit fixed manufacturing cost.

B) 800 units times $10 per unit materials cost.

C) 800 units times $20 per unit variable conversion cost plus $15 per unit fixed manufacturing cost.

D) 800 units times $20 per unit variable conversion cost plus $15 per unit fixed manufacturing cost plus $16.67 per unit indirect operating costs.

105) Absorption costing measures contribution to operating profit as:

A) Sales less unit level costs spent on goods sold.

B) Sales less variable cost of goods sold.

C) Sales less absorption cost of goods sold.

D) Sales less all costs including operating expenses.

106) Inventoriable costs:

A) include only the prime costs of manufacturing a product.

B) include only the conversion costs of providing a service.

C) exclude fixed manufacturing costs.

D) are regarded as assets until the units are sold.

107) The following information is available for the Weston Consulting Company for the fiscal year ended December 31.

Required:

(a) Compute the cost of services sold.

(b) Compute the total marketing and administrative costs.

(c) Compute net income.

108) The following information is available for the Cherryville Enterprises, Inc. for the fiscal year ended December 31.

Required:

(a) Compute the cost of goods sold.

(b) Compute the total marketing and administrative costs.

(c) Compute net income.

109) The following information is available for the Tenor Music Store for the fiscal year ended December 31.

Required:

(a) Prepare a cost of goods sold statement for Tenor Music Store.

(b) Compute the gross margin for the fiscal year ended December 31.

110) Required:

Using the table below as a reference, describe whether the following costs incurred in a manufacturing company are (a) fixed or variable and (b) product or period. The first cost item is presented in the table as an example.

*Straight-line depreciation method used.

111) The Torchdown Company began operations several years ago. The company purchased a building, and since only half of the space was needed for operations, the remaining space was rented to another firm for rental revenue of $20,000 per year. The success of Torchdown Company's product has resulted in the company needing more space. The renter's lease will expire next month and Torchdown will not renew the lease in order to use the space to expand operations and meet demand.

The company's product requires direct materials that cost $25 per unit. The company employs a production supervisor whose salary is $2,000 per month. Production line workers are paid $15 per hour to manufacture and assemble the product. The company rents the equipment needed to produce the product at a rental cost of $1,500 per month. Additional equipment will be needed as production is expanded and the monthly rental charge for this equipment will be $900 per month. The building is depreciated on a straight-line basis at $9,000 per year.

The company spends $40,000 per year to market the product. Shipping costs for each unit are $20 per unit. The cost of electricity and other utilities used for product is $2 per unit. The company plans to liquidate several investments in order to expand production. These investments currently earn a return of $8,000 per year.

Required:

Using the table below as a reference, describe which cost headings best identify the costs listed in the first column. As more than one type of cost can be applicable, ensure to list all possibilities when entering your answers (e.g., a cost might be a variable cost, and an overhead cost).

112) The following cost and inventory data were taken from the records of the Flagstaff Company for the year:

Inventories:

Required:

(a) Compute the cost of goods manufactured.

(b) Compute the cost of goods sold.

113) The Foxboro Manufacturing Company provided you with the following information for the fiscal year ended December 31.

Required:

(a) Compute the total manufacturing costs incurred during the year.

(b) Compute the total work-in-process during the year.

(c) Compute the cost of goods manufactured during the year.

(d) Compute the cost of goods sold during the year.

(e) Compute the total prime costs for the year.

(f) Compute the total conversion costs for the year.

114) The cost accountant for the Corner Manufacturing Company has provided you with the following information for the month of July:

Required:

Compute the following per unit items, assuming the company produced and sold 5,000 units at a price of $210.00 per unit.

(a) Total variable cost.

(b) Variable inventoriable cost.

(c) Full absorption cost.

(d) Full cost.

(e) Contribution margin.

(f) Gross margin.

(g) Profit margin.

115) The cost accountant for the Friendly Manufacturing Company has provided you with the following information for the month of July:

Required:

Assuming the company produced and sold 5,000 units, and there were no units in inventory on July 1, prepare the following income statements for the month of July:

(a) Contribution margin income statement.

(b) Gross margin income statement.

116) Shuster Industries manufactures baseballs and identified the following costs associated with their manufacturing activity (V = Variable; F = Fixed). The following information is available for the month of June when 25,000 baseballs were produced, but only 23,500 baseballs were sold.

Required:

Compute the following amounts for July, assuming 30,000 baseballs were produced and sold: (Assume normal production ranges from 15,000 to 40,000 baseballs)

(a) Total manufacturing costs.

(b) Total conversion costs.

(c) Period costs per unit.

(d) Full costs per unit.

117) Each column below is independent and for a different company. Use the data given, which refers to one year for each example, to find the unknown account balances.

118) The following data appeared in Moline Company's records on December 31:

On January 1, the Finished Goods Inventory account had a balance of $280,000, and the Work-in-Process Inventory account had a balance of $90,650. Sales revenue for the year was $6,687,500.

Required:

(a) Prepare a cost of goods manufactured statement.

(b) Prepare a cost of goods sold statement.

(c) Prepare a gross margin income statement.

119) The information below has been taken from the cost records of Gator Corp. for the past year:

Required:

(a) Calculate the cost of direct materials purchased during the year.

(b) Calculate the direct labor costs charged to production during the year.

(c) Calculate the cost of goods manufactured during the year.

(d) Calculate the cost of goods sold for the year.

120) Information from the records of the Shawnee Production Company for the month of January is as follows:

Required:

(a) Prepare a statement of cost of goods manufactured and sold for the month of January.

(b) Prepare a gross margin income statement for the month of January.

121) The information below has been taken from the cost records of Toro Corp. for the past year:

Required:

(a) Calculate the cost of direct materials purchased during the year.

(b) Calculate the direct labor costs charged to production during the year.

(c) Calculate the cost of goods manufactured during the year.

(d) Calculate the cost of goods sold for the year.

122) Information from the records of the Navaho Industries for the month of July is as follows:

Required:

(a) Prepare a statement of cost of goods manufactured and sold for the month of July.

(b) Prepare a gross margin income statement for the month of July.

123) The Yellville Company provided you with the following information for the fiscal year ended December 31.

Required:

(a) Compute the total manufacturing costs incurred during the year.

(b) Compute the total work-in-process during the year.

(c) Compute the cost of goods manufactured during the year.

(d) Compute the cost of goods sold during the year.

(e) Compute the total prime costs for the year.

(f) Compute the total conversion costs for the year.

124) The Younce Equipment Company provided you with the following information for the fiscal year ended December 31.

Required:

(a) Compute the total manufacturing costs incurred during the year.

(b) Compute the total work-in-process during the year.

(c) Compute the cost of goods manufactured during the year.

(d) Compute the cost of goods sold during the year.

125) Mobile Device Retail has collected the following information for May:

Required:

Prepare a gross margin income statement for the month of May.

126) Fowler Retail has collected the following information for August:

Required:

Prepare a gross margin income statement for the month of August.

127) Zach Hartman has developed a new electronic device that he has decided to produce and market. The production facility will be in a nearby industrial park which Zach will rent for $4,000 per month. Utilities will cost $500 per month. He will use his personal computer, which he purchased for $2,000 last year, to monitor the production process. The computer will become obsolete before it wears out from use. The computer will be depreciated at the rate of $1,000 per year. He will rent production equipment at a monthly cost of $8,000. Zach estimates the materials cost per finished unit of product to be $50, and the labor cost to be $10. He will hire hourly paid workers and spend his time promoting the product. To do this, he will quit his job which pays $4,500 per month. Advertising will cost $2,000 per month. Zach will not draw a salary from the new company until it gets well established.

Required:

Complete the chart below by placing an "X" under each heading that helps to identify the cost involved. There can be "Xs" placed under more than one heading for a single cost; e.g., a cost might be an overhead cost and a product cost. There would be an "X" placed under each of these headings opposite the cost.

128) A manufacturing company has provided the following data for the month of March:

Inventories:

Raw materials purchased during March totaled $69,000 and the cost of goods manufactured totaled $146,000.

Required:

(a) What was the cost of raw materials used in production during March? Show your work.

(b) What was the cost of goods sold for March? Show your work.

129) During the month of June, Bolder Corporation, a manufacturing company, purchased raw materials costing $76,000. The cost of goods manufactured for the month was $129,000. The beginning balance in the raw materials inventory account was $26,000 and the ending balance was $21,000. The beginning balance in the finished goods inventory account was $52,000 and the ending balance was $35,000.

Required:

(a) What was the cost of raw materials used in production during June? Show your work.

(b) What was the cost of goods sold for June? Show your work.

130) A partial listing of costs incurred at Marshall Corporation during August appears below:

Required:

(a) What is the total amount of product costs listed above? Show your work.

(b) What is the total amount of period costs listed above? Show your work.

131) Grankowski Corporation has provided the following partial listing of costs incurred during November:

Required:

(a) What is the total amount of product costs listed above? Show your work.

(b) What is the total amount of period costs listed above? Show your work.

132) In October, Youngstown Corporation had sales of $273,000, selling expenses of $26,000, and administrative expenses of $47,000. The cost of goods manufactured was $183,000. The beginning balance in the finished goods inventory account was $45,000 and the ending balance was $34,000.

Required:

Prepare an Income Statement in good form for October.

133) In July, Mountain Life, Inc., a merchandising company, had sales of $295,000, selling expenses of $24,000, and administrative expenses of $29,000. The cost of merchandise purchased during the month was $215,000. The beginning balance in the merchandise inventory account was $25,000 and the ending balance was $30,000.

Required:

Prepare an Income Statement in good form for July.

134) A number of costs and measures of activity are listed below.

Required:

For each item above, indicate whether the cost is MAINLY fixed or variable with respect to the possible measure of activity listed next to it.

135) A number of costs and measures of activity are listed below.

Required:

For each item above, indicate whether the cost is MAINLY fixed or variable with respect to the possible measure of activity listed next to it.

136) A number of costs are listed below.

Required:

For each item above, indicate whether the cost is direct or indirect with respect to the cost object listed next to it.

137) The following data relates to the Sunshine Company:

Required: 

(a) Compute the direct materials used during the year.

(b) Compute the cost of goods manufactured during the year.

(c) Compute the cost of goods sold during the year.

138) A computer virus destroyed some of the accounting records for Dorchester Antique Remodeling Company for the years 2019–2021. The following information was salvaged from the computer system.

Required:

Determine the correct amounts for A through P.

139) Ryan's Lazer Lighting Inc. produces lamps. During 2019, the company incurred the following costs:

Inventories for the year were:

Required:

Prepare a cost of goods manufactured and sold statement.

140) Explain the difference between an outlay cost, an expense, and an opportunity cost.

141) Explain the difference between a cost, a cost object, and a cost pool.

142) Explain the difference between direct materials inventory, work in process inventory, finished goods inventory, and cost of goods sold.

143) Explain the difference between cost of goods manufactured and cost of goods sold.

144) Explain the difference between a direct cost and an indirect cost.

145) The following information applies to the Jamison Tools Company for the year ended December 31, 2019:

Required:

Prepare a statement of cost of goods manufactured and an income statement for the year ended December 31, 2019.

146) The following information applies to the Garden Master Company for the year ended December 31, 2019:

Required:

Prepare a statement of cost of goods manufactured and an income statement for the year ended December 31, 2019.

147) Michael Corporation has provided the following data for the month of July:

Inventories:

Required:

a. Prepare a Statement of Cost of Goods Manufactured in good form for July.

b. Prepare an Income Statement in good form for July.

148) The following information is available for the Crossover Company:

Sales: 25,000 units per year at $45 per unit

Production: 30,000 units in 2019 and 20,000 units in 2020

At the beginning of 2019 there was no inventory

Variable manufacturing costs are $30.00 per unit

Fixed manufacturing costs are $150,000 per year

Marketing costs are all fixed at $75,000 per year

Required:

(a) Prepare a gross margin income statement under absorption costing for 2019 and 2020. Include a column for each year and a total column.

(b) Prepare a contribution margin income statement under variable costing for 2019 and 2020. Include a column for each year and a total column.

(c) Comment on the results and reconcile any differences in income.

149) Razor Corporation produces and sells a single product at $40 per unit. During 2019, the company produced 200,000 units, 160,000 of which were sold during the year. All ending inventory was in finished goods inventory; there was no inventory on hand at the beginning of the year. The following data relate to the company's production process:

Required:

Calculate the following. 

(a) The unit cost of ending inventory on the balance sheet prepared for stockholders.

(b) The unit cost of ending inventory on a variable costing balance sheet.

(c) The operating income using absorption costing.

(d) The operating income using variable costing.

(e) The ending inventory using absorption costing.

(f) The ending inventory using variable costing.

(g) A reconciliation of the difference in operating income between absorption costing and variable costing using the shortcut method.

150) Consider the following cost and production information for Barnard Steel Building Company, Inc.

Additional information: 

∙ Sales revenue: $20,000,000.

∙ Beginning inventory: $1,150,000.

∙ Sales of part D-1340: 80 units.

∙ Sales of all other parts are the same as the number of units produced.

∙ Sales price of part D-1340: $35,500 per unit

∙ The only spending increase was for materials cost due to increased production. All other spending as shown above was unchanged.

Barnard Steel Building Company uses the variable costing method. 

Required:

(a) Compute the (1) contribution margin, (2) operating income, and (3) ending inventory for Barnard Steel Building Company.

(b) Assume that sales of part D-1340 increase by 30 units to 110 units during the given period (production remains constant). Re-compute the above amounts.

(c) Jaime Porter, the controller of Barnard Steel Building Company, is considering the use of absorption costing instead of variable costing to be in line with financial reporting requirements. She knows that the use of a different costing method will give rise to different incentives. Explain to her how alternative methods of calculating product costs create different incentives.

151) Consider the following cost and production information for Darrell Building Components, Inc.

Additional information:

∙ Sales revenue: $5,200,000.

∙ Beginning inventory: $275,000.

∙ The only spending increase was for materials cost due to increased production. All other spending as shown above was unchanged.

∙ Sales of all parts are the same as the number of units produced.

Darrell Building Components, Inc. uses the absorption costing method.

Required:

(a) Compute the (1) gross margin, (2) operating income, and (3) ending inventory for Darrell Building Components, Inc.

(b) Assume that production of part D-1251 increases by 25 units during the given period (sales remain constant). Re-compute the above amounts.

(c) Thane Smith, the cost manager of Darrell Building Components, argues with the controller that variable costing is a better method for product costing. Using the information in part (b) above, re-compute the operating income for Darrell Building Components using variable costing. Explain any differences in the operating incomes obtained under the two different methods.

152) Hurwitz Corporation had the following activities during 2019:

Required:

(a) Prepare a schedule of cost of goods manufactured for 2019.

(b) Prepare a schedule of cost of goods sold for 2019.

(c) Prepare an income statement for 2019.

153) Styling Toys, Inc. (STI) manufactures a variety of electronic toys for children aged 3 to 14 years. The company started as a Ma & Pa basement operation, and grew steadily over the last nine years. It now employs over 100 people and has sales revenue of over $250 million. Samantha Marks, the CEO of STI also recognizes that competition has increased during this period; therefore future growth will not be easy.

Marks recognizes that one of the areas of weakness is the accounting and costing system. Marks' maternal uncle, Zack, had maintained the accounts for the company. He meticulously kept track of all the invoices that were received, payments made, and painstakingly prepared crude annual reports. With Zack passing away at the age of 85, Marks decided to hire a professional cost management expert to keep track of the company's costs. She hired Dona FalconWright, who had just completed her CMA.

After acquainting Falcon with the company and its people, Marks decided to get down to business. She called Falcon to her office to have a serious conversation about accounting and costing, in particular.

Marks: Dona, I would like you to pay particular attention to developing an official costing system. Currently, we don't have one. I believe this should be your first priority because competition is rising and if we do not understand our costs, we might start losing sales to our rivals.

Falcon: I understand your point very well, Ms. Marks.

Marks: Call me Sam.

Falcon: Very well, Sam. I have a few ideas that I picked up from my CMA courses that I think are worth implementing. However, it looks like we need to start with the basics.

Required:

Assume the role of Dona Falcon. Write a brief report outlining the basics of a cost management information system. Include in your report the following:

∙ Resources and costs

∙ Supply of resources vs. the use of resources

∙ Classification of costs (three dimensions of resources)

∙ Alternative costing systems