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ACG 3301 Spring 2011

Exam 1 Review Sec B51

1. An opportunity cost is: A. the difference in total costs which results from selecting one alternative instead of another. B. the benefit forgone by selecting one alternative instead of another. C. a cost which may be saved by not adopting an alternative. D. a cost which may be shifted to the future with little or no effect on current operations.

Lavell Corporation reported the following data for the month of February:

7 . !he total manufacturing cost for February was: A. "17#$%%% B. "171$%%% C. "7%$%%% D. "1%&$%%%

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application Learning !"ecti#e: $ Learning !"ecti#e: % Le#el: Me&ium

Lavell Corporation reported the following data for the month of February:

&%. !he cost of goods manufactured for February was: A. "171$%%% '. "17#$%%% C. "1&($%%% D. "1) $%%%

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application Learning !"ecti#e: $ Learning !"ecti#e: % Le#el: Me&ium

Lavell Corporation reported the following data for the month of February:

&1. !he cost of goods sold for February was: A. "**)$%%% B. "1(#$%%% C. "1&#$%%% D. "1*7$%%%

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application Learning !"ecti#e: $ Learning !"ecti#e: %

)). !he following inventory balances relate to 'harath +anufacturing Corporation at the beginning and end of the year:

'harath,s cost of goods sold was "-)($%%%. .hat was 'harath,s cost of goods manufactured/ A. "--%$%%% '. "-7%$%%% C. "-&*$%%% D. "-& $%%%

0oods available for sale 1 Cost of goods sold 2 Finished goods inventory$ ending 0oods available for sale 1 "-)($%%% 2 "(-$%%% 1 "-& $%%% Finished goods inventory$ beginning 2 Cost of goods manufactured 1 0oods available for sale "* $%%% 2 Cost of goods manufactured 1 "-& $%%% Cost of goods manufactured 1 "-& $%%% 3 "* $%%% 1 "--%$%%%

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application

). +att Company uses activity3based costing. !he company has two products: A and '. !he annual production and sales of 4roduct A is &$%%% units and of 4roduct ' is -$%%% units. !here are three activity cost pools$ with estimated total cost and e5pected activity as follows:

!he cost per unit of 4roduct A under activity3based costing is closest to: A. "*.#% '. "(. % C. "1%.) D. "-.-%

Calculation of 6verhead Costs to 4roduct A:

Cost 4er 7nit: 4roduct A 1 ")*$&%%.%% &$%%% units 1 "-.-% per unit

17. 4ar8 Company uses the weighted3average method in its process costing system. !he +olding Department is the second department in its production process. !he data below summari9e the department,s operations in :anuary.

!he accounting records indicate that the conversion cost that had been assigned to beginning wor8 in process inventory was "#%$#&# and a total of "*1($& % in conversion costs were incurred in the department during :anuary. !he cost per e;uivalent unit for conversion costs for :anuary in the +olding Department is closest to: A. "#.&*( '. "#.1&C. "#.-)% D. "#.) %

7. <n =ob3order costing$ all of the following statements are correct with respect to labor time and cost e5cept: A. time tic8ets are 8ept by employees showing the amount of wor8 on specific =obs. '. the =ob cost sheet for a =ob will contain all direct labor charges to that particular =ob. C. labor cost that can be traced to a =ob only with a great deal of effort is treated as part of manufacturing overhead. D. a machine operator performing routine annual maintenance wor8 on a piece of e;uipment would charge the maintenance time to a specific =ob.

&. >e5 Corporation manufactures a variety of products. <n the past$ >e5 had been using a traditional overhead allocation system based on machine hours. For the current year$ >e5 decided to switch to an activity3based costing system using machine hours and the number of inspections as measures of activity. <nformation on these measures of activity and related overhead rates for the current year is as follows:

:ob ?&1* for the current year re;uired 1) machine hours and * inspections. .ould this =ob have been overcosted or undercosted under the traditional system and by how much/ A. undercosted by "(B. undercosted by "## C. overcosted by "&% D. undercosted by "&% @stimated overhead 1 @stimated activity 4redetermined rate ")*%$%%% 1 A)%$%%% "&B 2 A($%%% "#%B !raditional overhead rate 1 @stimated overhead @stimated machine hours "1%.#% 1 ")*%$%%% )%$%%% !raditional overhead allocation 1 !raditional overhead rate Actual machine hours "1)- 1 "1%.#% 1) Activity3based costing overhead allocation 1 AActual machine hours 4redetermined overhead rateB 2 ACumber of inspections 4redetermined overhead rateB "*%% 1 A1) "&B 2 A* "#%B !he traditional system allocates "1)- of overhead whereas the activity3based costing system allocates "*%% of overheadD therefore the traditional system undercosted the =ob by "##.

11. !he Assembly Department started the month with ) $%%% units in its beginning wor8 in process inventory. An additional *7#$%%% units were transferred in from the prior department during the month to begin processing in the Assembly Department. !here were *1$%%% units in the ending wor8 in process inventory of the Assembly Department. Eow many units were transferred to the ne5t processing department during the month/ A. ((($%%% '. *(-$%%% C. ()#$%%% D. (1*$%%%

1*. Lucas Company uses the weighted3average method in its process costing system. !he company adds materials at the beginning of the process in the Forming Department$ which is the first of two stages in its production process. <nformation concerning operations in the Forming Department in 6ctober follows:

.hat was the materials cost of wor8 in process at 6ctober (1/ A. "($%-% '. ")$)*% C. "-$%%% D. "-$1*%

1(. Dewey Company uses the weighted3average method in its process costing system. !he first processing department$ the .elding Department$ started the month with 1)$%%% units in its beginning wor8 in process inventory that were *%F complete with respect to conversion costs. !he conversion cost in this beginning wor8 in process inventory was "1 $*%%. An additional &-$%%% units were started into production during the month. !here were 1($%%% units in the ending wor8 in process inventory of the .elding Department that were -%F complete with respect to conversion costs. A total of ")7)$(-% in conversion costs were incurred in the department during the month. !he cost per e;uivalent unit for conversion costs is closest to: A. ").&1* B. "-.*%C. "-.#%% D. "-.- %

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application Learning !"ecti#e: ' Learning !"ecti#e: ( Le#el: Me&ium

1*. <smail Corporation uses the F<F6 method in its process costing system. !he first processing department$ the Forming Department$ started the month with *1$%%% units in its beginning wor8 in process inventory that were 1%F complete with respect to conversion costs. !he conversion cost in this beginning wor8 in process inventory was "-$% %. An additional &$%%% units were started into production during the month and )$%%% units were completed and transferred to the ne5t processing department. !here were *#$%%% units in the ending wor8 in process inventory of the Forming Department that were (%F complete with respect to conversion costs. A total of "*- $*- in conversion costs were incurred in the department during the month. .hat would be the cost per e;uivalent unit for conversion costs for the month/ AGound off to three decimal places.B A. "*. %% '. "*.7#& C. "*.- % D. "*.(1#

1-. Hets Corporation uses the F<F6 method in its process costing system. 6perating data for the @nameling Department for the month of +ay appear below:

.hat were the e;uivalent units for conversion costs in the @nameling Department for +ay/ A. &($1 % '. &%$-%% C. &($&%% D. &#$#%%