MANUFACTURING TEST BANK a) $505,000

TRUE/ FALSE STATEMENTS b) $495,000

1. Manufacturing costs that cannot be classified as direct material or direct labour c) $545,000
are classified as operating expenses. d) $455,000
2. Raw materials are equal to direct materials. Solution: ($25,000 + $500,000 – $20,000) = $505,000
3. Fixed costs may jump (rather than remaining fixed) at incremental levels of 14. Which beginning and ending inventories appear on a cost of goods
activity. manufactured schedule?
4. The high-low method is a quick means of separating fixed and variable costs. a) raw materials only
5. What the high-low method may lack in precision, it makes up for in efficiency and b) raw materials and work in process only
ease of use. c) raw materials, work in process, and finished goods
6. Total product costs are deducted from total cost of work in process to calculate d) work in process only
cost of goods manufactured. 15. Which of the following represents the correct order in which inventories are
7. If the ending work in process inventory is less than the beginning work in process reported on a manufacturer’s balance sheet?
inventory, then the cost of goods manufactured will be less than total a) raw materials, work in process, finished goods
manufacturing costs for the period. b) work in process, finished goods raw materials
8. Raw materials inventory is not an asset until it is used to make a product. c) finished goods, work in process, raw materials
MULTIPLE CHOICE QUESTIONS d) work in process, raw materials, finished goods
9. In which of the following categories do indirect materials belong? 16. Into which one of the following accounts would the work of factory employees,
Product Manufacturing Period that can be physically and directly associated with converting raw materials into
Cost Overhead Cost finished goods, be categorized?
a) No No Yes a) direct labour
b) Yes No No b) indirect labour
c) Yes Yes No c) manufacturing overhead
d) Yes Yes Yes d) indirect materials
10. Which one of the following is indirect labour considered? 17. Which one of the following would not be classified as manufacturing overhead?
a) product cost a) indirect materials
b) nonmanufacturing cost b) insurance on factory building
c) period cost c) indirect labour
d) raw material cost d) direct materials
11. Which one of the following costs would be included in manufacturing overhead 18. Which one of the following is a product cost?
of a lawn mower manufacturer? a) indirect labour
a) the cost of the wheels b) office salaries
b) the cost of the fuel lines that run from the motor to the gas tank c) sales person’s salaries
c) depreciation on the testing equipment d) advertising costs
d) the wages earned by motor assemblers 19. A company uses sandpaper in its production process. How is the cost of the
12. Which of the following would most likely be included in manufacturing sandpaper classified?
overhead? a) an insignificant expense that can be ignored
a) rent on the company’s store b) a direct material
b) insurance on a delivery truck c) a period cost
c) rent on the company’s factory d) a product cost
d) an oil change on a delivery truck 20. In which classification would the wages of a factory payroll clerk be classified?
13. For 2020, Sparkman Company has cost of goods manufactured of $500,000, a) raw materials
beginning finished goods inventory of $25,000, and ending finished goods inventory b) indirect labour
of $20,000. How much is cost of goods sold? c) period cost
d) direct labour d) recorded costs.
21. Which one of the following is not a manufacturing cost? 29. Zirk, Inc. incurred cost of goods manufactured totalling $700,000,
a) advertising costs manufacturing overhead of $320,000, and direct materials totalling $40,000. How
b) cost of goods sold much is the amount of direct labour?
c) manufacturing overhead a) Cannot be determined from the information provided.
d) direct materials b) $340,000
22. What criteria must be met in order to consider the work of factory employees to c) $660,000
be direct labour? d) $700,000
a) It must be promptly associated with converting materials into products. Solution: ($700,000 – $320,000 – $40,000) = $340,000
b) It must be physically associated with converting materials into products. 30. Ranger Company reported total manufacturing costs of $65,000, manufacturing
c) It must be materially associated with converting materials into products. overhead totalling $13,000, and direct materials totalling $16,000. How much is
d) It must be periodically associated with converting materials into products. direct labour cost?
23. Which one of the following is classified as direct labour? a) Cannot be determined from the information provided.
a) flour in a bakery b) $94,000
b) wages of factory janitors c) $29,000
c) bottlers of cola in a bottling company d) $36,000
d) copy machine costs at a copy shop Solution: Both beginning and ending work in process would be required to
24. In what category are lubricants that are used for wheel bearings on skateboards determine.
produced by a manufacturer categorized? 31. Which of the following are period costs?
a) selling expense a) income taxes and indirect materials
b) indirect materials b) selling and administrative expenses
c) miscellaneous expense c) indirect labour
d) direct materials d) advertising and factory depreciation
25. Which one of the following is not another name for the term manufacturing 32. How does a manufacturing company classify sales commissions?
overhead? a) as indirect labour
a) period costs b) as product costs
b) factory overhead c) as manufacturing overhead
c) indirect manufacturing costs d) as period costs
d) burden 33. Which of the following are considered product costs?
26. Which product cost is most difficult to associate with a product? a) period costs and administrative expenses
a) direct labour b) selling and administrative expenses
b) advertising c) inventoriable costs and plant assets
c) direct materials d) direct labour costs and manufacturing overhead
d) manufacturing overhead 34. When are period costs recorded on the income statement?
27. A company incurred manufacturing costs that were product costs, but they are a) when they occur
not classified as either direct materials or direct labour. What are these called? b) when the product that they are associated with is sold
a) manufacturing overhead c) at the discretion of management
b) selling and administrative expenses d) none of the above
c) period costs 35. What must occur for inventoriable costs to become expenses under the
d) marketing costs matching principle?
28. Inventoriable costs are also referred to as a) The product must be completed and ready to sell.
a) product costs. b) The product must be sold.
b) administrative costs. c) All of the costs associated with manufacturing a product must be incurred.
c) period costs. d) The product must have incurred labour.
36. Which of the following could be considered either a product or a period cost b) workers’ compensation insurance on factory workers wages allocated to
depending on the purpose? the factory
a) manufacturing overhead c) a processor used to produce computers
b) direct labour d) a manager’s salary for work performed in the corporate head office
c) indirect materials 44. Which of the following would most likely be viewed as indirect materials?
d) depreciation a) ball bearings associated with an industrial tractor wheel
37. Where would you expect to find depreciation on factory equipment? b) axle grease associated with the suspension of a new car
a) included with depreciation expense on the income statement c) new tires for a commercial truck
b) in the manufacturing overhead section of the Costs of Goods Manufactured d) cost of boring a cylinder in assembly
schedule 45. As plant controller, you are trying to determine the costs over which you have
c) only on the income statement as part of cost of goods sold the most control on a day-to-day basis. Your goal is to achieve better profitability.
d) as a period cost in the operating expense section of the income statement The plant operations manager suggests that overhead is the easiest area to directly
38. WHICH ONE OF THE FOLLOWING REPRESENTS A PERIOD COST? reduce costs. Which of the following items would be classified as manufacturing
a) company advertisement overhead?
b) depreciation of plant equipment a) factory janitor
c) production manager’s salary b) general corporate liability insurance
d) direct materials c) cost of landscaping the corporate office
39. Which one of the following is most likely a direct material? d) the western division’s vice president’s salary
a) sawdust used to soak up spills in a paint factory 46. Which of the following is considered manufacturing overhead?
b) lubricants for factory machinery a) depreciation on the press that moulds the plastic into work in process
c) paper used in the photocopy machine in the sales office b) the line worker’s Christmas bonus designated by management
d) circuit boards in a computer c) tools that were originally utilized for production but are currently being
40. Manufacturing overhead can be categorized as used by management to fix a copier in the upstairs corporate office
a) a prime cost and a period cost. d) the courier charge for delivering a new ball bearing joint for a robotic paint arm
b) a conversion cost and a period cost. 47. A company loses its opening financial records in a fire. During the following
c) a prime cost and a product cost. year, it incurred costs of production of $250,000 and sold $300,000 in merchandise.
d) a conversion cost and a product cost. It took an inventory count and found that it had $100,000 in product on hand. What
41. WHICH ONE OF THE FOLLOWING IS NOT CONSIDERED A ‘MATERIAL’ COST? should the company’s opening inventory show before the fire?
a) partially completed motor engines for a motorcycle plant a) $50,000
b) bolts used in manufacturing the compressor of an engine b) $100,000
c) rivets for the wings of a new commercial jet aircraft c) $150,000
d) lumber used to build tables d) Cannot be determined from the above information.
42. As production manager, Mr. B is asked to track the manufacturing cost per unit Solution: ($300,000 – $250,000 + $100,000) = $150,000
on the factory floor. Total manufacturing costs were $100,000 before considering 48. Salaries of sales people who only sell one product should best be shown as
factory maintenance salaries of $12,000 and $50,000 of factory depreciation. How a) fixed overhead.
much is the calculation of manufacturing cost per unit if 500 units had been b) variable overhead.
produced in the current quarter? c) direct selling costs.
a) $224 d) indirect selling costs.
b) $300 49. Which of the following is a direct cost of a hotel?
c) $200 a) meals in the restaurant
d) $324 b) room cleaning
Solution: ($100,000 + $12,000 + $50,000)/500 units= $324 c) room service
43. Which one of the following is an example of a period cost? d) cleaning the lobby
a) a change in benefits for the union workers who work in the Toronto plant 50. Which of the following are period costs?
of a Fortune 1000 manufacturer a) workers wages in the shipping department
b) factory workers wages paid for statutory holidays a) direct, variable, product cost.
c) workers wages in the plant maintenance department b) fixed period cost.
d) workers wages on an assembly line c) fixed product cost.
51. Which of the following statements is true? d) indirect period cost.
a) Advertising is a product cost and a plant manager’s salary is a period cost. 58. Indirect labour is a
b) Advertising is a period cost and a plant manager’s salary is a manufacturing a) direct, variable, product cost.
overhead cost. b) direct, variable, period cost.
c) Advertising is a period cost and a plant manager’s salary is a period cost. c) indirect, variable, product cost.
d) Advertising is a product cost and a plant manager’s salary is a manufacturing d) indirect, fixed or variable, product cost.
overhead cost. 59. Which of the following would most likely be considered direct material?
52. Which of the following is true? a) wood used to make a chair
a) Within the relevant range a valid argument can be made for the assumption of b) lubrication for factory machines
linearity of variable costs. c) glue used to make a chair
b) At the upper and lower limits of the relevant range of company activity, linearity d) cleaning products used in a factory
of variable c) costs is a given. 60. Manufacturing overhead is a
c) The relevant range is reflective of the relevant range of products a company a) direct, variable, product cost.
offers to its customers. b) direct, variable period costs.
d) Fixed costs vary in total within the relevant range. c) indirect, variable, product cost.
53. Which of the following is not true? d) indirect, fixed or variable, product cost.
a) Mixed costs are comprised of both fixed costs and variable costs, and as a result, 61. Fees for office cleaning and maintenance in a factory are
mixed costs increase proportionately with an increase in activity level. a) neither direct nor indirect.
b) Mixed costs change in total, but not proportionately with the change in activity b) fixed product costs.
level. c) variable product costs.
c) An electricity bill is an example of mixed costs. The fixed portion represents the d) fixed or variable product costs.
cost of having the service available and the variable cost is reflective of actual 62. Fees for office telephones are
customer usage. a) fixed period costs.
d) Mixed costs are also known as semi-variable costs. b) mixed period costs.
54. Examples of fixed costs include all but one of the following: c) variable period costs.
a) cost of factory rent for the 12 month contract term. d) direct, fixed, or variable period costs.
b) cost of Janet’s apartment rent during her 3rd year of university. 63. Property taxes for the entire manufacturing facility, including the front office
c) cost of a car rental which includes a fee per km driven. and factory area are
d) a one-week rental of a carpet cleaning machine. a) both fixed and variable product costs.
55. Variable costs b) both direct and indirect costs.
a) vary in total as activity varies. c) both a product and a period cost.
b) vary on a per unit basis as activity varies. d) none of the above.
c) are unpredictable. 64. The relevant range can be commonly understood to mean
d) none of the above. a) the normal range of output (activity) within which the company operates.
56. Which of the following would most likely be considered direct labour? b) the range wherein fixed costs are always fixed.
a) a worker installing components in a computer c) the range wherein variable costs are strictly curvilinear.
b) a maintenance worker d) the range wherein fixed costs are strictly proportional to the level of activity.
c) a security guard 65. Where there is a linear relationship between two variables,
d) a sales person a) the change in the dependent variable yields a predictable, constant change in the
57. The cost of the management accountant working in the front office of a independent variable.
company is a
b) the change in the independent variable yields a predictable, constant change in 72. The high-low method
the dependent variable. a) is a useful means of predicting the highest cost a company will incur in the
c) there is seldom a linear relationship between two variables. operating period.
d) a change in the “Y” variable yields a predictable, constant change in the “X” b) is a useful means of separating fixed and variable elements from a mixed cost.
variable. c) is more time-consuming than the scatter diagram method.
66. Which of the following statements is true? d) is more complex than the use of linear regression analysis.
a) In real life, the curvilinear nature of variable costs is questionable. 73. Critical inputs in using the high-low method include all of the following except
b) In real life, fixed costs are fixed in total and do not change at various activity a) actual activity levels (production levels) for an operating period.
levels. b) actual mixed costs (total costs) corresponding to the various activity levels.
c) Within the relevant range, there is rarely a straight-line relationship for both c) a calculator.
variable and fixed costs. d) a hypothesis for the slope.
d) Within the relevant range the linear assumption is valid and useful for cost Use the following information for questions 74–77.
behaviour analysis. # Machine Maintenance
Month Hours (X) Costs (Y)
67. Outside of the relevant range, which of the following outcomes is unlikely? Jan 3,000 $440
a) It may be difficult for management to change all fixed costs. Feb 4,500 $690
b) Achieving cost efficiency may be difficult. Mar 8,000 $510
c) Total fixed costs will not change. Apr 7,000 $600
d) At a 0% activity level all fixed costs will cease. May 6,000 $550
68. A curvilinear relationship between variable costs and changes in activity levels Jun 9,000 $980
suggests what? Jul 3,500 $840
a) A strictly linear relationship between fixed costs and activity levels is implausible. Aug 5,500 $600
b) A strictly curvilinear relationship between changes in activity levels and variable
costs is possible only within the relevant range.
c) Since the relationship between activity levels and variable costs is linear within 74. Which of the following choices represents the highest and lowest respective
the relevant range and less linear at lower and higher levels outside the relevant coordinates of activity level and corresponding total costs?
range, the straight-line (linear) relationship takes on a curvature in the real world. a) (3,000 hours, $440), (9,000 hours, $980)
d) none of the above b) (9,000 hours, $980), (3,000 hours, $440)
69. Mixed costs are c) ($3,000, 440 hours), ($9,000, 980 hours)
a) costs with both indirect and direct elements. d) ($9,000, 980 hours), ($3,000, 440 hours)
b) costs with both product and period elements. Solution: 9,000 hours is the highest activity level at $980 and 3000 hours is
c) costs with both fixed and variable elements. the lowest activity at $440.
d) none of these. 75. Using the high-low method, what is the slope for this set of data?
70. Mixed costs a) $9
a) change in proportion to changes in activity level. b) $0.09
b) change in total in response to changes in activity level. c) $11.11
c) change proportionately and in total as a result of changes in activity level. d) $540
d) none of these. Solution: ($980 – $440) / (9,000 – 3,000) = $.09
71. To be useful to management accountants for planning and predictive purposes, 76. What does the slope represent?
mixed costs a) the rate at which the X variable changes as a result of the Y variable
a) must be classified into their fixed and variable elements. b) the rate at which the Y variable changes as a result of the X variable
b) must be classified into their direct and indirect elements. c) the rate at which the dependent variable changes as a result of the fixed cost
c) must be classified into their product and period elements. component
d) none of these.
d) the rate at which the independent variable changes as a result of changes in the Solution: Y = $180 + $1.2X
dependent variable 82. Ending finished goods inventory
77. What is the equation of the line using the high-low method and this data? a) appears on a cost of goods manufactured schedule.
a) $980 = 170 + (0.09X) a) for a manufacturing company is equivalent to merchandise inventory for a
b) Y = $170 + (0.09 x 9,000) merchandising company.
c) Y = 170+ ($0.09 X) c) represents the cost of completed goods available for sale to customers.
d) X = 170+ ($0. 09 Y) d) is calculated by adding beginning finished goods inventory to cost of goods sold
Solution: Y = $170 + $.09X and subtracting cost of goods manufactured.
78. A high-low approach to establishing fixed and variable components of costs is 83. Which one of the following is the correct calculation of cost of goods sold for a
most effective when information available is manufacturing company?
a) curvilinear. a) beginning FG inventory – cost of goods manufactured – ending FG inventory
b) erratic and highly fluctuating. b) ending FG inventory – cost of goods manufactured + beginning FG inventory
c) outside of the relevant range. c) beginning FG inventory + cost of goods purchased – ending FG inventory
d) linear. d) beginning FG inventory + cost of goods manufactured – ending FG inventory
Use the following information for questions 79–81. 84. How does a manufacturing company report cost of goods manufactured?
Labour Overhead a) as a current asset on the balance sheet
Month Hours (X) Costs (Y) b) as a component of the raw materials inventory on the balance sheet
Jan 200 $415 c) as a component in the calculation of cost of goods sold on the income statement
Feb 175 $385 d) as an administrative expense on the income statement
Mar 290 $520 85. If you want to know the amounts a company used to calculate, ‘cost of goods
Apr 300 $534 manufactured,’ where would you look?
May 185 $403 a) on the income statement
Jun 265 $490 b) on the Balance Sheet
Jul 160 $372 c) on both the Balance Sheet and income statement
Aug 320 $564 d) only in the managerial accounting records
79. What is the slope of this data, using the high-low method? 86. A merchandising company includes cost of goods purchased in its calculation of
a) $1.76 cost of goods sold. What is the counterpart used by a manufacturing company?
b) $180 a) ending inventory
c) $1.20 b) beginning inventory
d) $0.83 c) cost of goods available for sale
Solution: ($564 – $372) / (320 – 160) = $192/160 = $1.2 d) cost of goods manufactured
80. Which of the following choices represents the highest and lowest respective 87. Cost of goods sold applies to
coordinates of activity level and corresponding total overhead costs? a) only merchandisers' Income Statements.
a) ($372, 160 labour hours), ($564, 320 labour hours) b) only manufacturers' Income Statements.
b) ($564, 320 labour hours), ($372, 160 labour hours) c) both manufacturers’ and merchandisers' Income Statements.
c) (160 labour hours, $372), (320 labour hours, $564) d) manufacturers, merchandisers, and service companies.
d) (320 labour hours, $564), (160 labour hours, $372) 88. How is the cost of goods manufactured calculated?
Solution: 320 labour hours is the highest level of activity at $564 and 160 a) beginning WIP + direct materials used + direct labour + manufacturing overhead
labour hours is the lowest level of activity at $372. + ending WIP
81. What is the equation of the line using the high-low method and this data? b) direct materials used + direct labour + manufacturing overhead – beginning WIP
a) $564 = 180 + (1.2X) + ending WIP
b) X = 180+ ($1.20Y) c) beginning WIP + direct materials used + direct labour + manufacturing overhead –
c) Y = $180 + ($1.2 X) ending WIP
d) Y = $180 + (1.20 x 320)
d) direct materials used + direct labour + manufacturing overhead – ending WIP – 93. Assume Caltreck Manufacturing’s cost of goods manufactured for 2020
beginning WIP amounted to $1,200,000. How much would it report as cost of goods sold for the
89. During 2020, "cost of goods manufactured" was less than the amount of "Total year?
manufacturing costs" for the period. Which statement is true? a) $1,210,000
a) Ending work in process inventory is greater than beginning work in process b) $1,250,000
inventory. c) $1,325,000
b) Ending work in process is less than beginning work in process inventory. d) $1,190,000
c) Ending work in process is equal to the cost of goods manufactured. Solution: ($125,000 + $1,200,000 – $115,000) = $1,210,000
d) Ending work in process is less than beginning finished goods inventory. 94. Hooter Manufacturing Company reported the following year-end information:
90. Hardigan Manufacturing Company reported the following year-end information: Beginning work in process inventory $75,000
beginning work in process inventory, $80,000; cost of goods manufactured, Beginning raw materials inventory 20,000
$980,000; beginning finished goods inventory, $50,000; ending work in process Ending work in process inventory 73,000
inventory, $70,000; and ending finished goods inventory, $40,000. How much is Ending raw materials inventory 23,000
Haridgan’s cost of goods sold for the year? Raw materials purchased 220,000
a) $980,000 Direct labour 170,000
b) $990,000 Manufacturing overhead 80,000
c) $970,000 How much is Hooter Manufacturing’s cost of goods manufactured for the
d) $1,000,000 year?
Solution: ($50,000 + $980,000 – $40,000) = $990,000 a) $470,000
Use the following information for questions 91–93. b) $465,000
Caltreck Manufacturing Inc.'s accounting records reflect the following inventories: c) $469,000
Dec. 31, 2019 Dec. 31, 2020 d) $472,000
Raw materials inventory $100,000 $ 80,000 Solution: ($75,000 + $20,000 + $220,000 – $23,000 + $170,000 + $80,000 –
Work in process inventory 130,000 145,000 $73,000) = $469,000
Finished goods inventory 125,000 115,000 95. What amount is given by the sum of direct materials, direct labour, and
During 2020, Caltreck purchased $950,000 of raw materials, incurred direct labour manufacturing overhead incurred?
costs of $125,000, and incurred manufacturing overhead totalling $160,000. a) total cost of work in process
b) cost of goods available for sale
c) total manufacturing costs
91. How much raw materials is transferred to production during 2020 for Caltreck d) cost of goods manufactured
Manufacturing? 96. What amount is given by the sum of the cost of the beginning work in process
a) $1,240,000 and the total manufacturing costs for the current year?
b) $970,000 a) cost of goods manufactured
c) $950,000 b) cost of goods available for sale
d) $930,000 c) total cost of work in process
Solution: ($100,000 + $950,000 – $80,000) = $970,000 d) cost of goods sold
92. How much is total manufacturing costs incurred during 2020 for Caltreck? 97. What are the components of total manufacturing costs?
a) $1,240,000 a) direct materials and direct labour only
b) $1,255,000 b) direct labour and manufacturing overhead only
c) $1,235,000 c) manufacturing overhead only
d) $1,250,000 d) direct materials, direct labour, and manufacturing overhead
Solution: ($100,000 + $950,000 – $80,000 + $125,000 + $160,000) = 98. Rezell Combines, Inc. has $4,000 of finished goods inventory as of December 31,
$1,255,000 2020. If beginning finished goods inventory was $2,000 and cost of goods sold was
$8,000, how much would Rezell report for cost of goods manufactured?
a) $9,000 b) They become cost of goods sold.
b) $2,000 c) They are reported as selling expenses.
c) $10,000 d) They are deducted from the sales account.
d) $6,000 103. Where would you expect to find ending raw materials inventory?
Solution: ($8,000 – $2,000 + $4,000) = $10,000 a) on the costs of goods manufactured schedule as an addition to raw materials
99. At May 31, 2020, Smythe Inc. has $4,500 in beginning raw materials, purchases, and on the Balance Sheet
$6,000 of direct labour. If manufacturing overhead was $10,500, total b) on the costs of goods manufactured schedule as a subtraction from raw materials
manufacturing costs was $50,500, and total raw material purchases were available for use, and on the Balance Sheet
$36,000, how much is ending amount of raw materials?
c) only on the Balance Sheet
a) $36,000
d) only the costs of goods manufactured schedule
b) $21,000
c) $40,500 104. Which one of the following does not appear on the balance sheet of a
d) $6,500 manufacturing company?
Solution: ($6,000 + $10,500 + $4,500 + $36,000 – $50,500) = $6,500 a) finished goods inventory
100. Costs of goods manufactured of SuperK Company are shown below: b) raw materials inventory
SUPERK COMPANY c) cost of goods manufactured
Cost of Goods Manufactured d) work in process inventory
Year Ending December 31, 2020 105. What amount would you find on financial statements of merchandising
————————————————————————————————————— companies that is referred to as finished goods inventory for a manufacturing
—— company?
Beginning work in process: $15,000 a) purchase
Direct materials: b) cost of goods purchased
Beginning raw materials $14,000 c) merchandise inventory
Raw material purchases 22,000 d) raw materials inventory
Total raw materials available for use 36,000 106. How would you expect to see manufacturing inventories listed on a company’s
Ending raw materials 5,500 balance sheet?
Direct materials used 30,500 a) in alphabetical order
Direct Labour 6,000 b) in order of liquidity
Total manufacturing overhead 10,500 c) in order from largest to smallest
Ending work in process 18,000 d) any order the company desires
Cost of Goods Manufactured $44,000 107. Which of the following is a manufacturing activity?
How much is the total manufacturing cost? a) finished goods being sold directly to the public
a) $20,500 b) developing new products through research and development
b) $23,000 c) converting raw materials into finished goods
c) $47,000 d) all of the above
d) $44,000 108. What is work in process inventory generally described as?
Solution: ($30,500 + $6,000 + $10,500) = $47,000 a) costs applicable to units that have been started in production but are only
101. In a manufacturing company, the cost of direct labour is treated as an expense partially completed
when b) costs associated with the end stage of manufacturing that are almost
a) products are sold. always complete and ready for customers
c) costs strictly associated with direct labour
b) products are transferred into work in process inventory.
d) beginning stage production costs associated with labour costs dealing with
c) wages are paid to the employees.
bringing in raw materials from the shipping docks
d) at month end with accruals for wages.
102. What occurs when inventoriable costs are removed from the balance sheet?
a) They increase operating expenses.
BRIEF Exercises Indicate whether each of the following costs would be classified as prime or
Brief Exercise 109 conversion costs:
Presented below are Truck Company’s monthly manufacturing cost data related to a) ___ Raw materials used to make the product
its personal computer products: b) ___ Direct labour used in the manufacturing of the product
a) Utilities for manufacturing equipment $570,000 c) ___ Factory utilities
b) Raw material (CPU, chips, etc.) 73,000 d) ___ Direct labour used to unload raw materials from the supplier’s
c) Depreciation on manufacturing building 320.000 truck
d) Wages for production workers 770,000 e) ___ Cleaning staff that work only in the factory
f) ___ Factory machinery maintenance
Enter each cost item in the following table, placing an “X” under the appropriate
headings. g) ___ Lubricants for the factory machinery
h) ___ Supervisor of the production process
Product Costs Solution 111
a) prime
Direct Direct Factory
Materials Labour Overhead b) prime or conversion
c) conversion
a)
d) prime
b)
e) conversion
c)
f) conversion
d)
g) conversion
h) conversion
Solution 109
Brief Exercise 112
Presented below are EKP Inc.’s monthly manufacturing cost data
Product Costs
related to its wooden furniture products:
Direct Direct Factory
Materials Labour Overhead a) Security $75,000
a) X b) Factory wages $120,000
b) X c) Factory Utilities $85,000
c) X d) Wood $210,000
d) X Enter each cost item in the following table, placing an ‘X’ under the
appropriate headings.
Brief Exercise 110 Product Costs
Determine whether each of the following costs should be classified as direct Direct Materials Direct Labour Factory Overhead
materials (DM), direct labour (DL), or manufacturing overhead (MO).
a)
a) ___ Depreciation on equipment
b) ___ Table legs used in manufacturing tables b)
c) ___ Wages paid to factory workers c)
d) ___ Factory rent d)
Solution 110
a) MO Solution 112
b) DM
c) DL
Product Costs
d) MO
Direct Materials Direct Labour Factory Overhead
Brief Exercise 111
 a) X Rent $17,000 $17,000
Labour $25,000 $37,500
b) X
Utilities $7,500 $8,500
c) X
d) X Calculate total variable, fixed and mixed costs.
Solution 115
Brief Exercise 113 50,000 units
Describe the main difference between direct materials and indirect materials that 70,000 units
are used in any given production process. Variable Costs = Direct Materials + Labour $75,000 $112,500
Solution 113 Fixed Costs = Depreciation + Rent 24,000 24,000
The main difference is measurability. For most products, measuring materials used Mixed Costs = Selling costs + Utilities 12,500 16,000
is important because it can be translated into a per unit measurement. This assists Brief Exercise 116
management in keeping track of the main amount of materials that are used in The following data was gathered by RGB Industries for the first 6 months of 2020
manufacturing the products themselves. Should any discrepancies occur in these (expressed in thousands):
measurements, management can take action to correct problems. Machine Overhead
Indirect materials are generally those items that are used in the process but cannot Month Hours (X) Costs (Y)
be easily assigned to each unit manufactured. Such items are adhesives, screws, Jan 125 $380
washers and some covering materials such as paint. Feb 80 $329
Management finds it more efficient to monitor such items on a volume rather than Mar 95 $340
a per unit basis. Apr 115 $380
Brief Exercise 114 May 130 $394
Great Motors Ltd. incurred the following costs in 2020 at two different levels of Jun 100 $349
production: Using the high-low method, determine the cost equation for overhead costs.
2500 Units 3500 units Solution 116
Direct Materials $50,000 $70,000 Slope = ($394 – $329)/(130 – 80) = $1.30 per machine hour
Labour $25,000 $35,000 Fixed costs = $394 – ($1.30 x 130) = $225 x $1000 = $225,000
Office Costs $15,000 $17,500 Y = $225,000 + $1.3X
Depreciation $5,000 $5,000 *Alternative calculation for fixed costs: Fixed costs = $329 – ($1.30 x 80) = $225
Rent $14,000 $14,000 Brief Exercise 117
Utilities $7,500 $8,500 Presented below are data related to the shipping costs for the Almond Factory:
Distribution Number of
Classify each cost as variable, fixed, or mixed. Month Costs (Y) Shipments (X)
Jan $4,918 3500
Solution 114 Feb $4,245 2650
Variable Costs – Direct Materials, Labour Mar $5,205 3850
Fixed Costs – Depreciation, Rent Apr $4,532 2999
Mixed Costs – Office Costs, Utilities May $4,544 3002
Brief Exercise 115 Jun $5,025 3650
Anne’s Cupcakes incurred the following costs in 2020 at two different levels of Using the high-low method, determine the cost equation for distributions costs.
production: Solution 117
50,000 Units 75,000 units Slope = ($5205 – $4245) / (3850 – 2650) = $0.80
Direct Materials $50,000 $75,000 Fixed costs = $5205 – ($0.80 x 3850) = $2125
Selling Costs $5,000 $7,500
Depreciation $7,000 $7,000 Y = $225 + $1.3X
*Alternative calculation for fixed costs: Fixed costs = $4245 – ($0.80 x 2650) = $2125 a)
Brief Exercise 118 Direct materials used $35,000
Presented below are incomplete 2020 manufacturing cost data for Supreme Direct labour 72,000
Corporation. Determine the missing amounts. Factory overhead 27,000
Total manufacturing costs $134,000
Direct Materials Direct Labour Factory Total Manufacturing b)
Used Overhead Overhead Costs Total manufacturing costs $730,000
a) $17,000 $89,000 $23,000 ? Less Direct labour (57,000)
b) ? $64,000 $72,000 $336,000 Less Factory overhead (231,000)
c) $117,000 ? $32,000 $278,000 Equals Direct materials used $442,000
c)
Solution 118 Total manufacturing costs $632,000
Direct Materials Direct Labour Factory Total Manufacturing Less Direct materials used (28,000)
Used Overhead Overhead Costs Less Factory overhead (186,000)
a) $17,000 $89,000 $23,000 $129,000 Equals Direct labour $418,000
b) $200,000 $64,000 $72,000 $336,000 Brief Exercise 121
c) $117,000 $129,000 $32,000 $278,000 Presented below are incomplete 2020 manufacturing cost data for Spondo
Corporation. Determine the missing amounts.
Brief Exercise 119
Criba Manufacturing Company has the following data: direct labour $320,000, Work
direct materials used $749,000, total manufacturing overhead $475,000, and Direct Work in Cost of
Direct Factory Total
beginning work in process $36,000. Calculate a) total manufacturing costs and b) Labour in Proce Goods
Materials Overhe Manufactu
total cost of work in process. Overhe Proces ss Manufactu
Used ad ring Costs
Solution 119 ad s (1/1) (12/3 red
a) 1)
Direct labour $ 320,000 a
$120,0 $86,0
Direct materials used 749,000 ) $38,00 $72,00 $43,00 ? ?
00 00
Total manufacturing overhead 475,000 0 0 0
Total manufacturing costs $1,544,000 b
$149,0 $98,0
b) ) $53,00 $90,00 $292,000 ? $321,000
00 00
Beginning work in process $ 36,000 0 0
Total manufacturing costs 1,544,000 c $53,00 $116,0 $121,0 $463,0
$290,000 ? $715,000
Total cost of work in process $1,580,000 ) 0 00 00 00
Brief Exercise 120
Presented below are incomplete 2020 manufacturing cost data for Swartnez Solution 121
Corporation. Determine the missing amounts. Work in
Total Manufacturing Work in Process Cost of Goods
Direct Total Process
Costs (1/1) Manufactured
Materials Direct Factory Manufacturing (12/31)
Used Labour Overhead Costs a) $153,000 $120,000 $86,000 $187,000
a) $35,000 $72,000 $27,000 ? b) $292,000 $127,000 $98,000 $321,000
b) ? $57,000 $231,000 $730,000 c) $290,000 $463,000 $38,000 $715,000
c) $28,000 ? $186,000 $632,000
Solution 120 Brief Exercise 122
Raynor Manufacturing Company has the following data: Current Assets
Direct labour $46,000 Cash $ 102,000
Direct materials used 84,000 Accounts receivable 73,000
Total manufacturing overhead 60,000 Inventories
Ending work in process 30,000 Raw materials $46,000
Beginning work in process 40,000 Work in process 37,000
Finished goods 64,000 147,000
Calculate a) total manufacturing costs and b) cost of goods manufactured. Prepaid expenses 15,000
Solution 122 Total current assets $337,000
a) ANSWER KEY
Direct labour $46,000 Item Ans. Item Ans. Item Ans. Item Ans.
Direct materials used 84,000
Total manufacturing overhead 60,000
1. F 3. F 5. T 7. F
Total manufacturing costs $190,000 2. F 4. T 6. F 8. F
Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.
b) 9. c 29. b 49. b 69. c 89. a
Beginning work in process $ 40,000 10. a 30. a 50. a 70. b 90. b
Total manufacturing costs 190,000 11. c 31. b 51. b 71. a 91. b
Less ending work in process (30,000)
12. c 32. d 52. a 72. b 92. b
Cost of goods manufactured $200,000
13. a 33. d 53. a 73. c 93. a
Brief Exercise 123
Distinguish between the main components of the income statement for a 14. b 34. a 54. c 74. b 94. c
manufacturing company which makes clothing and a retail company that only buys 15. a 35. b 55. a 75. b 95. c
and sells clothing. 16. a 36. d 56. a 76. b 96. c
Solution 123 17. d 37. b 57. b 77. c 97. d
The main difference lies in the manner in which products sold are highlighted in the 18. a 38. a 58. d 78. d 98. c
income statement on the cost of goods section. The manufacturer shows the costs 19. d 39. d 59. a 79. c 99. d
of goods that it sells as Cost of Goods Manufactured while the retail company 20. b 40. d 60. d 80. d 100. c
shows its costs as Purchases. 21. a 41. a 61. a 81. c 101. a
Where inventories are shown, the manufacturer shows its ending inventory as
22. b 42. d 62. b 82. b 102. b
Finished Goods Inventory while the retailer shows it as Ending Merchandise
Inventory.
23. c 43. d 63. c 83. d 103. b
Brief Exercise 124 24. b 44. b 64. a 84. c 104. c
In alphabetical order below are current asset items for Sudler Company as of 25. a 45. a 65. b 85. d 105. c
December 31, 2020. Prepare the current assets section of the company’s 26. d 46. a 66. c 86. d 106. b
balance sheet as of the same date. 27. a 47. c 67. c 87. c 107. c
Accounts receivable $73,000 28. a 48. c 68. c 88. c 108. a
Cash 102,000
Finished goods 64,000
Prepaid expenses 15,000
Raw materials 46,000
Work in process 37,000

Solution 124