Furra College Hawassa Campus

Department of Accounting & Finance

Project Assignment of Cost & Management I

Name ______________________ ID _________ Section ____________

Part I: CHOOSE THE BEST ANSWER FROM A GIVEN ALTERNATIVES
1. Which of the following is not a manufacturing cost:
a) Direct materials B. Manufacturing overhead
b) Administrative costs D. Direct labor
2. Costs that are taken directly to the income statement as expenses in the period in which they
are incurred are:
a) Product costs B. Prime costs C. Sunk costs D. Period costs
3. The potential benefit given up when one alternative is selected over another is a:
a) Prime cost B. Sunk cost C. Opportunity cost D. Direct cost
4. A direct cost is one which:
a) Is not worth the effort of tracing to a specific cost object
b) Remains constant no matter the activity level
c) Can be easily and conveniently traced to a specific cost object
d) Always sunk
5. At production level of 2000 units a cost is $20,000; at production level of 4500 units the
same cost is $45,000. This is an example of a:
a) Variable cost B. Direct cost C. Fixed cost D. Sunk cost
6. Which of the following is an example of a fixed cost in a manufacturing company:
a) The cost of raw materials
b) The cost of electricity for running machines
c) Wages of assembly line workers
d) Depreciation on factory equipment
7. Mary works at a convenience store and is paid $400 a week. She considers enrolling in a
college to earn a degree. She thinks she will have to quit her job if she goes to college. The
wages that she will lose if she chooses college are:
a) Sunk cost B. Opportunity cost C. Indirect cost D. Prime cost
8. Which cost is not relevant to the decision whether to purchase a new chocolate dipping
machine or continue using the old one:
a) The cost of the new machine
b) Lower maintenance costs for the new machine
 c) The cost of the old machine
d) Additional training required for operating the new machine
9. Conversion costs consist of:
e) Direct materials and direct labor
f) Direct materials and manufacturing overhead
g) Manufacturing and nonmanufacturing costs
h) Direct labor and manufacturing overhead
10. A cost that goes into Work in Process inventory and then into the Finished Goods inventory
before appearing on the income statement as cost of goods sold is a:
i) Period cost
j) Fixed cost
k) Opportunity cost
l) Product cost
11. Job WR53 at NW Fab, Inc. required $200 of direct materials and 10 direct labor hours at $15
per hour. Estimated total overhead for the year was $760,000 and estimated direct labor
hours were 20,000. What would be recorded as the cost of job WR53?
a. $200. B. $350. C. $380.D. $730.
12. Job WR53 at NW Fab, Inc. required $200 of direct materials and 10 direct labor hours at $15
per hour. Estimated total overhead for the year was $760,000 and estimated direct labor
hours were 19,000. What would be recorded as the cost of job WR53?
a. $200. B. $350. C. $750. D. $730.
13. If overhead contains fixed costs, what will happen to the predetermined overhead rate if
lower unit sales volume is expected?
b. The predetermined overhead rate will likely increase.
c. The predetermined overhead rate would be unaffected.
d. The predetermined overhead rate will likely decrease
e. None of the above
14. If overhead contains fixed costs, what will happen to product costs computed by the
accounting system if lower unit sales volume is expected?
f. Product costs will likely increase.
g. Product costs would be unaffected.
h. Product costs will likely decrease.
i. None of the above
15. Tiger, Inc. had actual manufacturing overhead costs of $1,210,000 and a predetermined
overhead rate of $4.00 per machine hour. Tiger, Inc. worked 290,000 machine hours during
the period. Tiger’s manufacturing overhead is
 a. $50,000 over applied.
b. $50,000 under applied.
c. $60,000 over applied.
d. $60,000 under applied.
16. Crest Winery in Woodinville leases an automatic corking machine for $100,000 per year. If
run at full capacity, it can cork 50,000 cases of wine per year. The company has estimated
40,000 cases of wine will be produced and sold next year. What is the predetermined
overhead rate if it is based on the estimated number of cases of wine?
j. $2.00 per case.
k. $2.50 per case.
l. $4.00 per case.
m. None of the above
17. Crest Winery in Woodinville leases an automatic corking machine for $100,000 per year. If
run at full capacity, it can cork 50,000 cases of wine per year. The company has estimated
40,000 cases of wine will be produced and sold next year. What is the predetermined
overhead rate if it is based on the number of cases of wine at capacity?
n. $2.00 per case.O.$2.50 per case. P $4.00 per caseQ.None of the above
18. When capacity is used in the denominator in the predetermined rate, what happens to the
predetermined overhead rate as estimated activity decreases
o. The predetermined overhead rate goes up when activity goes down.
p. The predetermined overhead rate stays the same; it is not affected by changes in
activity.
q. The predetermined overhead rate goes down when activity goes down.
r. None of the above
19. When estimated activity is used in the denominator in the predetermined rate, what happens
to the predetermined overhead rate as estimated activity decreases?
s. The predetermined overhead rate goes up when activity goes down.
t. The predetermined overhead rate stays the same; it is not affected by changes in
activity.
u. The predetermined overhead rate goes down when activity goes down.
v. None of the above
20. Jacobs Company's Assembly Department has materials cost at $4 per unit and conversion
cost at $8 per unit. There are 9,000 units in ending work in process, all of which are 70%
complete as to conversion costs. What are the total costs assigned to inventory?
a) $50,400 B. $86,400 C. $75,600 D. $108,000
21. If beginning work in process is 2,000 units, ending work in process is 1,000 units, and the
units accounted for equals 5,000 units, what are the units started into production?
a) 7,000 B. 6,000 C. 3,000 D.4,000
22. Which of the following would not appear as a debit in the Work in Process account of a
second department in a two stage production process?
a) Materials used
b) Overhead applied
c) Labor assigned
d) Cost of products transferred out
23. One characteristic of products that are mass-produced in a continuous production process is
that
a) The products are identical or very similar in nature.
b) They are grouped in batches.
c) They are produced at the time an order is received.
d) Their costs are accumulated on job cost sheets
24. Which of the following would not appear as a debit in the Work in Process account of a
second department in a two stage production process?
a) Materials used
b) Overhead applied
c) Labor assigned
d) cost of products transferred out
Use the following information for questions 25–28.
In the month of June, department X had 10,000 units in beginning work in process that were
70% complete. During June, 40,000 units were transferred into production from another
department. At the end of June, there were 5,000 units in ending work in process that were 40%
complete. Materials are added at the beginning of the process, while conversion costs are
incurred uniformly throughout the process
25. How many units were transferred out of the process in June?
a) 40,000 units
b) 35,000 units
c) 45,000 units
d) 50,000 units
26. The equivalent units of production for materials for June were
a) 45,000 equivalent units.
b) 50,000 equivalent units.
c) 52,000 equivalent units.
d) 40,000 equivalent units
27. The equivalent units of production for conversion costs for June were
a) 40,000 equivalent units.
b) 47,000 equivalent units.
c) 45,000 equivalent units.
d) 50,000 equivalent units.
28. A process cost accounting system is most appropriate when
 a) A variety of different products are produced, each one requiring different types of
materials, labor, and overhead.
b) The focus of attention is on a particular job or order.
c) Similar products are mass-produced.
d) Individual products are custom made to the specification of customers
29. Which of the following cost elements occurs in a process costing system?
a) Direct materials
b) Direct labor
c) Manufacturing overhead
d) All of these

30. The account maintained by a manufacturing business for inventory of goods in the process of
manufacture is:
A. Finished goods C. Work in process
B. Materials D. None

31. If the factory overhead account has a credit balance, factory overhead is said to be:

A. Under applied C. Under absorbed

B. Over applied D. None of the above

32. For which of the following would the job order cost system be appropriate?

A. Antique furniture repair shop C. coal manufactures

B. Rubber manufactures D. All of the above

33. Which of the following is not a volume based out driver?

A. Machines hours C. Direct labor costs
B. Direct labor hours D. None of the above

34. When a job is completed and the client is billed, the costs are trampled to what account in a
cost accounting system for a service enterprise?
A. Accounts payable C. Purchase account
B. Cost of service account D. None of the above

35. Product costing in a manufacturing firm is the process of:

A. Accumulating the companies period costs

B. Allocating costs among the organizational departments
C. Placing a value on the company's fixed assets
D. Assigning costs to the organizations inventory
E. Assigning costs to the company's financial statement
36. XYZ company incurred Br 50,000 of direct labor and Br 2000 of indirect labor the proper
journal entry to record there events would include a debit to work in process for:
A. Br 0 because work in process should be credited
B. Br 0 because work in process is not affected
C. Br 2000
D. Br 50,000
E. Br 52,000
37. ABC company, which applies overhead at rate of 150% of direct labor cost, began work on
job no 101 during February. The job was completed in March and sold during April, having
accumulated direct material and labor chapter of Br. 15,000 and Br 6000 respectively. On the
bases of this information, the total overhead applied to job no 101 amounted to:
A. Br 0 D. Br 8000
B. Br 4000 E. Br 9000 C. Br 6000
38. The left side of the manufacturing overhead amount is used to accumulate
A. actual manufacturing overhead costs ad incurred throughout the accounting period
B. Overhead applied to work in process inventory
C. under applied overhead D. Predetermined overhead E. Over applied overhead
39. As production takes place, all manufacturing costs are added to the:
A. work in process inventory account
B. Manufacturing overhead inventory account
C. Cost of goods sold account
D. Finished goods inventory account
E. Production labor account
40. A print shop would likely utilize
A. Job -order costly B. Process costing C. Job-order brightly
D. Process budget E. Joint costing
41. A typical job-cost sheet would practice information about all of the following items related to
an order except.
A. the art of direct materials used B. administration costs C. Direct labor costs incurred
D. Applied manufacturing overhead E. Direct labor hearts worked

42. Walton manufacturing recently sold goods that cost Br 35,000 for Br 42,000 cash. The
journal entries to record this transaction would include:
A. A credit to work in process inventory for Br 35,000
B. a debit to sales account for Br 42,000
C. A credit to profit on sales for Br 7000
D. A debit to finished goods inventory for Br 35,000
E. A credit to sales revenue for Br 42,000

43. TOT Company worked on four jobs during its first year of operations: No 410,402,403 and
404 Nos. 401 and 402 were completed by year end, and no 401 was sold at a profit of 40%
 cost. A review of job no 403's cost sheet revealed direct materials charges of Br 20,000 and
total manufacturing costs of Br. 25,000. It Tokyo company applies overhead at 150% of
direct labor cost, the overhead applied to job no 403 must have been:
A. Br 0 B. Br 2000 C. Br 3000 D. Br 3333 E. Br 5000

44. Which of the following entries walled not likely be a user of job costing system?
A. Custom furniture manufactories B. Consuming firms C. Hospitals D. Law firms
E. None of the above, as all are likely users
The following data apply to question # 45 through 47.
Selected data concerning the past fiscal year’s operations of the Eyoha Manufacturing Company
are presented below:
Inventories
Beginning Ending
Direct materials Br.75, 000 Br.85, 000
Work in process 80, 000 30, 000
Finished goods 90, 000 110,000
Other data follows:
Direct materials used……………………………………..Br.326, 000
Total manufacturing costs charged to production…………… 686, 000*
* Include direct materials, direct labor, and factory overhead applied at the rate of 60% of
direct labor cost. Assume no under or over applied manufacturing overhead.
45. The cost of direct materials purchased during the year amounted to:
A. Br.411, 000 D. Br.336, 000
B. Br.360, 000 E. None of the above
C Br.316, 000

46. Direct labor costs charged to production during the year amounted to:
A. Br.135, 000 D. Br.216, 000
B. Br.225, 000 E. None of the above
C Br.360, 000

47. The costs of goods manufactured during the year was

A. Br.636, 000 D. Br.716, 000
B. Br.766, 000 E. None of the above
C Br.736, 000
48. All of the following statements are correct when referring to job order costing except:
A. All the costs appearing on a job cost sheet are actual costs.
B. Indirect materials are not charged to a specific job.
C. Job order costing would be appropriate for a textbook publisher.
D. Job order costing is applicable to those industries in which work is done against orders
received from customers.
 E. None of the above.

II. Exercises

1. The related data that follow relate to the Berger furniture company

Direct material purchased ---------------------Br 160,000

Direct material used --------------------------- 79,000
Direct labor-------------------------------------- 170,000
Manufacturing overhead incurred ---------- 100.000
Manufacturing overhead applied ----------- 90,000

During the year, products costing Br 310,000 were completed, and products costing Br 316,000
were sold for Br 455,000
Required: propose journal entries to record the preceding transaction and events.

2. Company which uses a job costing system is a labor intensive firm, with many skilled crafts
people on the payroll. Job No 789 was the only job in process on January 1, having costs of Br
22,500 as of that date: Direct materials used and direct labor incurred January were:

Job No Direct Materials Direct Labour

Job. No 789 Br 2000 Br 6000
Job No 790 9000 10,000
Job no 791 14,000 8000

Job no 791 was the only job in production as of January 31

Required
A. Should mono company use direct labor or machine hours as a cost driver why?
B. Assume that the company decided to use direct labor as its art driver. If the budgeted
amount of direct labor and manufacturing overhead are anticipated to be Br 200,000 and
Br 300,000 respectively. What is the firm's predetermined overhead rate?
C. Compute the cost of work in process inventory as of January 31
D. Compute the cost of completed jobs during January
E. Suppose that the company sold its completed jobs, adding a 40% markup to cost. How
much would the firm report as ( 1) art of goods sold and ( 2) sales revenue?

2. Consider the following information for Arsema Dany Company, factious company, which is
a manufacture of quality clogs and managed by Mr. Binda.
Item Cost
a) Sandpaper, nails, and varnishes $ 8,400
b) Leather 140,000
c) Factory rent (Lease) 12,000
d) Labor-cutting 210,000
e) Supervisor’s salary 15,000
f) Maintenance and depreciation (factory, fixed) 2,000
g) Utilities-factory 6,000
h) Binda’s salary (general manger) 28,000
i) Labor assembling 175,000
J) Sales commissions to dealers 10,500
K) Shipping costs 7,000
L) Administrative manager’s salary 20,000
M) Office supplies 100
N) Administrative secretary's salary 10,000
O) Wood 70,000
P) Advertising 1,000

Required: - identify the following costs:

1. Direct materials costs 5. Administrative Costs
2. Direct labor costs 6. Prime costs, and
3. Manufacturing overhead costs 7. Conversion costs.
4. Marketing costs