Accounting 201 M4 H2 || A+ Verified Solutions.
In its first year of business, Miss Take, the bookkeeper, erroneously recorded $10,000 of product
costs as period costs. Sixty percent of the inventory has been sold. Which of the following are
correct? (Select all that apply.) correct answers Inventory is understated by $4,000
Cost of Goods Sold is understated by $6,000
Twisted Pretzel, Inc. had beginning Work-in-Process Inventory (WIP) of $10,000 and makes
only one product. It incurred the following costs during the year:
Factory production worker wages - $ 70,000
Direct materials - 40,000
Allocated factory rent - 60,000
Allocated factory utilities - 50,000
Sales commissions - 100,000
At the end of the year WIP totaled - $ 4,000.
Calculate the total costs of goods manufactured and transferred to Finished Goods Inventory.
correct answers 226,000
Cost of Goods Manufactured = Beginning WIP + Direct Materials + Direct Labor + Allocated
Manufacturing Overhead - Ending WIP
Review the partial financial statements to determine whether the business is a manufacturing,
merchandising (Distribution or Retail), or service (including Financial Service Firms)
organization.
COGS = Cost of Goods Sold
1. Company #1 is a:
2. Company #2 is a:
3. Company #3 is a: correct answers 1. Merchandising Organization
2. Manufacturing Organization
3. Service Organization
Just in Thyme, Inc., bottles and sells spices. Identify whether each cost is a Product Cost or
Period Cost.
1. Cost of spices
2. Salary of CEO, Justin Thyme
3. Cost of bottlers' wages correct answers 1. Product Cost
2. Period Cost
3. Product Cost
For a manufacturing company, which of the following is an example of a period cost rather than
a product cost? correct answers Wages of sales persons
French Confection, Inc., allocates overhead using direct labor hours as the allocation activity.
The following information was estimated at the beginning of the year:
Estimated Manufacturing Overhead - $100,000
Estimated Machine Hours - 4,000
Estimated Direct Labor Hours - 5,000
, During the year, the bakery department used 800 machine hours and 2,000 direct labor hours.
How much manufacturing overhead was allocated to the bakery department during the year?
correct answers 40,000.00
(100,,000) = 20
(20 * 2,000) = 40,000
Salt & Buttery, Inc., is a catering business. Direct labor costs are $16 per hour and overhead is
allocated to jobs at a rate of $20 per direct labor hour. Catering for the Morris Lest party cost
$800 for direct materials and took 7 direct labor hours. Calculate the total cost of the Morris Lest
party. correct answers 1,052
(16 * 7) = 112 + (20 * 7) = 252 + 800 = 1052
Total Costs = Direct Labor + Direct Material + Allocated Overhead
Direct Labor = Wage per hour * Number of hours
Allocated Overhead = Predetermined Overhead Rate per hour * Number of direct labor hours
Hindenburger, Inc., began operations on January 1. It made 5,000 burgers and sold 4,000 of
them. Hindenburger incurred the following costs:
Raw materials - $4,000
Wages of production worker - 8,000
Rent for corporate headquarters - 5,000
Depreciation on manufacturing equipment - 1,000
Commissions paid to sales people - 4,000
Calculate the Total Product Cost for the year ended December 31. correct answers 13,000
4,000 + 8,000 + 1,000 = 13,000
Total Product Cost = Direct Material + Direct Labor + Allocated Overhead (related to
production)
Boris' Car Loft, Inc., began operations on January 1. It manufactures 10,000 automobiles and
sold 8,000. It incurred the following costs during the year:
Factory worker wages - $ 50,000
Chief Financial Officer's salary - 500,000
Factory rent - 10,000
Factory materials - 40,000
Corporate headquarters' rent - 200,000
Calculate the total product cost for the year ended December 31. correct answers 100,000
50,000 + 10,000 + 40,000 = 100,000
Total Product Cost = Direct Material + Direct Labor + Allocated Overhead (related to
production)
All of the following companies would most likely use process costing EXCEPT correct answers
Ryan Homebuilders, Inc.
Frying Dutchman, Inc. had beginning Work-in-Process Inventory (WIP) of $8,000. It incurred
the following costs during the year:
Factory production worker wages - $ 40,000
Direct materials - 70,000
