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True/False

1.Manufacturing overhead is an indirect cost with respect to units of product.

Level: Medium LO: 1 Ans: T

2. Depreciation on office equipment would not be included in the cost of goods manufactured.

Level: Easy LO: 2,4 Ans: T

3. Rent on a factory building used in the production process would be classified as a period cost and as a

fixed cost.

Level: Medium LO: 2,5 Ans: F

4. Period costs are found only in manufacturing companies, not in merchandising companies.

Level: Medium LO: 2 Ans: F

5. Depreciation on equipment a company uses in its selling and administrative activities would be

classified as a product cost.

Level: Medium LO: 2 Ans: F

6. If the finished goods inventory increases between the beginning and the end of a period, then the cost

of goods manufactured is smaller than the cost of goods sold.

Level: Hard LO: 3,4 Ans: F

7. The cost of goods manufactured is calculated by adding the amount of work in process at the end of the

year to the cost of raw materials used, direct labor worked, and manufacturing overhead incurred for the

year and then subtracting work in process at the beginning of the year.

Level: Medium LO: 4 Ans: F

8. A publisher that sells its books through agents who are paid a constant percentage commission on each

book sold would classify the commissions as a fixed cost.

Level: Medium LO: 5 Ans: F

9. Variable costs per unit are affected by changes in activity.

Level: Easy LO: 5 Ans: F

Brewer,IntroductiontoManagerialAccounting,3/e

10. A cost is either direct or indirect. The classification will not change if the cost object changes.

Level: Medium LO: 6 Ans: F

11. The amount that a manufacturing company could earn by renting unused portions of its warehouse is

an example of an opportunity cost.

Level: Easy LO: 7 Ans: T

MultipleChoice

12.Indirect labor is a part of:

A) Prime cost.

B) Conversion cost.

C) Period cost.

D) Nonmanufacturing cost.

Source: CPA, adapted

Level: Medium LO: 1,2 Ans: B

13. The cost of lubricants used to grease a production machine in a manufacturing company is an example

of a(n):

A) period cost.

B) direct material cost.

C) indirect material cost.

D) none of the above.

Level: Easy LO: 1,2 Ans: C

14. The salary paid to the president of King Company would be classified on the income statement as

a(n):

A) administrative expense.

B) direct labor cost.

C) manufacturing overhead cost.

D) selling expense.

Level: Easy LO: 1 Ans: A

Brewer,IntroductiontoManagerialAccounting,3/e

A) A above

B) B above

C) C above

D) D above

Source: CPA, adapted

Level: Easy LO: 1 Ans: C

16. Direct material cost is a:

A) A above

B) B above

C) C above

D) D above

Source: CPA, adapted

Level: Medium LO: 1 Ans: B

17. Prime cost and conversion cost share what common element of total cost?

A) Direct materials.

B) Direct labor.

C) Variable overhead.

D) Fixed overhead.

Source: CPA, adapted

Level: Easy LO: 1 Ans: B

18. Prime cost consists of:

A) direct labor and manufacturing overhead.

B) direct materials and manufacturing overhead.

C) direct materials and direct labor.

D) direct materials, direct labor and manufacturing overhead.

Level: Easy LO: 1 Ans: C

Brewer,IntroductiontoManagerialAccounting,3/e

A) A above

B) B above

C) C above

D) D above

Source: CPA, adapted

Level: Medium LO: 1 Ans: D

20. Property taxes on a companys factory building would be classified as a(n):

A) product cost.

B) opportunity cost.

C) period cost.

D) variable cost.

Level: Easy LO: 2,5,7 Ans: A

21. Depreciation on a personal computer used in the marketing department of a manufacturing firm would

be classified as:

A) a product cost that is fixed with respect to the companys output.

B) a period cost that is fixed with respect to the companys output.

C) a product cost that is variable with respect to the companys output.

D) a period cost that is varaible with respect to the companys output.

Level: Medium LO: 2,5 Ans: B

22. The nursing station on the fourth floor of Central Hospital is responsible for the care of patients who

have undergone orthopedic surgery. The costs of drugs administered by the nursing station to patients

would be classified as:

A) direct costs of the patients.

B) indirect costs of the patients.

C) overhead costs of the nursing station.

D) period costs of the hospital.

Level: Hard LO: 2,6 Ans: A

23. All of the following would be classified as product costs except:

A) property taxes on production equipment.

B) insurance on factory machinery.

C) salaries of the advertising staff.

D) wages of machine operators.

Level: Easy LO: 2 Ans: C

Brewer,IntroductiontoManagerialAccounting,3/e

A) only if goods are partially completed at the end of the period.

B) only if goods are unsold at the end of a period.

C) only if goods are partially completed or are unsold at the end of a period.

D) only in merchandising firms.

Level: Medium LO: 2 Ans: C

25. Ross Corporation shipped finished goods to a customer on credit, but the sale was not recorded and

the costs of the finished goods were incorrectly included on the periods balance sheet as part of the

finished goods inventory. Which one of the following statements is correct concerning the effects of this

error?

A) Accounts receivable was not affected, inventory was overstated, sales were understated, and cost of

goods sold was understated.

B) Accounts receivable was understated, inventory was not affected, sales were understated, and cost of

goods sold was understated.

C) Accounts receivable was understated, inventory was overstated, sales were understated, and cost of

goods sold was overstated.

D) Accounts receivable was understated, inventory was overstated, sales were understated, and cost of

goods sold was understated.

Source: CMA, adapted

Level: Easy LO: 3 Ans: D

26. Data for Cost A and Cost B are as follows:

A) Cost A is fixed, Cost B is variable.

B) Cost A is variable, Cost B is fixed.

C) Both Cost A and Cost B are variable.

D) Both Cost A and Cost B are fixed.

Level: Medium LO: 5 Ans: B

Brewer,IntroductiontoManagerialAccounting,3/e

A) will increase with increases in activity.

B) will decrease with increases in activity.

C) are not affected by activity.

D) should be ignored in making decisions since they cannot change.

Level: Medium LO: 5 Ans: B

28. The costs of staffing and operating the accounting department at Central Hospital would be

considered by the Department of Surgery to be:

A) direct costs.

B) indirect costs.

C) incremental costs.

D) opportunity costs.

Level: Hard LO: 6,7 Ans: B

29. A cost incurred in the past that is not relevant to any current decision is classified as a(n):

A) period cost.

B) opportunity cost.

C) sunk cost.

D) differential cost.

Level: Easy LO: 7 Ans: C

30. Differential costs can:

A) only be fixed costs.

B) only be variable costs.

C) be either fixed or variable.

D) be incremental but not decremental.

Level: Easy LO: 7 Ans: C

31. John Johnson decided to leave his former job where he earned $12 per hour to go to a new job where

he will earn $13 per hour. In the decision process, the former wage of $12 per hour would be classified as

a(n):

A) sunk cost.

B) direct cost.

C) fixed cost.

D) opportunity cost.

Level: Easy LO: 7 Ans: D

32. The term that refers to costs incurred in the past that are not relevant to a decision is:

A) marginal cost.

B) indirect cost.

C) period cost.

D) sunk cost.

Level: Easy LO: 7 Ans: D

Brewer,IntroductiontoManagerialAccounting,3/e

A) $97,000

B) $167,000

C) $102,000

D) $61,000

Level: Medium LO: 1,2 Ans: A

34. The following costs were incurred in February:

A) $59,000

B) $80,000

C) $53,000

D) $139,000

Level: Medium LO: 1,2 Ans: C

35. The following costs were incurred in March:

A) $88,000

B) $38,000

C) $136,000

D) $84,000

Level: Medium LO: 1,2 Ans: D

Brewer,IntroductiontoManagerialAccounting,3/e

A) $86,000

B) $65,000

C) $47,000

D) $127,000

Level: Medium LO: 1,2 Ans: B

37. The following costs were incurred in February:

A) $71,000

B) $32,000

C) $113,000

D) $57,000

Level: Medium LO: 1,2 Ans: D

38. The following costs were incurred in March:

A) $63,000

B) $107,000

C) $38,000

D) $77,000

Level: Medium LO: 1,2 Ans: A

Brewer,IntroductiontoManagerialAccounting,3/e

39. Aable Companys manufacturing overhead is 20% of its total conversion costs. If direct labor is

$45,000 and if direct materials are $53,000, the manufacturing overhead is:

A) $11,250

B) $13,250

C) $180,000

D) $24,500

Level: Hard LO: 1 Ans: A

40. Abair Companys manufacturing overhead is 20% of its total conversion costs. If direct labor is

$38,000 and if direct materials are $35,000, the manufacturing overhead is:

A) $18,250

B) $9,500

C) $8,750

D) $152,000

Level: Hard LO: 1 Ans: B

41. Abbey Companys manufacturing overhead is 60% of its total conversion costs. If direct labor is

$35,000 and if direct materials are $55,000, the manufacturing overhead is:

A) $135,000

B) $23,333

C) $82,500

D) $52,500

Level: Hard LO: 1 Ans: D

42. During the month of January, direct labor cost totaled $17,000 and direct labor cost was 60% of prime

cost. If total manufacturing costs during January were $82,000, the manufacturing overhead was:

A) $11,333

B) $53,667

C) $28,333

D) $65,000

Level: Hard LO: 1 Ans: B

43. During the month of February, direct labor cost totaled $13,000 and direct labor cost was 40% of

prime cost. If total manufacturing costs during February were $80,000, the manufacturing overhead was:

A) $32,500

B) $19,500

C) $67,000

D) $47,500

Level: Hard LO: 1 Ans: D

Brewer,IntroductiontoManagerialAccounting,3/e

44. During the month of March, direct labor cost totaled $17,000 and direct labor cost was 70% of prime

cost. If total manufacturing costs during March were $88,000, the manufacturing overhead was:

A) $24,286

B) $71,000

C) $63,714

D) $7,286

Level: Hard LO: 1 Ans: C

45. Knowel Companys direct labor is 40 percent of its conversion cost. If the manufacturing overhead

cost for the last period was $60,000 and the direct materials cost was $30,000, the direct labor cost was:

A) $90,000

B) $20,000

C) $60,000

D) $40,000

Level: Hard LO: 1 Ans: D

46. In January direct labor was 40% percent of conversion cost. If the manufacturing overhead cost for

the month was $78,000 and the direct materials cost was $22,000, the direct labor cost was:

A) $14,667

B) $52,000

C) $33,000

D) $117,000

Level: Hard LO: 1 Ans: B

47. In February direct labor was 60% percent of conversion cost. If the manufacturing overhead cost for

the month was $78,000 and the direct materials cost was $22,000, the direct labor cost was:

A) $52,000

B) $14,667

C) $117,000

D) $33,000

Level: Hard LO: 1 Ans: C

48. In March direct labor was 60% percent of conversion cost. If the manufacturing overhead cost for the

month was $38,000 and the direct materials cost was $32,000, the direct labor cost was:

A) $21,333

B) $48,000

C) $25,333

D) $57,000

Level: Hard LO: 1 Ans: D

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49. Crossland Companys direct labor cost is 30% of its conversion cost. If the manufacturing overhead

cost for the last period was $49,000 and the direct materials cost was $20,000, the direct labor cost was:

A) $ 6,000

B) $14,700

C) $21,000

D) $34,000

Level: Hard LO: 1 Ans: C

50. CF Company manufactures wooden rocking chairs. CF identified the following three material costs in

its production process for July: $100,000 for springs for the rocking mechanism; two springs at a cost of

$10 each are used in each chair; $1,700 for glue used as needed from one gallon containers; and $500 for

stain used to touch up spots on the chairs. The total cost that should have been assigned to indirect

material for July was:

A) $102,200

B) $500

C) $2,200

D) $1,700

Level: Medium LO: 1 Ans: C

51. Fab Co. manufactures textiles. Fabs manufacturing costs last year included the following salaries and

wages:

A) $195,000

B) $165,000

C) $150,000

D) $120,000

Source: CPA, adapted

Level: Medium LO: 1 Ans: D

52. A manufacturing company has provided the following cost data for a recent period:

A) $18,000

B) $26,000

C) $30,000

D) $34,000

Source: CIMA, adapted

Brewer,IntroductiontoManagerialAccounting,3/e

11

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53. A manufacturing company prepays its insurance coverage for a three-year period. The premium for

the three years is $3,000 and is paid at the beginning of the first year. Three-fourths of the premium

applies to factory operations and one-fourth applies to selling and administrative activities. What amounts

should be considered product and period costs respectively for the first year of coverage?

A) A above

B) B above

C) C above

D) D above

Level: Hard LO: 2 Ans: D

54. Last month a manufacturing company had the following operating results:

A) $371,000

B) $459,000

C) $383,000

D) $377,000

Level: Hard LO: 3,4 Ans: A

55. Last month a manufacturing company had the following operating results:

A) $375,000

B) $414,000

C) $399,000

D) $351,000

Level: Hard LO: 3,4 Ans: D

Brewer,IntroductiontoManagerialAccounting,3/e

13

56. Gabert Inc. is a merchandising company. Last month the companys merchandise purchases totaled

$68,000. The companys beginning merchandise inventory was $17,000 and its ending merchandise

inventory was $13,000. What was the companys cost of goods sold for the month?

A) $72,000

B) $68,000

C) $98,000

D) $64,000

Level: Easy LO: 3 Ans: A

57. Haag Inc. is a merchandising company. Last month the companys cost of goods sold was $86,000.

The companys beginning merchandise inventory was $20,000 and its ending merchandise inventory was

$21,000. What was the total amount of the companys merchandise purchases for the month?

A) $86,000

B) $127,000

C) $87,000

D) $85,000

Level: Medium LO: 3 Ans: C

58. During February, the cost of goods manufactured was $83,000. The beginning finished goods

inventory was $14,000 and the ending finished goods inventory was $13,000. What was the cost of goods

sold for the month?

A) $83,000

B) $110,000

C) $82,000

D) $84,000

Level: Easy LO: 3 Ans: D

59. During March, the cost of goods manufactured was $62,000. The beginning finished goods inventory

was $11,000 and the ending finished goods inventory was $19,000. What was the cost of goods sold for

the month?

A) $70,000

B) $92,000

C) $54,000

D) $62,000

Level: Easy LO: 3 Ans: C

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Brewer,IntroductiontoManagerialAccounting,3/e

60. The following information is taken from the records of CL Company for last year:

What are the correct amounts for direct labor and ending work in process inventory?

A) A above

B) B above

C) C above

D) D above

Level: Hard LO: 4 Ans: D

61. The following information is taken from the records of DW Company for last year:

A) $24,000

B) $2,000

C) $22,000

D) $3,000

Level: Hard LO: 4 Ans: B

Brewer,IntroductiontoManagerialAccounting,3/e

15

62. Using the following data for February, calculate the cost of goods manufactured:

A) $78,000

B) $85,000

C) $72,000

D) $75,000

Level: Medium LO: 4 Ans: C

63. Using the following data for March, calculate the cost of goods manufactured:

A) $74,000

B) $86,000

C) $76,000

D) $75,000

Level: Medium LO: 4 Ans: A

Use the following information to answer 64-65

Clyde Company has provided the following data for the month of November:

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Brewer,IntroductiontoManagerialAccounting,3/e

17

A) $11,000

B) $23,000

C) $10,000

D) $12,000

Level: Hard LO: 2,4Ans:A

65. If the net operating income was $40,000, then the beginning finished goods inventory was:

A) $22,000

B) $9,000

C) $42,000

D) $1,000

Level: Hard LO: 2,3,4Ans:D

Use the following for questions 66-69

The following data (in thousands of dollars) have been taken from the accounting records of Karsen

Corporation for the just completed year.

66. The cost of the raw materials used in production during the year (in thousands of dollars) was:

A) $230

B) $220

C) $160

D) $260

Level: Medium LO: 2,3,4Ans:B

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Brewer,IntroductiontoManagerialAccounting,3/e

67. The cost of goods manufactured (finished) for the year (in thousands of dollars) was:

A) $590

B) $650

C) $660

D) $570

Level: Medium LO: 2,3,4 Ans:A

68. The cost of goods sold for the year (in thousands of dollars) was:

A) $680

B) $540

C) $640

D) $730

Level: Medium LO: 2,3,4Ans:B

69. The net operating income for the year (in thousands of dollars) was:

A) $180

B) $170

C) $390

D) $190

Level: Medium LO: 2,3,4 Ans:A

Use the following information to answer 70-73

The following data (in thousands of dollars) have been taken from the accounting records of Karsten

Corporation for the just completed year.

Brewer,IntroductiontoManagerialAccounting,3/e

19

70. The cost of the raw materials used in production during the year (in thousands of dollars) was:

A) $130

B) $170

C) $140

D) $60

Level: Medium LO: 2,3,4Ans:C

71. The cost of goods manufactured (finished) for the year (in thousands of dollars) was:

A) $530

B) $540

C) $470

D) $570

Level: Medium LO: 2,3,4Ans:C

72. The cost of goods sold for the year (in thousands of dollars) was:

A) $490

B) $450

C) $620

D) $600

Level: Medium LO: 2,3,4Ans:A

73. The net operating income for the year (in thousands of dollars) was:

A) $170

B) $140

C) $500

D) $200

Level: Medium LO: 2,3,4Ans:A

Use the following information to answer 74-77

The following data (in thousands of dollars) have been taken from the accounting records of Karstone

Corporation for the just completed year.

20

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74. The cost of the raw materials used in production during the year (in thousands of dollars) was:

A) $180

B) $140

C) $160

D) $170

Level: Medium LO: 2,3,4 Ans:B

75. The cost of goods manufactured (finished) for the year (in thousands of dollars) was:

A) $580

B) $600

C) $500

D) $630

Level: Medium LO: 2,3,4Ans:B

76. The cost of goods sold for the year (in thousands of dollars) was:

A) $620

B) $580

C) $720

D) $700

Level: Medium LO: 2,3,4Ans:A

77. The net operating income for the year (in thousands of dollars) was:

A) $260

B) $30

C) $90

D) ($30)

Level: Medium LO: 2,3,4Ans:B

Use the following information to answer 78-79

The manufacturing operations of QC Company had the following inventory balances for the month of

March:

78. If the company purchased $18,000 of raw materials during March, what was the cost of raw materials

used in production?

A) $16,000

B) $20,000

C) $41,000

D) $19,000

Level: Medium LO: 4Ans:A

Brewer,IntroductiontoManagerialAccounting,3/e

21

79. If the company transferred $38,000 of completed goods from work in process to finished goods

during March, what was the amount of the cost of goods sold?

A) $38,000

B) $43,000

C) $30,000

D) $46,000

Level: Medium LO: 3Ans:D

Use the following information to answer 80-81

Servix, Inc., produces water pumps. Each water pump contains a small valve that costs $5. During May,

600 valves were drawn from the supply room and installed in water pumps in the production process.

Eighty percent of these units were completed and transferred into finished goods warehouses. Of the units

completed, thirty percent were still unsold at the end of the month. There were no beginning inventories.

80. The cost of valves in work in process at the end of May would be:

A) $2,400

B) $3,000

C) $600

D) $720

Level: Easy LO: 4Ans:C

81. The cost of valves in cost of goods sold for May would be:

A) $1,680

B) $2,100

C) $900

D) $720

Level: Easy LO: 3Ans:A

Use the following information to answer 82-83

The manufacturing operations of Jones Company had the following inventory balances for the month of

March:

82. If the company purchased $20,000 of raw materials during March, what was the cost of raw materials

used in production?

A) $24,000

B) $22,000

C) $32,000

D) $18,000

Level: Medium LO: 4Ans:D

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83. If the company transferred $40,000 of completed goods from work in process to finished goods

during March, what was the amount of the cost of goods sold?

A) $47,000

B) $40,000

C) $33,000

D) $44,000

Level: Medium LO: 4Ans:A

Use the following information to answer 84-85

At a sales volume of 30,000 units, Carne Companys total fixed costs are $30,000 and total variable costs

are $45,000. The relevant range is 20,000 to 40,000 units.

84. If Carne Company were to sell 32,000 units, the total expected cost would be:

A) $75,000

B) $78,000

C) $80,000

D) $77,000

Level: Easy LO: 5 Ans:B

85. If Carne Company were to sell 40,000 units, the total expected cost per unit would be:

A) $2.50

B) $2.25

C) $2.13

D) $1.88

Level: Easy LO: 5Ans:B

Use the following information to answer 86-88

ApartiallistingofcostsincurredatGilhoolyCorporationduringSeptemberappearsbelow:

86.ThetotalofthemanufacturingoverheadcostslistedaboveforSeptemberis:

A)$669,000

B)$366,000

C)$34,000

D)$59,000

Brewer,IntroductiontoManagerialAccounting,3/e

23

Level:MediumLO:1Ans:D

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Brewer,IntroductiontoManagerialAccounting,3/e

87.ThetotaloftheproductcostslistedaboveforSeptemberis:

A)$59,000

B)$366,000

C)$669,000

D)$303,000

Level:MediumLO:2Ans:B

88.ThetotaloftheperiodcostslistedaboveforSeptemberis:

A)$303,000

B)$59,000

C)$366,000

D)$362,000

Level:MediumLO:2Ans:A

Use the following information to answer 89-91

ApartiallistingofcostsincurredduringDecemberatRooksCorporationappearsbelow:

89.ThetotaloftheperiodcostslistedaboveforDecemberis:

A)$82,000

B)$340,000

C)$389,000

D)$307,000

Level:MediumLO:2

ReferTo:01_10Ans:D

90.ThetotalofthemanufacturingoverheadcostslistedaboveforDecemberis:

A)$30,000

B)$82,000

C)$647,000

D)$340,000

Level:MediumLO:1Ans:B

Brewer,IntroductiontoManagerialAccounting,3/e

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91.ThetotaloftheproductcostslistedaboveforDecemberis:

A)$340,000

B)$82,000

C)$647,000

D)$307,000

Level:MediumLO:2Ans:A

Use the following information to answer 92-93

CohillCorporationreportedthefollowingdataforthemonthofJuly:

92.IftherawmaterialspurchasedduringJulytotaled$66,000,whatwasthecostoftherawmaterials

usedinproductionforthemonth?

A)$49,000

B)$67,000

C)$66,000

D)$65,000

Level:EasyLO:1,3Ans:D

93.Ifthecompanytransferred$225,000ofcompletedgoodsfromworkinprocesstofinishedgoods

inventoryduringJuly,whatwasthecostofgoodssoldforthemonth?

A)$231,000

B)$208,000

C)$242,000

D)$225,000

Level:EasyLO:3Ans:B

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AbareCorporationreportedthefollowingdataforthemonthofDecember:

Additionalinformation:

94.TheconversioncostforDecemberwas:

A)$134,000

B)$109,000

C)$192,000

D)$129,000

Level:MediumLO:1Ans:D

95.TheprimecostforDecemberwas:

A)$129,000

B)$115,000

C)$109,000

D)$62,000

Level:MediumLO:1Ans:B

Use the following information to answer 96-97

ManagementofLewallenCorporationhasaskedyourhelpasaninterninpreparingsomekeyreportsfor

September.Thebeginningbalanceintherawmaterialsinventoryaccountwas$25,000.Duringthe

month,thecompanymaderawmaterialspurchasesamountingto$60,000.Attheendofthemonth,the

balanceintherawmaterialsinventoryaccountwas$28,000.Directlaborcostwas$43,000and

manufacturingoverheadcostwas$71,000.Thebeginningbalanceintheworkinprocessaccountwas

$23,000andtheendingbalancewas$11,000.Thebeginningbalanceinthefinishedgoodsaccountwas

$29,000andtheendingbalancewas$45,000.Sellingexpensewas$15,000andadministrativeexpense

was$32,000.

96.TheconversioncostforSeptemberwas:

A)$114,000

B)$131,000

C)$171,000

Brewer,IntroductiontoManagerialAccounting,3/e

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D)$103,000

Level:MediumLO:1Ans:A

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97.TheprimecostforSeptemberwas:

A)$114,000

B)$100,000

C)$103,000

D)$47,000

Level:MediumLO:1Ans:B

Use the following information to answer 98-101

DulleaCorporationreportedthefollowingdataforthemonthofMay:

Additionalinformation:

98.ThetotalmanufacturingcostforMaywas:

A)$187,000

B)$76,000

C)$121,000

D)$194,000

Level:MediumLO:3,4Ans:A

99.ThecostofgoodsmanufacturedforMaywas:

A)$194,000

B)$121,000

C)$180,000

D)$187,000

Level:MediumLO:3,4Ans:A

100.ThecostofgoodssoldforMaywas:

A)$261,000

B)$149,000

C)$165,000

D)$223,000

Brewer,IntroductiontoManagerialAccounting,3/e

29

Level:MediumLO:3,4Ans:C

30

Brewer,IntroductiontoManagerialAccounting,3/e

101.ThenetoperatingincomeforMaywas:

A)$125,000

B)$55,000

C)$33,000

D)$99,000

Level:MediumLO:3,4Ans:B

Use the following information to answer 102-105

ManagementofMelendesCorporationhasaskedyourhelpasaninterninpreparingsomekeyreportsfor

October.Thecompanystartedthemonthwithrawmaterialsinventoriesof$38,000.Duringthemonth,

thecompanymaderawmaterialspurchasesamountingto$71,000.Attheendofthemonth,rawmaterials

inventoriestotaled$22,000.Directlaborcostwas$45,000andmanufacturingoverheadcostwas$79,000.

Thebeginningbalanceintheworkinprocessaccountwas$16,000andtheendingbalancewas$22,000.

Thebeginningbalanceinthefinishedgoodsaccountwas$38,000andtheendingbalancewas$49,000.

Salestotaled$250,000.Sellingexpensewas$24,000andadministrativeexpensewas$31,000.

102.ThetotalmanufacturingcostforOctoberwas:

A)$79,000

B)$195,000

C)$211,000

D)$124,000

Level:MediumLO:3,4Ans:C

103.ThecostofgoodsmanufacturedforOctoberwas:

A)$217,000

B)$211,000

C)$195,000

D)$205,000

Level:MediumLO:3,4Ans:D

104.ThecostofgoodssoldforOctoberwas:

A)$216,000

B)$194,000

C)$148,000

D)$239,000

Level:MediumLO:3,4Ans:B

105.ThenetoperatingincomeforOctoberwas:

A)$56,000

B)$0

C)$71,000

D)$1,000

Level:MediumLO:3,4Ans:D

Brewer,IntroductiontoManagerialAccounting,3/e

31

32

Brewer,IntroductiontoManagerialAccounting,3/e

HenleyCorporationreportedthefollowingdataforthemonthofJuly:

Additionalinformation:

106.ThetotalmanufacturingcostforJulywas:

A)$54,000

B)$90,000

C)$145,000

D)$147,000

Level:MediumLO:3,4Ans:C

107.ThecostofgoodsmanufacturedforJulywas:

A)$148,000

B)$142,000

C)$147,000

D)$145,000

Level:MediumLO:3,4Ans:A

108.ThecostofgoodssoldforJulywas:

A)$134,000

B)$162,000

C)$106,000

D)$224,000

Level:MediumLO:3,4Ans:B

109.ThenetoperatingincomeforJulywas:

A)$79,000

B)$48,000

C)$7,000

D)$22,000

Brewer,IntroductiontoManagerialAccounting,3/e

33

Level:MediumLO:3,4Ans:C

34

Brewer,IntroductiontoManagerialAccounting,3/e

LambertsonCorporationreportedthefollowingdataforthemonthofMarch:

Additionalinformation:

110.ThecostofgoodssoldforMarchwas:

A)$110,000

B)$177,000

C)$215,000

D)$147,000

Level:MediumLO:3,4Ans:D

111.ThenetoperatingincomeforMarchwas:

A)$79,000

B)$25,000

C)$83,000

D)$2,000

Level:MediumLO:3,4Ans:B

Brewer,IntroductiontoManagerialAccounting,3/e

35

NivesCorporationreportedthefollowingdataforthemonthofJanuary:

Additionalinformation:

112.ThetotalmanufacturingcostforJanuarywas:

A)$86,000

B)$198,000

C)$121,000

D)$187,000

Level:MediumLO:3,4Ans:B

113.ThenetoperatingincomeforJanuarywas:

A)$14,000

B)$16,000

C)$91,000

D)$82,000

Level:MediumLO:3,4Ans:A

Use the following information to answer 114-117

ManagementofShandleyCorporationhasaskedyourhelpasaninterninpreparingsomekeyreportsfor

August.Thebeginningbalanceintherawmaterialsinventoryaccountwas$21,000.Duringthemonth,

thecompanymaderawmaterialspurchasesamountingto$59,000.Attheendofthemonth,thebalance

intherawmaterialsinventoryaccountwas$22,000.Directlaborcostwas$39,000andmanufacturing

overheadcostwas$71,000.Thebeginningbalanceintheworkinprocessaccountwas$12,000andthe

endingbalancewas$18,000.Thebeginningbalanceinthefinishedgoodsaccountwas$30,000andthe

endingbalancewas$54,000.Salestotaled$220,000.Sellingexpensewas$11,000andadministrative

expensewas$34,000.

36

Brewer,IntroductiontoManagerialAccounting,3/e

114.ThetotalmanufacturingcostforAugustwas:

A)$168,000

B)$169,000

C)$71,000

D)$110,000

Level:MediumLO:3,4Ans:A

115.ThecostofgoodsmanufacturedforAugustwas:

A)$169,000

B)$168,000

C)$174,000

D)$162,000

Level:MediumLO:3,4Ans:D

116.ThecostofgoodssoldforAugustwas:

A)$186,000

B)$196,000

C)$138,000

D)$121,000

Level:MediumLO:3,4Ans:C

117.ThenetoperatingincomeforAugustwas:

A)$6,000

B)$65,000

C)$82,000

D)$37,000

Level:MediumLO:3,4Ans:D

Use the following information to answer 118-119

TheCFOofCarlCorporationhasprovidedthefollowingdataforSeptember.Thebeginningbalancein

therawmaterialsinventoryaccountwas$32,000.Duringthemonth,thecompanymaderawmaterials

purchasesamountingto$56,000.Attheendofthemonth,thebalanceintherawmaterialsinventory

accountwas$34,000.Directlaborcostwas$46,000andmanufacturingoverheadcostwas$68,000.The

beginningbalanceintheworkinprocessaccountwas$13,000andtheendingbalancewas$10,000.The

beginningbalanceinthefinishedgoodsaccountwas$53,000andtheendingbalancewas$31,000.Sales

totaled$270,000.Sellingexpensewas$15,000andadministrativeexpensewas$50,000.

118.ThecostofgoodssoldforSeptemberwas:

A)$129,000

B)$193,000

C)$292,000

D)$149,000

Level:MediumLO:3,4Ans:B

Brewer,IntroductiontoManagerialAccounting,3/e

37

38

Brewer,IntroductiontoManagerialAccounting,3/e

119.ThenetoperatingincomeforSeptemberwas:

A)$77,000

B)$91,000

C)$12,000

D)$35,000

Level:MediumLO:3,4Ans:C

Usethefollowinginformationtoanswer120121

BerthelotCorporationhasprovidedthefollowingdataforJune.Thebeginningbalanceintheraw

materialsinventoryaccountwas$34,000.Duringthemonth,thecompanymaderawmaterialspurchases

amountingto$50,000.Attheendofthemonth,thebalanceintherawmaterialsinventoryaccountwas

$28,000.Directlaborcostwas$47,000andmanufacturingoverheadcostwas$81,000.Thebeginning

balanceintheworkinprocessaccountwas$11,000andtheendingbalancewas$10,000.Thebeginning

balanceinthefinishedgoodsaccountwas$25,000andtheendingbalancewas$59,000.Salestotaled

$270,000.Sellingexpensewas$14,000andadministrativeexpensewas$43,000.

120.ThetotalmanufacturingcostforJunewas:

A)$81,000

B)$178,000

C)$184,000

D)$128,000

Level:MediumLO:3,4Ans:C

121.ThenetoperatingincomeforJunewas:

A)$35,000

B)$62,000

C)$85,000

D)$119,000

Level:MediumLO:3,4Ans:B

Use the following information to answer 122-123

OkeyCorporationhasprovidedthefollowingdataforthemonthofApril.Thebeginningbalanceinthe

finishedgoodsinventoryaccountwas$37,000andtheendingbalancewas$34,000.Salestotaled

$250,000.Costofgoodsmanufacturedwas$123,000,sellingexpensewas$17,000,andadministrative

expensewas$62,000.

122.ThecostofgoodssoldforAprilwas:

A)$202,000

B)$126,000

C)$123,000

D)$120,000

Level:EasyLO:3Ans:B

Brewer,IntroductiontoManagerialAccounting,3/e

39

40

Brewer,IntroductiontoManagerialAccounting,3/e

123.ThenetoperatingincomeforAprilwas:

A)$45,000

B)$127,000

C)$48,000

D)$130,000

Level:EasyLO:3Ans:A

Use the following information to answer 124-125

NiemanInc.,alocalretailer,hasprovidedthefollowingdataforthemonthofMarch:

124.ThecostofgoodssoldforMarchwas:

A)$146,000

B)$150,000

C)$142,000

D)$237,000

Level:EasyLO:3Ans:C

125.ThenetoperatingincomeforMarchwas:

A)$130,000

B)$134,000

C)$43,000

D)$47,000

Level:EasyLO:3Ans:D

Brewer,IntroductiontoManagerialAccounting,3/e

41

VarlandCorporationreportedthefollowingdataforthemonthofJune:

Additionalinformation:

126.ThetotalmanufacturingcostforJunewas:

A)$164,000

B)$79,000

C)$107,000

D)$161,000

Level:MediumLO:4Ans:D

127.ThecostofgoodsmanufacturedforJunewas:

A)$153,000

B)$161,000

C)$164,000

D)$169,000

Level:MediumLO:4Ans:A

Use the following information to answer 128-129

SherrCorporationreportedthefollowingdataforthemonthofMarch:

Additionalinformation:

42

Brewer,IntroductiontoManagerialAccounting,3/e

Brewer,IntroductiontoManagerialAccounting,3/e

43

128.ThecostofgoodsmanufacturedforMarchwas:

A)$185,000

B)$199,000

C)$181,000

D)$190,000

Level:MediumLO:4Ans:B

129.ThecostofgoodssoldforMarchwas:

A)$180,000

B)$218,000

C)$241,000

D)$124,000

Level:MediumLO:4Ans:A

Use the following information to answer 130-131

NahassCorporationhasprovidedthefollowingdataforSeptember.Thebeginningbalanceintheraw

materialsinventoryaccountwas$28,000.Duringthemonth,thecompanymaderawmaterialspurchases

amountingto$70,000.Attheendofthemonth,thebalanceintherawmaterialsinventoryaccountwas

$34,000.Directlaborcostwas$35,000andmanufacturingoverheadcostwas$53,000.Thebeginning

balanceintheworkinprocessaccountwas$18,000andtheendingbalancewas$11,000.Thebeginning

balanceinthefinishedgoodsaccountwas$57,000andtheendingbalancewas$31,000.

130.ThetotalmanufacturingcostforSeptemberwas:

A)$152,000

B)$88,000

C)$158,000

D)$53,000

Level:MediumLO:4Ans:A

131.ThecostofgoodsmanufacturedforSeptemberwas:

A)$152,000

B)$145,000

C)$158,000

D)$159,000

Level:MediumLO:4Ans:D

Use the following information to answer 132-133

Atasalesvolumeof35,000units,ClyCorporationssalescommissions(acostthatisvariablewith

respecttosalesvolume)total$525,000.

44

Brewer,IntroductiontoManagerialAccounting,3/e

132.Tothenearestwholedollar,whatshouldbethetotalsalescommissionsatasalesvolumeof36,100

units?(Assumethatthissalesvolumeiswithintherelevantrange.)

A)$525,000

B)$509,003

C)$533,250

D)$541,500

Level:EasyLO:5Ans:D

133.Tothenearestwholecent,whatshouldbetheaveragesalescommissionperunitatasalesvolumeof

33,600units?(Assumethatthissalesvolumeiswithintherelevantrange.)

A)$14.54

B)$15.00

C)$15.63

D)$15.32

Level:EasyLO:5Ans:B

Use the following information to answer 134-135

Atasalesvolumeof37,000units,MaksCorporationspropertytaxes(acostthatisfixedwithrespectto

salesvolume)total$802,900.

134.Tothenearestwholedollar,whatshouldbethetotalpropertytaxesatasalesvolumeof39,700

units?(Assumethatthissalesvolumeiswithintherelevantrange.)

A)$802,900

B)$748,295

C)$832,195

D)$861,490

Level:EasyLO:5Ans:A

135.Tothenearestwholecent,whatshouldbetheaveragepropertytaxperunitatasalesvolumeof

40,300units?(Assumethatthissalesvolumeiswithintherelevantrange.)

A)$21.70

B)$20.22

C)$19.92

D)$20.81

Level:EasyLO:5Ans:C

Use the following information to answer 136-137

KodamaCorporationstaffsahelplinetoanswerquestionsfromcustomers.Thecostsofoperatingthe

helplinearevariablewithrespecttothenumberofcallsinamonth.Atavolumeof30,000callsina

month,thecostsofoperatingthehelplinetotal$369,000.

Brewer,IntroductiontoManagerialAccounting,3/e

45

136.Tothenearestwholedollar,whatshouldbethetotalcostofoperatingthehelplinecostsatavolume

of33,800callsinamonth?(Assumethatthiscallvolumeiswithintherelevantrange.)

A)$369,000

B)$327,515

C)$392,370

D)$415,740

Level:EasyLO:5Ans:D

137.Tothenearestwholecent,whatshouldbetheaveragecostofoperatingthehelplinepercallata

volumeof31,300callsinamonth?(Assumethatthiscallvolumeiswithintherelevantrange.)

A)$12.30

B)$11.79

C)$10.92

D)$12.05

Level:EasyLO:5Ans:A

Use the following information to answer 138-139

EmertonCorporationleasesitscorporateheadquartersbuilding.Thisleasecostisfixedwithrespectto

thecompanyssalesvolume.Inarecentmonthinwhichthesalesvolumewas32,000units,theleasecost

was$716,800.

138.Tothenearestwholedollar,whatshouldbethetotalleasecostatasalesvolumeof30,900unitsina

month?(Assumethatthissalesvolumeiswithintherelevantrange.)

A)$742,317

B)$692,160

C)$704,480

D)$716,800

Level:EasyLO:5Ans:D

139.Tothenearestwholecent,whatshouldbetheaverageleasecostperunitatasalesvolumeof34,400

unitsinamonth?(Assumethatthissalesvolumeiswithintherelevantrange.)

A)$23.20

B)$21.62

C)$20.84

D)$22.40

Level:EasyLO:5Ans:C

46

Brewer,IntroductiontoManagerialAccounting,3/e

ThefollowingcostdatapertaintotheoperationsofBouffardDepartmentStores,Inc.,forthemonthof

May.

TheBrentwoodStoreisjustoneofmanystoresownedandoperatedbythecompany.TheShoe

DepartmentisoneofmanydepartmentsattheBrentwoodStore.Thecentralwarehouseservesallofthe

companysstores.

140.WhatisthetotalamountofthecostslistedabovethataredirectcostsoftheShoeDepartment?

A)$38,000

B)$29,000

C)$70,000

D)$34,000

Level:EasyLO:6Ans:A

141.WhatisthetotalamountofthecostslistedabovethatareNOTdirectcostsoftheBrentwoodStore?

A)$161,000

B)$86,000

C)$32,000

D)$38,000

Level:MediumLO:6Ans:A

Brewer,IntroductiontoManagerialAccounting,3/e

47

ThefollowingcostdatapertaintotheoperationsofRademakerDepartmentStores,Inc.,forthemonthof

March.

TheNorthridgeStoreisjustoneofmanystoresownedandoperatedbythecompany.TheCosmetics

DepartmentisoneofmanydepartmentsattheNorthridgeStore.Thecentralwarehouseservesallofthe

companysstores.

142.WhatisthetotalamountofthecostslistedabovethataredirectcostsoftheCosmeticsDepartment?

A)$83,000

B)$94,000

C)$90,000

D)$127,000

Level:EasyLO:6Ans:B

143.WhatisthetotalamountofthecostslistedabovethatareNOTdirectcostsoftheNorthridgeStore?

A)$172,000

B)$33,000

C)$80,000

D)$94,000

Level:MediumLO:6Ans:A

Use the following information to answer 144-146

DechicoCorporationpurchasedamachine3yearsagofor$456,000whenitlaunchedproductG92L.

Unfortunately,thismachinehasbrokendownandcannotberepaired.Themachinecouldbereplacedbya

newmodel330machinecosting$474,000orbyanewmodel260machinecosting$418,000.

Managementhasdecidedtobuythemodel260machine.Ithaslesscapacitythanthemodel330machine,

butitscapacityissufficienttocontinuemakingproductG92L.Managementalsoconsidered,butrejected,

thealternativeofdroppingproductG92Landnotreplacingtheoldmachine.Ifthatweredone,the

$418,000investedinthenewmachinecouldinsteadhavebeeninvestedinaprojectthatwouldhave

returnedatotalof$496,000.

48

Brewer,IntroductiontoManagerialAccounting,3/e

144.Inmakingthedecisiontobuythemodel260machineratherthanthemodel330machine,the

differentialcostwas:

A)$18,000

B)$56,000

C)$38,000

D)$40,000

Level:EasyLO:7Ans:B

145.Inmakingthedecisiontobuythemodel260machineratherthanthemodel330machine,thesunk

costwas:

A)$418,000

B)$456,000

C)$474,000

D)$496,000

Level:EasyLO:7Ans:B

146.Inmakingthedecisiontoinvestinthemodel260machine,theopportunitycostwas:

A)$418,000

B)$456,000

C)$474,000

D)$496,000

Level:EasyLO:7Ans:D

Use the following information to answer 147-149

ManagementofChildersCorporationisconsideringwhethertopurchaseanewmodel380machine

costing$278,000oranewmodel230machinecosting$207,000toreplaceamachinethatwaspurchased

3yearsagofor$266,000.TheoldmachinewasusedtomakeproductR16Kuntilitbrokedownlast

week.Unfortunately,theoldmachinecannotberepaired.

Managementhasdecidedtobuythenewmodel230machine.Ithaslesscapacitythanthenewmodel380

machine,butitscapacityissufficienttocontinuemakingproductR16K.

Managementalsoconsidered,butrejected,thealternativeofsimplydroppingproductR16K.Ifthatwere

done,insteadofinvesting$207,000inthenewmachine,themoneycouldbeinvestedinaprojectthat

wouldreturnatotalof$305,000.

147.Inmakingthedecisiontobuythemodel230machineratherthanthemodel380machine,thesunk

costwas:

A)$305,000

B)$266,000

C)$278,000

D)$207,000

Level:EasyLO:7Ans:B

Brewer,IntroductiontoManagerialAccounting,3/e

49

148.Inmakingthedecisiontobuythemodel230machineratherthanthemodel380machine,the

differentialcostwas:

A)$71,000

B)$59,000

C)$12,000

D)$39,000

Level:EasyLO:7Ans:A

149.Inmakingthedecisiontoinvestinthemodel230machine,theopportunitycostwas:

A)$278,000

B)$305,000

C)$207,000

D)$266,000

Level:EasyLO:7Ans:B

Essay

150.The Plastechnics 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 Plastechnics Companys product has resulted

in the company needing more space. The renters lease will expire next month and Plastechnics will not

renew the lease in order to use the space to expand operations and meet demand.

The companys product requires 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 the

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 company plans to liquidate several investments in order to expand production. These investments

currently earn a return of $8,000 per year.

Required:

Complete the answer sheet above by placing an "X" under each heading that identifies the cost involved.

The "Xs" can be placed under more than one heading for a single cost, e.g., a cost might be a sunk cost,

an overhead cost, and a product cost. An "X" can thus be placed under each of these headings opposite the

cost.

50

Brewer,IntroductiontoManagerialAccounting,3/e

Ans:

Brewer,IntroductiontoManagerialAccounting,3/e

51

151. The following data (in thousands of dollars) have been taken from the accounting records of Larder

Corporation for the just completed year.

Required:

(a.) Prepare a Schedule of Cost of Goods Manufactured in good form.

(b.) Compute the Cost of Goods Sold.

(c.) Using data from your answers above as needed, prepare an Income Statement in good form

Level: Medium LO: 1,3,4

Ans:

52

Brewer,IntroductiontoManagerialAccounting,3/e

152. The following data (in thousands of dollars) have been taken from the accounting records of Larop

Corporation for the just completed year.

Required:

(a.) Prepare a Schedule of Cost of Goods Manufactured in good form.

(b.) Compute the Cost of Goods Sold.

(c.) Using data from your answers above as needed, prepare an Income Statement in good form

Level: Medium LO: 1,3,4

Brewer,IntroductiontoManagerialAccounting,3/e

53

Ans:

153. RuiseCorporation,amanufacturingcompany,hasprovidedthefollowingdataforthemonthof

August:

RawmaterialspurchasedduringAugusttotaled$73,000andthecostofgoodsmanufacturedtotaled

$146,000.

Required:

(a.)WhatwasthecostofrawmaterialsusedinproductionduringAugust?Showyourwork.

(b.)WhatwasthecostofgoodssoldforAugust?Showyourwork.

54

Brewer,IntroductiontoManagerialAccounting,3/e

Level:EasyLO:1,3

Brewer,IntroductiontoManagerialAccounting,3/e

55

Ans:

154.DuringthemonthofFebruary,CumberCorporation,amanufacturingcompany,purchasedraw

materialscosting$79,000.Thecostofgoodsmanufacturedforthemonthwas$109,000.Thebeginning

balanceintherawmaterialsaccountwas$21,000andtheendingbalancewas$39,000.Thebeginning

balanceinthefinishedgoodsaccountwas$31,000andtheendingbalancewas$51,000.

Required:

(a.)WhatwasthecostofrawmaterialsusedinproductionduringFebruary?Showyourwork.

(b.)WhatwasthecostofgoodssoldforFebruary?Showyourwork.

Level:EasyLO:1,3

Ans:

56

Brewer,IntroductiontoManagerialAccounting,3/e

155.ApartiallistingofcostsincurredatFalkenbergCorporationduringOctoberappearsbelow:

Required:

(a.)Whatisthetotalamountofproductcostlistedabove?Showyourwork.

(b.)Whatisthetotalamountofperiodcostlistedabove?Showyourwork.

Level:MediumLO:2

Ans:

(a.)Productcostsconsistofdirectmaterials,directlabor,andmanufacturingoverhead:

(b.)Periodcostsconsistofallcostsotherthanproductcosts:

Brewer,IntroductiontoManagerialAccounting,3/e

57

156.SobotaCorporationhasprovidedthefollowingpartiallistingofcostsincurredduringAugust:

Required:

(a.)Whatisthetotalamountofproductcostlistedabove?Showyourwork.

(b.)Whatisthetotalamountofperiodcostlistedabove?Showyourwork.

Level:MediumLO:2

Ans:

(a.)Productcostsconsistofdirectmaterials,directlabor,andmanufacturingoverhead:

(b.)Periodcostsconsistofallcostsotherthanproductcosts:

58

Brewer,IntroductiontoManagerialAccounting,3/e

157.StarCorporationhasprovidedthefollowingdataforthemonthofJuly:

Required:

(a.)PrepareaScheduleofCostofGoodsManufacturedingoodformforJuly.

(b.)PrepareanIncomeStatementingoodformforJuly.

Level:MediumLO:3,4

Ans:

(a.)ScheduleofCostofGoodsManufactured

Brewer,IntroductiontoManagerialAccounting,3/e

59

(b.)IncomeStatement

158.InOctober,HolecekCorporationhadsalesof$238,000,sellingexpensesof$12,000,and

administrativeexpensesof$35,000.Thecostofgoodsmanufacturedwas$130,000.Thebeginning

balanceinthefinishedgoodsinventoryaccountwas$40,000andtheendingbalancewas$47,000.

Required:

PrepareanIncomeStatementingoodformforOctober.

Level:EasyLO:3

Ans:

159.InNovember,StimanInc.,amerchandisingcompany,hadsalesof$221,000,sellingexpensesof

$14,000,andadministrativeexpensesof$22,000.Thecostofmerchandisepurchasedduringthemonth

was$186,000.Thebeginningbalanceinthemerchandiseinventoryaccountwas$42,000andtheending

balancewas$52,000.

Required:

PrepareanIncomeStatementingoodformforNovember.

Level:EasyLO:3

60

Brewer,IntroductiontoManagerialAccounting,3/e

Ans:

IncomeStatement

160.LeibowitzCorporationhasprovidedthefollowingdataforthemonthofAugust:

Required:

PrepareaScheduleofCostofGoodsManufacturedingoodformforAugust.

Level:MediumLO:4

Brewer,IntroductiontoManagerialAccounting,3/e

61

Ans:

ScheduleofCostofGoodsManufactured

161.Anumberofcostsandmeasuresofactivityarelistedbelow.

Required:

Foreachitemabove,indicatewhetherthecostisMAINLYfixedorvariablewithrespecttothepossible

measureofactivitylistednexttoit.

Level:EasyLO:5

Ans:

(1.)Costofcementusedtoproducecinderblocks;Cinderblocksproduced;Variable

(2.)Costofleasingcheckoutequipmentonamonthlybasisatahardwarestore;Dollarsales;Fixed

(3.)Costofvaccineusedataclinic;Vaccinesadministered;Variable

(4.)Salaryofthestaffchaplainatahospital;Numberofpatients;Fixed

(5.)Windshieldwiperbladesinstalledonautosatanautoassemblyplant;Numberofautosassembled;

62

Brewer,IntroductiontoManagerialAccounting,3/e

Variable

(6.)Leasecostofequipmentatadentistsoffice;Numberofpatients;Fixed

(7.)Interestexpenseoncorporatedebt;Dollarsales;Fixed

(8.)Costofrentingproductionequipmentonamonthlybasisatasnowboardmanufacturer;Snowboards

produced;Fixed

(9.)Costofadvertisingatasnowboardcompany;Snowboardssold;Fixed

(10.)Cookswagesatatacoshop;Dollarsales;Fixed

162.Anumberofcostsandmeasuresofactivityarelistedbelow.

Required:

Foreachitemabove,indicatewhetherthecostisMAINLYfixedorvariablewithrespecttothepossible

measureofactivitylistednexttoit.

Level:EasyLO:5

Ans:

(1.)Costofrentingproductionequipmentonamonthlybasisatasurfboardmanufacturer;Surfboards

produced;Fixed

(2.)Costofshippingbagsofgardenmulchtoaretailgardenstore;Bagsshipped;Variable

(3.)Buildingrentatacoffeeshop;Dollarsales;Fixed

(4.)Costofharddiskinstalledinacomputer;Numberofcomputersassembled;Variable

(5.)Costoffreshvegetablesusedatacoffeeshop;Dollarsales;Variable

(6.)Janitorialwagesatasurfboardmanufacturer;Surfboardsproduced;Fixed

(7.)Costofadvertisingatasurfboardcompany;Surfboardssold;Fixed

(8.)Clinicalsuppliesatadoctorsoffice;Numberofpatients;Variable

(9.)Costofleasingcheckoutequipmentonamonthlybasisatanelectronicsstore;Dollarsales;Fixed

(10.)Costofheatinganelectronicsstore;Dollarsales;Fixed

Brewer,IntroductiontoManagerialAccounting,3/e

63

163.Anumberofcostsarelistedbelow.

Required:

Foreachitemabove,indicatewhetherthecostisdirectorindirectwithrespecttothecostobjectlisted

nexttoit.

Level:EasyLO:6

Ans:

(1.)Costofameaslesvaccineadministeredatanoutpatientclinicatahospital;Theoutpatientclinic;

Direct

(2.)Costofareplacementbatteryinstalledinacarattheautorepairshopofanautomobiledealer;The

autorepairshop;Direct

(3.)Accountingprofessorssalary;Aparticularclass;Indirect

(4.)Costofelectronicnavigationsysteminstalledinayachtatayachtmanufacturer;Aparticularyacht;

Direct

(5.)Costofwiringusedinmakingapersonalcomputer;Aparticularpersonalcomputer;Indirect

(6.)Supervisorswagesinacomputermanufacturingfacility;Aparticularpersonalcomputer;Indirect

(7.)Costoflubricationoilusedattheautorepairshopofanautomobiledealer;Theautorepairshop;

Direct

(8.)Costofheatingahotelrunbyachainofhotels;Aparticularhotelguest;Indirect

(9.)Costofheatingahotelrunbyachainofhotels;Theparticularhotel;Direct

(10.)Costoftonguedepressorsusedinanoutpatientclinicatahospital;Aparticularpatient;Indirect

64

Brewer,IntroductiontoManagerialAccounting,3/e

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