Chapter 3—Product Costing: Manufacturing Processes, Cost
Terminology, and Cost Flows Key
1. Which of the following types of organizations is most likely to have a raw materials inventory account?
2. Which of the following statements about manufacturing in a traditional environment is true?
3. A traditional manufacturing environment does not have which of the following?
4. Which of the following statements is true about manufacturing companies over the past 20 years?
5. Which of the following statements regarding the traditional manufacturing environment is not true?
6. Lean production is focused on eliminating waste associated with all of the following except
7. Under ideal conditions, companies operating in a ____ environment would reduce inventories of raw
materials, work-in-process and finished goods to very low levels or even zero.
8. Companies that operate in a lean production and just-in-time manufacturing environment are more likely to
experience which of the following?
9. A “manufacturing cell” is defined as a(n):
10. In a just-in-time environment, the production process often begins when:
11. Which of the following is an advantage of lean production and just-in-time (JIT) manufacturing systems?
12. Which of the following is a disadvantage of lean production and just-in-time (JIT) manufacturing systems?
13. Which of the following statements is true regarding the lean production and just-in-time (JIT)
manufacturing systems?
14. Which of the following is an advantage of the lean production and just-in-time (JIT) manufacturing
systems?
15. Which of the following is a characteristic of a lean production and just-in-time (JIT) manufacturing
environment but not of a traditional manufacturing environment?
16. Which of the following is a characteristic of a traditional production environment but not of a lean
production and just-in-time (JIT) manufacturing environment?
17. Which of the following is a risk that would more likely be seen in a lean production and just-in-time
manufacturing environment than in a traditional production environment?
18. Which of the following is not a type of manufacturing cost?
19. In general, costs incurred in the factory that do not qualify as either direct material or direct labor are
called:
20. Manufacturing costs typically consist of:
21. Materials that can be directly traced to a particular product and become an integral part of the finished
product are called:
22. Which of the following statements is true regarding manufacturing costs?
23. Which of the following statements is false regarding nonmanufacturing costs?
24. Which of the following would most likely be classified as indirect materials?
25. Which of the following types of employees would most likely have their wage be classified as direct labor?
26. Which of the following types of employees would most likely have their wage be classified as indirect
labor?
27. Manufacturing overhead includes:
28. Which of the following is not an example of a manufacturing overhead cost?
29. Which of the following is an example of a manufacturing overhead cost?
30. Which of the following is not an example of manufacturing overhead costs?
31. Which of the following is a product cost?
32. Jasper Corporation
Jasper Corporation incurred the following costs in April:
Salesperson’s salaries
$40,000
Factory maintenance worker
$20,000
Factory insurance
12,000
Administrative utilities
4,000
Factory supervisor salary
30,000
Administrative supplies
1,000
Advertising
15,000
Delivery truck insurance
2,000
Factory machine operator
22,000
Factory machine depreciation
6,000
Direct materials used
25,000
Receptionist salary
18,000
Refer to the Jasper Corporation information above. Total product costs are:
33. Jasper Corporation
Jasper Corporation incurred the following costs in April:
Salesperson’s salaries
$40,000
Factory maintenance worker
$20,000
Factory insurance
12,000
Administrative utilities
4,000
Factory supervisor salary
30,000
Administrative supplies
1,000
Advertising
15,000
Delivery truck insurance
2,000
Factory machine operator
22,000
Factory machine depreciation
6,000
Direct materials used
25,000
Receptionist salary
18,000
Refer to the Jasper Corporation information above. Total period costs are:
34. The type of costing that takes into account costs incurred by all the activities throughout a product’s entire
life is called:
35. The set of activities that increases the value of an organization’s products and services is called the:
36. Which of the following statements regarding life-cycle and/or product costing is true?
37. Which of the following is an “upstream cost” in the value chain?
38. Which of the following is a “downstream cost” in the value chain?
39. Products and their costs flow through a production facility in the following order:
40. Which of the following increases the work-in-process account?
41. Which of the following decreases the work-in-process account?
42. Product costs that transfer into finished goods inventory are called:
43. Product costs that transfer out of finished goods are called:
44. Which of the following statements accurately describes manufacturing cost flows in a just–in-time (JIT)
environment?
45. Which of the following types of companies would be the least likely to have the following cost pattern?
Raw materials ® Work-in–Process ® Finished Goods ® Cost of goods sold
46. Clyde Retailer’s is a local merchandiser which buys vintage clothing and sells it to local college students.
Clyde began the year with inventory costing $60,000. During the year inventory costing $300,000 was
purchased. At the end of the year, inventory costing $45,000 still remained. What was Clyde’s cost of goods
sold for the year?
47. The journal entry to record raw materials used would include a:
48. In 2009 Bradshaw Inc. incurred $40,000 of manufacturing overhead costs which will be paid for in 2010
Which of the following would be the correct journal entry to record this transaction?
49. The journal entry to record cost of goods manufactured would include a:
50. When the cost of a product is matched with its sales price, the result (difference) is called:
51. When nonmanufacturing costs are subtracted from gross margin, the result is called:
52. Michael’s Manufacturing, Inc.
Michael’s Manufacturing, Inc. has the following information available for the month of July:
Beginning
Ending
Raw materials inventory
$50,000
$ 62,000
Work-in-process inventory
80,000
55,000
Finished goods inventory
24,000
35,000
Raw materials purchased
$120,000
Direct labor costs
60,000
Overhead costs
45,000
Refer to the Michael’s Manufacturing, Inc. information above. Raw materials used for July is:
53. Michael’s Manufacturing, Inc.
Michael’s Manufacturing, Inc. has the following information available for the month of July:
Beginning
Ending
Raw materials inventory
$50,000
$ 62,000
Work-in-process inventory
80,000
55,000
Finished goods inventory
24,000
35,000
Raw materials purchased
$120,000
Direct labor costs
60,000
Overhead costs
45,000
Refer to the Michael’s Manufacturing, Inc. information above. Cost of goods manufactured for July is:
54. Michael’s Manufacturing, Inc.
Michael’s Manufacturing, Inc. has the following information available for the month of July:
Beginning
Ending
Raw materials inventory
$50,000
$ 62,000
Work-in-process inventory
80,000
55,000
Finished goods inventory
24,000
35,000
Raw materials purchased
$120,000
Direct labor costs
60,000
Overhead costs
45,000
Refer to the Michael’s Manufacturing, Inc. information above. Cost of goods sold for July is:
55. Nate’s Novelties, Inc.
Nate’s Novelties, Inc. has the following information available for July:
Beginning
Ending
Raw materials inventory
$12,000
$ 9,000
Work-in-process inventory
35,000
20,000
Finished goods inventory
20,000
44,000
Raw materials purchased
$25,000
Direct labor costs
55,000
Overhead costs
35,000
Refer to the Nate’s Novelties, Inc. information above. Raw materials used for July is:
56. Nate’s Novelties, Inc.
Nate’s Novelties, Inc. has the following information available for July:
Beginning
Ending
Raw materials inventory
$12,000
$ 9,000
Work-in-process inventory
35,000
20,000
Finished goods inventory
20,000
44,000
Raw materials purchased
$25,000
Direct labor costs
55,000
Overhead costs
35,000
Refer to the Nate’s Novelties, Inc. information above. Cost of goods manufactured for July is:
57. Nate’s Novelties, Inc.
Nate’s Novelties, Inc. has the following information available for July:
Beginning
Ending
Raw materials inventory
$12,000
$ 9,000
Work-in-process inventory
35,000
20,000
Finished goods inventory
20,000
44,000
Raw materials purchased
$25,000
Direct labor costs
55,000
Overhead costs
35,000
Refer to the Nate’s Novelties, Inc. information above. Cost of goods sold for July is:
58. Scott Products
Scott Products manufactures high-quality running shoes. The following information is available for 2009:
Beginning
Ending
Raw materials inventory
$ 65,000
$ 82,000
Work-in-process inventory
280,000
130,000
Finished goods inventory
90,000
120,000
Raw materials purchased
$250,000
Direct labor costs
340,000
Factory rent
60,000
Factory supplies
20,000
Factory utilities
15,000
Factory depreciation
30,000
Marketing costs
25,000
Administrative costs
100,000
In addition, 42,400 pairs were produced in 2009out of which 40,900 pairs were sold for $70 each.
Refer to the Scott Products information above. Cost of goods manufactured for 2009 is:
59. Scott Products
Scott Products manufactures high-quality running shoes. The following information is available for 2009:
Beginning
Ending
Raw materials inventory
$ 65,000
$ 82,000
Work-in-process inventory
280,000
130,000
Finished goods inventory
90,000
120,000
Raw materials purchased
$250,000
Direct labor costs
340,000
Factory rent
60,000
Factory supplies
20,000
Factory utilities
15,000
Factory depreciation
30,000
Marketing costs
25,000
Administrative costs
100,000
In addition, 42,400 pairs were produced in 2009out of which 40,900 pairs were sold for $70 each.
Refer to the Scott Products information above. What is net income for 2009? (ignore taxes)
60. Thompson Inc. has the following selected information available for 2009:
Cost of goods manufactured
$180,000
Cost of goods sold
150,000
Direct labor costs incurred
45,000
Raw material purchased
90,000
Raw material used
80,000
Beginning work-in-process
15,000
Ending work-in-process
9,000
Manufacturing overhead costs in 2005 amounted to:
61. Hillsborough Street Manufacturing Inc.
Hillsborough Street Manufacturing Inc. incurred the following costs in 2009:
Direct materials used
$37,000
Direct labor costs
45,000
Factory rent and utilities
18,000
Factory equipment depreciation
10,000
Marketing expenses
3,000
Administrative expenses
9,000
50,000 units were produced during the year out of which 40,000 units were sold for $10 each. There was no beginning or ending raw materials or
work-in-process inventory.
Refer to the Hillsborough Street Manufacturing Inc. information above. What is the product cost per unit?
62. Hillsborough Street Manufacturing Inc.
Hillsborough Street Manufacturing Inc. incurred the following costs in 2009:
Direct materials used
$37,000
Direct labor costs
45,000
Factory rent and utilities
18,000
Factory equipment depreciation
10,000
Marketing expenses
3,000
Administrative expenses
9,000
50,000 units were produced during the year out of which 40,000 units were sold for $10 each. There was no beginning or ending raw materials or
work-in-process inventory.
Refer to the Hillsborough Street Manufacturing Inc. information above. What is cost of goods sold for the year?
63. Hillsborough Street Manufacturing Inc.
Hillsborough Street Manufacturing Inc. incurred the following costs in 2009:
Direct materials used
$37,000
Direct labor costs
45,000
Factory rent and utilities
18,000
Factory equipment depreciation
10,000
Marketing expenses
3,000
Administrative expenses
9,000
50,000 units were produced during the year out of which 40,000 units were sold for $10 each. There was no beginning or ending raw materials or
work-in-process inventory.
Refer to the Hillsborough Street Manufacturing Inc. information above. Out of the above costs, what amount remains on the balance sheet at the end
of 2009?
64. Hillsborough Street Manufacturing Inc.
Hillsborough Street Manufacturing Inc. incurred the following costs in 2009:
Direct materials used
$37,000
Direct labor costs
45,000
Factory rent and utilities
18,000
Factory equipment depreciation
10,000
Marketing expenses
3,000
Administrative expenses
9,000
50,000 units were produced during the year out of which 40,000 units were sold for $10 each. There was no beginning or ending raw materials or
work-in-process inventory.
Refer to the Hillsborough Street Manufacturing Inc. information above. What is net income for the year?
65. Hudson Inc.
Hudson Inc. has the following information available for September:
Beginning
Ending
Raw materials
$ 8,000
$ 5,000
Work-in-process
30,000
40,000
Finished goods
7,000
3,000
Raw materials purchased
25,000
Direct labor costs
70,000
Manufacturing overhead costs
30,000
Administrative costs
12,000
Marketing costs
6,000
Refer to the Hudson Inc. information above. Total nonmanufacturing costs for September are:
66. Hudson Inc.
Hudson Inc. has the following information available for September:
Beginning
Ending
Raw materials
$ 8,000
$ 5,000
Work-in-process
30,000
40,000
Finished goods
7,000
3,000
Raw materials purchased
25,000
Direct labor costs
70,000
Manufacturing overhead costs
30,000
Administrative costs
12,000
Marketing costs
6,000
Refer to the Hudson Inc. information above. Cost of goods manufactured for September is: