Managerial Accounting
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113. Ogleby Inc.’s accounting records reflect the following inventories:
Dec. 31, 2012 Dec. 31, 2013
Raw materials inventory $120,000 $ 96,000
Work in process inventory 156,000 174,000
Finished goods inventory 150,000 138,000
During 2013, Ogleby purchased $840,000 of raw materials, incurred direct labor costs of
$150,000, and incurred manufacturing overhead totaling $192,000.
How much would Ogleby Manufacturing report as cost of goods manufactured for 2013?
a. $1,164,000
b. $1,224,000
c. $1,218,000
d. $1,188,000
114. Wasson Company reported the following year-end information:
Beginning work in process inventory $ 35,000
Beginning raw materials inventory 18,000
Ending work in process inventory 38,000
Ending raw materials inventory 15,000
Raw materials purchased 560,000
Direct labor 180,000
Manufacturing overhead 120,000
How much is Wasson’s total cost of work in process for the year?
a. $608,000
b. $863,000
c. $860,000
d. $898,000
115. Edmiston Company reported the following year-end information: beginning work in
process inventory, $80,000; cost of goods manufactured, $780,000; beginning finished
goods inventory, $50,000; ending work in process inventory, $70,000; and ending finished
goods inventory, $40,000. How much is Edmiston’s cost of goods sold for the year?
a. $780,000
b. $790,000
c. $770,000
d. $800,000
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116. Using the following information, compute the direct materials used.
Raw materials inventory, January 1 $ 20,000
Raw materials inventory, December 31 40,000
Work in process, January 1 18,000
Work in process, December 31 12,000
Finished goods, January 1 40,000
Finished goods, December 31 32,000
Raw materials purchases 1,400,000
Direct labor 560,000
Factory utilities 150,000
Indirect labor 50,000
Factory depreciation 400,000
Operating expenses 420,000
a. $1,460,000.
b. $1,420,000.
c. $1,400,000.
d. $1,380,000.
117. Assuming that the direct materials used is $1,400,000, compute the total manufacturing
costs using the following information.
Raw materials inventory, January 1 $ 20,000
Raw materials inventory, December 31 40,000
Work in process, January 1 18,000
Work in process, December 31 12,000
Finished goods, January 1 40,000
Finished goods, December 31 32,000
Raw materials purchases 1,400,000
Direct labor 560,000
Factory utilities 150,000
Indirect labor 50,000
Factory depreciation 400,000
Operating expenses 420,000
a. $2,560,000.
b. $2,554,000.
c. $2,360,000.
d. $2,980,000.
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118. Using $2,500,000 as the total manufacturing costs, compute the cost of goods
manufactured using the following information.
Raw materials inventory, January 1 $ 20,000
Raw materials inventory, December 31 40,000
Work in process, January 1 18,000
Work in process, December 31 12,000
Finished goods, January 1 40,000
Finished goods, December 31 32,000
Raw materials purchases 1,400,000
Direct labor 560,000
Factory utilities 150,000
Indirect labor 50,000
Factory depreciation 400,000
Operating expenses 420,000
a. $2,492,000.
b. $2,494,000.
c. $2,506,000.
d. $2,508,000.
119. Using $2,540,000 as the cost of goods manufactured, compute the cost of goods sold
using the following information.
Raw materials inventory, January 1 $ 20,000
Raw materials inventory, December 31 40,000
Work in process, January 1 18,000
Work in process, December 31 12,000
Finished goods, January 1 40,000
Finished goods, December 31 32,000
Raw materials purchases 1,400,000
Direct labor 560,000
Factory utilities 150,000
Indirect labor 50,000
Factory depreciation 400,000
Operating expenses 420,000
a. $2,546,000.
b. $2,508,000.
c. $2,532,000.
d. $2,548,000.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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120. Using the following information, compute the cost of direct materials used.
Raw materials inventory, January 1 $ 30,000
Raw materials inventory, December 31 60,000
Work in process, January 1 27,000
Work in process, December 31 18,000
Finished goods, January 1 60,000
Finished goods, December 31 48,000
Raw materials purchases 1,500,000
Direct labor 690,000
Factory utilities 225,000
Indirect labor 75,000
Factory depreciation 500,000
Operating expenses 630,000
a. $1,590,000.
b. $1,530,000.
c. $1,500,000.
d. $1,470,000.
121. Assuming the cost of direct materials used is $1,500,000, compute the total manufacturing
costs using the information below.
Raw materials inventory, January 1 $ 30,000
Raw materials inventory, December 31 60,000
Work in process, January 1 27,000
Work in process, December 31 18,000
Finished goods, January 1 60,000
Finished goods, December 31 48,000
Raw materials purchases 1,500,000
Direct labor 690,000
Factory utilities 225,000
Indirect labor 75,000
Factory depreciation 500,000
Operating expenses 630,000
a. $2,990,000.
b. $2,981,000.
c. $2,690,000.
d. $3,620,000.
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122. Assuming that the total manufacturing costs are $2,900,000, compute the cost of goods
manufactured using the information below.
Raw materials inventory, January 1 $ 30,000
Raw materials inventory, December 31 60,000
Work in process, January 1 27,000
Work in process, December 31 18,000
Finished goods, January 1 60,000
Finished goods, December 31 48,000
Raw materials purchases 1,500,000
Direct labor 690,000
Factory utilities 225,000
Indirect labor 75,000
Factory depreciation 500,000
Operating expenses 630,000
a. $2,888,000.
b. $2,891,000.
c. $2,909,000.
d. $2,912,000.
123. Assuming that the cost of goods manufactured is $2,960,000 compute the cost of goods
sold using the following information.
Raw materials inventory, January 1 $ 30,000
Raw materials inventory, December 31 60,000
Work in process, January 1 27,000
Work in process, December 31 18,000
Finished goods, January 1 60,000
Finished goods, December 31 48,000
Raw materials purchases 1,500,000
Direct labor 690,000
Factory utilities 225,000
Indirect labor 75,000
Factory depreciation 500,000
Operating expenses 630,000
a. $2,969,000.
b. $2,912,000.
c. $2,948,000.
d. $2,972,000.
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124. Samson Company reported total manufacturing costs of $300,000, manufacturing
overhead totaling $52,000, and direct materials totaling $64,000. How much is direct
labor cost?
a. Cannot be determined from the information provided.
b. $416,000
c. $416,000
d. $184,000
125. Given the following data for Mehring Company, compute (A) total manufacturing costs and
(B) cost of goods manufactured:
Direct materials used $230,000 Beginning work in process $30,000
Direct labor 150,000 Ending work in process 15,000
Manufacturing overhead 225,000 Beginning finished goods 38,000
Operating expenses 263,000 Ending finished goods 23,000
(A) (B)
a. $590,000 $620,000
b. $605,000 $590,000
c. $605,000 $620,000
d. $620,000 $635,000
126. Penner Company reported total manufacturing costs of $410,000, manufacturing
overhead totaling $78,000, and direct materials totaling $96,000. How much is direct
labor cost?
a. Cannot be determined from the information provided.
b. $584,000
c. $174,000
d. $236,000
127. Given the following data for Glennon Company, compute (A) total manufacturing costs
and (B) costs of goods manufactured:
Direct materials used $270,000 Beginning work in process $40,000
Direct labor 200,000 Ending work in process 20,000
Manufacturing overhead 300,000 Beginning finished goods 50,000
Operating expenses 350,000 Ending finished goods 30,000
(A) (B)
a. $750,000 $790,000
b. $770,000 $750,000
c. $770,000 $790,000
d. $790,000 $810,000
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128. Barton Company has beginning work in process inventory of $144,000 and total
manufacturing costs of $686,000. If cost of goods manufactured is $640,000, what is the
cost of the ending work in process inventory?
a. $170,000.
b. $198,000.
c. $210,000.
d. $190,000.
129. Gammil Company has beginning and ending raw materials inventories of $96,000 and
$120,000, respectively. If direct materials used were $440,000, what was the cost of raw
materials purchased?
a. $440,000.
b. $470,000.
c. $416,000.
d. $464,000.
130. Molina Company has beginning and ending work in process inventories of $130,000 and
$145,000 respectively. If total manufacturing costs are $650,000, what is the total cost of
goods manufactured?
a. $780,000.
b. $795,000.
c. $635,000.
d. $665,000.
131. Costas Company has beginning and ending raw materials inventories of $64,000 and
$80,000, respectively. If direct materials used were $290,000, what was the cost of raw
materials purchased?
a. $290,000.
b. $310,000.
c. $274,000.
d. $306,000.
132. Wood Company has beginning work in process inventory of $128,000 and total
manufacturing costs of $477,000. If cost of goods manufactured is $480,000, what is the
cost of the ending work in process inventory?
a. $110,000.
b. $131,000.
c. $140,000.
d. $125,000.
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133. Given the following data for Harder Company, compute cost of goods manufactured:
Direct materials used $120,000 Beginning work in process $20,000
Direct labor 200,000 Ending work in process 10,000
Manufacturing overhead 150,000 Beginning finished goods 25,000
Operating expenses 175,000 Ending finished goods 15,000
a. $460,000
b. $470,000
c. $480,000
d. $490,000
134. Which one of the following does not appear on the balance sheet of a manufacturing
company?
a. Finished goods inventory
b. Work in process inventory
c. Cost of goods manufactured
d. Raw materials inventory
135. The equivalent of finished goods inventory for a merchandising firm is referred to as
a. purchases.
b. cost of goods purchased.
c. merchandise inventory.
d. raw materials inventory.
136. How have many companies significantly lowered inventory levels and costs?
a. They use activity-based costing.
b. They utilize a balanced scorecard system.
c. They have a just-in-time method.
d. They focus on total quality management.
137. What term describes all business processes associated with providing a product or
service?
a. The manufacturing chain
b. The product chain
c. The supply chain
d. The value chain
138. Which one of the following managerial accounting approaches attempts to allocate
manufacturing overhead in a more meaningful fashion?
a. Balanced scorecard
b. Just-in-time inventory
c. Activity-based costing
d. Total quality management
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139. What is “balanced” in the balanced scorecard approach?
a. The number of products produced
b. The emphasis on financial and non-financial performance measurements
c. The amount of costs allocated to products
d. The number of defects found on each product
140. Which one of the following characteristics would likely be associated with a just–in-time
inventory method?
a. Ending inventory of work in process that would allow several production runs
b. A backlog of inventory orders not yet shipped
c. Minimal finished goods inventory on hand
d. An understanding with customers that they may come to the showroom and select
from inventory on hand
141. Many companies now focus on reducing defects in finished products with the goal of zero
defects. This is called
a. Activity-based costing.
b. Balanced scorecard.
c. Value chain.
d. Total quality management.
142. Financial and managerial accounting are similar in that both
a. have the same primary users.
b. produce general-purpose reports.
c. have reports that are prepared quarterly and annually.
d. deal with the economic events of an enterprise.
143. The function that pertains to keeping the activities of the enterprise on track is
a. planning.
b. directing.
c. controlling.
d. accounting.
144. Property taxes on a manufacturing plant are an element of a
Product Cost Period Cost
a. Yes No
b. Yes Yes
c. No Yes
d. No No
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145. For a manufacturing company, which of the following is an example of a period cost rather
than a product cost?
a. Depreciation on factory equipment
b. Wages of salespersons
c. Wages of machine operators
d. Insurance on factory equipment
146. For a manufacturing firm, cost of goods available for sale is computed by adding the
beginning finished goods inventory to
a. cost of goods purchased.
b. cost of goods manufactured.
c. net purchases.
d. total manufacturing costs.
147. If the cost of goods manufactured is less than the cost of goods sold, which of the
following is correct?
a. Finished Goods Inventory has increased.
b. Work in Process Inventory has increased.
c. Finished Goods Inventory has decreased.
d. Work in Process Inventory has decreased.
148. The principal difference between a merchandising and a manufacturing income statement
is the
a. cost of goods sold section.
b. extraordinary item section.
c. operating expense section.
d. revenue section.
149. If the total manufacturing costs are greater than the cost of goods manufactured, which of
the following is correct?
a. Work in Process Inventory has increased.
b. Finished Goods Inventory has increased.
c. Work in Process Inventory has decreased.
d. Finished Goods Inventory has decreased.
150. The sum of the direct materials costs, direct labor costs, and manufacturing overhead
incurred is the
a. cost of goods manufactured.
b. total manufacturing overhead.
c. total manufacturing costs.
d. total cost of work in process.
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151. The inventory accounts that show the cost of completed goods on hand and the costs
applicable to production that is only partially completed are, respectively
a. Work in Process Inventory and Raw Materials Inventory.
b. Finished Goods Inventory and Raw Materials Inventory.
c. Finished Goods Inventory and Work in Process Inventory.
d. Raw Materials Inventory and Work in Process Inventory.
Answers to Multiple Choice Questions
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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BRIEF EXERCISES
BE 152
Presented below are Truck Company’s monthly manufacturing cost data related to its personal
computer products.
(a) Taxes on factory building $820,000
(b) Raw materials 66,000
(c) Depreciation on manufacturing equip. 210,000
(d) Wages for assembly line workers 340,000
Instructions
Enter each cost item in the following table, placing an “X” under the appropriate headings.
Product Costs
Direct Materials
Direct Labor
Manufacturing Overhead
(a)
(b)
(c)
(d)
BE 153
Determine whether each of the following costs should be classified as direct materials (DM),
direct labor (DL), or manufacturing overhead (MO).
a. ____ Depreciation on factory equipment
b. ____ Table legs used in manufacturing tables
c. ____ Wages paid to assembly line workers
d. ____ Factory rent
Direct Materials
Direct Labor
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BE 154
Indicate whether each of the following costs of a pencil manufacturer would be classified as direct
materials (DM), direct labor (DL), or manufacturing overhead (MO).
a. ____ Depreciation of pencil painting machinery
b. ____ Lead inserted into pencils
c. ____ Factory utilities
d. ____ Wages of assembly line worker
e. ____ Salary of supervisor
f. ____ Factory machinery maintenance
g. ____ Wood
h. ____ Eraser compound
BE 155
Presented below are Cricket Company’s monthly manufacturing cost data related to its personal
computer products.
a. Hard drives and memory sticks $30,000
b. Wages to assemble equipment $65,000
c. Insurance on manufacturing building $41,000
d. Wages for factory supervisors $64,000
Instructions
Enter each cost item in the following table, placing an ‘X’ under the appropriate headings.
Product Costs
Direct Materials
Direct Labor
Manufacturing Overhead
a.
b.
c.
d.
Ans: N/A, LO: 3, Bloom: K, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: None, IMA:
Business Economics
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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BE 156
Identify whether each of the following is classified as a product cost or a period cost.
______________ 1. Direct labor
______________ 2. Direct materials
______________ 3. Factory utilities
______________ 4. Repairs to office equipment
______________ 5. Property taxes on factory building
______________ 6. Sales salaries
BE 157
Criba Company has the following data: direct labor $580,000, direct materials used $421,000,
total manufacturing overhead $206,000, and beginning work in process $47,000.
Instructions
Compute (a) total manufacturing costs and (b) total cost of work in process.
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BE 158
Presented below are incomplete 2013 manufacturing cost data for Swartnez Corporation.
Direct Materials Used
Direct Labor
Manufacturing Overhead
Total Manufacturing
Costs
(a)
$ 17,000
$42,000
?
$ 88,000
(b)
$148,000
?
$112,000
$480,000
Instructions
Determine the missing amounts.
BE 159
Presented below are incomplete 2013 manufacturing cost data for Supreme Corporation.
Direct Materials Used
Direct Labor
Factory Overhead
Total Manufacturing Costs
(a)
$48,000
$72,000
?
$184,000
(b)
$95,000
?
$80,000
$305,000
(c)
?
$80,000
$120,000
$290,000
Instructions
Determine the missing amounts.
Direct Materials Used
Direct Labor
Factory Overhead
Total Manufacturing Costs
(a)
$48,000
$72,000
$64,000
$184,000
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BE 160
Raynor Company has the following data:
Direct labor $76,000
Direct materials used 84,000
Total manufacturing overhead 60,000
Ending work in process 30,000
Beginning work in process 45,000
Instructions
Compute (a) total manufacturing costs and (b) cost of goods manufactured.
BE 161
In alphabetical order below are current asset items for Sudler Company as of December 31,
2013. Prepare the current assets section of the company’s balance sheet as of the same date.
Accounts receivable $41,000
Cash 61,000
Finished goods 26,000
Prepaid expenses 3,000
Raw materials 17,000
Work in process 32,000
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EXERCISES
Ex. 162
Financial accounting information and managerial accounting information have a number of
distinguishing characteristics. For each of the characteristics listed below, indicate which
characteristics are more closely related to financial accounting by placing the letter “F” in the
space to the left of the item and indicate those characteristics which are more closely associated
with managerial accounting by placing the letter “M” to the left of the item.
____ 1. General-purpose reports
____ 2. Reports are used internally
____ 3. Prepared in accordance with generally accepted accounting principles
____ 4. Special purpose reports
____ 5. Limited to historical cost data
____ 6. Reporting standard is relevance to the decision to be made
____ 7. Financial statements
____ 8. Reports generally pertain to the business as a whole
____ 9. Reports generally pertain to subunits
____ 10. Reports issued quarterly or annually
Ans: N/A, LO: 1, Bloom: C, Difficulty: Easy, Min: 7, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Solution 162 (7–11 min.)
Ex. 163
Determine whether each of the following is classified as:
DM: Direct materials
DL: Direct labor
MO: Manufacturing overhead
_____ 1. Assembly line workers’ wages.
_____ 2. Factory supervisors’ salaries.
_____ 3. Steel used in manufacturing product.
_____ 4. Insurance on factory building.
_____ 5. Rivets and screws used in production.
_____ 6. Tires used in manufacturing vehicles.
Ans: N/A, SO: 4, Bloom: C, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Solution 163 (5 min.)
Ex. 164
Presented below is a list of costs and expenses incurred in the factory by Nu-Way Corporation, a
manufacturer of recreational vehicles.
____ 1. Property taxes on the factory land
____ 2. Nails and glue used in production
____ 3. Cabinet maker’s wages
____ 4. Factory supervisors’ salaries
____ 5. Metal used in manufacturing
____ 6. Depreciation on factory machines
____ 7. Factory utilities
____ 8. Carpeting for the recreational vehicles
____ 9. Property taxes on the factory building
____ 10. Insurance on factory equipment
Instructions
Classify the above items into the following categories:
DM — Direct Materials
DL — Direct Labor
MO — Manufacturing Overhead
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Ex. 165
For each item, identify all applicable cost labels. Use the following code in your answer:
1 — Product Cost
2 — Period Cost
a. Advertising ________
b. Direct materials used ________
c. Sales salaries ________
d. Indirect factory labor ________
e. Repairs to office equipment ________
f. Factory manager’s salary ________
g. Direct labor ________
h. Indirect materials ________
Ex. 166
Kennedy Company reports the following costs and expenses in May.
Factory utilities $ 13,500 Direct labor $79,100
Depreciation on factory Sales salaries 48,400
equipment 12,650 Property taxes on factory
Depreciation on delivery trucks 3,800 building 2,500
Indirect factory labor 48,900 Repairs to office equipment 1,300
Indirect materials 70,800 Factory repairs 2,000
Direct materials used 157,600 Advertising 23,000
Factory manager’s salary 8,000 Office supplies used 2,640
Instructions
From the information, determine the total amount of:
(a) Manufacturing overhead.
(b) Product costs.
(c) Period costs.
Ans: N/A, LO: 3, 4, Bloom: AP, Difficulty: Hard, Min: 12, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: Business Economics
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Solution 166 (10–12 min.)
Ex. 167
Kwik Delivery Service reports the following costs and expenses in June 2013.
Indirect materials $ 8,400 Driver’s salaries $14,000
Depreciation on delivery Advertising 5,100
equipment 11,200 Delivery equipment
Dispatcher’s salary 5,000 repairs 300
Property taxes on office Office supplies 650
building 870 Office utilities 1,490
CEO’s salary 12,000 Repairs on office
Gas and oil for delivery trucks 3,200 equipment 180
Instructions
Determine the total amount of (a) delivery service (product) costs and (b) period costs.
Ans: N/A, LO: 4, Bloom: AP, Difficulty: Hard, Min: 10, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: Business Economics