Q: Which formula correctly calculates Prime Costs?

$$\text{Prime Costs} = \text{Direct Materials} + \text{Direct Labor}$$

Q: Given the following data, calculate the Cost of Goods Manufactured (COGM): Beginning WIP Inventory = $$5,000; Direct Materials = 10$$,000; Direct Labor = $$8,000; Manufacturing Overhead = 7$$,000; Ending WIP Inventory = $4,000.

$$\text{COGM} = 5,000 + (10,000 + 8,000 + 7,000) - 4,000 = 26,000$$

Q: A company uses a predetermined overhead rate based on direct labor hours. If estimated overhead costs are $120,000 and estimated direct labor hours are 30,000, what is the predetermined overhead rate?

$$\text{Predetermined Overhead Rate} = \frac{120,000}{30,000} = 4$$ per DL hour

Q: If a department has total costs of $50,000 and 10,000 equivalent units of production, what is the cost per EUP?

$$\text{Cost per EUP} = \frac{50,000}{10,000} = 5$$

Q: Which formula correctly calculates the Activity Rate in Activity-Based Costing?

$$\text{Activity Rate} = \frac{\text{Estimated Activity Cost}}{\text{Estimated Activity Driver}}$$

Q: A company’s production cost report shows 2,000 units started, 1,500 units completed, and 500 units 50% complete at period end. What are the equivalent units of production?

$$\text{EUP} = 1,500 + (500 \times 0.5) = 1,750$$

Question 1

Which of the following is classified as a product cost in manufacturing accounting?

Accepted Answer

Factory rent

Question 2

A company pays wages to employees who assemble products on the factory floor. How should these wages be classified?

Accepted Answer

Direct Labor (DL)

Question 3

Which formula correctly calculates Prime Costs?

Accepted Answer

$$	ext{Prime Costs} = 	ext{Direct Materials} + 	ext{Direct Labor}$$

Question 4

A company incurs depreciation on manufacturing equipment. How is this cost classified?

Accepted Answer

Manufacturing Overhead

Question 5

Which of the following is NOT included in the calculation of Cost of Goods Manufactured (COGM)?

Accepted Answer

Sales Revenue

Question 6

Given the following data, calculate the Cost of Goods Manufactured (COGM): Beginning WIP Inventory = $$5,000; Direct Materials = 10$$,000; Direct Labor = $$8,000; Manufacturing Overhead = 7$$,000; Ending WIP Inventory = $4,000.

Accepted Answer

$$	ext{COGM} = 5,000 + (10,000 + 8,000 + 7,000) - 4,000 = 26,000$$

Question 7

In job order costing, which account is credited when direct materials are issued to production?

Accepted Answer

Direct Materials Inventory

Question 8

A company uses a predetermined overhead rate based on direct labor hours. If estimated overhead costs are $120,000 and estimated direct labor hours are 30,000, what is the predetermined overhead rate?

Accepted Answer

$$	ext{Predetermined Overhead Rate} = \frac{120,000}{30,000} = 4$$ per DL hour

Question 9

Which of the following best describes Activity-Based Costing (ABC)?

Accepted Answer

Allocates overhead based on multiple activities and cost drivers

Question 10

A company manufactures two products. Product A requires more machine hours, while Product B requires more setups. Using traditional costing, which product is likely to be overcosted?

Accepted Answer

Product A

Question 11

In process costing, what is the purpose of calculating Equivalent Units of Production (EUP)?

Accepted Answer

To convert partially completed units into an equivalent number of fully completed units

Question 12

If a department has total costs of $50,000 and 10,000 equivalent units of production, what is the cost per EUP?

Accepted Answer

$$	ext{Cost per EUP} = \frac{50,000}{10,000} = 5$$

Question 13

Which journal entry records the allocation of manufacturing overhead to a job?

Accepted Answer

Debit Work in Process (WIP), Credit Manufacturing Overhead (MOH)

Question 14

Which cost is both a manufacturing overhead and a conversion cost?

Accepted Answer

Factory rent

Question 15

A company uses Activity-Based Costing (ABC) and identifies three activities: setups, machine hours, and inspections. If Product X uses more setups and fewer machine hours than Product Y, how will overhead allocation differ compared to traditional costing?

Accepted Answer

Product X will be allocated more overhead for setups under ABC than under traditional costing

Question 16

Which of the following is a period cost?

Accepted Answer

Executive salaries

Question 17

In tracing cost flow using T-accounts, which account is debited when goods are completed and transferred to Finished Goods Inventory?

Accepted Answer

Finished Goods Inventory

Question 18

Which formula correctly calculates the Activity Rate in Activity-Based Costing?

Accepted Answer

$$	ext{Activity Rate} = \frac{	ext{Estimated Activity Cost}}{	ext{Estimated Activity Driver}}$$

Question 19

A company’s production cost report shows 2,000 units started, 1,500 units completed, and 500 units 50% complete at period end. What are the equivalent units of production?

Accepted Answer

$$	ext{EUP} = 1,500 + (500 	imes 0.5) = 1,750$$

Question 20

Which of the following statements about overhead allocation methods is TRUE?

Accepted Answer

Activity-Based Costing (ABC) is more complex but provides more accurate cost allocation than the single plantwide rate

Cost Classification and Costing Methods in Manufacturing Accounting

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