Question 1

Allen Inspiration, Inc. is a merchandiser of stereo components. The company sold 7,000 units during the year. Given the following data: Sales Revenue: $$569,000; Beginning Merchandise Inventory: 45$$,000; Purchases: $$325,000; Ending Merchandise Inventory: 38$$,000; Selling and Administrative Expenses: $$153,000. What is the operating income for the year? (Round your answer to the nearest whole dollar.)

Use the following formulas:

$$	ext{Cost of Goods Sold} = 	ext{Beginning Inventory} + 	ext{Purchases} - 	ext{Ending Inventory}$$

$$	ext{Gross Profit} = 	ext{Sales Revenue} - 	ext{Cost of Goods Sold}$$

$$	ext{Operating Income} = 	ext{Gross Profit} - 	ext{Selling and Administrative Expenses}$

Accepted Answer

$$196,000$$

Question 2

Super Treat Inc. is a large manufacturer of auto tires. Given: Sales Revenue: $$93,000; Beginning Finished Goods Inventory: 17$$,000; Cost of Goods Manufactured: $$54,100; Cost of Goods Sold: 43$$,500. Calculate the amount of ending Finished Goods Inventory reported on the balance sheet.

Use the formula:

$$	ext{Ending Finished Goods Inventory} = 	ext{Beginning Finished Goods Inventory} + 	ext{Cost of Goods Manufactured} - 	ext{Cost of Goods Sold}$$

Accepted Answer

$$27,600$$

Question 3

Parrish Manufacturing provided the following for March: Sales Revenue: $$110,000; Beginning Finished Goods Inventory: 8$$,000; Ending Finished Goods Inventory: $$6,500; Cost of Goods Manufactured: 25$$,600. Compute cost of goods sold.

$$	ext{Cost of Goods Sold} = 	ext{Beginning Finished Goods Inventory} + 	ext{Cost of Goods Manufactured} - 	ext{Ending Finished Goods Inventory}$$

Accepted Answer

$$27,100$$

Question 4

Zephyr Corporation had estimated manufacturing overhead costs for the coming year to be $$306,000. The estimated direct labor hours are 8,000. What is the predetermined overhead allocation rate?

$$	ext{Predetermined Overhead Rate} = \frac{	ext{Estimated Overhead Costs}}{	ext{Estimated Direct Labor Hours}}$

Accepted Answer

$$38.25$$ per direct labor hour

Question 5

At the beginning of the year, Green Street Manufacturing had the following balances: Work-in-Process Inventory: $$2,000; Finished Goods Inventory: 7$$,000; Manufacturing Overhead: $$6,000. Additional details: Direct materials used: 84$$,000; Direct labor: $$61,000; Manufacturing overhead incurred: 62$$,000; Cost of goods manufactured: $$147,000; Cost of goods sold: 141$$,000. After adjusting for the balance in Manufacturing Overhead, what is the ending balance in Finished Goods Inventory?

Accepted Answer

$$13,000$$

Question 6

Babula Manufacturing produces plastic toys and uses process costing. On January 1, the Finishing Department had 2,000 units of partially completed inventory. During January, 7,000 units were transferred in from the previous department, and 3,000 units remained in ending inventory. If all direct materials are added at the beginning of the process, what are the equivalent units for direct materials for January?

$$	ext{Equivalent Units} = 	ext{Units transferred out} + 	ext{Equivalent units in ending inventory}$$

Accepted Answer

$$9,000$$ units

Question 7

A company has the following information: Beginning Inventory: $$10,000; Purchases: 50$$,000; Ending Inventory: $$8,000; Sales Revenue: 80$$,000. What is the cost of goods sold?

$$	ext{Cost of Goods Sold} = 	ext{Beginning Inventory} + 	ext{Purchases} - 	ext{Ending Inventory}$$

Accepted Answer

$$52,000$$

Question 8

If a company’s predetermined overhead rate is $$20 per direct labor hour and actual direct labor hours worked were 10,000, but actual overhead incurred was 210$$,000, what is the amount of over- or under-applied overhead?

$$	ext{Applied Overhead} = 	ext{Predetermined Rate} 	imes 	ext{Actual Hours}$$

$$	ext{Over- or Under-applied Overhead} = 	ext{Applied Overhead} - 	ext{Actual Overhead}$$

Accepted Answer

$$10,000$$ under-applied

Question 9

A manufacturing company uses process costing. If 5,000 units are started and completed during the period, and there are 2,000 units in ending inventory that are 50% complete, what are the equivalent units for conversion costs?

$$	ext{Equivalent Units} = 	ext{Units completed} + (	ext{Ending Inventory} 	imes 	ext{Percentage completion})$$

Accepted Answer

$$6,000$$

Question 10

A company’s beginning finished goods inventory is $$12,000, cost of goods manufactured is 40$$,000, and ending finished goods inventory is $$10,000. What is the cost of goods sold?

$$	ext{Cost of Goods Sold} = 	ext{Beginning Finished Goods Inventory} + 	ext{Cost of Goods Manufactured} - 	ext{Ending Finished Goods Inventory}$

Accepted Answer

$$42,000$$

Question 11

If a company’s sales revenue is $$200,000, cost of goods sold is 120$$,000, and selling and administrative expenses are $$50,000, what is the operating income?

$$	ext{Operating Income} = 	ext{Sales Revenue} - 	ext{Cost of Goods Sold} - 	ext{Selling and Administrative Expenses}$

Accepted Answer

$$30,000$$

Question 12

A company estimates $$500,000 in manufacturing overhead and 25,000 machine hours for the year. If actual machine hours used are 24,000, what is the applied overhead?

$$	ext{Predetermined Overhead Rate} = \frac{\$$500,000}{25,000}$$

$$	ext{Applied Overhead} = 	ext{Predetermined Overhead Rate} 	imes 	ext{Actual Machine Hours}$$

Accepted Answer

$$480,000$$

Question 13

Which of the following best describes the purpose of a predetermined overhead rate in a manufacturing environment?

Accepted Answer

To allocate indirect costs to products based on an activity driver

Question 14

A company’s beginning work-in-process inventory is $$5,000, direct materials used are 20$$,000, direct labor is $$15,000, manufacturing overhead is 10$$,000, and ending work-in-process inventory is $$4,000. What is the cost of goods manufactured?

$$	ext{Cost of Goods Manufactured} = 	ext{Beginning WIP} + 	ext{Direct Materials} + 	ext{Direct Labor} + 	ext{Manufacturing Overhead} - 	ext{Ending WIP}$

Accepted Answer

$$46,000$$

Step-by-Step Guidance for Financial Accounting Exam Questions

Study Guide - Practice Questions

Study Guide - Flashcards