Q: A retailer has the following information: - Beginning inventory: $$3,800 - Purchases: 40$$,000 - Freight-in: $$3,700 - Import duties: 1$$,300 - Ending inventory: $5,900 What is the formula for Cost of Goods Sold (COGS)?

$$\text{COGS} = \text{Beginning inventory} + \text{Purchases} + \text{Freight-in} + \text{Import duties} - \text{Ending inventory}$$

Q: Value Electronics has the following data for October: - Revenues: $$27,200 - Direct Labor: 3$$,600 - Manufacturing Overhead: $$6,400 - Direct Materials Used: 8$$,100 - Finished Goods Inventory, October 1: $$4,000 - Finished Goods Inventory, October 31: ? - Gross Profit: 12$$,600 If Cost of Goods Sold (COGS) is $14,600, what is the formula to find Ending Finished Goods Inventory?

$$\text{Ending FG Inventory} = \text{Beginning FG Inventory} + \text{COGM} - \text{COGS}$$

Q: Elkland Heating & Cooling estimates its overhead for the year at $61,500 and expects to use 4,100 direct labor hours. What is the predetermined overhead rate per direct labor hour?

$$\text{Predetermined Overhead Rate} = \frac{61,500}{4,100} = 15$$ per hour

Q: If Elkland Heating & Cooling uses 155 direct labor hours for Job 101, what is the total overhead allocated to Job 101 using the predetermined overhead rate of $15 per hour?

$$\text{Overhead Allocated} = 155 \times 15 = 2,325$$

Q: Irvin Associates, a law firm, hires Attorney Amanda Hiller at an annual salary of $207,000. She is expected to work 2,300 hours per year. What is the hourly cost rate for Hiller?

$$\text{Hourly Cost Rate} = \frac{207,000}{2,300} = 90$$

Q: Irvin Associates expects total indirect costs of $660,000 and 22,000 direct labor hours for the year. What is the indirect cost allocation rate per hour?

$$\text{Indirect Cost Allocation Rate} = \frac{660,000}{22,000} = 30$$

Question 1

Which of the following best describes an indirect cost in financial accounting?

Accepted Answer

A cost that is related to a cost object but cannot be traced specifically to it.

Question 2

In a job costing system, which statement about materials is NOT correct?

Accepted Answer

Materials used during production are always classified as direct materials.

Question 3

Which of the following costs incurred by PEZ Candy Inc. would be classified as a period cost?

Accepted Answer

Employees who work in the PEZ Visitor Center.

Question 4

Which of the following is included in manufacturing overhead?

Accepted Answer

Plant supervisor’s salary.

Question 5

Given the following data for Justine Industries, what is the formula for calculating Cost of Goods Manufactured (COGM)?

- Beginning Raw Materials Inventory: $$17,000
- Ending Raw Materials Inventory: 12$$,000
- Purchases of Direct Materials: $$55,000
- Direct Labor: 121$$,000
- Manufacturing Overhead: $$151,000
- Beginning Work In Process Inventory: 22$$,000
- Ending Work In Process Inventory: $21,000

Select the correct formula.

Accepted Answer

COGM = Direct Materials Used + Direct Labor + Manufacturing Overhead + Beginning Work In Process Inventory - Ending Work In Process Inventory

Question 6

A retailer has the following information:

- Beginning inventory: $$3,800
- Purchases: 40$$,000
- Freight-in: $$3,700
- Import duties: 1$$,300
- Ending inventory: $5,900

What is the formula for Cost of Goods Sold (COGS)?

Accepted Answer

$$	ext{COGS} = 	ext{Beginning inventory} + 	ext{Purchases} + 	ext{Freight-in} + 	ext{Import duties} - 	ext{Ending inventory}$$

Question 7

Value Electronics has the following data for October:

- Revenues: $$27,200
- Direct Labor: 3$$,600
- Manufacturing Overhead: $$6,400
- Direct Materials Used: 8$$,100
- Finished Goods Inventory, October 1: $$4,000
- Finished Goods Inventory, October 31: ?
- Gross Profit: 12$$,600

If Cost of Goods Sold (COGS) is $14,600, what is the formula to find Ending Finished Goods Inventory?

Accepted Answer

$$	ext{Ending FG Inventory} = 	ext{Beginning FG Inventory} + 	ext{COGM} - 	ext{COGS}$$

Question 8

Elkland Heating & Cooling estimates its overhead for the year at $61,500 and expects to use 4,100 direct labor hours. What is the predetermined overhead rate per direct labor hour?

Accepted Answer

$$	ext{Predetermined Overhead Rate} = \frac{61,500}{4,100} = 15$$ per hour

Question 9

If Elkland Heating & Cooling uses 155 direct labor hours for Job 101, what is the total overhead allocated to Job 101 using the predetermined overhead rate of $15 per hour?

Accepted Answer

$$	ext{Overhead Allocated} = 155 	imes 15 = 2,325$$

Question 10

Irvin Associates, a law firm, hires Attorney Amanda Hiller at an annual salary of $207,000. She is expected to work 2,300 hours per year. What is the hourly cost rate for Hiller?

Accepted Answer

$$	ext{Hourly Cost Rate} = \frac{207,000}{2,300} = 90$$

Question 11

Irvin Associates expects total indirect costs of $660,000 and 22,000 direct labor hours for the year. What is the indirect cost allocation rate per hour?

Accepted Answer

$$	ext{Indirect Cost Allocation Rate} = \frac{660,000}{22,000} = 30$$

Question 12

If Attorney Hiller works 16 hours for Client 367, what is the total job cost for Client 367, given her hourly cost rate is $$90 and the indirect cost allocation rate is 30$$?

Accepted Answer

$$	ext{Total Job Cost} = (90 + 30) 	imes 16 = 1,920$$

Question 13

Which of the following is NOT a product cost for PEZ Candy Inc.?

Accepted Answer

Touch screen PEZ trivia game in the Visitor’s Center

Question 14

Which of the following is a period cost for PEZ Candy Inc.?

Accepted Answer

Fringe benefits associated with employees who work in the PEZ visitors center

Question 15

Olson Frame manufactures picture frames. Which of the following items is NOT included in manufacturing overhead?

Accepted Answer

Depreciation expense on company cars used by sales force

Question 16

A company’s manufacturing overhead for November is $$4,000, but the overhead allocated based on the predetermined rate is 4$$,350. Has manufacturing overhead been overallocated or underallocated, and by how much?

Accepted Answer

Overallocated by $350

Question 17

Which of the following is the correct formula for calculating direct materials used?

Accepted Answer

$$	ext{Direct Materials Used} = 	ext{Beginning Raw Materials Inventory} + 	ext{Purchases} - 	ext{Ending Raw Materials Inventory}$$

Question 18

Which of the following is a controllable cost?

Accepted Answer

A cost that can be influenced by management decisions.

Step-by-Step Guidance for Financial Accounting Exam Review (Chapters 1–3)

Study Guide - Practice Questions

Study Guide - Flashcards