CMA ESSAY QUESTION
COST TERMS AND CONCEPTS
Q1 Lucas Manufacturing has three cost objects that it uses to accumulate costs for its manufacturing plants. They are:
Cost object #1: The physical buildings and equipment
Cost object #2: The use of buildings and equipment
Cost object #3: The availability and use of manufacturing labor
The following manufacturing overhead cost categories are found in the accounting records:
a. Depreciation on buildings and equipment
b. Lubricants for machines
c. Property insurance
d. Supervisors’ salaries
e. Fringe benefits
f. Property taxes
g. Utilities
Required:
Assign each of the above costs to the most appropriate cost object.
Answer:
Cost object # 1 includes categories a, c, and f.
Cost object # 2 includes categories b and g.
Cost object # 3 includes categories d and e.
Q2 . Archambeau Products Company manufactures office furniture. Recently, the company decided to develop a formal cost accounting system and classify all costs into three categories. Categorize each of the following items as being appropriate for (1) cost tracing to the finished furniture, (2) cost allocation of an indirect manufacturing cost to the finished furniture, or (3) as a nonmanufacturing item.
Cost Cost Nonmanu-
Item Tracing Allocation facturing
Carpenter wages ________ ________ ________
Depreciation - office building ________ ________ ________
Glue for assembly ________ ________ ________
Lathe department supervisor ________ ________ ________
Lathe depreciation ________ ________ ________
Lathe maintenance ________ ________ ________
Lathe operator wages ________ ________ ________
Lumber ________ ________ ________
Samples for trade shows ________ ________ ________
Metal brackets for drawers ________ ________ ________
Factory washroom supplies ________ ________ ________
Answer:
Cost Cost Nonmanu-
Item Tracing Allocation facturing
Carpenter wages X
Depreciation - office building X
Glue for assembly X
Lathe department supervisor X
Lathe depreciation X
Lathe maintenance X
Lathe operator wages X
Lumber X
Samples for trade shows X
Metal brackets for drawers X
Factory washroom supplies X
Q3 Butler Hospital wants to estimate the cost for each patient stay. It is a general health care facility offering only basic services and not specialized services such as organ transplants.
Required:
a. Classify each of the following costs as either direct or indirect with respect to each patient.
b. Classify each of the following costs as either fixed or variable with respect to hospital costs per day.
Direct Indirect Fixed Variable
Electronic monitoring ______ ______ ______ ______
Meals for patients ______ ______ ______ ______
Nurses' salaries ______ ______ ______ ______
Parking maintenance ______ ______ ______ ______
Security ______ ______ ______ ______
Answer:
Direct Indirect Fixed Variable
Electronic monitoring X X
Meals for patients X X
Nurses salaries X X
Parking maintenance X X
Security X X
Q4 . Combs, Inc. reports the following information for September sales:
Sales $15,000
Variable costs 3,000
Fixed costs 4,000
Operating income $ 8,000
Required:
If sales double in October, what is the projected operating income?
Answer:
(15,000 x 2) - ($3,000 x 2) - $4,000 = $20,000
Q5 Axle and Wheel Manufacturing currently produces 1,000 axles per month. The following per unit data apply for sales to regular customers:
Direct materials $200
Direct manufacturing labor 30
Variable manufacturing overhead 60
Fixed manufacturing overhead 40
Total manufacturing costs $330
The plant has capacity for 2,000 axles.
Required:
a. What is the total cost of producing 1,000 axles?
b. What is the total cost of producing 1,500 axles?
c. What is the per unit cost when producing 1,500 axles?
Answer:
a. [($200 + $30 + $60) x 1,000 units] + ($40 x 1,000 units) = $330,000
b. [($200 + $30 + $60) x 1,500 units] + $40,000 = $475,000
c. $475,000 / 1,500 = $316.67 per unit
Q6 The following information pertains to Ball Company:
Manufacturing costs $2,400,000
Units manufactured 40,000
Beginning inventory 0 units
39,800 units are sold during the year for $100 per unit.
Required:
a. What is the average manufacturing cost per unit?
b. What is the amount of ending finished goods inventory?
c. What is the amount of gross margin?
Answer:
a. $2,400,000 / 40,000 = $60.00
b. (40,000 – 39,800) x $60 = $12,000
c. 39,800 x ($100 - $60) = $1,592,000
Q7 . Cheaney Incorporated reports the following information.
On January 31, 20x1, Job #101 was the only job in process with accumulated costs of:
Direct materials $2,000
Direct manufacturing labor 1,000
Manufacturing overhead 1,000
Total $4,000
During February, Job #102 and Job #103 were started and the following costs were added:
Job #101 Job #102 Job #103
Direct materials $4,000 $5,000 $6,000
Direct manufacturing labor 1,000 2,000 3,000
Manufacturing overhead 2,000 3,000 4,000
Total $7,000 $10,000 $13,000
On February 28, 20x1:
Job #101 was completed and sold for $20,000.
Job #102 was completed but not sold.
Job #103 remains in production.
Required:
Using the above information, determine the following amounts:
a. Work-in-process inventory on February 1, 20x1.
b. Work-in-process inventory on February 28, 20x1.
c. Finished goods inventory on February 28, 20x1.
d. Cost of goods manufactured for February.
e Cost of goods sold for February.
f. Gross margin for February.
Answer:
a. $4,000
b. Job #103 $13,000
c. Job #102 $10,000
d. (Job #101 $11,000) + (Job #102 $10,000) = $21,000
e. Job #101 $11,000
f. $20,000 - $11,000 = $9,000
Q8 . Evans Inc. had the following activities during 20x1:
Direct materials:
Beginning inventory $ 40,000
Purchases 123,200
Ending inventory 20,800
Direct manufacturing labor 32,000
Manufacturing overhead 24,000
Beginning work-in-process inventory 1,600
Ending work-in-process inventory 8,000
Beginning finished goods inventory 48,000
Ending finished goods inventory 32,000
Required:
a. What is the cost of direct materials used during 20x1?
b. What is cost of goods manufactured for 20x1?
c. What is cost of goods sold for 20x1?
d. What amount of prime costs was added to production during 20x1?
e. What amount of conversion costs was added to production during 20x1?
Answer:
a. $40,000 + $123,200 - $20,800 = $142,400
b. $142,400 + $32,000 + $24,000 + $1,600 - $8,000 = $192,000
c. $192,000 + $48,000 - $32,000 = $208,000
d. $142,400 + $32,000 = $174,400
e. $32,000 + $24,000 = $56,000
Q9 . Helmer Sporting Goods Company manufactured 100,000 units in 20x3 and reported the following costs:
Sandpaper $ 32,000 Leasing costs - plant $ 384,000
Materials handling 320,000 Depreciation - equipment 224,000
Coolants & lubricants 22,400 Property taxes - equipment 32,000
Indirect manufacturing labor 275,200 Fire insurance - equipment 16,000
Direct manufacturing labor 2,176,000 Direct material purchases 3,136,000
Direct materials, 1/1/x3 384,000 Direct materials, 12/31/x3 275,200
Finished goods, 1/1/x3 672,000 Sales revenue 12,800,000
Finished goods, 12/31/x3 1,280,000 Sales commissions 640,000
Work-in-process, 1/1/x3 96,000 Sales salaries 576,000
Work-in-process, 12/31/x3 64,000 Advertising costs 480,000
Administration costs 800,000
Required:
a. What is the amount of direct materials used during 20x3?
b. What manufacturing costs were added to WIP during 20x3?
c. What is cost of goods manufactured for 20x3?
d. What is cost of goods sold for 20x3?
Answer:
a. $384,000 + $3,136,000 - $275,200 = $3,244,800
b. $3,244,800 + $2,176,000 + $32,000 + $320,000 + $22,400 + $275,200 + $384,000 + $224,000 + $32,000 + $16,000 = $6,726,400
c. $6,726,400 + $96,000 - $64,000 = $6,758,400
d. $6,758,400 + $672,000 - $1,280,000 = $6,150,400
No comments:
Post a Comment