All Extra Credit Questions (Up to Exam 1)---Day 3 of class---1. Which of the following is not a product cost?A) Salaries of football playersB) The cost of furniture that will be soldC) Delivery costs paid by Walgreens for shipping Tylenol D) The cost of plastic incurred by Coca-ColaAnswer: A - Football players aren’t a product and their salaries are periodical. Furniture, Tylenol, and Coca-Cola are costs related to a product2. How much Overhead is applied this period?Direct Labor Hours(DLH)(cost driver) – 20,000 hoursBudgeted Overhead(OH) - $3,000,000Actual DLH – 22,000 hoursActual OH - $3,200,000Answer: $3,300,000-POHR=(expected OH/Cost Driver)POHR= (3,000,000/20,000)POHR= $150 (per DLH)OHA(overhead applied)= POHR x activityOHA= $150 x 22,000 = $3,300,0003. What is COGM?Job 1 Job 2 Job 3Prior Period Product Cost $100 $0 $0(CurrentPeriod)DM $30 $60 $10DL $50 $30 $20OH $20 $30 $15Job 1 was only job in process at beginning of periodJobs 1 & 2 were finished this periodAnswer: $320- Job 1 and Job 2 were finished this period, so all of their costs are incurred this period. 100 + 30 + 50 + 20 + 0 + 60 + 30 + 30 = 3204. Which of the following is not used to calculate product cost under the normal costing system?A) Actual DMB) Actual OHC) Actual DLD) Applied OHAnswer: B- Normal costing uses actual the prices of DM &DL, but calculates an applied OH based on a cost driver.---Day 4 of class---1. A company makes guns. It takes 6 employees 45 minutes each to make 100 guns. Expected overhead is $103,500. Actual overhead is $110,000. Overhead applied is based on direct labor hours. It actually takes 8 employees 45 minutes each to make 100 guns. What is applied overhead?Answer: $138,000- DLH is cost driver 6 x (45/60) = 4.5 hours budgeted 8 x (45/60) = 6 hours actually used POHR= (103,500/4.5) POHR= $23,000 OHA= $23,000 x 6 = $138,0002. DM= 40% of conversion costs, DL = 20% of conversion costs, OH = $20,000, what is the total product cost?Answer: $35,000- Conversion costs = (DL + OH)DL = .2(DL + OH)DL = .2(DL + 20,000)DL = .2DL + 4,000).8DL = 4,000DL = 5,000DM = .4(DL + OH)DM = .4(5,000 + 20,000)DM = 10,000Total Product Cost = DM + DL + OHTPC = 10,000 + 5,000 + 20,000TPC = $35,0003. Period costs that have been expensed can be found (can choose more than one or none at all):A) Raw MaterialsB) WIPC) InventoryD) COGSE) Selling and AdministrativeF) Operating ExpenseAnswer: E & F---Day 5 of class---1. How much OH should be applied to “A” using Activity Based Costing(ABC)?Shipping(Material Weight) - $100,000Setups(Runs) - $25,000General(DLH) - $75,000Company makes 2 products: A and B. Product usage:A – 40,000lbs of Material / 50 Runs / 10,000 DLHB – 80,000lbs of Material / 100 Runs / 5,000 DLHAnswer: 91666- POHR(Material)= (100,000/120,000) = .83OHA(Material)= .83 x 40,000 = $33,333POHR(Runs)= (25,000/150) = 166.67OHA(Runs)= 166.67 x 50 = $8,333POHR(DLH)= (75,000/15,000) = 5OHA(DLH)= 5 x 10,000 = $50,000Total OHA= $33,333+$8,333+$50,000 = $916662.Which of the following is manufacturing OH?A) Wood glue used in manufacturingB) Hourly wages of refinery security guardsC) Depreciation on factory machineryD) Plant insurance costsE) All of the aboveAnswer: E- All are involved with the manufacturing of the product but are not DM or DL.3. What are Prime Costs and what are Conversion Costs?Answer: Prime Costs= DM + DLConversion Costs= DL + OH4. What is the difference between COGS & TMC (total manufacturing cost)?Answer: TMC= DL + DM + OH [for all goods this period] COGS= all goods sold this period5. If you change from traditional costing to ABC costing, what will change?-DM-DL-Expected OH-Actual OH-Applied OHAnswer: Applied OH---Day 6 of class---1. In a traditional system compared to a ABC system; is Tails over, under, or accurately costed?Two products: Tails and MilesTraditional Overhead: 35% Tails and 65% MilesTwo cost drivers: Machine hours and Materials costMiles uses 20% of machine hours and 45% of materials costAnswer: UndercostedTraditional ABCMiles 65% OH 45% OHTails 35% OH 55% OH***-Miles ABC-calculated OH is based off of 20% of one cost driver, and 45% of another cost driver. At most miles will have 45% OH. This means Tails will have at least 55% OH. 55% or greater > 35%. Under ABC costing tails should actually be 55% of cost (at least) and in traditional it is 35%. It is undercosted.2. What is the Overhead Applied for machine hours to Riddles?-Two Products: Jokes and RiddlesExpected Activity Actual ActivityCost pool Expected OH Jokes Riddles Jokes RiddlesDLH 800,000 100,000 400,000 105,000 410,000Machine Hours 2,100,000 300,000 700,000 290,000 750,000Setups 1,600,000 3,000 1,000 4,000 750Answer: $1,575,000-POHR= (2,100,000/1,000,000) = 2.1 /hourOHA= 2.1 x 750,000 = $1,575,0003. What is the effect on each of the following accounts if you mistakenly charging a product cost as a period cost if you finished all products but sold none? Inventories? COGS? Net Income?Answer: Inventory is too lowCOGS has no changeNet Income is too low SalesProduct cost ---------------> Inventory ---------- (if sold) --------> - COGS GMPeriod cost -----------------------------------------------------------------> - Op. Exp NI4. For a company that produces back scratchers, the cost of wood is a _____ cost.A) Step VariableB) MixedC) FixedD) VariableAnswer: D-Wood would be a DM, and that would vary depending on volume of units produced5. Which is not a conversion cost?A) Metal used in productionB) Rent of production facilitiesC) Workers that assemble dollsD) Janitors employed (only) in factoriesAnswer: A-Conversion costs include DL and OH. Metal is the only DM cost. All others are DL and OH.---Day 7 of class---1. How much of indirect costs should be allocated to Cotton?-Activity based costing (ABC)Feather CottonDirect Materials Cost $1,500 $500Machine Hours 5 5Kilowatt hours 100 300Answer: $1,850POHR = (OH/CD) x Activity = OHAMH -> (1,000/2,000) x 500 = 250MO -> (2,000/10) x 5 = 1000Power-> (800/400) x 300 = 600 $1,8502. What is the mixed cost function of the following information, and using that formula, what are our total costs if we produce 20,000 units?Fixed OH = 100,000Variable OH = $3/unitPrime Costs = $6/unitAnswer: TC = 9(VC) + FC TC = $280,000- TC = m(VC) + FC TC = m(3+6) + 100,000 TC = m(9) + 100,000 TC = 9(20,000) + 100,000 TC = $280,0003. What are
View Full Document