Process costing production environment


Question 1: The Murphy Corp. had the following information available for the year ended 1999:

Beginning

Ending

Work in Process Inventory

$10,000

$15,000

Finished Goods Inventory

21,000

17,000

Direct Material Inventory

5,000

8,000

Direct Material purchased

40,000

Direct labour

(2,500 DLH @ $8)

Overhead

33,000


Murphy Corp.’s cost of direct material used is

a.    $13,000.
b.    $37,000.
c.    $40,000.
d.    $53,000.

Question 2. Which of the following statements about a process costing production environment is false?

a.    Production is accomplished in small discrete batches.
b.    Products are homogeneous.
c.    Costs are accumulated by department.
d.    Costs are accumulated by specific cost components.

Question 3. Carolina Co. applies overhead to jobs at the rate of 40% of direct labour cost. Direct materials of $1,250 and direct labour of $1,400 were expended on Job 44 during June. At May 31, the balance in Job 44 was $2,800. The June 30 balance is

a.    $3,210.
b.    $4,760.
c.    $5,450.
d.    $6,010.

Question 4. Standard costs can be used in

a.    job order costing.
b.    neither process costing nor job order costing.
c.    process costing and job order costing.
d.    process costing.

Question 5. If a corporation discontinues a product segment, which of the following are likely to decline?

a.    total variable costs and total fixed costs
b.    total variable costs
c.    allocated fixed costs, total variable costs, and total fixed costs
d.    allocated fixed costs

Question 6. Xeno Corp manufactures three products in similar production processes using the same employees and the same direct material. Information for the three products follows:

Product A

Product B

Product C

Sales price per unit

$30

$40

$50

Variable costs per unit

15

20

20

Direct fixed costs (annual)

$25,000

$50,000

$40,000

Direct labour per unit

.6 hour

1 hour

1.2 hours


Because of a labour strike, only 2,000 direct labour hours are available for production in March. Demand for each product exceeds the number of units that can be produced with 2,000 labour hours. In March, if only one of the three products is produced, which of the following will maximize corporate profits?

a.    Product A
b.    Product B
c.    Product C
d.    Either Product A or Product C

Question 7: David Beadle Company makes patio chairs that require production time of 30 minutes per unit. The company wants its finished goods inventory to equal 10% of the following month's sales. The budgeted labour rate is $9 per hour. Planned sales for October, November, and December (respectively) are 8,000; 11,000; and 14,000 chairs. Budgeted direct labour cost for December is $63,900.

What are budgeted unit sales for January of the following year?

a.    14,000
b.    15,000
c.    16,000
d.    17,000

Question 8: Alexander Company is estimating its budget expense for cleaning uniforms. The formula to estimate this monthly cost is:

Uniform cleaning = $16,560 + $.09X
where X = number of direct labour hours

This estimate includes $2,800 of depreciation.

How much will be included in the pro forma income statement for cleaning uniforms in May if the firm expects 144,000 direct labour hours in that month?

a.    $12,960
b.    $26,720
c.    $29,520
d.    $32,320

Question 9: Business process redesign is associated with which of the following?

a.    outsourcing
b.    neither outsourcing nor technology advancement
c.    both outsourcing and technology advancement
d.    technology advancement

Question 10: The master production schedule is

a.    an economic forecast of the order quantities and safety stocks for each item produced by a manufacturer.
b.    essentially a production budget that provides more detail about time horizons.
c.    similar to the equivalent units of production schedule but has greater detail about percentages of completion.
d.    used to develop budgeted sales information that can be input into the master budget.

Question 11: The payback period for projects with even cash flows is found by dividing the

a.    annuity amount by the investment.
b.    investment by the cash outflows.
c.    investment by the annuity amount.
d.    annuity amount by the cash outflows.

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