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Exam 2: Cost Concepts, Behaviour and Estimation

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Question 31

Multiple Choice

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The following data (in thousands of pounds) have been taken from the accounting records of Karmint Corporation for the just completed year: - The net operating profit for the year (in thousands of pounds) was:

A) £140.
B) £170.
C) £110.
D) £410.

E) B) and D)
F) B) and C)

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Question 32

Multiple Choice

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In June direct labour was 60% percent of conversion cost. If the manufacturing overhead cost for the month was £36,000 and the direct materials cost was £22,000, the direct labour cost was

A) £33,000.
B) £14,667.
C) £24,000.
D) £54,000.

E) C) and D)
F) None of the above

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Question 33

Multiple Choice

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During the month of May, Cassidy Manufacturers incurred £30,000, £40,000 and £20,000 of direct material, direct labour and manufacturing overhead costs respectively. If the cost of goods manufactured was £95,000 and the ending work in process inventory was £15,000, the beginning inventory of work in process must have been

The cost of goods that have been completed but are not yet sold are part of work in process inventory

The cost of factory machinery purchased last year is

The cost of goods manufactured is computed by deducting the beginning inventory of work in process from the total manufacturing costs incurred during a given period.

Define the following. Prime cost, conversion cost & manufacturing overhead

Morton Company's manufacturing costs last year were as follows: Conversion cost was: $\begin{array}{lrr} \text { Direct materials } &£300,000\\ \text { Direct labour } &400,000\\ \text { Manutacturing overhead: } &\\ \text {variable. } &80,000\\ \text {Fixed } &50,000\\\end{array}$

Which of the following statements is correct in describing manufacturing overhead costs

During June, the cost of goods manufactured was £71,000. The beginning finished goods inventory was £18,000 and the ending finished goods inventory was £11,000. What was the cost of goods sold for the month

Access the report by Fitzgerald, Johnston, Brignall, Silvestro and Voss (1991) mentioned on page 32 of Chapter 2. Discuss the differences that you see between costing for service industries and manufacturing. Give examples

Gable Inc. is a merchandising company. Last month the company's merchandise purchases totaled £86,000. The company's beginning merchandise inventory was £15,000 and its ending merchandise inventory was £11,000. What was the company's cost of goods sold for the month

When volume or level of activity decreases, variable costs will

Direct labour combined with direct materials is known as prime cost

The inventory of finished goods on hand at the end of a period would be considered an asset, but inventories of raw materials and work-in-process would not be considered assets until production is completed

Abburi Company's manufacturing overhead is 60% of its total conversion costs. If direct labour is £52,000 and if direct materials are £28,000, the manufacturing overhead is

A department accepts a new order from a customer. It has already incurred £100 for design costs. It has also incurred costs of £200 for visits by sales staff. If the order is accepted a quality inspector will be transferred from another department. The inspector earns £20,000 per year. If the order is accepted there will be additional training costs of £700. - In this decision the differential design costs are:

Which of the following combinations of costs make up conversion cost

Salaries and wages incurred in the factory would be product costs

Noel Stewart bought a machine two years ago for £500. He must now replace the old machine by buying a new model 206 for £700 or a used model 204 for £650. Noel has decided to buy model 204. Noel Stewart has estimated that the total fixed costs for his department are £10,000. He also estimated that his variable cost per unit is £10. Noel Stewart bought some materials 2 years ago for £300. These materials have simply been left in stock as they were not needed. A new customer offers to buy a product that uses these materials. The conversion cost is £500 and the customer has offered to pay £650 for the product. Noel decides to accept the order. - If Noel produced 100 units his fixed cost per unit would be: