Multiple Choice Questions

Use the following information to answer questions 1 and 2.

Melody Logos manufactures key chains for college bookstores. During the year, the company produced 35,000 key chains and sold 30,000 of the units. The company had no WIP at the beginning or end of the year and no finished goods inventory at the beginning of the year.

Direct materials used ............ $31,000

Direct labor ................. 18,000

Factory rent ................ 12,000

Depreciation on factory equipment ....... 2,000

Depreciation on office equipment ....... 750

Marketing expenses ............. 2,500

Administrative expenses ........... 40,000

1. What is the product cost per unit?

a. $1.24

b. $1.80

c. $3.04

d. $2.85

2. What is the company’s net income for the year if 30,000 units are sold for $3.50 each?

a. $122,000

b. $105,000

c. $7,750

d. ($1,250)

3. Cost of goods manufactured equals:

a. Beginning direct materials inventory plus all production costs incurred less ending direct materials inventory

b. Beginning direct materials inventory plus all production costs incurred less ending work in process inventory

c. Beginning work in process inventory plus direct materials used plus direct labor used plus manufacturing overhead used less ending work in process inventory

d. Beginning work in process inventory plus direct materials used plus direct labor used plus manufacturing overhead used plus beginning finished goods inventory

4. The production cost flow model is best described as:

a. raw materials storeroom, work in process, finished goods inventory

b. raw materials storeroom, partially finished goods, finished goods inventory

c. work in process, raw materials storeroom, finished goods inventory

d. all of the above

5. Royal Cabinet Co. utilizes lean production and JIT manufacturing in its factory and builds custom cabinets for retail customers. The company had no WIP or finished goods inventory and incurred the following costs during the year.

Direct materials used $140,000

Direct labor 120,000

Factory overhead 160,000

Marketing expenses 40,000

Administrative expenses 80,000

If the company’s sales for the year totaled $800,000, Royal’s income was:

a. $260,000

b. $380,000

c. $300,000

d. none of the above

Use the following information to answer questions 6 through 8.

Leo Ceramics had the following information available for January:

6. Raw materials used in January are:
a. $5,000
b. $116,000
c. $121,000
d. $126,000

7. Leo’s cost of goods manufactured in January is:
a. $196,000
b. $199,000
c. $254,000
d. $364,000

8. Leo’s cost of goods sold for January is:
a. $4,000
b. $37,000
c. $196,000
d. $200,000

9. Which of the following is true?
Expensed When Incurred Expensed When Product Sold
a. Product costs Period costs
b. Period costs Product costs
c. Both Neither
d. NeitherBoth

Transcribed Image Text:

Ending Beginning $110,000 55,000 41,000 Raw materials inventory Work in process inventory Finished goods inventory Raw materials purchased Direct labor (2,500 hours at $12.00) Manufacturing overhead 115,000 58,000 37,000 121,000 30,000 53,000