Which of the following will be included in manufacturing overhead costs? *

| June 6, 2016

Week 6 Homework 18-21

Multiple choice (5 pts each) (highlight or clearly mark your answer)

1) Which of the following will be included in manufacturing overhead costs?

a. Indirect labor and indirect materials

b. Salaries of salesmen

c. Direct materials and direct labor

d. Delivery costs to ship goods to customers

2) Product costs are expensed:

a. when the products are consumed or sold.

b. at the end of the accounting period they are incurred in.

c. when the products are transferred to Work-in-Process Inventory account.

d. when the market value of products goes above the recorded value.

3) Which of the following correctly describes the accounting for administrative expenses of a manufacturing company?

a. Administrative expenses are product costs and are expensed as incurred.

b. Administrative expenses are period costs and are expensed as incurred.

c. Administrative expenses are product costs and are expensed when the manufactured product is sold.

d. Administrative expenses are period costs and are expensed when the manufactured product is sold.

4) Alexandra’s Designs, a fashion boutique, incurred the following in the month of September:

Salaries paid to designers


Wages paid to tailors


Indirect wages


What is the journal entry to record the total labor charges incurred during September?


Work-in-Process Inventory (direct labor)


Manufacturing Overhead (indirect labor)


Wages payable



Work-in-Process Inventory (direct labor)


Wages Payable



Wages Payable


Finished Goods Inventory


Work-in-Process Inventory (direct labor)



Manufacturing Overhead (indirect labor)


Wages Payable


5) Which of the following is both a prime cost and a conversion cost?

a. Manufacturing overhead

b. Direct materials

c. Direct labor

d. Selling expenses

6) Which of the following will be classified as a conversion cost?

a. Cost of raw materials

b. Depreciation on factory equipment

c. Salary of sales personnel

d. Depreciation on office furniture

Problems (10 pts each) (please show your work for partial credit)

1) Selected data for Lemon Grass Company for 2015 is provided below:

Factory Utilities

$ 1,500

Indirect Materials Used


Direct Materials Used


Property Taxes on Factory Building


Sales Commissions


Indirect Labor Incurred


Direct Labor Incurred


Depreciation on Factory Equipment


What is the total factory overhead?

2) At the beginning of 2015, Swift Company’s Work-in-Process Inventory account had a balance of $120,000. During 2015, $250,000 of direct materials were used in production, and $75,000 of direct labor costs were incurred. Manufacturing overhead amounted to $850,000. The cost of goods manufactured was $675,000. What is the balance in the Work-in-Process Inventory account on December 31, 2015?

3) AceTravel Services provided the following information:

Cost allocation rate for direct labor: $40 per hour

Cost allocation rate for indirect costs: $22 per hour

If Ace receives $350 for a job requiring 5 hours of direct labor, then how much profit will they make?

4) Reed Production has provided the following information for the year 2015:

Direct Labor


Beginning Work-in-Process Inventory


Direct Materials Used


Ending Work-in-Process Inventory


Manufacturing Overhead


During the year, Reed produced 71,020 units of product. Calculate the per unit product cost.

5) Ruth Company incurred the following costs in July:

Units produced

1,000 units

Direct materials

$ 30 per unit

Direct labor

$25 per unit

Variable manufacturing overhead

$10 per unit

Fixed manufacturing overhead

$7,000 per month

Variable selling and administrative costs

$8 per unit

Fixed selling and administrative costs

$2,000 per month

Calculate the total product cost using absorption costing and variable costing.

6) LDR Manufacturing produces a pesticide chemical and uses process costing. There are three processing departments—Mixing, Refining, and Packaging. On January 1, 2014, the first department, Mixing, had no beginning inventory. During January, 40,000 fl. oz. of chemicals were started in production. Of these, 32,000 fl. oz. were completed and 8,000 fl. oz. remained in process. In the Mixing Department, all direct materials are added at the beginning of the production process and conversion costs are applied evenly through the process.

At the end of the month, LDR calculated equivalent units. The ending inventory in the Mixing Department was 60% complete with respect to conversion costs. With respect to conversion costs, how many equivalent units were calculated for the product that was completed and for ending inventory?

7) Margaret sells hand-knit scarves at a flea market. Each scarf sells for $25. Margaret pays $30 to rent a vending space for one day. The variable costs are $15 per scarf. How many scarves should she sell each day in order to break even?

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