Question

1. Valles Corporation had $22,000 of raw materials on hand on February 1. During the month, the company purchased an additional $75,000 of raw materials. The journal entry to record the purchase of raw materials would include a:

a. credit to Raw Materials of $97,000

b. debit to Raw Materials of $97,000

c. credit to Raw Materials of $75,000

d. debitto Raw Materials of $75,000

2. Wedd Corporation had $35,000 of raw materials on hand on May 1. During the month, the company purchased an additional $68,000 of raw materials. During May, $92,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $5,000. The debits to the Work in Process account as a consequence of the raw materials transactions in May total:

a. $92,000

b. $0

c. $68,000

d. $87,000

3. Another term for product cost is

a. Period Cost

b. Value-Adding Cost

c. Variable Cost

d. Inventoriable Cost

4. Conversion Costs consist of

a. Direct Materials and Direct Labor

b. Direct Materials and Overhead

c. Direct Labor and Overhead

d. Direct Materials and Indirect Materials

5. The three costs in every product are

a. Direct materials, Work in Process, and Overhead

b. Direct materials, Work in Process, and Finished Goods

c. Direct materials, Direct Labor, and Overhead

d. Direct materials, Direct Labor, and Work in Process

6. Cost of Goods Manufactured is equal to

a. Direct Materials + Direct Labor + Overhead

b. Beginning Work in Process + Total Manufacturing Costs + Ending Work in Process

c. Beginning Work in Process + Period Costs - Ending Work in Process

d. Beginning Work in Process + Total Manufacturing Costs - Ending Work in Process

7. Which of the following equations is correct

a. Total Manufacturing Costs = Direct Materials + Direct Labor + Selling Costs

b. Total Manufacturing Costs = Direct Materials + Direct Labor + Overhead

c. Total Manufacturing Costs = Direct Materials + Direct Labor + Selling, General and Administrative Costs

d. Total Manufacturing Costs = Product Costs + Period Costs

8. The ending balance in Work in Process represents

a. Units started but not completed

b. Units completed but not sold

c. Units to which no overhead has been applied

d. Units that have not been started

9. Consider the following information: direct materials used totaled $134,600; direct labor amounted to $396,800; overhead was computed to be $789,600; Work in Process Inventory on January 1, 2017, was $378,200; and Work in Process Inventory on December 31, 2017, was $385,200. What was the cost of goods manufactured?

a. $1,314,000

b. $1,321,000

c. $1,328,000

d. $2,084,400

10. The Finished Goods Inventory and Cost of Goods Sold for a manufacturing company for the year 2017 are as follows: January 1 Finished Goods Inventory, $382,500; December 31 Finished Goods Inventory, $270,000; Cost of Goods Sold for the year, $1,522,000. The cost of goods manufactured for the year was

a. $1,139,500

b. $644,500

c. $1,184,500

d. $1,409,500

11. In a manufacturing environment, costs of indirect materials initially flow

a. into the Work in Process Inventory account.

b. into the Materials Inventory account.

c. directly to the Overhead account.

d. into the Finished Goods Inventory account.

12. Caspar Co. had the following balances in 2017:

Beginning Raw Materials Inventory $ 5,000

Ending Raw Materials Inventory $ 7,000

Purchases of Raw Materials $60,000

Beginning Work in Process Inventory $15,000

Ending Work in Process Inventory $18,000

Beginning Finished Goods Inventory $ 3,000

Ending Finished Goods Inventory $ 8,000

Direct Labor $45,000

Overhead (including $2,000 of Indirect Materials) $ 35,000

Calculate the following:

a. Raw Materials Available for Use: ______________________________

b. Direct Materials Used: _______________________________

c. Total Manufacturing Costs: _______________________________

d. Cost of Goods Manufactured: _______________________________

Answer 1

1. The correct option is d) Debit to Raw Materials of $ 75,000.

The opening balance of raw material of $ 22,000 was recorded on February 1. Right now, we just need to record the purchase of raw material. Purchasing would increase the raw material balance, also raw material is an asset for the organization. Thus, raw material is debited by the purchase amount of $ 75,000.

2. The correct option is d) $ 87,000.

The total amount of Work In Process during May is $ 92,000, which includes $ 5,000 Indirect materials. Indirect Materials is debited under the account name 'Manufacturing Overhead'. So, Work in Process debit is 92,000 - 5,000 = $ 87,000

3. The correct option is d) Inventoriable Cost.

Product Cost is cost of raw materials plus cost of labor plus cost of manufacturing overhead. Product cost is used to value the goods in inventory so it is also known as Inventoriable Cost.

4. The correct option is c) Direct Labor and Overhead

Conversion cost is the cost of converting or transforming raw materials into finished products. It is the total of Direct Labor and Overhead charges which in turn is equal to production cost apart from cost of raw materials.

5. The correct option is c) Direct materials, Direct Labor, and Overhead

Product Cost is cost of raw materials plus cost of labor plus cost of manufacturing overhead. These three costs are necessary to convert raw materials into finished products.

6. The correct option is c) Beginning Work in Process + Period Costs - Ending Work in Process

Cost of Goods Manufactured is Direct Labor + Direct Material + Manufacturing Overhead + Beginning Work in Process - Ending Work in Process. Direct Labor + Direct Material + Manufacturing Overhead = Period Costs

7. The correct option is b) Total Manufacturing Costs = Direct Materials + Direct Labor + Overhead

Total Manufacturing Cost is the cost of all the resources required to make a product during a particular period of time.

8. The correct option is a) Units started but not completed.

Work In Process means that portion of the inventory which is in the process of transforming from raw materials to finished product. The production has started but finished product is not yet complete.

9. The correct option is a) $1,314,000.

Cost of Goods Manufactured = Direct Labor + Direct Material + Manufacturing Overhead + Beginning Work in Process - Ending Work in Process = 396,800 + 134,600 + 789,600 + 378,200 - 385,200 = $ 1,314,000

10. The correct option is d) $1,409,500​​​​​​​.

Cost of Goods Sold = Beginning Inventory of Finished Product + Cost of Goods Manufactured - Closing Inventory of Finished Product

1,522,000 = 382,500 + Cost of Goods Manufactured - 270,000

Cost of Goods Manufactured = 1,522,000 - 382,500 + 270,000 = $ 1,409,500

11. The correct option is c) directly to the Overhead account.​​​​​​​

The indirect material cost includes factory supplies which cannot be linked to a specific job glue, oil, stationery etc. thus, they are recorded under Overhead account.

12. a) Raw Material available for use = Beginning Raw Materials Inventory + Purchases of Raw Materials = 5,000 + 60,000 = $ 65,000

b) Direct Materials used = Beginning Raw Materials Inventory + Purchases of Raw Materials – Ending Raw Materials Inventory – Indirect Materials Used = 5,000 + 60,000 - 7,000 - 2,000 = $ 56,000

c) Total Manufacturing Costs = Direct Materials + Direct Labor + Overhead = 56,000 + 45,000 + 35,000 = $ 136,000

d) Cost of Goods Manufactured = Total Manufacturing Costs + Beginning Work In Process Inventory – Ending Work in Process Inventory = 136,000 + 15,000 - 18,000 = $ 133,000