AICPA: BB Critical Thinking; FN Measurement
119) The following costs were incurred in May:
Direct materials
$
41,000
Direct labor
$
13,000
Manufacturing overhead
$
46,000
Selling expenses
$
18,000
Administrative expenses
$
15,000
Conversion costs during the month totaled:
A) $54,000
B) $133,000
C) $59,000
D) $87,000
Answer: C
Explanation: Conversion cost = Direct labor + Manufacturing overhead = $13,000 + $46,000 = $59,000
Difficulty: 2 Medium
Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements
Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
120) Abburi Company's manufacturing overhead is 60% of its total conversion costs. If direct labor is $52,000 and if direct materials are $28,000, the manufacturing overhead is:
A) $34,667
B) $78,000
C) $42,000
D) $120,000
Answer: B
Explanation: Manufacturing overhead = 0.60 × Conversion cost
Direct labor = $52,000
Conversion cost = Direct labor + Manufacturing overhead
Conversion cost = $52,000 + Manufacturing overhead
Conversion cost = $52,000 + (0.60 × Conversion cost)
0.40 × Conversion cost = $52,000
Conversion cost = $52,000 ÷ 0.40 = $130,000
Manufacturing overhead = 0.60 × Conversion cost
Manufacturing overhead = 0.60 × $130,000 = $78,000
Difficulty: 3 Hard
Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements
Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
121) During the month of May, direct labor cost totaled $10,000 and direct labor cost was 40% of prime cost. If total manufacturing costs during May were $86,000, the manufacturing overhead was:
A) $76,000
B) $25,000
C) $61,000
D) $15,000
Answer: C
Explanation:
Direct labor cost = $10,000
Direct labor cost = 0.40 × Prime cost
Total manufacturing cost = $86,000
Direct labor cost = 0.40 × Prime cost
Prime cost = Direct labor cost ÷ 0.40
Prime cost = $10,000 ÷ 0.40 = $25,000
Total manufacturing cost = Prime cost + Manufacturing overhead cost
$86,000 = $25,000 + Manufacturing overhead cost
Manufacturing overhead cost = $61,000
Difficulty: 3 Hard
Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements
Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
122) In May direct labor was 60% of conversion cost. If the manufacturing overhead for the month was $54,000 and the direct materials cost was $30,000, the direct labor cost was:
A) $36,000
B) $20,000
C) $81,000
D) $45,000
Answer: C
Explanation: Direct labor = 0.60 × Conversion cost
Manufacturing overhead = $54,000
Conversion cost = Direct labor + Manufacturing overhead
Conversion cost = Direct labor + $54,000
Conversion cost = (0.60 × Conversion cost) + $54,000
0.40 × Conversion cost = $54,000
Conversion cost = $54,000 ÷ 0.40
Conversion cost = $135,000
Direct labor = 0.60 × Conversion cost = 0.60 × $135,000 = $81,000
Difficulty: 3 Hard
Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements
Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.