# Costs and Direct Labor Cost

Topics: Costs, Variable cost, Cost Pages: 5 (1320 words) Published: November 23, 2012
Midterm2Practice Key
1. The following data have been recorded for recently completed Job 501 on its job cost sheet. Direct materials cost was \$3,067. A total of 30 direct labor-hours and 104 machine-hours were worked on the job. The direct labor wage rate is \$12 per labor-hour. The company applies manufacturing overhead on the basis of machinehours. The predetermined overhead rate is \$11 per machine-hour. The total cost for the job on its job cost sheet would be: A. \$4,571 B. \$3,757 C. \$3,090 D. \$3,427 Applied manufacturing overhead = Predetermined overhead rate x Actual machine-hours Applied manufacturing overhead = \$11 x 104 Applied manufacturing overhead = \$1,144 Total cost = Direct materials + Direct labor + Applied manufacturing overhead Total cost of Job 607 = \$3,067 + (30 x \$12) + \$1,144 = \$4,571

Loraine Company applies manufacturing overhead to jobs using a predetermined overhead rate of 70% of direct labor cost. Any underapplied or overapplied overhead cost is closed to Cost of Goods Sold at the end of the month. During August, the following transactions were recorded by the company:

2. The amount of direct materials cost in the August 31 Work in Process inventory account was: A. \$10,200 B. \$9,000 C. \$4,800 D. \$4,200

3. The Cost of Goods Manufactured for August was: A. \$69,600 B. \$69,500 C. \$76,900 D. \$84,500

4. The balance on August 1 in the Raw Materials inventory account was: A. \$4,500 B. \$7,000 C. \$9,000 D. \$11,500

5. Schrick Inc. manufactures a variety of products. Variable costing net operating income was \$86,800 last year and ending inventory increased by 1,900 units. Fixed manufacturing overhead cost was \$6 per unit. What was the absorption costing net operating income last year? A. \$86,800 B. \$75,400 C. \$98,200 D. \$11,400 Fixed manufacturing overhead deferred = \$6 x 1,900 = \$11,400 Absorption costing net income = Variable costing net operating income + Fixed manufacturing overhead deferred = \$86,800 + \$11,400 = \$98,200

6. Ben Company produces a single product. Last year, the company's net operating income under absorption costing was \$4,400 lower than under variable costing. The company sold 8,000 units during the year, and its variable costs were \$8 per unit, of which \$3 was variable selling expense. Fixed manufacturing overhead was \$1 per unit in beginning inventory under absorption costing. How many units did the company produce during the year? A. 12,400 units B. 3,600 units C. 7,120 units D. 7,450 units Unit fixed manufacturing overhead = (Difference in income / Change in inventory) = \$4,400 Change in inventory = \$1 Change in inventory = 4,400 units Units produced during the year = 8,000 units sold - 4,400 units change in inventory = 3,600 units

Ross Company produces a single product. The company has direct materials costs of \$8 per unit, direct labor costs of \$6 per unit, and manufacturing overhead of \$10 per unit. Sixty percent of the manufacturing overhead is for fixed costs. In addition, variable selling and administrative costs are \$2 per unit, and fixed selling and administrative costs are \$3 per unit at the current activity level. Assume that direct labor is a variable cost.

7. Under absorption costing, the unit product cost is: A. \$24 B. \$20 C. \$26 D. \$29 Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead cost + Fixed manufacturing overhead cost = \$8 + \$6 + \$10* = \$24 * Manufacturing overhead cost of \$10 includes variable and fixed costs.

8. Under variable costing, the unit product cost is: A. \$24 B. \$20 C. \$18 D. \$21 Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead = \$8 + \$6 + [\$10 x (100% - 60%)] = \$8 + \$6 + \$4= \$18

9. Viren Corporation has provided the following data from its activity-based costing system:

The company makes 240 units of product T91H a year, requiring a total of 550 machine-hours, 90 orders, and 40 inspection-hours per year. The product's direct materials cost is...