Question

Testbank, Question 27

	Your answer is incorrect. Try again.

If a company using job-order costing overestimates its manufacturing overhead costs the effect will be to:

Overstate net operating income.

Understate the ending finished goods inventory account balance.

Overstate cost of goods sold.

Overstate cost of goods manufactured.

Which of the following is the best example of a variable cost?

Monthly loan payment on a plant generator.

Labour cost for plant employees.

Lease payment for the office copy machine.

General Manager’s salary.

Testbank, Question 54 During May, Mayer Company's total fixed costs were $5,000 and variable costs were $7,000 when 500 units were produced. How much is the total cost for June if 600 units are produced? $13,400 $12,000 $7,000 $14,400 Which of the following is most likely a product cost? Advertising expense Sales commissions for the current month Cardboard packaging for the product Janitorial expense for the administrative offices

Capital Region Rafting Company recorded the following data for the month of October:
Cost of beginning inventory $46,000
Cost of ending inventory $32,000
Cost of goods sold $122,000

Inventory purchases for the month of October total:

$108,000

$136,000

$200,000

$44,000

Answer 1

ANSWER:

1. Cost of goods sold
2. Labour cost for plant employees
3. $13,400
4. Cardboard packaging for the product
5. $136,000

EXPLANATION:

1.

If a company using job-order costing overestimates it's manufacturing overhead, the effect will be to increase the cost of goods sold, and it doesn't directly affect the cost of goods manufactured.

2.

The variable Cost among the examples must be the labour cost for plant employees. Other expenses given such as monthly loan payment, lease payment and GM salary are all examples of fixed cost.

3.

Given, fixed cost = $5000

Number of units = 500

Total Variable Cost = $7000

Variable Cost per unit = $7000 / 500 = $14 per unit

600 units:

Fixed cost = $5,000 (remains the same)

Variable Cost = $8,400

Total cost = $5,000 + $8,400 = $13,400

4.

Cardboard packaging expense for a product can be considered as a product cost as it is directly attributable to a product. Other expenses given including advertising expense, sales commission, janitorial expense are general indirect expenses.

5.

Inventory pruchased during the month =

Cost of goods sold + cost of ending inventory (-) cost of opening inventory

= $46,000 + $1222,000 (-) $32,000

= $136,000