Question

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.

The Choi Company provided the following information at the end of 2012:

Finished goods inventory, ending $51,000
Cost of goods manufactured $87,000
Cost of goods sold $93,000
Work-in-process inventory, beginning $43,000
Work-in-process inventory, ending $38,000

The balance in the finished goods inventory account at January 1^st must have been:

$92,000

$45,000

$57,000

$44,000

Testbank, Question 51 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. 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

Answer 1

a)	An overestimation of manufacturing overhead will lead to overestimation of "Cost of Goods sold"
b)	Finished Goods
	Beg. Bal.	$   57,000.00	COGS	$   93,000.00
	WIP	$   87,000.00	End. Bal.	$   51,000.00
		$ 144,000.00		$ 144,000.00
	Answer:	$   57,000.00
c)	Among the given options, Labor cost for plant employees would be the best example of a variable cost
d)	For May
	Variable cost per unit =		$ 7000 / 500
		=	$          14.00
	For June
	Total Cost =		Variable Cost + Fixed Cost
		=	(600 units x $ 14) + $ 5000
		=	$ 13,400.00

Just let me know if you find any answer incorrect