ACTG 222 Unit 1

The primary difference between financial accounting and managerial accounting is that

• Financial accounting is used by internal parties while managerial accounting is used by external parties.

• Financial accounting is future-oriented while managerial accounting is historical in nature.

• Financial accounting is used by external parties while managerial accounting is used by internal parties.

• Financial accounting is prepared as needed (perhaps even daily), but managerial accounting is prepared periodically (monthly, quarterly, annually).

Jamieson Supply Inc. (JSI) had beginning work in process inventory of $8,000. During the period, JSI transferred $34,000 of raw materials to work in process. Labor costs amounted to $41,000 and overhead amounted to $36,000. If the ending balance in work in process inventory was $12,000, what was the amount transferred to finished goods inventory?

• $107,000.

• $119,000.

• $131,000.

• $111,000.

Answer explanation

$107,000 transferred to finished goods = (beginning work in process $8,000 + transfer of raw materials $34,000 + labor costs $41,000 + overhead $36,000) – $12,000 ending work in process. 

Which of the following costs is recorded in the Work in Process Inventory account?

• Cost of salaries paid to office workers.

• Estimated manufacturing overhead.

• Actual cost of advertising.

• Cost of delivering merchandise to customers.

If the number of units produced increases, then

• Unit variable costs will increase.

• Unit fixed costs will decrease.

• Total variable costs will remain the same.

• Total fixed costs will increase.

Sea Shore Industries (SSI) had for Year 1: Estimated Overhead Costs $102,000 and Estimated Direct Labor Hours 6,800. If actual direct labor worked in February was 600 hours, how much overhead cost would be allocated to work in process for the month?

• a.     $0.

• $6,900.

• $5,666.

• $9,000.

Sea Shore Industries (SSI) had for Year 1: Estimated Overhead Costs $102,000 and Estimated Direct Labor Hours 6,800. If actual overhead costs for the year were $106,000 and actual direct labor worked was 7,000 hours, then overhead would be

• overapplied by $1,000.

• underapplied by $1,000.

• overapplied by $3,000.

• underapplied by $3,000.

Allen Manufacturing Co. is currently working on two jobs. The job order cost sheets for Job 101 and Job 102 provide the following information: Job 101 had direct materials costs of $12,000 and Direct labor of $24,000 and Job 102 had direct materials costs of $15,000 and direct labor of $30,000. Allen applies overhead jobs at $0.60 per direct labor dollar. Job 102 is finished and has been sold for $90,000. Allen’s gross margin on Job 102 is

• $87,000.

• $40,000.

• $27,000.

• $13,000.

Actual manufacturing overhead costs are recorded

• a. On the left (debit) side of the Work in Process Inventory account.

• b. On the right (credit) side of the Work in Process Inventory account.

• c. On the left (debit) side of the Manufacturing Overhead account.

• d. On the right (credit) side of the Manufacturing Overhead account.

• Both b and c.

Suppose you are trying to decide whether to sell your accounting book at the end of the semester or keep it as a reference book for future courses. If you decide to keep the book, the money you would have received from selling it is a(n)

• Sunk cost.

• Opportunity cost.

• Out-of-pocket cost.

• Indirect cost.

Masterson Company has calculated a cost per unit of $4.00 for materials and $8.50 for conversion to manufacture a specific product. Ending work in process has 1,000 units that are fully complete for materials and 70 percent complete for conversion. How much will Masterson have in its ending Work in Process Inventory?

• $12,500

• $5,950

• $8,750

• $9,950

Answer explanation

1,000 x $4 = $4,000

1,000 x 70% x $8.50 = $5,950

$4,000 + $5,950 = $9,950