Review Session 2 Merch and Manu

Download as docx, pdf, or txt
Download as docx, pdf, or txt
You are on page 1of 17

REVIEW SESSION 2 – MERCH AND MANUFACTURING

THEORIES - MERCH

1. Which of the following appears in the income statement of a merchandising business, but not in
the income statement of a business that renders only services?

A. Interest revenue. C. Advertising expense.

B. Gross profit. D. Income tax expense

2. When goods are shipped FOB destination and the seller pays the transportation charges, the buyer
(M)

a. journalizes a reduction for the cost of the merchandise.

b. journalizes a reimbursement to the seller.

c. does not take a discount.

d. makes no journal entry for the transportation.

3. The company purchases goods with the terms 1/15, n/45. What do the terms mean?

A. A 1% discount is available for 45 days; otherwise, the invoice must be paid in 15 days.

B. A 1% discount is available for 15 days after the invoice date; otherwise, the invoice must be paid
in 45 days.

C. A 15% discount is available and the invoice is due in 45 days.

D. A 15% discount is available and the invoice is due in 15 days

4. Yeonjun Coffee sold merchandise inventory costing $2,000 for $3,500 in cash. As the accountant,
you would tell the bookkeeper to:

a. debit Cash for $3,500, credit Sales for $2,500, and credit Merchandise Inventory for $2,000

b. debit Cash for $3,500, debit Cost of Goods Sold for $2,000, credit Sales for $3,500, and credit
Merchandise Inventory for $2,000

c. debit Cash for $3,500, debit Merchandise Inventory for $2,000, credit Sales for $3,500, and
credit Cost of Goods Sold for $2,000

d. debit Sales for $3,500, debit Merchandise Inventory for $2,000, credit Cash for $3,500, and
credit Cost of Goods Sold for $2,000
e. debit Sales for $3,500, debit Cost of Goods Sold for $2,000, credit Cash for $3,500, and credit
Merchandise Inventory for $2,000

5. Which of the following credit terms is the most advantageous to the purchaser of merchandise?

A. 1/10, n/30. C. 2/10, n/30.

B. 5/10, n/60. D. 5/10, n/20

PROBLEMS – MERCH

Questions 1-3 are based on the following information:

Selected account information from Dami Corporation is presented below:

Cost of Goods Sold $ 77,000


Sales 150,000
Sales Returns & Allowances 13,000
Sales Discount 6,000
Selling Expenses 15,000
Administrative Expenses 30,000
1. The amount of net sales shown on the company’s income statement would be

A. $131,000 C. $144,000

B. $137,000 D. $169,000

SOL:

Sales - Sales Returns and Allowances - Sales Disc. = NET SALES

150,000 - 13,000 - 6,000 = 131,000

2.The gross profit amount shown on the company’s income statement would be

A. $54,000 C. $73,000

B. $61,000 D. $76,000

SOL:

Net sales - COGS = Gross Profit

131,000 - 77,000 = 54,000


3. The amount of net income that would be shown on the company’s income statement is

A. $54,000 C. $28,000

B. $47,000 D. $9,000

SOL:

Gross Profit - Operating Expenses = Net income

54,000 - 15,000 - 30,000 = 9,000

4. Chris uses its periodic inventory system and the following information is available:

• Sales $ 43,400
• Inventory – Beginning 11,200
• Inventory – Ending 9,800
• Purchases 32,200
Calculate the cost of goods sold (E)

A. $ 77,000. D. $32,200.

B. $33,600. E. $43,400.

C. 11,200.

SOL:

COGS = Beg. Inventory + Purchases - Inventory, End.

= 11,200 + 32,200 - 9,800

= 33,600

5.

a. P1,074,600

b. P1,085,400

c. P1,009,800

d. P1,080,900
SOL:

All titles that involve cash via sales: Trade A/R, Sales, Accounts written off.

= 1,080,000 (Current Sales)

Less: Gain in Trade A/R: (75,600 – 70,200) = 5,400

= 1,074,600

Less: Changes to Accounts Written off (4,500-4,500) = 0

MANUFACTURING – THEORIES

1. Cost of goods manufactured is used to compute (D)


a. Manufacturing overhead applied.
b. Finished goods inventory.
c. Direct materials used.
d. Cost of goods sold.

2. The formula to compute cost of goods manufactured is (E*)


a. beginning Work in Process Inventory plus purchases of raw material minus ending Work in
Process Inventory.
b. beginning Work in Process Inventory plus direct labor plus direct material used plus overhead
incurred minus ending Work in Process Inventory.
c. direct material used plus direct labor plus overhead incurred.
d. direct material used plus direct labor plus overhead incurred plus beginning Work in Process
Inventory

3. The components of manufacturing cost are


a. Variable costs, fixed costs, and overhead costs.
b. Materials, direct labor, and overhead.
c. Purchases, wages, and manufacturing overhead.
d. Wages and salaries, maintenance and repairs, utilities, and depreciation.

4. Which of the following statements is/are true?

I. Selling, general and administrative costs are part of manufacturing overhead.


II. Manufacturing overhead costs are also known as indirect manufacturing costs.
a. Only I
b. Only II
c. Both I and II
d. Neither

5. A good description of “cost of goods manufactured” is the recorded cost of the: (M)
A. units completed during the period.
B. work done on all units during the period.
C. units started and completed during the period.
D. work done this period on units completed this period

MANUFACTURING – PROBLEMS

1. If the beginning balance for May of the materials inventory account was $27,500, the ending
balance for May is $28,750, and $128,900 of materials were used during the month, the materials
purchased during the month cost (E)
A. $101,400 C. $130,150
B. $127,650 D. $157,650

SOL:

Materials used + materials ending inventory - materials beginning inventory = Materials purchased
128900 + 28750 - 27500 = 130150

2.

No. 46 choices:

A. $16,000.
B. $19,000.
C. $23,000.
D. $27,000.

SOL: Raw materials, Beg. + Raw Materials Purchased - Raw Materials, End. = Direct Materials Used or
DMU

So, 5,000 + 25,000 - 3,000 = 27,000 (This is your DMU)

DISREGARD OTHERS

3. Supply the missing figure:


Direct materials used ??
Direct labor 60
Factory overhead 90
Work-in-process, Beginning 30
Work-in-process, Ending 40
Cost of goods manufactured $200
What is the amount of direct materials used? (E)

A. $50 D. $200
B. $60 E. $40
C. $70

SOL: To arrive at Cost of goods manufactured: Total manufacturing cost + WIP, Beg. - WIP, End

Total manufacturing cost = Direct materials used + Direct Labor + Factory Overhead

But, Direct Materials Used is missing.

So, we work back.

$200 (COGM) + $40 (WIP, end) - $30 (WIP, beg) - $90 (FO) - $60 (DL) = $60 (DMU)

To check:

60 + 60 + 90 = 210 (Total Manufacturing Cost)

210 + 30 - 40 = 200 (Cost of Goods Manufactured)

4. Given the following data for Bbokkie Company, what is the cost of goods sold?

Beginning inventory of finished goods $100,000

Cost of goods manufactured 700,000

Ending inventory of finished goods 200,000

Beginning work-in-process inventory 300,000

Ending work-in-process inventory 50,000

A. $500,000
B. $600,000
C. $800,000
D. $950,000

SOL: COGS = COGM + Finished Goods, Beg. - Finished Goods, End.

= 700,000 + 100,000 - 200,000

Remember the formula, and don’t get distracted with the “flower-flower” stuffs.

5. During the month of May, Minsung Manufacturing Company purchased $43,000 of raw materials.
The manufacturing overhead totaled $27,000 and the total manufacturing costs were $106,000.
Assuming a beginning inventory of raw materials of $8,000 and an ending inventory of raw
materials of $6,000, direct labor must have totaled: (E)
A. $34,000.
B. $38,000.
C. $36,000.
D. $45,000

SOL: Total manufacturing cost = Direct materials used + Direct Labor + Factory Overhead

But, direct labor is missing. So, we work back.

 First, compute the Direct Materials Used:


8,000 (Raw materials, beg.) + 43,000 (Raw materials purchased) - 6,000 (Raw materials, end) = 45,000

 Next, work back starting from the Total manufacturing cost:


106,000 - 27,000 (Factory overhead) - 45,000 (DMU) = 34,000

The result is the total amount for Direct Labor.

To check: Direct materials used + Direct Labor + Factory Overhead

45,000 + 34,000 + 27,000 = 106,000

6. Supply the missing figure:

Raw materials placed in production 30


Direct labor 80
Factory overhead ??
Work-in-process Beginning 24
Work-in-process Ending 28
Cost of goods manufactured $150
What is the amount of factory overhead?

A. $44 D. $40
B. $114 E. $110
C. $28

SOL: COGM = Total manufacturing cost + WIP, Beg. - WIP, End

Total manufacturing cost = Direct materials used + Direct Labor + Factory Overhead

This time Factory Overhead is missing. So, we work back:

$150 (COGM) + $28 (WIP, end) - $24 (WIP, beg.) - $80 (DL) - $30 (DMU) = $44 (Factory Overhead)

7. Guk Manufacturing Corp. shows the following cost pertaining to RM’s order:

Direct materials cost P4,200

Direct labor (rate of P8/hr) 300 hrs

Machine hours (factory overhead rate of P15/hr) 200 hrs

How much is the total manufacturing cost of RM’s order? (E)

A. P 8,800 C. P10,300
B. P 9,600 D. P11,100

SOL:

4,200 + (300 x 8) + (200 x 15)

4,200 + 2,400 + 3,000 = 9,600

TMC = DMC + Direct labor + Factory overhead

8. During the month of May, JinHit Manufacturers incurred $30,000, $40,000 and $20,000 of direct
material, direct labor and manufacturing overhead costs respectively. If the cost of goods
manufactured was $95,000 and the ending work in process inventory was $15,000, the beginning
inventory of work in process must have been: (E)
A. $ 10,000. C. $110,000.
B. $ 20,000. D. $ 5,000

SOL: Work back!

95,000 (COGM) + 15,000 (WIP, end) - 90,000 (DMU; the sum of 30,000, 40,000 and 20,000) = 20,000
(WIP, beg)

To check:

90,000 (DMU) + 20,000 (WIP, beg) - 15,000 (WIP, end) = 95,000 (COGM)
9. Assume the following data for Soyeon n’ Soojin Company for December:

Direct materials used $80,000

Direct labor 50,000

Actual factory overhead costs 100,000

Beginning work-in-process inventory 20,000

Ending work-in-process inventory 40,000

Beginning finished goods inventory 30,000

Ending finished goods inventory 25,000

10. What is the cost of goods manufactured for December? (E)

a. $235,000 d. $215,000
b. $230,000 e. $210,000
c. $250,000

SOL:

First, DMU + Direct labor + Manufacturing overhead = Total manufacturing costs

80,000 + 50,000 + 100,000 = 230,000

Second, TMC + Beginning WIP - Ending WIP = COGM

230,000 + 20,000 - 40,000 = 210,000

DISREGARD THE FINISHED GOODS BEG AND END INVENTORY, because those are used for COGS
computation

11. The information below relates to Binnie Manufacturing Company's operations for a recent month.
(Assume that all raw materials are direct materials.):

Purchases of raw materials $91,000


Direct labor cost $122,000
Selling costs (total) $42,000
Administrative costs (total) $56,000
Manufacturing overhead costs (total) $340,000
Raw materials inventory, beginning $22,000
Work in process inventory, beginning $27,000
Finished goods inventory, beginning $42,000
Raw materials inventory, ending $7,000
Work in process inventory, ending $35,000
Finished goods inventory, ending $15,000
What was Binnie's cost of goods manufactured for the month? (E2)

A. $545,000 C. $568,000
B. $560,000 D. $587,000

SOL:

First: Raw materials, beginning + Purchases of raw materials - Raw materials, ending = Direct materials
used

 22,000 + 91,000 - 7,000 = 106,000


Second: DMU + Direct labor + Manufacturing overhead = Total manufacturing costs

 106,000 + 122,000 + .340,000 = 568,000


Third: TMC + Work in process, Beginning - Work in process, Ending = Cost of Goods Manufactured

 568,000 + 27,000 - 35,000 = 560,000

12. Woozi Company recorded the following on July:

Total manufacturing cost P 1,000

Work in process inventory, beg. 800

Work in process inventory, end. 900

Finished goods inventory, beg. 1,500

Finished goods inventory, end. 1,400

What is the total cost of goods available for sale?

A. 1,000
B. 900
C. 2,400
D. 2,300
E. 100
SOL: Cost of goods available for sale = COGM + Finished goods inventory, Beg.
First, find COGM: 1,000 + 800 - 900 = 900 (TMC + WIP Beg. - WIP End)

Second, find COGAS: 900 + 1500 = 2,400

13.

a. 111,875,000

b. 113,750,000

c. 118,750,000

d. 119,375,000

Sol:

Raw Mat. + Direct Labor + Factory Overhead = 116,250,000 (TCM)

Total Cost of Manufacturing + Decrease in Raw Materials – Increase in Finished Good = 113,750,000

APPLICATION: A decrease in raw materials means that those materials were used to make more finished
goods, which may be part of the cost of the goods sold, so we increase it. However, an increase in
finished goods means that those finished goods were sold (notice in merchandising, all goods beg and
end are finished goods, and an ending inventory signifies inventory that was not sold), so we shall deduct
it from cost of goods sold.
14.

a. 108,000
b. 214,600
c. 217,200
d. 219,600

There is no longer a need to solve for direct materials used, since


the direct materials used was already stated at the beginning of
the scenario. Your DMU (Direct materials used) is 60,000. Solve as
usual

Notice how it says “Raw materials applied” at the start. If a thing


was “applied” then wouldn’t that mean it was in use?

15. The gross profit of Brian Company for 2010 is $300,000, cost of goods manufactured is $400,000,
the beginning inventories of goods in process and finished goods are $28,000 and $35,000,
respectively, and the ending inventories of goods in process and finished goods are $50,000 and
$70,000, respectively. The cost of goods sold of Brian Company for 2010 must have been

a. $378,000
b. $265,000
c. $278,000
d. $365,000
SOL: COGS = COGM + Finished Goods, beg. - Finished goods, end

365,000 = 400,000 + 35,000 - 70,000

Disregard other elements.

16. The following cost data were taken from the records of a Hwasa’s manufacturing company:

Depreciation on factory equipment $ 1,000

Depreciation on sales office 500

Advertising 7,000

Freight-out (shipping) 3,000

Wages of production workers 28,000

Raw materials used 47,000

Sales salaries and commissions 10,000

Factory rent 2,000

Factory insurance 500

Materials handling 1,500

Administrative salaries 2,000

Based upon this information, the total manufacturing cost incurred during the year was (M)

a. $78,500
b. $80,500
c. $80,000
d. $83,000

SOL: Manufacturing costs include direct labor, direct materials, and any other indirect costs (overhead)
connected with production. Selling and administrative costs (e.g., depreciation on sales office, freight-
out, sales salaries, and commission, advertising, and administrative salaries) are not included. Thus, total
manufacturing costs is $80,000.

 $28,000 (Production wages) + 47,000 (Raw materials) + 2,000 (Factory rent) + 500 (Factory
insurance) + 1,000 (Factory depreciation) + 1,500 (Materials handling) = $80,000
17.

For the year 19x7, the cost of goods manufactured and gross profit were P10,000,000 and P1,500,000,
respectively. Sales for the year was (E)

a. P10,200,000 c. P11,725,000
b. P11,700,000 d. P11,925,000

SOL: Gross profit = Sales - COGS

Sales is missing so we work back.

First, we must find COGS: 10,000,000 + 750,000 - 550,000 = 10,200,000 (COGM + Finished goods Beg -
Finished goods end)

Second, we work back using the given: 1,500,000 + 10,200,000 = 11,700,000 (Gross profit + COGS =
Sales)

To check: Sales - COGS = GP

11,700,000 - 10,200,000 = 1,500,000

18. Based on the following data, what is the gross profit for Hoshi company on July 20x1?

Sales $ 1,000,000

Net purchases of raw materials 600,000

Cost of goods manufactured 800,000

Marketing and administrative expenses 250,000

Indirect manufacturing costs 500,000

Finished goods, July 1 100,000

Work in Process, July 1 500,000

Finished goods, July 31 500,000

Work in Process, July 31 400,000


A. $200,000
B. $400,000
C. $600,000
D. $900,000

SOL:

First, find COGS: COGM + Finished goods, beg - Finished goods, end

= 800,000 + 100,000 - 500,000

COGS= 400,000

Second, find Gross profit: Sales - COGS

= 1,000,000 - 400,000

GP = 600,000

19.

The net income for April 19x9 was

a. P167,150
b. P76,950
c. P126,150
d. P177,300

SOL: COGM + Finished goods, beg. - Finished goods, end = COGS;

Sales - COGS = Gross profit

Gross profit - Operating expenses = Net income/Net profit


153,650 + 54,000 - 72,000 = 135,650

352,150 - 135,650 = 189,500

189,500 - 12,200 = 177,300

INFORMATION TO NUMBER 20-22

20. For the month of March 2012, prime cost was


A. $90,000 C. $144,000
B. $120,000 D. $150,000

SOL:

Step 1. Direct materials, Beg. + Direct materials purchased - Direct materials, End = Direct Materials
Used (DMU)

36,000 + 84,000 - 30,000 = 90,000

Step 2. Direct Materials Used + Direct Labor = Prime Cost

90,000 + 60,000 = 150,000

21. For the month of March 2012, conversion cost was


A. $90,000 C. $144,000
B. $140,000 D. $170,000
SOL: Conversion cost is the sum of direct manufacturing labor ($60,000, as given) and factory overhead.
The factory overhead rate per direct manufacturing labor hour is $10.00. To compute the number of
direct manufacturing labor hours worked, the direct manufacturing labor payroll ($60,000) is divided by
the direct manufacturing labor rate per hour ($7.50), resulting in 8,000 direct manufacturing labor
hours. Factory overhead applied is 8,000 hours at $10 per hour, or $80,000. Thus, conversion cost
incurred was $140,000 ($60,000 of direct manufacturing labor plus $80,000 of applied factory
overhead). - via reviewer

22. For the month of March 2012, cost of goods manufactured was
A. $236,000 C. $230,000
B. $224,000 D. $218,000

SOL:

Direct Materials Used (36,000 + 84,000 - 30,000) = 90,000

Direct Labor = 60,000

Factory Overhead (60,000 / 7.50 x 10.00) = 80,000

DMU + Direct Labor + Factory Overhead = Total manufacturing cost

90,000 + 60,000 + 80,000 = 230,000

TMC + Work in process, Beg. - Work in process, End = Cost of Goods Manufactured (COGM)

230,000 + 18,000 - 12,000 = 236,000

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy