Part 1 Costing Systems_Sol 14 Aug 2022

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 1/66 Question 1 1.D.2.h tb.ab.cost.010_1809 LOS: 1.D.2.h Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: medium Bloom Code: 3 Sip Healthy Company manufactures juicers and blenders. Management has compiled the following information: Juicer Blender Units produced 7,500 15,000 Direct materials/unit $62.50 $40.00 Direct labor/unit $15.00 $5.00 Direct labor hours, production 22,500 15,000 Machine hours, production 30,000 20,000 Batches 10,000 15,000 Production costs are as follows: Activity Cost Activity Driver Machining $420,000 Machine hours Moving/ warehousing $255,000 Direct labor hours Equipment setup $160,000 Batches Total overhead cost $835,000 What is the cost per driver unit for the cost of machining? $6.80 per direct labor hour. $37.11 per unit. Rationale  $6.80 per direct labor hour. Incorrect. This amount is the cost per driver unit for moving/warehousing. Make sure to use the correct production cost and correct activity driver for machining. Rationale  $6.40 per batch. Incorrect. This amount is the cost per driver unit for equipment setup. Make sure to use the correct production cost and correct activity driver for machining. Rationale  $8.40 per machine hour. Correct. The overhead cost for machining is $420,000, and the activity driver for machining is machine hours. The two products had 30,000 and 20,000 machine hours; therefore, the cost per driver unit for machining is $8.40 per machine hour ($420,000 ÷ (30,000 + 20,000)). Rationale  $37.11 per unit. Incorrect. This amount is the cost per unit using a traditional costing system. Make sure to use the correct production cost and correct activity driver for machining. $8.40 per machine hour. Correct $6.40 per batch. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 2/66 Question 2 1.D.2.f tb.proc.c.008_1809 LOS: 1.D.2.f Lesson Reference: Process Costing Difficulty: medium Bloom Code: 3 Sweetums Syrup adds raw materials costs at the beginning of its manufacturing process and incurs conversion costs uniformly throughout the process. At the beginning of last month, Sweetums had 20,000 units that were 40% complete in its Beginning Work-in-Process Inventory. Over the course of the month, the company began production of 150,000 units; at month's end, 90,000 of those units were finished and transferred out, while the remaining units were 90% complete. Using the Weighted Average method, what was Sweetums’ equivalent units of production for materials for the month? 98,000 equivalent units. 162,000 equivalent units. 240,000 equivalent units. Rationale  170,000 equivalent units. Correct. The first step is to calculate the number of units in Ending Work-in-Process Inventory. Since units to account for must equal units accounted for, Ending Work-in-Process Inventory can be solved for as follows: Units to account for are Beginning Work-in-Process plus units started (20,000 + 150,000 = 170,000). Units accounted for are units transferred out plus Ending Work-in-Process (90,000 + Ending Work-in-Process Inventory). 20,000 + 150,000 = 90,000 + Ending Work-in-Process Inventory Ending Work-in-Process Inventory = 170,000 − 90,000 Ending Work-in-Process Inventory = 80,000 units. Because Ending Work-in-Process is 100% complete with respect to materials (they are added at the beginning of the process), equivalent units of production under the Weighted Average method = 170,000 units (90,000 + (80,000 × 100%)). Rationale  98,000 equivalent units. Incorrect. This number is the equivalent units of production assuming Ending Work-in-Process is 10% (100% − 90%) complete. Materials are added at the beginning of the process, so the Ending Work-in-Process is not 10% complete with respect to materials. Rationale  162,000 equivalent units. Incorrect. This number is the equivalent units for conversion costs. Materials are added at the beginning of the process, so the Ending Work-in- Process is not 90% complete with respect to materials. Rationale  240,000 equivalent units. Incorrect. Units accounted for is not calculated as units started plus units transferred out. Units started includes units that have been transferred out by the end of the month. 170,000 equivalent units. Correct

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 3/66 Question 3 1.D.2.f tb.proc.c.007_1809 LOS: 1.D.2.f Lesson Reference: Process Costing Difficulty: medium Bloom Code: 3 This month, the Roasting Department of Java Coffee Company completed and transferred out 75,000 one-pound bags of coffee. The department also had 25,000 units that were 80% complete with respect to conversion costs and no Beginning Work-in-Process. Using the FIFO method, how many equivalent units of production for conversion costs does the department have for the month? 70,000 80,000 Rationale  70,000 Incorrect. When calculating equivalent units of output, make sure to add, not subtract, the equivalent units in Ending Work-in-Process, and multiply by the percent complete, not the complement. Rationale  95,000 Correct. Since there is no beginning Work-in-Process Inventory, the equivalent units of output equal units transferred out plus the equivalent units in Ending Work-in-Process; therefore, the equivalent units of production equals 95,000 (75,000 + (25,000 × 80%)). Rationale  100,000 Incorrect. When calculating equivalent units of output, make sure to calculate the equivalent units of the Ending Work-in-Process. Rationale  80,000 Incorrect. When calculating equivalent units of output, make sure to multiply the units in Ending Work-in-Process by the percent complete, not the complement. 95,000 Correct 100,000 Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 4/66 Question 4 1.D.2.b 1C2-LS04 LOS: 1.D.2.b Lesson Reference: Job Order Costing Difficulty: medium Bloom Code: 4 A company uses job order costing and begins the period with no finished goods inventory, but with a beginning work-in-process (WIP) of these jobs: Job #15 = $42,000 Job #16 = $33,000 Job #17 = $12,000 Total WIP = $87,000 During the period, a new job is started (Job #18) and these costs are incurred: Direct materials: $100,000 (20% each for Jobs #15, #16, #17 and 40% for Job #18) Direct labor: 5,000 hours at $15 per hour (hours for Jobs #15, #16, #17, and #18 are 1,500, 1,500, 1,200, and 800, respectively) Factory overhead (using a predetermined rate where total overhead for the year is estimated to be $200,000 and total direct labor (cost driver) is 50,000 hours). Jobs #15 and #16 are completed and sold during the period. What is ending WIP inventory? $98,000. $12,000. Rationale  $90,000. This answer is incorrect. This answer did not consider the costs in beginning work-in-process for Job #17. Further, this answer did not consider the overhead for either job. Rationale  $98,000. TThis answer is incorrect. This answer did not consider the costs in beginning work-in-process for Job #17. Rationale  $12,000. This answer is incorrect. This answer did not consider costs incurred for the two jobs during the period. Rationale  $110,000. The cost of the jobs not completed can be broken down as: (note the predetermined overhead rate is $200,000 ÷ 50,000 or $4/direct labor hour). Job #17 Job #18 Beg. WIP $12,000 $ 0 Current: DM 20,000 40,000 (20% and 40% of $100,000) DL 18,000 12,000 (1,200, 800 hours x $15/hour) OH 4,800 3,200 (1,200, 800 hours x $4/hour) Total $54,800 $55,200 Grand total = $110,000 $110,000. Correct $90,000. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 5/66