Question 1
Use the following information to answer this question.
Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.
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Sales volume (units) |
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4,000 |
5,000 |
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Cost of sales |
$338,000 |
$422,500 |
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Selling and administrative costs |
$89,600 |
$106,000 |
The best estimate of the total contribution margin when 4,300 units are sold is
Question 2
Indiana Corporation produces a single product that it sells for $9 per unit. During the first year of operations, 100,000 units were produced, and 90,000 units were sold. Manufacturing costs and selling and administrative expenses for the year were as follows:
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Fixed Costs |
Variable Costs |
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Raw materials |
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$1.75 per unit produced |
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Direct labor |
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$1.25 per unit produced |
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Factory overhead |
$100,000 |
$0.50 per unit produced |
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Selling and administrative |
$70,000 |
$0.60 per unit sold |
What was Indiana Corporation’s net operating income for the year using variable costing?
Question 3
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Green Company’s variable expenses are 75% of sales. At a sales level of $400,000, the company’s degree of operating leverage is 8. At this sales level, fixed expenses are |
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Question 4
Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.
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Sales volume (units) |
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|
4,000 |
5,000 |
|
|
Cost of sales |
$338,000 |
$422,500 |
|
Selling and administrative costs |
$89,600 |
$106,000 |
The best estimate of the total variable cost per unit is
Question 5
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Last year, Gransky Corporation’s variable costing net operating income was $52,100, and its ending inventory increased by 400 units. Fixed manufacturing overhead cost was $7 per unit. What was the absorption costing net operating income last year? |
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Question 6
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Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:
Data concerning two recent orders are listed here:
Assuming that the company charges $556.96 for the Smith wedding cake, what would be the overall margin on the order? |
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Question 7
Slosh Cleaning Corporation services both residential and commercial customers. Slosh expects the following operating results next year for each type of customer:
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Operating Results |
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Residential |
Commercial |
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Sales |
$60,000 |
$140,000 |
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Contribution margin ratio |
50% |
30% |
Slosh expects to have $18,000 in fixed expenses next year. What would Slosh’s total dollar sales have to be next year to generate a profit of $90,000?
Question 8
Daniele Corporation uses an activity-based costing system with the following three activity cost pools:
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Activity Cost Pool |
Total Activity |
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Fabrication |
50,000 machine-hours |
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Order processing |
500 orders |
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Other |
not applicable |
The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:
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Cost Data |
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Wages and salaries |
$280,000 |
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Depreciation |
$200,000 |
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Occupancy |
$140,000 |
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Total |
$620,000 |
The distribution of resource consumption across activity cost pools is given below:
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Activity Cost Pools |
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Fabrication |
Order Processing |
Other |
Total |
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Wages and salaries |
60% |
30% |
10% |
100% |
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Depreciation |
20% |
35% |
45% |
100% |
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Occupancy |
10% |
50% |
40% |
100% |
The activity rate for the Fabrication activity cost pool is closest to _______ per machine hour.
Question 9
Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.
|
|
Sales volume (units) |
|
|
4,000 |
5,000 |
|
|
Cost of sales |
$338,000 |
$422,500 |
|
Selling and administrative costs |
$89,600 |
$106,000 |
The best estimate of the total monthly fixed cost is
Question 10
Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:
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Activity Cost Pools |
Activity Rate |
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Size-related |
$0.94 per guest |
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Complexity-related |
$31.62 per tier |
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Order-related |
$55.70 per order |
- The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake.
- The measure of complexity is the number of tiers in the cake.
- The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.)
- The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The activity rates don’t include the costs of purchased decorations, such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders are listed here:
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Pyburn Wedding |
Smith Wedding |
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Number of reception guests |
72 |
189 |
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Number of tiers on the cake |
4 |
5 |
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Cost of purchased decorations for cake |
$29.92 |
$68.75 |
Suppose the company decides that the present activity-based costing system is too complex and that all costs (except for the costs of purchased decorations) should be allocated on the basis of the number of guests. In that event, what would you expect to happen to the costs of cakes?
Question 11
At a break-even point of 400 units sold, variable expenses were $4,000, and fixed expenses were $2,000. What will the 401st unit sold contribute to profit?
Question 12
Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:
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Production Cost Data |
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Direct materials |
$153,000 |
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Direct labor |
$110,500 |
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Variable manufacturing overhead |
$204,000 |
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Fixed manufacturing overhead |
$255,000 |
Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.
Under absorption costing, the carrying value on the balance sheet of the ending inventory for the year would be
Question 13
Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the past five months of operations.
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Machine Hours |
Electrical Cost |
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August |
1,000 |
$1,620 |
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September |
900 |
$1,510 |
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October |
1,500 |
$1,870 |
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November |
2,000 |
$1,950 |
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December |
1,300 |
$1,730 |
Using the high-low method of analysis, the estimated fixed cost per month for electricity is closest to which of the following?
Question 14
Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:
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Production Cost Data |
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Direct materials |
$153,000 |
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Direct labor |
$110,500 |
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Variable manufacturing overhead |
$204,000 |
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Fixed manufacturing overhead |
$255,000 |
Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.
The contribution margin per unit was
Question 15
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Sanker Inc. has provided the following data for the month of August. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.
Manufacturing overhead for the month was overapplied by $5,000. The company allocates any underapplied or overapplied overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. |
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The journal entry to record the allocation of any underapplied or overapplied overhead for August would include
Question 16 |
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Sanker Inc. has provided the following data for the month of August. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.
Manufacturing overhead for the month was overapplied by $5,000. The company allocates any underapplied or overapplied overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. |
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The work-in-process inventory at the end of August after allocation of any underapplied or overapplied overhead for the month is closest to |
Question 17
The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just-completed year.
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Sales |
$910 |
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Raw materials, inventory, beginning |
$80 |
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Raw materials, inventory, ending |
$20 |
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Purchases of raw materials |
$100 |
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Direct labor |
$130 |
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Manufacturing overhead |
$200 |
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Administrative expenses |
$160 |
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Selling expenses |
$140 |
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Work in process inventory, beginning |
$40 |
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Work in process inventory, ending |
$10 |
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Finished goods inventory, beginning |
$130 |
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Finished goods inventory, ending |
$150 |
The cost of goods sold for the year (in thousands of dollars) was
Question 18
Abis Corporation uses the weighted-average method in its process-costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were
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Cost |
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Percent Complete |
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Material costs |
$6,000 |
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50% |
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Conversion costs |
$9,900 |
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30% |
A total of 9,200 units were started, and 8,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
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Cost |
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Material costs |
$113,900 |
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Conversion costs |
$322,500 |
The ending inventory was 80% complete with respect to materials and 20% complete with respect to conversion costs
What are the equivalent units for conversion costs for the month in the first processing department?
Question 19
Becky works on the assembly line of a manufacturing company where she installs a component part for one of the company’s products. She’s paid $16 per hour for regular time, and time and a half for all work in excess of 40 hours per week. Becky’s employer offers fringe benefits that cost the company $3 for each hour of employee time (both regular and overtime). During a given week, Becky works 42 hours but is idle for 3 hours due to material shortages. The company treats all fringe benefits relating to direct labor as added direct labor cost and the remainder as part of manufacturing overhead. The allocation of Becky’s wages and fringe benefits for the week between direct labor cost and manufacturing overhead would be
Question 20
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Abis Corporation uses the weighted-average method in its process-costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were
A total of 9,200 units were started, and 8,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
The ending inventory was 80% complete with respect to materials and 20% complete with respect to conversion costs. |
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The cost per equivalent unit for conversion costs for the first department for the month isclosest to |
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Question 21
Abis Corporation uses the weighted-average method in its process-costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were
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Cost |
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Percent Complete |
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Material costs |
$6,000 |
|
50% |
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Conversion costs |
$9,900 |
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30% |
A total of 9,200 units were started, and 8,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
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Cost |
|
Material costs |
$113,900 |
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Conversion costs |
$322,500 |
The ending inventory was 80% complete with respect to materials and 20% complete with respect to conversion costs.
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The cost per equivalent unit for materials for the month in the first processing department is closest to |
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Question 22
The following cost data pertain to the operations of Left-hand Department Stores, Inc., for the month of December.
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Corporate legal office salaries |
$74,000 |
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Shoe Department cost of sales, Brentwood Store |
$35,000 |
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Corporate headquarters building lease |
$78,000 |
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Store manager’s salary Brentwood Store |
$14,000 |
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Shoe Department sales commissions, Brentwood Store |
$5,000 |
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Store utilities, Brentwood Store |
$14,000 |
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Shoe Department manager’s salary, Brentwood Store |
$3,000 |
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Central warehouse lease cost |
$10,000 |
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Janitorial costs, Brentwood Store |
$8,000 |
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The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood Store. The central warehouse serves all of the company’s stores. |
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What is the total amount of the costs listed above that are direct costs of the Shoe Department? |
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Question 23
Dewey Company uses the weighted-average method in its process-costing system. The first processing department, the Welding Department, started the month with 15,000 units in its beginning work-in-process inventory that were 20% complete with respect to conversion costs. The conversion cost in this beginning work-in-process inventory was $19,200. An additional 86,000 units were started into production during the month. There were 13,000 units in the ending work-in-process inventory of the Welding Department that were 60% complete with respect to conversion costs. A total of $575,360 in conversion costs were incurred in the department during the month.
The cost per equivalent unit for conversion costs is
Question 24
The following cost data pertain to the operations of Left-hand Department Stores, Inc., for the month of December.
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Corporate legal office salaries |
$74,000 |
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Shoe Department cost of sales, Brentwood Store |
$35,000 |
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Corporate headquarters building lease |
$78,000 |
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Store manager’s salary Brentwood Store |
$14,000 |
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Shoe Department sales commissions, Brentwood Store |
$5,000 |
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Store utilities, Brentwood Store |
$14,000 |
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Shoe Department manager’s salary, Brentwood Store |
$3,000 |
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Central warehouse lease cost |
$10,000 |
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Janitorial costs, Brentwood Store |
$8,000 |
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The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood Store. The central warehouse serves all of the company’s stores. |
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What is the total amount of the costs listed above that are not direct costs of the Brentwood Store? |
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Question 25
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The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just-completed year.
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Sales |
$910 |
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Raw materials, inventory, beginning |
$80 |
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Raw materials, inventory, ending |
$20 |
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Purchases of raw materials |
$100 |
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Direct labor |
$130 |
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Manufacturing overhead |
$200 |
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Administrative expenses |
$160 |
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Selling expenses |
$140 |
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Work in process inventory, beginning |
$40 |
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Work in process inventory, ending |
$10 |
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Finished goods inventory, beginning |
$130 |
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Finished goods inventory, ending |
$150 |
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The cost of goods manufactured (finished) for the year (in thousands of dollars) was |
Question 26
The following data (in thousands of dollars) have been taken from the accounting records of Karlana Corporation for the just-completed year.
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Sales |
$910 |
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Raw materials, inventory, beginning |
$80 |
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Raw materials, inventory, ending |
$20 |
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Purchases of raw materials |
$100 |
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Direct labor |
$130 |
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Manufacturing overhead |
$200 |
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Administrative expenses |
$160 |
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Selling expenses |
$140 |
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Work in process inventory, beginning |
$40 |
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Work in process inventory, ending |
$10 |
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Finished goods inventory, beginning |
$130 |
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Finished goods inventory, ending |
$150 |
The cost of the raw materials used in production during the year (in thousands of dollars) was
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