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Cena Company (CC) manufactures sporting equipment and it provided the following information for its most recent year of operations (all raw materials are used in production as direct materials):

Purchase of raw materials	$ 45,000
Direct labor	$ 53,000
Manufacturing overhead applied to work in process	$ 68,000
Actual manufacturing overhead cost	$ 68,000

Inventory balances at the beginning and the end of the year were as follows:

	Beginning	Ending
Raw materials	$ 10,000	$ 22,500
Work in process	$ 35,000	$ 69,000
Finished goods	$ 0	$ 39,500

The company has asked you to explain the flow of costs within the Schedules of Cost of Goods Manufactured and Cost of Goods Sold to its senior management team. To aid your explanation, you have decided to create visualization that depicts the flow of these costs.

1a. The conversion costs of $121,000 (shown in item 7) contain which of the following costs?

check all that apply

• Direct labor + Manufacturing overhead applied to work in process
• Direct materials used in production + Direct labor
• Direct materials used in production + Manufacturing overhead applied to work in process
• Raw material purchases + Manufacturing overhead applied to work in process

1b. Which of the following equations reflects the flow of costs within the three inventory accounts included in the schedules of cost of goods manufactured and cost of goods sold?

check all that apply

A. Beginning balance Additions Ending balance = Transferred

B. Beginning balance + Additions Ending balance = Transferred

C. Beginning balance Additions + Ending balance = Transferred

D. Beginning balance + Additions + Ending balance = Transferred

1c. Which of the following statements is true?

check all that apply

• The cost of goods manufactured transfers out to the cost of goods sold.
• The cost of goods manufactured transfers out to raw materials inventory.
• The cost of goods manufactured transfers out to finished goods inventory.
• The cost of goods manufactured transfers out to work in process inventory.

1d. The total amount of product costs included in this visualization that would be recorded as an expense in the income statement would be:

check all that apply

• $80,000
• $32,500
• $119,500
• $199,500

1e. If the companys actual manufacturing cost had been $70,000 instead of $68,000, what effect would it have had on the cost of goods manufactured (COGM)?

check all that apply 5

• It would increase the beginning balance of work in process inventory by $2,000.
• It would decrease the cost of goods manufactured (COGM) by $2,000.
• It would increase the cost of goods manufactured (COGM) by $2,000.
• It would have no effect on the cost of goods manufactured (COGM).

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