Test Bank Cornerstones of Managerial Accounting 2nd Edition by Mowen,Hansen ,Pittman, Mcconomy, Heitger

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Chapter 5 – Job-Order Costing

 

 

1. Which of the following is a characteristic of job-order costing?

  a. Products produced are identical in nature
  b. Unit cost is computed by dividing process costs of the period by the units produced in the period.
  c. Unit cost is computed by dividing total job costs by units sold on that job.
  d. The cost of one job is typically different from that of another job.

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

2. How are unit costs calculated?

  a. by dividing total cost associated with the units produced by the unit cost
  b. by adding all variable costs per unit associated with the units produced
  c. by dividing total fixed costs by the number of units produced
  d. by dividing total cost associated with the units produced by the number of units produced

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; explaining

 

3. Which of the following is a production cost in an automobile manufacturing company?

  a. salary of the Chief Executive Officer
  b. secretary of the controller’s wages
  c. variable manufacturing overhead
  d. fixed selling costs

 

ANSWER:   c
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

4. Which of the following costs are easy to trace to individual jobs?

  a. direct materials and overhead
  b. direct materials and direct labour
  c. direct labour and overhead
  d. overhead and indirect labour

 

ANSWER:   b
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

5. Which of the following types of businesses is most likely to use a process-costing system?

  a. print shop
  b. doctor’s office
  c. home building
  d. petroleum

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; differentiating

 

6. What is characteristic of  job-order costing?

  a. It is used in firms that produce homogeneous products.
  b. The total cost of each job is accumulated on the time card.
  c. The document for accumulating manufacturing costs is the cost sheet.
  d. Costs are collected by department.

 

ANSWER:   c
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

7. In normal costing, how are direct materials, direct labour, and overhead costs assigned?

  a. Actual direct materials, actual direct labour, and actual overhead costs are assigned to products.
  b. Actual direct materials cost is assigned to products, but direct labour and overhead costs are assigned using predetermined rates.
  c. Actual direct labour cost is assigned to products, but direct material and overhead costs are assigned using predetermined rates.
  d. Actual direct material and direct labour costs are assigned to products, but overhead costs are assigned using predetermined rates.

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

8. What are the components of manufacturing overhead?

  a. all costs other than direct materials
  b. all manufacturing costs other than direct materials
  c. all costs other than direct materials and direct labour
  d. all manufacturing costs other than direct materials and direct labour

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

9. Which of the following types of businesses is most likely to use a job order costing system?

  a. food
  b. cement
  c. lawyer
  d. chemicals

 

ANSWER:   c
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; differentiating

 

10. From an operational perspective, which is not a decision that unit costs are used to make?

  a. hiring a new CEO
  b. evaluating performance on an ongoing basis
  c. establishing a price for a product or service
  d. determining the long-term feasibility of a business strategy

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; differentiating

 

11. What costs are used in a normal job-order costing system?

  a. actual costs for direct materials, estimated costs for direct labour, and actual costs for overhead
  b. estimated costs for direct materials, estimated costs for direct labour, and estimated costs for overhead
  c. actual costs for direct materials and actual costs for direct labour, and estimated costs for overhead
  d. estimated costs for direct materials, actual costs for direct labour, and actual costs for overhead

 

ANSWER:   c
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; differentiating

 

12. How do process costing firms accumulate costs?

  a. by job or process
  b. by unit or department
  c. by process or unit
  d. by process or department

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; differentiating

 

13. What are the characteristics of process costing?

  a. wide variety of distinct products
  b. costs accumulated by job
  c. unit costs computed by dividing total job costs by number of units produced for that job
  d. homogeneous products

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; differentiating

 

14. Which of the following methods of measuring costs associated with production is more widely used in practice?

  a. normal costing
  b. actual costing
  c. authentic costing
  d. ordinary costing

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 186
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

15. Which of the following costs poses the most problems when using an actual cost system?

  a. direct materials
  b. overhead
  c. direct labour
  d. direct materials and direct labour

 

ANSWER:   b
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 186
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

16. Which of the following statements about overhead costs is correct?

  a. Overhead costs are not incurred uniformly throughout the year.
  b. Overhead costs have a definite, identifiable relationship with units produced.
  c. Low production in one month would give rise to low unit overhead costs.
  d. High production in one month would give rise to high unit overhead costs.

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

17. Which of the following is a characteristic of normal costing?

  a. Actual overhead costs are not assigned directly to jobs.
  b. Predetermined rates are not used to assign overhead.
  c. Applied overhead is not calculated on a job-specific basis.
  d. Plant-wide and departmental rates cannot be used to assign overhead.

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 186
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

18. When using normal costing, which costs never enter the work-in-process account?

  a. applied overhead
  b. actual overhead
  c. direct materials
  d. direct labour

 

ANSWER:   b
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 186
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

19. Which of the following is a characteristic of actual overhead using normal costing?

  a. It is recorded to the overhead control account at the beginning of the period.
  b. It is reconciled at the end of a period with applied overhead.
  c. It is separated into many smaller accounts, such as indirect labour and supplies.
  d. It is estimated easily at the beginning of the period.

 

ANSWER:   b
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 186
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

20. What formula is used to calculate the predetermined overhead rate?

  a. estimated annual overhead / estimated annual activity level
  b. actual annual overhead / estimated annual activity level
  c. estimated annual overhead / actual annual activity level
  d. actual annual overhead / actual annual activity level

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

21. When is the predetermined overhead rate usually calculated?

  a. at the end of each month
  b. at the beginning of each month
  c. at the beginning of the year
  d. at the end of the year

 

ANSWER:   c
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

22. Whitney Company uses a predetermined rate to apply overhead. At the beginning of the year, Whitney estimated its overhead costs at $280,000, direct labour hours at 40,000, and machine hours at 10,000. Actual overhead costs incurred were $289,000, actual direct labour hours were 41,000, and actual machine hours were 11,000.

Suppose the predetermined overhead rate is based on machine hours. What would be the total amount credited to the factory overhead account for the year for Whitney?

  a. $240,000
  b. $246,000
  c. $249,280
  d. $308,000

 

ANSWER:   d
RATIONALE:   SUPPORTING CALCULATIONS: $28 × 11,000 = $308,000
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

Company, Inc. applies overhead on the basis of direct labour hours. At the beginning of the year, Company, Inc. estimates overhead to be $540,000, machine hours to be 150,000, and direct labour hours to be 90,000. During January, Company, Inc. has 8,000 direct labour hours and 12,000 machine hours.

 

23. Refer to the Figure. What is the predetermined overhead rate?

  a. $4 per machine hour
  b. $6 per direct labour hour
  c. $40,200
  d. $44,000

 

ANSWER:   b
RATIONALE:   Predetermined overhead rate = $540,000/90,000 = $6 per direct labour hour
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

24. Refer to the Figure. What is the overhead applied for January?

  a. $26,800
  b. $40,200
  c. $44,000
  d. $48,000

 

ANSWER:   d
RATIONALE:   Predetermined rate = $6 per direct labour hour Applied overhead = $6 x 8,000 = $48,000
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

25. Refer to the Figure. Suppose the actual overhead for January is $51,000. What is the overhead variance?

  a. $800 overapplied
  b. $800 underapplied
  c. $3,000 overapplied
  d. $3,000 underapplied

 

ANSWER:   d
RATIONALE:   $51,000 − $48,000 = $3,000 underapplied.
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

At the beginning of the year, Rovetti, Inc. estimated that in the coming year overhead would be $600,000 and direct labour hours would be 200,000. At the end of the year, it had actual overhead of $656,000 and 225,050 direct labour hours.

 

26. Refer to the Figure. What is the predetermined overhead rate?

  a. $2.63 per direct labour hour
  b. $3.00 per direct labour hour
  c. $3.42 per direct labour hour
  d. $4.00 per direct labour hour

 

ANSWER:   b
RATIONALE:   Overhead rate = $600,000/200,000 = $3 per direct labour hour
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

27. Refer to the Figure. What is the overhead variance for Rovetti?

  a. $56,000 overapplied
  b. $56,000 underapplied
  c. $19,150 overapplied
  d. $19,150 underapplied

 

ANSWER:   d
RATIONALE:   Predetermined overhead rate = $600,000/200,000 = $3 per direct labour hour Applied overhead = $3 × 225,050 = $675,150 Overhead variance = $656,000 − $675,150 = $19,150 Underapplied Overhead
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

Blackfoot Softball Glove Company estimated the following yearly data at the beginning of the year:

  Assembly Department Testing Department Total
Overhead $570,000 $130,000 $700,000
Direct Labour Hours 142,500 32,500 175,000
Machine Hours 32,000 65,000 97,000

Blackfoot uses departmental overhead rates. In the assembly department, direct labour hours are used to apply overhead. Machine hours are used to apply overhead in the testing department.

Actual data for August are as follows:

  Assembly Department Testing Department Total
Overhead $42,000 $12,000 $54,000
Direct Labour Hours 13,500 2,430 15,930
Machine Hours 4,020 11,000 15,020

 

28. Refer to the Figure. Suppose Blackfoot decides to continue using departmental overhead rates. What are the predetermined rates for the assembly and testing departments, respectively?

  a. assembly: $4 per direct labour hour; testing: $2 per machine hour
  b. assembly: $2 per direct labour hour; testing: $4 per machine hour
  c. assembly: $4 per direct labour hour; testing: $4 per direct labour hour
  d. assembly: $7.22 per machine hour; testing: $7.22 per machine hour

 

ANSWER:   a
RATIONALE:   Assembly: $570,000/142,000 = $4 per direct labour hour Testing: $130,000/65,000 = $2 per machine hour
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

29. Refer to the Figure. Suppose Blackfoot decides to continue using departmental overhead rates and a job spends 4 hours in assembly and 3 hours in testing. What is the amount of overhead charged to the job?

  a. $20.00
  b. $22.00
  c. $28.00
  d. $50.54

 

ANSWER:   b
RATIONALE:   ($4 × 4 hrs.) + ($2 × 3 hrs.) = $22
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

30. Refer to the Figure. Which of the following best represents the departmental overhead rates?

  a. Applied overhead for the testing department is $4,860.
  b. Applied overhead for the assembly department is $54,000.
  c. Applied overhead for both departments combined is $63,720.
  d. Overhead for the assembly department is underapplied.

 

ANSWER:   b
RATIONALE:   Assembly applied overhead = $4 per direct labour hour × 13,500 direct labour hours = $54,000 Testing applied overhead = $2 per machine hour × 11,000 = $22,000 Combined applied overhead = $54,000 + $22,000 = $76,000 Overhead for the assembly department is overapplied ($54,000 applied − $42,000 actual)
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

31. Refer to the Figure. Suppose that instead of departmental rates, Blackfoot uses a plantwide overhead rate that is based on direct labour hours. What is the predetermined overhead rate rounded to the nearest cent?

  a. $0.52 per direct labour hour
  b. $2.57 per direct labour hour
  c. $4.00 per direct labour hour
  d. $5.00 per direct labour hour

 

ANSWER:   c
RATIONALE:   Predetermined overhead rate = $700,000/$175,000 = $4 per direct labour hour
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

32. What rarely occurs regarding the overhead variance?

  a. actual overhead equals applied overhead
  b. overhead is underapplied
  c. overhead is overapplied
  d. overhead is immaterial

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

33. Which of the following total costs is included in the unit cost of a job?

  a. the total costs of materials purchased
  b. the total costs of labour worked on the in the factory
  c. the total costs of actual overhead
  d. the total costs of applied overhead

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

34. Peterson Company has applied overhead of $75,000 and actual overhead of $87,600 for the month of October. It applies overhead on the basis of direct labour hours, which equalled 15,000 in October. Overhead for the year was estimated to be $925,000. What are the direct labour hours estimated for the year?

  a. 150,000
  b. 170,000
  c. 175,200
  d. 185,000

 

ANSWER:   d
RATIONALE:   Predetermined overhead rate = $75,000/15,000 = $5 per direct labour hour Direct labour hours = $925,000/$5 per direct labour hour = 185,000
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; implementing

 

35. At the beginning of the year, Healthworks Company estimated the following for the coming year:

Overhead $420,000
Direct labour hours 70,000

Healthworks used normal costing and applies overhead on the basis of direct labour hours. For the month of May, direct labour hours equalled 10,300 and actual overhead equalled $56,750.

What is the overhead applied to production in May?

  a. $30,000
  b. $46,750
  c. $51,600
  d. $61,800

 

ANSWER:   d
RATIONALE:   Predetermined overhead rate = $420,000/70,000 = $6 per direct labour hour Applied overhead = $6 × 10,300 = $61,800
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

36. The BeautyWorks Corporation manufactures custom-made purses. The following data pertains to Job AAA:

Direct materials placed into production $4,000
Direct labour hours worked 60 hours
Direct labour rate per hour $15
Machine hours worked 100 hours

Factory overhead is applied using a plantwide rate that is based on direct labour hours. Factory overhead was budgeted at $120,000 for the year, and the direct labour hours were estimated to be 30,000. Job AAA consists of 50 units. What is the overhead cost assigned to Job AAA?

  a. $240
  b. $400
  c. $750
  d. $1,500

 

ANSWER:   a
RATIONALE:   SUPPORTING CALCULATIONS: $120,000/30,000 = $4; $4 × 60 = $240
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

37. Avonlea Construction builds custom houses for individual buyers. On April 1, it had one job started with a beginning work-in-process balance of $76,000. During April, the job was finished and sold. Direct labour for the job in April was $75,000, and direct materials used were $67,000. Overhead is computed at a rate of 65% of direct labour. All sales have a markup of 40%. What was the selling price of the house?

  a. $82,862.50
  b. $236,750.00
  c. $262,087.50
  d. $373,450.00

 

ANSWER:   d
RATIONALE:  
Beginning Work in Process $ 76,000
Direct Materials 67,000
Direct Labour 75,000
Overhead 48,750
Total Cost $266,750

$266,750 × 140% = $373,450

POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 193
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

38. What document lists the total cost for a single product?

  a. job-order cost sheet
  b. materials requisition form
  c. time ticket
  d. purchase order

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 194
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

39. Which of the following statements about a job-order costing is correct?

  a. Many different jobs are listed on a job-order cost sheet.
  b. Direct labour is allocated to jobs along with overhead.
  c. Work in process consists of all completed work.
  d. Time tickets are used to post the cost of direct labour to individual jobs.

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 194
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

40. What form requires the job number and the type, quantity, and unit price of direct materials issued?

  a. time ticket
  b. materials requisition form
  c. job-order cost sheet
  d. labour summary sheet

 

ANSWER:   b
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 195
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

41. Which of the following source documents would NOT be used to help decide the cost of a job?

  a. a material requisition form
  b. a time ticket for direct labour
  c. a time ticket for indirect labour
  d. a cost of goods sold sheet

 

ANSWER:   c
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 195
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

42. Which of the following items may be listed on a materials requisition form to maintain proper control over a firm’s inventory of direct materials?

  a. cost of supplies
  b. cost of lubricants for production machinery
  c. the date and a signature
  d. the date and the cost of the form

 

ANSWER:   c
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 195
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

43. Which of the following is a characteristic of the job-order cost sheet?

  a. It contains information about special orders only.
  b. It is subsidiary to the cost of goods sold account.
  c. It is the primary document for accumulating all costs related to a particular job.
  d. It contains only the materials information pertinent to a job.

 

ANSWER:   c
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 194
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

44. On March 1, Job 492 had a beginning balance of $500. During March, direct materials of $700 and direct labour of $400 were added to the job. Overhead is applied to production at a rate of 60% of direct labour. There are ten units in Job 492.

What is the unit cost?

  a. $134
  b. $184
  c. $1,100
  d. $1,840

 

ANSWER:   b
RATIONALE:   SUPPORTING CALCULATIONS:

Beginning balance $ 500
Direct Materials 700
Direct Labour 400
Overhead * 240
Total $1,840

*(60%x$400) $1,840/10 = $184

POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 193
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

45. Which of the following costs is NOT included on a job-order cost sheet?

  a. direct material costs
  b. applied factory overhead costs
  c. direct labour costs
  d. actual factory overhead costs

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p194
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

46. Which of the following is characteristic of costing?

  a. Actual overhead costs always enter the work-in-process account.
  b. The cost of a job includes direct materials, direct labour, and applied overhead.
  c. When a job is complete, it must leave cost of goods sold and be entered into finished goods or work-in-process.
  d. Direct materials are not included in the job cost.

 

ANSWER:   b
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 194
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

47. For which of the following are time tickets filled out?

  a. indirect labourers
  b. direct labourers
  c. managers
  d. supervisors

 

ANSWER:   b
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 196
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

48. Which of the following is NOT on a time ticket?

  a. employee’s name
  b. employee’s wage rate
  c. hours worked on each job
  d. cost of materials

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 195
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

49. Big Red Truck Company designs and builds fire trucks. During June, it had applied overhead of $125,000. Overhead is applied at the rate of 80% of direct labour cost. Direct labour wages average $10 per hour.

How many direct labour hours did Big Red Truck Company have for the month of June?

  a. 4,500
  b. 10,500
  c. 12,500
  d. 156,250

 

ANSWER:   c
RATIONALE:   SUPPORTING CALCULATIONS: $125,000/80% = $156,250 direct labour cost $156,250/$10 per hour = 12,500 direct labour hours
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p.197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

50. Which of the following costs is included in labour cost flows?

  a. direct labour cost
  b. indirect labour cost
  c. administration cost
  d. direct materials cost

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

51. In what order do cost elements flow through accounts until they are recognized as an expense?

  a. work in process, cost of goods sold, finished goods
  b. finished goods, work in process, cost of goods sold
  c. finished goods, cost of goods sold, work in process
  d. work in process, finished goods, cost of goods sold

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

52. Zinger Corporation had the following information available for March of the current year:

Work in process, March 1 $20,000
Materials placed into production, March 27,500
Direct labour, March 37,500

The factory overhead rate is 150% of direct labour costs. Job cost sheets had the following balances:

Job Z1 $32,500
Job Z2 55,000
Job Z3 35,000
Job Z4 18,750

Jobs Z3 and Z4 were not completed at the end of March. What is the balance in work in process for Zinger at the end of March?

  a. $53,750
  b. $56,250
  c. $85,000
  d. $87,500

 

ANSWER:   a
RATIONALE:   SUPPORTING CALCULATIONS: $35,000 + $18,750 = $53,750
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

53. Elegant Furnishings designs and builds upscale dining room tables for individual customers. On June 1, two jobs were in process: Braun with a beginning balance of $21,700; and Prince with a beginning balance of $8,790. Overhead costs are applied by using a rate of 70% of direct labour costs. Both jobs are unfinished at the end of June. Data on July costs for both jobs are as follows:

  Braun Prince
Direct Materials $6,100 $  10,200
Direct Labour Cost 2,700 11,000

Which of the following is the total of the work-in-process account at June 30?

  a. $28,000
  b. $37,590
  c. $58,490
  d. $70,080

 

ANSWER:   d
RATIONALE:   SUPPORTING CALCULATIONS:

  Braun Prince
Beginning Work in Process $21,700 $ 8,790
Direct Materials 6,100 10,200
Direct Labour 2,700 11,000
Overhead 1,890 7,700
Total $32,390 $37,690

$32,390 + $37,690 = $70,080

POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

54. Ending work in process for Hands On Carpentry was $64,000 for January. Direct labour and direct materials for the month had a combined total of $39,000. Direct labour was twice as much as direct materials. The overhead rate is 70% of direct labour. No jobs were finished during the month. What was the beginning work in process?

  a. $0
  b. $4,250
  c. $6,800
  d. $15,250

 

ANSWER:   c
RATIONALE:  
Direct Materials $13,000
Direct Labour 26,000
Overhead 18,200
  $57,200

$64,000 − $57,200 = 6,800

POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

55. Which account can sometimes be skipped when a good is produced for a particular customer?

  a. raw materials
  b. work in process
  c. finished goods
  d. cost of goods sold

 

ANSWER:   c
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

56. Which of the following statements is characteristic of overhead?

  a. The adjusted cost of goods sold is equal to the normal cost of goods manufactured plus or minus the overhead variance.
  b. If the overhead variance shows underapplied overhead, then that amount would be subtracted from normal cost of goods sold.
  c. Variances in overhead are expected every other month.
  d. If the overhead variance shows overapplied overhead, then that amount would be subtracted from normal cost of goods sold.

 

ANSWER:   b
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

57. Shakers Manufacturing has the following information listed before reconciling the overhead variance.

Estimated Overhead $760,000
Applied Overhead 756,000
Actual Overhead 740,000
Cost of Goods Sold 935,000

Assume that any overhead variance is immaterial. Which of the following is the adjusted cost of goods sold after adjusting for the overhead variance?

  a. $915,000
  b. $919,000
  c. $939,000
  d. $951,000

 

ANSWER:   b
RATIONALE:  
Applied Overhead $756,000
Actual Overhead 740,000
Overapplied Overhead $ 16,000

Adjusted Cost of Goods Sold = $935,000 − $16,000 = $919,000

POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; implementing

 

58. Which accounts are affected when a job is completed and remains in inventory?

  a. raw materials and work in process
  b. work in process and finished goods
  c. raw materials and cost of goods sold
  d. finished goods and cost of goods sold

 

ANSWER:   b
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

59. Which of the following can serve as a subsidiary for the finished goods inventory?

  a. completed job-order cost sheets
  b. incomplete job-order cost sheets
  c. work-in-process inventory
  d. raw material inventory

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

60. Which of the following costs are NOT associated with selling and general administrative activities?

  a. period costs
  b. nonmanufacturing costs
  c. manufacturing costs
  d. direct material costs

 

ANSWER:   c
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 205
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

61. Which of the following is NOT a manufacturing cost?

  a. direct materials
  b. direct labour
  c. distribution costs
  d. overhead

 

ANSWER:   c
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 205
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

62. At the beginning of the year, Shoeman Corporation estimates its overhead for the year will be $150,000. Suppose the actual overhead for the year is $160,000 and the applied overhead for the year is $145,000. Assume that the overhead variance is immaterial. What journal entry is needed to reconcile the overhead variance?

  a. Cost of Goods Sold          15,000
Overhead Control            15,000
  b. Overhead Control            15,000
Cost of Goods Sold          15,000
  c. Cost of Goods Sold          5,000
Overhead Control            5,000
  d. Overhead Control            5,000
Cost of Goods Sold          5,000

 

ANSWER:   a
RATIONALE:  
Actual Overhead $ 160,000
Applied Overhead 145,000
Underapplied Overhead $ 15,000
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; implementing

 

HiTech Housing uses job-order costing. At the end of the month, the following data were gathered:

Job # Total Cost Complete? Sold?
529 $409 no no
530 $513 yes no
531 $115 no no
532 $790 yes yes
533 $650 yes no
534 $540 no no
535 $  90 no no
536 $970 yes yes
537 $179 no no
538 $400 no no

HiTech Housing’s selling price is cost plus 50% for each of its houses.

 

63. Refer to the Figure. What is the total in the work-in-process account?

  a. $1,163
  b. $1,733
  c. $1,760
  d. $2,923

 

ANSWER:   b
RATIONALE:  
Job 529 $ 409
Job 531 115
Job 534 540
Job 535 90
Job 537 179
Job 538 400
Total Work in Process $1,733
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

64. Refer to the Figure. What is the total in finished goods?

  a. $1,163
  b. $1,733
  c. $1,760
  d. $2,923

 

ANSWER:   a
RATIONALE:   Finished goods = $513 + $650 = $1,163
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

65. Refer to the Figure. What is the cost of goods sold for the month?

  a. $1,163
  b. $1,733
  c. $1,760
  d. $2,640

 

ANSWER:   c
RATIONALE:   Jobs 532 and 536 are sold. $790 + $970 = $1,760
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

66. Refer to the Figure. What is the selling price of Job 536?

  a. $790
  b. $970
  c. $1,185
  d. $1,455

 

ANSWER:   a
RATIONALE:   Selling price = $970 × 1.50 = $1,455
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

Michelle’s has the following transactions for the month of October:

1. Purchased materials on account for $111,482.
2. Materials requisitioned for $82,383.
3. Direct labour of $51,000 was incurred (but not yet paid).
4. Actual overhead for the month was $33,000. It has not been paid yet (charge to various payables).
5. Overhead is applied to production at the rate of 70% of direct labour.
6. Jobs totalling $56,000 were transferred from work in process to finished goods.
7. Jobs costing $41,000 were sold.

Balances at the beginning of the month were:

Materials $17,890
Work in process 0
Finished goods 8,321

 

67. Refer to the Figure. What is the ending balance in work in process?

  a. $110,383
  b. $113,083
  c. $166,383
  d. $169,083

 

ANSWER:   b
RATIONALE:   Ending Work in Process = $82,383 + $51,000 + $35,700 (as 51,000 × 70%) − $56,000 = $113,083
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

68. Refer to the Figure. What is the ending balance of finished goods?

  a. $0
  b. $15,000
  c. $23,321
  d. $64,321

 

ANSWER:   c
RATIONALE:   Ending Balance = $8,321 + $56,000 − $41,000 = $23,321
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

69. Refer to the Figure. What is the journal entry to record actual overhead for the month?

  a. Overhead Control          33,000
Various Payables           33,000
  b. Work in Process           33,000
Various Payables           33,000
  c. Various Payables          33,000
Work in Process            33,000
  d. Various Payable           33,000
Overhead Control           33,000

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

70. Refer to the Figure. What is the journal entry to record applied overhead for the month?

  a. Work in Process           35,700
Overhead Control           35,700
  b. Various Payables          35,700
Overhead Control           35,700
  c. Overhead Control          35,700
Work in Process           35,700
  d. Overhead Control          35,700
Various Payables           35,700

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

Bob’s Powerwasher Company makes custom powerwashers for individual customers. On April 1, one job was in process, Job 900, which had a cost of $45,650. Jobs 901, 902, and 903 were started during the month of July. Data on costs added during the month are as follows:

  Job 900 Job 901 Job 902 Job 903
Direct Materials $12,500 $  6,740 $2,520 $  7,870
Direct Labour $  5,880 $10,280 $3,760 $11,360

Overhead is applied to production at the rate of 85% of direct labour cost. Job 903 was completed on April 26, and the client was billed at cost plus 45%. All other jobs remained in process.

 

71. Refer to Bob’s Powerwasher Company. What is the balance in the work-in-process account on April 30?

  a. $87,498
  b. $88,340
  c. $104,262
  d. $106,570

 

ANSWER:   c
RATIONALE:   Jobs 900, 901, and 902 are the only jobs considered in this calculation.

  900 901 902
Beginning Work in Process $45,650 $ 0 $ 0
Direct Materials 12,500 6,740 2,520
Direct Labour 5,880 10,280 3,760
Overhead 4,998 8,738 3,196
Total $69,028 $25,758 $9,476

$69,028 + $25,758 + $9,476 = $104,262

POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

72. Refer to the Figure. What is the price of Job 903?

  a. $27,883.50
  b. $28,886.00
  c. $41,884.70
  d. $74,536.00

 

ANSWER:   c
RATIONALE:  
Direct Materials $ 7,870
Direct Labour 11,360
Overhead 9,656
Total Cost $28,886

$28,886 × 145% = $41,884.70

POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

73. Refer to the Figure. Suppose selling and administrative expenses for the month of July equal $6,000. What is operating income for the month of July?

  a. $6,998.70
  b. $12,998.70
  c. $28,886.00
  d. $41,884.70

 

ANSWER:   a
RATIONALE:   Only Job 903 was completed and sold during the month. Operating income = $41,884.70 − $28,886.00 − $6,000 = $6,998.70
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 205
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

Rally Point Inc. designs and builds volleyball gymnasiums. Each gymnasium is custom-built to an individual customer’s specifications. Rally Point uses job-order costing to track its costs. In January, Rally Point worked on three jobs. Data for these jobs are as follows:

  Job 100 Job 200 Job 300
Balance 1/1 $13,790 $       0 $         0
Direct Materials 16,200 8,500 30,500
Direct Labour Cost 23,300 7,600 45,000
Machine Hours 400 300 2,000

Overhead is applied to jobs at the rate of $25 per machine hour. By January 31, Job 200 is the only job unfinished. The balance of finished goods on January 1 is $63,290 (consisting of Job 100 only). Jobs 100 and 300 are sold during January. Rally Point sells its product at cost plus 40%.

 

74. Refer to Rally Point, Inc. What is the balance in the work-in-process account on January 31?

  a. $0
  b. $16,100
  c. $23,600
  d. $212,390

 

ANSWER:   c
RATIONALE:   Job 200 is the only job in the work-in-process account.

Direct Materials $ 8,500
Direct Labour $ 7,600
Overhead $ 7,500 ($25 × 300)
  $23,600
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

75. Refer to Rally Point, Inc. What is the balance of finished goods at January 31?

  a. $0
  b. $39,500
  c. $53,290
  d. $188,790

 

ANSWER:   a
RATIONALE:   There are no jobs in finished goods. Both jobs that were finished during January have been sold.
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

76. Refer to the Figure. What is the cost of goods sold for February?

  a. $125,790
  b. $175,700
  c. $188,790
  d. $307,300

 

ANSWER:   c
RATIONALE:   Cost of goods sold consists of Jobs 100 and 300. Job 100: $13,790 + $16,200 + $23,300 + $10,000 (Overhead = $25 × 400) = $63,290 Job 300: $30,500 + $45,000 + $50,000 = $125,500 $63,200+$125,500 = $188,790 total cost of both jobs
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

77. Refer to the Figure. What is the sales revenue for January?

  a. $131,600
  b. $175,700
  c. $237,300
  d. $264,306

 

ANSWER:   d
RATIONALE:   Cost of goods sold = 125,500 + $63,290 = $188,790 Sales revenue = $188,790 × 140% = $264,306
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

Nature’s Best Milk produces dairy equipment. Most of its jobs have a number of units per job. The company has two different departments through which all jobs pass. Overhead is applied using a plantwide rate of $13 per direct labour hour. Direct labour wages average $8 an hour. Data for Job 3 for the year are as follows:

Direct Materials $50,000
Direct Labour Costs  
  Dept. A 60,000
  Dept. B 12,000
Machine hours used  
  Dept. A 200
  Dept. B 2,400
Units Produced 20,000

 

78. Refer to the Figure . What is the total cost of Job 3?

  a. $112,000
  b. $134,600
  c. $145,800
  d. $229,000

 

ANSWER:   d
RATIONALE:  
Direct Materials $ 50,000
Direct Labour 72,000
Overhead 117,000 (9,000 direct labour hours × $13 per hour)
Total $239,000
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p 193
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

79. Refer to the Figure. What is the cost per unit?

  a. $5.60
  b. $5.73
  c. $11.95
  d. $13.00

 

ANSWER:   c
RATIONALE:  
Direct Materials $ 50,000
Direct Labour 72,000
Overhead 117,000 (9,000 direct labour hours × $13 per hour)
Total $239,000

$239,000/20,000 units = $11.95

POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 193
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

Valley Water Slides makes custom water slides for hotels. On September 1, three jobs were in process: Jobs 812, 813, and 814. Two more jobs, Jobs 815 and 816, were started during September. By September 30, Jobs 812, 814, and 816 were finished. The following data were collected:

  Job 812 Job 813 Job 814 Job 815 Job 816
9/1 Balance $615 $830 $   945
Direct Materials 750 235 1,280 $200 $915
Direct Labour 420 115 560 320 875

Overhead is applied at the rate of 120% of direct labour cost. Jobs are sold at cost plus 60%. Selling and administrative expenses for September totalled $2,950. By September 30, Jobs 812 were 816 are sold, but the customer who ordered Job 814 cancelled the order so the slide is still in the warehouse.

 

80. Refer to the Figure. What is the ending balance in work in process as of September 30?

  a. $1,392
  b. $1,700
  c. $1,961
  d. $2,222

 

ANSWER:   d
RATIONALE:   Jobs 813 and 815 are the only jobs left in process.

  Job 813 Job 815
Balance in Work in Process $ 830 $ 0
Direct Materials 235 200
Direct Labour 115 320
Overhead 138 384
Total $1,318 $904

$1,318 + $904 = $2,222

POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

81. Refer to the Figure. Suppose the beginning balance of finished goods was $0. What is the ending balance of finished goods?

  a. $2,785.00
  b. $3,457.00
  c. $5,531.20
  d. $8,206.40

 

ANSWER:   b
RATIONALE:   Job 814 is the only one in Finished Goods Total cost = $945 + $1,280 + $560 + $672 = $3,457
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

82. Refer to the Figure. What is the selling price of Job 816?

  a. $2,840
  b. $2,864
  c. $3,408
  d. $4,544

 

ANSWER:   a
RATIONALE:   Total cost of Job 816 is $2,840. $2,840 × 160% = $4,544.
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

83. Refer to the Figure. What is the cost of goods sold for September?

  a. $3,575.00
  b. $5,129.00
  c. $5,720.00
  d. $8,206.40

 

ANSWER:   b
RATIONALE:   Jobs 812 and 816 are the only jobs that have been sold.

  Job 812 Job 816
Beginning Work in Process $ 615 $ 0
Direct Materials 750 915
Direct Labour 420 875
Overhead 504 1,050
Total $2,289 $2,840

$2,289 + $2,840 = 5,129

POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

84. Refer to the Figure. What is John’s operating income for the month of September?

  a. $0
  b. $127.40
  c. $3,077.40
  d. $8,206.40

 

ANSWER:   b
RATIONALE:  
Sales $ 8,206.40
Less: Cost of Goods Sold 5,129.00
  Gross Margin 3,077.40
Less: Operating Expenses 2,950.00
  Operating Income $ 127.40
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

The Solidwood Corporation manufactures custom-made furniture. The following data pertains to Job X4A:

Direct materials placed into production $9,000
Direct labour hours worked 300 hours
Direct labour rate per hour $15
Machine hours worked 100 hours

Factory overhead rate is $22.50 per machine hour.

 

85. Refer to the Figure. Suppose one-half of Job X4A was sold for $10,000. What would be the total amount of costs assigned to Job X4A?

  a. $9,000
  b. $13,500
  c. $15,750
  d. $20,250

 

ANSWER:   c
RATIONALE:   SUPPORTING CALCULATIONS: $9,000 + $15(300) + $22.50(100) = $15,750
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 193
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

86. Refer to the Figure. Suppose Job X4A consists of 500 units and one-half of Job X4A was sold for $10,000. What would be the cost per unit for Job X4A?

  a. $18.00
  b. $27.00
  c. $31.50
  d. $40.50

 

ANSWER:   c
RATIONALE:   SUPPORTING CALCULATIONS: $9,000 + $15(300) + $22.50(100) = $15,750/500 = $31.50
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 193
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

87. Which account is usually credited when the work-in-process account is debited for direct labour?

  a. cash
  b. wages payable
  c. overhead control
  d. raw materials

 

ANSWER:   b
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

88. Which account is credited when overhead is debited to overhead control?

  a. various payable accounts
  b. raw materials
  c. office supplies
  d. equity

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

89. What account is debited when goods are sold?

  a. cost of goods sold
  b. finished goods
  c. work in process
  d. accounts payable

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

90. What account is credited when goods are sold?

  a. finished goods
  b. cost of goods sold
  c. accounts payable
  d. cash

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; Exemplifying

 

91. Which of the following events would require two separate journal entries?

  a. selling a good
  b. transferring a good to finished goods
  c. purchasing raw materials
  d. hiring an hourly employee

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

92. What account increases when raw materials are purchased on account?

  a. expenses
  b. liabilities
  c. equity
  d. revenue

 

ANSWER:   b
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; exemplifying

 

93. A job costing $5,000 is completed. What journal entry is used to record this transaction?

  a. Finished Goods              5,000
Cost of Goods Sold          5,000
  b. Cost of Goods Sold          5,000
Finished Goods              5,000
  c. Work in Process             5,000
Finished Goods              5,000
  d. Finished Goods              5,000
Work in Process             5,000

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; classifying

 

94. On March 9 of the current year, Job 123 was completed. The job cost sheet showed a total of $4,000 in direct materials and $6,000 in direct labour at a rate of $20 per direct labour hour. Factory overhead is applied at $30 per direct labour hour. Which of the following debits to finished goods inventory records the completion of Job 123?

  a. $4,000
  b. $9,000
  c. $13,000
  d. $19,000

 

ANSWER:   d
RATIONALE:   SUPPORTING CALCULATIONS: $4,000 + $6,000 + $30($6,000/$20) = $19,000
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

Triple M Corporation manufactures module homes. Assume that Triple M uses a job costing system. During June of the current year, the following transactions occurred:

Triple M purchased $4,500 of lumber on account.
Triple M used $3,750 of lumber in production and incurred 50 hours of direct labour hours at $15 per hour.
Depreciation of $1,500 was recorded on equipment used to build houses.
A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

 

95. Refer to the Figure. What journal entry should be used to record the requisition of lumber for Triple M?

  a. debit to work in process of $4,500
  b. debit to materials inventory of $3,750
  c. credit to finished goods of $3,750
  d. debit to work in process of $3,750

 

ANSWER:   d
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

96. Refer to the Figure. Which of the following should be included in the journal entry to record labour for Triple M?

  a. debit to finished goods of $750
  b. debit to wages payable of $750
  c. credit to finished goods of $750
  d. debit to work in process of $750

 

ANSWER:   d
RATIONALE:   SUPPORTING CALCULATIONS: Labour is recorded as a debit to Work in Process $15 × 50 = $750
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

Xtra Company uses a job-order costing system to account for product costs. The following information pertains to the current year:

Materials placed into production $160,000
Indirect labour 40,000
Direct labour (10,000 hours) 180,000
Depreciation of factory building 60,000
Other factory overhead 100,000
Increase in work-in-process inventory 50,000

Factory overhead rate is $18 per direct labour hour.

 

97. Refer to the Figure. What is the total amount credited to materials inventory for Xtra in the current year?

  a. $110,000
  b. $160,000
  c. $170,000
  d. $480,000

 

ANSWER:   b
RATIONALE:   SUPPORTING CALCULATIONS: Materials used in production = $160,000
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

98. Refer to the Figure. What is the total amount debited to finished goods inventory in the current year?

  a. $470,000
  b. $490,000
  c. $510,000
  d. $550,000

 

ANSWER:   a
RATIONALE:   SUPPORTING CALCULATIONS: $160,000 + $180,000 + ($18 × 10,000) − $50,000 = $470,000
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management
KEYWORDS:   Bloom’s Higher order; executing

 

99. What schedule is used to ensure accuracy in computing product costs?

  a. the schedule of the cost of goods manufactured
  b. the schedule of the cost of goods sold
  c. the schedule of the overhead
  d. the schedule of raw materials used

 

ANSWER:   a
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 213

 

100. Process costing is used for manufacturing and service firms producing unique products or services.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

101. A primary characteristic of job-order costing is that the cost of each job is unique and must be tracked individually.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

102. In a process costing environment, equivalent unit costs are computed by dividing the process costs for the given period by the output of the period.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

103. In an actual cost system, actual direct materials, actual direct labour and actual overhead are used to calculate the unit cost.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 186
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

104. The use of normal costing means that actual overhead costs are NOT assigned directly to jobs.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 186
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

105. Actual overhead is used to arrive at the cost of goods manufactured.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 186
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

106. Overhead costs are assigned to work in process using a predetermined rate.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

107. The difference between actual overhead and applied overhead is the overhead variance.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

108. If actual overhead is less than applied overhead, the variance is called underapplied overhead.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

109. If actual overhead is greater than applied overhead, the variance is called underapplied overhead.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

110. Actual overhead is reconciled with applied overhead at the end of the period.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

111. Departmental overheads can be added together to get plantwide overhead.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 192
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

112. The use of a departmental rate has the advantage of being simple and reduces data collection requirements.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 192
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

113. Production costs consist only of direct labour and manufacturing overhead.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 193
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

114. A job-order cost sheet is the source document where direct labour costs are assigned to individual jobs.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 194
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

115. Using a time ticket, the cost accounting department can enter the cost of direct materials onto the correct job-order cost sheet.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 194
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

116. There are other source documents besides the time ticket and the material requisition form used to fill out the job-order cost sheet.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 194
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

117. The raw materials account is an inventory account located on the balance sheet.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

118. The work-in-process account consists of all the job-order costs sheets for the unfinished jobs.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

119. The three manufacturing cost elements are direct materials, direct labour, and overhead.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

120. When materials are put into production, they are taken from the raw materials account and put into the work-in-process account.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

121. Actual overhead costs are accumulated in the overhead control account.

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

122. If the overhead variance is immaterial, it is allocated among the ending balances of work in process, finished goods, and cost of goods sold.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

123. The cost of goods sold appearing on the income statement as an expense is the normal cost of goods sold.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

124. The cost of completed units is always debited to work in process and credited to finished goods.

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

125. The journal entry for $17,000 materials purchased on account is:

Raw Materials 17,000  
     
             Accounts Payable   17,000
     

 

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

126. In job-order costing, the journal entry for $7,200 raw materials requisitioned for use in production is:

Raw Materials 7,200  
     
             Work in Process   7,200
     

 

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

127. The journal entry for $7,200 raw materials requisitioned for use in production is:

Work in Process 7,200  
     
             Raw Materials   7,200
     

 

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

128. In job-order costing, the journal entry for $1,700 of unpaid direct labour is:

Work in Process 1,700  
     
            Wages Payable   1,700
     

 

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

129. In job-order costing, the journal entry for overhead applied at the rate of $3 per direct labour hour when 210 direct labour hours were worked is:

Work in Process 630  
     
          Applied Overhead   630
     

 

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

130. The journal entry for overhead applied at the rate of $3 per direct labour hour when 210 direct labour hours were worked is:

Work in Process 630  
     
           Overhead Control   630
     

 

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

131. In job-order costing, the journal entry for a completed job costing $7,000 but NOT sold is:

Finished Goods 7,000  
     
            Work in Process   7,000
     

 

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 207
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

132. The journal entry for $17 of underapplied overhead is:

Cost of Goods Sold 17  
     
           Applied Overhead   17
     

 

  a. True
  b. False

 

ANSWER:   False
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

133. The journal entry for $17 of underapplied overhead is:

Cost of Goods Sold 17  
     
           Overhead Control   17
     

 

  a. True
  b. False

 

ANSWER:   True
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

134. Canadian Doll Company had the following overhead costs and production for two months. The dolls are identical to each other.

  October February
Actual Overhead $12,000 $12,000
Number of Dolls 4,000 3,000

 

A. What is the overhead cost per doll per month?
B. What type of costing is being used here, and what is the problem with this type that is presented here?

 

ANSWER:    

A. For October, the unit overhead cost per doll is $3 (12,000/4,000). For February, the unit overhead cost per doll is $4 (12,000/3,000).
   
B. The type of costing being used here is actual costing. The problem with assigning actual overhead to units that is presented here is that the number of units produced per month varies. This makes the costs of the dolls different because of the different number of units produced. The doll produced in January will be more expensive because of this.
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 193
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

135. Xbin Incorporated estimated overhead to be $440,000 and direct labour hours to be 100,000 for the year. Actual direct labour ended up being 120,000 hours. Actual overhead for the year amounted for $500,000.

A. What is the predetermined overhead rate?
B. What is the applied overhead for the year?
C. What is the amount of under- or over-applied overhead at the end of the year?

 

ANSWER:    

A. predetermined overhead rate = $440,000/100,000 = $4.40 per direct labour hour.
B. applied overhead = $4.40 × 120,000 = $528,000
C. $528,000 − $500,000 = $28,000 over applied overhead
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

136. White Mountain Company produces various types of snow skis. Estimated overhead for the year was $780,000 and estimated direct labour hours were 260,000. During the month of June, 18,100 direct labour hours were worked, $55,400 of direct materials were used, and the average wage was $15 per hour. In June, 10,000 pairs of skis were produced.

A. Calculate the predetermined overhead rate.
B. Calculate the overhead applied to production for June.
C. Calculate unit cost for each pair of skis.

 

ANSWER:    

A. $760,000/260,000 = $3 per direct labour hour
   
B. 3 × 18,100 = $54,300
   
C. $381,200/10,000=$38.12 per pair of skis
   
  Direct Materials $  55,400  
  Direct Labour 271,500  
  Overhead     54,300  
  Total $381,200  

 

Direct Labour:  18,100 x $15 = $271,500
Overhead:  18,100 x $3 = $54,300

POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

137. Langly Company provided the following data:

Budgeted overhead $100,000
Budgeted direct labour hours 10,000
Actual overhead $99,000
Actual direct labour hours 11,000

 

A. What is applied overhead?
B. What is the overhead variance? Is it overapplied or underapplied?

 

ANSWER:   predetermined overhead rate = $100,000/10,000 = $10 per direct labour hour

A. $10 × 11,000 = $110,000
   
B. $99,000 − $110,000 = $11,000 underapplied
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p.187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

138. Budgeted overhead is $40,000, budgeted direct labour hours are 2,000, actual overhead is $40,400, and direct labour hours are 3,230. Unadjusted cost of goods sold is $140,800. Calculate the following:

A. Calculate the overhead variance.
B. What is adjusted cost of goods sold?

 

ANSWER:   predetermined overhead rate = $40,000/2,000 = $20 per direct labour hour.
Applied Overhead = $20 × 3,230 = $64,600

A. $40,400 − $40,000 = $400 overapplied
   
B. $140,800 − $400 = $140,400
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 200
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

139. A company has two departments that all goods pass through: machining and assembly. Machining overhead is applied based on machine hours, and assembly overhead is applied based on direct labour hours. Data on each department are as follows:

  Machining Assembly
Budgeted Overhead $75,000 $40,000
Budgeted Direct Labour Hours 5,000 10,000
Budgeted Machine Hours 25,000 1,000
Actual Overhead $75,400 $39,200
Actual Direct Labour Hours 5,203 9,980
Actual Machine Hours 25,040 850

 

A. Calculate the overhead rate for each department.
B. What is each department’s applied overhead?
C. Calculate each department’s overhead variance. Specify whether it is overapplied or underapplied.

 

ANSWER:    

A. Machining Overhead rate = $75,000/25,000 = $3 per machine hour
  Assembly Overhead rate = $40,000/10,000 = $4 per direct labour hour
   
B. Machining Applied Overhead = $3 × 25,040 = $75,120
  Assembly Applied Overhead = $4 × 9,980 = $39,920
   
C. Machining Overhead Variance = $75,400 − $75,120 = $280 underapplied
  Assembly Overhead Variance = $39,920 − $39,200 = $720 overapplied
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

140. Sparkle Company produces ornamental trees and uses normal costing. Sparkle applies overhead based on direct labour hours. The following data are provided:

  Budgeted Actual
Overhead $400,000 $392,000
Machine Hours 20,000 18,000
Direct Labour Hours 16,000 17,840
Direct Materials Cost   $521,000
Direct Labour Cost   $410,000
Units Produced   10,000

 

A. Calculate applied overhead.
B. Calculate the unit cost.

 

ANSWER:    

A. predetermined overhead rate = $400,000/16,000 = $25 per direct labour hour
  $25 × 17,840 = $446,000 applied overhead
   
B. Unit cost = ($521,000 + $410,000 + $446,000)/10,000 = $137.70 per Christmas tree
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p.187-193
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

141. Goodwin Company uses a normal job-order costing system. Currently, a plantwide overhead rate based on direct labour is used. Sarah Lindsay, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignments than a plantwide rate can offer. Some jobs spend most of their time in Department A, while others spend most of their time in Department B. Goodwin Company has the following data for its two departments for the coming year:

  Department A Department B
Expected overhead cost $75,000 $33,000
Expected direct labour hours 30,000 24,000

 

A. Compute the plantwide overhead rate.
B. Compute the departmental overhead rates. (Carry out your answers to three decimal places.)
C. Which overhead rate would you recommend, and why?

 

ANSWER:    

A. $108,000/54,000 = $2 per direct labour hour.
   
B. Dept. A = $75,000/30,000 = $2.50 per direct labour hour
  Dept. B = $33,000/24,000 = $1.375 per direct labour hour
   
C. The departmental rate would provide more accuracy. Department A appears to be more overhead intensive, so jobs spending more time in Department A ought to receive more overhead.
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

142. Green Oak Farm Equipment is a job-order costing manufacturer that uses a plantwide overhead rate that is based on direct labour hours. Estimations for the year include $420,000 in overhead and 30,000 direct labour hours. Green Oak worked on five jobs in March. Data are as follows:

  Job 89 Job 90 Job 91 Job 92 Job 93
Balance, 3/1 $23,110 $18,240 $  9,510 $         0 $       0
Direct Materials 13,000 17,210 22,900 15,240 8,210
Direct Labour cost 8,075 11,500 16,250 9,750 4,860
Direct Labour Hours 1,615 2,300 3,250 1,950 972

By March 31, Jobs 89 and 91 were completed and sold. The rest of the jobs remained in process.

A. Calculate the plantwide overhead rate.
B. Calculate the work in process on March 31.
C. Calculate the cost of goods sold for March.
D. Assume Green Oak marks up cost by 40%. What is the selling price of Jobs 89 and 91?

 

ANSWER:    

A. $420,000/30,000 = $14 per direct labour hour
   
B. $79,150 + $52,290 + $26,678 = $158,118
   
    Job 90 Job 92 Job 93  
  Balance, 3/1 $18,240 $0 $0  
  Direct Materials 17,210 15,240 8,210  
  Direct Labour cost 11,500 9,750 4,860  
  Overhead   32,200   27,300   13,608  
  Total $79,150 $52,290 $26,678  
   
C. Job 89: ($23,110 + $13,000 + $8,075) + (1,615 × $14) = $66,795
  Job 91: ($9,510 + $22,900 + $16,250) + (3,250 × $14) = $94,160
   
D. Job 89: $66,795 × 1.4 = $93,513
  Job 91: $94,160 × 1.4 = $131,824
POINTS:   1
DIFFICULTY:   Challenging
REFERENCES:   p. 197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

143. Giant Company is a job-order costing company that produces customized bicycles. During the month of October, Giant had three jobs in-process, Job 50cm, Job 56cm, and Job 60 cm. By the end of the month, all three jobs had been completed, with Job 60cm being sold for $484.50. The following costs belong to each job:

  Job 50cm Job 56cm Job 60cm
Direct Materials $  90 $  85 $  95
Direct Labour 100 110 95
Applied Overhead   140   154   133
Total $330 $349 $323

 

A. Overhead is applied based on direct labour dollars. What is the overhead rate?
B. What rate does Giant use to price its jobs?
C. What is the gross margin on Job 60cm?

 

ANSWER:    

A. $140/$100 = 1.40 = 140% of direct labour cost (This was using Jobs 50cm, Job 56cm & Job 60cm result in the same answer.)
   
B. $484.50/$323 = 1.5 Giant prices its jobs at cost plus 50%.
   
C. $484.50 − $323 = $161.50
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p.187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

144. What are the three steps of overhead application?

ANSWER:  
1. Calculate the predetermined overhead rate.
2. Apply the overhead to production throughout the year.
3. Reconcile the difference between the total actual overhead incurred during the year and the total overhead applied to production.
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

145. Kilo Company has a job-costing system. The following items appeared in the work-in-process account during January of the current year:

January 1 balance $  20,000
Materials placed into production ?
Direct labour (4,000 hours) $120,000
Factory overhead applied $  96,000
Cost of goods manufactured $400,000
January 30 balance $  16,000

Kilo applies overhead to production on the basis of direct labour hours. Job XX, the only job in process on January 30, has been charged $10,600 materials cost and has 100 labour hours of direct labour time assigned to it.

Required:

A. Determine the predetermined factory overhead rate for Kilo Company.
B. Determine the amounts of materials, direct labour, and factory overhead included in the January 30 work in process.
C. Determine the amount of materials placed into production during January.

 

ANSWER:    

A. Factory overhead rate = $96,000/4,000 = $24 per direct labour hour
   
B. Costs assigned to Job XX:
    Materials $10,600
    direct labour (100 × $30*) 3,000
    factory overhead applied (100 × $24)     2,400
    work in process, February 28 $16,000
     
    * $120,000/4,000 = $30 per hour
     
C. $X + $120,000 + $96,000 + $20,000 − $16,000 = $400,000
  X = $180,000
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p.187
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

146. Steel Incorporated uses a job-order costing system and a predetermined overhead rate based on machine hours.

At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000 and machine hours would be 8,000.

The following information pertains to November of the current year:

  Job 10 Job 11 Job 12 Total
Work in Process, Nov. 1 $16,000 $26,000 $38,000 $80,000

December production activity:

Materials requisitioned $  4,000 $  4,800 $  7,200 $16,000
Direct labour cost $  2,400 $  3,600 $  4,000 $10,000
Machine hours 400 700 900 2,000
Labour hours 120 180 200 500

Actual manufacturing overhead cost incurred in November was $61,000.

Required:

A. Compute the predetermined overhead application rate.
B. Determine the total cost associated with each job.
C. If Jobs 10 and 12 were completed, prepare the journal entry to move the cost.
D. If Job 10 was delivered to customers that paid $50,000 cash, prepare the journal entries.
E. What is the gross profit for Job 10?
F. What is the cost assigned to ending work in process?
G. Assuming no beginning finished goods, what is the cost assigned to ending finished goods?
H. How much was overhead overapplied or underapplied?

 

ANSWER:    

A. $240,000/8,000 = $30
   
B.   Job 10 Job 11 Job 12 Total
  Work in process, Nov. 1 $16,000 $26,000 $38,000 $80,000
  Materials requisitioned $  4,000 $  4,800 $  7,200 $16,000
  Direct labour cost $  2,400 $  3,600 $  4,000 $10,000
  Overhead applied:
  Machine hours
    400 × $30 $12,000      
    700 × $30   $21,000    
    900 × $30 _______ ______ $27,000  
    Total $34,400 $55,400 $76,200  
   
C. Job 10 + Job 12 = $34,400 + $76,200 = $110,600
       (the cost of goods manufactured)
   
  Finished goods $110,600      
    Work in process   $110,600  
   

 

D. Record a sale
   
  Cash $50,000  
    Sales   $50,000
       
  Cost of goods sold $34,400  
    Finished goods   $34,400
       
E. Sales $50,000  
  CGS   34,400  
  Gross Profit $15,600  
   
F. Job 11 is still in production = $55,400
   
G. Finished goods has 1 job − Job 12 = $76,200
       
H. Actual overhead $61,000  
  Applied overhead ($12,000 + $21,000 + $27,000) = $60,000  
  Underapplied overhead $  1,000  
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 187-205
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

147. Refer to Baldwin, Inc.

A. Calculate the per-unit cost of Job 12.
B. Calculate the ending balance in the Work-in-Process account.

 

ANSWER:    

A. Unit cost = ($ 2,480 + $12,300 + $9,840)/100 = $246.20 per unit
   
B. Ending WIP = Job 13 = $1,970 + $17,490 + $13,992 = $33,452
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 187-205
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

148. Refer to Baldwin, Inc.

 

A. Prepare the journal entries for requisitioning all materials used during the month.
B. Prepare the journal entries for direct labour for the month. Assume the workers have not been paid yet.

 

ANSWER:    

A. Work in Process $4,450  
    Raw Materials   $4,450
   
B. Work in Process $29,790  
    Wages Payable   $29,790
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

149. Refer to Baldwin, Inc. Prepare the journal entries reflecting the completion and sale on account of Job 12. The selling price is 160% of cost.

ANSWER:    

Finished Goods $24,620  
  Work in Process   $24,620
 
Cost of Goods Sold $24,620  
  Finished Goods   $24,620
 
Accounts Receivable $39,392  
  Sales   $39,392
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p.206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

150. If actual overhead for the year is $33,451 and applied overhead is $32,000, is the overhead variance overapplied or underapplied? Prepare the journal entry necessary to reconcile overhead. Assume the variance is immaterial.

ANSWER:   Actual overhead is more than applied overhead, so the overhead variance of $1,451 is underapplied. The journal entry would be:

Cost of Goods Sold $1,451  
  Overhead Control   $1,451
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

151. The following information was taken from the job cost sheet for Job 101 for Scott Manufacturing Company:

Date started: July 5
Date completed: August 21

 

  Direct Direct Factory Job
Date Materials Labour Overhead Total
July 5 $3,000      
July 15   $   900 $450  
July 17 1,500      
July 22   1,350 675  
August 1 1,500      
August 21   600 300  

Job 101 was sold on account on August 25 for 160% of its cost.

Required:

A. Prepare the journal entries to record the costs incurred for Job 101 in the current year for direct materials, direct labour, and factory overhead.
B. Prepare the journal entry to record the completion of Job 101.
C. What is the predetermined factory overhead rate for Scott?
D. Prepare the journal entries to record the sale of Job 101.

 

ANSWER:    

A. Work in Process 6,000  
    Materials   6,000
       
  Work in Process 2,850  
    Wages Payable   2,850
       
  Work in Process 1,425  
    Factory Overhead   1,425
       
B. Finished Goods 10,275  
    Work in Process   10,275
       
C. $1,425/$2,850 = 50% of direct labour costs    
       
D. Accounts Receivable 16,440  
    Sales   16,440
       
  Cost of Goods Sold 10,275  
    Finished Goods   10,275
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 206
LEARNING OBJECTIVES:   MACC.MOWE.15.5.5 – 5.5
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

152. There are two major types of companies: those that use a job-order costing system and those that use process-costing systems.

A. Explain the differences between the two types of systems.
B. List 3 examples of each type of company.

 

ANSWER:    

A. Manufacturing and service firms producing unique products or services require a job-order accounting system. The cost of one job differs from that of another job and must be kept separate. Firms producing very similar products or services can use a process-costing system. The cost of one unit is identical to the cost of another unit.
   
B. Common job-order businesses include: printing, construction, furniture making, medical and dental services, automobile repair, and beautician services.
  Common process manufacturers include: food, cement, petroleum, and chemical firms.
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p.185
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Communication
United States – IMA-Cost Management

 

153. Consider two costing systems, normal costing and actual costing.

A. Which costing system do most firms use to assign costs to units of product or service? What does this costing system include?
B. What is the other costing system? What does this costing system include?

 

ANSWER:    

A. Most firms use normal costing systems to assign costs to units of product or service. This system includes actual direct materials, actual direct labour, and applied overhead.
   
B. The other costing system is the actual costing system. It includes actual direct materials, actual direct labour, and actual overhead.
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 186
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Communication
United States – IMA-Cost Management

 

154. Discuss overapplied and underapplied overhead.

ANSWER:   Since the predetermined overhead rate is based on estimated data, applied overhead will rarely equal actual overhead. If actual overhead is greater than applied overhead, then the variance is called underapplied overhead. If actual overhead is less than applied overhead, then the variance is called overapplied overhead. If overhead has been underapplied, then product cost has been understated; in this case, the cost appears lower than it really is. Conversely, if overhead has been overapplied, then product cost has been overstated; in this case, the cost appears higher than it really is.
POINTS:   1
DIFFICULTY:   Medium
REFERENCES:   p. 188
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
NATIONAL STANDARDS:   United States – AACSB Communication
United States – IMA-Cost Management

 

Match each item with the correct statement below.

a. Predetermined overhead rate
b. Plantwide overhead rate
c. Departmental overhead rate
d. Overhead variance
e. Overapplied overhead
f. Underapplied overhead
g. Applied overhead
h. Normal cost of goods sold

 

DIFFICULTY:   Easy
REFERENCES:   184-191
LEARNING OBJECTIVES:   MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

155. Overhead assigned to production using predetermined rates

ANSWER:   g
POINTS:   1

 

156. An overhead rate computed using estimated data

ANSWER:   a
POINTS:   1

 

157. The amount by which actual overhead exceeds applied overhead

ANSWER:   f
POINTS:   1

 

158. The difference between actual overhead and applied overhead

ANSWER:   d
POINTS:   1

 

159. The amount by which applied overhead exceeds actual overhead

ANSWER:   e
POINTS:   1

 

160. A single overhead rate calculated using all estimated overhead for a factory divided by the estimated activity level across the entire factory

ANSWER:   b
POINTS:   1

 

161. Estimated overhead for a single department divided by the estimated activity level for that same department

ANSWER:   c
POINTS:   1

 

Match each item with the correct statement below.

a. Actual cost system
b. Job-order cost system
c. Normal cost system
d. Process-costing system

 

DIFFICULTY:   Easy
REFERENCES:   184-186
LEARNING OBJECTIVES:   MACC.MOWE.15.5.1 – 5.1
MACC.MOWE.15.5.2 – 5.2
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

162. An approach that assigns the actual costs of direct materials and direct labour to products but uses a predetermined rate to assign overhead costs

ANSWER:   c
POINTS:   1

 

163. An approach that assigns actual costs of direct materials, direct labour, and overhead to products

ANSWER:   a
POINTS:   1

 

164. A costing system in which costs are collected and assigned to units of production for each individual job

ANSWER:   b
POINTS:   1

 

165. A costing system that accumulates production costs by process by department for a given period of time

ANSWER:   d
POINTS:   1

 

Match each item with the correct statement below. Answers may be used more than once.

a. Job-order cost sheet
b. Time ticket
c. Materials requisition form

 

DIFFICULTY:   Easy
REFERENCES:   p. 194-197
LEARNING OBJECTIVES:   MACC.MOWE.15.5.3 – 5.3
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

166. Form headed by the job order number, or name

ANSWER:   a
POINTS:   1

 

167. Form that asks for the type, quantity, and unit price of direct materials

ANSWER:   c
POINTS:   1

 

168. Form filled out by each employee every day

ANSWER:   b
POINTS:   1

 

169. Form prepared every time a new job is started

ANSWER:   a
POINTS:   1

 

170. Form that may be used to maintain proper control over a firm’s inventory of direct materials

ANSWER:   c
POINTS:   1

 

Match the following cost flows with the proper event in a job-costing firm:

a. Completion of job
b. End of each accounting period
c. Materials are removed from storage into production
d. Product is sold
e. End of year

 

DIFFICULTY:   Medium
REFERENCES:   p. 197-204
LEARNING OBJECTIVES:   MACC.MOWE.15.5.4 – 5.4
NATIONAL STANDARDS:   United States – AACSB Analytic
United States – IMA-Cost Management

 

171. Actual overhead is reconciled with applied overhead

ANSWER:   b
POINTS:   1

 

172. Immaterial overhead variance closed to costs of goods

ANSWER:   e
POINTS:   1

 

173. Direct materials, direct labour and applied overhead are totalled to yield manufacturing cost of job

ANSWER:   a
POINTS:   1

 

174. Schedule of costs of goods sold is prepared

ANSWER:   b
POINTS:   1

 

175. Costs of product are removed from finished goods and added to cost of goods sold

ANSWER:   d
POINTS:   1

 

176. Cost of materials is removed from materials account and added to work in process

ANSWER:   c
POINTS:   1

 

177. Costs of job are transferred from work in process to finished goods

ANSWER:   a
POINTS:   1