Test Bank For Managerial Accounting 10th Edition by Ray Garrison,Chesley, Ray Carroll, Webb,Lib

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Chapter 5

Student: ___________________________________________________________________________

1. Which of the following companies is most likely to use a job-order costing system rather than a process costing system?

A. Fast food restaurant

 

B. Shipbuilder

 

C. Crude oil refinery

 

D. Candy maker

 

2. Kelly Sportswear manufactures a specialty line of T-shirts. The company uses a job-order costing system. During March, the following costs were incurred on Job 1052:

Manufacturing overhead was applied at the rate of $25 per machine hour, and Job 1052 required 800 machine hours. In addition, selling and shipping costs of $7,000 were incurred. Job 1052 consisted of 7,000 shirts and was completed on March 24. The total cost of job 1052 transferred from Work in Process to Finished Goods on March 24 is:

A. $33,700

 

B. $38,500

 

C. $18,500

 

D. $20,000

 

3. Which of the following contain(s) the detailed cost data that support the Work in Process control account?

A. Job cost sheets.

 

B. The Manufacturing Overhead account.

 

C. The Finished Goods inventory account.

 

D. Purchase requisitions.

 

4. In a normal job-order costing system, the journal entry to record the application of overhead cost to jobs includes which of the following?

A. A credit to the Work in Process inventory account.

 

B. A credit to the Manufacturing Overhead account.

 

C. A debit to Cost of Goods Sold.

 

D. A debit to the Manufacturing Overhead account.

 

5. In a normal job-order costing system, the use of indirect materials would usually be recorded as a debit to which account?

A. Raw Materials.

 

B. Work in Process.

 

C. Manufacturing Overhead.

 

D. Finished Goods.

 

6. In a normal job-order costing system, the salary of the factory supervisor would usually be recorded as a debit to which of the following accounts?

A. Manufacturing Overhead.

 

B. Salary Expense.

 

C. Work in Process.

 

D. Finished Goods.

 

7. In a job-order costing system, direct labour costs usually are recorded initially with a debit to which of the following accounts?

A. Manufacturing Overhead.

 

B. Finished Goods inventory.

 

C. Direct Labour Expense.

 

D. Work in Process.

 

8. Which of the following statements is true if a company applies overhead to jobs on the basis of a predetermined overhead rate and reports a credit balance in the Manufacturing Overhead account at the end of any period?

A. More overhead cost has been charged to jobs than has been incurred during the period.

 

B. More overhead cost has been incurred during the period than has been charged to jobs.

 

C. The amount of overhead cost charged to jobs is greater than the estimated cost for the period.

 

D. The amount of overhead cost charged to jobs is less than the estimated overhead cost for the period.

 

9. In a job-order costing system, when a job remains incomplete at the end of a period, how is the amount of overhead cost that has been applied to that job treated?

A. It is deducted on the Income Statement as overapplied overhead.

 

B. It is closed out to Cost of Goods Sold.

 

C. It is transferred to Finished Goods.

 

D. It is part of the ending balance of the Work in Process inventory account.

 

10. (Appendix 5A) Which level of activity, if used to set a predetermined overhead rate, may encourage managers to increase selling prices as demand falls?

A. Budgeted level of activity.

 

B. Actual level of activity.

 

C. Capacity (maximum) level of activity.

 

D. Normal level of activity.

 

11. The Work in Process inventory account of a manufacturing company shows a balance of $2,400 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $400 and $200 for direct materials and charges of $300 and $500 for direct labour. From this information, what predetermined overhead rate, as a percentage of direct labour costs, does the company appear to be using?

A. 80%.

 

B. 125%.

 

C. 240%.

 

D. 300%.

 

12. Freeman Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated manufacturing overhead would be $150,000 and direct labour hours would be 10,000. The actual figures for the year were $186,000 for manufacturing overhead and 12,000 direct labour hours. The cost records for the year will show which of the following?

A. Overapplied overhead of $30,000.

 

B. Underapplied overhead of $30,000.

 

C. Underapplied overhead of $6,000.

 

D. Overapplied overhead of $6,000.

 

13. Harrell Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated its total manufacturing overhead cost at $400,000 and its direct labour hours at 100,000 hours. The actual overhead cost incurred during the year was $350,000 and the actual direct labour hours incurred on jobs during the year was 90,000 hours. What would be the manufacturing overhead for the year?

A. $10,000 underapplied.

 

B. $10,000 overapplied.

 

C. $50,000 underapplied.

 

D. $50,000 overapplied.

 

14. For the current year, Paxman Company incurred $150,000 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was overapplied in the amount of $6,000 for the year. If the predetermined overhead rate was $8.00 per direct labour hour, how many hours were worked during the year?

A. 17,750 hours.

 

B. 18,000 hours.

 

C. 18,750 hours.

 

D. 19,500 hours.

 

15. Carlo Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. The company estimated manufacturing overhead at $255,000 for the year and direct labour hours at 100,000 hours. Actual manufacturing overhead costs incurred during the year totalled $270,000; actual direct labour hours were 105,000. What was the overapplied or underapplied overhead for the year?

A. $2,250 overapplied.

 

B. $2,250 underapplied.

 

C. $15,000 overapplied.

 

D. $15,000 underapplied.

 

16. Sawyer Manufacturing Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. Last year, the company worked 57,000 actual direct labour hours and used 40,000 machine hours. The company had estimated that it would work 55,000 direct labour hours using 44,000 machine hours during the year and incur $330,000 of manufacturing overhead cost. What was the company’s manufacturing overhead applied for the year?

A. $345,000.

 

B. $342,000.

 

C. $330,000.

 

D. $300,000.

 

17. The Watts Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labour cost in Department A and on machine hours in Department B. At the beginning of the year, the company made the following estimates:

What predetermined overhead rates would be used in Departments A and B, respectively?

A. 50% and $8.00.

 

B. 50% and $5.00.

 

C. 110% and $15.00.

 

D. 200% and $5.00.

 

18. Compton Company uses a predetermined overhead rate in applying overhead to production orders on a labour cost basis in Department A and on a machine hours basis in Department B. At the beginning of the most recently completed year, the company made the following estimates:

What predetermined overhead rate would be used in Departments A and B, respectively?

A. 83% and $5.00.

 

B. 83% and $3.00.

 

C. 120% and $3.00.

 

D. 120% and $5.00.

 

19. Kelsh Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for next year:

Kelsh estimates that 5,000 direct labour hours and 10,000 machine hours will be worked during the year. What will be the predetermined overhead rate per hour?

A. $6.80.

 

B. $6.40.

 

C. $3.40.

 

D. $8.20.

 

20. Simplex Company has the following estimated costs for next year:

Simplex estimates that 10,000 direct labour and 16,000 machine hours will be worked during the year. If overhead is applied on the basis of machine hours, what will be the overhead rate per hour?

A. $3.50.

 

B. $6.94.

 

C. $7.63.

 

D. $8.56.

 

21. At the beginning of the current year CR Company estimated the following costs:

CR Company estimated 20,000 labour hours to be worked during the year. Actual labour hours worked were 22,000 hours. If overhead is applied on the basis of direct labour hours, what will be the overhead applied for the year?

A. $55,000.

 

B. $49,500.

 

C. $103,400.

 

D. $75,900.

 

22. Lucy Sportswear manufactures a specialty line of T-shirts. The company uses a job-order costing system. During March, the following costs were incurred on Job ICU2:

In addition, selling and shipping costs of $7,000 were incurred on the job. Manufacturing overhead was applied at the rate of $25 per machine hour, and Job ICU2 required 800 machine hours. If Job ICU2 consisted of 7,000 shirts, what was the Cost of Goods Sold per shirt?

A. $5.50.

 

B. $5.70.

 

C. $6.00.

 

D. $6.50.

 

23. Worrell Corporation has a job-order costing system. The following debits (credits) appeared in the Work in Process account for the month of March:

Worrell applies overhead at a predetermined rate of 90% of direct labour cost. Job No. 232, the only job still in process at the end of March, has been charged with manufacturing overhead of $2,250. What was the amount of direct materials charged to Job No. 232?

A. $2,250.

 

B. $2,500.

 

C. $4,250.

 

D. $9,000.

 

24. The Samuelson Company uses a job-order costing system. The following data were recorded for June:

Overhead is charged to production at 70% of the direct materials cost. Jobs 475, 477, and 478 have been delivered to the customer. What was Samuelson’s Work in Process inventory balance for Job 476 on June 30?

A. $6,450.

 

B. $2,860.

 

C. $2,300.

 

D. $2,720.

 

25. Sweet Company applies overhead to jobs on the basis of 125% of direct labour cost. If Job 107 shows $10,000 of manufacturing overhead applied, how much was the direct labour cost on the job?

A. $8,000.

 

B. $12,500.

 

C. $11,250.

 

D. $10,000.

 

26. Manufacturing overhead is overapplied for the year by $3,000. The unadjusted cost of goods sold is $360,000. Closing manufacturing overhead into cost of goods sold will result in which of the following?

A. Adjusted cost of goods sold of $363,000.

 

B. A credit balance in manufacturing overhead of $6,000.

 

C. Adjusted cost of goods sold of $357,000.

 

D. Adjusted cost of goods sold of $360,000.

 

27. Knowlton Company applies overhead to completed jobs on the basis of 70% of direct labour cost. If Job 501 shows $21,000 of manufacturing overhead applied, what was the direct labour cost on the job?

A. $14,700.

 

B. $21,000.

 

C. $30,000.

 

D. $27,300.

 

28. Beaver Company used a predetermined overhead rate last year of $2 per direct labour hour based on an estimate of 25,000 direct labour hours to be worked during the year. Actual costs and activity during the year were:

What was the under- or overapplied overhead last year?

A. $1,000 underapplied.

 

B. $1,000 overapplied.

 

C. $2,000 underapplied.

 

D. $3,000 overapplied.

 

29. Dowan Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. During the year, Dowan Company incurred $156,600 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was underapplied by $12,600 for the year. If the predetermined overhead rate is $6.00 per direct labour-hour, how many hours did the company work during the year?

A. 24,000 hours.

 

B. 25,000 hours.

 

C. 26,000 hours.

 

D. 28,200 hours.

 

30. During the year, Paul Company used a predetermined overhead rate of $3.50 per direct labour hour, based on an estimate of 22,000 direct labour hours to be worked during the year. Actual overhead cost and activity during the year were:

What was the under- or overapplied overhead for the year?

A. $2,500 overapplied.

 

B. $2,500 underapplied.

 

C. $10,500 overapplied.

 

D. $13,000 underapplied.

 

31. Bitter Company incurs a direct labour rate of $15 per hour applies overhead to jobs on the basis of $1.25 per direct labour hour. If Job 107 shows $86,000 of direct material and $10,000 of manufacturing overhead applied, what is the total cost of job 107?

A. $96,000.

 

B. $120,000.

 

C. $130,000.

 

D. $216,000.

 

32. Kanuck Company applies overhead to completed jobs on the basis of $0.70 per machine hour. If Job 501 shows $28,000 of manufacturing overhead applied, how many machine hours were used for the job?

A. 19,600.

 

B. 28,000.

 

C. 30,000.

 

D. 40,000.

 

33. The balances in White Company’s Work in Process inventory account were $15,000 on August 1 and $18,000 on August 31. The company incurred $30,000 in direct labour cost during August and requisitioned $25,000 in raw materials (all direct material). The sum of the debits to the Manufacturing Overhead account totalled $28,000 for the month while the sum of the credits totalled $30,000. Which of the following statements is correct?

A. Finished Goods was debited for $82,000 during the month.

 

B. Finished Goods was debited for $52,000 during the month.

 

C. Manufacturing Overhead was underapplied by $2,000 at the end of the month

 

D. Finished Goods was credited for $82,000 during the month

 

34. Under Lamprey Company’s job-order costing system, manufacturing overhead is applied to Work in Process inventory using a predetermined overhead rate. During January, Lamprey’s transactions included the following:

Lamprey Company had no beginning or ending inventories. What was the cost of goods manufactured for January?

A. $318,000.

 

B. $310,000.

 

C. $322,000.

 

D. $330,000.

 

35. What was the amount of direct materials used during November if $20,000 in raw materials were purchased during the month, all raw materials are direct, and if the inventories were as follows?

A. $15,000.

 

B. $20,000.

 

C. $21,000.

 

D. $24,000.

 

36. Sharp Company’s records show that overhead was overapplied by $10,000 last year. This overapplied overhead was closed out to the Cost of Goods Sold account at the end of the year. In trying to determine why overhead was overapplied by such a large amount, the company has discovered that $6,000 of depreciation on factory equipment was charged to administrative expense in error. Given the above information, which of the following statements is true?

A. Manufacturing overhead was actually overapplied by $16,000 for the year.

 

B. The company’s net income is understated by $6,000 for the year.

 

C. Under the circumstances described above, the error in recording depreciation would have no effect on net income for the year.

 

D. The $6,000 in depreciation should have been charged to Work in Process rather than to administrative expense.

 

The following partially completed T-accounts summarize last year’s transactions for Kelshaw Company:

At the end of the year, the company closes out the balance in the Manufacturing Overhead account to Cost of Goods Sold.

 

37. What is the indirect labour cost?

A. $5,000.

 

B. $12,000.

 

C. $15,000.

 

D. $35,000.

 

38. What is the cost of goods manufactured?

A. $50,000.

 

B. $55,000.

 

C. $56,000.

 

D. $61,000.

 

39. What is the cost of goods sold (after adjustment for under- or over applied overhead)?

A. $51,000.

 

B. $54,000.

 

C. $55,000.

 

D. $56,000.

 

40. What is the manufacturing overhead applied?

A. $27,000.

 

B. $28,000.

 

C. $29,000.

 

D. $36,000.

 

41. What is the cost of direct materials used?

A. $11,000.

 

B. $12,000.

 

C. $15,000.

 

D. $20,000.

 

42. What would be the ending Work in Process account balance?

A. $2,000.

 

B. $13,000.

 

C. $50,000.

 

D. $55,000.

 

43. What is the total manufacturing cost for the year?

A. $27,000

 

B. $50,000

 

C. $55,000

 

D. $63,000

 

Mallet Company has only Job 844 in process on March 1 of the current year. The job has been charged with $2,000 of direct material cost, $2,500 of direct labour cost, and $1,750 of manufacturing overhead cost. The company assigns overhead cost to jobs at a predetermined rate of 70% of direct labour cost. Any under- or overapplied overhead cost is closed out to Cost of Goods Sold at the end of the month.

During March, the following activity and amounts were recorded by the company:

Raw materials (all direct materials):

Labour:

Inventories:

Work in Process inventory contains $5,500 of direct labour cost.

 

44. What is the amount of direct materials cost in the March 31 work in process inventory account?

A. $5,150.

 

B. $9,350.

 

C. $9,000.

 

D. $3,850.

 

45. What is the cost of goods manufactured for March?

A. $67,250.

 

B. $67,300.

 

C. $81,800.

 

D. $75,550.

 

46. Which of the following would be included in the entry to dispose of the under- or over applied overhead cost for the month?

A. A debit of $50 to Cost of Goods Sold.

 

B. A debit of $50 to Manufacturing Overhead.

 

C. A debit of $5,500 to Manufacturing Overhead.

 

D. A credit of $5,500 to Cost of Goods Sold.

 

47. What was the March 1 balance in the Raw Materials inventory?

A. $10,500.

 

B. $9,500.

 

C. $6,500.

 

D. $8,500.

 

The Milo Company’s records for May contain the following information:

Ending inventories:

The company uses a predetermined overhead rate of $5.00 per direct labour hour to apply manufacturing overhead to jobs.

 

48. What was the actual overhead cost incurred during the month?

A. $50,000.

 

B. $55,000.

 

C. $40,000.

 

D. $45,000.

 

49. What was the total cost added to Work in Process during May?

A. $101,000.

 

B. $106,000.

 

C. $61,000.

 

D. $111,000.

 

50. Assuming no beginning inventory for Work in Process, the cost of goods manufactured is:

A. $156,000.

 

B. $51,000.

 

C. $56,000.

 

D. $11,000.

 

The information below has been taken from the cost records of Tercel Company for the past year:

 

51. What was the cost of raw materials purchased during the year?

A. $411,000.

 

B. $360,000.

 

C. $316,000.

 

D. $336,000.

 

52. What amount of direct labour cost was charged to production during the year?

A. $135,000.

 

B. $225,000.

 

C. $360,000.

 

D. $216,000.

 

53. What was the cost of goods manufactured during the year?

A. $636,000.

 

B. $766,000.

 

C. $736,000.

 

D. $716,000.

 

54. What was the cost of goods sold for the year (before disposition of any under- or overapplied overhead)?

A. $736,000.

 

B. $716,000.

 

C. $691,000.

 

D. $801,000.

 

The following data are for Potras Company:

 

55. What is the cost of raw materials used in production?

A. $26,000.

 

B. $71,000.

 

C. $76,000.

 

D. $66,000.

 

56. What is the cost of goods manufactured?

A. $114,000.

 

B. $133,000.

 

C. $121,000.

 

D. $138,000.

 

57. What is the cost of goods sold?

A. $131,000.

 

B. $91,000.

 

C. $81,000.

 

D. $111,000.

 

The Bus Company uses a job-order costing system. The following information was recorded for September:

Added During September

The direct labour wage rate is $10 per hour. Overhead is applied at the rate of $5 per direct labour hour. Jobs 1, 2, and 3 have been completed and transferred to finished goods. Job 2 has been delivered to the customer.

 

58. What is the ending Work in Process inventory?

A. $7,575.

 

B. $5,350.

 

C. $4,325.

 

D. $5,150.

 

59. What is the cost of goods manufactured for September?

A. $10,750.

 

B. $11,275.

 

C. $5,925.

 

D. $7,625.

 

60. What is the cost of goods sold for September (before disposition of any under- or overapplied overhead)?

A. $2,100.

 

B. $5,925.

 

C. $3,700.

 

D. $1,950.

 

The following journal entries (without dollar data) were taken from the accounting records of Case Company. Case Company has a job-order costing system and applies overhead to jobs using a predetermined overhead rate.

 

61. Which entry records the purchase of raw materials?

A. 8.

 

B. 4.

 

C. 6.

 

D. 1.

 

62. Which entry transfers the cost of goods manufactured for the period?

A. 1.

 

B. 4.

 

C. 7.

 

D. 5.

 

63. Which entry records the application of overhead?

A. 1.

 

B. 5.

 

C. 6.

 

D. 3.

 

64. Which entry records amortization on manufacturing equipment?

A. 1.

 

B. 3.

 

C. 4.

 

D. 5.

 

Summit Company has provided the following inventory balances and manufacturing cost data for the month of January:

Under Summit’s job-order costing system, any over- or underapplied overhead is closed out to the Cost of Goods Sold account at the end of the calendar year (that is, December 31).

 

65. What was the total amount of direct material purchases during January?

A. $180,000.

 

B. $190,000.

 

C. $195,000.

 

D. $200,000.

 

66. How much direct labour cost was incurred during January?

A. $170,000.

 

B. $175,000.

 

C. $180,000.

 

D. $186,000.

 

The Tse Manufacturing Company uses a job-order costing system and applies overhead to jobs using a predetermined overhead rate. The company closes out any balance in the Manufacturing Overhead account to Cost of Goods Sold. During the year the company’s Finished Goods inventory account was debited for $125,000 and credited for $110,000. The ending balance in the Finished Goods inventory account was $28,000. At the end of the year, manufacturing overhead was overapplied by $4,500.

 

67. What was the balance in the Finished Goods inventory account at the beginning of the year?

A. $28,000.

 

B. $13,000.

 

C. $17,500.

 

D. $8,500.

 

68. If the estimated manufacturing overhead for the year was $24,000, and the applied overhead was $26,500, what was the actual manufacturing overhead cost for the year?

A. $19,500.

 

B. $22,000.

 

C. $28,500.

 

D. $31,000.

 

Sai Company uses a job order cost system and applies manufacturing overhead costs to jobs using a predetermined overhead rate based on direct labour-hours. The following data were extracted from the company’s accounting records for Year 6

Job #461 was completed during the year and the following costs had been incurred on that job:

 

69. Suppose Job #461 contained 100 units. What unit cost would appear on the job cost sheet for job #461?

A. $55.00 per unit.

 

B. $61.00 per unit.

 

C. $61.75 per unit.

 

D. $62.50 per unit.

 

70. What was the underapplied or over applied overhead for the year?

A. $6,000 overapplied.

 

B. $4,000 underapplied.

 

C. $10,000 underapplied.

 

D. $10,000 overapplied.

 

71. How much of any underapplied or overapplied overhead would have been due to the fact that the estimated overhead allocation base was different from the actual?

A. $4,000.

 

B. $6,000.

 

C. $10,000.

 

D. $14,000.

 

72. How much of any underapplied or overapplied overhead would have been due to the fact that the estimated overhead costs were different from the actual?

A. $4,000.

 

B. $6,000.

 

C. $10,000.

 

D. $14,000.

 

73. (Appendix 5A) What is the predetermined overhead rate based on capacity to 2 decimal places?

A. $5.35

 

B. $6.69

 

C. $5.50

 

D. $5.40

 

(Appendix 5A) Secrease Corporation uses machine-hours as the allocation base for applying its manufacturing overhead.

All of the company’s manufacturing overhead is fixed.

 

74. (Appendix 5A) If the predetermined overhead rate is based on capacity, by how much was manufacturing overhead for the year over applied or underapplied?

A. Manufacturing overhead underapplied $113,800

 

B. Manufacturing overhead overapplied $113,800

 

C. Manufacturing overhead overapplied $105,000

 

D. Manufacturing overhead underapplied $105,000

 

75. Job-order costing is more likely to be used than process costing in situations where many different products or services are produced each period to customer specifications.

True    False

 

76. Job-order costing is used in manufacturing companies and process costing is used in service firms.

True    False

 

77. In a job-order costing system, costs are traced to departments and then allocated to units of product using an averaging process.

True    False

 

78. Normally, a job cost sheet is NOT prepared for a job until after the job has been completed.

True    False

 

79. Job cost sheets supporting a normal job-order costing system contain entries for actual direct material, actual direct labour, and actual manufacturing overhead cost incurred in completing a job.

True    False

 

80. In order to improve the accuracy of unit costs, most companies recalculate the predetermined overhead rate each month.

True    False

 

81. The following journal entry would be made to apply overhead cost to jobs in a job-order costing system:

True    False

 

82. When the predetermined overhead rate is based on direct labour-hours, the amount of overhead applied to a job is proportional to the amount of actual direct labour-hours incurred on the job.

True    False

 

83. When completed goods are sold, the transaction is recorded as a debit to Cost of Goods Sold and a credit to Work in Process.

True    False

 

84. The most common accounting treatment of underapplied manufacturing overhead is to transfer it to the Manufacturing Overhead control account.

True    False

 

85. In a normal job-order costing system, the Work in Process inventory account contains the actual costs of direct labour, direct materials, and manufacturing overhead incurred on partially completed jobs.

True    False

 

86. Non-manufacturing costs are expensed as incurred, rather than going into the Work in Process account.

True    False

 

87. A credit balance in the Manufacturing Overhead account at the end of the year means that overhead was underapplied.

True    False

 

88. Indirect materials are NOT charged to a specific job but rather are included in manufacturing overhead.

True    False

 

89. The labour time ticket contains a detailed summary of the direct and the indirect labour hours of an employee.

True    False

 

90. (Appendix 5A) Basing predetermined overhead rate on capacity will almost certainly result in overapplied overhead.

True    False

 

91. A public accounting firm would have cost elements involving direct labour and overhead but not raw materials.

True    False

 

92. When a job is completed and transferred to the finished goods warehouse the journal entry to record this is debit Cost of Goods Sold and credit Work in Process Inventory.

True    False

 

93. Raw materials can be direct materials, but NOT all direct materials need to be raw materials.

True    False

 

94. (Appendix 5A) If the predetermined overhead rate is based on the estimated total amount of the allocation base at capacity, it is more likely that overhead will be underapplied than overapplied.

True    False

 

95. A public accounting firm employs 10 full-time professionals who provide services to clients. All professional labour compensation is traced directly to clients on a per professional labour-hour basis. Any other costs are included in a single indirect-cost pool (same as overhead) and allocated to individual clients according to billable professional labour-hours.

Operating costs and data for the year included the following:

Required:

a. By how much, if any, was the overhead cost underapplied or overapplied?
b. Prepare a summary journal entry to close any underapplied or overapplied overhead cost to a Cost of Services Provided account.
c. Explain qualitatively and quantitatively (in as much detail as possible) the source(s) of any underapplied or overapplied overhead cost.

 

 

 

 

96. Gilford, Inc., uses a job-order costing system. Costs going through the company’s work-in-process account during June are listed below. Manufacturing overhead is applied to production using a predetermined overhead rate based on direct labour cost.

Only Job 105 was still in process at the end of the month. This job had been charged with $3,000 in direct materials cost.

Required:

a.) Complete the following for Job 105:

b.) Determine the total amount of materials cost charged to completed jobs during the month.

 

 

 

 

97. Stan Wilson, a newly hired worker at Superior Moulding, was puzzled by the job cost sheets attached to the jobs he worked on. He understood the materials and labour cost entries; these entries represent the actual costs of materials he requisitioned for the job and the cost of the labour hours he recorded for the job. However, he did not understand the entry for Manufacturing Overhead. This entry was made at the end of the day by the accountants, and he had no idea where this number came from. He asked the company’s controller, Mary Donner, but the only part of the explanation he understood was that the overhead entries do not represent actual overhead costs.

Required:

Explain to Stan what the Manufacturing Overhead entries on the job cost sheet mean.

 

 

 

 

98. Bakerston Company is a manufacturing firm that uses job-order costing. The company’s inventory balances at the beginning and end of the year were as follows:

The company applies overhead to jobs using a predetermined overhead rate based on machine hours. At the beginning of the year, the company estimated that it would work 33,000 machine hours and incur $231,000 in manufacturing overhead cost. The following transactions were recorded for the year:

a.) Raw materials purchased: $315,000.
b.) Raw materials requisitioned for use in production: $307,000 ($281,000 direct and $26,000 indirect).
c.) The following employee costs were incurred:

d.) Selling costs: $147,000.
e.) Factory utility costs: $10,000.
f.) Depreciation for the year: $127,000, of which $120,000 is related to factory operations and $7,000 is related to selling and administrative activities.
g.) Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,000 machine hours.
h.) Sales for the year: $1,253,000.

Required:

a. Prepare a schedule of cost of goods manufactured in good form.
b. Was the manufacturing overhead under- or overapplied? By how much?
c. Prepare an income statement for the year in good form. The company closes out any under- or overapplied overhead to Cost of Goods Sold.

 

 

 

 

99. Allenton Company is a manufacturing firm that uses job-order costing. At the beginning of the year, the company’s inventory balances were as follows:

The company applies overhead to jobs using a predetermined overhead rate based on machine hours. At the beginning of the year, the company estimated that it would work 31,000 machine hours and incur $248,000 in manufacturing overhead cost. The following transactions were recorded for the year:

a.) Raw materials purchased: $411,000.
b.) Raw materials requisitioned for use in production: $409,000 ($388,000 direct and $21,000 indirect).
c.) The following employee costs were incurred:

d.) Selling costs: $148,000.
e.) Factory utility costs: $12,000.
f.) Depreciation for the year: $121,000, of which $114,000 is related to factory operations and $7,000 is related to selling and administrative activities.
g.) Manufacturing overhead was applied to jobs. The actual level of activity for the year was 29,000 machine hours.
h.) Cost of goods manufactured for the year: $783,000.
i.) Sales for the year: $1,107,000; the costs on the job cost sheets of the goods that were sold: $768,000.
j.) The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.

Required:

Prepare the appropriate journal entry for each of the items above (a. through j.). You can assume that all transactions with employees, customers, and suppliers were conducted in cash.

 

 

 

 

100. The Collins Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of materials used in production. At the beginning of the most recent year, the following estimates were made as a basis for computing the predetermined overhead rate for the year:

The following transactions took place during the year (all purchases and services were acquired on account):

a.) Raw materials purchased: $86,000.
b.) Raw materials requisitioned for use in production (all direct materials): $98,000.
c.) Utility costs incurred in the factory: $15,000.
d.) Salaries and wages incurred as follows:

e.) Maintenance costs incurred in the factory: $15,000.
f.) Advertising costs incurred: $89,000.
g.) Depreciation recorded for the year: $80,000, of which 80% relates to factory assets and the remainder relates to selling and administrative assets.
h.) Rental cost incurred on buildings: $70,000 (75% of the space is occupied by the factory, and 25% is occupied by sales and administration).
i.) Miscellaneous selling and administrative costs incurred: $11,000.
j.) Manufacturing overhead cost was applied to jobs as per company policy.
k.) Cost of goods manufactured for the year: $500,000.
l.) Sales for the year (all on account): $1,000,000. These goods cost $600,000 to manufacture.

Required:

Prepare journal entries to record the information above. Key your entries by the letters a through l.

 

 

 

 

101. Carver Test Systems manufactures automated testing equipment. The company uses a job-order costing system and applies overhead on the basis of machine hours (MH). At the beginning of the year, estimated manufacturing overhead was $1,960,000, and the estimated machine hours was 98,000. Data regarding several jobs at Carver are presented below.

By the end of the first month (January), all jobs but RX-115 were completed, and all completed jobs had been delivered to customers except for SL-205.

Required:

What was the balance in Finished Goods inventory at the end of January?

 

 

 

 

102. Dotsero Technology, Inc., has a job-order costing system. The company uses predetermined overhead rates in applying manufacturing overhead cost to individual jobs. The predetermined overhead rate in Department A is based on machine hours, and the rate in Department B is based on direct materials cost. At the beginning of the most recent year, the company’s management made the following estimates for the year:

Job 243 entered into production on April 1 and was completed on May 12. The company’s cost records show the following information about the job:

At the end of the year, the records of Dotsero showed the following actual cost and operating data for all jobs worked on during the year:

Required:

a.) Compute the predetermined overhead rates for Department A and Department B.
b.) Compute the total overhead cost applied to Job 243.
c.) Compute the amount of underapplied or overapplied overhead in each department at the end of the current year.

 

 

 

 

103. Scanlon Company has a job-order costing system and applies manufacturing overhead cost to products on the basis of machine hours. The following estimates were used in preparing the predetermined overhead rate for the most recent year:

During the most recent year, a severe recession in the company’s industry caused the curtailment of production and a buildup of inventory in the company’s warehouses. The company’s cost records revealed the following actual cost and operating data for the year:

Required:

(a.) Compute the company’s predetermined overhead rate for the year and the amount of under- or overapplied overhead for the year.
(b.) Determine the difference between net income for the year if the under- or overapplied overhead is allocated to the appropriate accounts rather than closed out directly to Cost of Goods Sold.

 

 

 

 

104. The following cost data relate to the manufacturing activities of the Kamas Company during the most recent year:

The company uses a predetermined overhead rate to charge overhead cost to production. The rate for the year just completed was $4.00 per machine hour; a total of 6,000 machine hours were recorded for the year.

Required:

a. Compute the amount of under- or overapplied overhead cost for the year just ended.
b. Prepare a schedule of cost of goods manufactured for the year.

 

 

 

 

105. Arthur Manufacturing Company produces a single product. The controller has asked for your help in preparing a schedule of cost of goods manufactured for the month just ended. The following information is available:

1.) Eleven thousand units were sold at $22 per unit.
2.) Thirteen thousand units requiring one unit each of raw materials were produced.
3.) Raw materials inventory at the beginning of the month was 1,100 units at $4 each.
4.) During the month, two purchases of raw materials were made:
Purchase #1: 7,000 units at $5.00 each
Purchase #2: 6,000 units at $5.50 each
5.) The company uses the first-in, first-out method of determining raw materials inventories.
6.) The work-in-process inventories were:

7.) Direct labour cost was $110,000.
8.) Overhead is applied to production on the basis of 65% of direct labour cost.

Required:

Prepare a schedule of cost of goods manufactured for the month.

 

 

 

 

106. At the beginning of the year, manufacturing overhead for the year was estimated to be $250,860. At the end of the year, actual direct labor-hours for the year were 20,800 hours, the actual manufacturing overhead for the year was $245,860, and manufacturing overhead for the year was underapplied by $10,820. The predetermined overhead rate is based on direct labour-hours.

Required:

What must have been the estimated direct labor-hours at the beginning of the year used in setting the predetermined overhead rate?

 

 

 

 

107. Brabec Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 19,700 hours. At the end of the year, actual direct labor-hours for the year were 17,700 hours, the actual manufacturing overhead for the year was $392,940, and manufacturing overhead for the year was underapplied by $35,400.

Required:

What must have been the estimated manufacturing overhead cost at the beginning of the year used setting the predetermined overhead rate?

 

 

 

 

108. Daffe Corporation uses direct labor-hours in setting its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $165,600. At the end of the year, actual direct labor-hours for the year were 11,900 hours, manufacturing overhead for the year was overapplied by $10,760, and the actual manufacturing overhead was $160,600.

Required:

What must have been the predetermined overhead rate for the year?

 

 

 

 

109. X Company reported the following actual cost data for the year:

X Company used a 150% predetermined overhead rate based on direct labour cost. The rate was based on annual estimated overhead cost and direct labour cost of $252,000 and $168,000, respectively.

Required:

a. Calculate the cost of goods manufactured.
b. What was the cost of goods sold before adjusting for any under or overapplied overhead?
c. By how much was manufacturing overhead cost under or overapplied?
d. Prepare a summary journal entry to close any under or overapplied manufacturing overhead cost to cost of goods sold. Is such an entry appropriate in this situation? Why or why not?
e. Analyze the under or overapplied manufacturing overhead costs calculated in part c above into two separate components: amount due to incorrect estimate of the annual manufacturing overhead costs and an amount due to incorrect estimate of the annual direct labour cost.

 

 

 

 

110. Y Company reported the following actual costs data for the year:

Y Company used a predetermined overhead rate based on direct labour hours. Estimated annual manufacturing overhead cost and direct labour hours were $150,000 and 20,000, respectively.

Required:

a. What was the pre-determined manufacturing overhead rate?
b. Calculate the cost of goods manufactured.
c. What was the cost of goods sold before adjusting for any under or overapplied overhead?
d. By how much was manufacturing overhead cost under or overapplied?
e. Prepare a summary journal entry to close any under or overapplied manufacturing overhead cost to cost of goods sold. Is such an entry appropriate in this situation? Why or why not?
f. Analyze the under or overapplied manufacturing overhead costs calculated in part c above into two separate components: amount due to incorrect estimate of the annual manufacturing overhead costs and an amount due to incorrect estimate of the annual direct labour cost.

 

 

 

 

 

 

Chapter 5 Key

1. Which of the following companies is most likely to use a job-order costing system rather than a process costing system?

A. Fast food restaurant

 

B. Shipbuilder

 

C. Crude oil refinery

 

D. Candy maker

 

Accessibility: Keyboard Navigation
Blooms: Understand
CPA Competency: 3.3.1 Evaluates cost classifications and costing methods for management of ongoing operations.
Difficulty: Easy
Garrison – Chapter 05 #1
Learning Objective: 05-01 Distinguish between process costing and job-order costing; and identify the production or service processes that fit with each costing method.
Topic: 05-01 Process Costing
Topic: 05-02 Job-Order Costing.
 

 

2. Kelly Sportswear manufactures a specialty line of T-shirts. The company uses a job-order costing system. During March, the following costs were incurred on Job 1052:

Manufacturing overhead was applied at the rate of $25 per machine hour, and Job 1052 required 800 machine hours. In addition, selling and shipping costs of $7,000 were incurred. Job 1052 consisted of 7,000 shirts and was completed on March 24. The total cost of job 1052 transferred from Work in Process to Finished Goods on March 24 is:

A. $33,700

 

B. $38,500

 

C. $18,500

 

D. $20,000

 

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #2
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-04 Job Cost Sheet.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-19 Summary of Cost Flows.
 

 

3. Which of the following contain(s) the detailed cost data that support the Work in Process control account?

A. Job cost sheets.

 

B. The Manufacturing Overhead account.

 

C. The Finished Goods inventory account.

 

D. Purchase requisitions.

 

Accessibility: Keyboard Navigation
Blooms: Understand
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #3
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Topic: 05-04 Job Cost Sheet.
 

 

4. In a normal job-order costing system, the journal entry to record the application of overhead cost to jobs includes which of the following?

A. A credit to the Work in Process inventory account.

 

B. A credit to the Manufacturing Overhead account.

 

C. A debit to Cost of Goods Sold.

 

D. A debit to the Manufacturing Overhead account.

 

Accessibility: Keyboard Navigation
Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #4
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Topic: 05-16 The Concept of a Clearing Account.
 

 

5. In a normal job-order costing system, the use of indirect materials would usually be recorded as a debit to which account?

A. Raw Materials.

 

B. Work in Process.

 

C. Manufacturing Overhead.

 

D. Finished Goods.

 

Accessibility: Keyboard Navigation
Blooms: Understand
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #5
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Topic: 05-12 Issue of Direct and Indirect Materials.
Topic: 05-15 Manufacturing Overhead Costs.
 

 

6. In a normal job-order costing system, the salary of the factory supervisor would usually be recorded as a debit to which of the following accounts?

A. Manufacturing Overhead.

 

B. Salary Expense.

 

C. Work in Process.

 

D. Finished Goods.

 

Accessibility: Keyboard Navigation
Blooms: Understand
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Easy
Garrison – Chapter 05 #6
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Topic: 05-15 Manufacturing Overhead Costs.
 

 

7. In a job-order costing system, direct labour costs usually are recorded initially with a debit to which of the following accounts?

A. Manufacturing Overhead.

 

B. Finished Goods inventory.

 

C. Direct Labour Expense.

 

D. Work in Process.

 

Accessibility: Keyboard Navigation
Blooms: Understand
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Easy
Garrison – Chapter 05 #7
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Topic: 05-14 Labour Cost.
 

 

8. Which of the following statements is true if a company applies overhead to jobs on the basis of a predetermined overhead rate and reports a credit balance in the Manufacturing Overhead account at the end of any period?

A. More overhead cost has been charged to jobs than has been incurred during the period.

 

B. More overhead cost has been incurred during the period than has been charged to jobs.

 

C. The amount of overhead cost charged to jobs is greater than the estimated cost for the period.

 

D. The amount of overhead cost charged to jobs is less than the estimated overhead cost for the period.

 

Accessibility: Keyboard Navigation
Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #8
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-15 Manufacturing Overhead Costs.
Topic: 05-16 The Concept of a Clearing Account.
Topic: 05-20 Underapplied and Overapplied Overhead.
Topic: 05-21 Disposition of Underapplied or Overapplied Overhead Balances.
 

 

9. In a job-order costing system, when a job remains incomplete at the end of a period, how is the amount of overhead cost that has been applied to that job treated?

A. It is deducted on the Income Statement as overapplied overhead.

 

B. It is closed out to Cost of Goods Sold.

 

C. It is transferred to Finished Goods.

 

D. It is part of the ending balance of the Work in Process inventory account.

 

Accessibility: Keyboard Navigation
Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #9
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-15 Manufacturing Overhead Costs.
Topic: 05-16 The Concept of a Clearing Account.
Topic: 05-19 Summary of Cost Flows.
 

 

10. (Appendix 5A) Which level of activity, if used to set a predetermined overhead rate, may encourage managers to increase selling prices as demand falls?

A. Budgeted level of activity.

 

B. Actual level of activity.

 

C. Capacity (maximum) level of activity.

 

D. Normal level of activity.

 

Accessibility: Keyboard Navigation
Blooms: Understand
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Easy
Garrison – Chapter 05 #10
Learning Objective: 05-08 (Appendix 5A) Explain the implications of basing the predetermined overhead rate on activity at full capacity rather than on estimated activity for the period.
Topic: Topic Tags Needed
 

 

11. The Work in Process inventory account of a manufacturing company shows a balance of $2,400 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $400 and $200 for direct materials and charges of $300 and $500 for direct labour. From this information, what predetermined overhead rate, as a percentage of direct labour costs, does the company appear to be using?

A. 80%.

 

B. 125%.

 

C. 240%.

 

D. 300%.

OH applied = 2,400 – 1,400 = 1,000 and rate = 1,000/800 = 1.25 or 125%

 

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #11
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Topic: 05-04 Job Cost Sheet.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-10 Summary of Document Flows.
Topic: 05-15 Manufacturing Overhead Costs.
 

 

12. Freeman Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated manufacturing overhead would be $150,000 and direct labour hours would be 10,000. The actual figures for the year were $186,000 for manufacturing overhead and 12,000 direct labour hours. The cost records for the year will show which of the following?

A. Overapplied overhead of $30,000.

 

B. Underapplied overhead of $30,000.

 

C. Underapplied overhead of $6,000.

 

D. Overapplied overhead of $6,000.

OH rate = $150,000/10,000 hrs = $15/hr.
Applied = 12,000 hours @ $15/hr = $180,000
Less the actual overhead of $186,000 = underapplied overhead of $6,000

 

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #12
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-15 Manufacturing Overhead Costs.
Topic: 05-16 The Concept of a Clearing Account.
 

 

13. Harrell Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated its total manufacturing overhead cost at $400,000 and its direct labour hours at 100,000 hours. The actual overhead cost incurred during the year was $350,000 and the actual direct labour hours incurred on jobs during the year was 90,000 hours. What would be the manufacturing overhead for the year?

A. $10,000 underapplied.

 

B. $10,000 overapplied.

 

C. $50,000 underapplied.

 

D. $50,000 overapplied.

Rate = $400,000/100,000 hrs. = $4/hr.
Applied = 90,000 hrs @$4/hr. = $360,000
Actual OH = $350,000 therefore overapplied by $10,000

 

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #13
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-15 Manufacturing Overhead Costs.
Topic: 05-16 The Concept of a Clearing Account.
 

 

14. For the current year, Paxman Company incurred $150,000 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was overapplied in the amount of $6,000 for the year. If the predetermined overhead rate was $8.00 per direct labour hour, how many hours were worked during the year?

A. 17,750 hours.

 

B. 18,000 hours.

 

C. 18,750 hours.

 

D. 19,500 hours.

Applied overhead = $150,000 + $6,000 = $156,000
DL Hours = $156,000/$8/hr = 19,500 hours

 

Accessibility: Keyboard Navigation
Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #14
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-15 Manufacturing Overhead Costs.
Topic: 05-16 The Concept of a Clearing Account.
 

 

15. Carlo Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. The company estimated manufacturing overhead at $255,000 for the year and direct labour hours at 100,000 hours. Actual manufacturing overhead costs incurred during the year totalled $270,000; actual direct labour hours were 105,000. What was the overapplied or underapplied overhead for the year?

A. $2,250 overapplied.

 

B. $2,250 underapplied.

 

C. $15,000 overapplied.

 

D. $15,000 underapplied.

OH rate = $255,000/100,000 hrs. = $2.55/hr.
Applied = 105,000 hrs @ $2.55/hr = $267,750
Actual overhead = $270,000 therefore Underapplied $2,250

 

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #15
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-15 Manufacturing Overhead Costs.
Topic: 05-16 The Concept of a Clearing Account.
 

 

16. Sawyer Manufacturing Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. Last year, the company worked 57,000 actual direct labour hours and used 40,000 machine hours. The company had estimated that it would work 55,000 direct labour hours using 44,000 machine hours during the year and incur $330,000 of manufacturing overhead cost. What was the company’s manufacturing overhead applied for the year?

A. $345,000.

 

B. $342,000.

 

C. $330,000.

 

D. $300,000.

OH rate = $330,000/55,000 DLH = $6/DLH
Applied = 57,000 DLH @ $6/DLH = $342,000

 

Accessibility: Keyboard Navigation
Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #16
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Topic: 05-06 Using the Predetermined Overhead Rate.
 

 

17. The Watts Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labour cost in Department A and on machine hours in Department B. At the beginning of the year, the company made the following estimates:

What predetermined overhead rates would be used in Departments A and B, respectively?

A. 50% and $8.00.

 

B. 50% and $5.00.

 

C. 110% and $15.00.

 

D. 200% and $5.00.

Dept. A = $60,000/$30,000 = 200% Dept. B = $50,000/10,000 m. hrs = $5/m. hr.

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Easy
Garrison – Chapter 05 #17
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-26 Multiple Predetermined Overhead Rates.
 

 

18. Compton Company uses a predetermined overhead rate in applying overhead to production orders on a labour cost basis in Department A and on a machine hours basis in Department B. At the beginning of the most recently completed year, the company made the following estimates:

What predetermined overhead rate would be used in Departments A and B, respectively?

A. 83% and $5.00.

 

B. 83% and $3.00.

 

C. 120% and $3.00.

 

D. 120% and $5.00.

Dept. A = $67,200/$56,000 = 120% Dept. B = $45,000/15,000 m. hrs = $3/m. hr.

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Easy
Garrison – Chapter 05 #18
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-26 Multiple Predetermined Overhead Rates.
 

 

19. Kelsh Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for next year:

Kelsh estimates that 5,000 direct labour hours and 10,000 machine hours will be worked during the year. What will be the predetermined overhead rate per hour?

A. $6.80.

 

B. $6.40.

 

C. $3.40.

 

D. $8.20.

($20,000 + 4,000 + 10,000)/10,000 m. hrs. = $3.40/m.hr.

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #19
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-15 Manufacturing Overhead Costs.
Topic: 05-17 Non-manufacturing Costs.
 

 

20. Simplex Company has the following estimated costs for next year:

Simplex estimates that 10,000 direct labour and 16,000 machine hours will be worked during the year. If overhead is applied on the basis of machine hours, what will be the overhead rate per hour?

A. $3.50.

 

B. $6.94.

 

C. $7.63.

 

D. $8.56.

(35,000 + 5,000 + 16,000)/16,000 m.hrs = $3.5/m.hr.

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #20
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-15 Manufacturing Overhead Costs.
Topic: 05-17 Non-manufacturing Costs.
 

 

21. At the beginning of the current year CR Company estimated the following costs:

CR Company estimated 20,000 labour hours to be worked during the year. Actual labour hours worked were 22,000 hours. If overhead is applied on the basis of direct labour hours, what will be the overhead applied for the year?

A. $55,000.

 

B. $49,500.

 

C. $103,400.

 

D. $75,900.

OH rate = (15,000 + 8,000 + 10,000 + 12,000)/20,000 hrs. = $2.25/hr.
Applied = 22,000 hrs. @ $2.25/hr = $49,500

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #21
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-15 Manufacturing Overhead Costs.
Topic: 05-17 Non-manufacturing Costs.
 

 

22. Lucy Sportswear manufactures a specialty line of T-shirts. The company uses a job-order costing system. During March, the following costs were incurred on Job ICU2:

In addition, selling and shipping costs of $7,000 were incurred on the job. Manufacturing overhead was applied at the rate of $25 per machine hour, and Job ICU2 required 800 machine hours. If Job ICU2 consisted of 7,000 shirts, what was the Cost of Goods Sold per shirt?

A. $5.50.

 

B. $5.70.

 

C. $6.00.

 

D. $6.50.

Total Cost = DM + DL + OH applied = 13,700 + 4,800 + (800 hrs @$25/hr) = $38,500. CGS = $38,500/7,000 shirts = $5.50/shirt

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #22
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-04 Job Cost Sheet.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-09 Computation of Unit Costs.
Topic: 05-18 Cost of Goods Sold.
 

 

23. Worrell Corporation has a job-order costing system. The following debits (credits) appeared in the Work in Process account for the month of March:

Worrell applies overhead at a predetermined rate of 90% of direct labour cost. Job No. 232, the only job still in process at the end of March, has been charged with manufacturing overhead of $2,250. What was the amount of direct materials charged to Job No. 232?

A. $2,250.

 

B. $2,500.

 

C. $4,250.

 

D. $9,000.

WIP ending inv. = 12,000 + 40,000 + 30,000 + 27,000 – 100,000 = $9,000
DL = 2250/.9 = $2,500. DM = $9,000 – 2500 – 2250 = $4,250

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #23
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-04 Job Cost Sheet.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-19 Summary of Cost Flows.
 

 

24. The Samuelson Company uses a job-order costing system. The following data were recorded for June:

Overhead is charged to production at 70% of the direct materials cost. Jobs 475, 477, and 478 have been delivered to the customer. What was Samuelson’s Work in Process inventory balance for Job 476 on June 30?

A. $6,450.

 

B. $2,860.

 

C. $2,300.

 

D. $2,720.

WIP inv. June 30 Balance = 900 + 600 + 800 + (600 * .7) = $2,720

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #24
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-04 Job Cost Sheet.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-19 Summary of Cost Flows.
 

 

25. Sweet Company applies overhead to jobs on the basis of 125% of direct labour cost. If Job 107 shows $10,000 of manufacturing overhead applied, how much was the direct labour cost on the job?

A. $8,000.

 

B. $12,500.

 

C. $11,250.

 

D. $10,000.

DL = 10,000/1.25 = $8,000

 

Accessibility: Keyboard Navigation
Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #25
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Topic: 05-06 Using the Predetermined Overhead Rate.
 

 

26. Manufacturing overhead is overapplied for the year by $3,000. The unadjusted cost of goods sold is $360,000. Closing manufacturing overhead into cost of goods sold will result in which of the following?

A. Adjusted cost of goods sold of $363,000.

 

B. A credit balance in manufacturing overhead of $6,000.

 

C. Adjusted cost of goods sold of $357,000.

 

D. Adjusted cost of goods sold of $360,000.

Adjusted cost of goods sold = $360,000 – 3,000 overapplied = $357,000

 

Accessibility: Keyboard Navigation
Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #26
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-10 Summary of Document Flows.
Topic: 05-20 Underapplied and Overapplied Overhead.
Topic: 05-21 Disposition of Underapplied or Overapplied Overhead Balances.
Topic: 05-22 Close out Underapplied Overhead to Cost of Goods Sold.
 

 

27. Knowlton Company applies overhead to completed jobs on the basis of 70% of direct labour cost. If Job 501 shows $21,000 of manufacturing overhead applied, what was the direct labour cost on the job?

A. $14,700.

 

B. $21,000.

 

C. $30,000.

 

D. $27,300.

$21,000/.7 = $30,000.

 

Accessibility: Keyboard Navigation
Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #27
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Topic: 05-06 Using the Predetermined Overhead Rate.
 

 

28. Beaver Company used a predetermined overhead rate last year of $2 per direct labour hour based on an estimate of 25,000 direct labour hours to be worked during the year. Actual costs and activity during the year were:

What was the under- or overapplied overhead last year?

A. $1,000 underapplied.

 

B. $1,000 overapplied.

 

C. $2,000 underapplied.

 

D. $3,000 overapplied.

(24,[email protected] $2) – 47,000 = $1,000 overapplied

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #28
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-20 Underapplied and Overapplied Overhead.
 

 

29. Dowan Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. During the year, Dowan Company incurred $156,600 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was underapplied by $12,600 for the year. If the predetermined overhead rate is $6.00 per direct labour-hour, how many hours did the company work during the year?

A. 24,000 hours.

 

B. 25,000 hours.

 

C. 26,000 hours.

 

D. 28,200 hours.

$156,000 – 12,600 = $144,000 applied. Actual hours worked = $144,000/$6/hr. = 24,000 hrs.

 

Accessibility: Keyboard Navigation
Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #29
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Topic: 05-06 Using the Predetermined Overhead Rate.
 

 

30. During the year, Paul Company used a predetermined overhead rate of $3.50 per direct labour hour, based on an estimate of 22,000 direct labour hours to be worked during the year. Actual overhead cost and activity during the year were:

What was the under- or overapplied overhead for the year?

A. $2,500 overapplied.

 

B. $2,500 underapplied.

 

C. $10,500 overapplied.

 

D. $13,000 underapplied.

$90,000 – (25,000 @ $3.50) = $2,500 underapplied.

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #30
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-20 Underapplied and Overapplied Overhead.
 

 

31. Bitter Company incurs a direct labour rate of $15 per hour applies overhead to jobs on the basis of $1.25 per direct labour hour. If Job 107 shows $86,000 of direct material and $10,000 of manufacturing overhead applied, what is the total cost of job 107?

A. $96,000.

 

B. $120,000.

 

C. $130,000.

 

D. $216,000.

DL hours worked = $10,000/$1.25 per hour = 8,000 hours.
Total cost = $86,000 + (8,000 hrs. @ $15/hr) + $10,000 = $216,000

 

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #31
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Topic: 05-04 Job Cost Sheet.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-14 Labour Cost.
Topic: 05-15 Manufacturing Overhead Costs.
 

 

32. Kanuck Company applies overhead to completed jobs on the basis of $0.70 per machine hour. If Job 501 shows $28,000 of manufacturing overhead applied, how many machine hours were used for the job?

A. 19,600.

 

B. 28,000.

 

C. 30,000.

 

D. 40,000.

$28,000/$0.70/hr = 40,000 machine hours.

 

Accessibility: Keyboard Navigation
Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #32
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Topic: 05-06 Using the Predetermined Overhead Rate.
 

 

33. The balances in White Company’s Work in Process inventory account were $15,000 on August 1 and $18,000 on August 31. The company incurred $30,000 in direct labour cost during August and requisitioned $25,000 in raw materials (all direct material). The sum of the debits to the Manufacturing Overhead account totalled $28,000 for the month while the sum of the credits totalled $30,000. Which of the following statements is correct?

A. Finished Goods was debited for $82,000 during the month.

 

B. Finished Goods was debited for $52,000 during the month.

 

C. Manufacturing Overhead was underapplied by $2,000 at the end of the month

 

D. Finished Goods was credited for $82,000 during the month

Total transferred out of WIP (credit) = 15,000 + 30,000 + 25,000 + 30,000 – 18,000
Therefore debit Finished Goods $82,000

 

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #33
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-10 Summary of Document Flows.
Topic: 05-19 Summary of Cost Flows.
Topic: 05-20 Underapplied and Overapplied Overhead.
 

 

34. Under Lamprey Company’s job-order costing system, manufacturing overhead is applied to Work in Process inventory using a predetermined overhead rate. During January, Lamprey’s transactions included the following:

Lamprey Company had no beginning or ending inventories. What was the cost of goods manufactured for January?

A. $318,000.

 

B. $310,000.

 

C. $322,000.

 

D. $330,000.

CGM = 90,000 + 107,000 + 113,000 = $310,000.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #34
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
 

 

35. What was the amount of direct materials used during November if $20,000 in raw materials were purchased during the month, all raw materials are direct, and if the inventories were as follows?

A. $15,000.

 

B. $20,000.

 

C. $21,000.

 

D. $24,000.

DM used = 4,000 + 20,000 – 3,000 = $21,000

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Easy
Garrison – Chapter 05 #35
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-11 The Purchase and Issue of Materials
Topic: 05-12 Issue of Direct and Indirect Materials.
Topic: 05-19 Summary of Cost Flows.
 

 

36. Sharp Company’s records show that overhead was overapplied by $10,000 last year. This overapplied overhead was closed out to the Cost of Goods Sold account at the end of the year. In trying to determine why overhead was overapplied by such a large amount, the company has discovered that $6,000 of depreciation on factory equipment was charged to administrative expense in error. Given the above information, which of the following statements is true?

A. Manufacturing overhead was actually overapplied by $16,000 for the year.

 

B. The company’s net income is understated by $6,000 for the year.

 

C. Under the circumstances described above, the error in recording depreciation would have no effect on net income for the year.

 

D. The $6,000 in depreciation should have been charged to Work in Process rather than to administrative expense.

Although the actual overhead should have been $6,000 greater and therefore overapplied overhead of $4,000 the effect on NI is zero because the depreciation was still deducted (as an operating expense instead of CGS) to compute NI therefore no error on the NI amount.

 

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #36
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-17 Non-manufacturing Costs.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
Topic: 05-20 Underapplied and Overapplied Overhead.
 

 

The following partially completed T-accounts summarize last year’s transactions for Kelshaw Company:

At the end of the year, the company closes out the balance in the Manufacturing Overhead account to Cost of Goods Sold.

 

Garrison – Chapter 05
 

 

37. What is the indirect labour cost?

A. $5,000.

 

B. $12,000.

 

C. $15,000.

 

D. $35,000.

The debit to OH represents the indirect labour of $5,000. Credit to Wages and Salaries payable i.e.$30,000. Debit WIP = DL $15,000, Debit sales Salaries expense = 10,000 and debit OH = $5,000.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #37
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-14 Labour Cost.
Topic: 05-19 Summary of Cost Flows.
 

 

38. What is the cost of goods manufactured?

A. $50,000.

 

B. $55,000.

 

C. $56,000.

 

D. $61,000.

This is the debit to finished goods and the credit to WIP which represents CGM = $50,000.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #38
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-04 Job Cost Sheet.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
 

 

39. What is the cost of goods sold (after adjustment for under- or over applied overhead)?

A. $51,000.

 

B. $54,000.

 

C. $55,000.

 

D. $56,000.

Total debits to Man. OH = $29,000 = actual less #6 applied 28,000 = $1,000 underapplied. From Fin. Goods t-account the unadjusted CGS = 17,000 + 50,000 – 12,000 = $55,000. Therefore CGS adjusted = 55,000 + 1,000 underapplied = $56,000.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #39
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-04 Job Cost Sheet.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
Topic: 05-22 Close out Underapplied Overhead to Cost of Goods Sold.
 

 

40. What is the manufacturing overhead applied?

A. $27,000.

 

B. $28,000.

 

C. $29,000.

 

D. $36,000.

transaction #6 MOH applied = $28,000.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #40
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-15 Manufacturing Overhead Costs.
Topic: 05-16 The Concept of a Clearing Account.
Topic: 05-19 Summary of Cost Flows.
 

 

41. What is the cost of direct materials used?

A. $11,000.

 

B. $12,000.

 

C. $15,000.

 

D. $20,000.

WIP account transaction #2 = $12,000.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #41
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-12 Issue of Direct and Indirect Materials.
Topic: 05-19 Summary of Cost Flows.
 

 

42. What would be the ending Work in Process account balance?

A. $2,000.

 

B. $13,000.

 

C. $50,000.

 

D. $55,000.

From WIP t-account; 8,000 + 12,000 + 15,000 + 28,000 – 50,000 = $13,000.

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #42
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
 

 

43. What is the total manufacturing cost for the year?

A. $27,000

 

B. $50,000

 

C. $55,000

 

D. $63,000

DM + DL + OH applied = 12,000 + 15,000 + 28,000 = $55,000

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #43
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
 

 

Mallet Company has only Job 844 in process on March 1 of the current year. The job has been charged with $2,000 of direct material cost, $2,500 of direct labour cost, and $1,750 of manufacturing overhead cost. The company assigns overhead cost to jobs at a predetermined rate of 70% of direct labour cost. Any under- or overapplied overhead cost is closed out to Cost of Goods Sold at the end of the month.

During March, the following activity and amounts were recorded by the company:

Raw materials (all direct materials):

Labour:

Inventories:

Work in Process inventory contains $5,500 of direct labour cost.

 

Garrison – Chapter 05
 

 

44. What is the amount of direct materials cost in the March 31 work in process inventory account?

A. $5,150.

 

B. $9,350.

 

C. $9,000.

 

D. $3,850.

DM = WIP e.i. – DL – OH applied = 14,500 – 5500 – (5500 * .7) = $5,150

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #44
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-12 Issue of Direct and Indirect Materials.
Topic: 05-19 Summary of Cost Flows.
 

 

45. What is the cost of goods manufactured for March?

A. $67,250.

 

B. $67,300.

 

C. $81,800.

 

D. $75,550.

CGM = 2,000 + 2,500 + 1750 + 30,500 + 26,500 + (26,500 * .7) – 14,500 = $67,300

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #45
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
 

 

46. Which of the following would be included in the entry to dispose of the under- or over applied overhead cost for the month?

A. A debit of $50 to Cost of Goods Sold.

 

B. A debit of $50 to Manufacturing Overhead.

 

C. A debit of $5,500 to Manufacturing Overhead.

 

D. A credit of $5,500 to Cost of Goods Sold.

OH applied = 26,500 * .7 = 18,550 less actual of 18,500 = $50 overapplied.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #46
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-19 Summary of Cost Flows.
Topic: 05-20 Underapplied and Overapplied Overhead.
Topic: 05-21 Disposition of Underapplied or Overapplied Overhead Balances.
 

 

47. What was the March 1 balance in the Raw Materials inventory?

A. $10,500.

 

B. $9,500.

 

C. $6,500.

 

D. $8,500.

Op.RM inventory = 7,500 + 30,500 – 29,500 = $8,500

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #47
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Topic: 05-10 Summary of Document Flows.
Topic: 05-11 The Purchase and Issue of Materials
Topic: 05-12 Issue of Direct and Indirect Materials.
 

 

The Milo Company’s records for May contain the following information:

Ending inventories:

The company uses a predetermined overhead rate of $5.00 per direct labour hour to apply manufacturing overhead to jobs.

 

Garrison – Chapter 05
 

 

48. What was the actual overhead cost incurred during the month?

A. $50,000.

 

B. $55,000.

 

C. $40,000.

 

D. $45,000.

Actual OH = 9,000 hrs. @$5/hr = $45,000 less overapplied 5,000 = $40,000

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #48
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-15 Manufacturing Overhead Costs.
Topic: 05-16 The Concept of a Clearing Account.
Topic: 05-20 Underapplied and Overapplied Overhead.
 

 

49. What was the total cost added to Work in Process during May?

A. $101,000.

 

B. $106,000.

 

C. $61,000.

 

D. $111,000.

Total cost = 14,000 + 47,000 + (9,000 hrs @$5) = $106,000

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #49
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-11 The Purchase and Issue of Materials
Topic: 05-14 Labour Cost.
Topic: 05-16 The Concept of a Clearing Account.
Topic: 05-19 Summary of Cost Flows.
 

 

50. Assuming no beginning inventory for Work in Process, the cost of goods manufactured is:

A. $156,000.

 

B. $51,000.

 

C. $56,000.

 

D. $11,000.

CGM = 14,000 + 47,000 + (9,000 hrs @$5) = $106,000 less 50,000 E.I = $56,000.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #50
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-16 The Concept of a Clearing Account.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
 

 

The information below has been taken from the cost records of Tercel Company for the past year:

 

Garrison – Chapter 05
 

 

51. What was the cost of raw materials purchased during the year?

A. $411,000.

 

B. $360,000.

 

C. $316,000.

 

D. $336,000.

RM purchased = 85,000 + 326,000 – 75,000 = $336,000.

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #51
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Topic: 05-11 The Purchase and Issue of Materials
Topic: 05-12 Issue of Direct and Indirect Materials.
 

 

52. What amount of direct labour cost was charged to production during the year?

A. $135,000.

 

B. $225,000.

 

C. $360,000.

 

D. $216,000.

MC – RM used = 686,000 – 326,000 = $360,000, therefore DL cost = 360,000/1.6 = $225,000.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #52
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-14 Labour Cost.
Topic: 05-19 Summary of Cost Flows.
 

 

53. What was the cost of goods manufactured during the year?

A. $636,000.

 

B. $766,000.

 

C. $736,000.

 

D. $716,000.

CGM = 80,000 + 686,000 – 30,000 = $736,000

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #53
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
 

 

54. What was the cost of goods sold for the year (before disposition of any under- or overapplied overhead)?

A. $736,000.

 

B. $716,000.

 

C. $691,000.

 

D. $801,000.

CGS = 90,000 + (80,000 + 686,000 – 30,000) – 110,000 = $716,000

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #54
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
 

 

The following data are for Potras Company:

 

Garrison – Chapter 05
 

 

55. What is the cost of raw materials used in production?

A. $26,000.

 

B. $71,000.

 

C. $76,000.

 

D. $66,000.

RM used in production = 21,000 + 71,000 – 26,000 = $66,000.

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Easy
Garrison – Chapter 05 #55
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Topic: 05-11 The Purchase and Issue of Materials
Topic: 05-12 Issue of Direct and Indirect Materials.
 

 

56. What is the cost of goods manufactured?

A. $114,000.

 

B. $133,000.

 

C. $121,000.

 

D. $138,000.

OH applied = OH actual since no variance.
CGM = 66,000 + 27,000 + 21,000 + 20,000 – 13,000 = $121,000

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #56
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-12 Issue of Direct and Indirect Materials.
Topic: 05-14 Labour Cost.
Topic: 05-19 Summary of Cost Flows.
Topic: 05-20 Underapplied and Overapplied Overhead.
 

 

57. What is the cost of goods sold?

A. $131,000.

 

B. $91,000.

 

C. $81,000.

 

D. $111,000.

CGM = 121,000 as in previous question no.56;
CGS = 30,000 + 121,000 – 40,000 = $111,000.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #57
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-16 The Concept of a Clearing Account.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
Topic: 05-20 Underapplied and Overapplied Overhead.
 

 

The Bus Company uses a job-order costing system. The following information was recorded for September:

Added During September

The direct labour wage rate is $10 per hour. Overhead is applied at the rate of $5 per direct labour hour. Jobs 1, 2, and 3 have been completed and transferred to finished goods. Job 2 has been delivered to the customer.

 

Garrison – Chapter 05
 

 

58. What is the ending Work in Process inventory?

A. $7,575.

 

B. $5,350.

 

C. $4,325.

 

D. $5,150.

Direct labour hours = $400/$10 per hour = 40 hours.
Job 4 = EI = 750 + 4,000 + 400 + 40 hrs @ $5/hr = $5,350.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #58
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-04 Job Cost Sheet.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-10 Summary of Document Flows.
Topic: 05-19 Summary of Cost Flows.
 

 

59. What is the cost of goods manufactured for September?

A. $10,750.

 

B. $11,275.

 

C. $5,925.

 

D. $7,625.

CGM = total cost of jobs 1, 2 and 3 BI + DM + DL + OH applied
= 2,900 + 2,050 + 650 + (650 * $5/$10) = $5,925

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #59
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-04 Job Cost Sheet.
Topic: 05-10 Summary of Document Flows.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
 

 

60. What is the cost of goods sold for September (before disposition of any under- or overapplied overhead)?

A. $2,100.

 

B. $5,925.

 

C. $3,700.

 

D. $1,950.

CGS = total cost of Job #2 = 1,400 + 250 + 300 + (300 * $5/$10) = $2,100.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #60
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-04 Job Cost Sheet.
Topic: 05-10 Summary of Document Flows.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
 

 

The following journal entries (without dollar data) were taken from the accounting records of Case Company. Case Company has a job-order costing system and applies overhead to jobs using a predetermined overhead rate.

 

Garrison – Chapter 05
 

 

61. Which entry records the purchase of raw materials?

A. 8.

 

B. 4.

 

C. 6.

 

D. 1.

 

Blooms: Understand
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Easy
Garrison – Chapter 05 #61
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Topic: 05-11 The Purchase and Issue of Materials
Topic: 05-12 Issue of Direct and Indirect Materials.
 

 

62. Which entry transfers the cost of goods manufactured for the period?

A. 1.

 

B. 4.

 

C. 7.

 

D. 5.

 

Blooms: Understand
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #62
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
 

 

63. Which entry records the application of overhead?

A. 1.

 

B. 5.

 

C. 6.

 

D. 3.

 

Blooms: Understand
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #63
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-05 Apply overhead cost to work in process using a predetermined overhead rate.
Topic: 05-15 Manufacturing Overhead Costs.
Topic: 05-16 The Concept of a Clearing Account.
 

 

64. Which entry records amortization on manufacturing equipment?

A. 1.

 

B. 3.

 

C. 4.

 

D. 5.

 

Blooms: Understand
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Easy
Garrison – Chapter 05 #64
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Topic: 05-15 Manufacturing Overhead Costs.
 

 

Summit Company has provided the following inventory balances and manufacturing cost data for the month of January:

Under Summit’s job-order costing system, any over- or underapplied overhead is closed out to the Cost of Goods Sold account at the end of the calendar year (that is, December 31).

 

Garrison – Chapter 05
 

 

65. What was the total amount of direct material purchases during January?

A. $180,000.

 

B. $190,000.

 

C. $195,000.

 

D. $200,000.

DM purchased = 30,000 + 190,000 – 40,000

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Easy
Garrison – Chapter 05 #65
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-11 The Purchase and Issue of Materials
Topic: 05-19 Summary of Cost Flows.
 

 

66. How much direct labour cost was incurred during January?

A. $170,000.

 

B. $175,000.

 

C. $180,000.

 

D. $186,000.

DL = 515,000 + 20,000 – 15,000 – 190,000 – 150,000 = $180,000

 

Blooms: Apply
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #66
Learning Objective: 05-04 Record the journal entries that reflect the flow of costs in a job-order costing system.
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-14 Labour Cost.
Topic: 05-19 Summary of Cost Flows.
 

 

The Tse Manufacturing Company uses a job-order costing system and applies overhead to jobs using a predetermined overhead rate. The company closes out any balance in the Manufacturing Overhead account to Cost of Goods Sold. During the year the company’s Finished Goods inventory account was debited for $125,000 and credited for $110,000. The ending balance in the Finished Goods inventory account was $28,000. At the end of the year, manufacturing overhead was overapplied by $4,500.

 

Garrison – Chapter 05
 

 

67. What was the balance in the Finished Goods inventory account at the beginning of the year?

A. $28,000.

 

B. $13,000.

 

C. $17,500.

 

D. $8,500.

Beginning FG = 28,000 + 110,000 – 125,000 = $13,000.

 

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #67
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Topic: 05-18 Cost of Goods Sold.
Topic: 05-19 Summary of Cost Flows.
 

 

68. If the estimated manufacturing overhead for the year was $24,000, and the applied overhead was $26,500, what was the actual manufacturing overhead cost for the year?

A. $19,500.

 

B. $22,000.

 

C. $28,500.

 

D. $31,000.

Actual MOH = 26,500 – 4,500 overapplied = $22,000

 

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Medium
Garrison – Chapter 05 #68
Learning Objective: 05-06 Prepare schedules of cost of goods manufactured and cost of goods sold.
Learning Objective: 05-07 Compute underapplied or overapplied cost; and prepare the journal entry to close the balance in manufacturing overhead to the appropriate accounts.
Topic: 05-16 The Concept of a Clearing Account.
Topic: 05-19 Summary of Cost Flows.
Topic: 05-20 Underapplied and Overapplied Overhead.
 

 

Sai Company uses a job order cost system and applies manufacturing overhead costs to jobs using a predetermined overhead rate based on direct labour-hours. The following data were extracted from the company’s accounting records for Year 6

Job #461 was completed during the year and the following costs had been incurred on that job:

 

Garrison – Chapter 05
 

 

69. Suppose Job #461 contained 100 units. What unit cost would appear on the job cost sheet for job #461?

A. $55.00 per unit.

 

B. $61.00 per unit.

 

C. $61.75 per unit.

 

D. $62.50 per unit.

DLH = $1,500/$5/DLH = 300 hrs.
OH rate = $50,000/20,000 DLH = $2.5.
Cost of Job = 4,000 + 1,500 + (300 hrs. @ $2.50/hr) = $6,250
Therefore $6,250/100 units = $62.50 per unit.

 

Blooms: Analyze
CPA Competency: 3.3.2 Evaluates and applies cost management techniques appropriate for specific costing decisions.
Difficulty: Hard
Garrison – Chapter 05 #69
Learning Objective: 05-02 Recognize the flow of costs through a job-order costing system.
Learning Objective: 05-03 Compute predetermined overhead rates; and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.
Topic: 05-04 Job Cost Sheet.
Topic: 05-06 Using the Predetermined Overhead Rate.
Topic: 05-09 Computation of Unit Costs.
 

 

 

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