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Managerial Accounting John Wild 7th Edition- Test Bank

Managerial Accounting John Wild 7th Edition- Test Bank

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Managerial Accounting John Wild 7th Edition- Test Bank

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Chapter 2  Job Order Costing and Analysis

 

1) Cost accounting systems accumulate production costs and then assign them to products and services.

 

2) A company that uses a cost accounting system normally has only two inventory accounts: Finished Goods Inventory and Work in Process Inventory.

 

3) Cost accounting information is helpful to management for pricing decisions but has no effect on controlling costs.

 

4) There are two basic types of cost accounting systems: job order costing and periodic costing.

 

5) There are two basic types of cost accounting systems: job order costing and process costing.

 

6) A company that produces a large number of standardized units would normally use a job order costing system.

 

7) A company that produces products individually designed to meet the needs of a specific customer, would normally use a job order costing system.

 

8) Job order costing would be appropriate for companies that produce custom homes and specialized equipment.

 

9) Job order costing would be appropriate for companies that produce pencils.

 

10) A job order costing system would be appropriate for a manufacturer of automobile tires.

 

11) Job order costing would be appropriate for companies that produce training films for a specific customer or custom-made furniture.

 

12) When a job involves producing more than one unit of a custom product, it is often called a job lot.

 

13) The total costs on job cost sheets for jobs that are not yet completed equals the balance in the Finished Goods Inventory account.

 

14) The total costs on job cost sheets for jobs that are not yet completed equals the balance in the Work in Process Inventory account.

 

15) The total costs on job cost sheets for jobs that are completed but not yet sold equals the balance in the Finished Goods Inventory account.

 

16) The total costs on job cost sheets for jobs that are completed but not yet sold equals the balance in the Work in Process Inventory account.

17) The direct materials section of a job cost sheet shows the materials costs assigned to a specific job, but the direct labor section only shows the total hours of labor allocated to the job.

 

18) The total manufacturing costs on job cost sheets for unfinished jobs equals the total amount in the Work in Process Inventory account in the general ledger.

 

19) A job cost sheet does not contain information that is useful for managing the production process.

 

20) Job cost sheets are used to track all of the costs assigned to a job, including direct materials, direct labor, overhead, and all selling and administrative costs.

 

21) Job order costing is used to determine the cost of producing each job or job lot.

 

22) The total cost of completed but undelivered jobs equals the balance in the Work in Process Inventory account.

 

23) Both direct and indirect labor costs are recorded on individual job cost sheets.

 

24) Job cost sheets include both product and period costs.

 

25) Only product costs are recorded on job cost sheets.

 

26) Service firms cannot use job order costing for determining a selling price for their services.

 

27) Job order costing applies to manufacturing firms only and not to service firms.

 

28) The cost of all direct materials issued to production is debited to Work in Process Inventory.

 

29) A materials requisition is a source document used by production managers to request materials for production and also used to assign materials costs to specific jobs or to overhead.

 

30) Requisitions of indirect materials are not recorded on job cost sheets.

 

31) A materials requisition is a source document used for recording materials received.

 

32) A receiving report is the source document for recording materials received in both a materials ledger card and in the general ledger.

 

33) In nearly all job order cost systems, materials ledger cards are perpetual records that are updated each time materials are purchased or issued for use in production.

 

34) The journal entry to record direct materials used includes a debit to Work in Process Inventory.

 

 

 

35) The journal entry to record indirect materials used includes a debit to Work in Process Inventory.

 

36) The journal entry to record the purchase of materials includes a debit to Work in Process Inventory.

 

37) Materials requisitions and time tickets are cost accounting source documents.

 

38) A time ticket is a source document used by an employee to record the number of hours worked on a particular job during the work day.

 

39) Time tickets can be used to determine the amount of direct labor to charge to jobs.

 

40) A time ticket is a source document that an employee uses to report how much indirect labor was performed for a job.

 

41) A time ticket is a source document used to record the total number of hours worked and serves as a source document for entries to record direct labor costs.

 

42) When direct labor costs are recorded, the journal entry is a debit to Factory Wages Payable and a credit to Work in Process Inventory.

 

43) The predetermined overhead rate is used to apply estimated overhead cost to jobs.

 

44) Factory overhead is often collected and summarized in a subsidiary factory overhead ledger.

 

45) Predetermined overhead rates are calculated at the end of the accounting period once the actual amount of factory overhead is known.

 

46) Predetermined overhead rates are calculated before the start of the accounting period, and are therefore based on estimates.

 

47) Predetermined overhead rates are necessary because cost accountants use periodic inventory systems.

 

48) The predetermined overhead rate based on direct labor cost is the ratio of estimated overhead cost to estimated direct labor cost for the period.

 

49) In a job order costing system, indirect labor costs are debited to the Factory Overhead account.

 

50) The predetermined overhead rate is revised many times during the period to compensate for inaccurate estimates previously made.

 

51) Under a job order costing system, individual jobs are charged with actual overhead costs when they are transferred to finished goods.

52) Actual factory overhead incurred in a job costing system is debited to a Factory Overhead general ledger account and credited to various other accounts.

 

53) Direct materials and direct labor costs are debited to the Factory Overhead account in a job costing system.

 

54) There should be a “cause and effect” relation between the overhead allocation base and overhead costs.

 

55) Overapplied overhead is the amount by which actual overhead cost exceeds the overhead applied to products during the period.

 

56) Underapplied overhead is the amount by which actual overhead cost exceeds the overhead applied to products during the period.

 

57) When actual overhead cost exceeds the overhead applied, overhead is said to be underapplied.

 

58) When actual overhead cost exceeds the overhead applied, overhead is said to be overapplied.

 

59) In a job order costing system, any immaterial underapplied overhead at the end of the period can be debited entirely to Cost of Goods Sold.

 

60) If actual overhead incurred during a period exceeds applied overhead, the difference will be a credit balance in the Factory Overhead account at the end of the period.

 

61) If actual overhead incurred during a period exceeds applied overhead, the difference will be a debit balance in the Factory Overhead account at the end of the period.

 

62) The Factory Overhead account will have a credit balance at the end of a period if overhead applied during the period is greater than the overhead incurred.

 

63) The Factory Overhead account will have a debit balance at the end of a period if overhead applied during the period is greater than the overhead incurred.

 

64) When overhead is underapplied at the end of a period, the adjusting journal entry includes a credit to Cost of Goods Sold.

 

65) Underapplied overhead is the amount by which overhead applied to jobs exceeds the actual overhead incurred during a period.

 

66) Overapplied overhead is the amount by which overhead applied to jobs using the predetermined overhead rate exceeds the actual overhead incurred during a period.

 

67) Overapplied or underapplied overhead should be removed from the Factory Overhead account at the end of each accounting period.

68) If overhead is underapplied, it means that individual jobs have not been charged enough during the year and the cost of goods sold reported is too low.

 

69) If overhead is overapplied, it means that individual jobs have not been charged enough overhead during the year and the cost of goods sold reported is too low.

 

70) If overhead is overapplied, it means that individual jobs have been charged too much overhead during the year and the cost of goods sold reported is too high.

 

71) If overhead is underapplied, it means that individual jobs have been charged too much during the year and the cost of goods sold reported is too high.

 

72) The schedule of cost of goods manufactured for a job costing system includes total actual factory overhead.

 

73) Period costs for a manufacturing company, such as selling and administrative expenses, are recorded directly to Work in Process Inventory when they are incurred.

 

74) Manufacturing costs incurred for jobs completed during an accounting period can bypass the inventory accounts on the balance sheet and be recorded directly in expense accounts.

 

75) Cost accounting systems are used to:

  1. A) Accumulate production and period costs and assign them to products or services.
  2. B) Accumulate production costs and assign them to products or services.
  3. C) Accumulate period cost and assign them to products or services.
  4. D) Accumulate production costs and assign them to Raw Materials Inventory.
  5. E) Analyze efficiency and effectiveness of inventory management.

 

76) A system of accounting for production operations that produces timely information about inventories and manufacturing costs per unit of product is a:

  1. A) Finished goods accounting system.
  2. B) General accounting system.
  3. C) Manufacturing accounting system.
  4. D) Cost accounting system.
  5. E) Production accounting system.

 

77) Job order costing would be used for all of the following except:

  1. A) Construction of a custom home.
  2. B) Production of running shoes.
  3. C) Production of a Pixar movie.
  4. D) Production of wedding invitations.
  5. E) Conducting an audit.

 

 

 

78) Compared to a general accounting system, a cost accounting system for a manufacturing company emphasizes:

  1. A) Periodic inventory counts.
  2. B) Total costs.
  3. C) Continually updating costs of materials, work in process, and finished goods inventories.
  4. D) Products and average costs.
  5. E) Large volume operations involving standardized products.

 

79) Features of job order production include all of the following except:

  1. A) Diversity of products produced.
  2. B) Mass production.
  3. C) Heterogeneity.
  4. D) Customization.
  5. E) Separate manufacturing from other products.

 

80) The two basic types of cost accounting systems are:

  1. A) Job order costing and perpetual costing.
  2. B) Job order costing and customized product costing.
  3. C) Job order costing and customized service costing.
  4. D) Job order costing and process costing.
  5. E) Job order costing and periodic costing.

 

81) The production activities for a customized product represent a(n):

  1. A) Operation.
  2. B) Job.
  3. C) Unit.
  4. D) Pool.
  5. E) Process.

 

82) A job order costing system would best fit the needs of a company that makes:

  1. A) Shoes and apparel.
  2. B) Paint.
  3. C) Cement.
  4. D) Custom machinery.
  5. E) Pencils and erasers.

 

83) Job order production is also known as:

  1. A) Mass production.
  2. B) Process production.
  3. C) Unit production.
  4. D) Customized production.
  5. E) Standard costing.

 

 

 

84) Omega Construction manufactures homes to customer specifications. It most likely uses:

  1. A) Process costing.
  2. B) Periodic costing.
  3. C) Unique costing.
  4. D) Job order costing.
  5. E) Activity-based costing.

 

85) A type of production that yields customized products or services for each customer is called:

  1. A) Customer orientation production.
  2. B) Job order production.
  3. C) Just-in-time production.
  4. D) Job lot production.
  5. E) Process production.

 

86) A company that makes which of the following types of products would best be suited for a job costing system?

  1. A) Fruit juice
  2. B) Swimming suits
  3. C) Snack chips
  4. D) Phone chargers
  5. E) Custom jewelry

 

87) The target cost for a job using job costing is calculated as:

  1. A) direct costs + desired profit.
  2. B) direct costs − desired profit.
  3. C) expected selling price − direct costs.
  4. D) expected selling price − desired profit.
  5. E) expected selling price + desired profit.

 

88) A job order production system would be appropriate for a company that produces which one of the following items?

  1. A) A landscaping design for a new hospital.
  2. B) Seedlings for sale in a nursery.
  3. C) Sacks of yard fertilizer.
  4. D) Packets of flower seeds.
  5. E) Small gardening tools, including rakes, shovels, and hoes.

 

89) Large aircraft manufacturers normally use:

  1. A) Job order costing.
  2. B) Process costing.
  3. C) Mixed costing.
  4. D) Full costing.
  5. E) Simple costing.

 

 

 

90) A document in a job order costing system that is used to record the costs of producing a job is a(n):

  1. A) Job cost sheet.
  2. B) Job lot.
  3. C) Finished goods summary.
  4. D) Process cost system.
  5. E) Units-of-production sheet.

 

91) A job cost sheet shows information about each of the following items except:

  1. A) The direct labor costs assigned to the job.
  2. B) The name of the customer.
  3. C) The costs incurred by the marketing department in selling the job.
  4. D) The overhead costs assigned to the job.
  5. E) The direct materials costs assigned to the job.

 

92) The job order cost sheets used by Greene Company revealed the following:

 

 

 

Job. No. Bal., May 1   May Production Costs  
134   $ 1,700     $ 0    
135     1,200       300    
136     0       900    

 

 

 

Job No. 135 was completed during May and Jobs No. 134 and 135 were shipped to customers in May. What was the company’s cost of goods sold for May and the balance of Work in Process inventory on May 31?

  1. A) $3,200; $900.
  2. B) $2,900; $1,200.
  3. C) $1,200; $2,900.
  4. D) $1,700; $1,200.
  5. E) $4,100; $0.

 

93) Job A3B was ordered by a customer on September 25. During the month of September, Jaycee Corporation requisitioned $2,500 of direct materials and used $4,000 of direct labor. The job was not finished by the end of September, but needed an additional $3,000 of direct materials and additional direct labor of $6,500 to finish the job in October. The company applies overhead at the end of each month at a rate of 200% of the direct labor cost incurred. What is the balance in the Work in Process account at the end of September relative to Job A3B?

  1. A) $5,500
  2. B) $11,500
  3. C) $6,500
  4. D) $9,500
  5. E) $14,500

94) Job A3B was ordered by a customer on September 25. During the month of September, Jaycee Corporation requisitioned $2,500 of direct materials and used $4,000 of direct labor. The job was not finished by the end of September, but needed an additional $3,000 of direct materials and additional direct labor of $6,500 to finish the job in October. The company applies overhead at the end of each month at a rate of 200% of the direct labor cost incurred. What is the total cost of the job when it is completed in October?

  1. A) $16,000
  2. B) $22,500
  3. C) $37,000
  4. D) $26,500
  5. E) $32,000

 

95) Job A3B was ordered by a customer on September 25. During the month of September, Jaycee Corporation requisitioned $2,500 of direct materials and used $4,000 of direct labor. The job was not finished by the end of September, but needed an additional $3,000 of direct materials in October and additional direct labor of $6,500 to finish the job. The company applies overhead at the end of each month at a rate of 200% of the direct labor cost. What is the amount of job costs added to Work in Process Inventory during October?

  1. A) $16,000
  2. B) $22,500
  3. C) $37,000
  4. D) $26,500
  5. E) $32,000

 

96) A job cost sheet includes:

  1. A) Direct materials, direct labor, and operating costs.
  2. B) Direct materials, estimated overhead, and administrative costs.
  3. C) Direct labor, actual overhead, and selling costs.
  4. D) Direct material, direct labor, and applied overhead.
  5. E) Direct materials, direct labor, and selling costs.

 

97) The balance in the Work in Process Inventory at any point in time equals

  1. A) the costs for jobs finished during the period but not yet sold.
  2. B) the manufacturing cost of jobs ordered but not yet started into production.
  3. C) the sum of the manufacturing costs for all jobs in process but not yet completed.
  4. D) the manufacturing costs of all jobs started during the period, completed or not.
  5. E) the sum of the materials, labor and overhead costs paid during the period.

 

 

 

98) The Work in Process Inventory account of a manufacturing company has a $3,200 debit balance. The company applies overhead using direct labor cost. The cost sheet of the only job still in process shows direct material cost of $1,400 and direct labor cost of $800. Therefore, the amount of applied overhead is:

  1. A) $1,800.
  2. B) $2,200.
  3. C) $1,000.
  4. D) $800.
  5. E) $2,400.

 

99) The Work in Process Inventory account of a manufacturing company has a $4,400 debit balance. The company applies overhead using direct labor cost. The cost sheet of the only job still in process shows direct material cost of $2,000 and direct labor cost of $800. Therefore, the company’s predetermined overhead rate is:

  1. A) 40% of direct labor cost.
  2. B) 50% of direct labor cost.
  3. C) 80% of direct labor cost.
  4. D) 200% of direct labor cost.
  5. E) 300% of direct labor cost.

 

100) A perpetual record of a raw materials item that records data on the quantity and cost of units purchased, units issued for use in production, and units that remain in the raw materials inventory, is called a(n):

  1. A) Materials ledger card.
  2. B) Materials requisition.
  3. C) Purchase order.
  4. D) Materials voucher.
  5. E) Purchase ledger.

 

101) A source document that production managers use to request materials for production and that is used to assign materials costs to specific jobs or to overhead is a:

  1. A) Job cost sheet.
  2. B) Production order.
  3. C) Materials requisition.
  4. D) Materials purchase order.
  5. E) Receiving report.

 

102) A company that uses a job order costing system would make the following entry to record the flow of direct materials into production:

  1. A) debit Work in Process Inventory, credit Cost of Goods Sold.
  2. B) debit Work in Process Inventory, credit Raw Materials Inventory.
  3. C) debit Work in Process Inventory, credit Factory Overhead.
  4. D) debit Factory Overhead, credit Raw Materials Inventory.
  5. E) debit Finished Goods Inventory, credit Raw Materials Inventory.

 

 

 

103) The Work in Process Inventory account for DG Manufacturing follows. Compute the cost of jobs completed and transferred to Finished Goods Inventory.

 

 

Work in Process Inventory
Beginning WIP 4,500      
Direct materials 47,100      
Direct labor 29,600      
Applied overhead 15,800      
Total Mfg. costs 97,000      
To finished goods     ?  
Ending WIP 8,900      

 

 

The cost of jobs transferred to finished goods is:

  1. A) $97,000.
  2. B) $105,900.
  3. C) $88,100.
  4. D) $95,200.
  5. E) $92,500.

 

 

 

104) A company’s overhead rate is 60% of direct labor cost. Using the following incomplete accounts, determine the cost of direct materials used.

106,400.

 

 

Work in Process Inventory
Beginning WIP 100,800      
Direct materials ?      
Direct labor ?      
Applied overhead ?      
To finished goods     ?  
Ending WIP 131,040      

 

Factory Overhead
100,800 90,720

 

Finished Goods Inventory
Beginning FG 118,200    
  324,800   301,000
Ending FG 142,000    

 

  1. A) $106,400.
  2. B) $113,120.
  3. C) $30,240.
  4. D) $211,680.
  5. E) $324,800.

 

 

 

105) A company’s overhead rate is 200% of direct labor cost. Using the following incomplete accounts, determine the cost of direct materials used.

 

 

Work in Process Inventory
Beginning WIP 50,000      
Direct materials ?      
Direct labor ?      
Applied overhead ?      
To finished goods     ?  
Ending WIP 60,000      

 

Factory Overhead
138,000 140,000

 

Finished Goods Inventory
Beginning FG 40,000    
  265,000   270,000
Ending FG 35,000    

 

  1. A) $130,000.
  2. B) $65,000.
  3. C) $270,000.
  4. D) $265,000.
  5. E) $280,000.

 

106) A source document that an employee uses to report how much time was spent working on a job or on overhead activities and that is used to determine the amount of direct labor to charge to the job or to determine the amount of indirect labor to charge to factory overhead is called a:

  1. A) Payroll Register.
  2. B) Factory payroll record.
  3. C) General Ledger.
  4. D) Time ticket.
  5. E) Factory Overhead Ledger.

 

107) When direct labor costs are recorded in a job costing:

  1. A) Factory Wages Payable is debited and Work in Process Inventory is credited.
  2. B) Work in Process Inventory is debited and Factory Wages Payable is credited.
  3. C) Cost of Goods Manufactured is debited and Direct Labor is credited.
  4. D) Direct Labor and Indirect Labor are debited and Factory Wages Payable is credited.
  5. E) Work in Process Inventory is debited and Factory Overhead is credited.

 

 

 

108) Oxford Company uses a job order costing system. In the last month, the system accumulated labor time tickets total $24,600 for direct labor and $4,300 for indirect labor. How are these costs recorded?

  1. A) Debit Payroll Expense $28,900; credit Cash $28,900.
  2. B) Debit Payroll Expense $24,600; debit Factory Overhead $4,300; credit Factory Wages Payable $28,900.
  3. C) Debit Work in Process Inventory $24,600; Debit Factory Overhead $4,300; Credit Factory Wages Payable $28,900.
  4. D) Debit Work in Process Inventory $24,600; credit Factory Wages Payable $28,900.
  5. E) Debit Work in Process Inventory $28,900; credit Factory Wages Payable $28,900.

 

109) Labor costs in production can be:

  1. A) Direct or indirect.
  2. B) Indirect or sunk.
  3. C) Direct or payroll.
  4. D) Indirect or payroll.
  5. E) Direct or sunk.

 

110) An example of direct labor cost is:

  1. A) Supervisor salary
  2. B) Maintenance worker wages
  3. C) Janitor wages
  4. D) Product assembler wages
  5. E) Accountant salary

 

111) A company has an overhead application rate of 125% of direct labor costs. How much overhead would be allocated to a job if it required direct labor costing $20,000?

  1. A) $5,000.
  2. B) $16,000.
  3. C) $25,000.
  4. D) $125,000.
  5. E) $250,000.

 

112) The rate established at the beginning of a period that uses estimated overhead and an allocation factor such as estimated direct labor, and that is used to assign overhead cost to jobs, is the:

  1. A) Predetermined overhead rate.
  2. B) Overhead variance rate.
  3. C) Estimated labor cost rate.
  4. D) Chargeable overhead rate.
  5. E) Miscellaneous overhead rate.

 

 

 

113) Kayak Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Kayak Company’s production costs for the year were: direct labor, $30,000; direct materials, $50,000; and factory overhead applied $6,000. The predetermined overhead rate was:

  1. A) 5.0%.
  2. B) 12.0%.
  3. C) 20.0%.
  4. D) 500.0%.
  5. E) 16.7%.

 

114) Lowden Company has a predetermined overhead rate of 160% and allocates overhead based on direct material cost. During the current period, direct labor cost is $50,000 and direct materials cost is $80,000. How much overhead cost should Lowden Company should apply in the current period?

  1. A) $31,250.
  2. B) $50,000.
  3. C) $80,000.
  4. D) $128,000.
  5. E) $208,000.

 

115) The overhead cost applied to a job during a period is recorded with a credit to Factory Overhead and a debit to:

  1. A) Jobs Overhead Expense.
  2. B) Cost of Goods Sold.
  3. C) Finished Goods Inventory.
  4. D) Indirect Labor.
  5. E) Work in Process Inventory.

 

116) CWN Company uses a job order costing system and last period incurred $80,000 of actual overhead and $100,000 of direct labor. CWN estimates that its overhead next period will be $75,000. It also expects to incur $100,000 of direct labor cost. If CWN bases applied overhead on direct labor cost, its predetermined overhead rate for the next period should be:

  1. A) 75%.
  2. B) 80%.
  3. C) 107%.
  4. D) 125%.
  5. E) 133%.

 

 

 

117) Cosi Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Cosi expects to incur $800,000 of overhead during the next period, and expects to use 50,000 labor hours at a cost of $10.00 per hour. What is Cosi Company’s predetermined overhead rate?

  1. A) 6.25%.
  2. B) 62.5%.
  3. C) 160%.
  4. D) 1600%.
  5. E) 67%.

 

118) B&T Company’s production costs for May are: direct labor, $13,000; indirect labor, $6,500; direct materials, $15,000; property taxes on production facility, $800; factory heat, lights and power, $1,000; and insurance on plant and equipment, $200. B&T Company’s factory overhead incurred for May is:

  1. A) $2,000.
  2. B) $6,500.
  3. C) $8,500.
  4. D) $21,500.
  5. E) $36,500.

 

119) Mesa Corp. allocates overhead to production on the basis of direct labor costs. Mesa’s total estimated overhead is $450,000 and estimated direct labor is $180,000. Determine the amount of overhead applied to a job which used $20,000 of direct labor.

  1. A) $8,000.
  2. B) $20,000.
  3. C) $70,000.
  4. D) $50,000.
  5. E) $90,000.

 

120) Dallas Company uses a job order costing system. The company’s executives estimated that direct labor would be $2,000,000 (200,000 hours at $10/hour) and that factory overhead would be $1,500,000 for the current period. At the end of the period, the records show that there had been 180,000 hours of direct labor and $1,200,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead rate?

  1. A) $6.00 per direct labor hour.
  2. B) $7.50 per direct labor hour.
  3. C) $6.67 per direct labor hour.
  4. D) $8.33 per direct labor hour.
  5. E) $7.08 per direct labor hour.

 

 

 

121) Using the following accounts and a predetermined overhead rate of 90% of direct labor cost, determine the amount of applied overhead.

 

 

Work in Process Inventory
Beginning WIP 17,600      
Direct materials 52,800      
Direct labor ?      
Applied overhead ?      
To finished goods     ?  
Ending WIP 36,080      

 

Finished Goods Inventory
Beginning FG 5,200      
  201,520      
Ending FG        

 

  1. A) $79,200.
  2. B) $167,200.
  3. C) $34,320.
  4. D) $88,000.
  5. E) $35,376.

 

122) If one unit of Product Z2 used $2.50 of direct materials and $3.00 of direct labor, sold for $8.00, and was assigned overhead at the rate of 30% of direct labor costs, how much gross profit was realized from this sale?

  1. A) $8.00.
  2. B) $5.50.
  3. C) $2.50.
  4. D) $1.60.
  5. E) $0.90.

 

123) The ending inventory of finished goods has a total cost of $9,000 and consists of 600 units. If the overhead applied to these goods is $3,000, and the overhead rate is 75% of direct labor, how much direct materials cost was incurred in producing these units?

  1. A) $3,750.
  2. B) $2,000.
  3. C) $4,000.
  4. D) $6,000.
  5. E) $9,000.

 

 

 

124) At the current year-end, Ruiz Company found that its overhead was underapplied by $2,500, and this amount was not considered material. Based on this information, Ruiz should:

  1. A) close the $2,500 to Cost of Goods Sold.
  2. B) close the $2,500 to Finished Goods Inventory.
  3. C) do nothing about the $2,500, since it is not material, and it is likely that overhead will be overapplied by the same amount next year.
  4. D) carry the $2,500 to the income statement as “Other Expense”.
  5. E) carry the $2,500 to the next period.

 

125) If overhead applied is less than actual overhead incurred, it is:

  1. A) Fully applied.
  2. B) Underapplied.
  3. C) Overapplied.
  4. D) Expected.
  5. E) Normal.

 

126) The amount by which the overhead applied to jobs during a period exceeds the overhead incurred during the period is known as:

  1. A) Adjusted overhead.
  2. B) Estimated overhead.
  3. C) Predetermined overhead.
  4. D) Underapplied overhead.
  5. E) Overapplied overhead.

 

127) The amount by which overhead incurred during a period exceeds the overhead applied to jobs is:

  1. A) Balanced overhead.
  2. B) Predetermined overhead.
  3. C) Actual overhead.
  4. D) Underapplied overhead.
  5. E) Overapplied overhead.

 

128) If a company applies overhead to production with a predetermined overhead rate, a credit balance in the Factory Overhead account at the end of the period means that:

  1. A) The bookkeeper has made an error because the debits don’t equal the credits.
  2. B) The balance will be carried forward to the next period as an overhead cost.
  3. C) Actual overhead incurred was less than the overhead amount applied to production.
  4. D) The overhead was underapplied for the period.
  5. E) Actual overhead was greater than the overhead amount applied to production.

 

 

 

129) At year-end, Marshall Enterprise’s Factory Overhead account has a credit balance of $5,000, which is not a material amount. What entry should Marshall make at year-end?

  1. A) No entry is needed.
  2. B) Debit Factory Overhead $5,000; credit Cost of Goods Sold $5,000.
  3. C) Debit Cost of Goods Sold $5,000; credit Factory Overhead $5,000.
  4. D) Debit Factory Overhead $5,000; credit Work in Process Inventory $5,000.
  5. E) Debit Factory Overhead $5,000; credit Finished Goods Inventory $5,000.

 

130) Morris Company applies overhead based on direct labor costs. For the current year, Morris Company estimated total overhead costs to be $400,000, and direct labor costs to be $2,000,000. Actual overhead costs for the year totaled $380,000, and actual direct labor costs totaled $1,800,000. At year-end, the balance in the Factory Overhead account is a:

  1. A) $380,000 Debit balance.
  2. B) $360,000 Debit balance.
  3. C) $20,000 Debit balance.
  4. D) $400,000 Credit balance.
  5. E) $20,000 Credit balance.

 

131) Morris Company applies overhead based on direct labor costs. For the current year, Morris Company estimated total overhead costs to be $400,000, and direct labor costs to be $2,000,000. Actual overhead costs for the year totaled $380,000, and actual direct labor costs totaled $1,800,000. At year-end, Factory Overhead is:

  1. A) Overapplied by $20,000.
  2. B) Overapplied by $190,000.
  3. C) Underapplied by $20,000.
  4. D) Overapplied by $40,000.
  5. E) Neither overapplied nor underapplied.

 

132) Mango Company applies overhead based on direct labor costs. For the current year, Mango Company estimated total overhead costs to be $300,000, and direct labor costs to be $150,000. Actual overhead costs for the year totaled $330,000, and actual direct labor costs totaled $170,000. At year-end, the balance in the Factory Overhead account is a:

  1. A) $330,000 Debit balance.
  2. B) $170,000 Debit balance.
  3. C) $10,000 Credit balance.
  4. D) $340,000 Credit balance.
  5. E) $10,000 Debit balance.

 

 

Managerial Accounting, 7e(Wild)

Chapter 4   Activity-Based Costing and Analysis

 

1) Overhead costs are indirect costs so assigning these costs to products requires an allocation method.

 

2) The activity-based costing method uses volume-based measures to allocate overhead costs.

 

3) Product costs consist of direct labor, direct materials, and overhead (indirect) costs.

 

4) Distorted product cost information can result in poor decisions.

 

5) Overhead costs are not directly related to production and cannot be traced to units of product like direct materials and direct labor can.

 

6) The cost to heat a manufacturing facility can be directly linked to the number of units produced.

 

7) Examples of volume-related measures include direct labor hours and machine hours.

 

8) Departments are the cost objects when the plantwide overhead rate method is used.

 

9) The plantwide overhead rate is total plantwide allocation base divided by total budgeted plantwide overhead cost.

 

10) The unit of product is the cost object when the plantwide overhead rate method is used.

 

11) The plantwide overhead rate is determined using volume-related measures.

 

12) Data concerning volume-related measures are readily available in most manufacturing settings.

 

13) The departmental overhead rate method uses a different overhead rate for each production department.

 

14) The departmental overhead rate method uses the same overhead rate for each production department.

 

15) By definition, costs classified as overhead are consumed in basically the same manner regardless of the process involved.

 

16) Products are the first stage cost objects when using a departmental overhead rate method.

 

17) The departmental overhead rate method allows each department to have its own overhead rate and its own allocation base.

 

 

 

18) The departmental overhead rate method involves the following four steps: 1) Assign overhead costs to departmental cost pools, 2) select an allocation base for each department, 3) compute overhead allocation rates for each department, and 4) use departmental overhead rates to assign overhead costs to products.

 

19) The premise of ABC is that it takes activities to make products and provide services and these activities drive costs.

 

20) Activities are the cost objects of the second stage of ABC.

 

21) Activities are the cost objects of the first stage of ABC.

 

22) A cost pool is a collection of costs that are related to the same or similar activity.

 

23) Activity-based costing first assigns costs to products and then uses these product costs to assign costs to manufacturing activities.

 

24) A single cost pool is used when allocating overhead using the activity-based costing method.

 

25) Multiple cost pools are used when allocating overhead using the plantwide overhead rate method.

 

26) Management’s pricing and cost decisions for a product are influenced by that product’s cost assignments.

 

27) A major disadvantage of using a plantwide overhead rate is the extreme difficulty in gathering the needed information.

 

28) The usefulness of overhead allocations based on a plantwide overhead rate depends on two crucial assumptions: (1) the overhead cost is correlated with the allocation base; and (2) all products use overhead cost in dissimilar proportions.

 

29) The usefulness of overhead allocations based on a plantwide overhead rate depends on two crucial assumptions: (1) the overhead cost is correlated with the allocation base; and (2) all products use overhead cost in similar proportions.

 

30) Some companies allocate their overhead cost using a plantwide overhead rate largely because of its simplicity.

 

31) Allocated overhead costs vary depending upon the allocation methods used.

 

32) When products differ in batch size and complexity, they usually consume different amounts of overhead resources.

 

33) Overhead costs are often affected by many issues and are frequently too complex to be explained by any one factor.

 

34) Compared to the departmental overhead rate method, the plantwide overhead rate method usually results in more accurate overhead allocations.

 

35) Compared to the plantwide overhead rate method, the departmental overhead rate method usually results in more accurate overhead allocations.

 

36) Because departmental overhead costs are allocated based on measures closely related to production volume, they accurately assign overhead, such as utility costs.

 

37) The use of a plantwide overhead rate is not acceptable for external reporting under GAAP.

 

38) ABC allocates overhead costs to products based on activities rather than direct labor or machine hours.

 

39) ABC can be used to assign costs to any cost object that is of management interest.

 

40) ABC is significantly less costly to implement and maintain than more traditional overhead costing systems.

 

41) ABC is more costly to implement and maintain than more traditional overhead costing systems.

 

42) When using the plantwide overhead rate method, total budgeted overhead costs are combined into one overhead cost pool.

 

43) Kinetic Company estimates that overhead costs for the next year will be $1,600,000 for indirect labor and $400,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 50,000 direct labor hours are planned for this next year, then the plantwide overhead rate is $.025 per direct labor hour.

 

44) Kinetic Company estimates that overhead costs for the next year will be $1,600,000 for indirect labor and $400,000 for factory utilities. The company uses direct labor hours as its overhead allocation base, and plans to use 50,000 direct labor hours for this next year. If a product uses 5 direct labor hours, then it will be assigned $200 in overhead costs.

 

45) A company estimates that costs for the next year will be $500,000 for indirect labor, $50,000 for factory utilities, and $1,000,000 for the CEO’s salary. The company uses machine hours as its overhead allocation base. If 25,000 machine hours are planned for this next year, then the plantwide overhead rate is $22 per machine hour.

 

46) A company estimates that costs for the next year will be $500,000 for indirect labor, $50,000 for factory utilities, and $1,000,000 for the CEO’s salary. The company uses machine hours as its overhead allocation base. If 25,000 machine hours are planned for this next year, then a product requiring 10 machine hours will be assigned $220 in overhead.

 

 

 

47) A company estimates total overhead costs for the next year to be $1,200,000 and wishes to use direct labor hours as its overhead allocation base. This company makes two products: (1) Fancy X, which requires three direct labor hours per unit, and (2) Plain X, which requires one direct labor hour per unit. If the company plans to make 10,000 units of Fancy X and 10,000 units of Plain X, then each unit produced will be allocated the same amount of overhead.

 

[The following information applies to the questions displayed below.] 

 

Malone Company sells two products Big X and Little X. Current direct material and direct labor costs are detailed below. Next year, the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year’s overhead is estimated to be $510,000. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $20 per hour and the company expects to manufacture 15,000 units of Big X and 18,000 units of Little X next year.

  Direct

Material

per Unit

 Direct

Labor Dollars

per Unit
Big X $ 5   $ 18  
Little X $ 3   $ 12  

 

48) Malone has 33,000 total estimated direct labor hours for next year.

 

49) Malone’s plantwide overhead rate will be $20.99 per direct labor hour next year.

 

50) If the direct labor time estimates are met, Malone will allocate $12.59 of overhead cost to each unit of Little X.

 

51) The first step in using the departmental overhead rate method requires that overhead be traced to each of the company’s departments.

 

52) The departmental overhead rate method traces costs to each department and then determines an allocation base for each department.

 

53) Turtle Company produces t-shirts that go through two operations, cutting and sewing, before they are complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for the cutting department based on direct labor hours is $2.69 per direct labor hour (rounded to two decimals).

 

  Cutting Sewing  
Direct labor hours   250,000 DLH   75,000 DLH
Machine hours   125,000 MH   150,000 MH
Overhead costs $ 500,000   $ 375,000  

 

 

 

 

54) A company produces heating elements that go through two operations, casting and assembling, before they are complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for the assembling department based on direct labor hours is $5 per direct labor hour.

 

  Casting Assembling  
Direct labor hours   1,875 DLH   7,500 DLH
Machine hours   12,500 MH   3,750 MH
Overhead costs $ 75,000   $ 37,500  

 

55) A company produces paint that goes through two operations, operation A and operation B, before it is complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for Department B based on machine hours is $4 per machine hour.

 

  Department A Department B  
Machine hours   50,000 MH   60,000 MH
Direct labor hours   78,500 DLH   100,800 DLH
Overhead costs $ 392,500   $ 403,200  

 

56) A company produces computer chips that go through two departments, department A1 and department B2, before they are complete. Expected costs and activities for the two departments are shown below. Departmental overhead rates are based on machine hours in department A1 and direct labor hours in department B2. Therefore, the overhead rates for department A1 and department B2 are $3.62 per machine hour and $5.73 per direct labor hour, respectively.

 

  Department A1 Department B2  
Machine hours   40,000 MH   30,000 MH
Direct labor hours   36,200 DLH   28,650 DLH
Overhead costs $ 144,800   $ 171,900  

 

57) A company produces garden benches that go through two departments, department 1A1 and department 2B2, before they are complete. Expected costs and activities for the two departments are shown below. Both departments have departmental overhead rates based on machine hours. Therefore, the overhead rates for department 1A1 and department 2B2 are the same.

 

  Department 1A1 Department 2B2  
Machine hours   70,000 MH   60,000 MH
Direct labor hours   56,350 DLH   50,160 DLH
Overhead costs $ 225,400   $ 250,800  

 

 

 

58) A company produces surgical equipment that goes through three departments, 1A1, 2B2, and 3C3, before they are complete. Expected costs and activities for the three departments are shown below. All departments have departmental overhead rates based on direct labor hours. Therefore, the overhead rate for each department is $5 per direct labor hour.

 

  Department 1A1 Department 2B2 Department 3C3  
Machine hours   15,000 MH   25,000 MH   20,000 MH
Direct labor hours   22,830 DLH   10,650 DLH   29,200 DLH
Overhead costs $ 114,150   $ 213,000   $ 73,000  

 

59) Activity-based costing involves four steps: (1) identify activities and the costs they cause, (2) group similar activities into cost pools, (3) determine an activity rate for each activity cost pool, and (4) allocate overhead costs to products using those activity rates.

 

60) The more activities tracked by activity-based costing, the more accurately overhead costs are assigned.

 

61) In activity-based costing, an activity can involve several related tasks.

 

62) Activities causing overhead cost in an organization are typically separated into four levels: (1) direct activities, (2) indirect activities, (3) batch level activities, and (4) facility level activities.

 

63) Machine setup costs are an example of a batch level activity.

 

64) Product design costs are an example of a unit level activity.

 

65) Facility-level costs are not traceable to individual product lines, batches or units.

 

66) Activity-based costing eliminates the need for overhead allocation rates.

 

67) Activity-based costing often shifts overhead costs from large volume, standardized products to low-volume, specialty products that consume disproportionate resources.

 

68) The final step of activity-based costing assigns overhead costs to pools rather than to products.

 

69) Batch-level costs vary with the number of units produced.

 

70) Unit-level costs vary with the number of units produced.

 

71) Batch-level costs do not vary with the number of units produced.

 

72) Product-level costs do not vary with the number of units or batches produced.

 

73) Facility-level costs vary with the number of units or batches produced.

 

74) A quality-inspection cost is an example of unit-level costs.

 

75) Plantwide overhead rates typically do a better job of matching each department’s overhead costs to the products using the department’s resources than do departmental overhead rates.

 

76) Two big benefits of ABC costing are a) more accurate product cost information and b) more detailed information on costs and the drivers of those costs.

 

77) A method of assigning overhead costs to a product using a single overhead rate is:

  1. A) Plantwide overhead rate method.
  2. B) Cost pool overhead rate method.
  3. C) Departmental overhead rate method.
  4. D) Activity-based costing.
  5. E) Overhead cost allocation method.

 

78) Which types of overhead allocation methods result in the use of more than one overhead rate during the same time period?

  1. A) Plantwide overhead rate method and departmental overhead rate method.
  2. B) Cost pool overhead rate method and plantwide overhead rate method.
  3. C) Departmental overhead rate method and activity-based costing.
  4. D) Activity-based costing and plantwide overhead rate method.
  5. E) Departmental overhead rate method and cost pool overhead rate method.

 

79) Which of the following would not be considered a product cost?

  1. A) Direct labor costs.
  2. B) Factory supervisor’s salary.
  3. C) Factory line worker’s salary.
  4. D) Cost accountant’s salary.
  5. E) Manufacturing overhead costs.

 

80) Overhead costs:

  1. A) Are directly related to production.
  2. B) Can be traced to units of product in the same way that direct materials can.
  3. C) Cannot be traced to units of product in the same way that direct labor can.
  4. D) Are period costs.
  5. E) Include only fixed costs.

 

81) The cost object of the plantwide overhead rate method is:

  1. A) The unit of product.
  2. B) The production departments of the company.
  3. C) The production activities of the company.
  4. D) Manufacturing cost pools.
  5. E) The time period.

 

 

 

82) Which of the following statements is true with regard to the plantwide overhead rate method?

  1. A) The rate is determined using volume-related measures.
  2. B) It is logical to use this method when overhead costs are not closely tied to volume-related measures.
  3. C) This method uses multiple overhead rates.
  4. D) The rate is determined using measures that are not closely related to volume.
  5. E) The method provides the most accurate means of allocating overhead costs.

 

83) The cost object(s) of the departmental overhead rate method is:

  1. A) The time period.
  2. B) The production departments of the company.
  3. C) The production departments in the first stage and the unit of product in the second stage.
  4. D) The unit of product in the first stage and the production departments in the second stage.
  5. E) The production activities of the company.

 

84) Which of the following statements is true with regard to the departmental overhead rate method?

  1. A) It is logical to use this method when overhead resources are consumed by various products in substantially the same way throughout multiple departments.
  2. B) It is logical to use this method when overhead resources are consumed by various products in substantially different ways throughout multiple departments.
  3. C) Each department has the same rate for the same activity pool.
  4. D) It requires one overhead cost pool and one rate.
  5. E) It is the same as activity-based costing.

 

85) The cost object(s) of the activity-based costing method is(are):

  1. A) The time period.
  2. B) The production departments of the company.
  3. C) The production activities of the company.
  4. D) The production activities in the first stage and the unit of product in the second stage.
  5. E) The unit of product in the first stage and the production activities in the second stage.

 

86) From an ABC perspective, what causes costs to be incurred?

  1. A) Financial transactions.
  2. B) The volume of units produced.
  3. C) Debits and credits.
  4. D) Management decisions.
  5. E) Activities.

 

87) Which of the following statements is true with regard to activity-based costing rates?

  1. A) The premise of ABC is that activities are what cause costs to be incurred.
  2. B) ABC is another way to refer to a multiple departmental rate situation.
  3. C) There one basic stage to ABC.
  4. D) ABC is simpler and less expensive to implement than other traditional methods of allocating overhead costs.
  5. E) All cost drivers used to determine the rates will be unit-level drivers.

 

88) What is the reason for pooling costs?

  1. A) To shift costs from low-volume to high-volume products.
  2. B) It is a budgeting technique designed to accurately track fixed costs.
  3. C) Determining a pool rate for all costs incurred by the same activity reduces the number of cost assignments required.
  4. D) This procedure helps to determine which costs are directly related to production volume.
  5. E) It simplifies departmental overhead costing procedures.

 

89) Which of the following are advantages of using the plantwide overhead rate method?

  1. A) The use of cost pools is considerably more accurate than other overhead allocations.
  2. B) The necessary information is readily available.
  3. C) It is more accurate than traditional overhead allocations.
  4. D) Each department has its own overhead rate and its own allocation base.
  5. E) It takes into account that when products differ in batch size and complexity, they usually consume different amounts of overhead resources.

 

90) Which of the following companies would be best served by a plantwide overhead rate?

  1. A) A company that manufactures many different products and whose operations are an equal mix of labor and mechanized work.
  2. B) A company that manufactures few products and whose operations are labor intensive.
  3. C) A company that manufactures many different products and whose operations are highly mechanized.
  4. D) A company whose products use overhead resources in very different ways.
  5. E) A company whose products differ in batch size and complexity and consume different amounts of overhead resources.

 

91) Which of the following is true?

  1. A) Overhead costs are often affected by many issues and are frequently too complex to be explained by any one factor.
  2. B) The departmental overhead rate is not usually based on measures closely related to production volume.
  3. C) The departmental overhead rate is most accurate in assigning overhead costs that are not driven by production volume.
  4. D) Allocated overhead costs will be the same no matter which allocation method is used.
  5. E) When cost analysts are able to logically trace cost objects to costs, costing accuracy is improved.

 

 

 

92) Which of the following is a disadvantage of the departmental overhead rate method?

  1. A) The departmental overhead rate method assigns overhead on the basis of volume-related measures.
  2. B) The departmental overhead rate method is more refined than the plantwide overhead rate method.
  3. C) The departmental overhead rate method does not assign overhead on the basis of volume-related measures.
  4. D) The departmental overhead rate method is simpler and less costly to implement than the plantwide rate method.
  5. E) There are no disadvantages of the departmental overhead rate method.

 

93) Which of the following is not true?

  1. A) The departmental overhead method assigns overhead on the basis of volume-related measures.
  2. B) The departmental overhead rate method is more refined than the plantwide overhead rate method.
  3. C) Overhead costing accuracy is improved by the use of multiple departmental rates rather than a single overhead rate.
  4. D) The departmental overhead rate method does not assign overhead on the basis of volume-related measures.
  5. E) The departmental overhead rate method is more costly to implement than the plantwide overhead rate method.

 

94) What are three advantages of activity-based costing over traditional volume-based allocation methods?

  1. A) Ease of use, more accurate product costing, and more effective cost control.
  2. B) Fewer allocation bases, ease of use, and a direct correlation to production volume.
  3. C) More accurate product costing, more effective cost control, and better focus on the relevant factors for decision making.
  4. D) More accurate product costing, fewer cost objects, and a direct correlation to production volume.
  5. E) More accurate product costing, ease of use, less costly to implement.

 

95) What are the main advantages of volume-based allocation methods compared to activity-based costing?

  1. A) Volume-based methods are easier to use and less costly to implement and maintain.
  2. B) Volume-based methods are more accurate and allowed by GAAP.
  3. C) Volume-based methods are less accurate and easier to use.
  4. D) Volume-based methods are harder to use and more costly to implement and maintain.
  5. E) There are no advantages to using volume-based methods.

 

 

 

96) K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 80,000 direct labor hours are planned for this next year, what is the company’s plantwide overhead rate?

  1. A) $0.02 per direct labor hour.
  2. B) $46.25 per direct labor hour.
  3. C) $36.25 per direct labor hour.
  4. D) $10 per direct labor hour.
  5. E) $0.10 per direct labor hour.

 

97) K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 80,000 direct labor hours are planned for this next year, how much overhead would be assigned to a product requiring 4 direct labor hours?

  1. A) $46.25
  2. B) $36.25
  3. C) $185.00
  4. D) $145.00
  5. E) None of the choices

 

98) Peterson Company estimates that overhead costs for the next year will be $6,520,000 for indirect labor and $550,000 for factory utilities. The company uses machine hours as its overhead allocation base. If 140,000 machine hours are planned for this next year, what is the company’s plantwide overhead rate? (Round your answer to two decimal places.)

  1. A) $0.02 per machine hour.
  2. B) $50.50 per machine hour.
  3. C) $45.75 per machine hour.
  4. D) $3.93 per machine hour.
  5. E) $0.25 per machine hour.

 

99) A company estimates that overhead costs for the next year will be $8,320,000 for indirect labor and $155,500 for factory utilities. The company uses machine hours as its overhead allocation base. If 400,000 machine hours are planned for this next year, what is the company’s plantwide overhead rate? (Round your answer to two decimal places.)

  1. A) $0.05 per machine hour.
  2. B) $21.19 per machine hour.
  3. C) $20.80 per machine hour.
  4. D) $0.39 per machine hour.
  5. E) $2.57 per machine hour.

 

 

 

100) The following data relates to Spurrier Company’s estimated amounts for next year.

 

Estimated: Department 1 Department 2  
Manufacturing overhead costs $ 1,100,000   $ 3,300,000  
Direct labor hours   540,000 DLH   790,000 DLH
Machine hours   90,000 MH   24,000 MH

 

What is the company’s plantwide overhead rate if direct labor hours are the allocation base? (Round your answer to two decimal places.)

  1. A) $3.31 per direct labor hour.
  2. B) $3.43 per direct labor hour.
  3. C) $2.04 per direct labor hour.
  4. D) $0.30 per direct labor hour.
  5. E) $0.50 per direct labor hour.

 

101) The following data relates to Black-Out Company’s estimated amounts for next year.

 

Estimated: Department 1 Department 2  
Manufacturing overhead costs $ 300,000   $ 400,000  
Direct labor hours   60,000 DLH   80,000 DLH
Machine hours   1,000 MH   2,000 MH

 

What is the company’s plantwide overhead rate if machine hours are the allocation base? (Round your answer to two decimal places.)

  1. A) $233.33 per MH
  2. B) $150.00 per MH
  3. C) $100.00 per MH
  4. D) $4.90 per MH
  5. E) $5.00 per MH

 

102) The following data relates to Patterson Company’s estimated amounts for next year.

 

Estimated: Department 1 Department 2  
Manufacturing overhead costs $ 50,000   $ 60,000  
Direct labor hours   180,000 DLH   200,000 DLH
Machine hours   200,000 MH   400,000 MH

 

What is the company’s plantwide overhead rate if direct labor hours are the allocation base? (Round your answer to two decimal places.)

  1. A) $3.45 per DLH
  2. B) $5.45 per DLH
  3. C) $0.29 per DLH
  4. D) $0.26 per DLH
  5. E) $0.20 per DLH

 

 

 

103) Lake Erie Company uses a plantwide overhead rate with machine hours as the allocation base. Next year, 600,000 units are expected to be produced taking 0.75 machine hours each. How much overhead will be assigned to each unit produced given the following estimated amounts?

 

Estimated: Department 1 Department 2
Manufacturing overhead costs $ 3,107,500   $ 1,520,000  
Direct labor hours   150,000 DLH   250,000 DLH
Machine hours   250,000 MH   175,000 MH

 

  1. A) $11.57 per unit
  2. B) $8.17 per unit
  3. C) $5.61 per unit
  4. D) $12.43 per unit
  5. E) $10.89 per unit

 

104) Red Raider Company uses a plantwide overhead rate with direct labor hours as the allocation base. Next year, 400,000 units are expected to be produced requiring 0.9 direct-labor hours each. How much overhead will be assigned to each unit produced given the following estimated amounts?

 

Estimated: Department 1 Department 2
Manufacturing overhead costs $ 2,530,000   $ 2,752,000  
Direct labor hours   168,000 DLH   110,000 DLH
Machine hours   30,000 MH   8,000 MH

 

  1. A) $19.00 per unit
  2. B) $17.10 per unit
  3. C) $139.00 per unit
  4. D) $125.10 per unit
  5. E) None of the choices

 

105) Red Raider Company uses a plantwide overhead rate with machine hours as the allocation base. Next year, 400,000 units are expected to be produced requiring 1.2 machine hours each. How much overhead will be assigned to each unit produced given the following estimated amounts?

 

Estimated: Department 1 Department 2  
Manufacturing overhead costs $ 2,530,000   $ 2,752,000  
Direct labor hours   168,000 DLH   110,000 DLH
Machine hours   30,000 MH   8,000 MH

 

  1. A) $19.00 per unit
  2. B) $139.00 per unit
  3. C) $22.68 per unit
  4. D) $166.80 per unit
  5. E) None of the choices

 

106) Western Company allocates $10 overhead to products based on the number of machine hours used. The company uses a plantwide overhead rate with machine hours as the allocation base. Given the amounts below, how many machine hours does the company expect in department 2?

 

Estimated: Department 1 Department 2  
Manufacturing overhead costs $ 250,000   $ 150,000  
Direct labor hours   8,000 DLH   12,000 DLH
Machine hours   15,000 MH   ? MH

 

  1. A) 33,000 MH
  2. B) 137,500 MH
  3. C) 82,500 MH
  4. D) 88,000 MH
  5. E) 25,000 MH

 

107) A company allocates $7.50 overhead to products based on the number of direct labor hours worked. The company uses a plantwide overhead rate with direct labor hours as the allocation base. Given the amounts below, how many direct labor hours does the company expect in department 2?

 

Estimated: Department 1 Department 2
Manufacturing overhead costs $ 74,358   $ 49,572  
Direct labor hours   6,610 DLH   ? DLH
Machine hours   700 MH   800 MH

 

  1. A) 9,914 DLH
  2. B) 6,612 DLH
  3. C) 3,109 DLH
  4. D) 7,454 DLH
  5. E) 16,254 DLH

 

108) Gray Company uses a plantwide overhead rate with machine hours as the allocation base. Use the following information to solve for the amount of machine hours estimated per unit of product Q.

 

Direct material cost per unit of Q $ 15  
Total estimated manufacturing overhead $ 100,000  
Total cost per unit of Q $ 60  
Total estimated machine hours   200,000 MH
Direct labor cost per unit of Q $ 30  

 

  1. A) 50 MH per unit of Q.
  2. B) 0.50 MH per unit of Q.
  3. C) 0.75 MH per unit of Q.
  4. D) 17.5 MH per unit of Q.
  5. E) 30 MH per unit of Q.

 

109) Gold Company uses a plantwide overhead rate with machine hours as the allocation base. Use the following information to solve for the amount of machine hours estimated per unit of product RST.

 

Direct material cost per unit of RST $ 15  
Total estimated manufacturing overhead $ 300,000  
Total cost per unit of RST $ 80  
Total estimated machine hours   150,000 MH
Direct labor cost per unit of RST $ 23  

 

  1. A) 21 MH per unit of RST.
  2. B) 2 MH per unit of RST.
  3. C) 20 MH per unit of RST.
  4. D) 37.5 MH per unit of RST.
  5. E) 38 MH per unit of RST.

 

110) Bond Company uses a plantwide overhead rate with direct labor hours as the allocation base. Use the following information to solve for the amount of direct labor hours estimated per unit of product G2.

 

Direct material cost per unit of G2 $ 7  
Total estimated manufacturing overhead $ 787,500  
Total cost per unit of G2 $ 22  
Total estimated direct labor hours   450,000 DLH
Direct labor cost per unit of G2 $ 4.25  

 

  1. A) 1.75 DLH per unit of G2.
  2. B) 6.14 DLH per unit of G2.
  3. C) 9.3 DLH per unit of G2.
  4. D) 0.66 DLH per unit of G2.
  5. E) 11.25 DLH per unit of G2.

 

 

 

111) Kamper Company sells two products Big Z and Little Z. Current direct material and direct labor costs are detailed below. Next year, the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year’s overhead is estimated to be $475,000. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $20 per hour and the company expects to manufacture 32,000 units of Big Z and 9,000 units of Little Z next year.

 

  Direct

Material

per Unit

 Direct

Labor Dollars

per Unit

  
Big Z $ 6   $ 17  
Little Z $ 12   $ 8  

 

What are total estimated direct labor hours for this next year?

  1. A) 30,800 total DLH.
  2. B) 616,000 total DLH.
  3. C) 300,000 total DLH.
  4. D) 1,025,000 total DLH.
  5. E) 916,000 total DLH.

 

112) Crinkle Cut Clothes Company manufactures two products CC1 and CC2. Current direct material and direct labor costs are detailed below. Next year the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year’s overhead is estimated to be $338,250. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $28 per hour and the company expects to manufacture 22,000 units of CC1 and 91,000 units of CC2 next year.

 

  Direct

Material

per Unit

 Direct

Labor Dollars

per Unit

  
CC1 $ 37.10   $ 22.40  
CC2 $ 25.20   $ 15.40  

 

Compute the plantwide overhead rate for next year.

  1. A) $28.00 per DLH.
  2. B) $37.80 per DLH.
  3. C) $1.35 per DLH.
  4. D) $5.00 per DLH.
  5. E) $0.20 per DLH.

 

 

 

[The following information applies to the questions displayed below.]

 

Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year’s expected costs and activities are shown below.

 

  Mixing Baking
Direct labor hours   400,000 DLH   80,000 DLH
Machine hours   800,000 MH   800,000 MH
Overhead costs $ 600,000   $ 400,000  

 

113) Compute Aztec’s departmental overhead rate for the mixing department based on direct labor hours.

  1. A) $1.50 per DLH.
  2. B) $5.00 per DLH.
  3. C) $0.75 per DLH.
  4. D) $0.50 per DLH.
  5. E) $2.08 per DLH.

 

114) Compute Aztec’s departmental overhead rate for the mixing department based on machine hours.

  1. A) $1.50 per MH.
  2. B) $5.00 per MH.
  3. C) $0.75 per MH.
  4. D) $0.50 per MH.
  5. E) $2.08 per MH.

 

115) Compute Aztec’s departmental overhead rate for the baking department based on direct labor hours.

  1. A) $1.50 per DLH
  2. B) $5.00 per DLH
  3. C) $0.75 per DLH
  4. D) $0.50 per DLH
  5. E) $2.08 per DLH

 

116) Compute Aztec’s departmental overhead rate for the baking department based on machine hours.

  1. A) $1.50 per MH
  2. B) $5.00 per MH
  3. C) $0.75 per MH
  4. D) $0.50 per MH
  5. E) $2.08 per MH

 

 

 

[The following information applies to the questions displayed below.]

 

Angle Max Industries produces a product which goes through two operations, Assembly and Finishing, before it is ready to be shipped. Next year’s expected costs and activities are shown below.

  Assembly Finishing
Direct labor hours   100,000 DLH   140,000 DLH
Machine hours   300,000 MH   60,000 MH
Overhead costs $ 300,000   $ 420,000  

 

117) Assume that the Assembly Department allocates overhead based on machine hours, and the Finishing Department allocates overhead based on direct labor hours. How much total overhead will be assigned to a product that requires 1 direct labor hour and 2.5 machine hours in the Assembly Department, and 3.5 direct labor hours and 0.5 machine hours in the Finishing Department?

  1. A) $13.00.
  2. B) $10.50.
  3. C) $2.50.
  4. D) $11.00.
  5. E) $7.50.

 

118) Assume that Angle Max Industries allocates overhead using a plantwide overhead rate based on machine hours. How much total overhead will be assigned to a product that requires 1 direct labor hour and 2.5 machine hours in the Assembly Department, and 3.5 direct labor hours and 0.5 machine hours in the Finishing Department?

  1. A) $7.50.
  2. B) $13.00.
  3. C) $10.50.
  4. D) $6.00.
  5. E) $11.00.

 

 

 

[The following information applies to the questions displayed below.] 

 

Tarnish Industries produces miniature models of farm equipment. These collectibles are in great demand. It takes two operations, molding and finishing, to complete the miniatures. Next year’s expected activities are shown in the following table:

 

  Molding Finishing
Direct labor hours   75,000 DLH   160,500 DLH
Machine hours   98,000 MH   81,500 MH

 

119) Tarnish Industries uses departmental overhead rates and is planning on a $2 per direct labor hour overhead rate for the molding department. Compute the estimated manufacturing overhead cost for the molding department given the information shown in the table.

  1. A) $225,000
  2. B) $196,000
  3. C) $150,000
  4. D) $321,000
  5. E) $471,000

 

120) Tarnish Industries uses departmental overhead rates and is planning on a $1.80 per direct labor hour overhead rate for the finishing department. Compute the estimated manufacturing overhead cost for the finishing department given the information shown in the table.

  1. A) $41,667
  2. B) $288,900
  3. C) $256,800
  4. D) $146,700
  5. E) $323,100

 

121) Tarnish Industries uses departmental overhead rates and is planning on a $2 per machine hour overhead rate for the molding department. Compute the estimated manufacturing overhead cost for the molding department given the information shown in the table.

  1. A) $195,000
  2. B) $196,000
  3. C) $163,000
  4. D) $321,000
  5. E) $471,000

 

122) Tarnish Industries uses departmental overhead rates and is planning on a $4.10 per machine hour overhead rate for the finishing department. Compute the estimated manufacturing overhead cost for the finishing department given the information shown in the table.

  1. A) $307,500
  2. B) $658,050
  3. C) $401,800
  4. D) $334,150
  5. E) $735,950

 

 

 

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