Exam 6: Fundamentals of Product and Service Costing

The following information has been gathered for Foxmoor Industries for its fiscal year ending December 31: Estimated factory overhead costs \ 1,500,000 Actual factory overhead costs \ 1,776,400 Estimated labor hours 48,000 Actual labor hours 51,700 Estimated labor costs \ 756,000 Actual labor costs \ 840,125 Estimated machine hours 96,000 Actual machine hours 102,600 - What is the predetermined factory overhead rate per machine hour?

Which of the following statements regarding the two-stage cost allocation process is (are) false? (A) If a company has three cost pools, then it should also have three different cost allocation bases. (B) The selection of an appropriate cost allocation base is more important for single-stage cost allocation systems than for two-stage cost allocation systems.

Which of the following statements is true?

Which of the following would be the least appropriate allocation base for allocating overhead in a highly automated (i.e., capital-intensive) manufacturing company?

A system that provides information about the costs of processes, products, and services used and produced by an organization is a:

The predetermined overhead rate for manufacturing overhead for Ashland Corporation was $8.00 per direct labor hour. The estimated labor rate was $10.00 per hour. If the estimated direct labor cost was $150,000, what was the estimated manufacturing overhead?

The basic cost flow model is:

Case (A) Case (B) Case (C) Beginning Balance (BB) ? \8 ,630 \ 71,600 Ending Balance (EB) 34,360 ? 75,100 Transferred In (TI) 194,600 42,600 ? Transferred Out (TO) 192,800 46,500 181,900 - For Case (A) above, what is the Beginning Balance (BB)?

Why might a company use direct labor cost as an overhead allocation base rather than using direct labor hours?

Cost pools are:

Job 731 was recently completed. The following data have been recorded on its job cost sheet: Direct materials \ 2,391 Direct labor-hours 69 labor-hours Direct labor wage rate \ 13 per labor-hour Machine-hours 129 machine-hours The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $14 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 731 would be:

Which of the following statements is (are) true regarding product costing? (A) Individual product costs are relevant for managerial decision-making but irrelevant for preparing the financial statements. (B) A common decision facing managers is determining the price at which to sell their products or provide their services.

Flambe Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the machine-hours for the upcoming year at 22,000 machine-hours. The estimated variable manufacturing overhead was $8.65 per machine-hour and the estimated total fixed manufacturing overhead was $609,400. The predetermined overhead rate for the recently completed year was closest to:

QuikCard processes credit card receipts for local banks. QuikCard processed 1,400,000 receipts in October. All receipts are processed the same day they are received. October costs were labor of $14,000 and overhead of $28,000. What is the cost to process 1,000 receipts?

Distinguish between job costing, process costing, and operations costing. Give an example of a company that would use each.

Tidy Furniture Company uses a job costing system. The following debits (credits) appeared in the Work-in-Process Inventory account for June 2020: Description Debits Credits June 1 Balance \ 20,000 Entire month Direct Materials 80,000 Entire month Direct Labor 60,000 Entire month Marufacturing overhead 45,000 Entire month Transferred out \ 120,000 Tidy applies overhead to production based on direct labor cost at a predetermined rate of 75%. Job 1000, the only job still in process at the end of June, has been charged with direct labor of $30,000. Tidy's Manufacturing Overhead account showed a credit balance of $10,000 at the end of June 2020. Required: (a) Calculate the amount of direct materials charged to Job 1000. (b) Compute the actual overhead for June 2020.

If the Beginning Balance (BB) equals the Ending Balance (EB), then the Transfers In (TI) equal the Transfers Out (TO).

The management of Marysville Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 48,000 machine-hours. In addition, capacity is 53,000 machine-hours and the actual activity for the year is 47,700 machine-hours. All of the manufacturing overhead is fixed and is $1,144,800 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year, as well as the manufacturing overhead at capacity, and the actual amount of manufacturing overhead for the year. Job J42O, which required 40 machine-hours, is one of the jobs worked on during the year. Required: (a) Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base. (b) Determine how much overhead would be applied to Job J42O if the predetermined overhead rate is based on the estimated amount of the allocation base. (c) Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity. (d) Determine how much overhead would be applied to Job J42O if the predetermined overhead rate is based on the amount of the allocation base at capacity.

Technical Measurement Company manufactures precision-measuring devices used by industrial companies in various capacities. The devices are produced in two stages: Assembly and Testing. The company has no beginning inventories because all units produced last year were sold by the end of the year. At the beginning of the year, the company has an order of 8,000 units. The company's predetermined overhead rate is based on materials used in assembly and direct labor hours in testing. Information concerning the predetermined overhead rates appears below: Direct labor is paid $20 per hour. Assembly Testing Budgeted overhead \ 1,000,000 500,000 Budgeted materials use 2,000,000 50,000 Budgeted direct labor hours 200,000 100,000 Budgeted direct labor cost 3,000,000 1,500,000 Other information regarding the production process: Assembly Testing Materials requisitioned \ 2,200,000 \ 48,000 Direct labor cost 3,100,000 1,575,000 Actual overhead cost 1,200,000 475,000 Required: (a) Compute the predetermined overhead rate for each department. (b) Calculate the total and per unit cost of producing 8,000 units.

The loan department of a financial corporation makes loans to businesses. The costs of processing these loans are often several thousand dollars. All loans are initially evaluated using the same financial analysis software, but some require outside services such as appraisals and legal services. Which is the most appropriate costing system for the loan department?