Reference: 03-07 The following data are for Potras Company: \[\begin{array} { | l | l | l | } \hline & \text { Beginning } & \text { Ending } \\ \hline \text { Finished goods inventory } & \$ 30,000 & \$ 40,000 \\ \hline \text { Work in process inventory } & \$ 20,000 & \$ 13,000 \\ \hline \text { Raw materials inventory } & \$ 21,000 & \$ 26,000 \\ \hline \text { Purchases of raw materials } & \$ 71,000 & \\ \hline \text { Factory depreciation } & \$ 5,000 & \\ \hline \text { Other factory costs } & \$ 10,000 & \\ \hline \text { Direct labour } & \$ 27,000 & \\ \hline \text { Indirect labour } & \$ 6,000 & \\ \hline \text { Selling expense } & \$ 12,000 & \\ \hline \begin{array} { l } \text { Overapplied or underapplied } \\ \text { overhead } \end{array} & - 0 - & \\ \hline \end{array}\] -The cost of goods manufactured was?

A) $114,000. B) $133,000. C) $138,000. D) $121,000. A) $114,000. B) $133,000. C) $138,000. D) $121,000. D

Using the following information: \[\begin{array} { | l | l | } \hline \text { Cost of Goods Sold for the year } & \$ 840,000 \\ \hline \text { Ending Finished Goods } & \$ 100,000 \\ \hline \text { Ending Work in Process } & \$ 60,000 \\ \hline \text { Overapplied manufacturing overhead } & \$ 40,000 \\ \hline \end{array}\] Assuming overapplied overhead is considered material, using the preferred method, what would be the adjustment to Cost of Goods Sold to close the overapplied overhead?

A) A credit of $33,600. B) A debit of $40,000. C) A credit of $40,000. D) A debit of $33,600. A) A credit of $33,600. B) A debit of $40,000. C) A credit of $40,000. D) A debit of $33,600. A

Worrell Corporation has a job-order costing system. appeared in the Work in Process account for the month of March: \[\begin{array} { | l | c | } \hline \text { March 1, balance } & \$ 12,000 \\ \hline \text { March 31, direct materials } & 40,000 \\ \hline \text { March 31, direct labour } & 30,000 \\ \hline \text { March 31, manufacturing overhead applied } & 27,000 \\ \hline \text { March 31, to finished goods } & ( 100,000 ) \\ \hline \end{array}\] 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) $9,000. B) $4,250. C) $2,250. D) $2,500. A) $9,000. B) $4,250. C) $2,250. D) $2,500.

CR Company has the following estimated costs for the next year: \[\begin{array} { | l | l | } \hline \text { Direct materials } & \$ 4,000 \\ \hline \text { Direct labour } & 20,000 \\ \hline \text { Rent on factory building } & 15,000 \\ \hline \text { Sales salaries } & 25,000 \\ \hline \text { Depreciation on factory equipment } & 8,000 \\ \hline \text { Indirect labour } & 10,000 \\ \hline \text { Production supervisor's salary } & 12,000 \\ \hline \end{array}\] CR Company estimates that 20,000 labour hours will be worked during the year. If overhead is applied on the basis of direct labour hours, the overhead rate per hour will be?

A) $4.70. B) $3.25. C) $2.25. D) $3.45. A) $4.70. B) $3.25. C) $2.25. D) $3.45.

Reference: 03-06 The Milo Company's records for May contained the following information: \[\begin{array} { | l | l | l | } \hline \text { Actual direct labour-hours } & 9,000 & \text { hours } \\ \hline \text { Actual direct labour cost } & \$ 47,000 & \\ \hline \text { Direct material purchased } & 16,000 & \\ \hline \text { Direct material used } & 14,000 & \\ \hline \text { Cost of goods sold } & 100,000 & \\ \hline \text { Overapplied overhead } & 5,000 & \\ \hline \text { Ending inventories: } & & \\ \hline \text { Raw materials } & 30,000 & \\ \hline \text { Work in process } & 50,000 & \\ \hline \text { Finished goods } & 70,000 & \\ \hline \end{array}\] The company uses a predetermined overhead rate of $5.00 per direct labour hour to apply manufacturing overhead to jobs. -The Cost of Goods Manufactured during the year was:

A) $716,000. B) $766,000. C) $636,000. D) $736,000. A) $716,000. B) $766,000. C) $636,000. D) $736,000.

Reference: 03-06 The Milo Company's records for May contained the following information: \[\begin{array} { | l | l | l | } \hline \text { Actual direct labour-hours } & 9,000 & \text { hours } \\ \hline \text { Actual direct labour cost } & \$ 47,000 & \\ \hline \text { Direct material purchased } & 16,000 & \\ \hline \text { Direct material used } & 14,000 & \\ \hline \text { Cost of goods sold } & 100,000 & \\ \hline \text { Overapplied overhead } & 5,000 & \\ \hline \text { Ending inventories: } & & \\ \hline \text { Raw materials } & 30,000 & \\ \hline \text { Work in process } & 50,000 & \\ \hline \text { Finished goods } & 70,000 & \\ \hline \end{array}\] The company uses a predetermined overhead rate of $5.00 per direct labour hour to apply manufacturing overhead to jobs. -The Cost of Goods Sold for the year (before disposition of any overhead underapplied or overapplied)was:

A) $736,000. B) $801,000. C) $691,000. D) $716,000. A) $736,000. B) $801,000. C) $691,000. D) $716,000.

Simplex Company has the following estimated costs for next year: \[\begin{array} { | l | l | } \hline \text { Direct materials } & \$ 15,000 \\ \hline \text { Direct labour } & 55,000 \\ \hline \text { Sales commissions } & 75,000 \\ \hline \text { Salary of production supervisor } & 35,000 \\ \hline \text { Indirect materials } & 5,000 \\ \hline \text { Advertising expense } & 11,000 \\ \hline \text { Rent on factory equipment } & 16,000 \\ \hline \end{array}\] 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, the overhead rate per hour will be:

A) $8.56. B) $3.50. C) $7.63. D) $6.94. A) $8.56. B) $3.50. C) $7.63. D) $6.94.

Reference: 03-08 The Bus Company uses a job-order costing system. The following information was recorded for September: \[\begin{array} { | l | l | l | l | } \hline & &{ \text { Added During September } } \\ \hline \text { Job Number } & \begin{array} { l } \text { September 1 } \\ \text { Inventory } \end{array} & \begin{array} { l } \text { Direct } \\ \text { Materials } \end{array} & \text { Direct Labour } \\ \hline 1 & \$ 1,000 & \$ 300 & \$ 200 \\ \hline 2 & 1,400 & 250 & 300 \\ \hline 3 & 500 & 1,500 & 150 \\ \hline 4 & 750 & 4,000 & 400 \\ \hline \end{array}\] 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. -The ending Work in Process inventory is?

A) $7,575. B) $5,150. C) $5,350. D) $4,325. A) $7,575. B) $5,150. C) $5,350. D) $4,325.

Reference: 03-06 The Milo Company's records for May contained the following information: \[\begin{array} { | l | l | l | } \hline \text { Actual direct labour-hours } & 9,000 & \text { hours } \\ \hline \text { Actual direct labour cost } & \$ 47,000 & \\ \hline \text { Direct material purchased } & 16,000 & \\ \hline \text { Direct material used } & 14,000 & \\ \hline \text { Cost of goods sold } & 100,000 & \\ \hline \text { Overapplied overhead } & 5,000 & \\ \hline \text { Ending inventories: } & & \\ \hline \text { Raw materials } & 30,000 & \\ \hline \text { Work in process } & 50,000 & \\ \hline \text { Finished goods } & 70,000 & \\ \hline \end{array}\] The company uses a predetermined overhead rate of $5.00 per direct labour hour to apply manufacturing overhead to jobs. -Direct labour costs charged to production during the year amounted to:

A) $135,000. B) $360,000. C) $225,000. D) $216,000. A) $135,000. B) $360,000. C) $225,000. D) $216,000.

Reference: 03-09 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. \[\begin{array} { | c | l | l | l | } \hline 1 . & \text { Work in Process } & \text { XXX } & \\ \hline & \text { Manufacturing Overhead } & \text { XXX } & \\ \hline & \text { Wages Payable } & & \text { XXX } \\ \hline & & & \\ \hline 2 . & \text { Salary Expense } & \text { XXX } & \\ \hline & \text { Wages Payable } & & \text { XXX } \\ \hline & & & \\ \hline 3 . & \text { Manufacturing Overhead } & \text { XXX } & \\ \hline & \text { Accumulated Depreciation } & & \text { XXX } \\ \hline & & & \\ \hline 4 . & \text { Work in Process } & \text { XXX } & \\ \hline & \text { Raw Materials } & & \text { XXX } \\ \hline & & & \\ \hline 5 . & \text { Work in Process } & \text { XXX } & \\ \hline & \text { Manufacturing Overhead } & & \text { XXX } \\ \hline & & & \\ \hline 6 . & \text { Manufacturing Overhead } & \text { XXX } & \\ \hline & \text { Raw Materials } & & \text { XXX } \\ \hline & & & \\ \hline \text { 7. } & \text { Finished Goods } & \text { XXX } & \\ \hline & \text { Work in Process } & & \text { XXX } \\ \hline & & & \\ \hline 8 . & \text { Raw Materials } & \text { XXX } & \\ \hline & \text { Accounts Payable } & & \text { XXX } \\ \hline \end{array}\] -The entry to record the purchase of raw materials is:

A) 8. B) 4. C) 6. D) 1. A) 8. B) 4. C) 6. D) 1.

Using the following information: \[\begin{array} { | l | l | } \hline \text { Cost of Goods Sold for the year } & \$ 840,000 \\ \hline \text { Ending Finished Goods } & \$ 100,000 \\ \hline \text { Ending Work in Process } & \$ 60,000 \\ \hline \text { Underapplied manufacturing overhead } & \$ 40,000 \\ \hline \end{array}\] Assuming underapplied overhead is considered material, using the preferred method, what would be the adjustment to Cost of Goods Sold to close the underapplied overhead?

A) A credit of $33,600. B) A debit of $40,000. C) A credit of $40,000. D) A debit of $33,600. A) A credit of $33,600. B) A debit of $40,000. C) A credit of $40,000. D) A debit of $33,600.

The Watts Company uses predetermined overhead rates to apply manufacturing overhea? to jobs. The predetermined overhead rate is based on labour cost in Dept. A and on machine hours in Dept. B. At the beginning of the year, the company made the following estimates: \[\begin{array} { | l | l | l | } \hline & \text { Dept } A & \text { Dept } B \\ \hline \text { Direct labour cost } & \$ 30,000 & \$ 40,000 \\ \hline \text { Manufacturing overhead } & 60,000 & 50,000 \\ \hline \text { Direct labour hours } & 6,000 & 8,000 \\ \hline \text { Machine hours } & 2,000 & 10,000 \\ \hline \end{array}\] What predetermined overhead rates would be used in Dept A and Dept B, respectively?

A) 110% and $15.00. B) 50% and $8.00. C) 50% and $5.00. D) 200% and $5.00. A) 110% and $15.00. B) 50% and $8.00. C) 50% and $5.00. D) 200% and $5.00.

Reference: 03-04 The following T accounts are for Stanford Company: $\begin{array}{} \text { Sales Salaries Expense }&\text { Work in Process }\\ \begin{array} { l|llll } \hline\text { Beg. Bal. 7,000 }&24,000\quad(2)\\ (1)\quad\quad19,000\end{array}&\begin{array} { l|llll } \hline ?\quad\quad(8)&\quad\quad\\ ?\quad\quad(9)\end{array} \end{array}$ $\begin{array}{lll}\text { Sales Salaries Expense }&\text { Work in Process }\\ \begin{array} { l|llll } \hline (4)\quad\quad11,000&\\\\\\\\\end{array}&\begin{array} { l|llll } \hline \text {(4)}\quad\quad11,000&\quad\\ (2)\quad\quad15,000\\ (4)\quad\quad181,000\\ (6)\quad\quad31,000\\ \end{array} \end{array}$ $\begin{array}{lll}\text { Accounts Payable }&\text { Manufacturing Overhead }\\ \begin{array} { l|llll } \hline \quad\quad\quad\quad&19,000\quad\quad(1)\\&5,000\quad\quad(5)\\\\\\\end{array}&\begin{array} { l|llll } \hline \text {(2)}\quad\quad9,000&31,000\quad\quad(6)\\ (3)\quad\quad16,000&\quad\quad\quad\quad?(9)\\ (4)\quad\quad8,000\\ (5)\quad\quad5,000\\ \end{array} \end{array}$ $\begin{array}{lll}\text { Wages \& Salaries Payable }&\text { Finished Goods }\\ \begin{array} { l|llll } \hline \quad\quad\quad\quad&7,000 \text { Beg. Bal. }\\&37,000\quad\quad(4)\\\\\\\end{array}&\begin{array} { l|llll } \hline\text { Beg. Bal. 18,000 }&\quad\quad\quad\quad?(8)\\ (7)\quad\quad62,000&\quad\quad\quad\quad?\\ \text { End. Bal. 15,000 }\\ \\ \end{array} \end{array}$ $\begin{array}{lll}\text { Accumulated Depreciation-Factory }\\ \begin{array} { l|llll } \hline \quad\quad\quad\quad&82,000 \quad \text { Beg. Bal. }\\&16,000\quad\quad(3)\\\\\\\end{array}\end{array}$ -The cost of goods manufactured is?

A) $71,000. B) $62,000. C) $64,000. D) $82,000. A) $71,000. B) $62,000. C) $64,000. D) $82,000.

Exam 3: Systems Design: Job-Order Costing

Reference: 03-07 The following data are for Potras Company: Beginning Ending Finished goods inventory \ 30,000 \ 40,000 Work in process inventory \ 20,000 \ 13,000 Raw materials inventory \ 21,000 \ 26,000 Purchases of raw materials \ 71,000 Factory depreciation \ 5,000 Other factory costs \ 10,000 Direct labour \ 27,000 Indirect labour \ 6,000 Selling expense \ 12,000 Overapplied or underapplied overhead -0- -The cost of goods manufactured was?

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(Multiple Choice)

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Question 1

Correct Answer:

Verified

D

Using the following information: Cost of Goods Sold for the year \ 840,000 Ending Finished Goods \ 100,000 Ending Work in Process \ 60,000 Overapplied manufacturing overhead \ 40,000 Assuming overapplied overhead is considered material, using the preferred method, what would be the adjustment to Cost of Goods Sold to close the overapplied overhead?

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(Multiple Choice)

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Question 2

Correct Answer:

Verified

A

The entry to transfer the cost of goods manufactured for the period is:

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(Multiple Choice)

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Question 3

Correct Answer:

Verified

B

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?

(Multiple Choice)

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Question 4

Worrell Corporation has a job-order costing system. appeared in the Work in Process account for the month of March: March 1, balance \ 12,000 March 31, direct materials 40,000 March 31, direct labour 30,000 March 31, manufacturing overhead applied 27,000 March 31, to finished goods (100,000) 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?

(Multiple Choice)

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Question 5

CR Company has the following estimated costs for the next year: Direct materials \ 4,000 Direct labour 20,000 Rent on factory building 15,000 Sales salaries 25,000 Depreciation on factory equipment 8,000 Indirect labour 10,000 Production supervisor's salary 12,000 CR Company estimates that 20,000 labour hours will be worked during the year. If overhead is applied on the basis of direct labour hours, the overhead rate per hour will be?

(Multiple Choice)

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Question 6

Work in Process is a control account supported by detailed cost data contained in:

(Multiple Choice)

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Question 7

Reference: 03-06 The Milo Company's records for May contained the following information: Actual direct labour-hours 9,000 hours Actual direct labour cost \ 47,000 Direct material purchased 16,000 Direct material used 14,000 Cost of goods sold 100,000 Overapplied overhead 5,000 Ending inventories: Raw materials 30,000 Work in process 50,000 Finished goods 70,000 The company uses a predetermined overhead rate of $5.00 per direct labour hour to apply manufacturing overhead to jobs. -The Cost of Goods Manufactured during the year was:

(Multiple Choice)

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Question 8

Reference: 03-06 The Milo Company's records for May contained the following information: Actual direct labour-hours 9,000 hours Actual direct labour cost \ 47,000 Direct material purchased 16,000 Direct material used 14,000 Cost of goods sold 100,000 Overapplied overhead 5,000 Ending inventories: Raw materials 30,000 Work in process 50,000 Finished goods 70,000 The company uses a predetermined overhead rate of $5.00 per direct labour hour to apply manufacturing overhead to jobs. -The Cost of Goods Sold for the year (before disposition of any overhead underapplied or overapplied)was:

(Multiple Choice)

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Question 9

Simplex Company has the following estimated costs for next year: Direct materials \ 15,000 Direct labour 55,000 Sales commissions 75,000 Salary of production supervisor 35,000 Indirect materials 5,000 Advertising expense 11,000 Rent on factory equipment 16,000 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, the overhead rate per hour will be:

(Multiple Choice)

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Question 10

Reference: 03-08 The Bus Company uses a job-order costing system. The following information was recorded for September: Added During September Job Number September 1 Inventory Direct Materials Direct Labour 1 \ 1,000 \ 300 \ 200 2 1,400 250 300 3 500 1,500 150 4 750 4,000 400 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. -The ending Work in Process inventory is?

(Multiple Choice)

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Question 11

Reference: 03-06 The Milo Company's records for May contained the following information: Actual direct labour-hours 9,000 hours Actual direct labour cost \ 47,000 Direct material purchased 16,000 Direct material used 14,000 Cost of goods sold 100,000 Overapplied overhead 5,000 Ending inventories: Raw materials 30,000 Work in process 50,000 Finished goods 70,000 The company uses a predetermined overhead rate of $5.00 per direct labour hour to apply manufacturing overhead to jobs. -Direct labour costs charged to production during the year amounted to:

(Multiple Choice)

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Question 12

Indirect materials are not charged to a specific job but rather are included in the Manufacturing Overhead account.

(True/False)

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Question 13

Reference: 03-09 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. 1. Work in Process XXX Manufacturing Overhead XXX Wages Payable XXX 2. Salary Expense XXX Wages Payable XXX 3. Manufacturing Overhead XXX Accumulated Depreciation XXX 4. Work in Process XXX Raw Materials XXX 5. Work in Process XXX Manufacturing Overhead XXX 6. Manufacturing Overhead XXX Raw Materials XXX 7. Finished Goods XXX Work in Process XXX 8. Raw Materials XXX Accounts Payable XXX -The entry to record the purchase of raw materials is:

(Multiple Choice)

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Question 14

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

(True/False)

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Question 15

Using the following information: Cost of Goods Sold for the year \ 840,000 Ending Finished Goods \ 100,000 Ending Work in Process \ 60,000 Underapplied manufacturing overhead \ 40,000 Assuming underapplied overhead is considered material, using the preferred method, what would be the adjustment to Cost of Goods Sold to close the underapplied overhead?

(Multiple Choice)

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Question 16

The Watts Company uses predetermined overhead rates to apply manufacturing overhea? to jobs. The predetermined overhead rate is based on labour cost in Dept. A and on machine hours in Dept. B. At the beginning of the year, the company made the following estimates: Dept A Dept B Direct labour cost \ 30,000 \ 40,000 Manufacturing overhead 60,000 50,000 Direct labour hours 6,000 8,000 Machine hours 2,000 10,000 What predetermined overhead rates would be used in Dept A and Dept B, respectively?

(Multiple Choice)

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Question 17

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:

(Multiple Choice)

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Question 18

Reference: 03-04 The following T accounts are for Stanford Company: Sales Salaries Expense Work in Process Beg. Bal. 7,000 24,000(2) (1)19,000 ?(8) ?(9) Sales Salaries Expense Work in Process (4)11,000 (4) 11,000 (2)15,000 (4)181,000 (6)31,000 Accounts Payable Manufacturing Overhead 19,000(1) 5,000(5) (2) 9,000 31,000(6) (3)16,000 ?(9) (4)8,000 (5)5,000 Wages \& Salaries Payable Finished Goods 7,000 Beg. Bal. 37,000(4) Beg. Bal. 18,000 ?(8) (7)62,000 ? End. Bal. 15,000 Accumulated Depreciation-Factory 82,000 Beg. Bal. 16,000(3) -The cost of goods manufactured is?

(Multiple Choice)

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Question 19

In job-order costing, all of the following statements are correct with respect to labour time and cost except:

(Multiple Choice)

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Question 20

The entry to transfer the cost of goods manufactured for the period is:

Work in Process is a control account supported by detailed cost data contained in:

Indirect materials are not charged to a specific job but rather are included in the Manufacturing Overhead account.

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

In job-order costing, all of the following statements are correct with respect to labour time and cost except:

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Cost Behaviour: Analysis and Use

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Cost-Volume-Profit Relationships

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