Exam 3: A Costing Framework and Cost Allocation

Axe applies overhead to jobs at a predetermined rate of 80% of direct Labour cost. Job No. 9, the only job still in process at the end of March, has been charged with direct Labour of £1,000. The amount of direct materials charged to Job No. 9 was

A proper journal entry to record issuing raw materials to be used on a job would be: a. Finished Goods xxx Raw Materials. xxx b. Raw Materials. xxx Work in Process xxx c. Work in Process xxx Raw Materials. xxx d. Raw Materials. xxx Finished Goods xxx

Kelson Company applies overhead to jobs on the basis of 60% of direct Labour cost. If Job 201 shows £27,000 of manufacturing overhead applied, the direct Labour cost on the job was

The process of assigning overhead cost to jobs is known as overhead application

Compare and Contrast the costing systems for Job Order and Product Process. Are they basically the same or different?

Which of the following would probably be the least appropriate allocation base for allocating overhead in a highly automated manufacturer of specialty valves?

Newcastle Company's beginning and ending inventories for the month of January were as follows: January 1 January 31 Direct Materials £80,000 £78,000 Work in Process £155,000 £166,000 Finished Goods £90,000 £88,000 Production data for month follow: Direct labour cost incurred. £215,000 Actual manufacturing overhead cost incurred £145,000 Direct materials purchases £160,000 Newcastle applies manufacturing overhead cost to jobs at the rate of 75% of direct labour cost incurred. This rate has been used for many years. The company does not close under- or overapplied manufacturing overhead to Cost of Goods Sold until the end of the year. -The management accountant wants to apply manufacturing overhead at a rate of 75% of direct labour. The managing director wants to know how this change will affect reported profit. (Assuming Newcastle applies manufacturing overhead cost to jobs at the rate of 75% of direct labour cost incurred). Newcastle Company's Cost of Goods Sold for January was:

In computing its predetermined overhead rate, Brady Company included its factory insurance cost twice. This error will result in

Under- or overapplied overhead represents the difference between actual overhead costs and applied overhead costs

The use of predetermined overhead rates in a job order cost system makes it possible to estimate the total cost of a given job as soon as production is completed

Loraine Company applies manufacturing overhead to jobs using a predetermined overhead rate of 70% of direct Labour cost. Any under- or overapplied overhead cost is closed to Cost of Goods Sold at the end of the month. During August, the following transactions were recorded by the company: -The entry to dispose of the under- or overapplied overhead cost for the month would include:

In a job order cost system, the use of indirect materials previously purchased is recorded as a decrease in

The balance in the Work in Process account equals

Entry Effect on Cost ofGoods Sold a. Manufacturing Overhead 5,000 Deduct £ 5,000 Cost of Goods Sold 5,000 b. Cost of Goods Sold 5,000 Deduct £ 5,000 Manufacturing Overhead 5,000 c. Cost of Goods Sold 5,000 Add £ 5,000 Manufacturing Overhead 5,000 d. Cost of Goods Sold 5,000 Add £ 5,000 Manufacturing Overhead 5,000 The operations of the Kerry Company resulted in underapplied overhead of £5,000. The entry to close out this balance to Cost of Goods Sold and the effect of the underapplied overhead on Cost of Goods Sold would be:

In a job-order cost system, the application of manufacturing overhead usually would be recorded as a debit to

Period costs are expensed as incurred, rather than going into the Work in Process account

The Donaldson Company uses a job-order cost system. The following data were recorded for July: Added During June July 1 Work in Process Direct Direct Job Number Stok Materials Labour 475 £1,500 £500 £300 476 £1,000 £700 £900 477 £900 £1,000 £1,500 478 £700 £1,200 £2,000 Overhead is applied to jobs at the rate of 80 percent of direct materials cost. Jobs 475, 477, and 478 were completed during July and transferred to finished goods. Jobs 475 and 478 have been delivered to the customer. Donaldson's Work in Process Stock balance on July 31 was:

Both job order and process costing systems use averaging to compute unit product costs

Compute the amount of direct materials used during August if £25,000 of raw materials were purchased during the month and the inventories were as follows: Balance Balance inventories August 1 Agust 31 Raw materials. £5,000 £3,000 Work in process. 13,000 16,000 Finished goods 25,000 27,000

Paulson Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for next year: Paulson estimated that 40,000 direct Labour hours and 20,000 machine hours would be worked during the year. The predetermined overhead rate per machine hour will be: Direct materials £25,000 Direct Labour 22,000 Advertising expense. 15,000 Rent on factory building. 13,500 Depreciation on factory equipment. 6,500 Indirect materials. 10,000 Sales salaries. 28,000 Insurance on factory equipment. 12,000