Exam 6: Absorption Costing and Variable Costing

Paul Company used a predetermined overhead rate during the year just completed of $3.50 per direct labor-hour,based on an estimate of 22,000 direct labor-hours to be worked during the year.Actual overhead cost and activity during the year were: Actual manufacturing overhead cost incurred \9 0,000 Actual direct labor-hours worked 25,000 The underapplied or overapplied overhead for the year would be:

Mieras Inc.has provided the following data for the month of November.There were no beginning inventories;consequently,the direct materials,direct labor,and manufacturing overhead applied listed below are all for the current month. Work In Finished Cost of Process Goods Goods Sold Total Direct materials............. \ 3,880 \ 11,440 \5 7,070 \ 72,390 Direct labor................... 5,100 16,720 83,410 105,230 Manufacturing overhead applied.......................... Total............................. Manufacturing overhead for the month was underapplied by $2,000. The company allocates any underapplied or overapplied overhead among work in process,finished goods,and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. The journal entry to record the allocation of any underapplied or overapplied overhead for November would include the following:

Mcgarey Inc.has provided the following data for the month of November.There were no beginning inventories;consequently,the direct materials,direct labor,and manufacturing overhead applied listed below are all for the current month. Work In Finished Cost of Process Goods Goods Sold Total Direct materials............. \ 1,970 \ 10,500 \ 65,100 \7 7,570 Direct labor................... 3,150 25,250 125,550 148,950 Manufacturing overhead applied.......................... Total............................. Manufacturing overhead for the month was underapplied by $12,000. The company allocates any underapplied or overapplied overhead among work in process,finished goods,and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. -The journal entry to record the allocation of any underapplied or overapplied overhead for November would include the following:

Which of the following situations always results in underapplied overhead?

When closing overapplied manufacturing overhead to cost of goods sold,which of the following would be true?

Niglio Inc.has provided the following data for the month of December.There were no beginning inventories;consequently,the direct materials,direct labor,and manufacturing overhead applied listed below are all for the current month. Work In Finished Cost of Process Goods Goods Sold Total Direct materials............. \6 ,350 \ 16,940 \ 40,480 \ 63,700 Direct labor................... 6,960 22,330 53,360 82,650 Manufacturing overhead applied.......................... Total............................. Manufacturing overhead for the month was underapplied by $10,000. The company allocates any underapplied or overapplied overhead among work in process,finished goods,and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. The finished goods inventory at the end of December after allocation of any underapplied or overapplied overhead for the month is closest to:

Waldvogel Corporation has provided data concerning the company's Manufacturing Overhead account for the month of April.Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold,the total of the debits to the Manufacturing Overhead account was $55,000 and the total of the credits to the account was $56,000.Which of the following statements is true?

Burkhammer Inc.has provided the following data for the month of August.There were no beginning inventories;consequently,the direct materials,direct labor,and manufacturing overhead applied listed below are all for the current month. Work In Finished Cost of Process Goods Goods Sold Total Direct materials............. \ 2,260 \ 12,180 \ 81,480 \ 95,920 Direct labor................... 1,900 14,500 97,000 113,400 Manufacturing overhead applied.......................... Total............................. Manufacturing overhead for the month was underapplied by $9,000. The company allocates any underapplied or overapplied overhead among work in process,finished goods,and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. Required: Determine the cost of work in process,finished goods,and cost of goods sold AFTER allocation of the underapplied or overapplied overhead for the period.

The actual manufacturing overhead incurred at Huberty Corporation during January was $73,000,while the manufacturing overhead applied to Work in Process was $78,000.The company's Cost of Goods Sold was $349,000 prior to closing out its Manufacturing Overhead account.The company closes out its Manufacturing Overhead account to Cost of Goods Sold.Which of the following statements is true?

Explain the potential problems of using absorption costing and suggest ways to minimize these problems.

Crimp Corporation uses direct labor-hours in its predetermined overhead rate.At the beginning of the year,the estimated direct labor-hours were 15,000 hours and the total estimated manufacturing overhead was $258,000.At the end of the year,actual direct labor-hours for the year were 13,100 hours and the actual manufacturing overhead for the year was $253,000.Overhead at the end of the year was:

The sum of all amounts transferred from the Work in Process account and into the Finished Goods account represents the Cost of Goods Manufactured for the period.

Mcgarey Inc.has provided the following data for the month of November.There were no beginning inventories;consequently,the direct materials,direct labor,and manufacturing overhead applied listed below are all for the current month. Work In Finished Cost of Process Goods Goods Sold Total Direct materials............. \ 1,970 \ 10,500 \ 65,100 \7 7,570 Direct labor................... 3,150 25,250 125,550 148,950 Manufacturing overhead applied.......................... Total............................. Manufacturing overhead for the month was underapplied by $12,000. The company allocates any underapplied or overapplied overhead among work in process,finished goods,and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. -The cost of goods sold for November after allocation of any underapplied or overapplied overhead for the month is closest to:

If a company applies overhead to jobs on the basis of a predetermined overhead rate,a credit balance in the Manufacturing Overhead account at the end of any period means that:

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

Roswick Inc.has provided the following data for the month of August.There were no beginning inventories;consequently,the direct materials,direct labor,and manufacturing overhead applied listed below are all for the current month. Work In Finished Cost of Process Goods Goods Sold Total Direct materials............. \ 2,990 \ 10,560 \ 40,960 \ 54,510 Direct labor................... 4,720 17,160 66,560 88,440 Manufacturing overhead applied.......................... Total............................. Manufacturing overhead for the month was underapplied by $3,000. The company allocates any underapplied or overapplied overhead among work in process,finished goods,and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. The journal entry to record the allocation of any underapplied or overapplied overhead for August would include the following:

Alvernaz Inc.has provided the following data for the month of April.There were no beginning inventories;consequently,the direct materials,direct labor,and manufacturing overhead applied listed below are all for the current month. Work In Finished Cost of Process Goods Goods Sold Total Direct materials............. \ 7,440 \ 13,300 \ 35,150 \ 55,890 Direct labor................... 7,560 18,200 48,100 73,860 Manufacturing overhead applied.......................... Total............................. Manufacturing overhead for the month was overapplied by $2,000. The company allocates any underapplied or overapplied overhead among work in process,finished goods,and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. -The work in process inventory at the end of April after allocation of any underapplied or overapplied overhead for the month is closest to:

Roofe Inc.has provided the following data for the month of October.There were no beginning inventories;consequently,the direct materials,direct labor,and manufacturing overhead applied listed below are all for the current month. Work In Finished Cost of Process Goods Goods Sold Total Direct materials............. \ 23,900 \ 16,800 \ 112,840 \ 133,540 Direct labor................... 1,310 12,000 80,600 93,910 Manufacturing overhead applied.......................... Total............................. Manufacturing overhead for the month was underapplied by $2,000. The company allocates any underapplied or overapplied overhead among work in process,finished goods,and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. -The journal entry to record the allocation of any underapplied or overapplied overhead for October would include the following: