Deck 6: Fundamentals of Product and Service Costing

Question 1

Regression analysis can be used to estimate the strength of the relationship between a cost and potential allocation bases for that cost.

Answer 1

True

Question 2

The selection of an appropriate cost allocation base is more important for single-stage cost allocation systems than for two-stage cost allocation systems.

Answer 2

False

Question 3

Process costing systems do not separate and record direct material and direct labor costs for each individual unit of product.

Answer 3

True

Question 4

Individual product costs are relevant for managerial decision-making but irrelevant for preparing the financial statements..

Question 5

Overestimating a period's allocation base will understate the predetermined overhead rate.

Question 6

Hospitals are more likely to use a process costing system than a job order costing system.

Question 7

It is important that cost management systems are designed using the cost-benefit principle so that the costs of gathering additional information are balanced against the benefits of that information.

Question 8

"Beginning Balance (BB)plus Transfers Out (TO)equals Ending Balance (EB)plus Transfers In (TI)".

Question 9

The predetermined overhead rate is calculated by dividing the prior period's overhead cost by the prior period's allocation base (i.e. ,activity level).

Question 10

The only purpose of cost information is to determine the individual product cost on a per unit basis in order to value inventory.

Question 11

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

Question 12

Operation costing is a hybrid system used in manufacturing goods that have some common characteristics and some individual characteristics.

Question 13

The two-stage cost allocation process allocates costs to multiple cost pools and then to individual cost objects using different allocation bases.

Question 14

One of the most common decisions facing managers is determining the price at which to sell one of their products or to provide their services.

Question 15

Cost management systems should be designed to report the same costs to each decision-maker.

Question 16

The Transfers In (TI)costs in the basic cost flow model of a manufacturing firm are direct materials,direct labor,and manufacturing overhead.

Question 17

In general,indirect costs are allocated,while direct costs are assigned.

Question 18

If a company has three cost pools,it should have three different cost allocation bases.

Question 19

The basic cost flow model applies only to physical units and not to costs.

Question 20

The term "product" often refers to an organization's output and includes both tangible items (e.g. ,chair,desk,etc. )and intangible items (e.g. ,services provided)

Question 21

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.

A) Only A is true.
B) Only B is true.
C) Both A and B are true.
D) Neither A nor B is true.

Question 22

The basic cost flow model is:

A) BB + TO - TI = EB.
B) BB + EB - TO = TI.
C) BB - TI - TO = EB.
D) BB + TI - TO = EB.

Question 23

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

A) continuous flow process.
B) cost management system.
C) two-stage allocation system.
D) operations cost.

Question 24

The basic cost flow model is:

A) EB + BB = TI + TO.
B) BB + EB = TI + TO.
C) EB - BB = TI - TO.
D) EB - BB = TO - TI.

Question 25

For Case (A)above,what is the Beginning Balance (BB)? $$\begin{array} { | l | r | r | r | } \hline & \text { Case } ( A ) & \text { Case } ( B ) & \text { Case } ( C ) \\\hline \text { Beginning Balance (BB) } & ? & \$ 23,000 & \$ 7,900 \\\hline \text { Ending Balance (EB) } & \$ 67,000 & 19,200 & 8,300 \\\hline \text { Transterred In (T) } & 149,600 & 97,700 & ? \\\hline \text { Transterred Out } ( T O ) & 164,600 & ? & 21,100 \\\hline\end{array}$$

A) $52,000.
B) $82,000.
C) $67,000.
D) $97,600.

Question 26

For Case (A)above,what is the Ending Balance (EB)? $$\begin{array} { | l | r | r | r | } \hline & \text { Case } ( A ) & \text { Case (B) } & \text { Case (C) } \\\hline \text { Beginning Balance (BB) } & \$ 36,520 & \$ 15,100 & \$ 5,600 \\\hline \text { Ending Balance (EB) } & ? & 11,400 & 12,200 \\\hline \text { Transterred In (T)) } & 166,200 & ? & 68,400 \\\hline \text { Transterred Out } ( T O ) & 164,400 & 93,200 & ? \\\hline\end{array}$$

A) $36,920.
B) $36,520.
C) $34,720.
D) $38,320.

Question 27

For Case (C)above,what is the Transferred-Out (TO)? $$\begin{array} { | l | r | r | r | } \hline & \text { Case } ( A ) & \text { Case (B) } & \text { Case (C) } \\\hline \text { Beginning Balance (BB) } & \$ 36,520 & \$ 15,100 & \$ 5,600 \\\hline \text { Ending Balance (EB) } & ? & 11,400 & 12,200 \\\hline \text { Transterred In (T)) } & 166,200 & ? & 68,400 \\\hline \text { Transterred Out } ( T O ) & 164,400 & 93,200 & ? \\\hline\end{array}$$

A) $75,000.
B) $61,800.
C) $68,400.
D) $80,600.

Question 28

The basic cost flow model is:

A) EB + TO = TI + BB.
B) BB + TO - TI = EB.
C) EB = BB - TI + TO.
D) EB - BB = TO - TI.

Question 29

The Cost Flow Diagram for product costing includes all of the following costs except:

A) selling expenses.
B) direct materials.
C) direct labor.
D) fixed manufacturing overheaD.
Selling expense is not a product cost;it is a period cost.

Question 30

For Case (C)above,what is the amount Transferred In (TI)? $$\begin{array} { | l | r | r | r | } \hline & \text { Case } ( A ) & \text { Case } ( B ) & \text { Case } ( C ) \\\hline \text { Beginning Balance (BB) } & ? & \$ 23,000 & \$ 7,900 \\\hline \text { Ending Balance (EB) } & \$ 67,000 & 19,200 & 8,300 \\\hline \text { Transterred In (T) } & 149,600 & 97,700 & ? \\\hline \text { Transterred Out } ( T O ) & 164,600 & ? & 21,100 \\\hline\end{array}$$

A) $12,800.
B) $20,700.
C) $21,500.
D) $29,400.

Question 31

For Case (B)above,what is the Transferred-In (TI)? $$\begin{array} { | l | r | r | r | } \hline & \text { Case } ( A ) & \text { Case (B) } & \text { Case (C) } \\\hline \text { Beginning Balance (BB) } & \$ 36,520 & \$ 15,100 & \$ 5,600 \\\hline \text { Ending Balance (EB) } & ? & 11,400 & 12,200 \\\hline \text { Transterred In (T)) } & 166,200 & ? & 68,400 \\\hline \text { Transterred Out } ( T O ) & 164,400 & 93,200 & ? \\\hline\end{array}$$

A) $96,900.
B) $119,700.
C) $89,500.
D) $66,700.

Question 32

For Case (A)above,what is the Beginning Balance (BB)? $$\begin{array} { | l | r | r | r | } \hline & \text { Case } ( A ) & \text { Case } ( B ) & \text { Case } ( C ) \\\hline \text { Beginning Balance (BB) } & ? & \$ 8,630 & \$ 71,600 \\\hline \text { Ending Balance (EB) } & 34,360 & ? & 75,100 \\\hline \text { Transterred In } ( T ) ) & 194,600 & 42,600 & ? \\\hline \text { Transterred Out } ( T O ) & 192,800 & 46,500 & 181,900 \\\hline\end{array}$$

A) $36,400.
B) $32,560.
C) $37,680.
D) $34,040.

Question 33

Which of the following statements is (are)false regarding cost allocations and product costing? (A)It is easier to determine the individual product cost for a manufacturer than it is for a wholesaler.(B)In general,indirect costs are assigned,while direct costs are allocated.

A) Only A is false.
B) Only B is false.
C) Both A and B are false.
D) Neither A nor B is false.

Question 34

For Case (C)above,what is the Transferred-In (TI)? $$\begin{array} { | l | r | r | r | } \hline & \text { Case } ( A ) & \text { Case } ( B ) & \text { Case } ( C ) \\\hline \text { Beginning Balance (BB) } & ? & \$ 8,630 & \$ 71,600 \\\hline \text { Ending Balance (EB) } & 34,360 & ? & 75,100 \\\hline \text { Transterred In } ( T ) ) & 194,600 & 42,600 & ? \\\hline \text { Transterred Out } ( T O ) & 192,800 & 46,500 & 181,900 \\\hline\end{array}$$

A) $146,700.
B) $178,400.
C) $190,790.
D) $185,400.

Question 35

For Case (B)above,what is the Ending Balance (EB)? $$\begin{array} { | l | r | r | r | } \hline & \text { Case } ( A ) & \text { Case } ( B ) & \text { Case } ( C ) \\\hline \text { Beginning Balance (BB) } & 64,800 & \$ 59,840 & ? \\\hline \text { Ending Balance (EB) } & 61,300 & ? & 13,800 \\\hline \text { Transterred In } ( T ) ) & 189,100 & 79,530 & 65,200 \\\hline \text { Transterred Out } ( T O ) & ? & 76,420 & 67,300 \\\hline\end{array}$$

A) $139,300.
B) $136,260.
C) $62,950.
D) $56,730.

Question 36

For Case (A)above,what is the Transferred-Out (TO)? $$\begin{array} { | l | r | r | r | } \hline & \text { Case } ( A ) & \text { Case } ( B ) & \text { Case } ( C ) \\\hline \text { Beginning Balance (BB) } & 64,800 & \$ 59,840 & ? \\\hline \text { Ending Balance (EB) } & 61,300 & ? & 13,800 \\\hline \text { Transterred In } ( T ) ) & 189,100 & 79,530 & 65,200 \\\hline \text { Transterred Out } ( T O ) & ? & 76,420 & 67,300 \\\hline\end{array}$$

A) $185,600.
B) $192,600.
C) $126,100.
D) $178,890.

Question 37

For Case (B)above,what is the amount Transferred Out (TO)? $$\begin{array} { | l | r | r | r | } \hline & \text { Case } ( A ) & \text { Case } ( B ) & \text { Case } ( C ) \\\hline \text { Beginning Balance (BB) } & ? & \$ 23,000 & \$ 7,900 \\\hline \text { Ending Balance (EB) } & \$ 67,000 & 19,200 & 8,300 \\\hline \text { Transterred In (T) } & 149,600 & 97,700 & ? \\\hline \text { Transterred Out } ( T O ) & 164,600 & ? & 21,100 \\\hline\end{array}$$

A) $93,900.
B) $101,500.
C) $116,900.
D) $120,700.

Question 38

For Case (B)above,what is the Ending Balance (EB)? $$\begin{array} { | l | r | r | r | } \hline & \text { Case } ( A ) & \text { Case } ( B ) & \text { Case } ( C ) \\\hline \text { Beginning Balance (BB) } & ? & \$ 8,630 & \$ 71,600 \\\hline \text { Ending Balance (EB) } & 34,360 & ? & 75,100 \\\hline \text { Transterred In } ( T ) ) & 194,600 & 42,600 & ? \\\hline \text { Transterred Out } ( T O ) & 192,800 & 46,500 & 181,900 \\\hline\end{array}$$

A) $4,730.
B) $12,530.
C) $46,500.
D) $8,630.

Question 39

The basic cost flow model is:

A) BB + TO = TI + EB.
B) BB + TO - TI = EB.
C) EB = BB + TI - TO.
D) EB - BB = TO - TI.

Question 40

Which of the following statements doesnot reflect one of the fundamental themes underlying the design of cost systems for managerial purposes?

A) Cost systems should have a decision focus.
B) Different cost information is used for different purposes.
C) Cost information for managerial purposes must meet the cost-benefit principle.
D) The primary purpose of cost systems is to gather information to value inventory.

Question 41

When a manufacturing company has a highly automated manufacturing plant producing many different products,what is probably the most appropriate basis of applying overhead costs to work-in-process?

A) Direct labor hours.
B) Direct labor dollars.
C) Machine hours.
D) Cost of materials useD.
Machine hours would more closely reflect the usage of the automated equipment.

Question 42

Refresh produces soft drinks and sodas.Production of 100,000 liters was started in February,85,000 liters were completed.Material costs were $38,220 for the month while conversion costs were $16,380.There was no beginning work-in-process;the ending work-in-process was 40% complete.What is the cost of the product that remains in work-in-process?

A) $16,380.
B) $51,000.
C) $3,600.
D) $9,000.

Question 43

The predetermined manufacturing overhead rate for 2016 was $4.00 per direct labor hour;employees were paid $5.00 per hour.If the estimated direct labor cost was $75,000,what was the estimated manufacturing overhead?

A) $15,000.
B) $60,000.
C) $75,000.
D) $93,750.

Question 44

Fortify,Inc.uses a predetermined manufacturing overhead rate based on direct labor hours to apply its indirect product costs to jobs.The following information has been collected for the previous year: Fortify used 25,000 direct labor hours and 50,000 machine hours during the previous year.What is the predetermined overhead rate per direct labor hour?
$$\begin{array} { | l | r | } \hline \text { Direct materials } & \$ 150,000 \\\hline \text { Direct labor } & 200,000 \\\hline \text { Sales commissions } & 100,000 \\\hline \text { Indirect labor } & 50,000 \\\hline \text { Rent on offic e equipment } & 25,000 \\\hline \text { Depreciation - factory building } & 75,000 \\\hline \text { Utilities - factory } & 125,000 \\\hline\end{array}$$

A) $24.00.
B) $15.00.
C) $14.00.
D) $10.00.

Question 45

Slider processes rebate requests for a large building supply firm.Slider processed 420,000 rebates in March.All rebates are processed the same day they are received.March costs were labor of $28,000 and overhead of $14,000.What is the cost to process 1,000 rebates?

A) $66.67.
B) $100.00.
C) $10.00.
D) $42.00.

Question 46

MegaRock produces quick setting concrete mix.Production of 200,000 tons was started in April,190,000 tons were completed.Material costs were $3,152,000 for the month while conversion costs were $591,000.There was no beginning work-in-process;the ending work-in-process was 70% complete.What is the material cost of the product that remains in work-in-process?

A) $315,200.
B) $157,600.
C) $112,000.
D) $160,000.

Question 47

Magnum Company uses direct labor cost as a basis for computing its predetermined overhead rate.In computing the predetermined overhead rate for 2016,the company misclassified a portion of direct labor cost as indirect labor.The effect of this misclassification will be to:

A) understate the predetermined overhead rate.
B) overstate the predetermined overhead rate.
C) there will be no effect on the predetermined overhead rate.
D) Can't tell from the information provideD.
Misclassifying the direct labor will cause the numerator to be larger and the denominator to be smaller,thus overstating the rate.

Question 48

Rapid Enterprises applies manufacturing overhead to its cost objects on the basis of 75% of direct material cost.If Job 17X had $72,000 of manufacturing overhead applied to it during May,the direct materials assigned to Job 17X was:

A) $54,000.
B) $72,000.
C) $96,000.
D) $126,000.

Question 49

The following information has been gathered for the Harrell Manufacturing Company for its fiscal year ending December 31: What is the predetermined manufacturing overhead rate per direct labor hour?
$$\begin{array} { | l | r | } \hline \text { Actual manufacturing overhead costs } & \$ 212,500 \\\hline \text { Actual direct labor hours } & 54,900 \\\hline \text { Actual direct labor costs } & \$ 445,000 \\\hline \text { Estimated manufacturing overhead costs } & \$ 210,000 \\\hline \text { Estimated direct labor } & \$ 434,000 \\\hline \text { Estimated direct labor hours } & 56,000 \\\hline\end{array}$$

A) $3.87.
B) $3.79.
C) $3.83.
D) $3.75.

Question 50

Flare Co.manufactures textiles.Among Flare's 2016 manufacturing costs were the following salaries and wages: What was the amount of Flare's 2016 direct labor? (CPA adapted)
$$\begin{array} { | l | r | } \hline \text { Loom operators } & \$ 120,000 \\\hline \text { Factory foremen } & 45,000 \\\hline \text { Machine mechanics } & 30,000 \\\hline\end{array}$$

A) $195,000.
B) $165,000.
C) $150,000.
D) $120,000.

Question 51

Flare Co.manufactures textiles.Among Flare's 2016 manufacturing costs were the following salaries and wages: What was the amount of Flare's 2016 indirect labor? (CPA adapted)
$$\begin{array} { | l | r | } \hline \text { Loom operators } & \$ 120,000 \\\hline \text { Factory foremen } & 45,000 \\\hline \text { Machine mechanics } & 30,000 \\\hline\end{array}$$

A) $75,000
B) $165,000
C) $150,000
D) $120,000

Question 52

For Case (C)above,what is the Beginning Balance (BB)? $$\begin{array} { | l | r | r | r | } \hline & \text { Case } ( A ) & \text { Case } ( B ) & \text { Case } ( C ) \\\hline \text { Beginning Balance (BB) } & 64,800 & \$ 59,840 & ? \\\hline \text { Ending Balance (EB) } & 61,300 & ? & 13,800 \\\hline \text { Transterred In } ( T ) ) & 189,100 & 79,530 & 65,200 \\\hline \text { Transterred Out } ( T O ) & ? & 76,420 & 67,300 \\\hline\end{array}$$

A) $15,900.
B) $2,100.
C) $11,700.
D) $13,800.

Question 53

MegaRock produces quick setting concrete mix.Production of 200,000 tons was started in April,190,000 tons were completed.Material costs were $3,152,000 for the month while conversion costs were $591,000.There was no beginning work-in-process;the ending work-in-process was 70% complete.What is the cost of the product that was completed and transferred to finished goods?

A) $3,610,000.
B) $3,555,850.
C) $2,994,400.
D) $3,743,000.

Question 54

The following direct labor information pertains to the manufacture of product Scour: What is the standard direct labor cost per unit of product Scour? (CPA adapted)
$$\begin{array} { | l | l | } \hline \text { Time required to make one unit } & 2 \text { direct labor } \\\text { hours } \\\hline \text { Number of direct workers } & 50 \\\hline \text { Number of productive hours per week, } & 40 \\\text { per worker } & \$ 500 \\\hline \text { Weekly wages per worker } & 20 \% \text { of wages } \\\hline \text { Workers' benefits treated as direct labor } \\\text { costs } & \\\hline\end{array}$$

A) $30.
B) $24.
C) $15.
D) $12.

Question 55

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?

A) $10.00.
B) $30.00.
C) $20.00.
D) $42.00.

Question 56

In a labor intensive company in which more overhead is used by the more highly skilled and paid employees,which activity base would be most appropriate for applying overhead to production?

A) Direct labor cost.
B) Direct material cost.
C) Direct labor hours.
D) Machine hours.

Question 57

The Titan Enterprises Company manufactures cleaning spray for public schools.During 2016,the company spent $600,000 on prime costs and $800,000 on conversion costs.Overhead is applied at a rate of 150% of direct labor costs.How much did the company allocate (apply)for manufacturing overhead during 2016?

A) $480,000.
B) $360,000.
C) $320,000.
D) $300,000.

Question 58

MegaRock produces quick setting concrete mix.Production of 200,000 tons was started in April,190,000 tons were completed.Material costs were $3,152,000 for the month while conversion costs were $591,000.There was no beginning work-in-process;the ending work-in-process was 70% complete.What is the cost of the product that remains in work-in-process?

A) $591,000.
B) $131,005.
C) $187,150.
D) $133,000.

Question 59

The following information has been gathered for the Harrell Manufacturing Company for its fiscal year ending December 31: What is the predetermined manufacturing overhead rate,assuming direct labor cost is used as the activity base?
$$\begin{array} { | l | r | } \hline \text { Actual manufacturing overhead costs } & \$ 212,500 \\\hline \text { Actual direct labor hours } & 54,900 \\\hline \text { Actual direct labor costs } & \$ 445,000 \\\hline \text { Estimated manufacturing overhead costs } & \$ 210,000 \\\hline \text { Estimated direct labor } & \$ 434,000 \\\hline \text { Estimated direct labor hours } & 56,000 \\\hline\end{array}$$

A) 48.4%.
B) 47.2%.
C) 49.0%.
D) 47.8%.

Question 60

Refresh produces soft drinks and sodas.Production of 100,000 liters was started in February,85,000 liters were completed.Material costs were $38,220 for the month while conversion costs were $16,380.There was no beginning work-in-process;the ending work-in-process was 40% complete.What is the cost of the product that was completed and transferred to finished goods?

A) $54,600.
B) $51,000.
C) $46,410.
D) $38,220.

Question 61

The predetermined manufacturing overhead rate for the year was $14.00 per direct labor hour;employees were paid $17.50 per hour.If the estimated direct labor cost was $315,000,what was the estimated manufacturing overhead?

A) $22,500.
B) $90,000.
C) $252,000.
D) $393,750.

Question 62

The following information has been gathered for Foxmoor Industries for its fiscal year ending December 31: What is the predetermined factory overhead rate per labor hour?
$$\begin{array} { | l | r | } \hline \text { Estimated factory ouerhead costs } & \$ 1,500,000 \\\hline \text { Actual factory overhead costs } & \$ 1,776,400 \\\hline \text { Estimated labor hours } & 48,000 \\\hline \text { Actual labor hours } & 51,700 \\\hline \text { Estimated labor costs } & \$ 756,000 \\\hline \text { Actual labor costs } & \$ 840,125 \\\hline \text { Estimated machine hours } & 96,000 \\\hline \text { Actual machine hours } & 102,600 \\\hline\end{array}$$

A) $29.01.
B) $31.25.
C) $37.01.
D) $34.36.

Question 63

The predetermined manufacturing overhead rate for the year was 140% of direct labor cost;employees were paid $17.50 per hour.If the estimated direct labor hours were 15,000,what was the estimated manufacturing overhead?

A) $210,000.
B) $187,500.
C) $262,500.
D) $367,500.

Question 64

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

A) Machine-hours.
B) Power consumption.
C) Direct labor-hours.
D) Machine setups.

Question 65

Arbor,Inc.has estimated overhead to be $300,000 and labor hours to be 30,000.Actual overhead turned out to be $310,000 when 30,500 labor hours were worked.The predetermined overhead rate would be:

A) 101.67%.
B) $10.00.
C) $10.16.
D) $10.33.

Question 66

Savor Flavor Supplies applies manufacturing overhead to its products on the basis of 50% of direct material cost.If a job had $35,000 of manufacturing overhead applied to it during May,the direct materials assigned to the job was:

A) $17,500.
B) $35,000.
C) $70,000.
D) $140,000.

Question 67

Trippett Industries manufactures cleaning products.During the year,the company spent $600,000 on chemicals and $728,000 on conversion costs.Overhead is applied at a rate of 180% of direct labor costs.How much did the company spend on manufacturing overhead during the year?

A) $260,000.
B) $468,000.
C) $128,000.
D) $404,444.

Question 68

The following information has been gathered for Catalyst Legal Services for its fiscal year ending December 31: What is the predetermined office overhead rate per billable labor dollar?
$$\begin{array} { | l | r | } \hline \text { Actual office overhead costs } & \$ 1,275,500 \\\hline \text { Actual billable labor hours } & 44,600 \\\hline \text { Actual billable labor costs } & \$ 3,960,000 \\\hline \text { Estimated office overhead costs } & \$ 1,080,000 \\\hline \text { Estimated billable labor hours } & 48,000 \\\hline \text { Estimated billable labor costs } & \$ 4,320,000 \\\hline\end{array}$$

A) 118.10%.
B) 25.00%.
C) 32.21%.
D) 400.00%.

Question 69

The following information has been gathered for Catalyst Legal Services for its fiscal year ending December 31: What is the predetermined office overhead rate per billable labor hour?
$$\begin{array} { | l | r | } \hline \text { Actual office overhead costs } & \$ 1,275,500 \\\hline \text { Actual billable labor hours } & 44,600 \\\hline \text { Actual billable labor costs } & \$ 3,960,000 \\\hline \text { Estimated office overhead costs } & \$ 1,080,000 \\\hline \text { Estimated billable labor hours } & 48,000 \\\hline \text { Estimated billable labor costs } & \$ 4,320,000 \\\hline\end{array}$$

A) $28.60.
B) $26.57.
C) $22.50.
D) $24.22.

Question 70

In computing its predetermined overhead rate,Stiles Company inadvertently left its indirect labor costs out of the computation.This oversight will cause:

A) Manufacturing Overhead to be overapplied.
B) the Cost of Goods Manufactured to be understated.
C) the debits to the Manufacturing Overhead account to be understated.
D) the ending balance in Work-in-Process to be overstateD.
The omission of an overhead item will cause the application to be less than it should be and Cost of Goods Manufactured will be less than it should be.

Question 71

Markham Corporation uses a job-order costing system.The following data are for last year: Markham applies overhead using a predetermined rate based on direct labor-hours.What predetermined overhead rate was used last year?
$$\begin{array} { | l | r | } \hline \text { Estimated direct labor-hours } & 12,000 \\\hline \text { Estimated manufacturing overhead costs } & \$ 39,000 \\\hline \text { Actual direct labor-hours } & 11,000 \\\hline \text { Actual manufacturing overhead costs } & \$ 37,000 \\\hline\end{array}$$

A) $3.55 per direct labor-hour.
B) $3.25 per direct labor-hour.
C) $3.08 per direct labor-hour.
D) $3.36 per direct labor-hour.

Question 72

Hyu Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year.At the beginning of the most recently completed year,the company estimated the labor-hours for the upcoming year at 52,000 labor-hours.The estimated variable manufacturing overhead was $2.78 per labor-hour and the estimated total fixed manufacturing overhead was $1,192,360.The actual labor-hours for the year turned out to be 52,600 labor-hours.The predetermined overhead rate for the recently completed year was closest to:

A) $2.78.
B) $25.45.
C) $25.71.
D) $22.93.

Question 73

The following direct labor information pertains to the manufacture of product Glaze: What is the standard direct labor cost per unit of product Glaze? (CPA adapted)
$$\begin{array} { | l | l | } \hline \text { Time required to make one unit } & 3 \text { direct labor } \\\text { hours } \\\hline \text { Number of direct workers } & 25 \\\hline \text { Number of productive hours per week, } & 36 \\\text { per worker } & \$ 700 \\\hline \text { Weekly wages per worker } & 30 \% \text { of wages } \\\hline \text { Workers' benefits treated as direct labor } \\\text { costs } & \\\hline\end{array}$$

A) $19.44.
B) $25.28.
C) $58.33.
D) $75.83.

Question 74

The Work in Process inventory account of a manufacturing firm shows a balance of $3,000 at the end of an accounting period.The job cost sheets of two uncompleted jobs show charges of $500 and $300 for materials,and charges of $400 and $600 for direct labor.From this information,it appears that the company is using a predetermined overhead rate,as a percentage of direct labor costs,of:

A) 83%.
B) 120%.
C) 40%.
D) 300%.

Question 75

At the beginning of the year,manufacturing overhead for the year was estimated to be $267,500.At the end of the year,actual direct labor-hours for the year were 22,100 hours,the actual manufacturing overhead for the year was $262,500,and manufacturing overhead for the year was overapplied by $13,750.If the predetermined overhead rate is based on direct labor-hours,then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:

A) 22,100 direct labor-hours.
B) 19,900 direct labor-hours.
C) 21,000 direct labor-hours.
D) 21,400 direct labor-hours.

Question 76

The following information has been gathered for Foxmoor Industries for its fiscal year ending December 31: What is the predetermined factory overhead rate per labor dollar?
$$\begin{array} { | l | r | } \hline \text { Estimated factory ouerhead costs } & \$ 1,500,000 \\\hline \text { Actual factory overhead costs } & \$ 1,776,400 \\\hline \text { Estimated labor hours } & 48,000 \\\hline \text { Actual labor hours } & 51,700 \\\hline \text { Estimated labor costs } & \$ 756,000 \\\hline \text { Actual labor costs } & \$ 840,125 \\\hline \text { Estimated machine hours } & 96,000 \\\hline \text { Actual machine hours } & 102,600 \\\hline\end{array}$$

A) 178.54%.
B) 211.44%.
C) 118.43%.
D) 198.41%.

Question 77

Which of the following is the correct formula to compute the predetermined overhead rate?

A) Estimated total units in the allocation base divided by estimated total manufacturing overhead costs.
B) Estimated total manufacturing overhead costs divided by estimated total units in the allocation base.
C) Actual total manufacturing overhead costs divided by estimated total units in the allocation base.
D) Estimated total manufacturing overhead costs divided by actual total units in the allocation base.

Question 78

Arbor,Inc.had overhead of $310,000 during the year when $260,000 in labor costs were incurred.Estimates at the start of the year for overhead and labor costs were $300,000 for overhead and $250,000 for labor costs.The predetermined overhead rate would be:

A) 101.67%.
B) 104.00%.
C) 120.00%.
D) 83.33%.

Question 79

The following information has been gathered for Foxmoor Industries for its fiscal year ending December 31: What is the predetermined factory overhead rate per machine hour?
$$\begin{array} { | l | r | } \hline \text { Estimated factory ouerhead costs } & \$ 1,500,000 \\\hline \text { Actual factory overhead costs } & \$ 1,776,400 \\\hline \text { Estimated labor hours } & 48,000 \\\hline \text { Actual labor hours } & 51,700 \\\hline \text { Estimated labor costs } & \$ 756,000 \\\hline \text { Actual labor costs } & \$ 840,125 \\\hline \text { Estimated machine hours } & 96,000 \\\hline \text { Actual machine hours } & 102,600 \\\hline\end{array}$$

A) $15.625.
B) $14.620.
C) $18.504.
D) $17.314.

Question 80

The cost per unit of the allocation base used to charge overhead to products is the:

A) job cost.
B) predetermined overhead rate.
C) operational cost.
D) process cost.