Question 1

Rogers Manufacturing's overhead at year-end was underapplied by $5,800, a small amount given the firm's size. The year-end journal entry to record this amount would include:

Accepted Answer

A)   a debit to Cost of Goods Sold.
B)   a debit to Manufacturing Overhead.
C)   a debit to Work-in-Process Inventory.
D)   a credit to Cost of Goods Sold.
E)   a credit to Work-in-Process Inventory. A

Question 2

Which of the following is the correct method to calculate a predetermined overhead rate?

Accepted Answer

A)   Budgeted total manufacturing cost/budgeted amount of cost driver.
B)   Budgeted overhead cost / budgeted amount of cost driver.
C)   Budgeted amount of cost driver / budgeted overhead cost.
D)   Actual overhead cost /budgeted amount of cost driver.
E)   Actual overhead cost / actual amount of cost driver. B

Question 3

Kwik Products uses a predetermined overhead application rate of $18 per labor hour. A review of the company's accounting records revealed budgeted manufacturing overhead for the period of $621,000, applied manufacturing overhead of $590,400, and overapplied overhead of $11,900.
Required: 
A. Determine Kwik's actual labor hours, budgeted labor hours, and actual manufacturing overhead.
B. Present the necessary year-end journal entry to handle the overapplied overhead, assuming that the firm allocates over- or underapplied overhead to Cost of Goods Sold.

Accepted Answer

A. Actual labor hours: $590,400 /$18 per hour = 32,800 hours
Budgeted labor hours: $621,000/ $18 per hour = 34,500 hours
Actual manufacturing overhead: $590,400 - $11,900 = $578,500
B.

Question 4

A manufacturing firm produces goods in accordance with customer specifications, commencing production upon receipt of a purchase order. To accumulate the cost of each order, the company would use a:

Accepted Answer

A)   job-cost record.
B)   cost allocation matrix.
C)   production log.
D)   overhead sheet.
E)   manufacturing cost record.

Question 5

If a company sells goods that cost $80,000 for $92,000, the firm will:

Accepted Answer

A)   reduce Finished-Goods Inventory by $80,000.
B)   reduce Finished-Goods Inventory by $92,000.
C)   report sales revenue on the balance sheet of $92,000.
D)   reduce Cost of Goods Sold by $80,000.
E)   follow more than one of the other procedures.

Question 6

Hsu Company incurred $90,000 of depreciation for the year. Eighty percent relates to the firm's production facilities, and 20% relates to sales and administrative offices. If all items are handled in the proper manner, a review of the company's accounting records should reveal a:

Accepted Answer

A)   debit to Depreciation Expense for $90,000.
B)   debit to Manufacturing Overhead for $90,000.
C)   debit to Manufacturing Overhead for $72,000.
D)   debit to Work-in-Process Inventory for $18,000.
E)   credit to Cash for $90,000.

Question 7

Which of the following is not a drawback of actual costing?

Accepted Answer

A)   Costs are subject to cyclicality.
B)   Costs avoid the estimation associated with predetermined overhead rates.
C)   Costs may not be evenly spread throughout the year due to large payments for overhead costs.
D)   Actual overhead costs may only be available after a production period has passed.
E)   All of these are drawbacks of actual costing.

Question 8

Use the following labor budget data for Roy & Miller Accounting, LLP to answer the following Questions
The budgeted overhead cost for the year is $1,260,000. The company has estimated that one-third of the budgeted over¬head cost is incurred to support the firm’s two partners, and two-thirds goes to support the staff accountants.   The current audit bid for Monoco Industries requires $18,000 in direct partner professional labor, $30,000 in direct staff accountant professional labor, $5,000 in direct material,
-If overhead is applied on the Monoco engagement based on a single-cost driver basis, what is the total cost of the engagement?

Accepted Answer

A)   $101,000
B)   $96,200
C)   $43,200
D)   $48,000
E)   $85,000

Question 9

Use the following labor budget data for Roy & Miller Accounting, LLP to answer the following Questions
The budgeted overhead cost for the year is $1,260,000. The company has estimated that one-third of the budgeted over¬head cost is incurred to support the firm’s two partners, and two-thirds goes to support the staff accountants.   The current audit bid for Monoco Industries requires $18,000 in direct partner professional labor, $30,000 in direct staff accountant professional labor, $5,000 in direct material,
-What is the total budgeted compensation for both partners and staff accountants?

Accepted Answer

A)   $1,000,000
B)   $600,000
C)   $1,160,000
D)   $1,400,000
E)   None of these answers is correct.

Question 10

An accountant recently debited Work-in-Process Inventory and credited Manufacturing Overhead at a company that uses normal costing. The accountant was:

Accepted Answer

A)   applying a predetermined overhead amount to production.
B)   recognizing receipt of the factory utilities bill.
C)   recording a year-end adjustment for an insignificant amount of underapplied overhead.
D)   recognizing actual overhead incurred during the period.
E)   recognizing the completion of production.

Question 11

Which of the following statements about materials is false?

Accepted Answer

A)   Acquisitions of materials are normally charged to the Purchases account.
B)   The use of direct materials gives rise to a debit to Work-in-Process Inventory.
C)   The use of indirect materials gives rise to a debit to Manufacturing Overhead.
D)   The use of indirect materials gives rise to a credit to Manufacturing Supplies Inventory.
E)   Direct materials are accounted for in a different manner than indirect materials.

Question 12

A typical job-cost record would provide information about all of the following items related to an order except:

Accepted Answer

A)   the cost of direct materials used.
B)   administrative costs.
C)   direct labor costs incurred.
D)   applied manufacturing overhead.
E)   direct labor hours worked.

Question 13

Which of the following statements about the use of direct labor as a cost driver is false?

Accepted Answer

A)   Direct labor is the most commonly used cost driver when calculating a predetermined overhead rate.
B)   Direct labor is gaining importance in many manufacturing applications with respect to being a significant cost driver.
C)   Direct labor is an inappropriate cost driver to use if a company is highly automated.
D)   If direct labor is a good cost driver, increases in direct labor are matched with increases in manufacturing overhead.
E)   Companies can use either direct labor cost or direct labor hours as a cost driver.

Question 14

Product costs provide crucial data for a variety of managerial purposes.

Accepted Answer

A) True 
 B)False

Question 15

Actual costing avoids the profitability of cyclicality.

Accepted Answer

A) True 
 B)False

Question 16

A computer manufacturer recently shipped several laptops to a customer (cost: $25,000) and billed the customer $30,000. Which of the following options correctly expresses the accounts that are debited and credited to record this transaction?

Accepted Answer

A)   Debits: Accounts Receivable, Finished-Goods Inventory; credits: Sales Revenue, Cost of Goods Sold.
B)   Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue, Finished-Goods Inventory.
C)   Debits: Sales Revenue, Cost of Goods Sold; credits: Accounts Receivable, Finished-Goods Inventory.
D)   Debits: Sales Revenue, Finished-Goods Inventory; credits: Accounts Receivable, Cost of Goods Sold.
E)   Debits: Accounts Receivable; credits: Finished-Goods Inventory, Profit on Sale.

Question 17

Travers Manufacturing incurred $106,000 of direct labor and $11,000 of indirect labor. The proper journal entry to record these events would include a debit to Work in Process for:

Accepted Answer

A)   $0 because Work in Process should be credited.
B)   $0 because Work in Process is not affected.
C)   $11,000.
D)   $106,000.
E)   $117,000.

Question 18

Boston, Inc. applies manufacturing overhead at the rate of $40 per machine hour. Budgeted machine hours for the current period were anticipated to be 120,000; however, a lengthy strike resulted in actual machine hours being worked of only 90,000. Budgeted and actual manufacturing overhead figures for the year were $4,800,000 and $4,180,000, respectively. On the basis of this information, the company's year-end overhead was:

Accepted Answer

A)   overapplied by $580,000.
B)   underapplied by $580,000.
C)   overapplied by $1,200,000.
D)   underapplied by $1,200,000.
E)   underapplied by $900,000.

Question 19

Farrina Manufacturing uses a predetermined overhead application rate of $8 per direct labor hour. A review of the company's accounting records for the year just ended discovered the following:
Underapplied manufacturing overhead: $7,200
Actual manufacturing overhead: $392,000
Budgeted labor hours: 50,000
Simone's actual labor hours worked totaled:

Accepted Answer

A)   48,100.
B)   49,100.
C)   49,900.
D)   50,900.
E)   cannot be determined based on the information presented.

Question 20

Margin Call, Inc., which uses a job-costing system, is a labor-intensive firm, with many skilled craftspeople on the payroll. Job no. 789 was the only job in process on January 1, having costs of $22,500 as of that date. Direct materials used and direct labor incurred during January were:

Job no. 791 was the only job in production as of January 31. 
Required: 
A. Should Margin Call use direct labor or machine hours as a cost driver. Why?
B. Assume that the company decided to use direct labor as its cost driver. If the budgeted amounts of direct labor and manufacturing overhead are anticipated to be $200,000 and $300,000, respectively, what is the firm's predetermined overhead rate?
C. Compute the cost of work-in-process inventory as of January 31.
D. Compute the cost of jobs completed during January.
E. Suppose that the company sold all of its completed jobs, adding a 40% markup to cost. How much would the firm report as sales revenue?

Accepted Answer

The answer of Margin Call, Inc., which uses a job-costing...

Exam 3: Product Costing and Cost Accumulation in a Batch Production Environment