Question 1

In the two-stage cost allocation process, costs are assigned:

Accepted Answer

A)  from jobs, to service departments, to production departments. 
B)  from service departments, to jobs, to production departments. 
C)  from service departments, to production departments, to jobs. 
D)  from production departments, to jobs, to service departments. 
E)  from the balance sheet (when goods are produced), to the income statement (when goods are sold).

Question 2

Job-order costing methods are used in a variety of service industry firms and nonprofit organizations.

Accepted Answer

A) True 
 B)False

Question 3

As production takes place, all manufacturing costs are added to the:

Accepted Answer

A)  Work-in-Process Inventory account. 
B)  Manufacturing-Overhead Inventory account. 
C)  Cost-of-Goods-Sold account. 
D)  Finished-Goods Inventory account. 
E)  Production Labor account.

Question 4

The primary difference between normalized and actual costing methods lies in the determination of a job's:

Accepted Answer

A)  direct material costs. 
B)  direct labor costs. 
C)  manufacturing overhead costs. 
D)  selling costs. 
E)  administrative costs.

Question 5

Bonanza Enterprises provides consulting services and uses a job-order system to accumulate the cost of client projects. Traceable costs are charged directly to individual clients; in contrast, other costs incurred by Bonanza , but not identifiable with specific clients, are charged to jobs by using a predetermined overhead application rate. Clients are billed for directly chargeable costs, overhead, and a markup.
Bonanza anticipates the following costs for the upcoming year:
  
Bonanza's partners desire to make a $480,000 profit for the firm and plan to add a percentage markup on total cost to achieve that figure.
On May 14, Bonanza completed work on a project for Laramie Manufacturing. The following costs were incurred: professional staff salaries, $68,000; administrative support staff, $8,900; travel, $10,500; and other operating costs, $2,600. 
Required: 
A. Determine Bonanza's total traceable costs for the upcoming year and the firm's total anticipated overhead.
B. Calculate the predetermined overhead rate. The rate is based on total costs traceable to client jobs.
C. What percentage of total cost will Bonanza add to each job to achieve its profit target?
D. Determine the total cost of the Laramie Manufacturing project. How much would Laramie be billed for services performed?

Accepted Answer

The answer of Bonanza Enterprises provides consulting services and uses...

Question 6

Discuss the reason for (1) allocating overhead to the cost of production jobs, and (2) applying overhead using a predetermined rate instead of an actual overhead rate.

Accepted Answer

The answer of Discuss the reason for (1) allocating overhead...

Question 7

The estimates used to calculate the predetermined overhead rate will virtually always:

Accepted Answer

A)  prove to be correct. 
B)  result in a year-end balance of zero in the Manufacturing Overhead account. 
C)  result in overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount. 
D)  result in underapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount. 
E)  result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.

Question 8

The left side of the Manufacturing Overhead account is used to accumulate:

Accepted Answer

A)  actual manufacturing overhead costs incurred throughout the accounting period. 
B)  overhead applied to Work-in-Process Inventory. 
C)  underapplied overhead. 
D)  predetermined overhead. 
E)  overapplied overhead.

Question 9

Which of the following statements about manufacturing cost flows is false?

Accepted Answer

A)  Direct materials, direct labor, and manufacturing overhead are entered in the Work-in-Process Inventory account. 
B)  The Finished-Goods Inventory account will contain entries that reflect the cost of goods sold during the period. 
C)  The cost of units sold during the period will typically appear on the income statement. 
D)  When a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000 in an account entitled Profit on Sale. 
E)  Units are normally transferred from Work-in-Process Inventory to Finished-Goods Inventory.

Question 10

Which of the following is not considered to be a service department?

Accepted Answer

A)  equipment maintenance department 
B)  material handling department 
C)  machining department 
D)  factory custodial service department 
E)  Vehicle repair department

Question 11

Which of the following statements about material requisitions is false?

Accepted Answer

A)  Material requisitions are often computerized. 
B)  Material requisitions are a common example of source documents. 
C)  Material requisitions contain information that is useful to the cost accounting department. 
D)  Material requisitions authorize the transfer of materials from the production floor to the raw materials warehouse. 
E)  Material requisitions are routinely linked to a bill of materials that lists all of the materials needed to complete a job.

Question 12

The journal entry needed to record $5,000 of advertising for Oxner Manufacturing would include:

Accepted Answer

A)  a debit to Advertising Expense. 
B)  a credit to Advertising Expense. 
C)  a debit to Manufacturing Overhead. 
D)  a credit to Manufacturing Overhead. 
E)  a debit to Projects-in-Process.

Question 13

Templeton Corporation recently used $75,000 of direct materials and $9,000 of indirect materials in production activities. The journal entries reflecting these transactions would include:

Accepted Answer

A)  a debit to Manufacturing Overhead for $9,000. 
B)  a debit to Manufacturing Overhead for $84,000. 
C)  a debit to Raw-Material Inventory for $75,000. 
D)  a debit to Work-in-Process Inventory for $84,000. 
E)  a credit to Manufacturing Overhead for $9,000.

Question 14

Manufacturing overhead is applied to production.
A. Describe several situations that may give rise to underapplied overhead.
B. Assume that underapplied manufacturing overhead is treated as an adjustment to Cost of Goods Sold. Explain why an underapplication of overhead increases Cost of Goods Sold.

Accepted Answer

The answer of Manufacturing overhead is applied to production.
A. Describe...

Question 15

Which of the following would not likely be used by service providers to accumulate job costs?

Accepted Answer

A)  Projects. 
B)  Contracts. 
C)  Clients. 
D)  Processes. 
E)  All of these, because service providers cannot use job-costing systems.

Question 16

Osgood Company, which applies overhead at the rate of 190% of direct material cost, began work on job no. 101 during June. The job was completed in July and sold during August, having accumulated direct material and labor charges of $27,000 and $15,000, respectively. On the basis of this information, the total overhead applied to job no. 101 amounted to:

Accepted Answer

A)  $0. 
B)  $28,500. 
C)  $51,300. 
D)  $70,500. 
E)  $79,800.

Question 17

A review of a company's Work-in-Process Inventory account found a debit for materials of $67,000. If all procedures were performed in the correct manner, this means that the firm:

Accepted Answer

A)  also recorded a credit to Raw-Material Inventory. 
B)  also recorded a credit to Manufacturing Supplies Inventory. 
C)  was accounting for the usage of direct materials. 
D)  was accounting for the usage of indirect materials. 
E)  also recorded a credit to Raw-Material Inventory and was accounting for the usage of direct materials.

Question 18

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 overhead rate for partners, if separate rates are used for partners and staff accountants?

Accepted Answer

A)  90% 
B)  75% 
C)  60% 
D)  225% 
E)  50%

Question 19

Electricity costs that were incurred by a company's production processes should be debited to Utilities Expense.

Accepted Answer

A) True 
 B)False

Question 20

In traditional product-costing systems, the measure of productive activity is usually some volume-based cost driver, like direct-labor hours.

Accepted Answer

A) True 
 B)False

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

In the two-stage cost allocation process, costs are assigned:

Job-order costing methods are used in a variety of service industry firms and nonprofit organizations.

As production takes place, all manufacturing costs are added to the:

The primary difference between normalized and actual costing methods lies in the determination of a job's:

Discuss the reason for (1) allocating overhead to the cost of production jobs, and (2) applying overhead using a predetermined rate instead of an actual overhead rate.

The estimates used to calculate the predetermined overhead rate will virtually always:

The left side of the Manufacturing Overhead account is used to accumulate:

Which of the following statements about manufacturing cost flows is false?

Which of the following is not considered to be a service department?

Which of the following statements about material requisitions is false?

The journal entry needed to record $5,000 of advertising for Oxner Manufacturing would include:

Templeton Corporation recently used $75,000 of direct materials and $9,000 of indirect materials in production activities. The journal entries reflecting these transactions would include:

Which of the following would not likely be used by service providers to accumulate job costs?

A review of a company's Work-in-Process Inventory account found a debit for materials of $67,000. If all procedures were performed in the correct manner, this means that the firm:

Electricity costs that were incurred by a company's production processes should be debited to Utilities Expense.

In traditional product-costing systems, the measure of productive activity is usually some volume-based cost driver, like direct-labor hours.