Transcript
Horngren's Accounting,11e (Miller-Nobles)
Chapter 19 Job Order Costing
Learning Objective 19-1
1) Cost accounting systems are used ________.
A) to accumulate product cost information
B) to accumulate and assign period costs to products
C) by manufacturing companies, not service companies
D) by stockholders for decision-making purposes
Answer: A
Diff: 2
LO: 19-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : How Do Manufacturing Companies Use Job Order and Process Costing Systems? (H1)
2) For each of the following types of business, indicate why the manager needs to know the unit cost information.
Managers of a Need to know the cost to
Bakery
Computer manufacturer
Bank
Seamstress
Answer:
Managers of a Need to know the cost to
Bakery Make a cake
Computer manufacturer Make a computer
Bank Service a customer's account
Seamstress Make a garment
Diff: 2
LO: 19-1
AACSB: Analytical thinking
AICPA Functional: Measurement
PE Question Type: Critical thinking
H2 : How Do Manufacturing Companies Use Job Order and Process Costing Systems? (H1)
3) Accounting firms, building contractors, and healthcare providers use process costing.
Answer: FALSE
Diff: 1
LO: 19-1
AACSB: Analytical thinking
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Job Order Costing
4) A job order costing system is used by companies that manufacture batches of unique products or provide specialized services.
Answer: TRUE
Diff: 1
LO: 19-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Job Order Costing
5) Which one of the following companies is most likely to use job order costing?
A) a gold refinery
B) a law firm
C) a surfboard manufacturer
D) a soft drink company
Answer: B
Diff: 2
LO: 19-1
AACSB: Analytical thinking
AICPA Functional: Measurement
PE Question Type: Application
H2 : Job Order Costing
6) Which of the following is true about ERP systems?
A) Because ERP systems are software based, they have given way to a more service-based economy.
B) Because ERP systems track costs more efficiently, the benefit from the cost information outweighs the cost of obtaining the information.
C) Because ERP systems track costs more efficiently, process costing systems are becoming more prevalent.
D) Because ERP systems have the ability to trace all production costs to individual units, all product costs can now be classified as either direct materials or direct labor.
Answer: B
Diff: 2
LO: 19-1
AACSB: Information technology
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Job Order Costing
7) Which of the following is a reason why a job order costing system is appropriate for a custom furniture manufacturer?
A) The cost incurred for each job will differ as per the order specifications.
B) The direct costs incurred for each job are the same, only indirect costs vary.
C) The raw materials used have already been accounted for using process costing.
D) Custom furniture manufacturers produce large quantities of similar products.
Answer: A
Diff: 2
LO: 19-1
AACSB: Analytical thinking
AICPA Functional: Measurement
PE Question Type: Critical thinking
H2 : Job Order Costing
8) Which of the following statements is true of costing systems?
A) A process costing system would be used by manufacturers of custom-made perfumes.
B) A job order costing system would be used by manufacturers of baking utensils.
C) A construction company would likely use a process costing system.
D) An accounting firm would likely use a job order costing system.
Answer: D
Diff: 2
LO: 19-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Job Order Costing
9) Define a job order costing system and list two types of businesses that would us a job order costing system.
Answer: A job order costing system is an accounting system that accumulates costs by job. Businesses that would use a job order costing system include accounting firms, music studios, health care providers, building contractors, and custom furniture manufacturers.
Diff: 1
LO: 19-1
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Job Order Costing
10) A process costing system is used when a company produces identical units through a series of production steps.
Answer: TRUE
Diff: 1
LO: 19-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Process Costing
11) Which of the following would use a process costing system rather than a job order costing system?
A) a health-care service provider
B) a music production studio
C) a paint manufacturer
D) a home remodeling contracting company
Answer: C
Diff: 2
LO: 19-1
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Process Costing
12) Which of the following businesses is most likely to use a process costing system?
A) a baker producing cakes to order
B) a legal service provider
C) an audit service provider
D) a candy manufacturer
Answer: D
Diff: 2
LO: 19-1
AACSB: Analytical thinking
AICPA Functional: Measurement
PE Question Type: Critical thinking
H2 : Process Costing
13) Which of the following is the correct order of the four steps of tracking product costs?
A) assign ? accumulate ? allocate ? adjust
B) accumulate ? assign ? allocate ? adjust
C) adjust ? allocate ? accumulate ? assign
D) allocate ? adjust ? accumulate ? assign
Answer: B
Diff: 2
LO: 19-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Process Costing
14) Both job order and process costing systems use a four-step method to track product costs. List each of the four steps.
Answer:
1. Accumulate
2. Assign
3. Allocate
4. Adjust
Diff: 1
LO: 19-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Process Costing
15) Define a process costing system and list two types of businesses that would use a process costing system.
Answer: A process costing system is an accounting system that accumulates costs by process. Businesses that would use a process costing system include a soft drink company, medical equipment manufacturer, and surf board manufacturer.
Diff: 1
LO: 19-1
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Process Costing
Learning Objective 19-2
1) When direct materials are received on the production floor, they are recorded on the job cost record.
Answer: TRUE
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : How Do Materials and Labor Costs Flow Through the Job Order Costing System? (H1)
2) For each of the following accounts, indicate what event causes the account to increase and to decrease. The answer is not debit or credit.
Account Is increased by: Is decreased by:
Raw Materials Inventory
Work-in-Process Inventory
Finished Goods Inventory
Cost of Goods Sold
Answer:
Account Is increased by: Is decreased by:
Raw Materials Inventory Materials purchased Materials used
Work-in-Process Inventory Direct materials used
Direct labor incurred
Manufacturing overhead allocated
Completion of jobs
Finished Goods Inventory Completion of jobs Shipping of sold units
Cost of Goods Sold Shipping of sold units
Adjusting entry Adjusting entry
Diff: 2
LO: 19-2
AACSB: Analytical thinking
AICPA Functional: Measurement
PE Question Type: Critical thinking
H2 : How Do Materials and Labor Costs Flow Through the Job Order Costing System? (H1)
3) What is cost of goods manufactured? Describe the flow of this cost through the job order costing system. Your answer should include the accounts involved and whether the flow involves a debit or credit.
Answer: When a job is completed, the costs are transferred out of Work-in-Process with a credit and transferred into Finished Goods Inventory with a debit. This amount is called Cost of Goods Manufactured.
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : How Do Materials and Labor Costs Flow Through the Job Order Costing System? (H1)
4) What is cost of goods sold? Describe the flow of this cost through the job order costing system. Your answer should include the accounts involved and whether the flow involves a debit or credit.
Answer: When the job is sold, the costs are transferred out of Finished Goods Inventory with a credit and transferred into Cost of Goods Sold with a debit. This amount is the job's cost of goods sold. Cost of Goods Sold is an expense on the income statement.
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : How Do Materials and Labor Costs Flow Through the Job Order Costing System? (H1)
5) When raw materials are requisitioned for a job, the Raw Materials Inventory account is debited.
Answer: FALSE
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
6) Manufacturing Overhead is a temporary account used to accumulate indirect production costs during the accounting period.
Answer: TRUE
Diff: 1
LO: 19-2
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Materials
7) The cost of indirect materials is transferred out of the Manufacturing Overhead account and accumulated in the Raw Materials Inventory account.
Answer: FALSE
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
8) The entry to record the purchase of direct materials on account would include a ________.
A) debit to the Raw Materials Inventory account
B) debit to the Work-in-Process Inventory account
C) credit to the Work-in-Process Inventory account
D) credit to the Raw Materials Inventory account
Answer: A
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
9) Which of the following accounts would be debited in the journal entry to record the issuance of direct materials?
A) Cost of Goods Sold
B) Work-in-Process Inventory
C) Finished Goods Inventory
D) Raw Materials Inventory
Answer: B
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
10) Manufacturing Overhead is a temporary account used to ________ indirect production costs during the accounting period.
A) allocate
B) assign
C) accumulate
D) approximate
Answer: C
Diff: 1
LO: 19-2
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Materials
11) The journal entry to issue indirect materials to production should include a debit to the ________.
A) Finished Goods Inventory account
B) Raw Materials Inventory account
C) Manufacturing Overhead account
D) Work-in-Process Inventory account
Answer: C
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
12) The journal entry to issue $500 of direct materials and $40 of indirect materials to production involves debit(s) to the ________.
A) Work-in-Process Inventory account for $500 and Finished Goods Inventory account for $40
B) Manufacturing Overhead account for $540
C) Work-in-Process Inventory account for $500 and Manufacturing Overhead account for $40
D) Work-in-Process Inventory account for $540
Answer: C
Diff: 2
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
13) Adelphia Manufacturing issued $75,000 of direct materials and $8,000 of indirect materials for production. Which of the following journal entries would correctly record the transaction?
A)
Raw Materials Inventory 83,000
Finished Goods Inventory
75,000
Work-in-Process Inventory
8,000
B)
Work-in-Process Inventory 83,000
Raw Materials Inventory
83,000
C)
Work-in-Process Inventory 75,000
Manufacturing Overhead 8,000
Raw Materials Inventory
83,000
D)
Manufacturing Overhead 83,000
Raw Materials Inventory
83,000
Answer: C
Diff: 2
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
14) Uniq Works purchased raw materials amounting to $122,000 on account and $20,000 for cash. The materials will be used to manufacture upholstery for furniture manufacturers on a contract basis. Which of the following journal entries correctly records this transaction?
A)
Accounts Payable 122,000
Cash 20,000
Raw Materials Inventory
142,000
B)
Finished Goods Inventory 142,000
Accounts Payable
142,000
C)
Work-in-Process Inventory 142,000
Accounts Payable
142,000
D)
Raw Materials Inventory 142,000
Cash
20,000
Accounts Payable
122,000
Answer: D
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
15) The accounts of Delphinia Dreams, Inc. showed the following balances at the beginning of October:
Account Debit
Raw Materials Inventory $31,000
Work-in-Process Inventory 42,000
Finished Goods Inventory 52,000
Manufacturing Overhead 20,000
During the month, direct materials amounting to $22,000 and indirect materials amounting to $5,000 were issued to production. What is the ending balance in the Work-in-Process Inventory account following these two transactions?
A) $42,000
B) $64,000
C) $10,000
D) $25,000
Answer: B
Explanation: B)
Beginning balance in WIP $42,000
Add: Direct Materials transferred 22,000
Ending balance $64,000
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
16) The accounts of Melissa Manufacturing showed the following balances at the beginning of December:
Account Debit
Raw Materials Inventory $56,000
Work-in-Process Inventory 76,000
Finished Goods Inventory 36,000
Manufacturing Overhead 19,000
The following transactions took place during the month:
December 2: Issued direct materials $23,000 and indirect materials $6,000 to production.
December 15: Incurred $6,000 and $4,000 toward factory's direct labor cost and indirect labor cost, respectively.
What should be the balance in the Work-in-Process Inventory following these transactions?
A) $105,000
B) $82,000
C) $59,000
D) $80,000
Answer: A
Explanation: A)
Beginning balance in WIP $76,000
Add: Direct materials transferred 23,000
Direct factory labor cost 6,000
Ending balance $105,000
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
17) On June 1, Dalton Productions had beginning balances as shown in the T-accounts below.
Raw Materials Inventory
10,000
Work-in-Process Inventory
20,000
Finished Goods Inventory
25,000
Manufacturing Overhead
41,000
During June, the following transactions took place:
June 2: Issued $2,900 of direct materials and $200 of indirect materials to production.
What was the balance in the Manufacturing Overhead account following this transaction?
A) $44,100
B) $43,900
C) $41,200
D) $41,000
Answer: C
Explanation: C)
Beginning balance in Manufacturing OH $41,000
Add: Indirect materials transferred 200
Ending balance $41,200
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
18) On June 1, Westbrook Productions had beginning balances as shown in the T-accounts below.
Raw Materials Inventory
10,000
Work-in-Process Inventory
20,000
Finished Goods Inventory
25,000
Manufacturing Overhead
41,000
During June, the following transactions took place:
June 2: Issued $3,100 of direct materials and $300 of indirect materials to production.
June 13: Incurred $7,500 of direct factory labor cost and $14,500 of indirect factory labor cost.
What was the balance in the Manufacturing Overhead account following these transactions?
A) $41,300
B) $55,800
C) $55,500
D) $58,600
Answer: B
Explanation: B)
Beginning balance in Manufacturing OH $41,000
Add: Indirect materials transferred 300
Indirect labor 14,500
Ending balance $55,800
Diff: 2
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
19) Broxsie Fabrication, Inc. issued $60,000 of direct materials and $15,500 of indirect materials to production. Prepare the journal entry to record the transaction.
Answer:
Work-in-Process Inventory 60,000
Manufacturing Overhead 15,500
Raw Materials Inventory
75,500
Diff: 2
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
20) Pandora Manufacturing purchased $95,000 of raw materials on account and $5,000 of raw materials for cash. The materials will be used to produce furniture. Provide the journal entry for the purchase of materials.
Answer:
Raw Materials Inventory 100,000
Accounts Payable
95,000
Cash
5,000
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Materials
21) Work-in-Process Inventory is debited when indirect labor costs are incurred in a job order costing system.
Answer: FALSE
Diff: 2
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Labor
22) The actual direct labor costs are assigned to individual jobs, and the actual direct labor cost is recorded with a debit to Work-in-Process Inventory.
Answer: TRUE
Diff: 1
LO: 19-2
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Labor
23) The journal entry to record direct labor costs actually incurred involves a debit to the ________.
A) Work-in-Process Inventory account
B) Wages Payable account
C) Manufacturing Overhead account
D) Raw Materials Inventory account
Answer: A
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Labor
24) The journal entry to record indirect labor costs incurred involves a debit to the ________.
A) Manufacturing Overhead account
B) Wages Payable account
C) Finished Goods Inventory account
D) Work-in-Process Inventory account
Answer: A
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Labor
25) The journal entry to record $1,600 of direct labor and $250 of indirect labor incurred will include debit(s) to the ________.
A) Manufacturing Overhead account for $1,850
B) Work-in-Process Inventory account for $1,600 and Finished Goods Inventory account for $250
C) Finished Goods Inventory account for $1,850
D) Work-in-Process Inventory account for $1,600 and Manufacturing Overhead account for $250
Answer: D
Diff: 2
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Labor
26) Altec Designs makes fashion clothing and reports the following data for the month of September:
Salaries paid to seamstresses $130,000
Wages paid to fabric cutters 30,000
Indirect wages 7,000
What is the journal entry to record the total labor charges incurred during September?
A)
Work-in-Process Inventory 160,000
Manufacturing Overhead 7,000
Wages Payable
167,000
B)
Work-in-Process Inventory 167,000
Wages Payable
167,000
C)
Wages Payable 167,000
Finished Goods Inventory
137,000
Work-in-Process Inventory
30,000
D)
Manufacturing Overhead 167,000
Wages Payable
167,000
Answer: A
Diff: 2
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Labor
27) Specialty Wood Products, Inc. had the following manufacturing labor costs last month:
Woodworkers' wages $100,000
Indirect laborers' wages 20,000
Maintenance personnel wages 10,000
Provide the journal entry to record the labor costs incurred, which will be paid at a later date.
Answer:
Work-in-Process Inventory 100,000
Manufacturing Overhead 30,000
Wages Payable
130,000
Diff: 1
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Labor
28) Norman Manufacturing reports the following data for the month:
Purchases of raw materials, on account $55,250
Materials requisitions:
Direct materials 49,750
Indirect materials 3,700
Labor incurred (not yet paid):
Direct labor 51,000
Indirect labor 2,500
Journalize the entries relating to materials and labor. Omit explanations.
Answer:
Raw Materials Inventory 55,250
Accounts Payable 55,250
Work-In-Process Inventory 49,750
Manufacturing Overhead 3,700
Raw Materials Inventory 53,450
Work-In-Process Inventory 51,000
Manufacturing Overhead 2,500
Wages Payable 53,500
Diff: 2
LO: 19-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Labor
Learning Objective 19-3
1) Actual manufacturing overhead costs are credited to the Manufacturing Overhead account.
Answer: FALSE
Diff: 1
LO: 19-3
AICPA Functional: Measurement
PE Question Type: Concept
H2 : How Do Overhead Costs Flow Through the Job Order Costing System? (H1)
2) In a manufacturing operation, depreciation of plant equipment should be debited to the Depreciation Expense account.
Answer: FALSE
Diff: 1
LO: 19-3
AICPA Functional: Measurement
PE Question Type: Concept
H2 : How Do Overhead Costs Flow Through the Job Order Costing System? (H1)
3) The amount of taxes and insurance incurred and paid for the plant of a manufacturing company should be debited to the Manufacturing Overhead account.
Answer: TRUE
Diff: 1
LO: 19-3
AICPA Functional: Measurement
PE Question Type: Concept
H2 : How Do Overhead Costs Flow Through the Job Order Costing System? (H1)
4) The total amount of manufacturing overhead costs incurred during the period is recorded on the credit side of the Manufacturing Overhead account.
Answer: FALSE
Diff: 1
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : How Do Overhead Costs Flow Through the Job Order Costing System? (H1)
5) When a job order costing system is used, actual manufacturing overhead costs are debited to ________.
A) expense accounts
B) the Manufacturing Overhead account
C) the Cost of Goods Sold account
D) the Work-In-Process Inventory account
Answer: B
Diff: 1
LO: 19-3
AICPA Functional: Measurement
PE Question Type: Concept
H2 : How Do Overhead Costs Flow Through the Job Order Costing System? (H1)
6) Which of the following will be categorized as a manufacturing overhead cost?
A) depreciation on factory plant and equipment
B) wages paid to assembly line workers
C) administration charges of showroom
D) cost of direct materials used
Answer: A
Diff: 1
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Concept
H2 : How Do Overhead Costs Flow Through the Job Order Costing System? (H1)
7) Which of the following will be debited to the Manufacturing Overhead account of a watch manufacturer?
A) office telephone costs
B) salaries paid to accountants
C) factory electricity costs
D) cost of printing brochures
Answer: C
Diff: 1
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Concept
H2 : How Do Overhead Costs Flow Through the Job Order Costing System? (H1)
8) The accounting for the allocation of overhead costs is a three-step process and occurs at three different points in the accounting cycle. List each of the three steps. For each step indicate when the step occurs and why the step is needed.
Answer:
Step 1: The predetermined overhead allocation rate is calculated before the period begins. Managers cannot wait until the end of the period to know the actual total overhead costs. Companies use this predetermined rate to allocate estimated overhead cost to individual jobs.
Step 2: Overhead is allocated during the period. During the period, managers need to allocate overhead to all jobs completed during the period and to jobs still in process at the end of the period. Allocated overhead is added to assigned direct material and direct labor costs. This allows managers to know the total cost of jobs completed and of jobs still in process at the end of the period.
Step 3: Overhead is adjusted at the end of the period. Because the overhead costs have been allocated based on the predetermined overhead allocation rate, the actual overhead costs may not equal the amount of overhead allocated during the period. An adjustment is required to zero out the Manufacturing Overhead account.
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : How Do Overhead Costs Flow Through the Job Order Costing System? (H1)
9) Which of the following describes the allocation base for allocating manufacturing overhead costs?
A) the primary cost driver of indirect manufacturing costs
B) the estimated base amount of manufacturing overhead costs in a year
C) the percentage used to allocate direct labor to Work-in-Process Inventory
D) the main element that causes direct costs
Answer: A
Diff: 1
LO: 19-3
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Before the Period - Calculating The Predetermined Overhead Allocation Rate
10) Which of the following correctly describes the term cost driver?
A) the inflation rate that causes costs to rise
B) the average inventory costs incurred at any point of time
C) the primary factor that causes a cost to be incurred
D) the total material, labor, and overhead costs of a completed job
Answer: C
Diff: 1
LO: 19-3
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Before the Period - Calculating The Predetermined Overhead Allocation Rate
11) The predetermined overhead allocation rate is the rate used to ________.
A) assign direct material costs to jobs
B) allocate actual manufacturing overhead costs incurred during a period
C) allocate estimated manufacturing overhead costs to jobs
D) trace manufacturing and non manufacturing costs to jobs
Answer: C
Diff: 1
LO: 19-3
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Before the Period - Calculating The Predetermined Overhead Allocation Rate
12) The predetermined overhead allocation rate is calculated by dividing ________.
A) the total estimated overhead costs by total number of days in a year
B) the estimated amount of cost driver by actual total overhead costs
C) the actual overhead costs by actual amount of the cost driver or allocation base
D) the estimated overhead costs by total estimated quantity of the overhead allocation base
Answer: D
Diff: 1
LO: 19-3
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Before the Period - Calculating The Predetermined Overhead Allocation Rate
13) The predetermined overhead allocation rate for a given production year is calculated ________.
A) at the end of the production year
B) before the accounting period begins
C) after completion of each job
D) after the preparation of financial statements for the year
Answer: B
Diff: 1
LO: 19-3
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Before the Period - Calculating The Predetermined Overhead Allocation Rate
14) Aaron, Inc. estimates direct labor costs and manufacturing overhead costs for the coming year to be $780,000 and $510,000, respectively. Aaron allocates overhead costs based on machine hours. The estimated total labor hours and machine hours for the coming year are 19,000 hours and 7,000 hours, respectively. What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.)
A) $111.43 per machine hour
B) $26.84 per labor hour
C) $1.53 per labor hour
D) $72.86 per machine hour
Answer: D
Explanation: D) Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base
Predetermined overhead allocation rate = $510,000 / 7,000 machine hours = $72.86 per machine hour
Diff: 1
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Before the Period - Calculating The Predetermined Overhead Allocation Rate
15) Zephyros Corporation had estimated manufacturing overhead costs for the coming year to be $312,000. The total estimated direct labor hours and machine hours for the coming year are 6,000 and 11,000, respectively. Manufacturing overhead costs are allocated based on direct labor hours. What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.)
A) $28.36 per machine hour
B) $18.35 per direct labor hour
C) $52.00 per direct labor hour
D) $1.83 per machine hour
Answer: C
Explanation: C) Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base
Predetermined overhead allocation rate = $312,000 / 6,000 labor hours = $52.00 per labor hour
Diff: 1
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Before the Period - Calculating The Predetermined Overhead Allocation Rate
16) Arabica Manufacturing uses a predetermined overhead allocation rate based on the number of machine hours. At the beginning of the year, it estimated total manufacturing overhead costs to be $1,000,000, total number of direct labor hours to be 4,500, and total number of machine hours to be 26,000 hours. What was the predetermined overhead allocation rate? (Round your answer to the nearest cent.)
A) $222.22 per machine hour
B) $32.79 per direct labor hour
C) $38.46 per machine hour
D) $46.51 per direct labor hour
Answer: C
Explanation: C)
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Before the Period - Calculating The Predetermined Overhead Allocation Rate
17) The Equinox Fabrication Plant suffered a fire incident in August, and most of the records for the year were destroyed. The following accounting data for the year were recovered:
Total manufacturing overhead estimated at the beginning of the year $100,960
Total direct labor costs estimated at the beginning of the year $184,000
Total direct labor hours estimated at the beginning of the year 3,200 direct labor hours
Actual manufacturing overhead costs for the year $99,100
Actual direct labor costs for the year $140,000
Actual direct labor hours for the year 2,500 direct labor hours
The company bases its manufacturing overhead allocation on the number of direct labor hours. What was the predetermined overhead allocation rate for the year? (Round your answer to the nearest cent.)
A) $40.38
B) $1.86
C) $31.55
D) $73.60
Answer: C
Explanation: C)
Diff: 1
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Before the Period - Calculating The Predetermined Overhead Allocation Rate
18) Archangel Manufacturing calculated a predetermined overhead allocation rate at the beginning of the year based on a percentage of direct labor costs. The production details for the year are given below:
Total manufacturing overhead costs estimated at the beginning of the year $140,000
Total direct labor costs estimated at the beginning of the year $320,000
Total direct labor hours estimated at the beginning of the year 12,000 direct labor hours
Actual manufacturing overhead costs for the year $160,000
Actual direct labor costs for the year $370,000
Actual direct labor hours for the year 11,200 direct labor hours
Calculate the manufacturing overhead allocation rate for the year based on the above data. (Round your final answer to two decimal places.)
A) 43.75%
B) 264.29%
C) 11.43%
D) 25.00%
Answer: A
Explanation: A)
Diff: 1
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Before the Period - Calculating The Predetermined Overhead Allocation Rate
19) Manufacturing overhead costs are allocated to the Work-in-Process Inventory account by a debit to the Manufacturing Overhead account.
Answer: FALSE
Diff: 1
LO: 19-3
AICPA Functional: Measurement
PE Question Type: Concept
H2 : During the Period - Allocating Overhead
20) Manufacturing overhead is allocated by debiting the Finished Goods Inventory account.
Answer: FALSE
Diff: 1
LO: 19-3
AICPA Functional: Measurement
PE Question Type: Concept
H2 : During the Period - Allocating Overhead
21) Manufacturing overhead is allocated by debiting the Work-in-Process Inventory account and crediting the Manufacturing Overhead account.
Answer: TRUE
Diff: 1
LO: 19-3
AICPA Functional: Measurement
PE Question Type: Concept
H2 : During the Period - Allocating Overhead
22) Sybil, Inc. uses a predetermined overhead allocation rate to allocate manufacturing overhead costs to jobs. The company recently completed Job 300X. This job used 10 machine hours and 3 direct labor hours. The predetermined overhead allocation rate is calculated to be $45 per machine hour. What is the amount of manufacturing overhead allocated to Job 300X using machine hours as the allocation base?
A) $450
B) $135
C) $585
D) $315
Answer: A
Explanation: A) Allocated manufacturing overhead cost = Predetermined overhead allocation rate × Actual quantity of the allocation base used by each job
Allocated manufacturing overhead cost = $45 × 10 machine hours = $450.
Diff: 1
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
23) Jeremy Corporation estimated manufacturing overhead costs for the year to be $490,000. Jeremy also estimated 7,000 machine hours and 1,000 direct labor hours for the year. It bases the predetermined overhead allocation rate on machine hours. On January 31, Job 25 was completed. It required 4 machine hours and 6 direct labor hours. What is the amount of manufacturing overhead allocated to the completed job? (Round your answer to the nearest dollar.)
A) $70
B) $700
C) $280
D) $1,960
Answer: C
Explanation: C) Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base
Predetermined overhead allocation rate = $490,000 / 7,000 machine hours = $70 per machine hour
Allocated manufacturing overhead cost = Predetermined overhead allocation rate × Actual quantity of the allocation base used by each job
Allocated manufacturing overhead cost = $70 × 4 machine hours = $280
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
24) The journal entry to record allocation of manufacturing overhead to a particular job includes a ________.
A) debit to the Finished Goods Inventory account and credit to the Manufacturing Overhead account
B) debit to the Work-in-Process Inventory account and credit to the Cash account
C) debit to the Manufacturing Overhead account and credit to the Finished Goods Inventory account
D) debit to the Work-in-Process Inventory account and credit to the Manufacturing Overhead account
Answer: D
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
25) Iglesias, Inc. completed Job 12 on November 30. The details of Job 12 are given below:
Direct labor cost $860
Direct materials cost $1,100
Machine hours 9 hours
Direct labor hours 23 hours
Predetermined overhead allocation rate $80 per machine hour
What is the total cost of Job 12?
A) $2,680
B) $1,960
C) $1,580
D) $1,820
Answer: A
Explanation: A)
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
26) Gardner Machine Shop estimates manufacturing overhead costs for the coming year at $318,000. The manufacturing overhead costs will be allocated based on direct labor hours. Gardner estimates 4,000 direct labor hours for the coming year. In January, Gardner completed Job A33, which used 70 machine hours and 20 direct labor hours. What was the amount of manufacturing overhead allocated to Job A33? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
A) $1,590
B) $5,565
C) $7,155
D) $4,543
Answer: A
Explanation: A)
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
27) Midtown, Inc. uses a predetermined overhead allocation rate of $68 per direct labor hour. In January, the company completed Job A23 which utilized 24 direct labor hours. Which of the following correctly describes the journal entry to allocate overhead to the job?
A) debit Finished Goods Inventory $1,632 and credit Manufacturing Overhead $1,632
B) debit Manufacturing Overhead $68 and credit Work-in-Process Inventory $68
C) debit Work-in-Process Inventory $1,632 and credit Manufacturing Overhead $1,632
D) debit Cost of Goods Sold $68 and credit Finished Goods Inventory $68
Answer: C
Explanation: C) Allocated manufacturing overhead cost = Predetermined overhead allocation rate × Actual quantity of the allocation base used by each job
Allocated manufacturing overhead cost = $68 per DLHr × 24 hours = $1,632
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
28) Halcyon, Inc. completed Job 10B last month. The cost details of Job 10B are shown below.
Direct labor cost $2,140
Direct materials cost $80
Machine hours 7 hours
Direct labor hours 71 hours
Predetermined overhead allocation rate per direct labor hour $34
Calculate the total job cost for Job 10B.
A) $2,458
B) $4,634
C) $2,220
D) $4,872
Answer: B
Explanation: B)
Direct labor cost $2,140
Direct materials cost 80
Manufacturing overhead allocated
($34 × 71 direct labor hours) 2,414
Job cost of Job 10B $4,634
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
29) Haddows, Inc. completed Job GH6 last month. The cost details of GH6 are shown below.
Direct labor cost $2,100
Direct materials cost $86
Direct labor hours 5 hours
Predetermined overhead allocation rate per direct labor hour $71
Number of units of finished product 32
Calculate the cost per unit of the finished product of Job GH6. (Round your answer to the nearest cent.)
A) $441.00
B) $13.78
C) $76.72
D) $79.41
Answer: D
Explanation: D)
Diff: 3
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
30) Jezebel, Inc. completed Job 12 and several other jobs in the last week. The cost details of Job 12 are shown below.
Direct labor cost $800
Direct materials cost $100
Machine hours 8 hours
Direct labor hours 17 hours
Predetermined overhead allocation rate per machine hour $85
Number of units of finished product 27 units
What is the cost per unit of finished product produced under Job 12? (Round your answer to the nearest cent.)
A) $33.33
B) $58.52
C) $92.94
D) $86.85
Answer: B
Explanation: B)
Diff: 3
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
31) Olympia Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor cost. At the beginning of the year, Olympia estimated total manufacturing overhead costs at $1,020,000 and total direct labor costs at $830,000. In June, Job 511 was completed. The details of Job 511 are shown below.
Direct materials cost $25,000
Direct labor cost $13,000
Direct labor hours 500 hours
Units of product produced 200 hours
What is the amount of manufacturing overhead costs allocated to Job 511? (Round any percentages to two decimal places and your final answer to the nearest dollar.)
A) $15,976
B) $30,723
C) $10,578
D) $20,343
Answer: A
Explanation: A)
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
32) Gill Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor cost. At the beginning of the year, Gill estimated total manufacturing overhead costs at $1,050,000 and total direct labor costs at $820,000. In June, Gill completed Job 511. The details of Job 511 are shown below. (Round to 2 decimal places.)
Direct materials cost $26,500
Direct labor cost $10,000
Direct labor hours 300 hours
Units of product produced 200 units
How much was the total job cost of Job 511? (Round any percentages to two decimal places and your final answer to the nearest dollar.)
A) $36,884
B) $49,300
C) $70,420
D) $36,756
Answer: B
Explanation: B)
Diff: 3
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
33) Irene Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor cost. At the beginning of the year, the company estimated total manufacturing overhead costs at $1,000,000 and total direct labor costs at $820,000. In June, Job 711 was completed. The details of Job 711 are shown below.
Direct materials cost $20,500
Direct labor cost $11,000
Direct labor hours 500 hours
Units of product produced 200 units
How much was the cost per unit of finished product? (Round any percentages to two decimal places and your final answer to the nearest cent.)
A) $157.50
B) $202.60
C) $169.60
D) $224.60
Answer: D
Explanation: D)
Diff: 3
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
34) Venus Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor cost. At the beginning of the year, it estimated the manufacturing overhead rate to be 20% of the direct labor cost. In the month of June, Venus completed Job 13C and its details are as follows:
Direct materials cost $6,680
Direct labor cost $23,000
Direct labor hours 34 hours
Units of product produced 250
What is the total cost incurred for Job 13C?
A) $31,016
B) $27,600
C) $11,280
D) $34,280
Answer: D
Explanation: D)
Direct materials cost $6,680
Direct labor cost 23,000
Manufacturing overhead ($23,000 × 0.2) 4,600
Total cost of Job 13C $34,280
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
35) Jordan Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor cost. At the beginning of the year, it estimated the manufacturing overhead rate to be 30% times the direct labor cost. In the month of June, Jordan completed Job 13C, and its details are as follows:
Direct materials cost $6,020
Direct labor cost $25,000
Direct labor hours 30 hours
Units of product produced 250
What is the cost per unit of finished product of Job 13C? (Round your answer to the nearest cent.)
A) $154.08
B) $131.30
C) $124.12
D) $130.00
Answer: A
Explanation: A)
Direct materials cost $6,020
Direct labor cost 25,000
Manufacturing overhead (25,000 × 30%) 7,500
Total cost of Job 13C 38,520
Cost per unit ($38,520 / 250 units) $154.08
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
36) Happy Clicks, Inc. uses a predetermined overhead allocation rate of $5.25 per machine hour. Actual overhead costs incurred during the year are as follows:
Indirect materials $5,600
Indirect labor $2,000
Plant depreciation $4,300
Plant utilities and insurance $9,900
Other plant overhead costs $12,100
Total machine hours used during year 7,100 hours
What is the amount of manufacturing overhead cost allocated to Work-in-Process Inventory during the year?
A) $41,000
B) $7,600
C) $33,400
D) $37,275
Answer: D
Explanation: D)
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
37) Doric Agricultural Corporation uses a predetermined overhead allocation rate based on the direct labor cost. The manufacturing overhead cost allocated during the year is $280,000. The details of production and costs incurred during the year are as follows:
Actual direct materials cost $812,000
Actual direct labor cost $180,000
Actual overhead costs incurred $264,000
Total direct labor hours 5,600 hours
What is the predetermined overhead allocation rate applied by the corporation? (Round your answer to two decimal places.)
A) 94.29%
B) 68.18 %
C) 155.56%
D) 34.48%
Answer: C
Explanation: C)
Actual direct labor cost $180,000
Allocated manufacturing overhead cost $280,000
Predetermined overhead allocation rate ($280,000 / 180,000) = 155.56%
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
38) The Quadrangle Fabrication Plant suffered a fire incident at the beginning of the year, which resulted in the loss of property including the accounting records. Some data for the year were retrieved, and extracts from it are shown below:
Total manufacturing overhead costs estimated at the beginning of the year $105,420
Total direct labor costs estimated at the beginning of the year $185,000
Total direct labor hours estimated at the beginning of the year 3,200 direct labor hours
Actual manufacturing overhead costs for the year $99,440
Actual direct labor costs for the year $150,000
Actual direct labor hours for the year 2,450 direct labor hours
The company's manufacturing overhead allocation is based on direct labor hours. How much manufacturing overhead was allocated to production during the year? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)
A) $105,420
B) $80,703
C) $137,691
D) $185,000
Answer: B
Explanation: B)
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
39) The Carlin Fabrication Plant suffered a fire incident at the beginning of the year, which resulted in the loss of property including the accounting records. Some data for the year were retrieved, and extracts from it are shown below:
Total manufacturing overhead costs estimated at the beginning of the year $105,000
Total direct labor costs estimated at the beginning of the year $186,000
Total direct labor hours estimated at the beginning of the year 3,400 direct labor hours
Total machine hours estimated at the beginning of the year 9,000 machine hours
Actual manufacturing overhead costs for the year $96,500
Actual direct labor costs for the year $146,000
Actual direct labor hours for the year 2,250 direct labor hours
Actual machine hours for the year 10,000 machine hours
The company's manufacturing overhead allocation is based on the number of machine hours. What is the amount of manufacturing overhead cost allocated to Work-in-Process Inventory during the year? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)
A) $26,250
B) $308,823
C) $116,700
D) $206,666
Answer: C
Explanation: D)
Diff: 3
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
40) Clinton Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor costs. The following are the details of production during the year:
Total manufacturing overhead costs estimated at the beginning of the year $140,000
Total direct labor costs estimated at the beginning of the year $330,000
Total direct labor hours estimated at the beginning of the year 12,000 direct labor hours
Actual manufacturing overhead costs for the year $160,000
Actual direct labor costs for the year $370,000
Actual direct labor hours for the year 11,800 direct labor hours
Calculate the amount of manufacturing overhead costs allocated to production. (Round any percentages to two decimal places and your final answer to the nearest dollar.)
A) $140,000
B) $179,394
C) $156,954
D) $160,000
Answer: C
Explanation: C)
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
41) Q-dot Manufacturing uses a predetermined overhead allocation rate based on direct labor hours. It has provided the following information for the year:
Manufacturing overhead costs allocated to production $185,000
Actual direct materials cost $540,000
Actual direct labor cost $2,470,000
Actual direct labor hours 9,020 direct labor hours
Estimated machine hours 180,000 machine hours
Based on the above information, calculate Q-dot's predetermined overhead allocation rate. (Round your answer to two decimal places.)
A) $1.03 per machine hour
B) 7.49% of direct labor cost
C) 34.26% of direct materials cost
D) $20.51 per direct labor hour
Answer: D
Explanation: D)
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
42) Felton Quality Productions uses a predetermined overhead allocation rate based on machine hours. It has provided the following information for the year:
Actual manufacturing overhead costs incurred $100,000
Manufacturing overhead costs allocated to production $46,000
Actual direct materials cost $230,000
Actual direct labor cost $50,000
Actual machine hours 32,000 hours
Based on the above information, calculate the predetermined overhead allocation rate applied by Felton Quality. (Round your answer to the nearest cent.)
A) $1.44 per machine hour
B) $3.13 per machine hour
C) $7.19 per machine hour
D) $1.56 per machine hour
Answer: A
Explanation: A)
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
43) Davie, Inc. used estimated direct labor hours of 250,000 and estimated manufacturing overhead costs of $1,100,000 in establishing its predetermined overhead allocation rate for the year. Actual results showed the following:
Actual manufacturing overhead $800,000
Allocated manufacturing overhead $900,000
What was the number of direct labor hours worked during the year? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.)
A) 181,818 hours
B) 281,250 hours
C) 250,000 hours
D) 204,545 hours
Answer: D
Explanation: D)
Diff: 3
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
44) Forsyth, Inc. uses estimated direct labor hours of 240,000 and estimated manufacturing overhead costs of $1,150,000 in establishing its predetermined overhead allocation rate for the year. Actual results showed the following:
Actual manufacturing overhead $800,000
Allocated manufacturing overhead $900,000
The number of direct labor hours worked during the period was ________. (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.)
A) 240,000 hours
B) 187,891 hours
C) 167,015 hours
D) 213,333 hours
Answer: B
Explanation: B)
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
45) The records at Smith and Jones, Inc. show that Job 110 is charged with $12,000 of direct materials and $11,000 of direct labor. Smith and Jones, Inc. allocate manufacturing overhead at 85% of direct labor cost. What is the total cost of Job No. 110?
A) $33,200
B) $32,350
C) $23,000
D) $11,000
Answer: B
Explanation: B)
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
46) Haverhill Products completed Job 440 and several other jobs during the year. In addition to direct labor and direct materials cost, Haverhill allocated $450 of manufacturing overhead to the job. Provide the journal entry for the allocation of manufacturing overhead.
Answer:
Work-in-Process Inventory 450
Manufacturing Overhead
450
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
47) Melinda, Inc. estimates manufacturing overhead costs for the coming year at $225,000, which will be allocated based on direct labor hours. Melinda estimates 9,000 direct labor hours for the coming year. In January, Job A33 was completed, which required 8 direct labor hours and 34 machine hours. Provide the journal entry to allocate manufacturing overhead to the job.
Answer:
Work-in-Process Inventory 200
Manufacturing Overhead
200
Estimated manufacturing overhead costs $225,000
Estimated direct labor hours 9,000 hours
Predetermined overhead allocation rate ($225,000 / 9,000 hours) $25
Number of direct labor hours worked on Job A33 8 hours
Allocated manufacturing overhead ($25 × 8 hours) $200
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
48) Metropolitan Enterprises reports the following information at December 31:
Manufacturing Overhead
$4,300 21,000
18,500 $45,500
Requirements
1. What is the actual manufacturing overhead of Metropolitan Enterprises?
2. What is the allocated manufacturing overhead?
3. Is manufacturing overhead underallocated or overallocated? By how much?
Answer:
1. Actual manufacturing overhead costs are debited to the Manufacturing Overhead account.
Actual manufacturing overhead = $4,300 + 21,000 + 18,500
Actual manufacturing overhead = $43,800
2. Allocated manufacturing overhead costs are credited to the Manufacturing Overhead account.
Allocated manufacturing overhead = $45,500
3. Allocated manufacturing overhead costs of $45,500 are greater than actual manufacturing overhead costs of $43,800. Thus manufacturing overhead is overapplied by $1,700.
Diff: 2
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : During the Period - Allocating Overhead
49) Ivade, Inc. uses a predetermined overhead allocation rate of $75 per direct labor hour. In January, Ivade completed Job B23, which utilized 20 direct labor hours. Provide the journal entry to allocate overhead to the job.
Answer:
Work-in-Process Inventory 1,500
Manufacturing Overhead
1,500
Explanation:
$75 per DLHr × 20 DLHrs = $1,500
Diff: 1
LO: 19-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : At the End of the Period - Adjusting for Overallocaed and Underallocated Overhead
Learning Objective 19-4
1) The cost of goods manufactured is recorded with a debit to the Work-in-Process Inventory account and a credit to the Cost of Goods Manufactured account.
Answer: FALSE
Diff: 1
LO: 19-4
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Transferring Costs To Finished Goods Inventory
2) The cost of goods manufactured is recorded with a debit to the Finished Goods Inventory account and a credit to the Work-in-Process Inventory account.
Answer: TRUE
Diff: 1
LO: 19-4
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Transferring Costs To Finished Goods Inventory
3) When a job is completed, the total cost of the job is recorded with a debit to Finished Goods Inventory and a credit to Work-in-Process Inventory.
Answer: TRUE
Diff: 1
LO: 19-4
AICPA Functional: Measurement
PE Question Type: Concept
H2 : Transferring Costs To Finished Goods Inventory
4) On January 1, Biden, Inc.'s Work-in-Process Inventory account had a balance of $30,600. During the year, $58,300 of direct materials was placed into production. Manufacturing wages incurred amounted to $84,000, of which $64,500 were for direct labor. Manufacturing overhead is allocated on the basis of 120% of direct labor cost. Actual manufacturing overhead was $90,400. Jobs costing $220,500 were completed during the year. What is the December 31 balance of Work-in-Process Inventory?
A) $153,400
B) $30,600
C) $230,800
D) $10,300
Answer: D
Explanation: D)
Diff: 2
LO: 19-4
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Transferring Costs To Finished Goods Inventory
5) On January 1, Jackson, Inc.'s Work-in-Process Inventory account showed a balance of $65,800. During the year, materials requisitioned for use in production amounted to $71,900, of which $67,600 represented direct materials. Factory wages for the period were $210,000 of which $187,000 were for direct labor. Manufacturing overhead is allocated on the basis of 60% of direct labor cost. Actual overhead was $116,340. Jobs costing $353,200 were completed during the year. The December 31 balance in Work-in-Process Inventory is ________.
A) $65,800
B) $320,400
C) $432,600
D) $79,400
Answer: D
Explanation: D)
Diff: 2
LO: 19-4
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Transferring Costs To Finished Goods Inventory
6) Caltran, Inc. completed manufacturing Job 445. It included $390 of direct materials cost, $1,220 of direct labor cost, and $500 of allocated manufacturing overhead. Which of the following is the correct journal entry needed to record the completed job?
A)
Work-in-Process Inventory 2,110
Finished Goods Inventory
2,110
B)
Finished Goods Inventory 2,110
Materials Inventory
2,110
C)
Work-in-Process Inventory 1,610
Cost of Goods Sold
1,610
D)
Finished Goods Inventory 2,110
Work-in-Process Inventory
2,110
Answer: D
Explanation: D)
Cost of Job 445:
Direct materials $390
Direct labor 1,220
Manufacturing overhead allocated 500
Job cost for Job 445 $2,110
Journal entry:
Finished Goods Inventory 2,110
Work-in-Process Inventory
2,110
Diff: 1
LO: 19-4
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Transferring Costs To Finished Goods Inventory
7) Altima, Inc. finished Job A40 on the last working day of the year. It utilized $300 of direct materials and $3,380 of direct labor. Altima uses a predetermined overhead allocation rate based on a percentage of direct labor costs, which has been fixed at 40%. The entry to record the completion of the job should involve a ________.
A) debit to Finished Goods Inventory $5,032 and a credit to Materials Inventory $5,032
B) debit to Cost of Goods Sold $5,032 and a credit to Finished Goods Inventory $5,032
C) debit to Finished Goods Inventory $5,032 and a credit to Work-in-Process Inventory $5,032
D) debit to Work-in-Process Inventory $5,032 and a credit to Finished Goods Inventory $5,032
Answer: C
Explanation: C)
Cost of Job A40:
Direct materials utilized $300
Direct labor 3,380
Manufacturing overhead allocated ($3,380 × 40%) 1,352
Job cost for Job A40 $5,032
Journal entry:
Finished Goods Inventory 5,032
Work-in-Process Inventory
5,032
Diff: 2
LO: 19-4
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Transferring Costs To Finished Goods Inventory
8) At the beginning of the year, Conway Manufacturing had the following account balances:
Work-in-Process Inventory
20,000
Finished Goods Inventory
8,000
Manufacturing Overhead
0
Cost of Goods Sold
0
Sales Revenue
0
The following additional details are provided for the year:
Direct materials placed in production $82,000
Direct labor incurred 190,100
Manufacturing overhead incurred 300,600
Manufacturing overhead allocated to production 297,700
Cost of jobs completed and transferred 500,800
The ending balance in the Work-in-Process Inventory account is a ________.
A) credit of $71,000
B) debit of $2,000
C) credit of $2,000
D) debit of $71,000
Answer: D
Explanation: D)
Diff: 2
LO: 19-4
AACSB: Analytical thinking
AICPA Functional: Measurement
PE Question Type: Critical thinking
H2 : Transferring Costs To Finished Goods Inventory
9) At the beginning of the year, Judge Manufacturing had the following account balances:
Work-in-Process Inventory
20,000
Finished Goods Inventory
8,000
Manufacturing Overhead
0
Cost of Goods Sold
0
Sales Revenue
0
The following additional details are provided for the year:
Direct materials placed in production $83,800
Direct labor incurred 191,800
Manufacturing overhead incurred 300,900
Manufacturing overhead allocated to production 295,700
Cost of jobs completed and transferred 501,200
The ending balance in the Finished Goods Inventory account is a ________.
A) debit of $509,200
B) debit of $501,200
C) debit of $8,000
D) debit of $571,300
Answer: A
Explanation: A)
Diff: 2
LO: 19-4
AACSB: Analytical thinking
AICPA Functional: Measurement
PE Question Type: Critical thinking
H2 : Transferring Costs To Finished Goods Inventory
10) When goods are transferred from the Work-in-Process Inventory account to the Finished Goods Inventory account, ________.
A) total assets and total liabilities increase by the same amount
B) total assets of the company remain constant
C) total equity and total assets increase by the same amount
D) total liabilities increase and total equity decreases by the same amount
Answer: B
Diff: 2
LO: 19-4
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : Transferring Costs To Finished Goods Inventory
11) Jupiter Manufacturing began business on January 1. During its first year of operation, Jupiter worked on five industrial jobs and reported the following information at year-end:
Job 1 Job 2 Job 3 Job 4 Job 5
Direct Materials 1,000 7,500 4,000 3,500 1,500
Direct Labor 12,000 20,000 13,000 12,000 900
Allocated Mfg. Overhead 1,500 6,000 2,500 7,500 500
Job completed: Jun 30 Sep 1 Oct 15 Nov 1 Not completed
Job sold: Jul 10 Sep 12 Not sold Not sold N/A
Revenues: 25,000 39,000 N/A N/A N/A
What was the balance in W