chapter 15

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accouting 202

Which of the following is one of the components of cost accounting?

a. It involves measuring product costs.

A major purpose of cost accounting is to

d. measure, record, and report product costs.

The two basic types of cost accounting systems are

b. job order and process cost systems.

A process cost system would most likely be used by a company that makes

c. breakfast cereal.

Which of the following would be accounted for using a job order cost system?

d. The construction of a new campus building.

Process costing is used when

a. the production process is continuous.

Process costing is not used when

c. jobs have distinguishing characteristics.

An important feature of a job order cost system is that each job

b. has its own distinguishing characteristics.

As of December 31, 2012, Grey Manufacturing had $2,500 of raw materials inventory. At the beginning of 2012, there was $2,000 of materials on hand. During the year, the company purchased $305,000 of materials; however, it paid for only $292,500. How much inventory was requisitioned for use on jobs during 2012?

b. $304,500

The flow of costs in a job order cost system

a. involves accumulating manufacturing costs incurred and assigning the accumulated costs to work done.

In a job order cost accounting system, the Raw Materials Inventory account is

b. a control account.

When a job is completed and all costs have been accumulated on a job cost sheet, the journal entry that should be made is

d. Finished Goods Inventory
Work In Process Inventory

The two major steps in the flow of costs are

c. accumulating and assigning.

The Raw Materials Inventory account is

b. debited for invoice costs and freight costs chargeable to the purchaser.

Records of individual items of raw materials would not be maintained

d. in the Raw Materials Inventory account.

Cost of raw materials is debited to Raw Materials Inventory when the

b. materials are received.

Which of the following is not included in factory labor costs?

b. Net earnings.

All of the following would be entries in assigning accumulated costs to the Work In Process Inventory except:

a. the purchase of raw materials.

Factory labor costs

c. include vacation pay.

Factory Labor is a(n)

d. manufacturing cost clearing account.

Grape Industries has the following labor costs:
Factory—Gross wages $390,000
Factory—Net wages 320,000
Employer Payroll Taxes Payable 50,000
The entry to record the cost of factory labor and the associated payroll tax expense will include a debit to Factory Labor for

a. $440,000.

Factory labor costs

c. include sick pay earned by factory workers.

Which of the following is not a control account?

b. Factory Labor

Manufacturing Overhead would not have a subsidiary account for

d. raw materials inventory.

The entry to record the acquisition of raw materials on account is

d. Raw Materials Inventory
Accounts Payable

Which one of the following best describes a job cost sheet?

a. It is a form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job.

Job cost sheets constitute the subsidiary ledger for the

c. Work In Process Inventory account.

A materials requisition slip showed that direct materials requested were $58,000 and indirect materials requested were $9,000. The entry to record the transfer of materials from the storeroom is

d. Work In Process Inventory 58,000
Manufacturing Overhead 9,000
Raw Materials Inventory 67,000

The job cost sheet does not show

d. the cost of goods sold.

Under an effective system of internal control, the authorization for issuing materials is made

b. on a prenumbered materials requisition slip.

A copy of the materials requisition slip would not include the:

d. name of the supplier.

Materials requisition slips are costed

d. using any of the inventory costing methods.

Postings to control accounts in a costing system are made

a. monthly.

Which one of the following should be equal to the balance of the Work In Process Inventory account at the end of the period?

b. The sum of the costs shown on the job cost sheets of unfinished jobs

Which of the following shows entries only to control accounts?

c. Work in Process
Manufacturing Overhead
Raw Materials Inventory

A time ticket does not indicate the

c. number of personal exemptions claimed by the employee.

Which one of the following is a source document that impacts the job cost sheet?

c. Labor time tickets.

Time tickets should be approved by

c. the employee's supervisor.

If the entry to assign factory labor showed only a debit to Work In Process Inventory, then all labor costs were

a. direct labor.

The principal accounting record used in assigning costs to jobs is

a. a job cost sheet.

The following information is available for completed Job No. 402: Direct materials, $80,000; direct labor, $120,000; manufacturing overhead applied, $60,000; units produced, 5,000 units; units sold, 4,000 units. The cost of the finished goods on hand from this job is

c. $52,000.

Yellow Manufacturing completed Job No. B14 during 2012. The job cost sheet listed the following:
Direct materials $44,000
Direct labor $24,000
Manufacturing overhead applied $16,000
Units produced 3,000 units
Units sold 1,800 units
How much is the cost of the finished goods on hand from this job?

Yellow Manufacturing completed Job No. B14 during 2012. The job cost sheet listed the following:
Direct materials $44,000
Direct labor $24,000
Manufacturing overhead applied $16,000
Units produced 3,000 units
Units sold 1,800 units
How much is the cost of the finished goods on hand from this job?

c. $33,600

Sparky Inc. uses job order costing for its brand new line of sewing machines. The cost incurred for production during 2012 totaled $18,000 of materials, $9,000 of direct labor costs, and $6,000 of manufacturing overhead applied. The company ships all goods as soon as they are completed which results in no finished goods inventory on hand at the end of any year. Beginning work in process totaled $15,000, and the ending balance is $9,000. During the year, the company completed 40 machines. How much is the cost per machine?

b. $975

As of December 31, 2012, Leaf Manufacturing had $2,000 of raw materials inventory. At the beginning of 2012, there was $1,600 of materials on hand. During the year, the company purchased $274,000 of materials; however it paid for only $264,000. How much inventory was requisitioned for use on jobs during 2012?

d. $273,600

Cost of goods manufactured equals $55,000 for 2012. Finished goods inventory is $2,000 at the beginning of the year and $5,500 at the end of the year. Beginning and ending work in process for 2012 are $4,000 and $5,000, respectively. How much is cost of goods sold for the year?

c. $51,500

A company expected its annual overhead costs to be $900,000 and direct labor costs to be $1,000,000. Actual overhead was $870,000, and actual labor costs totaled $1,100,000. How much is the company's predetermined overhead rate to the nearest cent?

c. $0.90

Percy, Inc. thinks machine hours is the best activity base for its manufacturing overhead. The estimate of annual overhead costs for its jobs was $820,000. The company used 1,000 hours of processing on Job No. B12 during the period and incurred overhead costs totaling $840,000. The budgeted machine hours for the year totaled 20,000. How much overhead should be applied to Job No. B12?

b. $41,000

Cotton Mfg. provided the following information from its accounting records for 2012:
Expected production 30,000 labor hours
Actual production 28,000 labor hours
Budgeted overhead $600,000
Actual overhead $580,000
How much is the overhead application rate if Cotton bases the rate on direct labor hours?

b. $20.00 per hour

Copper Industries applies overhead on the basis of 150% of direct labor cost. Job No. 176 is charged with $75,000 of direct materials costs and $90,000 of manufacturing overhead. The total manufacturing costs for Job No. 176 is

c. $225,000.

Wave Company manufactures customized desks. The following pertains to Job No. 978:
Direct materials used $9,450
Direct labor hours worked 360
Direct labor rate per hour $15.00
Machine hours used 300
Applied factory overhead rate per machine hour $22.00
What is the total manufacturing cost for Job No. 978?

b. $21,450

Sun Screen Manufacturers applies overhead on the basis of 120% of direct labor cost. Job No. 190 is charged with $80,000 of direct materials costs and $120,000 of manufacturing overhead. The total manufacturing costs for Job No. 190 is

d. $300,000.

Peralta Company manufactures customized desks. The following pertains to Job No. 953:
Direct materials used $16,800
Direct labor hours worked 600
Direct labor rate per hour $16.00
Machine hours used 400
Applied factory overhead rate per machine hour $30.00
What is the total manufacturing cost for Job No. 953?

b. $38,400

Cactus Tree Company provided the following information from its accounting records for 2012:
Expected production 60,000 labor hours
Actual production 56,000 labor hours
Budgeted overhead $1,200,000
Actual overhead $1,160,000
How much is the overhead application rate if Cactus Tree Company bases it on direct labor hours?

a. $20.00 per hour

The labor costs that have been identified as indirect labor should be charged to

a. manufacturing overhead.

Manufacturing overhead is applied to each job

b. by means of a predetermined overhead rate.

The predetermined overhead rate is based on the relationship between

b. estimated annual costs and expected annual activity.

The predetermined overhead rate is

c. determined at the beginning of the year.

In calculating a predetermined overhead rate, a recent trend in automated manufacturing operations is to choose an activity base related to

c. machine hours.

If annual overhead costs are expected to be $800,000 and direct labor costs are expected to be $1,000,000, then if the activity base is direct labor costs:

c. for every dollar of direct labor, 80 cents of manufacturing overhead will be assigned.

Overhead application is recorded with a

b. credit to Manufacturing Overhead.

Manufacturing overhead applied is added to direct labor incurred and to what other item to equal total manufacturing costs for the period?

d. Direct materials used.

Brothers Manufacturing applies overhead to production at a predetermined rate of 90% based on direct labor cost. Job No. 250, the only job still in process at the end of August, has been charged with manufacturing overhead of $3,600. What was the amount of direct materials charged to Job 250 assuming the balance in Work in Process inventory is $15,000?

c. $7,400.

Pane Industries applies overhead to production at a predetermined rate of 80% based on direct labor cost. Job No. 130, the only job still in process at the end of August, has been charged with manufacturing overhead of $3,000. What was the amount of direct materials charged to Job 130 assuming the balance in Work in Process inventory is $12,000?

c. $5,250.

For Wrought Iron Manufacturing, the predetermined overhead rate is 70% of direct labor cost. During the month, $300,000 of factory labor costs are incurred of which $80,000 is indirect labor. Actual overhead incurred was $160,000. The amount of overhead debited to Work in Process Inventory should be:

a. $154,000

Pepper Company applies overhead on the basis of 200% of direct labor cost. Job No. 305 is charged with $90,000 of direct materials costs and $120,000 of manufacturing overhead. The total manufacturing costs for Job No. 305 is:

b. $270,000

For Tunes Company, the predetermined overhead rate is 70% of direct labor cost. During the month, $350,000 of factory labor costs are incurred of which $100,000 is indirect labor. Actual overhead incurred was $180,000. The amount of overhead debited to Work in Process Inventory should be:

a. $175,000

At the beginning of the year, Scaled Manufacturing estimates annual overhead costs to be $1,200,000 and that 300,000 machine hours will be operated. Using machine hours as a base, the amount of overhead applied during the year if actual machine hours for the year was 315,000 hours is

d. $1,260,000.

Cost of goods sold is obtained from

b. the finished goods inventory records.

When determining costs of jobs, how does a company account for indirect materials?

c. It is transferred out of raw materials into manufacturing overhead when used.

In a job order cost system, a credit to Manufacturing Overhead will be accompanied by a debit to

c. Work in Process Inventory.

During 2012, Pappy Company expected Job No. 26 to cost $300,000 of overhead, $500,000 of materials, and $200,000 in labor. Tanner applied overhead based on direct labor cost. Actual production required an overhead cost of $560,000, $550,000 in materials used, and $220,000 in labor. All of the goods were completed. What amount was transferred to Finished Goods?

d. $1,100,000

Debits to Work in Process Inventory are accompanied by a credit to all but which one of the following accounts?

d. Cost of Goods Sold

Which of the following is not viewed as part of accumulating manufacturing costs in a job order cost system?

a. Cost of goods sold is recognized

Which of the following is not viewed as part of assigning manufacturing costs in a job order cost system?

c. Manufacturing overhead is incurred

In determining total manufacturing costs on the cost of goods manufactured schedule,

c. manufacturing overhead applied is added to direct materials and direct labor.

Sand Industries developed the following data for the current year:
Beginning work in process inventory $120,000
Direct materials used 72,000
Actual overhead 144,000
Overhead applied 108,000
Cost of goods manufactured 132,000
Total manufacturing costs 360,000

Sand's direct labor cost for the year is

b. $180,000.

Sand Industries developed the following data for the current year:
Beginning work in process inventory $120,000
Direct materials used 72,000
Actual overhead 144,000
Overhead applied 108,000
Cost of goods manufactured 132,000
Total manufacturing costs 360,000

Sand's ending work in process inventory is

a. $348,000.

Round and Square Industries developed the following data:
Beginning work in process inventory $270,000
Direct materials used 210,000
Actual overhead 330,000
Overhead applied 240,000
Cost of goods manufactured 360,000
Ending work in process 450,000
Round and Square's total manufacturing costs for the period is

b. $540,000.

Which of the following is not used in assigning manufacturing costs to work in process inventory?

a. Actual manufacturing overhead

On the cost of goods manufactured schedule, the cost of goods manufactured agrees with the

c. amount transferred from Work in Process Inventory to Finished Goods during the period.

Tablets Company had the following information at December 31:
Finished goods inventory, January 1 $ 30,000
Finished goods inventory, December 31 90,000
If the cost of goods manufactured during the year amounted to $1,260,000 and annual sales were $1,650,000, the amount of gross profit for the year is

c. $450,000.

Concrete International Industries incurred direct materials costs of $1,000,000 during the year. Manufacturing overhead applied was $180,000 and is applied at the rate of 60% of direct labor costs. Concrete International's total manufacturing costs for the year was

a. $1,480,000.

Pod Company developed the following data for the current year:
Beginning work in process inventory $ 68,000
Direct materials used 104,000
Actual overhead 88,000
Overhead applied 92,000
Cost of goods manufactured 450,000
Total manufacturing costs 428,000

How much is Pod Company's direct labor cost for the year?

c. $232,000

Pod Company developed the following data for the current year:
Beginning work in process inventory $ 68,000
Direct materials used 104,000
Actual overhead 88,000
Overhead applied 92,000
Cost of goods manufactured 450,000
Total manufacturing costs 428,000

How much is Pod Company's ending work in process inventory for the year?

a. $46,000

Mesquite Manufacturing Company developed the following data:
Beginning work in process inventory $ 60,000
Direct materials used 360,000
Actual overhead 420,000
Overhead applied 405,000
Cost of goods manufactured 960,000
Ending work in process 45,000

How much are total manufacturing costs for the period?

b. $945,000

Case Industries had the following information at December 31:
Finished goods inventory, January 1 $60,000
Finished goods inventory, December 31 84,000
If the cost of goods manufactured during the year amounted to $1,330,000 and annual sales were $1,996,000, how much is the amount of gross profit for the year?

d. $690,000

Spa Manufacturing incurred direct materials costs of $450,000 during the year. Manufacturing overhead applied was $420,000 and is applied based on direct labor costs. The predetermined overhead rate is 70%. How much are Spa Manufacturing's total manufacturing costs for the year?

d. $1,470,000

During 2012, Sand, Inc. expected Job No. 51 to cost $300,000 of overhead, $500,000 of materials, and $200,000 in labor. Sand applied overhead based on direct labor cost. Actual production required an overhead cost of $280,000, $550,000 in materials used, and $220,000 in labor. All of the goods were completed. What amount was transferred to Finished Goods?

b. $1,100,000

During 2012, Pavers Manufacturing expected Job No. 59 to cost $300,000 of overhead, $500,000 of materials, and $200,000 in labor. Pavers applied overhead based on direct labor cost. Actual production required an overhead cost of $280,000, $550,000 in materials used, and $220,000 in labor. All of the goods were completed. How much is the amount of over- or underapplied overhead?

d. $50,000 overapplied

Oscar Co. applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under- or overapplication of overhead for the period:
Estimated annual overhead cost $1,200,000
Actual annual overhead cost $1,155,000
Estimated machine hours 400,000
Actual machine hours 380,000

c. $1,140,000 applied and $15,000 underapplied

Sofa Manufacturers applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under- or overapplication of overhead for the period:
Estimated annual overhead cost $1,500,000
Actual annual overhead cost $1,470,000
Estimated machine hours 300,000
Actual machine hours 290,000

c. $1,450,000 applied and $20,000 underapplied

A company assigned overhead to work in process. At year end, what does the amount of overapplied overhead mean?

d. The overhead assigned to work in process is greater than the overhead incurred.

If the Manufacturing Overhead account has a debit balance at the end of a period, it means that

b. actual overhead costs were greater than overhead costs applied to jobs.

If the manufacturing overhead costs applied to jobs worked on were greater than the actual manufacturing costs incurred during a period, overhead is said to be

b. overapplied.

At the end of the year, any balance in the Manufacturing Overhead account is generally eliminated by adjusting

c. Cost of Goods Sold.

Manufacturing Overhead has a credit balance at the end of the period, then

c. overhead has been overapplied.

The Manufacturing Overhead account shows debits of $30,000, $24,000, and $28,000 and one credit for $86,000. Based on this information, manufacturing overhead

a. has been overapplied.

If Manufacturing Overhead has a debit balance at the end of the period, then

a. overhead has been underapplied.

If actual overhead is greater than applied manufacturing overhead, then manufacturing overhead is:

a. underapplied.

If actual overhead is less than applied manufacturing overhead, then manufacturing overhead is:

b. overapplied.

If manufacturing overhead has been underapplied during the year, the adjusting entry at the end of the year will show a

d. debit to Cost of Goods Sold.

If manufacturing overhead has been overapplied during the year, the adjusting entry at the end of the year will show a

a. debit to Manufacturing Overhead.

The existence of under- or overapplied overhead at the end of the year:

a. requires an adjustment to Cost of Goods Sold.

Conceptually, any under- or overapplied overhead at the end of the year should be allocated among all of the following except

c. ending raw materials inventory.

If, at the end of the year, Manufacturing Overhead has been overapplied, it means that

b. actual overhead costs were less than the overhead assigned to jobs.

A process cost system would be used for all of the following except the

c. printing of wedding invitations.

In a job order cost system, it would be correct in recording the purchase of raw materials to debit

c. Raw Materials Inventory.

In a manufacturing company, the cost of factory labor consists of all of the following except

c. net earnings of factory workers.

Which of the following is not a control account?

b. Factory Labor

When the company assigns factory labor costs to jobs, the direct labor cost is debited to

d. Work in Process Inventory.

Seven Industries applies overhead on the basis of 200% of direct labor cost. Job No. 501 is charged with $90,000 of direct materials costs and $120,000 of manufacturing overhead. The total manufacturing costs for Job No. 501 is

c. $270,000.

Companies assign manufacturing overhead to work in process on an estimated basis through the use of a(n)

d. predetermined overhead rate.

Overapplied manufacturing overhead exists when overhead assigned to work in process is

c. more than overhead incurred and there is a credit balance in Manufacturing Overhead at the end of a period.

Usually, under- or overapplied overhead is considered to be an adjustment to

d. cost of goods sold.

Which of the following statements about under- or overapplied manufacturing overhead is correct?

a. After the entry to transfer over- or underapplied overhead to Cost of Goods Sold is posted, Manufacturing Overhead will have a zero balance.

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