ACC 202 Exam 1 Study Guide

Almaraz Corporation has two manufacturing departments--Forming and Finishing. The company used the following data at the beginning of the year to calculate predetermined overhead rates: Forming Finishing Total Estimated total machine-hours (MHs) 7,000 3,000 10,000 Estimated total FMO $ 40,600 $ 8,100 $ 48,700 Estimated VMO cost per MH $ 1.30 $ 2.80 Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Note: FMO stands for Fixed Manufacturing Overhead and VMO stands for Variable Manufacturing Overhead The predetermined manufacturing overhead rate for Almaraz is closest to: A. $6.62 B. $4.87 C. $7.10 D. $4.10

A. $6.62

When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the following would be true? A. Gross margin will increase. B. Net income will decrease. C. Cost of Goods Sold will increase. D. Work in Process will decrease.

A. Gross margin will increase.

In a job-order costing system that is based on machine-hours, which of the following formulas is correct? A. Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours B. Predetermined overhead rate = Actual manufacturing overhead ÷ Actual machine-hours C. Predetermined overhead rate = Actual manufacturing overhead ÷ Estimated machine-hours D. Predetermined overhead rate = Estimated manufacturing overhead ÷ Actual machine-hours

A. Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours

Product costs that have become expenses can be found in: A. cost of goods sold. B. administrative expenses. C. period costs. D. selling expenses.

A. cost of goods sold.

The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n): A. indirect material cost. B. period cost. C. direct material cost. D. opportunity cost.

A. indirect material cost.

Dukes Corporation used a predetermined overhead rate this year of $2 per direct labor-hour, based on an estimate of 20,000 direct labor-hours to be worked during the year. Actual costs and activity during the year were: Actual manufacturing overhead cost incurred $ 38,000 Actual direct labor-hours worked 18,500 The overapplied or underapplied manufacturing for the year was: A. $1,000 overapplied B. $1,000 underapplied C. $3,000 underapplied D. $3,000 overapplied

B. $1,000 underapplied

Phaup Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 4.85 Direct labor $ 4.00 Variable manufacturing overhead $ 1.75 Fixed manufacturing overhead $ 3.90 Fixed selling expense $ 0.90 Fixed administrative expense $ 0.60 Sales commissions $ 0.50 Variable administrative expense $ 0.45 For financial reporting purposes, the total amount of period costs incurred to sell 5,000 units is closest to: A. $8,200 B. $12,250 C. $4,750 D. $7,500

B. $12,250

Leelanau Corporation uses a job-order costing system. The following data are for last year: Work in process beginning balance $ 10,500 Work in process ending balance $ 19,000 Cost of goods manufactured $ 323,000 Direct materials $ 115,000 Direct Labor $ 78,000 Leelanau applies overhead using a predetermined rate. What amount of overhead was applied to work in process last year? HIINT: BB WIP + DM + DL + MO Applied - EB WIP = COGM A. $121,500 B. $138,500 C. $203,500 D. $130,000

B. $138,500

Brendal Corporation is a manufacturer that uses job-order costing. The company has supplied the following data for the just completed year: Budget: Estimated total manufacturing overhead (MO) for the year $693,000 Estimated direct labor-hours for the year 42,000 Note: MO is applied to jobs using a POHR based on DLH Results of operations for the year: Raw materials (all direct) requisitioned for use in production $525,000 Direct labor cost $ 690,000 Actual direct labor-hours 49,000 Indirect labor cost $ 138,000 Other manufacturing overhead costs incurred $ 506,000 How much is the total manufacturing cost added to Work in Process during the year? A. $1,498,500 B. $2,023,500 C. $1,803,000 D. $1,215,000

B. $2,023,500

Ouelette Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: Average Cost per Unit @ 5000 Units Direct materials $ 5.25 Direct labor $ 4.05 Variable manufacturing overhead $ 1.30 Fixed manufacturing overhead $ 3.00 Fixed selling expense $ 0.70 Fixed administrative expense $ 0.40 Sales commissions $ 0.50 Variable administrative expense $ 0.45 If 6,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to: A. $15,000 B. $22,800 C. $25,800 D. $7,800

B. $22,800

The following information about Fisher Corporation's Work in Process inventory account has been provided for the month of May: May 1 balance in WIP $ 26,000 Costs added to WIP in May: Direct Materials $40,000 Direct Labor $ 50,000 Manufacturing Overhead allocated ??? May 31 balace in WIP $33,000 NOTE: "applied" and "allocated" mean the same thing During the month, Fisher Corporation's Work in Process inventory account was credited for $120,500, which represented the Cost of Goods Manufactured for the month. The amount of Manufacturing Overhead applied in the month of May was: A. $120,500 B. $37,500 C. $28,500 D. $4,500

B. $37,500

Which one of the following statements about using a plantwide overhead rate based on direct labor is correct? A. Using a plantwide overhead rate based on direct labor-hours will ensure that direct labor costs are correctly traced to jobs. B. It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver. C. The labor theory of value ensures that using a plantwide overhead rate based on direct labor will do a reasonably good job of assigning overhead costs to jobs. D. Using a plantwide overhead rate based on direct labor costs will ensure that direct labor costs will be correctly traced to jobs

B. It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.

Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory? A. The factory utilities of the department in which production takes place. B. The amount paid to the individual who stains a chair. C. The cost of the glue in a chair. D. The workman's compensation insurance of the supervisor who oversees production.

B. The amount paid to the individual who stains a chair.

Tusa Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year: Budget:Estimated total manufacturing overhead for the year $638,250 Estimated direct labor-hours (DLH) for the year 37,000 Results of operations (Actual) Actual direct labor-hours 34,000 Manufacturing overhead: Indirect labor cost $ 148,000 Other manufacturing overhead costs incurred $ 450,000 Cost of goods manufactured $ 1,611,000 Cost of goods sold (unadjusted) $ 1,518,000 The adjusted Cost of Goods Sold for the year is: (HINT: look for over or under applied overhead situation) A. $1,518,000 B. $1,506,500 C. $1,529,500 D. $1,506,500

C. $1,529,500

Johansen Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for the next year: Direct materials $ 6,000 Direct labor $ 20,000 Rent on factory building $ 15,000 Sales salaries $ 25,000 Depreciation on factory equipment $ 8,000 Indirect labor $ 12,000 Production supervisor's salary $ 15,000 Jameson estimates that 20,000 direct labor-hours will be worked during the year.The predetermined overhead rate per hour will be: A. $3.00 per direct labor-hour B. $4.00 per direct labor-hour C. $2.50 per direct labor-hour D. $2.79 per direct labor-hour

C. $2.50 per direct labor-hour

Coates Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $249,000, variable manufacturing overhead of $3.80 per machine-hour, and 30,000 machine-hours. The company has provided the following data concerning Job X784 which was recently completed: Job E's manufacturing cost: Number of units in the job 50 Total machine-hours 250 Direct materials $ 470 Direct labor cost $ 5,500 If the company marks up its unit product costs by 30% then the selling price for a unit in Job X784 is closest to: A. $155.22 B. $253.87 C. $233.87 D. $53.97

C. $233.87

Lister Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year (budgeted): Estimated total manufacturing overhead for the year $624,000 Estimated direct labor-hours for the year 39,000 Results of operations (actual): Actual direct labor-hours 36,000 Indirect labor cost $ 131,000 Other manufacturing overhead costs incurred $ 543,000 The total amount of manufacturing overhead applied (allocated) to production is: A.$674,000 B. $1,547,000 C. $576,000 D. $624,000

C. $576,000

Doakes Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours 60,000 Total fixed manufacturing overhead cost $ 378,000 Variable manufacturing overhead per direct labor-hour $ 2.20 Recently, Job M843 was completed with the following characteristics: Number of units in the job 60 Total direct labor-hours 120 Direct materials $ 630 Direct labor cost $ 2,400 The unit product cost for Job M843 is closest to: A. $27.50 B. $50.50 C. $67.50 D. $33.75

C. $67.50

Placensia Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year: Beginning inventories: Finished goods $ 33,000 Estimated total manufacturing overhead for the year $ 635,500 Estimated direct labor-hours for the year 41,000 Results of operations: Actual direct labor-hours 42,000 Manufacturing overhead: Indirect labor cost $ 177,000 Other manufacturing overhead costs incurred $ 444,000 Selling and administrative: Selling and administrative salaries $280,000 Other selling and administrative expenses $ 310,000 Cost of goods manufactured $ 1,501,000 Sales revenue $ 2,704,000 Cost of goods sold (unadjusted) $ 1,416,000 The net operating income is: A. $1,038,000 B. $1,318,000 C. $728,000 D. $1,008,000

C. $728,000

The Silver Corporation uses a predetermined overhead rate to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and on machine-hours in Dept. B. At the beginning of the year, the Corporation made the following estimates: Dept. A Dept. B Direct labor cost $ 60,000 $ 40,000 Manufacturing overhead $ 90,000 $ 45,000 Direct labor-hours 6,000 9,000 Machine-hours 2,000 15,000 What predetermined overhead rates would be used in Dept. A and Dept. B, respectively? A. 150% and $5.00 B. 67% and $3.00 C. 150% and $3.00 D. 67% and $5.00

C. 150% and $3.00

Dipaola Corporation has provided the following data concerning last month's operations. Purchases of raw materials $ 26,000 Indirect materials included in manufacturing overhead $ 6,000 Direct labor cost $ 58,000 Manufacturing overhead applied to Work in Process $ 87,000 Overapplied overhead $ 6,000 Beginning Ending Raw materials inventory $ 12,000 $ 18,000 Work in process inventory $ 46,000 $ 64,000 Finished goods inventory $ 31,000 $ 46,000 (Hint: Direct Materials and Indirect Materials are both stored in the Raw Materials inventory.) How much is the direct materials cost for the month on the Schedule of Cost of Goods Manufactured? A. $20,000 B. $26,000 C. $32,000 D. $14,000

D. $14,000

Giannitti Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the upcoming year appear below: Estimated machine-hours 36,000 Estimated variable manufacturing overhead $ 3.01 per machine-hour Estimated total fixed manufacturing overhead $ 1,058,040 The predetermined overhead rate for the recently completed year was closest to: A. $3.01 per machine-hour B. $29.39 per machine-hour C. $32.81 per machine-hour D. $32.40 per machine-hour

D. $32.40 per machine-hour

Columbo Corporation has two production departments, Forming and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department's predetermined overhead rate is based on machine-hours (MH) and the Finishing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Forming Finishing Machine-hours 17,000 10,000 Direct labor-hours 1,000 9,000 Total fixed manufacturing overhead cost $ 110,500 $ 78,300 Variable manufacturing overhead per MH $ 1.60 Variable manufacturing overhead per MH $ 3.30 During the current month the company started and finished Job A948. The following data were recorded for this job: Job A948: Forming Finishing Machine-hours 70 30 Direct labor-hours 10 50 Direct materials $ 650 $ 330 Direct labor cost $ 380 $ 1,900 If the company marks up its manufacturing costs by 40% then the selling price for Job A948 would be closest to: A. $4,427.00 B. $6,818.00 C. $1,770.80 D. $6,197.80

D. $6,197.80

Bressette Corporation has provided the following information: Cost per Unit Direct materials $ 6.20 Direct labor $ 3.70 Variable manufacturing overhead $ 1.25 Sales commissions $ 1.50 Variable administrative expense $ 0.50 Cost per Period Fixed manufacturing overhead $ 10,000 Fixed selling and administrative expense $ 5,000 For financial reporting purposes, the total amount of product costs incurred to make 5,000 units is closest to: A. $55,750 B. $70,750 C. $10,000 D. $65,750

D. $65,750

The salary paid to the president of a company would be classified on the income statement as a(n): A. selling expense B. manufacturing overhead cost C. direct labor cost D. administrative expense

D. Administrative Expense

Which of the following is NOT a period cost? A. Insurance on a company showroom where customers can view new products. B. Cost of a seminar concerning tax law updates that was attended by the company's controller. C. Salary of a clerk who handles customer billing D. Depreciation of factory maintenance equipment.

D. Depreciation of factory maintenance equipment.

Rotonga Manufacturing Company leases a vehicle to deliver its finished products to customers. Which of the following terms correctly describes the monthly lease payments made on the delivery vehicle? A. Direct Cost YES / Fixed Cost NO B. Direct Cost NO / Fixed Cost NO C. Direct Cost YES / Fixed Cost YES D. Direct Cost NO / Fixed Cost YES

D. Direct Cost NO / Fixed Cost YES

The costs of direct materials are classified as: Conversion cost Manufacturing cost Prime cost A) Yes Yes Yes B) No No No C) Yes Yes No D) No Yes Yes

D. No Yes Yes

Under a job-order costing system, the dollar amount transferred from Work in Process to Finished Goods is the sum of the costs charged to all jobs: A. started in process during the period. B. completed and sold during the period. C. in process during the period. D. completed during the period

D. completed during the period

Job cost sheets contain entries for actual direct material, actual direct labor, and actual manufacturing overhead cost incurred in completing a job. True False

False