Accounting exam 2

Overmiller Mfg. provided the following information from its accounting records for 2021. Expected production50,000 labor hoursActual production66,000 labor hoursBudgeted annual overhead$780,000Actual overhead$960,000 What is the predetermined overhead rate if Overmiller Mfg. bases the rate on direct labor hours (rounded to the nearest cent)?

$15.60

During January, its first month of operations, Rain Tree Company accumulated the following manufacturing costs: raw materials purchased $ 5,500 on account factory labor $ 6,400 utilities payable $ 3,100. In January, requisitions of raw materials for production are as follows: Job 1 $ 920 Job 2 $ 1,600 Job 3 $ 720 general factory use $ 700. Compute the updated balance in the Work In Process Inventory account at the end of January.

$3,240

Deer Run Company produces sunglasses. During the year, manufacturing overhead costs are estimated to be $ 227,000. Estimated machine usage is 2,750 hours. The company assigns overhead based on machine hours. Job No. 551 used 70 machine hours. Compute the predermined overhead rate: Determine the amount of overhead to apply to Job No. 551:

$82.55 $5778.50

During January, Nyx Company's manufacturing accounts contained the following manufacturing costs: raw materials $ 4,500 factory labor $ 6,700 manufacturing overhead $ 3,700 Work in Process, $ 3,060. During January, time tickets show that the factory labor of $ 6,700 was used as follows: Job 1 $ 2,330 Job 2 $ 1,780 Job 3 $ 1,590 general factory use $ 1,000. Compute the updated balance in the Work in Process Inventory account at the end of January.

$8760

Classify each of the following costs as unit-level, batch-level, product-level, or facility-level. First-shift supervisor's salary. Powdered raw plastic. Dies for casting plastic components. Depreciation on injection molding machines (assume units-of-activity depreciation) Changing dies on machines. Moving components to assembly department. Engineering design. Employee health and medical insurance coverage.

(a) First-shift supervisor's salary. Facility-level (b) Powdered raw plastic. Unit-level (c) Dies for casting plastic components. Product-level (d) Depreciation on injection molding machines (assume units-of-activity depreciation). Unit-level (e) Changing dies on machines. Batch-level (f) Moving components to assembly department. Batch-level (g) Engineering design. Product-level (h) Employee health and medical insurance coverage. Facility

Fixed costs

-constant in total -vary per unit (inverse per unit cost relationship with activity)

process costing

-large volume -similar products -production is continuous -accumulate costs for a period of time

Mixed costs

-vary in total -vary per unit (Utilities; maintenance) non-proportionate changes

Variable costs

-vary in total -constant per unit (direct materials; direct labor) proportionate changes to mirror activity level changes

Flow of costs in a job order costing system; put them in the correct order: Costs are transferred to Cost of Goods Sold Costs are transferred to Finished Goods Inventory Accumulate manufacturing costs Assign manufacturing costs to Work in Process Inventory

1. Accumulate manufacturing costs 2. Assign manufacturing costs to Work in Process Inventory 3. Costs are transferred to Finished Goods Inventory 4. Costs are transferred to Cost of Goods Sold

Balanced Scorecard

A performance-measurement approach that uses both financial and nonfinancial measures, tied to company objectives, to evaluate a company's operations in an integrated fashion.

A method of allocating overhead based on each product's use of activities in making the product.

Activity Based Costing

Which of the following managerial accounting approaches attempts to allocate manufacturing overhead more accurately? Activity-based costing Balanced scorecard Total quality management Just-in-time inventory

Activity-based costing

Formula for Cost of Goods Manufactured

Beginning WIP Inventory+DM Used+DL+MOH LESS Ending WIP Inventory EQUALS Cost of Goods Manufactured

Which of the following would not be an overhead activity cost pool? Shipping Inspecting and testing Direct materials Packaging

Direct materials

Which of the following is not a product-level activity? Engineering changes Inventory management Product design Equipment setups

Equipment setups

When direct labor costs are assigned to jobs, Manufacturing Overhead increases and Factory Labor decreases. Work in Process and Factory Labor both increase. Work in Process and Manufacturing Overhead both increase. Factory Labor decreases and Work in Process increases.

Factory Labor decreases and Work in Process increases.

ABC usually results in less appropriate management decisions. True False

False

True or False. Actual manufacturing overhead costs should be recorded in the Work in Process Inventory account as they are incurred.

False

True or False: A cost driver does not generally have a direct cause-effect relationship with the resources consumed.

False

When goods are sold, Cost of Goods Sold is increased and Work in Process Inventory account is decreased.

False

Which of the following is a non-value-added activity? Assembly Machining Painting Inventory control

Inventory control

Inventory system in which goods are manufactured or purchased just as they are needed for sale.

Just in time inventory

Which of the following would be an appropriate cost driver for the machining activity cost pool? Machine hours Purchase orders Inspections Machine setups

Machine hours

Which of the following factors would suggest that a company should consider switching to activity-based costing? The manufacturing process has been stable. Production managers use data provided by the existing system. Product lines are similar in volume and manufacturing complexity. Overhead costs constitute a significant portion of total costs.

Overhead costs constitute a significant portion of total costs.

Advantages vs disadvantages of job order costing

Pros: More precise in assigning costs to projects than __process costing__________. More useful information is available to help determine: Job Profits Future Job bids_ Cons: Significant data entry to assign costs to projects: Time Consuming Inaccuracies impact profitability Accuracy of the job order cost system is dependent on the overhead assignment process.

Part of the value chain for a manufacturing company.

Research and development

Which of the following would be accounted for using a job order cost system? The construction of a new campus building. The production of cell phones. The refining of petroleum. The production of automobiles.

The construction of a new campus building.

When determining the costs of jobs, how does a company account for indirect materials? They are transferred out of raw materials inventory into manufacturing overhead when used. They remain part of the raw materials inventory. They are added to work in process as used. They are transferred out of raw materials inventory into work in process inventory as used.

They are transferred out of raw materials inventory into manufacturing overhead when used.

Systems that are especially important to firms adopting just-in-time inventory methods.

Total quality Mangaement

Accumulating and assigning manufacturing costs are two important activities in a job order cost system. True False

True

At the end of the year, the amount of the overapplied overhead is recorded as a decrease to Cost of Goods Sold.

True

Cost accounting is primarily concerned with accumulating information about product costs. True False

True

True or False Just-in-time strives to eliminate inventories by using a pull approach.

True

True or False. There should be a separate job cost sheet for each job.

True

Under the just-in-time inventory method, goods are manufactured or purchased just-in-time for use. True False

True

Which of the following is not typical of traditional costing systems? Assumption of correlation between direct labor and incurrence of overhead cost. Use of a single predetermined overhead rate. Use of direct labor hours or direct labor cost to assign overhead. Use of multiple cost drivers to allocate overhead.

Use of multiple cost drivers to allocate overhead.

cost driver

a factor or activity that has direct cause-effect relationship with resources consumed.

The two major steps in the flow of costs are accumulating and assigning. acquiring and accumulating. allocating and assigning. accumulating and amortizing.

accumulating and assigning.

he costs associated with ordering materials, setting up machines, assembling products, and inspecting products are examples of cost drivers. direct labor costs. activity pools. nonmanufacturing activities.

activity pools

If the Manufacturing Overhead has a positive balance at the end of a period, it means that no jobs have been completed. actual overhead costs were less than overhead applied to jobs. actual overhead costs were greater than overhead applied to jobs. actual overhead costs were equal to overhead applied to jobs.

actual overhead costs were greater than overhead applied to jobs.

To use activity-based costing, it is necessary to know the estimated use of cost drivers per activity. estimated use of cost drivers per product. cost driver for each activity cost pool. all of these.

all of these.

On the cost of goods manufactured schedule, the cost of goods manufactured agrees with the total additions to Work in Process Inventory during the period. increases to Cost of Goods Sold during the period. balance of Finished Goods Inventory at the end of the period. amount transferred from Work in Process Inventory to Finished Goods during the period.

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

activity cost pool

anything that incurs cost while producing a product of performing a service

Batch‐level activities

are costs incurred every time a group (batch) of units is produced or a series of steps is performed. Purchase orders, machine setup, and quality tests are examples of batch‐level activities.

Facility support activities

are necessary for development and production to take place. These costs are administrative in nature and include building depreciation, property taxes, plant security, insurance, accounting, outside landscape and maintenance, and plant management's and support staff's salaries.

Product‐line activities

are those activities that support an entire product line but not necessarily each individual unit. Examples of product‐line activities are engineering changes made in the assembly line, product design changes, and warehousing and storage costs for each product line.

Formula for cost of goods sold

beginning inventory + purchases - ending inventory = cost of goods sold

A process cost system would most likely be used by a company that makes breakfast cereal. college graduation announcements. videos. repairs to automobiles.

breakfast cereal.

Overhead application is recorded as a(n) decrease to Manufacturing Overhead. decrease to job cost sheets. decrease to Work in Process Inventory. increase to Manufacturing Overhead.

decrease to Manufacturing Overhead.

The predetermined overhead rate is based on the relationship between estimated annual costs and actual activity. estimated monthly costs and actual monthly activity. estimated annual costs and estimated annual activity. actual monthly costs and actual annual activity.

estimated annual costs and estimated annual activity.

Predetermined Overhead Rate

estimated total manufacturing overhead cost/estimated total amount of activities

In order to achieve the most accurate costing, the cost driver chosen for a given activity must show a ___________ between the cost driver and the actual consumption of overhead costs. reasonable relationship low degree of correlation high degree of correlation moderate connection

high degree of correlation

➢Under-applied manufacturing overhead: the overhead assigned to Work In Process Inventory is _______ the overhead incurred.(Positive MOH)

less than

In determining total manufacturing costs on the cost of goods manufactured schedule, beginning Work in Process Inventory should have a zero balance. ending Work in Process Inventory is deducted from beginning Work in Process Inventory. actual manufacturing overhead costs appear as a deduction. manufacturing overhead applied is added to direct materials and direct labor.

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

Just-in-time processing results in a push approach. minimizes inventory storage and waiting time. requires a less-skilled workforce. all of these.

minimizes inventory storage and waiting time.

➢Over-applied manufacturing overhead: the overhead assigned to Work In Process Inventory is _________ the overhead incurred. (Neg MOH)

more than

Unit‐level activities

occur every time a service is performed or a product is made. The costs of direct materials, direct labor, and machine maintenance are examples of unit‐level activities.

If the manufacturing overhead costs applied to jobs are greater than the actual manufacturing overhead costs incurred during a period, overhead is said to be in error. prepaid. overapplied. underapplied.

overapplied

Often the most difficult part of computing accurate unit costs is determining the proper amount of _________ to assign to each product, service, or job.

overhead

A job cost sheet does not show the costs chargeable to a specific job. the total costs of a completed job. the unit cost of a completed job. the cost of goods sold.

the cost of goods sold.

All of the following would be recorded in assigning accumulated costs to the Work in Process Inventory except the purchase of raw materials. factory labor is used. overhead is applied. raw materials are used.

the purchase of raw materials.

Many companies now focus on reducing defects in finished products with the goal of zero defects. This is called total quality management. balanced scorecard. value chain. activity-based costing.

total quality management.

Job Order Costing

unique products; each job has special characteristics calculate cost per job