ACCT 202 Chapter 2

Optimum Finance Inc. provides budget, savings, and investment services to clients who want a stress-free financial lifestyle. The company customizes a program for each client based on their individual goals that includes budget recommendations, investment counseling, and savings techniques. The company uses a job order cost system that keeps track of the cost of the amount of time financial consultants spend with each client. Optimum applies all indirect operating costs (e.g., rent, utilities, and management salaries) as a percentage of the consultant's labor cost. During the most recent year, the firm estimated that it would pay $500,000 to its consultants and incur indirect operating costs of $750,000. Actual consultant labor costs were $537,500 and actual indirect operating costs were $725,000. What is the predetermined overhead rate that Optimum will use for the current year? A. $1.50 per dollar of consultant labor cost. B. $1.35 per dollar of consultant labor cost. C. $0.67 per dollar of consultant labor cost. D. $1.45 per dollar of consultant labor cost.

A. $1.50 per dollar of consultant labor cost. The predetermined overhead rate is $750,000/$500,000 = $1.50 per dollar of consultant labor cost.

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, actual labor hours were 21,000. The predetermined overhead rate would be A. $10.00 B. $1.05 C. $10.75 D. $10.24

A. $10.00 $200,000/20,000 = $10.00

Optimum Finance Inc. provides budget, savings, and investment services to clients who want a stress-free financial lifestyle. The company customizes a program for each client based on their individual goals that includes budget recommendations, investment counseling, and savings techniques. The company uses a job order cost system that keeps track of the cost of the amount of time financial consultants spend with each client. Optimum applies all indirect operating costs (e.g., rent, utilities, and management salaries) as a percentage of the consultant's labor cost. During the most recent year, the firm estimated that it would pay $500,000 to its consultants and incur indirect operating costs of $750,000. Actual consultant labor costs were $537,500 and actual indirect operating costs were $725,000. During the year, Optimum provided 42 hours of consulting services to Joan Clair for which Optimum pays an average of $20 per hour. What is the total cost of providing services to Joan? A. $2,100. B. $1,974. C. $2,058. D. $1,403.

A. $2,100. The predetermined overhead rate is $750,000/$500,000 = $1.50 per dollar of consultant labor cost. Consultant labor cost for providing services to Joan is $840 (42 x $20). Overhead is applied at $1.50 per dollar of consultant labor cost = $840 x $1.50 = $1,260. Total cost of providing services to Joan = $840 + $1,260 = $2,100.

Santos Inc had the following information for the preceding year: Raw Materials: BE (1/1): $40,000 EE (12/31): $30,000 Work in Process Inventory: BE: $35,000 EE: $? Finished Goods Inventory: $30,000 $? Additional information for the year is as follows: Direct Materials Used: $200,000 Direct Labor: $150,000 Manufacturing overhead applied: $160,000 Cost of goods manufactured: $525,000 Cost of goods sold: $544,000 What was the ending Work in Process Inventory balance on 12/31? A. $20,000 B. $11,000 C. $50,000 D. $54,000

A. $20,000 Current manufacturing costs = $200,000 + $150,000 + $160,000 = $510,000. Cost of goods manufactured = 525,000 = $35,000 + $510,000 - ending Work in Process Inventory, so ending Work in Process Inventory = $35,000 + $510,000 - $525,000 = $20,000.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, actual labor hours were 21,000. The predetermined manufacturing overhead rate would be A. $20.00 B. $0.05 C. $20.75 D. $19.05

A. $20.00 $400,000/20,000 = $20.00.

McGown Corp has the following information: Raw Materials: BE (1/1): $20,000 EE (12/31): $30,000 Work in Process Inventory: BE: $15,000 EE: $18,000 Finished Goods Inventory: $30,000 $20,000 Additional information for the year is as follows: Raw materials purchases: $100,000 Direct Labor: $75,000 Manufacturing overhead applied: $80,000 Indirect Materials: $0 Compute the current manufacturing costs. A. $245,000 B. $255,000 C. $65,000 D. $68,000

A. $245,000 Direct materials used = $20,000 + $100,000 - $0 - $30,000 = $90,000. Current manufacturing costs = $90,000 + $75,000 + $80,000 = $245,000.

Mendez Inc had the following information for the preceding year: Work in Process Inventory: BE: $? EE: $35,000 Finished Goods Inventory: $? $30,000 Additional information for the year is as follows: Direct Materials Used: $200,000 Direct Labor: $150,000 Manufacturing overhead applied: $160,000 Cost of goods manufactured: $525,000 Cost of goods sold: $544,000 What was the beginning Finished Goods Inventory balance on 1/1? A. $49,000 B. $65,000 C. $50,000 D. $69,000

A. $49,000 $544,000 = Beginning Finished Goods Inventory + $525,000 - $30,000. Beginning Finished Goods Inventory = $544,000 + $30,000 - $525,000 = $49,000.

Sawyer Company had the following information for the year: Direct materials used:$190,000 Direct Labor Incurred (7,000 hours) $245,000 Actual manufacturing overhead incurred $273,000 Sawyer Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $9,000. What was cost of goods manufactured? A. $715,000 B. $708,000 C. $755,000 D. $706,000

A. $715,000 Predetermined overhead rate = $320,000/8,000 = $40. Applied manufacturing overhead = $40 x 7,000 = $280,000. Cost of goods manufactured = $190,000 + $245,000 + $280,000 + $0 - $0 = $715,000.

Which of the following is incorrect regarding service firms? A. Each client or account is equivalent to a process in a process costing firm. B. The accounting system will track the time and resources spent serving a specific client or account. C. Managers of service firms need cost information to price their services, to budget and control costs, and to determine the profitability of different types of clients. D. The primary driver used to assign costs is billable hours.

A. Each client or account is equivalent to a process in a process costing firm. In service firms, each client or account is equivalent to a job in a manufacturing setting. All the other choices regarding service firms are correct.

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Manufacturing Overhead would be credited for $5,000 B. Manufacturing Overhead would be credited for $15,000 C. Manufacturing Overhead would be debited for $5,000 D. Manufacturing Overhead would be debited for $15,000

A. Manufacturing Overhead would be credited for $5,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000. Underapplied overhead = $215,000 - $210,000 = $5,000, which is credited to Manufacturing Overhead.

Manufacturing overhead is applied to each job using which formula? A. Predetermined overhead rate x actual value of the allocation base for the job B. Predetermined overhead rate x estimated value of the allocation base for the job C. Actual overhead rate x estimated value of the allocation base for the job D. Predetermined overhead rate/actual value of the allocation base for the job

A. Predetermined overhead rate x actual value of the allocation base for the job This is the formula for applied manufacturing overhead.

Which of the following accounts is not affected by applied manufacturing overhead? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

A. Raw Materials Inventory Manufacturing overhead is applied to Work in Process inventory; the cost moves to Finished Goods when goods are completed, and Cost of Goods Sold when they are sold.

Which of the following represents the cost of materials purchased but not yet issued to production? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

A. Raw Materials Inventory Raw Materials Inventory represents the cost of materials purchased from suppliers but not yet used in production.

When direct materials are used in production, which of the following accounts is credited? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

A. Raw Materials Inventory When direct materials are used in production, the cost is transferred from Raw Materials Inventory (with a credit) to Work in Process Inventory (with a debit).

When materials are purchased, which of the following accounts is debited? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

A. Raw Materials Inventory When materials are purchased, they are initially recorded in Raw Materials Inventory with a debit to the account.

In recording the purchase of materials that are not traced to any specific job, which of the following is correct? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

A. Raw Materials Inventory would be debited When indirect materials are purchased, they are debited to raw materials inventory.

When disposed of, underapplied manufacturing overhead will A. increase Cost of Goods Sold. B. increase Finished Goods. C. decrease Cost of Goods Sold. D. decrease Finished Goods.

A. increase Cost of Goods Sold. If manufacturing overhead is underapplied, Cost of Goods sold should be adjusted upward since not enough overhead was put in during the period.

Cost of goods sold is the amount of cost transferred A. out of Finished Goods Inventory and into Cost of Goods Sold. B. out of Work in Process Inventory and into Cost of Goods Sold. C. out of Work in Process Inventory and into Manufacturing Overhead. D. out of Work in Process Inventory and into Finished Goods Inventory.

A. out of Finished Goods Inventory and into Cost of Goods Sold. When goods are sold, their cost is transferred out of Finished Goods Inventory and into Cost of Goods Sold.

Santos Inc had the following information for the preceding year: Raw Materials: BE (1/1): $40,000 EE (12/31): $30,000 Work in Process Inventory: BE: $35,000 EE: $? Finished Goods Inventory: $30,000 $? Additional information for the year is as follows: Direct Materials Used: $200,000 Direct Labor: $150,000 Manufacturing overhead applied: $160,000 Cost of goods manufactured: $525,000 Cost of goods sold: $544,000 What was the ending Finished Goods Inventory balance on 12/31? A. $20,000 B. $11,000 C. $50,000 D. $54,000

B. $11,000 $544,000 = $30,000 + $525,000 - ending Finished Goods Inventory. Ending Finished Goods Inventory = $30,000 + $525,000 - $544,000 = $11,000.

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. The amount debited to the Manufacturing Overhead account would be A. $200,000 B. $215,000 C. $210,000 D. $225,750

B. $215,000 Actual manufacturing overhead costs of $215,000 are accumulated on the debit side of the Manufacturing Overhead account.

Overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual overhead was $225,000, and actual direct labor hours were 19,000. The amount debited to the manufacturing overhead account would be A. $250,000 B. $225,000 C. $213,750 D. $237,500

B. $225,000 Actual manufacturing overhead costs of $225,000 are debited to the Manufacturing Overhead account.

McGown Corp has the following information: Raw Materials: BE (1/1): $20,000 EE (12/31): $30,000 Work in Process Inventory: BE: $15,000 EE: $18,000 Finished Goods Inventory: $30,000 $20,000 Additional information for the year is as follows: Raw materials purchases: $100,000 Direct Labor: $75,000 Manufacturing overhead applied: $80,000 Indirect Materials: $0 Compute the cost of goods manufactured. A. $248,000 B. $242,000 C. $265,000 D. $235,000

B. $242,000 Direct materials used = $20,000 + $100,000 - $0 - $30,000 = $90,000. Current manufacturing costs = $90,000 + $75,000 + $80,000 = $245,000. Cost of goods manufactured = $15,000 + $245,000 - $18,000 = $242,000.

Manufacturing overhead was estimated to be $500,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $450,000, actual direct labor hours were 19,000. The predetermined overhead rate would be A. $22.50 B. $25.00 C. $23.68 D. $26.32

B. $25.00 $500,000/20,000 = $25.00

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. The amount debited to the Manufacturing Overhead account would be A. $400,000 B. $415,000 C. $420,000 D. $435,750

B. $415,000 Actual manufacturing overhead costs are debited to the Manufacturing Overhead account.

Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Cost of Goods Sold would be credited for $25,000 B. Cost of Goods Sold would be credited for $12,500 C. Cost of Goods Sold would be debited for $12,500 D. Cost of Goods Sold would be debited for $25,000

B. Cost of Goods Sold would be credited for $12,500 Predetermined overhead rate = $250,000/20,000 = $12.50. Applied manufacturing overhead = $12.50 x 19,000 = $237,500. Overapplied overhead = $237,500 - $225,000 = $12,500, which is credited to Cost of Goods Sold.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Cost of Goods Sold would be credited for $15,000 B. Cost of Goods Sold would be credited for $5,000 C. Cost of Goods Sold would be debited for $5,000 D. Cost of Goods Sold would be debited for $15,000

B. Cost of Goods Sold would be credited for $5,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000. Overapplied overhead = $420,000 - $415,000 = $5,000, which is credited to cost of goods sold.

Which of the following would be used to transfer the cost of completed goods during the period? A. Credit to Raw Materials Inventory B. Credit to Work in Process Inventory C. Debit to Manufacturing Overhead D. Credit to Manufacturing Overhead

B. Credit to Work in Process Inventory When a job is completed, its total manufacturing cost is transferred out of Work in Process Inventory with a credit and into Finished Goods Inventory with a debit.

Which of the following types of firms would most likely use job order costing? A. Happy-Oh Cereal Company B. Huey, Lewey & Dewie, Attorneys C. SoooSweet Beverage D. C-5 Cement Company

B. Huey, Lewey & Dewie, Attorneys Job order costing is used in companies that offer customized or unique products or services, such as a law firm.

All the costs assigned to an individual job are summarized on a A. Cost driver sheet. B. Job cost sheet. C. Materials requisition form. D. Labor time ticket.

B. Job cost sheet. The job cost sheet is a document that summarizes all of the costs incurred on a specific job.

The cost of materials used on a specific job is first captured on which source document? A. Cost driver sheet B. Materials requisition form C. Labor time ticket D. Process cost sheet

B. Materials requisition form The materials requisition form lists the quantity and cost of the direct materials used on a specific job.

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. Which of the following would be correct? A. Overhead is underapplied by $15,000 B. Overhead is underapplied by $5,000 C. Overhead is overapplied by $5,000 D. Overhead is overapplied by $15,000

B. Overhead is underapplied by $5,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000. Underapplied overhead = $215,000 - $210,000 = $5,000.

When units are completed, the cost associated with the job is credited to which account? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

B. Work in Process Inventory When a job is completed, its cost is transferred from Work in Process Inventory (with a credit) to Finished Goods Inventory (with a debit).

When direct materials are used in production, which of the following accounts is debited? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

B. Work in Process Inventory When direct materials are used in production, the cost is transferred from Raw Materials Inventory (with a credit) to Work in Process Inventory (with a debit).

Which of the following represents the accumulated costs of jobs as yet incomplete? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

B. Work in Process Inventory Work in Process Inventory represents the total cost of jobs that are still in process.

When materials are placed into production, A. Raw Materials Inventory is debited if the materials are traced directly to the job. B. Work in Process Inventory is debited if the materials are traced directly to the job. C. Manufacturing Overhead is debited if the materials are traced directly to the job. D. Raw Materials Inventory is credited only if the materials are traced directly to the job, otherwise manufacturing overhead is credited.

B. Work in Process Inventory is debited if the materials are traced directly to the job. When direct materials are placed into production, the cost is transferred from Raw Materials Inventory with a credit, and debited to Work in Process Inventory.

Which of the following would be used to record the labor cost that is traceable to a specific job? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

B. Work in Process Inventory would be debited As direct labor costs are incurred, they are debited to Work in Process Inventory.

Which of the following would be used to apply manufacturing overhead to production for the period? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Work in Process Inventory would be credited

B. Work in Process Inventory would be debited When manufacturing overhead is applied to production, Work in Process Inventory is debited and the Manufacturing Overhead account is credited.

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. The amount credited to the Manufacturing Overhead account would be A. $200,000 B. $215,000 C. $210,000 D. $225,750

C. $210,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000, which would be credited to Manufacturing Overhead.

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, actual labor hours were 21,000. The amount of manufacturing overhead applied to production would be A. $200,000 B. $215,000 C. $210,000 D. $225,750

C. $210,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000.

McGown Corp has the following information: Raw Materials: BE (1/1): $20,000 EE (12/31): $30,000 Work in Process Inventory: BE: $15,000 EE: $18,000 Finished Goods Inventory: $30,000 $20,000 Additional information for the year is as follows: Raw materials purchases: $100,000 Direct Labor: $75,000 Manufacturing overhead applied: $80,000 Indirect Materials: $0 Compute the unadjusted cost of goods sold. A. $133,000 B. $242,000 C. $252,000 D. $255,000

C. $252,000 Direct materials used = $20,000 + $100,000 - $0 - $30,000 = $90,000. Current manufacturing costs = $90,000 + $75,000 + $80,000 = $245,000. Cost of goods manufactured = $15,000 + $245,000 - $18,000 = $242,000. Cost of goods sold = $30,000 + $242,000 - $20,000 = $252,000.

Sawyer Company had the following information for the year: Direct materials used: $190,000 Direct Labor Incurred (7,000 hours) $245,000 Actual manufacturing overhead incurred $273,000 Sawyer Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods balance of $9,000. How much overhead was applied during the year? A. $245,000 B. $273,000 C. $280,000 D. $320,000

C. $280,000 Predetermined overhead rate = $320,000/8,000 = $40.00. Applied manufacturing overhead = $40.00 x 7,000 = $280,000.

Jackson Company had the following information for the year: Direct materials used: $295,000 Direct Labor Incurred (9,000 hours) $245,000 Actual manufacturing overhead incurred $343,000 Jackson Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods balance of $19,000. How much overhead was applied during the year? A. $245,000 B. $343,000 C. $360,000 D. $320,000

C. $360,000 Predetermined overhead rate = $320,000/8,000 = $40.00. Applied manufacturing overhead = $40.00 x 9,000 = $360,000.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. The amount credited to the Manufacturing Overhead account would be A. $400,000 B. $415,000 C. $420,000 D. $435,750

C. $420,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000, which is credited to Manufacturing Overhead.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, actual labor hours were 21,000. The amount of manufacturing overhead applied to production would be A. $400,000 B. $415,000 C. $420,000 D. $435,750

C. $420,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000.

Mendez Inc had the following information for the preceding year: Work in Process Inventory: BE: $? EE: $30,000 Finished Goods Inventory: $? $30,000 Additional information for the year is as follows: Direct Materials Used: $200,000 Direct Labor: $150,000 Manufacturing overhead applied: $160,000 Cost of goods manufactured: $525,000 Cost of goods sold: $544,000 What was the beginning Work in Process Inventory balance on 1/1? A. $49,000 B. $65,000 C. $50,000 D. $69,000

C. $50,000 Current manufacturing costs = $200,000 + $150,000 + $160,000 = $510,000. Cost of goods manufactured = $525,000 = Beginning Work in Process Inventory + $510,000 - $35,000, so ending Work in Process Inventory = $525,000 + $35,000 - $510,000 = $50,000.

Manufacturing overhead was estimated to be $200,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $215,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Cost of Goods Sold would be credited for $15,000 B. Cost of Goods Sold would be credited for $5,000 C. Cost of Goods Sold would be debited for $5,000 D. Cost of Goods Sold would be debited for $15,000

C. Cost of Goods Sold would be debited for $5,000 Predetermined overhead rate = $200,000/20,000 = $10.00. Applied manufacturing overhead = $10.00 x 21,000 = $210,000. Underapplied overhead = 215,000 - $210,000 = $5,000, which is debited to Cost of Goods Sold.

Which of the following represents the cost of jobs completed but not yet sold? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

C. Finished Goods Inventory Once goods are finished, their costs are transferred out of Work in Process Inventory and into Finished Goods Inventory until they are sold.

When units are completed, the cost associated with the job is debited to which account? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

C. Finished Goods Inventory When a job is completed, its cost is transferred from Work in Process Inventory (with a credit) to Finished Goods Inventory (with a debit).

When units are sold, the cost associated with the units is credited to which account? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

C. Finished Goods Inventory When units are sold, their cost is transferred from Finished Goods Inventory (with a credit) to Cost of Goods Sold (with a debit).

The source document that captures how much time a worker has spent on various jobs during the period is a A. Cost driver sheet. B. Materials requisition form. C. Labor time ticket. D. Job cost sheet.

C. Labor time ticket. A direct labor time ticket shows how much time a worker has spent on various jobs each week, as well as the cost of that time.

If a company uses a predetermined overhead rate, which of the following statements is correct? A. Manufacturing Overhead will be debited for estimated overhead B. Manufacturing Overhead will be credited for estimated overhead C. Manufacturing Overhead will be debited for actual overhead D. Manufacturing Overhead will be credited for actual overhead

C. Manufacturing Overhead will be debited for actual overhead Actual manufacturing overhead costs are accumulated on the debit side of the Manufacturing Overhead account.

Which of the following would be used to record the labor cost that is not traceable to a specific job? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

C. Manufacturing Overhead would be debited Actual indirect labor costs are accumulated on the debit side of the Manufacturing Overhead account.

Which of the following would be used to record the depreciation of manufacturing equipment? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

C. Manufacturing Overhead would be debited Actual indirect manufacturing costs are accumulated in the Manufacturing Overhead account on the debit side of the account.

Which of the following would be used to record the factory supervisor's salary? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

C. Manufacturing Overhead would be debited Actual indirect manufacturing costs are accumulated in the Manufacturing Overhead account on the debit side of the account.

Which of the following would be used to record the property taxes on a factory building? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

C. Manufacturing Overhead would be debited Actual indirect manufacturing costs are accumulated in the Manufacturing Overhead account on the debit side of the account.

Which of the following would be used to record the usage of indirect manufacturing resources? A. Raw Materials Inventory would be debited B. Work in Process Inventory would be debited C. Manufacturing Overhead would be debited D. Manufacturing Overhead would be credited

C. Manufacturing Overhead would be debited All actual indirect manufacturing costs are accumulated in the Manufacturing Overhead account on the debit side of the account.

Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Manufacturing Overhead would be credited for $12,500 B. Manufacturing Overhead would be credited for $25,000 C. Manufacturing Overhead would be debited for $12,500 D. Manufacturing Overhead would be debited for $25,000

C. Manufacturing Overhead would be debited for $12,500 Predetermined overhead rate = $250,000/20,000 = $12.50. Applied manufacturing overhead = $12.50 x 19,000 = $237,500. Overapplied overhead = $237,500 - $225,000 = $12,500, which is debited to Manufacturing Overhead.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct? A. Manufacturing Overhead would be credited for $5,000 B. Manufacturing Overhead would be credited for $20,000 C. Manufacturing Overhead would be debited for $5,000 D. Manufacturing Overhead would be debited for $20,000

C. Manufacturing Overhead would be debited for $5,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000. Overapplied overhead = $420,000 - $415,000 = $5,000, which is debited to Manufacturing Overhead.

If materials being placed into production are not traced to a specific job, A. Raw Materials Inventory would be debited. B. Work in Process Inventory would be debited. C. Manufacturing Overhead would be debited. D. Manufacturing Overhead would be credited.

C. Manufacturing Overhead would be debited. When indirect materials are placed into production, the cost is transferred from Raw Materials Inventory with a credit, and debited to Manufacturing Overhead.

Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. Which of the following would be correct? A. Overhead is underapplied by $25,000 B. Overhead is underapplied by $12,500 C. Overhead is overapplied by $12,500 D. Overhead is overapplied by $25,000

C. Overhead is overapplied by $12,500 Predetermined overhead rate = $250,000/20,000 = $12.50. Applied manufacturing overhead = $12.50 x 19,000 = $237,500. Overapplied overhead = $237,500 - $225,000 = $12,500.

Manufacturing overhead was estimated to be $400,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $415,000, and actual labor hours were 21,000. Which of the following would be correct? A. Overhead is underapplied by $15,000 B. Overhead is underapplied by $5,000 C. Overhead is overapplied by $5,000 D. Overhead is overapplied by $15,000

C. Overhead is overapplied by $5,000 Predetermined overhead rate = $400,000/20,000 = $20.00. Applied manufacturing overhead = $20.00 x 21,000 = $420,000. Overapplied overhead = $420,000 - $415,000 = $5,000.

Which of the following types of firms would most likely use process costing? A. Superior Auto Body & Repair B. Crammond Custom Cabinets C. Sunshine Soft Drinks D. Jackson & Taylor Tax Service

C. Sunshine Soft Drinks Process costing is used by companies that make standardized or homogeneous products or services, such as a soft drink company.

Service firms: A. tend to use a lot of direct materials in addition to billable hours. B. tend to incur few indirect costs that cannot be traced to specific clients or accounts. C. assign indirect costs to individual clients or accounts based on an allocation base such as billable hours. D. use process costing to assign costs to individual clients or accounts.

C. assign indirect costs to individual clients or accounts based on an allocation base such as billable hours. Most service firms do not use a lot direct materials, tend to incur many indirect costs that cannot be traced to specific clients or accounts, and use job costing to assign costs to individual clients or accounts. Indirect costs are treated much like manufacturing overhead in a factory and are assigned using an allocation base such as billable hours.

When disposed of, overapplied manufacturing overhead will A. increase Cost of Goods Sold. B. increase Finished Goods. C. decrease Cost of Goods Sold. D. decrease Finished Goods.

C. decrease Cost of Goods Sold. If manufacturing overhead is overapplied, Cost of Goods sold should be adjusted downward since too much overhead was put in during the period.

Overhead costs are overapplied if the amount applied to Work in Process is A. greater than estimated overhead. B. less than estimated overhead. C. greater than actual overhead incurred. D. less than actual overhead incurred.

C. greater than actual overhead incurred. Overhead cost is overapplied if the amount applied is more than the actual overhead cost.

Optimum Finance Inc. provides budget, savings, and investment services to clients who want a stress-free financial lifestyle. The company customizes a program for each client based on their individual goals that includes budget recommendations, investment counseling, and savings techniques. The company uses a job order cost system that keeps track of the cost of the amount of time financial consultants spend with each client. Optimum applies all indirect operating costs (e.g., rent, utilities, and management salaries) as a percentage of the consultant's labor cost. During the most recent year, the firm estimated that it would pay $500,000 to its consultants and incur indirect operating costs of $750,000. Actual consultant labor costs were $537,500 and actual indirect operating costs were $725,000. During the year, Optimum provided 64 hours of consulting services to Robert Howard for which Optimum pays an average of $18 per hour. What is the total cost of providing services to Robert? A. $2,707. B. $2,822. C. $1,924. D. $2,880.

D. $2,880. The predetermined overhead rate is $750,000/$500,000 = $1.50 per dollar of consultant labor cost. Consultant labor cost for providing services to Robert is $1,152 (64 x $18). Overhead is applied at $1.50 per dollar of consultant labor cost = $1,152 x $1.50 = $1,728. Total cost of providing services to Robert = $1,152 + $1,728 = $2,880.

Kilt Company had the following information for the year: Direct materials used: $110,000 Direct Labor Incurred (5,000 hours) $150,000 Actual manufacturing overhead incurred $166,000 Kilt Company used a predetermined overhead rate of $42 per direct labor hour for the year and estimated that direct labor hours would total 5,500 hours. Assume the only inventory balance is an ending Work in Process balance of $17,000. How much overhead was applied during the year? A. $231,000 B. $150,000 C. $166,000 D. $210,000

D. $210,000 $42.00 x 5,000 = $210,000.

Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000, and actual direct labor hours were 19,000. The amount credited to the Manufacturing Overhead account would be A. $250,000 B. $225,000 C. $213,750 D. $237,500

D. $237,500 Predetermined overhead rate = $250,000/20,000 = $12.50. Applied manufacturing overhead = $12.50 x 19,000 = $237,500, which is credited to Manufacturing Overhead.

Ragtime Company had the following information for the year: Direct materials used: $110,000 Direct Labor Incurred (5,000 hours) $150,000 Actual manufacturing overhead incurred $166,000 Ragtime Company used a predetermined overhead rate of $35 per direct labor hour for the year. Assume the only inventory balance is an ending Work in Process Inventory balance of $17,000. What was adjusted cost of goods sold? A. $435,000 B. $426,000 C. $418,000 D. $409,000

D. $409,000 Applied manufacturing overhead = $35 x 5,000 = $175,000. Cost of goods manufactured = $110,000 + $150,000 + $175,000 + $0 - $17,000 = $418,000. Overapplied overhead = $175,000 - $166,000 = $9,000. Unadjusted cost of goods sold = $0 + $418,000 - $0 = $418,000. Adjusted cost of goods sold = $418,000 - $9,000 = $409,000.

Ragtime Company had the following information for the year: Direct materials used: $110,000 Direct Labor Incurred (5,000 hours) $150,000 Actual manufacturing overhead incurred $166,000 Ragtime Company used a predetermined overhead rate of $35 per direct labor hour for the year. Assume the only inventory balance is an ending Work in Process Inventory balance of $17,000. What was cost of goods manufactured? A. $260,000 B. $426,000 C. $435,000 D. $418,000

D. $418,000 Applied manufacturing overhead = $35 x 5,000 = $175,000. Cost of goods manufactured = $110,000 + $150,000 + $175,000 + $0 - $17,000 = $418,000.

Manufacturing overhead was estimated to be $500,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $450,000, actual direct labor hours were 19,000. The amount of manufacturing overhead applied to production would be A. $500,000 B. $450,000 C. $427,500 D. $475,000

D. $475,000 Predetermined overhead rate = $500,000/20,000 = $25.00. Applied manufacturing overhead = $25.00 x 19,000 = $475,000.

Sawyer Company had the following information for the year: Direct materials used:$190,000 Direct Labor Incurred (7,000 hours) $245,000 Actual manufacturing overhead incurred $273,000 Sawyer Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $9,000. What was adjusted cost of goods sold? A. $715,000 B. $708,000 C. $706,000 D. $699,000

D. $699,000 Predetermined overhead rate = $320,000/8,000 = $40. Applied manufacturing overhead = $40 x 7,000 = $280,000. Cost of goods manufactured = $190,000 + $245,000 + $280,000 + $0 - $0 = $715,000. Overapplied overhead = $280,000 - $273,000 = $7,000. Unadjusted cost of goods sold = $0 + $715,000 - $9,000 = $706,000. Adjusted cost of goods sold = $706,000 - $7,000 = $699,000.

Jenkins Company had the following information for the year: Direct materials used:$295,000 Direct Labor Incurred (9,000 hours) $245,000 Actual manufacturing overhead incurred $343,000 Jenkins Company used a predetermined overhead rate using estimated overhead of $320,000 and 8000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $19,000. What was adjusted cost of goods sold? A. $900,000 B. $883,000 C. $881,000 D. $864,000

D. $864,000 Predetermined overhead rate = $320,000/8,000 = $40. Applied manufacturing overhead = $40 x 9,000 = $360,000. Cost of goods manufactured = $295,000 + $245,000 + $360,000 + $0 - $0 = $900,000. Unadjusted cost of goods sold = $0 + $900,000 - $19,000 = $881,000. Overapplied overhead = $360,000 - $343,000 = $17,000. Adjusted cost of goods sold = $881,000 - $17,000 = $864,000.

McGown Corp has the following information: Raw Materials: BE (1/1): $20,000 EE (12/31): $30,000 Work in Process Inventory: BE: $15,000 EE: $18,000 Finished Goods Inventory: $30,000 $20,000 Additional information for the year is as follows: Raw materials purchases: $100,000 Direct Labor: $75,000 Manufacturing overhead applied: $80,000 Indirect Materials: $0 Compute the direct materials used in production. A. $20,000 B. $30,000 C. $110,000 D. $90,000

D. $90,000 Direct materials used = $20,000 + $100,000 - $0 - $30,000 = $90,000.

Jenkins Company had the following information for the year: Direct materials used:$295,000 Direct Labor Incurred (9,000 hours) $245,000 Actual manufacturing overhead incurred $343,000 Jenkins Company used a predetermined overhead rate using estimated overhead of $320,000 and 8,000 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $19,000. What was cost of goods manufactured? A. $841,000 B. $860,000 C. $883,000 D. $900,000

D. $900,000 Predetermined overhead rate = $320,000/8,000 = $40. Applied manufacturing overhead = $40 x 9,000 = $360,000. Cost of goods manufactured = $295,000 + $245,000 + $360,000 + $0 - $0 = $900,000.

Which of the following represents the cost of the jobs sold during the period? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

D. Cost of Goods Sold Once a job is sold, its total cost is transferred out of Finished Goods Inventory and into Cost of Goods Sold.

When units are sold, the cost associated with the units is debited to which account? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold

D. Cost of Goods Sold When units are sold, their cost is transferred from Finished Goods Inventory (with a credit) to Cost of Goods Sold (with a debit).

Which of the following would be used to apply manufacturing overhead to production for the period? A. Credit to Raw Materials Inventory B. Credit to Work in Process Inventory C. Debit to Manufacturing Overhead D. Credit to Manufacturing Overhead

D. Credit to Manufacturing Overhead When manufacturing overhead is applied to production, Work in Process Inventory is debited and the Manufacturing Overhead account is credited.

Which of the following is a characteristic of a manufacturing environment that would use job order costing? A. Standardized production process B. Continuous manufacturing C. Homogenous products D. Differentiated products

D. Differentiated products Job order costing is used in companies that offer customized or unique products or services.

A predetermined overhead rate is calculated using which formula? A. Actual manufacturing overhead cost/estimated units in the allocation base B. Estimated units in the allocation base/estimated manufacturing overhead cost C. Estimated manufacturing overhead cost/actual units in the allocation base D. Estimated manufacturing overhead cost/estimated units in the allocation base

D. Estimated manufacturing overhead cost/estimated units in the allocation base This is the formula for the predetermined overhead rate.

When manufacturing overhead is applied to production, which of the following accounts is credited? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Manufacturing Overhead

D. Manufacturing Overhead When manufacturing overhead is applied to production, Work in Process Inventory is debited and the Manufacturing Overhead account is credited.

Overhead costs are underapplied if the amount applied to Work in Process is A. greater than estimated overhead. B. less than estimated overhead. C. greater than actual overhead incurred. D. less than actual overhead incurred.

D. less than actual overhead incurred. Overhead cost is underapplied if the amount applied is less than the actual overhead cost.

The most common method for disposing of over- or underapplied overhead is to A. recalculate the overhead rate for the period. B. recalculate the overhead rate for the next period. C. make a direct adjustment to Work in Process Inventory. D. make a direct adjustment to Cost of Goods Sold.

D. make a direct adjustment to Cost of Goods Sold. The most common method for disposing of the balance in Manufacturing Overhead is to make a direct adjustment to Cost of Goods Sold.

Cost of goods manufactured is the amount of cost transferred A. out of Finished Goods Inventory and into Cost of Goods Sold. B. out of Finished Goods Inventory and into Work in Process Inventory. C. out of Work in Process Inventory and into Manufacturing Overhead. D. out of Work in Process Inventory and into Finished Goods Inventory.

D. out of Work in Process Inventory and into Finished Goods Inventory. The total cost that is transferred out of Work in Process Inventory and into Finished Goods Inventory is called the cost of goods manufactured.

Underapplied overhead means A. too little overhead was applied to raw materials. B. actual overhead is greater than estimated overhead. C. finished goods will need to be credited. D. there is a debit balance remaining in the overhead account.

D. there is a debit balance remaining in the overhead account. If overhead is underapplied, there is a debit balance in the account.