ACCT 2301 Chapter 5

The departments responsible for creating products or services that are sold to customers are referred to as... a. support departments b. producing departments c. profit making departments d. cost centers

producing departments

The method that assigns support department costs only to producing departments in proportion to each producting department's usage of the service is known as... a. none of these are correct b. the reciprocal method c. the direct method d. the sequential method

the direct method

The method that assigns support department costs by giving full recognition to support department interactions is known as... a. the direct method b. the sequential method c. none of these are correct d. the reciprocal method

the reciprocal method

Which of the following is not on a time ticket? a. employee's name b. employee's wage rate c. hours worked on each job d. cost of materials e. All of these are on a time ticket.

cost of materials

Labor cost flows reflect a. both indirect and direct labor cost. b. indirect labor cost. c. direct labor cost. d. administration cost and indirect cost. e. administration cost.

direct labor

The predetermined overhead rate is calculated by a. estimated annual overhead/Actual annual activity level. b. estimated annual overhead/Estimated annual activity level. c. estimated annual overhead/Estimated manufacturing cost. d. actual annual overhead/Estimated annual activity level. e. actual annual overhead/Actual annual activity level.

estimated annual overhead/estimated annual activity level

Actual overhead is reconciled with applied overhead at the beginning of the period. True False

false

In an actual cost system, actual direct materials, actual direct labor and estimated overhead are used to determine unit cost. True False

false

Overhead costs are assigned to Finished Goods using a predetermined rate. True False

false

The raw materials account is an inventory account located on the income statement. True False

false

The work-in-process account consists of all the job-order cost sheets for the completed jobs. True False

false

In a normal costing system, actual overhead is used to arrive at the cost of goods manufactured. True False

fasle

Which of the following is not true about job-order costing? a. It is used in firms that produce homogeneous products. b. The cost of each job is accumulated on the job-order cost sheet. c. The key document for accumulating manufacturing costs is the job-order cost sheet. d. All of these are correct. e. None of these are correct.

it is used in firms that produce homogeneous products

The costs of a job are accounted for on the... a. materials requisition sheet b. sales invoice c. job-order cost sheet d. time ticket

job-order cost sheet

The document that lists the total cost for a single job is a a. job-order cost sheet. b. materials requisition form. c. time ticket. d. purchase order. e. None of these are correct.

job-order cost sheet

Costs associated with selling and general administrative activities are not a. period costs. b. nonmanufacturing costs. c. manufacturing costs. d. period costs and nonmanufacturing costs. e. any of these.

manufacturing costs

Which form asks for type, quantity, unit price of direct materials issued, and for the number of the job? a. time ticket b. materials requisition form c. job-order cost sheet d. None of these are correct. e. All of these are correct.

materials requisition form

Which method of measuring costs associated with production is more widely used in practice? a. normal costing b. actual costing c. both are used equally. d. neither one is used. e. cannot be determined.

normal costing

The method that assigns support department costs by giving partial recognition to support department interactions is known as... a. the sequential method b. the reciprocal method c. the direct method d. none of these are correct

the sequential method

Figure 5-2. At the beginning of the year, Kyla Inc. estimated that overhead would be $880,000 and direct labor hours would be 220,000. At the end of the year, actual overhead was $920,600 and there were actually 230,000 direct labor hours. Refer to Figure 5-2. What is the predetermined overhead rate? a. $4 per direct labor hour b. $2.63 per direct labor hour c. $4.18 per direct labor hour d. $880,000 e. None of these are correct.

$4 per direct labor hour Rationale: Predetermined overhead rate = $880,000 / 220,000 = $4 per direct labor hour

For 2010, Jake's Dog Supply Manufacturing uses machine-hours as the only overhead cost-allocation base. The accounting records contain the following information: Using job costing, the 2010 actual indirect-cost rate is: $4.00 per machine-hour $4.80 per machine-hour $5.00 per machine-hour $6.00 per machine-hour

$4.80 per machine-hour

Gibson Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Winfield High School band jacket job. For Gibson Manufacturing, what is the annual manufacturing overhead cost-allocation rate? $0.50 $0.80 $0.30 $33.33

.30

Figure 5-4. Hill Company uses job-order costing. At the end of the month, the following data was gathered: Job # Total Cost Complete? Sold? 803 $611 yes yes 804 423 yes no 805 805 no no 806 682 yes yes 807 525 yes no 808 250 no no 809 440 yes yes 810 773 yes no 811 267 no no 812 341 no no ​ Hill's selling price is cost plus 50% for each of its products. Refer to Figure 5-4. What is the total in Finished Goods? a. $1,860 b. $1,721 c. $2,163 d. $1,700 e. $2,230

1,721 Rationale: Job # Total Cost 804 $ 423 807 525 810 773 Total finished goods $1,721

Figure 5-4. Hill Company uses job-order costing. At the end of the month, the following data was gathered: Job # Total Cost Complete? Sold? 803 $611 yes yes 804 423 yes no 805 805 no no 806 682 yes yes 807 525 yes no 808 250 no no 809 440 yes yes 810 773 yes no 811 267 no no 812 341 no no ​ Hill's selling price is cost plus 50% for each of its products. Refer to Figure 5-4. What is Cost of Goods Sold for the month? a. $1,733 b. $2,440 c. $1,353 d. $1,181 e. $1,760

1,733 Rationale: Job # Total Cost 803 $ 611 806 682 809 440 Total Cost of Goods Sold $1,733

Hallett Company uses departmental overhead rates. In the cutting department, overhead is applied on the basis of machine hours. In the sewing department, overhead is applied on the basis of direct labor hours. At the beginning of the year, the company estimated the following... Cutting Department Sewing Department Overhead $219,293 $348,886 Direct Labor Hours 32,573 80,096 Machine Hours 136,528 78,959 Actual data for the month of June are... Cutting Department Sewing Department Overhead $19,082 $33,319 Direct Labor Hours 2,727 7,783 Machine Hours 11,484 6,602 Calculate the predetermined overhead rate for the Cutting Department.

1.6062Cutting Department Estimated Overhead divided by Cutting Department Estimated Machine Hours.

Hallett Company uses departmental overhead rates. In the cutting department, overhead is applied on the basis of machine hours. In the sewing department, overhead is applied on the basis of direct labor hours. At the beginning of the year, the company estimated the following... Cutting Department Sewing Department Overhead $270,402 $364,454 Direct Labor Hours 30,439 101,897 Machine Hours 135,371 67,317 Actual data for the month of June are... Cutting Department Sewing Department Overhead $19,294 $30,748 Direct Labor Hours 3,062 8,529 Machine Hours 12,639 6,743 Calculate the predetermined overhead rate for the Cutting Department.

1.9975 Cutting Deparment Estimated Overhead divided by Cutting Department Estimated Machine Hours.

Folsom Company manufactures specialty tools, uses normal costing, and applies overhead on the basis of machine hours. The company had the following financial information.... Beginning of Year Estimates End of Year Actuals Overhead $547,619 $432,164 Machine Hours 47,470 61,475 For the month of November, machine hours were 11,682. For the year, the unadjusted Cost of Goods Sold was $505,038. Calculate the predetermined overhead rate for the company.

11.5361 Correct answer is estimated overhead divided by estimated machine hours.

Folsom Company manufactures specialty tools, uses normal costing, and applies overhead on the basis of machine hours. The company had the following financial information.... Beginning of Year Estimates End of Year Actuals Overhead $501,761 $433,842 Machine Hours 40,876 77,677 For the month of November, machine hours were 10,228. For the year, the unadjusted Cost of Goods Sold was $683,998. Calculate the predetermined overhead rate for the company.

12.2752 Correct answer is estimated overhead divided by estimated machine hours

Folsom Company manufactures specialty tools, uses normal costing and applies overhead on the basis of machine hours. The company had the following financial information.... End of Year Actuals Overhead $414,788 Machine Hours 72,391 For the month of Novenber, machine hours were 10,380. The predetermined overhead rate was $ 13 For the year, the unadjusted Cost of Goods Sold was $683,257. Calculate the dollar amount of overhead applied to production in November.

134,940 Correct answer is predetermined overhead rate times machine hours for November,

Figure 5-5. Brillant Design Company makes custom chairs for individual customers. On October 1, there was one job in process, Job 243, with a cost of $1,300. Jobs 244, 245, and 246 were started during the month of October. Data on costs added during the month are as follows: Job 243 Job 244 Job 245 Job 246 Direct Materials $8,400 $2,300 $5,550 $9,200 Direct Labor 3,100 980 2,200 5,010 ​ Overhead is applied to production at the rate of 70% of direct labor cost. Job 245 was completed on October 14 and the client was billed at cost plus 55%. All other jobs remained in process. Refer to Figure 5-5. What is the price of Job 245? a. $18,761.20 b. $20,204.20 c. $22,310.50 d. $14,399.50 e. $10,627.70

14,399.50 Rationale: Job 245 DM $5,550.00 DL 2,200.00 OH 1,540.00 Total cost $9,290.00 Price $14,399.50

Figure 5-10. The King Corporation manufactures custom-made furniture. The following data pertains to Job X4A: Direct materials placed into production $9,000 Direct labor hours worked 300 hours Direct labor rate per hour $15 Machine hours worked 100 hours ​ Plantwide overhead rate is $22.50 per machine hour. Refer to Figure 5-10. What is the total amount of costs assigned to Job X4A? a. $15,750 b. $9,000 c. $20,250 d. $13,500

15,750 Rationale: SUPPORTING CALCULATIONS: $9,000 + ($15 × 300) + ($22.50 × 100) = $15,750

Figure 5-8. John's Water Slides makes custom water slides for hotels. On September 1, there were three jobs in process, Jobs 812, 813, and 814. Two more jobs were started during September, Jobs 815 and 816. By September 30, Jobs 812, 814, and 816 were finished. The following data has been collected: Job 812 Job 813 Job 814 Job 815 Job 816 9/1 Balance $615 $830 $ 945 --- --- Direct materials 750 235 1,280 $200 $915 Direct labor 420 115 560 320 875 ​ Overhead is applied at the rate of 120% of direct labor cost. Jobs are sold at cost plus 60%. Selling and administrative expenses for September totaled $2,950. By September 30, Jobs 812 were 816 are sold, but the customer who ordered Job 814 decided he did not want the slide so it is still in the warehouse. Refer to Figure 5-8. Calculate the ending balance in Work-in-Process as of September 30. a. $1,961 b. $1,392 c. $3,555.20 d. $1,700 e. $2,222

2,222 Rationale: Jobs 813 and 815 are the only jobs left in process. ​ Job 813 Job 815 BWIP $ 830 $ 0 Direct materials 235 200 Direct labor 115 320 Overhead 138 384 Total $1,318 $904 ​ $1,318 + $904 = $2,222

Horvath Company uses normal costing and applies overhead on the basis of direct labor hours. The company had the following financial information.... End of Year Actuals Overhead $533,708 Direct Labor Hours 78,429 For the month of March, direct labor hours were 7,468. The predetermined overhead rate was $ 4 For the year, the unadjusted Cost of Goods Sold was $729,999. Calculate the dollar amount of overhead applied to production for the year.

313,716 Correct answer is predetermined overhead rate times labor hours for the year.

Hallett Company uses departmental overhead rates. In the cutting department, overhead is applied on the basis of machine hours. In the sewing department, overhead is applied on the basis of direct labor hours. Actual data for the month of June are... Cutting Department Sewing Department Overhead $18,969 $34,325 Direct Labor Hours 2,792 9,580 Machine Hours 13,603 7,372 Assume that the predetermined overhead rate for the Cutting Department is $2.86 per machine hour. Calculate the overhead applied to production in the Cutting Department in the month of June.

38,904.5800 Cutting Department predetermined overhead rate times Cutting Department Actual Machine Hours.

Figure 5-8. John's Water Slides makes custom water slides for hotels. On September 1, there were three jobs in process, Jobs 812, 813, and 814. Two more jobs were started during September, Jobs 815 and 816. By September 30, Jobs 812, 814, and 816 were finished. The following data has been collected: Job 812 Job 813 Job 814 Job 815 Job 816 9/1 Balance $615 $830 $ 945 --- --- Direct materials 750 235 1,280 $200 $915 Direct labor 420 115 560 320 875 ​ Overhead is applied at the rate of 120% of direct labor cost. Jobs are sold at cost plus 60%. Selling and administrative expenses for September totaled $2,950. By September 30, Jobs 812 were 816 are sold, but the customer who ordered Job 814 decided he did not want the slide so it is still in the warehouse. Refer to Figure 5-8. What is the selling price of Job 816? a. $4,544 b. $2,840 c. $2,864 d. $3,408 e. $0, it is not completed yet.

4,544 Rationale: Total cost of Job 816 is $2,840. ​ $2,840 × 160% = $4,544.

Horvath Company uses normal costing and applies overhead on the basis of direct labor hours. The company had the following financial information.... Beginning of Year Estimates End of Year Actuals Overhead $461,259 $544,882 Direct Labor Hours 85,750 76,563 For the month of March, direct labor hours were 7,084. For the year, the unadjusted Cost of Goods Sold was $658,941. Calculate the predetermined overhead rate.

5.3791 Correct answer is estimated overhead divided by estimated labor hours.

Philadelphia Company manufactures pipes and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $15 per direct labor-hour. The following data are obtained from the accounting records for June 2010: The amount of manufacturing overhead allocated to all jobs during June 2010 totals: $38,500 $52,500 $55,000 $100,000

52,000

Folsom Company manufactures specialty tools, uses normal costing, and applies overhead on the basis of machine hours. The company had the following financial information.... End of Year Actuals Overhead $608,586 Machine Hours 70,834 For the month of November, machine hours were 11,731. For the year, the total applied overhead was $ 791,597 For the year, the unadjusted Cost of Goods Sold was $816,823. For the year, calculate the adjusted Cost of Goods Sold after adjusting for the overhead variance.

633,812 Correct answer is Unadjusted Cost of Goods Sold plus Under Applied Overhead (or, minus Over Applied Overhead).

Folsom Company manufactures specialty tools, uses normal costing, and applies overhead on the basis of machine hours. The company had the following financial information.... End of Year Actuals Overhead $811,440 Machine Hours 64,630 For the month of November, machine hours were 11,215. The predetermined overhead rate was $ 13 For the year, the unadjusted Cost of Goods Sold was $680,414. For the year, calculate the adjusted Cost of Goods Sold after adjusting for the overhead variance.

651,664 Correct answer is Unadjusted Cost of Goods Sold plus Under Applied Overhead (or, minus Over Applied Overhead).

Folsom Company manufactures specialty tools, uses normal costing, and applies overhead on the basis of machine hours. The company had the following financial information.... End of Year Actuals Overhead $662,256 Machine Hours 65,221 For the month of November, machine hours were 11,280. For the year, the total applied overhead was $ 793,400 For the year, the unadjusted Cost of Goods Sold was $851,306. For the year, calculate the adjusted Cost of Goods Sold after adjusting for the overhead variance.

720,162 Correct answer is Unadjusted Cost of Goods Sold plus Under Applied Overhead (or, minus Over Applied Overhead).

Folsom Company manufactures specialty tools, uses normal costing and applies overhead on the basis of machine hours. The company had the following financial information.... End of Year Actuals Overhead $855,758 Machine Hours 72,742 For the month of November, machine hours were 11,341. The predetermined overhead rate was $ 10 For the year, the unadjusted Cost of Goods Sold was $541,478. Calculate the dollar amount of overhead applied to production for the year.

727,420 Correct answer is predetermined overhead rate times machine hours for the year.

Manufacturing overhead a. consists of all manufacturing costs other than direct materials and direct labor. b. consists of all costs other than direct materials and direct labor. c. consists of all costs other than direct materials. d. consists of all manufacturing costs other than direct materials.

consists of all manufacturing costs other than direct materials and direct labor

Horvath Company uses normal costing and applies overhead on the basis of direct labor hours. The company had the following financial information.... End of Year Actuals Overhead $420,249 Direct Labor Hours 69,959 For the month of March, direct labor hours were 7,880. For the year, the total applied overhead was $ 370,450 For the year, the unadjusted Cost of Goods Sold was $677,976. For the year, calculate the adjusted Cost of Goods Sold after adjusting for the overhead variance.

727,775 Correct answer is Unadjusted Cost of Goods Sold plus Under Applied Overhead (or, minus Over Applied Overhead).

Folsom Company manufactures specialty tools, uses normal costing, and applies overhead on the basis of machine hours. The company had the following financial information.... End of Year Actuals Overhead $709,977 Machine Hours 60,419 For the month of November, machine hours were 10,492. The predetermined overhead rate was $ 11 For the year, the unadjusted Cost of Goods Sold was $697,187. For the year, calculate the adjusted Cost of Goods Sold after adjusting for the overhead variance.

742,555 Correct answer is Unadjusted Cost of Goods Sold plus Under Applied Overhead (or, minus Over Applied Overhead).

Horvath Company uses normal costing and applies overhead on the basis of direct labor hours. The company had the following financial information.... End of Year Actuals Overhead $480,328 Direct Labor Hours 60,384 For the month of March, direct labor hours were 7,164. For the year, the total applied overhead was $ 374,903 For the year, the unadjusted Cost of Goods Sold was $651,156. For the year, calculate the adjusted Cost of Goods Sold after adjusting for the overhead variance.

756,581 Correct answer is Unadjusted Cost of Goods Sold plus Under Applied Overhead (or, minus Over Applied Overhead).

Horvath Company uses normal costing and applies overhead on the basis of direct labor hours. The company had the following financial information.... End of Year Actuals Overhead $498,700 Direct Labor Hours 74,354 For the month of March, direct labor hours were 7,922. The predetermined overhead rate was $ 6 For the year, the unadjusted Cost of Goods Sold was $707,017. For the year, calculate the adjusted Cost of Goods Sold after adjusting for the overhead variance.

759,593 Correct answer is Unadjusted Cost of Goods Sold plus Under Applied Overhead (or, minus Over Applied Overhead).

Folsom Company manufactures specialty tools, uses normal costing and applies overhead on the basis of machine hours. The company had the following financial information.... End of Year Actuals Overhead $742,769 Machine Hours 69,666 For the month of November, machine hours were 11,133. The predetermined overhead rate was $ 11 For the year, the unadjusted Cost of Goods Sold was $520,174. Calculate the dollar amount of overhead applied to production for the year.

766,326 Correct answer is predetermined overhead rate times machine hours for the year.

Sanders Manufacturing has the following amounts listed before reconciling the overhead variance. Estimated overhead $760,000 Applied overhead 756,000 Actual overhead 740,000 Cost of goods sold 935,000 ​ Assuming that any overhead variance is immaterial, calculate the adjusted Cost of Goods Sold after adjusting for the overhead variance. a. $939,000 b. $915,000 c. $955,000 d. $951,000 e. $919,000

919,000 Rationale: Applied Overhead $756,000 Actual Overhead 740,000 Overapplied Overhead $ 16,000 ​ Adjusted Cost of Goods Sold = $935,000 − $16,000 = $919,000

An example of a support department is... Human Resources (Personnel) Product Assembly Painting units produced Stacking units produced

Human Resources

A normal job-order costing system is a system that uses: a. estimated costs for direct materials, direct labor, and overhead. b. actual costs for direct materials and overhead, estimated costs for direct labor. c. actual costs for direct materials and direct labor and estimated costs for overhead. d. actual costs for direct materials and estimated costs for direct labor and overhead.

actual costs for direct materials and direct labor and estimated costs for overhead

Which of the following is the assignment process used with normal costing? a. Actual direct labor cost is assigned to products, but direct material and overhead costs are assigned using predetermined rates. b. Actual direct materials cost is assigned to products, but direct labor and overhead costs are assigned using predetermined rates. c. All manufacturing costs are assigned using predetermined rates. d. Actual direct material and direct labor costs are assigned to products, but overhead costs are assigned using predetermined rates. e. Actual direct materials, actual direct labor and actual overhead cost are assigned to products.

actual direct material and direct labor costs are assigned to products, but overhead costs are assigned using predetermined rates

Using normal costing, which costs never enter the work-in-process account? a. applied overhead b. actual overhead c. direct materials d. direct labor e. None of these.

actual overhead

Which of the following sentences is not true? a. Actual overhead costs always enter the Work-in-Process account. b. The cost of a job includes direct materials, direct labor, and applied overhead. c. When a job is complete, it must leave Work-in-Process and be entered into Finished Goods or Cost of Goods Sold. d. All of these are correct. e. None of these are correct.

actual overhead costs always enter the work-in-process account

Which of the following costs is not included on a job-order cost sheet? a. direct material costs b. direct labor costs c. actual plantwide overhead costs d. applied plantwide overhead costs

actual plantwide overhead costs

Which of the following is not a manufacturing cost element? a. direct materials b. direct labor c. advertising expense d. overhead e. All of these are correct.

advertising expense

Which of the following is true? a. The adjusted cost of goods sold is equal to normal cost of goods sold plus or minus the overhead variance. b. If the overhead variance shows overapplied overhead, then that amount would be subtracted from normal cost of goods sold. c. Variances in overhead are expected every month. d. All of these. e. None of these.

all of these

The predetermined overhead rate is usually calculated a. at the beginning of each month. b. at the end of each month. c. at the end of the year. d. at the beginning of the year.

at the beginning of the year

Which of the following statements is true? a. There will be many different jobs on a job-order cost sheet. b. Time tickets are used to post the cost of direct labor to individual jobs. c. Work-in-process consists of all complete work. d. Direct labor is allocated to jobs along with overhead using a cost driver. e. None of these.

time tickets are used to post the cost of direct labor to individual jobs

Production costs consist of direct materials, direct labor, and overhead. True False

true

The difference between actual overhead and applied overhead is called an overhead variance. True False

true

The three manufacturing cost elements are direct materials, direct labor, and overhead. True False

true

The order that cost elements flow through accounts until they are recognized as an expense is a. Work-in-Process, Cost of Goods Sold, Finished Goods b. Finished Goods, Work-in-Process, Cost of Goods Sold c. Finished Goods, Cost of Goods Sold, Work-in-Process d. Work-in-Process, Finished Goods, Cost of Goods Sold

work-in-process, finished goods, cost of goods sold