Acct. Ch. 10

Loise Inc., a manufacturing company, forecasts that total overhead for the current year will be $19,250,000, and total machine hours will be 350,000 hours. However, the actual overhead is $6,095,000, and the actual machine hours are 142,000 hours. If the company uses a predetermined overhead rate based on machine hours for applying overhead, what is the predetermined overhead rate?

$55 per machine hour

Elite, Inc., has estimated total factory overhead costs of $900,000 and 25,000 direct labor hours for the current fiscal year. If the direct labor hours for Job N41 are 2,000, calculate the total factory overhead applied to this job.

$72,000

_____ cost is both a prime cost and a conversion cost.

Direct labor

Which of the following is an example of a factory overhead cost?

Factory heating and lighting cost

The current year's advertising costs are normally considered as product costs.

False

Which of the following statements about financial accounting is true?

Financial accounting information is required to be reported annually but may be reported monthly or quarterly.

Which of the following is true of job order cost systems?

Job order cost systems are often used by companies that manufacture custom products for customers or batches of similar products.

In a just-in-time (JIT) system, each work center is connected to other work centers through information contained on a

Kanban.

The recording of the jobs completed would decrease _____.

Work in Process

The sale of a finished good on account would _____.

increase cost of goods sold and decrease finished goods; increase accounts receivable and increase sales

Assume that a hospital uses activity-based costing to allocate hospital overhead to patients. Which of the following is the first step in allocating it?

Identifying activity cost pools

Which of the following statements about the activity-based costing (ABC) method is true?

In complex manufacturing systems, one way to avoid distorted product costs is by using the activity-based costing method.

The balance of Factory Overhead at the end of the year is disposed of by transferring it to the _____ account.

cost of goods sold

When a job is completed and the client is billed, the costs are transferred to a _____ account.

cost of services

The cost of wages paid to employees directly involved in the manufacturing process of converting materials into finished product is classified as _____.

direct labor cost

Prime costs consist of _____ and _____ costs.

direct materials; direct labor

For a manufacturing business, work-in-process inventories consist of inventories that have _____.

entered the manufacturing process but not been completed

Dividing estimated total factory overhead costs by estimated activity base will give the _____.

predetermined factory overhead rate

A _____ cost system provides product costs for each manufacturing department or process.

process

If a service business bills clients for services in advance, the billed amount is

treated as deferred revenue until the services are completed.

Conversion cost is the combination of direct labor cost and factory overhead cost.

True

Russet Inc. estimates total factory overhead cost of $75,000 for the year and an activity base of 25,000 direct labor hours. The predetermined factory overhead rate is _____ per direct labor hour.

$3

Lobelia Inc.'s direct materials cost is $153,600, direct labor cost is $752,800, indirect materials cost is $1,100, indirect labor cost is $900, and other factory overhead costs are $14,100. What is Lobelia Inc.'s prime cost?

$906,400

Which of the following is an advantage of using a job order cost accounting system?

A job order cost accounting system can be used by managers for cost evaluation, decision making, and performance analysis.

Which of the following manufacturing costs is an indirect cost of producing a product?

Oil lubricants used for factory machinery

Which of the following statements about process cost systems is true?

Process cost systems are often used by companies that manufacture units of a product that are indistinguishable from each other.

Which of the following costs appear on a balance sheet?

Product costs

Which of the following statements best describes a traditional production process?

Supervisors enter materials into manufacturing so as to keep all the manufacturing departments (processes) operating.

Which of the following would be included in the materials inventory?

The cost of rubber present in the stock of companies that manufacture tires

A manufacturing business reports three types of inventory on its balance sheet: direct materials, products in the process of being manufactured, and finished products.

True

If factory overhead applied is less than the actual costs, the overhead is said to be underapplied.

True

If the cost of employee wages is not a significant portion of the total product cost, the wages are classified as factory overhead cost.

True

Reporting under managerial accounting is not restricted by specific rules such as generally accepted accounting principles (GAAP).

True

The cost of a manufactured product generally consists of direct materials cost, direct labor cost, and factory overhead cost.

True

Which of the following statements is a difference between financial accounting and managerial accounting?

Under financial accounting, reports are prepared using GAAP, whereas under managerial accounting, information that is useful to management for its decision making is not recorded using GAAP.

Which of the following statements about managerial accounting is true?

Under managerial accounting, reports are prepared as needed by management for its decision making.