Chapter 3

Murphy company has three departments, and uses a multiple predetermined overhead rate system. Department A manufactures parts in a highly automated process, then Department B assembles the parts by hand. Department C places completed units in a heat chamber to sterilize them before they are shipped out. Match each department with an appropriate overhead allocation rate.

Department A - Machine hours Department B - Direct Labor hours Department C - Batches

_______ ________ inventory consists of completed units that have not yet been sold.

Finished goods

True or false: The transfer of costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next.

True

Murphy Manufacturing estimated manufacturing overhead for 2013 to be $100,000. Murphy uses direct labor-hours as its allocation base. They estimated that 5,000 hours would be used in 2013. Actual overhead for the year was $120,000 and actual direct labor-hours were 7,500. How much overhead was applied to a job completed during 2013 that used 200 direct labor-hours? a) $4,000 b) $4,800 c) $3,200 d) $100,000

a) $4,000

Manufacturing overhead costs (check all that apply): a) consist of many different items. b) in total tend to vary significantly from one period to the next. c) do not impact the average cost per unit. d) are indirect costs.

a) consist of many different items. d) are indirect costs.

A factor that causes overhead costs is called a: a) cost driver b) predetermined overhead rate c) manufacturing cost d) cost object

a) cost driver

A(n) _____ is any event that causes consumption of overhead resources.

activity

What methods can be used to dispose of underapplied or overapplied manufacturing overhead? (Check all that apply.) a) Closing it out to Work in process b) Closing it out to Cost of goods sold. c) Allocating it among Raw materials, Work in process, and Finished goods d) Allocating it among Work in process, Finished goods, and Cost of goods sold. e) Closing it out to Finished goods.

b) Closing it out to Cost of goods sold. d) Allocating it among Work in process, Finished goods, and Cost of goods sold.

What kinds of costs are assigned to units of product in absorption costing (check all that apply)? a) Variable selling and administrative costs b) Fixed manufacturing costs c) Variable manufacturing costs d) Fixed selling and administrative costs

b) Fixed manufacturing costs c) Variable manufacturing costs

Which of the following are widely used allocation bases in manufacturing (check all that apply)? a) Product revenue b) Units of product c) Maintenance costs d) Direct labor hours e) Nonmanufacturing costs f) Machine hours g) Direct labor cost

b) Units of product b) Units of product d) Direct labor hours f) Machine hours g) Direct labor cost

Which account(s) are debited in the journal entry to record manufacturing labor costs? a) Salaries and wages payable b) Work in process and Manufacturing overhead c) Work in process and Salaries and wages payable d) Manufacturing overhead and Salaries and wages payable

b) Work in process and Manufacturing overhead

An activity _________ pool relates to a single activity measure in the activity-based approach.

cost

What is credited in the journal entry to record the purchase of materials? a) Manufacturing overhead b) Work in process c) Raw materials d) Accounts payable

d) Accounts payable

Which of the following is not one of the categories into which manufacturing costs are generally classified? a) Manufacturing overhead b) Direct materials c) Direct labor d) Selling & administrative expenses

d) Selling & administrative expenses

Designing and advertising a product are all ______-level activities

product

Factory labor charges that cannot be easily traced to a job are treated as: a) nonmanufacturing costs b) manufacturing overhead c) direct labor

b) manufacturing overhead

Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of ________-level activities.

batch

Which of the following costs would be classified as manufacturing overhead (check all that apply)? a) The CEO's salary b) Direct materials c) The factory supervisor's salary d) Factory insurance e) Office equipment depreciation

c) The factory supervisor's salary d) Factory insurance

Which of the following are widely used allocation bases in manufacturing (check all that apply)? a) Nonmanufacturing costs b) Product revenue c) Units of product d) Machine hours e) Maintenance costs f) Direct labor cost g) Direct labor hours

c) Units of product d) Machine hours f) Direct labor cost g) Direct labor hours

A job cost sheet contains (check all that apply): a) materials costs charged to the job b) selling costs charged to the job c) the selling price of the job d) labor costs charged to the job e) manufacturing overhead costs charged to the job

a) materials costs charged to the job d) labor costs charged to the job e) manufacturing overhead costs charged to the job