Principles of Managerial Accounting - Chapter 16 Test

A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that total factory overhead costs would be $360,000 and direct labor hours would be 30,000. Actual factory overhead costs incurred were $377,200, and actual direct labor hours were 36,000. What is the predetermined factory overhead rate per direct labor hour?

$12.00 Predetermined Factory Overhead Rate = Estimated Total Factory Overhead Costs ÷ Estimated Activity Base = $360,000 ÷ 30,000 direct labor hours = $12.00 per direct labor

Journalizing the entry for the indirect labor costs incurred for general factory use would include a debit to

Factory Overhead

The controlling account for the job cost sheets is

Work in Process

The journal entries for the cost and sale of a finished good on account are

debit Cost of Goods Sold, credit Finished Goods; debit Accounts Receivable, credit Sales

If the amount of factory overhead cost incurred exceeds the amount applied, the factory overhead account will have a

debit balance and be underapplied

When Job 117 was completed, direct materials totaled $4,400; direct labor, $5,600; and factory overhead, $2,400. A total of 1,000 units were produced at a per-unit cost of

$12.40 Total Cost = Direct Materials + Direct Labor + Factory Overhead = $4,400 + $5,600 + $2,400 = $12,400 Per-unit Cost = $12,400 ÷ 1,000 units = $12.40

Aspen Technologies has the following budget data: Estimated direct labor hours 15,000 Estimated direct labor dollars $90,000 Estimated factory overhead costs $198,000 If factory overhead is to be applied based on direct labor hours, the predetermined factory overhead rate is

$13.20 Predetermined Factory Overhead Rate = Estimated Total Factory Overhead Costs ÷ Estimated Activity Base = $198,000 ÷ 15,000 labor hours = $13.20 per labor hour

Costs that are incurred in generating revenues during the period, but not involved in the manufacturing process, are referred to as

period costs

Which of the following represents the factory overhead applied to a product?

predetermined factory overhead rate times actual activity base

Costs that are treated as assets until the product is sold are

product costs

Reynolds Manufacturers Inc. has estimated total factory overhead costs of $95,000 and expected direct labor hours of 9,500 for the current fiscal year. If Job 117 incurs 2,300 direct labor hours, Work in Process will be debited and Factory Overhead will be credited for

$23,000 Predetermined Factory Overhead Rate = Estimated Total Factory Overhead Costs ÷ Estimated Activity Base = $95,000 ÷ 9,500 labor hours = $10 per labor hour Amount Credited to Factory Overhead = Predetermined Factory Overhead Rate × Direct Labor Hours = $10 × 2,300 labor hours = $23,000

In job order costing, the journal entry for the flow of direct labor costs into production consists of a

debit to Work in Process and a credit to Wages Payable

Selected accounts with some amounts omitted are as follows: Work in Process Oct. 1 Balance 20,000 Oct. 31 Goods finished X 31 Direct materials 96,700 31 Direct labor 201,000 31 Factory overhead X Finished Goods Oct. 1 Balance 52,000 31 Goods finished 360,000 If the balance of Work in Process on October 31 is $21,000, what was the amount of factory overhead applied in October?

$63,300 Factory Overhead Applied in October = Finished Goods + Balance of Work in Process on October 31 - Balance of Work in Process on October 1 - Direct Materials - Direct Labor = $360,000 + $21,000 - $20,000 - $96,700 - $201,000 = $63,300

Cavy Company estimates that total factory overhead costs for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which are estimated to be 40,000 hours. The machine hours for the month of April for all of the jobs were 4,780. If the actual factory overhead for April totaled $141,800. Determine the over- or underapplied amount for the month.

$7,575 overapplied $1,250,000 ÷ 40,000 hours = $31.25 per machine hour $31.25 × 4,780 machine hours = $149,375 factory overhead applied $141,800 - $149,375 = $7,575 overapplied

During the period, labor costs incurred on account amounted to $175,000, including $150,000 for production orders and $25,000 for general factory use. Factory overhead applied to production was $32,000. The journal entry for the actual factory overhead costs incurred is

Factory Overhead 25,000 Wages Payable 25,000

During the period, labor costs incurred on account amounted to $175,000, including $150,000 for production orders and $25,000 for general factory use (indirect labor). In addition, factory overhead charged to production was $32,000. The journal entry for the direct labor costs is

Work in Process 150,000 Wages Payable 150,000

A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that total factory overhead costs would be $360,000 and direct labor hours would be 30,000. Actual factory overhead costs incurred were $377,200, and actual direct labor hours were 36,000. The journal entry to apply the factory overhead costs for the year would include a

credit to Factory Overhead for $432,000 Predetermined Factory Overhead Rate = Estimated Total Factory Overhead Costs ÷ Estimated Activity Base = $360,000 ÷ 30,000 direct labor hours = $12 per direct labor hour Applied Factory Overhead Costs = Predetermined Overhead Rate × Actual Direct Labor Hours = $12 × 36,000 direct labor hours = $432,000 The journal entry to apply the factory overhead costs for the year would include a credit to Factory Overhead for $432,000.

Selected accounts with some amounts omitted are as follows: Work in Process Aug. 1 Balance 275,000 Aug. 31 Goods finished 1,030,000 31 Direct materials X 31 Direct labor 450,000 31 Factory overhead X Factory Overhead Aug. 1-31 Costs incurred 145,000 Aug. 1 Balance 15,000 31 Applied X If the balance of Work in Process on August 31 is $220,000, what was the amount debited to Work in Process for factory overhead in August, assuming a factory overhead rate of 30% of direct labor costs?

$135,000 Amount Debited to Work in Process for Factory Overhead in August = Direct Labor Costs × Factory Overhead Rate = $450,000 × 30% = $135,000

Selected accounts with amounts omitted are as follows: Work in Process Aug. 1 Balance 275,000 Aug. 31 Goods finished 1,030,000 31 Direct materials X 31 Direct labor 450,000 31 Factory overhead X Factory Overhead Aug. 1-31 Costs incurred 145,000 Aug. 1 Balance 15,000 31 Applied (30% of direct labor cost) X If the balance of Work in Process on August 31 is $220,000, what was the amount debited to Work in Process for direct materials in August?

$390,000 Amount Debited to Work in Process for Direct Materials in August = Finished Goods + Balance of Work in Process on August 31 - Balance of Work in Process on August 1 - Direct Labor - Applied Factory Overhead = $1,030,000 + $220,000 - $275,000 - $450,000 - ($450,000 × 30%) = $390,000

The journal entry for the transfer of 1,600 units of Part No. 1177, with a value of $2.50 each, to work in process is

Work in Process 4,000 Materials 4,000 Number of Units × Unit Price = 1,600 × $2.50 = $4,000 The journal entry for the transfer of 1,600 units of Part No. 1177, with a value of $2.50 each, to work in process is to debit Work in Process and to credit Materials for $4,000.

Winston Company estimates that total factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which are estimated to be 50,000 hours. The total machine hours for the year were 54,300. The actual factory overhead for the year was $1,348,800. a. Determine the total factory overhead applied. fill in the blank 1 of 1$ 1,357,500 b. Compute the over- or underapplied factory overhead for the year.

a. $1,357,5000 b.8,700 overapplied c. Factory Overhead 8,700 Cost of Goods Sold 8,700 a. $1,250,000 ÷ 50,000 hours = $25 per machine hour 54,300 machine hours × $25 = $1,357,500 factory overhead applied b. $1,348,800 actual - $1,357,500 applied = $8,700 overapplied

Cavy Company estimates that total factory overhead costs will be $660,000 for the year. The company has decided that the basis for applying factory overhead should be direct labor hours, which are estimated to be 100,000 hours. a. Compute the predetermined factory overhead rate. Round your answer to the nearest cent. ____ per direct labor hour b. Determine the amount of factory overhead applied to Job 345 if the amount of direct labor hours is 560 and to Job 777 if the amount of direct labor hours is 800. Job 345 _____ Job 777 ______ c. Journalize the entry for the factory overhead applied if Jobs 345 and 777 are the only jobs for the period. If an amount box does not require an entry, leave it blank.

a. $6.60 b. $3,696 $5,280 c.Work in Process 8,976 Factory Overhead 8,976 a. $660,000 ÷ 100,000 direct labor hours = $6.60 per direct labor hour b. Job 345: 560 hrs. × $6.60 = $3,696 Job 777: 800 hrs. × $6.60 = $5,280