AC351 Chapter 2 Quiz Study Questions

Sivret Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours 80,000 Total fixed manufacturing overhead cost $624,000 Variable manufacturing overhead per machine-hour $ 3.10 Recently, Job M598 was completed with the following characteristics: Number of units in the job 60 Total machine-hours 300 Direct materials $ 645 Direct labor cost $9,000 The amount of overhead applied to Job M598 is closest to: (Round your intermediate calculations to 2 decimal places.) Multiple Choice A) $3,270 B) $2,340 C) $930 D) $4,200

A) $3,270 Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $624,000 + ($3.10 per machine-hour × 80,000 machine-hours) = $624,000 + $248,000 = $872,000 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $872,000 ÷ 80,000 machine-hours = $10.90 per machine-hour Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $10.90 per machine-hour × 300 machine-hours = $3,270

Cull Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $546,700, variable manufacturing overhead of $2.00 per machine-hour, and 77,000 machine-hours. The company has provided the following data concerning Job X455 which was recently completed: Number of units in the job 20 Total machine-hours 80 Direct materials $ 840 Direct labor cost $1,680 If the company marks up its unit product costs by 20% then the selling price for a unit in Job X455 is closest to: (Round your intermediate calculations to 2 decimal places.) Multiple Choice A) $214.88 B) $32.48 C) $194.88 D) $162.40

C) $194.88. Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $546,700 + ($2.00 per machine-hour × 77,000 machine-hours) = $546,700 + $154,000 = $700,700 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $700,700 ÷ 77,000 machine-hours = $9.10 per machine-hour Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $9.10 per machine-hour × 80 machine-hours = $728 Direct materials$ 840Direct labor1,680Manufacturing overhead applied728Total cost of Job X455$3,248 Total cost of Job X455 (a)$3,248Number of units (b)20Unit product cost (a) ÷ (b)$162.40 Unit product cost for Job X455$162.40Markup (20% × $162.40)32.48Selling price$194.88

Stoke Corporation has two production departments, Forming and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department's predetermined overhead rate is based on machine-hours and the Assembly Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Forming Assembly Machine-hours 20,000 15,000 Direct labor-hours 2,000 7,000 Total fixed manufacturing overhead cost $138,000 $58,100 Variable manufacturing overhead per machine-hour $ 2.30 Variable manufacturing overhead per direct labor-hour $ 3.00 During the current month the company started and finished Job A460. The following data were recorded for this job: Job A460: Forming Assembly Machine-hours 8010 Direct labor-hours 3050 The amount of overhead applied in the Forming Department to Job A460 is closest to: (Round your intermediate calculations to 2 decimal places.) Multiple Choice A) $664.00 B) $184.00 C) $736.00 D) $184,000.00

C) $736.00 Forming Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department) = $138,000 + ($2.30 per machine-hour × 20,000 machine-hours) = $138,000 + $46,000 = $184,000 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $184,000 ÷ 20,000 machine-hours = $9.20 per machine-hour Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $9.20 per machine-hour × 80 machine-hours = $736

Valvano Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $440,000, variable manufacturing overhead of $2.20 per machine-hour, and 50,000 machine-hours. The estimated total manufacturing overhead is closest to: Multiple Choice A) $440,000 B) $440,200 C) $110,000 D) $550,000

D) $550,000. Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $440,000 + ($2.20 per machine-hour × 50,000 machine-hours) = $440,000 + $110,000 = $550,000

Jurica Corporation has two production departments, Forming and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Forming Customizing Machine-hours 19,000 15,000 Direct labor-hours 4,000 6,000 Total fixed manufacturing overhead cost $100,700 $63,000 Variable manufacturing overhead per machine-hour $ 2.00 Variable manufacturing overhead per direct labor-hour $ 3.90 The predetermined overhead rate for the Forming Department is closest to: Multiple Choice A) $23.12 per machine-hour B) $2.00 per machine-hour C) $5.30 per machine-hour D) $7.30 per machine-hour

D) $7.30 per machine hour. Forming Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department) = $100,700 + ($2.00 per machine-hour × 19,000 machine-hours) = $100,700 + $38,000 = $138,700 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $138,700 ÷ 19,000 machine-hours = $7.30 per machine-hour

If the overhead rate is computed annually based on the actual costs and activity for the year, the manufacturing overhead assigned to any particular job can be computed as soon as the job is completed. (T/F)

False

The amount of overhead applied to a particular job equals the actual amount of overhead caused by the job. (T/F)

False

Job-order costing systems often use allocation bases that do not reflect how jobs actually use overhead resources. (T/F)

True

The costs attached to products that have not been sold are included in ending inventory on the balance sheet. (T/F)

True

The fact that one department may be labor intensive while another department is machine intensive explains in part why multiple predetermined overhead rates are often used in larger companies. (T/F)

True