Chp 7

Given the following information, if the company prorates the overapplied overhead, how much will be allocated to Work-in-Process? Stage Overhead Applied Sold $10,000 Finished goods $50,000 Work-in-Process $20,000 Overapplied overhead $5,000

$1,250 Reason: ($20,000 ÷ $80,000) × $5,000 = $1,250

A company applies overhead using a predetermined overhead rate based on direct labor cost. Given the following information, calculate the manufacturing overhead applied to Job 101. Estimated manufacturing overhead cost $300,000 Estimated direct labor cost $150,000 Actual direct labor cost for Job 101 $80,000

$160,000 Reason: ($300,000 ÷ $150,000) × $80,000 = $160,000

Anders Inc.'s predetermined overhead rate is 40% of direct labor cost. One of the jobs bid on and completed during the year estimated $10,000 of direct labor. The actual direct labor cost for the job was $12,000. Based on this, how much manufacturing overhead cost was applied to the job?

$4,800 Reason: $12,000 × 40% = $4,800

A department uses direct labor cost as its allocation base for allocating manufacturing overhead. The department estimated manufacturing overhead for the year would be $100,000, direct labor cost would be $400,000, and direct labor hours would be 20,000. At the end of the year, actual manufacturing overhead was $112,500, actual direct labor costs were $375,000, and actual direct labor hours were 15,000. What is the department's predetermined overhead rate for allocating manufacturing overhead?

25% Reason: Estimated manufacturing overhead ÷ estimated direct labor cost = $100,000 ÷ $400,000 = 25%

When a company sells finished goods on account for $75,000 that cost $50,000 to produce, the accounts debited include

Accounts Receivable Cost of Goods Sold

When a company sells finished goods on account for $75,000 that cost $50,000 to produce, the accounts debited include Blank______.

Accounts Receivable Cost of Goods Sold

Which of the following is NOT an inventory account?

Accounts payable

Which of the following is not a common event that leads to manufacturing overhead being recorded?

Accumulating actual direct materials and direct labor costs.

Which of the following would not be found in a job cost sheet?

Administrative costs allocated to the department.

The journal entry to record the applied manufacturing overhead cost includes a credit to

Applied Manufacturing Overhead

When a company uses both an Applied Manufacturing Overhead account and a Manufacturing Overhead Control account, the journal entry to write off overapplied or underapplied overhead will always debit

Applied Manufacturing Overhead

When overhead is applied to products, the Blank______ account is credited.

Applied Manufacturing Overhead

Which of the following is false regarding recording manufacturing overhead?

Because manufacturing overhead is directly related to the completion of jobs, there is always a transaction that triggers a journal entry.

A predetermined overhead rate formula based on direct labor cost would include which of the following in its calculation?

Estimated manufacturing overhead Estimated direct labor cost

Which of the following statements are correct?

If job expenditures are 70% of the total estimated to be spent but the job is only 50% complete, the job will require higher costs than estimated. Management needs to know the stage of completion of a project to evaluate performance and control costs.

Which of the following are true of why service organizations may use job costing?

Job costing provides management the information necessary to assess job profitability and estimate costs for bidding purposes. Job costing allows a service firm to assess customer profitability because the the job is often the customer.

The journal entry to record the direct materials transferred to a job includes a credit to

Materials Inventory

The journal entry to record the purchase of direct materials on account includes a debit to

Materials Inventory

The entry to record the direct labor incurred and assigned to a job includes a credit to

Wages Payable

The entry to record the direct labor incurred and assigned to a job includes a debit to

Work-in-Process

The journal entry to record the applied manufacturing overhead cost includes a debit to

Work-in-Process Inventory

The journal entry to record the sale of finished goods includes all of the following accounts except

Work-in-Process Inventory

Once costs are known, costing provides more current information than costing.

actual: normal

To reduce the risk of firms misrepresenting the cost of jobs on large government jobs, governments usually require a(n)

audit

Charging costs to the wrong jobs

can result in poor decisions can result in cost-plus pricing errors

An account in the general ledger that summarizes a set of subsidiary ledger accounts is a

control account

Debits to the Manufacturing Overhead Control are to record all of the following except

direct materials

The journal entry to record the transfer of inventory to finished goods includes a debit to

finished goods inventory

Materials, Work-in-Process, and Finished Goods are assets that are classified as

inventory

Intentionally charging costs to the wrong job

is done to avoid the appearance of cost overruns is always unethical misleads managers who rely on accurate cost information

A unit of a product that is easily distinguishable from other units is called a(n)

job

The cost accounting system records and tracks the cost of a job using a

job cost record job cost sheet subsidiary ledger account

Improprieties in job costing are caused by all of the following except

miscalculating predetermined overhead rates

Job costing is Blank______ used in service organizations.

often

If actual overhead is $45,000 and applied overhead is $48,000, then overhead is

overapplied

If a job is 60% completed but 80% of the total budget has been spent, job supervisors may be tempted to

overstate

A major ethical issue for organizations is the accusation of Blank______ the cost of jobs they are being reimbursed for.

overstating

A complex job that often takes months or years to complete and requires the work of many different departments, divisions, or subcontractors is called a(n)

project

Bridges, shopping centers, and other jobs that take months or years to complete and involve the work of many are called

projects

When applied overhead is more than actual overhead, the journal entry made at the end of the period Blank______ Cost of Goods Sold.

reduces

The first step in a job costing system is to

select an allocation base

The job cost sheet summarizes all of the following costs except

selling and administrative costs

When the cost of a job is determined by budgeted direct materials and labor cost plus overhead applied using a predetermined overhead rate and a budgeted allocation base, Blank______ costing is being used.

standard

The predetermined overhead rate is computed in advance based on annual amounts so

the cost of jobs is not distorted erratic daily or monthly costs and production volumes do not affect the calculation of long-run costs the cost of jobs can be calculated as completed

A firm chooses to allocate overhead costs using a method that provides the most favorable result rather than attempting to find a true allocation base. This practice

will misrepresent the cost of the job could be considered unethical

Direct materials, direct labor, and manufacturing overhead are components of the

work in progress