ACC 202 Ch. 2

Using the information provided by Amilmar Inc., calculate the predetermined overhead rate. Amilmar has determined machine hours to be the appropriate cost driver to allocate overhead costs.

$3.75 explanation: Using the information provided, the predetermined overhead rate is $3.75, calculated by dividing the estimated total manufacturing overhead costs of $750,000 by the estimated machine hours of 200,000 hours.

finished goods inventory

The costs of jobs completed but not yet sold.

Cost of Goods Sold

The costs of jobs sold during the period.

Which of the following is true of direct labor time tickets?

They are used to record direct labor costs in a job order cost system. explanation: Direct labor time tickets track and record the direct labor costs in a job order cost system. They do not record the indirect labor cost.

Cost information is used for:

ALL OF THE ABOVE explanation: Cost information is used to determine the price to charge for a product, to plan for the future, to monitor spending, and to evaluate performances.

A __________ influences manufacturing overhead costs incurred.

Cost driver explanation: A cost driver drives or influences the manufacturing overhead costs incurred.

The predetermined overhead rate is calculated by taking:

Estimated manufacturing overhead cost divided by estimated total cost driver explanation: Predetermined overhead rate is calculated by taking Estimated manufacturing overhead cost divided by estimated total cost driver

All of the following are broad categories of manufacturing costs except for:

Indirect materials explanation: The broad categories of manufacturing costs are direct materials, direct labor and manufacturing overhead. Indirect materials and indirect labor are included in manufacturing overhead.

Which of the following is not used by job order costing system?

Mass production explanation: Job order costing is used in companies that offer customized or unique products or services. Costs are accumulated by the job or project on a job cost sheet.

work in process inventory

The accumulated costs of incomplete jobs.

Manufacturing overhead was estimated to be $200,000 for the year along with 5,000 direct labor hours. Actual manufacturing overhead was $240,000, and actual labor hours were 5,500. The amount debited (left-side) to the Manufacturing Overhead account would be:

$240,000 explanation: Actual manufacturing overhead costs of $240,000 are debited (left-side) to the Manufacturing Overhead account.

Venus International makes customized furniture and uses job order costing. During a period, its beginning raw materials inventory was $10,000. It purchased raw materials of $20,000 and ended the period with ending raw materials inventory of $3,000. What is the cost of raw materials transferred to Work in Process Inventory?

$27,000 explanation: The total of beginning raw materials inventory of $10,000 and raw materials purchased of $20,000 is $30,000. Deducting the ending raw materials inventory of $3,000 from $30,000, we get $27,000 as the cost of raw materials transferred to Work in Process Inventory.

Stoneside Inc. has provided you with the following information for its Manufacturing Overhead account at the end of the period. Actual manufacturing overhead costs incurred total $31,910. The company applied manufacturing overhead cost in the amount of $28,900. What is the overapplied or underapplied manufacturing overhead?

$3,010 Underapplied explanation: The difference between actual overhead incurred and the overhead applied gives us underapplied or overapplied manufacturing overhead. The underapplied overhead is $3,010 (Actual overhead of $31,910 − Overhead applied of $28,900).

Which of the following will likely use a job order costing system to track costs?

An interior designer explanation: Job order costing is used when companies produce products or provide services that are different from each other. Interior designers are most likely to use a job order costing system because each project they take on will be different from other projects.

The most common method for disposing of the balance in the Manufacturing Overhead account is to make a direct adjustment to what other account?

Cost of Goods Sold explanation: The most common method for disposing of the balance in the Manufacturing Overhead account is to make a direct adjustment to the Cost of Goods Sold account.

Which of the following is not used by process costing system?

Customized jobs explanation: Process costing involves the standardized or homogeneous products or services, which are mass produced. Costs are accumulated by the process on a production report.

The cost of materials used on a specific job is summarized on which document?

Job cost sheet explanation: The job cost sheet summarizes the quantity and cost of the direct materials used on a specific job.

Which of the following is an appropriate costing method for companies that produce identical units of product?

Process costing explanation: Companies that produce standardized, or homogeneous, products or services are likely to use process costing.

Which of the following will be listed in a materials requisition form?

Quantity and cost of direct materials used on a specific job explanation: A materials requisition form lists the quantity and cost of the direct materials used for a specific job. Indirect materials cannot easily and conveniently be traced to specific jobs. Instead, when requisitioned, indirect materials become part of overhead costs.

Raw Materials Inventory

The costs of materials purchased but not yet issued to production.

Smith and Stein Inc. is a jeweler specialized in making exclusive designs for its customers. Its unadjusted cost of goods sold in a period is $150,000 and the period's sales revenue is $225,000. If the underapplied manufacturing overhead is $5,000, calculate the gross profit.

$70,000 explanation: The underapplied manufacturing overhead of $5,000 is added to the unadjusted cost of goods sold of $150,000. The cost of goods sold is now $155,000, and is deducted from the sales revenue of $225,000 to determine the gross profit of $70,000.

Amilmar Inc. has provided this information regarding its overhead costs. It has determined machine hours to be the appropriate cost driver to allocate overhead costs. What will be the total overhead costs applied during the year?

$742,500 explanation: Using the information provided, we calculate the predetermined overhead rate to be $3.75. Then, by multiplying the overhead rate of $3.75 by the actual machine hours of 198,000 hours, we determine the overhead applied to be $742,500.

Which of the following is the correct way to adjust overapplied manufacturing overhead?

Deduct from cost of goods sold explanation: Overapplied manufacturing overhead is deducted from cost of goods sold to obtain the adjusted cost of goods sold.