Cost Accounting Chapter 2

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Spartan Corporation estimates that it will incur $200,000 of total manufacturing overhead cost at an estimated activity level of 10,000 direct labor-hours. What is the amount of manufacturing overhead that would be applied to a job that required 200 direct labor-hours? A. $2,000 B. $4,000 C. $6,000 D. $10,000

B. $4,000

Mansfield, Incorporated, has two production departments, Assembly and Packaging. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The predetermined overhead rate in the Assembly Department is based on machine hours (MHs) and it is based on direct labor-hours (DLHs) in the Packaging Department. At the beginning of the year, the company made the following estimates: Assembly Packaging Direct labor-hours 5,200 62,000 Machine-hours 68,400 11,900 Total fixed manufacturing overhead cost $390,000 $419,000 Variable manufacturing overhead per DLH $3.75 Variable manufacturing overhead per MH $3.00 What is the estimated total manufacturing overhead in the Assembly Department? A. $595,200 B. $651,600 C. $809,000 D. $1,246,700

A. $595,200

Brothern Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the most recently completed year appear below: Estimates made at the beginning of the year: Estimated machine-hours 35,900 Estimated variable manufacturing overhead $6.73 per machine-hour Estimated total fixed manufacturing overhead $801,288 Actual machine-hours for the year 33,300 The predetermined overhead rate for the recently completed year was closest to: A. $28.56 per machine-hour B. $29.05 per machine-hour C. $6.73 per machine-hour D. $22.32 per machine-hour

B. $29.05 per machine-hour

The adjustment for overapplied overhead ________. A. decreases cost of goods sold and decreases net operating income. B. decreases cost of goods sold and increases net operating income. C. increases cost of goods sold and decreases net operating income. D. increases cost of goods sold and increases net operating income.

B. decreases cost of goods sold and increases net operating income.

The management of Blue Ocean Company estimates that 50,000 machine-hours will be required to support the production planned for the year. It also estimates $300,000 of total fixed manufacturing overhead cost for the coming year and $4 of variable manufacturing overhead cost per machine-hour. What is the predetermined overhead rate? A. $6.00 per machine hour. B. $8.00 per machine hour. C. $10.00 per machine hour. D. $12.50 per machine hour.

C. $10.00 per machine hour.

Mansfield, Incorporated, has two production departments, Assembly and Packaging. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The predetermined overhead rate in the Assembly Department is based on machine hours (MHs) and it is based on direct labor-hours (DLHs) in the Packaging Department. At the beginning of the year, the company made the following estimates: Assembly Packaging Direct labor-hours 5,200 62,000 Machine-hours 68,400 11,900 Total fixed manufacturing overhead cost $390,000 $419,000 Variable manufacturing overhead per DLH $3.75 Variable manufacturing overhead per MH $3.00 What is the predetermined overhead rate for the Packaging Department? A. $8.70 per DLH B. $9.61 per DLH C. $10.51 per DLH D. $18.28 per DLH

C. $10.51 per DLH

Job 910 was recently completed. The following data have been recorded on its job cost sheet: Direct materials $2,474 Direct labor-hours 73 labor-hours Direct labor wage rate $19 per labor-hour Machine-hours 134 machine-hours The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $20 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 910 would be: A. $3,861 B. $3,865 C. $6,541 D. $7,381

C. $6,541

When all of a company's job cost sheets are viewed collectively they form what is known as a ________. A. general ledger B. inventory C. job-order costing system D. subsidiary ledger

D. subsidiary ledger

What is the term used when a company applies less overhead to production than it actually incurs? A. Misapplied B. Overapplied C. Unadjusted D. Underapplied

D. underapplied

Actual overhead costs are not assigned to jobs in a job costing system. A. True B. False

A. True

Johansen Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for the next year: Direct materials $6,000 Direct labor $20,000 Rent on factory building $15,000 Sales salaries $25,000 Depreciation on factory equipment $8,000 Indirect labor $12,000 Production supervisor's salary $15,000 Jameson estimates that 20,000 direct labor-hours will be worked during the year. The predetermined overhead rate per hour will be: A. $2.50 per direct labor-hour B. $2.79 per direct labor-hour C. $3.00 per direct labor-hour D. $4.00 per direct labor-hour

A. $2.50 per direct labor-hour

Lupo 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 30,900 Total fixed manufacturing overhead cost $154,500 Variable manufacturing overhead per machine-hour $3.00 Recently, Job T687 was completed with the following characteristics: Number of units in the job 10 Total machine-hours 30 Direct materials $740 Direct labor cost $1,480 If the company marks up its unit product costs by 40% then the selling price for a unit in Job T687 is closest to: (Round your intermediate calculations to 2 decimal places.) A. $98.40 B. $232.00 C. $344.40 D. $310.80

C. $344.40

Companies can improve job cost accuracy by using ________. A. plantwide overhead rate B. direct-labor hours to apply overhead C. multiple predetermined overhead rates D. number of units in the job to apply overhead

C. multiple predetermined overhead rates

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. A. True B. False

A. True

The direct materials required to manufacture each unit of product are listed on a ________. A. bill of materials B. materials requisition form C. materials ticket D. job order cost sheet

A. bill of materials

In a job-order cost system, indirect labor is assigned to a job using information from the employee time ticket. A. True B. False

B. False

A normal cost system applies overhead to jobs ________. A. by multiplying a predetermined overhead rate by the estimated amount of the allocation base incurred by the job B. by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job C. using the actual amount of overhead caused by each job D. using the normal amount of overhead caused by each job

B. by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job

If a job is not completed at year end, then no manufacturing overhead cost would be applied to that job when a predetermined overhead rate is used. A. True B. False

B. False

In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated ________. A. total manufacturing overhead cost B. total fixed manufacturing overhead cost C. variable manufacturing overhead cost per unit of the allocation base D. total amount of the allocation base

B. total fixed manufacturing overhead cost

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours to produce 50 audio controllers, what is this job's unit product cost (per audio controller)? A. $52 B. $62 C. $100 D. $124

D. $124

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours, what is the total cost assigned to this job? A. $5,000 B. $5,200 C. $6,000 D. $6,200

D. $6,200

The following data have been recorded for recently completed Job 450 on its job cost sheet. Direct materials cost was $2,136. A total of 33 direct labor-hours and 270 machine-hours were worked on the job. The direct labor wage rate is $21 per labor-hour. The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $25 per machine-hour. The total cost for the job on its job cost sheet would be: A. $6,535 B. $6,954 C. $11,724 D. $9,579

D. $9,579

Which of the following statements about using a plantwide overhead rate based on direct labor is correct? A. Using a plantwide overhead rate based on direct labor-hours will ensure that direct labor costs are correctly traced to jobs. B. Using a plantwide overhead rate based on direct labor costs will ensure that direct labor costs will be correctly traced to jobs. C. It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver. D. The labor theory of value ensures that using a plantwide overhead rate based on direct labor will do a reasonably good job of assigning overhead costs to jobs.

C. It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.


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