ACCT 2302 | Chapter 2

Murphy Manufacturing estimated total manufacturing overhead for 2021 to be $100,000 and uses direct labor-hours as the allocation base. They estimated that 5,000 hours would be used. Actual overhead for 2021 was $120,000 and actual direct labor-hours were 7,500. The overhead applied to a job completed during 2021 that used 200 direct labor-hours was ______. $100,000 $4,000 $4,800 $3,200

$ 4,000 Reason: The predetermined overhead rate = $100,000 ÷ 5,000 direct labor-hours = $20 per direct labor-hour. The overhead applied to the job = $20 per direct labor-hours ×200 direct labor-hours = $4,000.

Estimated manufacturing overhead $500,000 $338,000 $162,000 Estimated direct labor cost $250,000 $130,000 $120,000 Actual manufacturing overhead $720,000 $400,000 $320,000 Actual direct labor cost $300,000 $160,000 $140,000 Based on this information, the predetermined overhead rate per direct labor dollar for Dept. A is ______.

$2.60 Reason: $338,000 ÷ $130,000 = $2.60

Job XYZ has a total manufacturing cost of $600. If the mark-up percentage is 40%, the job will sell for $ _______.

$840 ($600 + ($600x40%) = $840)

company dept a. dept b.estimated manufacturing overhead$500,000 $338,000 $162,000 estimated direct labor cost$250,000 $130,000 $120,000 actual manufacturing overhead$720,000 $400,000 $320,000 actual direct labor cost$300,000 $160,000 $140,000 Based on this information, the predetermined overhead rate per direct labor dollar for dept. b. is $_____.

1.35 Reason: 162,000/120,000 = 1.35

Estimated manufacturing overhead $450,000estimated direct labor hours 150,000actual manufacturing overhead $405,000actual direct labor hours 180,000 Based on this information, the amount of overhead allocated to a job that used 300 direct labor hours is $_______.

900 450,000 / 150,000 = 3.00 per direct labor hour X 300 = 900

All manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under ___________ costing

Absorption

When a company creates overhead rates based on the actions it performs, it is employing an approach called _______ - _______ costing.

Activity-based

Cost of Electricity to run the ultrasound machines a. Differential Cost b. Opportunity Cost c. Sunk Cost d. None

a. Differential Cost

Cost of the new color laser printer a. Differential Cost b. Opportunity Cost c. Sunk Cost d. None

a. Differential Cost

The cost of maintaining the old machine a. Differential Cost b. Opportunity Cost c. Sunk Cost d. None

a. Differential Cost

The wages of employees who assemble computers from components. a. Direct labor cost b. Direct materials cost c. Manufacturing overhead cost d. Selling cost e. Administrative cost

a. Direct labor cost

Which of the following is only true in a multiple predetermined overhead rate system? a. Each production department may have its own predetermined overhead rate. b. Multiple types of overhead are included to calculate the predetermined overhead rate. c. Overhead is applied multiple times throughout the period.

a. Each production department may have its own predetermined overhead rate.

A factor that causes overhead costs is called a ______. a. cost driver b. predetermined overhead rate c. manufacturing cost d. cost object

a. cost driver

When compared to a departmental approach, using activity-based costing results in ______ overhead rates. a. more b. less c. the same number of

a. more

A multiple predetermined overhead rate system is more accurate than a plantwide overhead rate system because it ______. a. reflects differences in how overhead costs are incurred within departments b. reflects how different departments use direct materials c. is easier to apply than a plantwide system d. reflects how different departments use direct labor

a. reflects differences in how overhead costs are incurred within departments

The cost of a hard drive installed in a computer. a. Direct labor cost b. Direct materials cost c. Manufacturing overhead cost d. Selling cost e. Administrative cost

b. Direct materials cost

Benefits from a new X-Ray Machine a. Differential Cost b. Opportunity Cost c. Sunk Cost d. None

b. Opportunity Cost

Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing? a. The wages of technicians at an auto repair shop b. The salary of the manager at a hair salon c. The salary of an attorney at a law firm d. The salary of a surgeon at a hospital

b. The salary of the manager at a hair salon Reason: This would be considered overhead.

The type and quantity of each type of direct material needed to complete a unit of product is listed on the ______. a. materials requisition form b. bill of materials c. time ticket d. production order

b. bill of materials

The difference between direct labor and indirect labor is that direct labor ______. a. is a manufacturing overhead cost, while indirect labor is not b. can be easily traced to jobs, while indirect labor cannot c. is a variable cost, while indirect labor is a fixed cost is a manufacturing cost and indirect labor is a period cost

b. can be easily traced to jobs, while indirect labor cannot

Which of the following would not be considered a job in a service firm that uses job-order costing? a. A client at a law firm b. The tax department in an accounting firm c. A patient in a hospital d. A repair job at an auto repair shop

b. the tax department in an accounting firm (this is a department; a job would be an individual client)

Depreciation on equipment used to test assembled computers before release to customers. a. Direct labor cost b. Direct materials cost c. Manufacturing overhead cost d. Selling cost e. Administrative cost

c. Manufacturing overhead cost

The salary of the assembly shop's supervisor. a. Direct labor cost b. Direct materials cost c. Manufacturing overhead cost d. Selling cost e. Administrative cost

c. Manufacturing overhead cost

Which of the following is not a manufacturing cost category? a. Direct materials b. Direct labor c. Selling & administrative costs d. Manufacturing overhead

c. Selling & administrative costs

Cost of the old ultrasound machine a. Differential Cost b. Opportunity Cost c. Sunk Cost d. None

c. Sunk Cost

The adjustment for overapplied overhead ______ net income. a. decreases both cost of goods sold and b. increases cost of goods sold and decreases c. decreases cost of goods sold and increases d. increases both cost of goods sold and

c. decreases cost of goods sold and increases

The document that records the materials, labor, and manufacturing overhead costs charged to a job is the ______. a. time ticket b. materials requisition form c. job cost sheet d. production order

c. job cost sheet

Rent on the space occupied by radiology a. Differential Cost b. Opportunity Cost c. Sunk Cost d. None

d. None

The Salary of the head of the Laboratory Department a. Differential Cost b. Opportunity Cost c. Sunk Cost d. None

d. None

The Salary of the head of the Radiology Department a. Differential Cost b. Opportunity Cost c. Sunk Cost d. None

d. None

Sales commissions paid to the company's salespeople. a. Direct labor cost b. Direct materials cost c. Manufacturing overhead cost d. Selling cost e. Administrative cost

d. Selling cost

The cost of advertising in the Phoenix Sun Computer newspaper. a. Direct labor cost b. Direct materials cost c. Manufacturing overhead cost d. Selling cost e. Administrative cost

d. Selling cost

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n) ______. a. job cost ledger b. financial statement backup c. book of original entry d. subsidiary ledger

d. subsidiary ledger

The salary of the company's accountant. a. Direct labor cost b. Direct materials cost c. Manufacturing overhead cost d. Selling cost e. Administrative cost

e. Administrative cost

True or false: One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors.

true