Chapter 4: Job Costing

________ is the process of distributing indirect costs to products. A) Cost allocation B) Job cost recording C) Cost pooling D) Cost tracing

A) Cost allocation

6) The budgeted indirect-cost rate for each cost pool is computed as ________. A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base B) budgeted annual quantity of cost allocation base divided by budgeted annual indirect costs C) actual annual indirect costs divided by budgeted annual quantity of cost allocation base D) budgeted annual indirect costs divided by budgeted actual quantity of cost allocation base

A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base

A ________ links an indirect cost to a cost object. A) cost-allocation base B) cost pool C) cost assignment D) cost tracing

A) cost-allocation base

Wayland Manufacturing uses a normal cost system and had the following data available for 2010: Direct materials purchased on account $ 148,000 Direct materials requisitioned 82,000 Direct labor cost incurred 130,000 Factory overhead incurred 146,000 Cost of goods completed 292,000 Cost of goods sold 256,000 Beginning direct materials inventory 26,000 Beginning WIP inventory 64,000 Beginning finished goods inventory58,000 Overhead application rate, as a percent of direct-labor costs 125 percent The journal entry to record the materials placed into production would include a ________. A) credit to Direct Materials Inventory for $82,000 B) debit to Direct Materials Inventory for $148,000 C) credit to WIP Inventory for $82,000 D) debit to WIP Inventory for $148,000

A) credit to Direct Materials Inventory for $82,000

Each indirect-cost pool of a manufacturing firm ________. A) utilizes a separate cost-allocation rate B) is a subset of total direct costs C) relates to multiple cost centres D) utilizes the same cost-allocation rate for all costs incurred

A) utilizes a separate cost-allocation rate

Wayland Manufacturing uses a normal cost system and had the following data available for 2010: Direct materials purchased on account $ 148,000 Direct materials requisitioned 82,000 Direct labor cost incurred 130,000 Factory overhead incurred 146,000 Cost of goods completed 292,000 Cost of goods sold 256,000 Beginning direct materials inventory 26,000 Beginning WIP inventory 64,000 Beginning finished goods inventory58,000 Overhead application rate, as a percent of direct-labor costs 125 percent The ending balance of direct materials inventory is ________. A) $92,000 B) $174,000 C) $82,000 D) $108,000

Answer: A Explanation: A) $26,000 + $148,000 - $82,000 = $92,000

Fixed costs remain constant at $400,000 per month. During high-output months variable costs are $320,000, and during low-output months variable costs are $80,000. What are the respective high and low indirect-cost rates if budgeted professional labor-hours are 16,000 for high-output months and 4,000 for low-output months? A) $45.00 per hour; $120.00 per hour B) $45.00 per hour; $45.00 per hour C) $25.00 per hour; $20.00 per hour D) $56.20 per hour; $120.00 per hour

Answer: A Explanation: A) $400,000 / 16,000 = $25.00 $400,000 / 4,000 = $100.00 $320,000 / 16,000 = 20.00 $80,000 / 4,000 = 20.00 High Month = $45.00Low Month = $120.00

Comfort Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Winton High School band jacket job. Company Winton High School Job Direct materials $40,000 $2,000 Direct labor $10,000 $400 Manufacturing overhead costs $45,000 Machine-hours 100,000mh 900mh 12) What amount of manufacturing overhead costs will be allocated to this job? A) $405 B) $425 C) $270 D) $465

Answer: A Explanation: A) 900 mh × $45,000 / 100,000 mh = $405

Sky High Company has two departments, X and Y. The following estimates are for the coming year: X. Y Direct manufacturing labor-hours 20,000 40,000 Machine-hours 40,000. 20,000 Manufacturing overhead $200,000 $400,000 The budgeted indirect-cost driver rate for Y based on the number of machine-hours is in excess of X by ________. A) $15 per machine-hour B) $10 per machine-hour C) $20 per machine-hour D) $8 per machine-hour

Answer: A Explanation: A) X = $200,000 / 40,000 mh = $5 Y = $400,000/ 20,000 mh = $20; Excess = $20 − $5 = $15

Sky High Company has two departments, X and Y. The following estimates are for the coming year: X. Y Direct manufacturing labor-hours 20,000 40,000 Machine-hours 40,000. 20,000 Manufacturing overhead $200,000 $400,000 8) A single indirect-cost rate based on direct manufacturing labor-hours for the entire plant is ________. A) $15 per direct labor-hour B) $10 per direct labor-hour C) $21 per direct labor-hour D) $12 per direct labor-hour

Answer: B Explanation: B) $600,000 / 60,000 dlh = $10

Wayland Manufacturing uses a normal cost system and had the following data available for 2010: Direct materials purchased on account $ 148,000 Direct materials requisitioned 82,000 Direct labor cost incurred 130,000 Factory overhead incurred 146,000 Cost of goods completed 292,000 Cost of goods sold 256,000 Beginning direct materials inventory 26,000 Beginning WIP inventory 64,000 Beginning finished goods inventory58,000 Overhead application rate, as a percent of direct-labor costs 125 percent The ending balance of work-in-process inventory is ________. A) $438,500 B) $146,500 C) $130,000 D) $422,000

Answer: B Explanation: B) $64,000 + $82,000 + $130,000 + 1.25 ($130,000) - 292,000 = $146,500

Comfort Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Winton High School band jacket job. Company Winton High School Job Direct materials $40,000 $2,000 Direct labor $10,000 $400 Manufacturing overhead costs $45,000 Machine-hours 100,000mh 900mh 13) What are the total manufacturing costs of this job? A) $1,970 B) $2,805 C) $2,905 D) $1,920

Answer: B Explanation: B) DM $2,000 + DML $400 + MOH $405 = $2,805

Mark Papers employs 15 full-time employees and 10 trainees. Direct and indirect costs are applied on a professional labor-hour basis that includes both employee and trainee hours. Following is information for 2014: Budget Actual Indirect costs $200,000 $300,000 Annual salary of each employee $100,000 $110,000 Annual salary of each trainee $ 25,000 $ 30,000 Total professional labor-hours 50,000 dlh 60,000 dlh 18) What are the budgeted direct-cost rate and the budgeted indirect-cost rate, respectively, per professional labor-hour? A) $30.00; $4.50 B) $35.00; $4.00 C) $32.40; $5.00 D) $27.00; $5.00

Answer: B Explanation: B) [($100,000 × 15) + ($25,000 × 10)] / 50,000 = $35 budgeted direct rate $200,000 / 50,000 = $4.00 budgeted indirect rate

20) When a normal costing system is used, clients using proportionately more full-time employees than trainees will ________. A) be overbilled for actual resources used B) be underbilled for actual resources used C) be billed accurately for actual resources used D) result in an underallocation of direct costs

Answer: B be underbilled for actual resources used

Vision Enterprises manufactures digital video equipment. For each unit, $3,000 of direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $25 per direct manufacturing labor hour. Calculate the profit earned on 50 units if each unit sells for $9,000. A) $65,000 B) $80,000 C) $75,000 D) $2,500

Answer: C Explanation: C) $3,000 + $2,000 + (($2,000/20) × $25) = $7,500 Profit earned on 50 units = ($9,000 − $7,500) × 50 units = $75,000

Comfort Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Winton High School band jacket job. Company Winton High School Job Direct materials $40,000 $2,000 Direct labor $10,000 $400 Manufacturing overhead costs $45,000 Machine-hours 100,000mh 900mh 11) For Comfort Manufacturing, what is the annual manufacturing overhead cost-allocation rate? A) $0.50 B) $0.80 C) $0.45 D) $33.33

Answer: C Explanation: C) $45,000/100,000 mh = $0.45 per mh

The ending balance of finished goods inventory is ________. A) $58,000 B) $36,000 C) $94,000 D) $292,000

Answer: C Explanation: C) $58,000 + $292,000 - $256,000 = $94,000

10) Kamrock applies manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy Mouse product. Estimates for this order include: Direct materials of $50,000; 600 direct manufacturing labor-hours at $20 per hour; and a 20% markup rate on total manufacturing costs. Manufacturing overhead cost estimates for this special order total ________. A) $46,000 B) $34,000 C) $36,000 D) $40,000

Answer: C Explanation: C) $60 × 600 dlh = $36,000

For 2014, Thomas Manufacturing uses machine-hours as the only overhead cost-allocation base. The estimated manufacturing overhead costs are $300,000 and estimated machine hours are 50,000. The actual manufacturing overhead costs are $420,000 and actual machine hours are 70,000. 7) What is the difference between the budgeted and the actual manufacturing overhead using job costing? A) $0.20 B) $0.50 C) $1.00 D) $1.20

Answer: C Explanation: C) Actual manufacturing overhead is $420,000/70,000 = $7.00 per machine hour. Difference is $7.00 - $6.00 = $1

Mark Papers employs 15 full-time employees and 10 trainees. Direct and indirect costs are applied on a professional labor-hour basis that includes both employee and trainee hours. Following is information for 2014: Budget Actual Indirect costs $200,000 $300,000 Annual salary of each employee $100,000 $110,000 Annual salary of each trainee $ 25,000 $ 30,000 Total professional labor-hours 50,000 dlh 60,000 dlh 19) How much should a client be billed in a normal costing system when 1,000 professional labor-hours are used? A) $33,600 B) $29,800 C) $39,000 D) $41,000

Answer: C Explanation: C) [($100,000 × 15) + ($25,000 × 10)] / 50,000 × 1,000 = $35,000 + $200,000 / 50,000 × 1,000 = 4,000 $39,000

Bernard Company's budgeted manufacturing overhead is $3,300,000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 60,000. What is the manufacturing overhead rate?

Answer: D Explanation: D) $3,300,000/60,000 hours = $55.00

For 2014, Thomas Manufacturing uses machine-hours as the only overhead cost-allocation base. The estimated manufacturing overhead costs are $300,000 and estimated machine hours are 50,000. The actual manufacturing overhead costs are $420,000 and actual machine hours are 70,000. 6) Using job costing, the 2014 budgeted manufacturing overhead rate is ________. A) $6.50 per machine-hour B) $4.80 per machine-hour C) $5.50 per machine-hour D) $6.00 per machine-hour

Answer: D Explanation: D) $300,000 / 50,000 mh = $6 per machine-hour

Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 2014: Budget Actual Indirect costs $270,000 $300,000 Annual salary of each attorney $100,000 $110,000 Annual salary of each paraprofessional $ 29,000 $ 30,000 Total professional labor-hours 50,000 dlh 60,000 dlh 20) What are the actual direct-cost rate and the actual indirect-cost rate, respectively, per professional labor-hour? A) $27.00; $4.17 B) $29.80; $5.40 C) $32.40; $5.00 D) $27.00; $5.00

Answer: D Explanation: D) [($110,000 × 12) + ($30,000 × 10)] / 60,000 = $27.00 actual direct rate $300,000 / 60,000 = $5.00 actual indirect rate

Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 2014: Budget Actual Indirect costs $270,000 $300,000 Annual salary of each attorney $100,000 $110,000 Annual salary of each paraprofessional $ 29,000 $ 30,000 Total professional labor-hours 50,000 dlh 60,000 dlh 21) How much should the client be billed in an actual costing system if 200 professional labor-hours are used? A) $5,000 B) $6,960 C) $7,480 D) $6,400

Answer: D Explanation: D) [($110,000 × 12) + ($30,000 × 10)] / 60,000 × 200 = $5,400 + $300,000 / 60,000 × 200 = $1,000 = $6,400

Actual costing helps managers get information earlier and take corrective measures to improve labor efficiency.

Answer: FALSE Explanation: Normal costing helps managers get information earlier and take corrective measures to improve labor efficiency.

The budgeted indirect cost rate is actual indirect costs divided by budgeted quantity of the cost allocation base.

Answer: FALSE Explanation: The budgeted indirect cost rate is budgeted indirect costs divided by budgeted quantity of the cost allocation base.

5) Direct costs ________. A) are anything for which a measurement of costs is desired B) are costs related to a particular cost object that can be traced to that cost object in a cost-effective manner C) focus specifically on the costing needs of the CFO D) are costs related to a particular cost object that cannot be traced to that cost object in a cost-effective

B) are costs related to a particular cost object that can be traced to that cost object in a cost-effective manner

In a costing system, ________. A) cost tracing allocates indirect costs B) cost allocation assigns direct costs C) a cost-allocation base can be either financial or nonfinancial D) a cost object should be a product and not a department or a geographic territory

C) a cost-allocation base can be either financial or nonfinancial

Which of the following includes both traced direct costs and allocated indirect costs? A) cost tracing B) cost pools C) cost assignments D) cost allocations

C) cost assignments

A ________ is a grouping of individual indirect cost items. A) cost allocation base B) cost assignment C) cost pool D) job-costing system

C) cost pool

Product costing information will include ________. A) to increase profits B) to increase sales and image of the company C) for cost management D) for efficient human resource management

C) for cost management

1) Job costing information is used ________. A) to determine target customers B) to calculate the percentage of completion C) for internal financial reporting D) to enhance public relations

C) for internal financial reporting

In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job. A) direct materials B) direct labor C) manufacturing overhead costs D) total costs

C) manufacturing overhead costs

Assigning direct costs to a cost object is called ________. A) cost allocation B) cost assignment C) cost pooling D) cost tracing

D) cost tracing

The cost allocation base ________. A) is a grouping of individual indirect cost items B) are costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way C) is anything for which a measurement of costs is desired D) is a systematic way to link an indirect cost or group of indirect costs to cost objects

D) is a systematic way to link an indirect cost or group of indirect costs to cost objects

In a normal costing system, the Manufacturing Overhead Control account ________. A) is increased by allocated manufacturing overhead B) is credited with amounts transferred to Work-in-Process C) is decreased by allocated manufacturing overhead D) is debited with actual overhead costs

D) is debited with actual overhead costs

Shotter Manufacturing is a small textile manufacturer using machine-hours to calculate the single indirect-cost rate to allocate manufacturing overhead costs to various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the jackets to be made for Jackson High School Science Olympiad. Company Jackson High School Job Direct materials $25,000 $600 Direct manufacturing labor $5,000 $150 Manufacturing overhead costs $30,000 Machine-hours (mh) 50,000 mh 800 mh Required: a. For Shotter Manufacturing, determine the annual manufacturing overhead cost-allocation rate. b. Determine the amount of manufacturing overhead costs allocated to the Jackson High School job. c.Determine the estimated total manufacturing costs for the Jackson High School job.

a. Manufacturing overhead cost-allocation rate = $0.60 per mh = $30,000/50,000 mh b. $480 estimated manufacturing overhead costs = 800 mh × $0.60 per mh c. Direct materials $600 Direct manufacturing labor $150 Manufacturing overhead costs 480 Estimated total manufacturing costs $1,230 Diff: 3

A cost object is anything for which a measurement of costs is desired.

true

Cost objects may be jobs, products, or customers.

true

The cost driver of an indirect cost is often used as the cost-allocation base.

true