ACC 202 Chapter 3 (Anderson SDSU)

Which of the following statement(s) is (are) correct regarding overhead application? I. Actual overhead rates result in more accurate but less timely information. II. Predetermined overhead rates result in less accurate but more timely information. III. Predetermined overhead rates tend to smooth product costs over time.

I, II, and III

Job no. C12 was completed in November at a cost of $18,500, subdivided as follows: direct material, $3,500; direct labor, $6,000; and manufacturing overhead, $9,000. The journal entry to record this information is:

Finished-Goods Inventory 18,500 Work-in-Process Inventory 18,500

Selto Manufacturing recently sold goods that cost 35,000 for 45,000 cash. the journal entries to record this transaction would include

a credit to Sales Revenue for 45,000

Howard Manufacturing's overhead at year-end was under-applied by $5,800, a small amount given the firm's size. the year-end journal entry to record this amount would include

a debit to Cost of Goods sold

Longview Corporation recently used $72,000 of direct materials and $3,000 of indirect materials in production activities. The journal entries reflecting these transactions would include:

a debit to Raw Material Inventory of 72,000

Metro Corporation uses a predetermined overhead rate of $20 per machine hour. In deriving this figure, the company's accountant used

a denominator of budgeted machine hours for the current accounting period

manufacturing overhead is

a pool of indirect production costs that must somehow be attached to each unit manufactured

the process of assigning overhead costs to the jobs that are worked on is commonly called

overhead application

throughout the accounting period, the credit side of the Manufacturing Overhead account is used to accumulate

overhead applied to Work In Process inventory

the term "normal costing" refers to the use of

predetermined overhead rates

if a company sells goods goods that cost 70,000 for 82,000, the firm will

reduce Finished Costs Inventory by 70,000

the estimates used to calculate the predetermined overhead rate will virtually always

result in either underapplied or overapplied that is closed to Cost of Goods Sold if it is immaterial in amount

Pruitt Company has developed an integrated system that coordinates the flow of all goods, services, and information into and out of the organization, working with raw material vendors as well as customers to improve service and reduce costs. The firm is said to be using:

supply chain management

the left side of the Manufacturing Overhead account is used to accumulate

the actual manufacturing overhead costs incurred throughout the accounting period

the assignment of direct labor cost to individual jobs is based on

the actual time spent on each job multiplied by the wage rate

Maher, Inc., applies manufacturing overhead at the rate of $60 per machine hour. Budgeted machine hours for the current period were anticipated to be 80,000; however, a lengthy strike resulted in actual machine hours being worked of only 65,000. Budgeted and actual manufacturing overhead figures for the year were $4,800,000 and $4,180,000, respectively. On the basis of this information, the company's year-end overhead was:

under-applied by $280,000

Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $150,000, direct professional labor hours were estimated to be 15,000, and direct professional labor cost was projected to be $225,000. During the year, Media incurred actual overhead costs of $146,000, actual direct professional labor hours of 14,500, and actual direct labor cost of $222,000. By year-end, the firm's overhead was:

$1,000 under-applied

Dale Company, which applies overhead at the rate of 190% of direct labor cost, began work on job no. 101 during June. The job was completed in July and sold during August, having accumulated direct material and labor charges of $27,000 and $15,000, respectively. On the basis of this information, the total overhead applied to job no. 101 amounted to:

$28,500

Horton Company applies overhead based on direct labor hours. At the beginning of 20x1, the company estimated that manufacturing overhead would be $500,000, and direct labor hours would be 10,000. Actual overhead by the conclusion of 20x1 amounted to $400,000. On the basis of this information, Horton's 20x1 predetermined overhead rate is:

$50 per direct labor hour

At the Nassau Advertising Agency, partner and staff compensation cost is a key driver of agency overhead. In light of this fact, which of the following is the correct expression to determine the amount of overhead applied to a particular client job?

(Budgeted overhead ÷ budgeted compensation) x actual compensation cost on the job.

Oregon Manufacturing incurred $106,000 of direct labor and $11,000 of indirect labor. The proper journal entry to record these events would include a debit to Work in Process for:

106,000

Treetops worked on four jobs during its first year of operation: nos. 401, 402, 403, and 404. Nos. 401 and 402 were completed by year-end, and no. 401 was sold at a profit of 40% of cost. A review of job no. 403's cost record revealed direct material charges of $20,000 and total manufacturing costs of $25,000. If Treetops applies overhead at 150% of direct labor cost, the overhead applied to job no. 403 must have been:

3,000

Huxtable charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of machine hours. The following data pertain to the current year: Budgeted manufacturing overhead: $480,000 Actual manufacturing overhead: $440,000 Budgeted machine hours: 20,000 Actual machine hours: 16,000 Overhead applied to production totaled:

384,000

Which of the following statements about materials is false? A. Acquisitions of materials are normally charged to the Purchases account. B. The use of direct materials gives rise to a debit to Work-in-Process Inventory. C. The use of indirect materials gives rise to a debit to Manufacturing Overhead. D. The use of indirect materials gives rise to a credit to Manufacturing Supplies Inventory. E. Direct materials are accounted for in a different manner than indirect materials.

A. Acquisitions of materials are normally charged to the Purchases account.

Armada Company applies manufacturing overhead by using a predetermined rate of 150% of direct labor cost. The data that follow pertain to job no. 831: Direct material cost $72,000 Direct labor cost 38,000 If Armada adds a 30% markup on total cost to generate a profit, which of the following choices depicts a portion of the accounting needed to record the sale of job no. 831?

Account Debited: Accounts Receivable Amount: 217,100

Barney Company applies manufacturing overhead by using a predetermined rate of 200% of direct labor cost. The data that follow pertain to job no. 764: Direct material cost $55,000 Direct labor cost 40,000 If Barney adds a 40% markup on total cost to generate a profit, which of the following choices depicts a portion of the accounting needed to record the sale of job no. 764?

Account Debited: Cost of Goods Sold Amount: 175,000

Fletcher, Inc., disposes of under- or overapplied overhead at year-end as an adjustment to cost of goods sold. Prior to disposal, the firm reported cost of goods sold of $590,000 in a year when manufacturing overhead was underapplied by $15,000. If sales revenue totaled $1,400,000, determine (1) Fletcher's adjusted cost of goods sold and (2) gross margin.

Adjusted Cost of Goods Sold: $605,000 Gross Margin: $795,000

A typical job-cost record would provide information about all of the following items related to an order except: A. the cost of direct materials used. B. administrative costs. C. direct labor costs incurred. D. applied manufacturing overhead. E. direct labor hours worked.

B. administrative costs

Which of the following is the correct method to calculate a predetermined overhead rate? A. Budgeted total manufacturing cost ÷ budgeted amount of cost driver. B. Budgeted overhead cost ÷ budgeted amount of cost driver. C. Budgeted amount of cost driver ÷ budgeted overhead cost. D. Actual overhead cost ÷ budgeted amount of cost driver. E. Actual overhead cost ÷ actual amount of cost driver.

B. Budgeted overhead cost ÷ budgeted amount of cost driver.

Which of the following statements about the use of direct labor as a cost driver is false? A. Direct labor is the most commonly used cost driver when calculating a predetermined overhead rate. B. Direct labor is gaining in importance in many manufacturing applications with respect to being a significant cost driver. C. Direct labor is an inappropriate cost driver to use if a company is highly automated. D. If direct labor is a good cost driver, increases in direct labor are matched with increases in manufacturing overhead. E. Companies can use either direct labor cost or direct labor hours as a cost driver.

B. Direct labor is gaining in importance in many manufacturing application with respect to being a significant cost driver

5. Which of the following types of companies would most likely use process costing? A. Aircraft manufacturers. B. Textile manufacturers. C. Textbook publishers. D. Custom-machining firms. E. Shipbuilders.

B. Textile manufacturers

Which of the following manufacturers would most likely use job-order costing? A. Chemical manufacturers. B. Microchip processors. C. Custom-furniture manufacturers. D. Gasoline refiners. E. Fertilizer manufacturers.

C. Custom-furniture manufacturers

when underapplied or overapplied manufacturing overhead is prorated, amounts can be assigned to which of the following accounts

Costs of Goods Sold, Work In Process Inventory, and Finished Goods Inventory

8. Which of the following statements about material requisitions is false? A. Material requisitions are often computerized. B. Material requisitions are a common example of source documents. C. Material requisitions contain information that is useful to the cost accounting department. D. Material requisitions authorize the transfer of materials from the production floor to the raw materials warehouse. E. Material requisitions are routinely linked to a bill of materials that lists all of the materials needed to complete a job.

D. Material requisitions authorize the transfer of materials from production floor to the raw materials warehouse

Which of the following would not likely be used by service providers to accumulate job costs? A. Projects. B. Contracts. C. Clients. D. Processes. E. All of the above, as service providers cannot use job-costing systems.

D. Processes

Which of the following statements is true? A. Service firms have little need for determining the cost of their services. B. The concept of product costing is relevant only for manufacturing firms. C. The cost of year-end inventory appears on the balance sheet as an expense. D. Service companies use cost information for planning and control purposes. E. Mining and petroleum companies have no inventorial costs.

D. Service companies use cost information for planning and control purposes

Which of the following statements about manufacturing cost flows is false? A. Direct materials, direct labor, and manufacturing overhead are entered in the Work-in-Process Inventory account. B. The Finished-Goods Inventory account will contain entries that reflect the cost of goods sold during the period. C. The cost of units sold during the period will typically appear on the income statement. D. When a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000 in an account entitled Profit on Sale. E. Units are normally transferred from Work-in-Process Inventory to Finished-Goods Inventory.

D. When a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000 in an account entitled Profit on Sale.

A computer manufacturer recently shipped several laptops to a customer (cost: $25,000) and billed the customer $30,000. Which of the following options correctly expresses the accounts that are debited and credited to record this transaction?

Debits: Accounts Receivable, Finished-Goods Inventory; credits: Sales Revenue, Cost of Goods Sold.

Which of the following entities would not likely be a user of job-costing systems? A. Custom-furniture manufacturers. B. Repair shops. C. Hospitals. D. Accounting firms. E. None of the above, as all are likely users.

E. None of the above, as all are likely users.

14. Which of the following statements regarding work in process is not correct? A. Work in process is partially completed inventory. B. Work in process consists of direct labor, direct material, and manufacturing overhead. C. Work-in-Process Inventory is debited to record direct material used and direct labor incurred. D. Work-in-Process Inventory appears on the year-end balance sheet. E. Work-in-Process Inventory is credited when goods are sold.

E. Work-in-Process Inventory is credited when goods are sold.

The following information relates to October: Production supervisor's salary: $2,500 Factory maintenance wages: 250 hours at $8 per hour The journal entry to record the preceding information is

Manufacturing Overhead 4,500 Wages Payable 4,500

Sanger Corporation debited Costs of Goods Sold and credited Manufacturing Overhead at year-end. On the basis of this information, we can conclude that

actual overhead exceeded applied overhead

an accountant recently debited Work In Process inventory and credited Manufacturing Overhead. the accountant was

applying a predetermined overhead amount to production

product costing in a manufacturing firm is the process of...

assigning costs to the firm's inventory

under or over applied manufacturing overhead at year-end is most commonly

charged or credited to Cost of Goods Sold

the final step in recognizing completion of production requires a company to

debit Finished Goods Inventory and credit Work In Process Inventory

Regency Company incurred $90,000 of depreciation for the year. Eighty percent relates to the firm's production facilities, and 20% relates to sales and administrative offices. If all items are handled in the proper manner, a review of the company's accounting records should reveal a:

debit to manufacturing overhead for 72,000

the journal entry needed to record $5000 of advertising for Westwood Manufacturing would include:

debit to manufacturing overhead for 72,000a debit to advertising expense

if the amount of effort and attention to products varies substantially throughout a firm's various manufacturing operations, the firm might consider the use of

departmental overhead rates

the total production cost of a job is composed of

direct material, direct labor, and applied manufacturing overhead

Fog Company, which uses labor hours to apply overhead to manufacturing, may have increased amounts of under-applied overhead at month end if

employees are hit hard with a widespread outbreak of the flu

in the two-stage cost allocation process, costs are assigned

from service departments, to production departments, to jobs

A manufacturing firm produces goods in accordance with customer specifications, commencing production upon receipt of a purchase order. To accumulate the cost of each order, the company would use a:

job cost record

A custom-home builder would likely utilize:

job order costing

Electricity costs that were incurred by a company's production processes should be debited to:

manufacturing overhead

In comparison with firms that use plantwide overhead rates and departmental overhead rates, companies that have adopted activity-based costing will typically use:

more cost pools and more cost drivers

43. Carlson charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of labor hours. The following data pertain to the current year: Budgeted manufacturing overhead: $1,600,000 Actual manufacturing overhead: $1,632,000 Budgeted labor hours: 50,000 Actual labor hours: 48,000 Which of the following choices denotes the correct status of manufacturing overhead at year-end?

under-applied by $96,000

A review of a company's Work-in-Process Inventory account found a debit for materials of $67,000. If all procedures were performed in the correct manner, this means that the firm:

was accounting for usage of direct materials by also crediting the Raw Material Inventory account

As production takes place, all manufacturing costs are added to the:

work in process inventory account