ACCT 206 CH 1-3 EXAM 1

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $________.

$2

Estimated manufacturing overhead $450,000 Estimated direct labor hours 150,000 Actual manufacturing overhead $405,000 Actual direct labor hours 180,000 Based on this information, the predetermined overhead rate per direct labor hour is $__.____.

$3.00

Smith, Inc. uses a job-order costing system with the predetermined overhead rate of $12 per machine-hour. The job cost sheet for Job #42A listed $12,000 in direct labor cost, $18,000 in direct materials cost, 1,200 direct labor-hours and 1,100 machine-hours. The total cost of Job #42A is $___._____

$43,200

Estimated manufacturing overhead $450,000 Estimated direct labor hours 150,000 Actual manufacturing overhead $405,000 Actual 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

Any purchased materials that will go into the finished product are first recorded in the ______ ______ inventory account.

Raw Materials

Units of product that are only partially complete are contained in ______ ____ process inventory.

Work in

Jones Company uses a job-order costing system with a predetermined overhead rate of 120% of direct labor cost. The job cost sheet for Job #420 listed $4,000 in direct materials cost and $5,000 in direct labor cost to manufacture 7,500 units. What is the total cost of Job #420? a. $15,000 b. $9,000 c. $10,000 d. $11,000

a. $15,000

Raw materials inventory was $5,000 at the beginning of the year and $12,000 at the end of the year. During the year, a total of $27,000 in raw materials were purchased, including $4,000 of indirect materials that were put into manufacturing overhead during the period. Calculate the cost of direct materials used during the period. a. $16,000 b. $20,000 c. $30,000 d. $24,000

a. $16,000

Which of the following costs are found on the balance sheet of a manufacturer? a. Direct Labor b. Selling and Administrative

a. Direct Labor

The predetermined overhead rate equals a. Estimated total manufacturing overhead ÷ Estimated total units in the allocation base. b. Estimated total manufacturing overhead ÷ Actual total units in the allocation base. c. Actual total manufacturing overhead ÷ Estimated total units in the allocation base. d. Actual total manufacturing overhead ÷ Actual total units in the allocation base.

a. Estimated total manufacturing overhead ÷ Estimated total units in the allocation base.

Which of the following costs are found on the balance sheet of a manufacturer? a. Manufacturing Overhead b. Selling and Administrative

a. Manufacturing Overhead

Which of the following costs are found on the balance sheet of a manufacturer? a. Raw Materials b. Selling and Administrative

a. Raw Materials

Which of the following statements are true? a. Raw materials inventory represents the cost of materials not yet used in production. b. Direct labor costs flow through the Raw materials inventory account. c. Raw materials inventory only includes the cost of direct materials.

a. Raw materials inventory represents the cost of materials not yet used in production.

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

a. The tax department in an accounting firm

One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors. a. True. b. False.

a. True.

A normal cost system assigns overhead to jobs using ______. a. a predetermined overhead rate b. an actual overhead rate c. budgeted production standards

a. a predetermined overhead rate

An essential quality of an overhead allocation base is that it must ______. a. be common to all the company's products and services. b. be a cost associated with producing the firm's goods. c. vary with all overhead costs. d. be calculated using a predetermined overhead rate.

a. be common to all the company's products and services.

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.

Materials requisition forms are used for ______. a. controlling the flow of materials into production. b. specifying the cost of materials to be ordered. c. summarizing the cost of a job.

a. controlling the flow of materials into production.

Categories of manufacturing costs include ______. a. direct materials b. administrative expenses c. selling expenses

a. direct materials.

To calculate the unit product cost using the job cost sheet ______ by the number of units produced. a. divide the total job cost b. multiply the total job cost c. add direct labor to manufacturing overhead and divide d. add direct labor to direct materials and divide

a. divide the total job cost

A SERVICE firm that would most likely use job-order costing is a ______. a. law practice. b. car manufacturer. c. clothing shop.

a. law practice.

Materials requisition forms are used for ______. a. making journal entries in accounting records. b. specifying the cost of materials to be ordered. c. summarizing the cost of a job.

a. making journal entries in accounting records.

The formula for applying overhead to a specific job is: ______ amount of allocation base incurred by job. a. predetermined overhead rate × b. estimated manufacturing overhead ÷ c. predetermined overhead rate ÷ d. estimated manufacturing overhead ×

a. predetermined overhead rate ×

A bill of materials contains the ______. a. quantity of each direct material needed to complete a unit of product. b. quantity of materials to be drawn from the storeroom. c. type of materials to be drawn from the storeroom.

a. quantity of each direct material needed to complete a unit of product.

Jones Company uses a job-order costing system with a predetermined overhead rate of 120% of direct labor cost. The job cost sheet for Job #420 listed $4,000 in direct materials cost and $5,000 in direct labor cost to manufacture 7,500 units. The unit cost of Job #420 is ______. a. $1.33 b. $1.20 c. $2.00

c. $2.00

Finished goods ______. a. is the same as cost of goods manufactured b. consist of goods that require additional processing before being sold c. consist of goods that have been sold to customers during the period d. consist of completed, unsold goods

d. consist of completed, unsold goods

To calculate a predetermined overhead rate, divide estimated total manufacturing overhead by the ______. a. estimated units of production b. estimated total direct labor hours c. actual total manufacturing overhead d. estimated total allocation base

d. estimated total allocation base

The type and quantity of materials to be drawn from the storeroom and the job that will be charged for the materials is specified on the ______. a. time ticket. b. bill of materials. c. production order form. d. materials requisition form.

d. materials requisition form.

Selling and administrative costs incurred are treated as ______. a. product costs b. assets c. liabilities d. period expenses

d. period expenses

In the formula Y = a + bX, X represents the estimated ______. a. total fixed manufacturing overhead cost b. variable manufacturing cost per unit c. total manufacturing overhead cost d. total amount of the allocation base

d. total amount of the allocation base

Allocation bases that do not drive overhead costs ______. a. cannot be used to calculate overhead b. are difficult to keep track of c. will always cause job costs to be overstated d. will not accurately measure costs used by jobs

d. will not accurately measure costs used by jobs

Completed units that have not yet been sold are found in ______ ______ inventory.

finished goods

Companies that make many different products each period use _______ - _______ costing.

job-order

The schedule of cost of goods ______ summarizes costs that remain in Work in process inventory and that have been transferred from Work in process to Finished goods inventory.

manufactured

The approach used when overhead is applied to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the jobs is called ______ costing.

normal

The schedule of cost of goods ____ summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods Sold.

sold

Cost of goods manufactured is the ______. a. sum of all jobs transferred from Work in process to Finished goods b. average value of the Work in process account c. value of all jobs transferred from Finished goods to Cost of goods sold d. sum of all jobs in Finished goods at the end of a period

a. sum of all jobs transferred from Work in process to Finished goods

Overhead application is used to apply overhead costs to jobs ______. a. throughout the accounting period b. at the end of the accounting period c. before the accounting period beings

a. throughout the accounting period

A bill of materials contains the ______. a. type of each direct material needed to complete a unit of product. b. quantity of materials to be drawn from the storeroom. c. type of materials to be drawn from the storeroom.

a. type of each direct material needed to complete a unit of product.

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

absorption

Given the following, compute the cost of goods manufactured. Direct material cost: $40,000 Direct labor cost: $100,000 Applied overhead: $120,000 Beginning work in process inventory: $30,000 Ending work in process inventory: $12,000 a. $260,000 b. $278,000 c. $242,000 d. $302,000

b. $278,000

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

b. $4,000

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.

Which of the following costs are charged directly to the income statement? a. Manufacturing overhead b. Administrative costs c. Direct materials d. Direct labor

b. Administrative costs

Period costs flow from Finished Goods to Cost of Goods Sold. a. True b. False

b. False

All hours on computerized time tickets are automatically posted directly to job cost sheets. a. True. b. False.

b. False.

Job-order costing can only be used in manufacturing firms. a. True. b. False.

b. False.

The root cause of inaccurately assigning costs to jobs is generally due to poor tracking of direct labor costs. a. True. b. False.

b. False.

When jobs are sold their costs are transferred out of ______. a. Cost of Goods Manufactured b. Finished Goods c. Work in Process d. Cost of Goods Sold

b. Finished Goods

Which of the following is NOT included when calculating unit product costs? a. Direct materials. b. Sales commissions. c. Manufacturing overhead. d. Direct labor.

b. Sales commissions.

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

b. Selling & administrative costs.

Which of the following costs are charged directly to the income statement? a. Manufacturing overhead b. Selling costs c. Direct materials d. Direct labor

b. Selling costs

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.

A cost driver is ______. a. the amount of overhead assigned to a job b. a factor that causes overhead costs to occur c. something you want to know the cost of d. a measure that is used to assign overhead costs to products and services

b. a factor that causes overhead costs to occur

The most common approach to product costing throughout the world is ______ costing. a. variable b. absorption

b. absorption

Companies use a predetermined overhead rate rather than an actual overhead rate because ______. a. a predetermined rate is easier to calculate and apply b. an actual rate is not known until the end of the period c. a predetermined rate is more accurate d. it is impossible to calculate an actual rate

b. an actual rate is not known until the end of the period

The predetermined overhead rate is calculated ______. a. as soon as actual overhead is known b. before the period begins c. as the period progresses d. after the period is over

b. before the period begins

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

b. bill of materials.

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.

Manufacturing overhead ______. a. is directly traceable to units produced. b. consists of many different types of costs.

b. consists of many different types of costs.

Manufacturing overhead ______. a. is directly traceable to units produced. b. contains both fixed and variable costs.

b. contains both fixed and variable costs.

Widely used allocation bases in manufacturing include ______. a. product revenue. b. direct labor hours. c. nonmanufacturing costs.

b. direct labor hours.

Period costs flow from Finished Goods to Cost of Goods Sold. a. True b. False

b. false

Cost of goods manufactured ______. a. is the same as cost of goods sold b. includes manufacturing costs of goods finished during the period c. is generally recorded as an asset on the balance sheet

b. includes manufacturing costs of goods finished during the period

Manufacturing overhead ______. a. is directly traceable to units produced. b. is an indirect cost.

b. is an indirect cost.

Assigning manufacturing overhead to product is complicated because ______. a. many companies have large amounts of variable overhead b. it consists of many types of costs c. it is an indirect cost

b. it consists of many types of costs. c. it is an indirect cost.

A job cost sheet contains ______ the job. a. selling costs charged to b. labor costs charged to c. the selling price of

b. labor costs charged to

The sum of all amounts transferred from work in process to the finished goods accounts represents the cost of good ______. a. sold b. manufactured c. started during the period

b. manufactured

A job cost sheet contains ______ the job. a. selling costs charged to b. manufacturing overhead charged to c. the selling price of

b. manufacturing overhead charged to

Categories of manufacturing costs include ______. a. administrative expenses b. manufacturing overhead c. selling expenses

b. manufacturing overhead.

Companies that use job-order costing make ______. a. a very few products in large numbers b. many different products

b. many different products

Direct materials costs are recorded on the job cost sheet when the ______. a. requisition form is submitted to the storeroom clerk. b. materials are issued to the job. c. job is complete. d. job is sold to a customer.

b. materials are issued to the job.

The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find ______. a. actual overhead b. overhead applied to the job c. the total cost of the job d. the predetermined overhead rate for the job

b. overhead applied to the job

In the formula Y = a + bX, a represents the estimated ______. a. total amount of the allocation base b. total fixed manufacturing overhead cost c. variable manufacturing cost per unit d. total manufacturing overhead cost

b. total fixed manufacturing overhead cost

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.

Costs of partially completed units are accounted for in ______. a. finished goods b. work in process c. cost of goods manufactured d. raw materials

b. work in process

When preparing financial statements in a job-order costing system, finished goods flow first to the ____ ____ and then to the ____ _____.

balance sheet; income statement

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.

Given the following, calculate total manufacturing costs to account for: Direct materials: $40,000 Direct labor: $100,000 Manufacturing overhead applied: $120,000 Actual manufacturing overhead: $110,000 Beginning Work in process inventory: $30,000 Ending Work in process inventory: $12,000 a. $260,000 b. $278,000 c. $290,000 d. $280,000

c. $290,000

Which of the following would not be a good allocation base for manufacturing overhead? a. Units of product. b. Direct labor hours. c. Accounting hours. d. Machine hours.

c. Accounting hours.

Which of the following statements are true? a. Raw materials inventory only includes the cost of direct materials. b. Direct labor costs flow through the Raw materials inventory account. c. Raw materials inventory represents the cost of materials not yet used in production.

c. Raw materials inventory represents the cost of materials not yet used in production.

Which of the following statements are true? a. Direct labor costs flow through the Raw materials inventory account. b. Raw materials inventory only includes the cost of direct materials. c. When materials are purchased, they are recorded in the Raw materials inventory account.

c. When materials are purchased, they are recorded in the Raw materials inventory account.

Which of the following statements are true? a. Raw materials inventory only includes the cost of direct materials. b. Direct labor costs flow through the Raw materials inventory account. c. When materials are purchased, they are recorded in the Raw materials inventory account.

c. When materials are purchased, they are recorded in the Raw materials inventory account.

A job-order costing system may inaccurately assign costs to jobs due to ______. a. inaccurate allocation of direct labor b. inaccurate allocation of direct materials c. an inappropriate allocation base

c. an inappropriate allocation base

An allocation base is a(n) ______. a. measure used to assign all manufacturing costs to products and services b. activity that causes overhead costs to change c. common measure used to assign overhead costs to products and services

c. common measure used to assign overhead costs to products and services

The amount transferred from Work in Process to Finished Goods is ______. a. ending inventory b. cost of goods sold c. cost of goods manufactured

c. cost of goods manufactured

Widely used allocation bases in manufacturing include ______. a. product revenue. b. nonmanufacturing costs. c. direct labor cost.

c. direct labor cost.

Categories of manufacturing costs include ______. a. administrative expenses b. selling expenses c. direct labor

c. direct labor.

The United States requires absorption costing for ______ financial reports. a. both internal and external b. internal c. external d. neither internal nor external

c. external

Widely used allocation bases in manufacturing include ______. a. product revenue. b. nonmanufacturing costs. c. machine hours.

c. machine hours

A job cost sheet contains ______ the job. a. selling costs charged to b. the selling price of c. materials costs charged to

c. materials costs charged to

Companies can improve job cost accuracy by using _________. a. 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 manufacturing overhead applied to each job equals a. the actual overhead rate × the actual amount of the allocation used by the job. b. the actual overhead rate × the estimated amount of the allocation used by the job. c. the predetermined overhead rate × the actual amount of the allocation used by the job. d. the predetermined overhead rate × the estimated amount of the allocation used by the job.

c. the predetermined overhead rate × the actual amount of the allocation used by the job.

The document that provides an hour-by-hour summary of the employee's activities throughout the day is called a ______. a. production order b. materials requisition form c. time ticket d. job cost sheet

c. time ticket

Widely used allocation bases in manufacturing include ______. a. product revenue. b. nonmanufacturing costs. c. units of product.

c. units of product.

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.

Overhead application is the process of ______. a. calculating a predetermined overhead rate b. calculating the total cost of a job c. adjusting accounts for the difference between applied and actual overhead d. assigning manufacturing overhead cost to jobs

d. assigning manufacturing overhead cost to jobs

Costs assigned to units of product in absorption costing include ______ manufacturing costs. a. only fixed b. neither variable nor fixed c. only variable d. both variable and fixed

d. both variable and fixed