Chapter 2 Accounting

1) ________ measure, record, and report product costs. A) Cost accounting systems B) Job cost records C) Material requisitions D) Accounting record systems

Answer: A

5) The costs transferred to Finished Goods Inventory are called ________. A) Cost of Goods Manufactured B) Cost of Goods Sold C) Work-in-Process Inventory D) Sales Revenue

Answer: A

4) The flow of costs in a job order costing system ________. A) cannot be determined until all jobs are complete B) transfers all costs to manufacturing overhead C) involves accumulating costs and then assigning costs to jobs D) includes the major steps of accumulating and amortizing

Answer: C

1) A cost accounting system will assist a manager in determining how many and which products to produce. True/False

True

2) Cost accounting systems are primarily concerned with accumulating product cost information. True/False

True

6) The amount of taxes and insurance incurred and paid for the plant of a manufacturing company should be debited to the Manufacturing Overhead account. True/False

True

8) The cost of goods manufactured is recorded with a debit to the Finished Goods Inventory account and a credit to the Work-in-Process Inventory account. True/False

True

9) Which of the following will be categorized as a manufacturing overhead cost? A) depreciation on factory plant and equipment B) wages paid to assembly line workers C) administration charges of showroom D) cost of direct materials used

Answer: A

6 Archangel Manufacturing calculated a predetermined overhead allocation rate at the beginning of the year based on direct labor costs. The production details for the year are given below: Total manufacturing overhead costs estimated at the beginning of the year=$140,000 Total direct labor costs estimated at the beginning of the year=$320,000 Total direct labor hours estimated at the beginning of the year=10,000 direct labor hours Actual manufacturing overhead costs for the year=$160,000 Actual direct labor costs for the year=$360,000 Actual direct labor hours for the year=12,200 direct labor hours Calculate the manufacturing overhead allocation rate for the year based on the above data. (Round your final answer to two decimal places.) A) 43.75% B) 257.14% C) 11.43% D) 22.95%

Answer: A Total manufacturing overhead costs estimated at the beginning of the year/ Total direct labor costs estimated at the beginning of the year

7 Iglesias, Inc. completed Job 12 on November 30. The details of Job 12 are given below: Direct labor cost=$850 Direct materials cost=$1000 Machine hours=8 hours Direct labor hours=24 hours Predetermined overhead allocation rate=$70 per machine hour What is the total cost of Job 12? A) $2410 B) $1850 C) $1410 D) $1560

Answer: A) Direct labor cost + Direct materials cost+ Manufacturing Overheard (70 x 8) = $2410

2) Job order costing ________. A) keeps track of costs that are accumulated by process B) keeps track of costs associated with each job C) is used by companies that manufacture identical units through a series of uniform production steps or processes D) keeps track of costs only at the end of the accounting period

Answer: B

3) Which one of the following companies is most likely to use job order costing? A) a gold refinery B) a law firm C) a surfboard manufacturer D) a soft drink company

Answer: B

7) When a job order costing system is used, depreciation for the factory equipment is debited to ________. A) Depreciation Expense B) Manufacturing Overhead C) Accumulated Depreciation D) Work-in Process Inventory

Answer: B

8) When a job order costing system is used, actual manufacturing overhead costs are debited to ________. A) expense accounts B) the Manufacturing Overhead account C) the Cost of Goods Sold account D) the Work-In-Process Inventory account

Answer: B

2 The accounts of Delphinia Dreams, Inc. showed the following balances at the beginning of October: Account Debit Raw Materials Inventory $34,000=D Work-in-Process Inventory 40,000=D Finished Goods Inventory 50,000=D Manufacturing Overhead 23,000=D During the month, direct materials amounting to $21,000 and indirect materials amounting to $5000 were issued to production. What is the ending balance in the Work-in-Process Inventory account following these two transactions? A) $40,000 B) $61,000 C) $10,000 D) $28,000

Answer: B Explanation: B) Beginning balance in WIP $40,000 Add: Direct Materials transferred 21,000 Ending balance $61,000

8 Halcyon, Inc. completed Job 10B last month. The cost details of Job 10B are shown below. Direct labor cost=$2110 Direct materials cost=$80 Machine hours=7 hours Direct labor hours=73 hours Predetermined overhead allocation rate per direct labor hour=$32 Calculate the total job cost for Job 10B. A) $2414 B) $4526 C) $2190 D) $4750

Answer: B Explanation: B) Direct labor cost $2110 Direct materials cost 80 Manufacturing overhead allocated ($32 × 73 direct labor hours) 2336 Job cost of Job 10B $4526

1 The journal entry to issue $800 of direct materials and $60 of indirect materials to production involves debit(s) to the ________. A) Work-in-Process Inventory account for $800 and Finished Goods Inventory account for $60 B) Manufacturing Overhead account for $860 C) Work-in-Process Inventory account for $800 and Manufacturing Overhead account for $60 D) Work-in-Process Inventory account for $860

Answer: C

6) A document that shows the direct materials, direct labor, and manufacturing overhead costs for an individual job is called a ________. A) materials requisition record B) cost of goods sold record C) job cost record D) finished goods record

Answer: C

10) The predetermined overhead allocation rate is calculated by dividing ________. A) the total estimated overhead costs by total number of days in a year B) the estimated amount of cost driver by actual total overhead costs C) the actual overhead costs by actual amount of the cost driver or allocation base D) the estimated overhead costs by total estimated quantity of the overhead allocation base

Answer: D

9 Haddows, Inc. completed Job GH6 last month. The cost details of GH6 are shown below. Direct labor cost=$2200 Direct materials cost=$81 Direct labor hours=7 hours Predetermined overhead allocation rate per direct labor hour=$70 Number of units of finished product=34 Calculate the cost per unit of the finished product of Job GH6. (Round your answer to the nearest cent.) A) $571.00 B) $16.79 C) $79.12 D) $81.50

Answer: D Direct labor cost + Direct materials cost + Manufacturing overhead (70 x 7) = Job Cost (2771)/34 = $81.50

4 Aaron, Inc. estimates direct labor costs and manufacturing overhead costs for the coming year to be $760,000 and $520,000, respectively. Aaron allocates overhead costs based on machine hours. The estimated total labor hours and machine hours for the coming year are 16,000 hours and 8000 hours, respectively. What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.) A) $95.00 per machine hour B) $32.50 per labor hour C) $1.46 per labor hour D) $65.00 per machine hour

Answer: D Explanation: D) Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base Predetermined overhead allocation rate = $520,000 / 8000 machine hours = $65.00 per machine hour

10 Happy Clicks, Inc. uses a predetermined overhead allocation rate of $5.00 per machine hour. Actual overhead costs incurred during the year are as follows: Indirect materials=$6600 Indirect labor=$3200 Plant depreciation=$43 Plant utilities and insurance=$9900 Other plant overhead costs=$11,700 Total machine hours used during year=7000 hours What is the amount of manufacturing overhead cost allocated to Work-in-Process Inventory during the year? A) $38,443 B) $9800 C) $28,643 D) $35,000

Answer: D Total machine hours used during year x 5.00 = 35,000

3 The accounts of Melissa Manufacturing showed the following balances at the beginning of December: Account Debit Raw Materials Inventory $59,000=D Work-in-Process Inventory 75,000=D Finished Goods Inventory 30,000=D Manufacturing Overhead 24,000=D The following transactions took place during the month: December 2: Issued direct materials $39,000 and indirect materials $6000 to production. December 15: Incurred $5000 and $4000 toward factory's direct labor cost and indirect labor cost, respectively. What should be the balance in the Work-in-Process Inventory following these transactions? A) $119,000 B) $80,000 C) $69,000 D) $79,000

Explanation: A) Beginning balance in WIP $75,000 Add: Direct materials transferred 39,000 Chapter 02 Handout Solution Direct factory labor cost 5000 Ending balance $119,000

5 Zephyros Corporation had estimated manufacturing overhead costs for the coming year to be $301,000. The total estimated direct labor hours and machine hours for the coming year are 7000 and 13,000, respectively. Manufacturing overhead costs are allocated based on direct labor hours. What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.) A) $23.15 per machine hour B) $15.05 per direct labor hour C) $43.00 per direct labor hour D) $1.86 per machine hour

Explanation: C) Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base Predetermined overhead allocation rate = $301,000 / 7000 labor hours = $43.00 per labor hour

3) A company starts the job cost record when the job is completed. True/False

False

4) Actual manufacturing overhead costs are credited to the Manufacturing Overhead account. True/False

False

5) In a manufacturing operation, depreciation of plant equipment should be debited to the Depreciation Expense account. True/False

False

7) The total amount of manufacturing overhead costs incurred during the period is recorded on the credit side of the Manufacturing Overhead account. True/False

False