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12/16/21, 1:29 PM Assignment Print View

1.
Kronos Test Systems manufactures automated testing equipment. The company uses a job-order costing system and applies overhead
on the basis of machine hours (MH). At the beginning of the year, estimated manufacturing overhead was $1,960,000, and the
estimated machine hours was 98,000. Data regarding several jobs at Kronos are presented below.

Job Number Beginning Balance Direct Materials Direct Labour Machine Hours
XJ-107 $218,000 $5,000 $8,400 180
ST-211 121,450 2,500 12,160 300
XD-108 22,600 81,450 20,960 3,100
SL-205 40,000 71,800 27,000 2,020
RX-115 15,200 20,000 1,00
By the end of the first month (January), all jobs but RX-115 were completed, and all completed jobs had been delivered to customers
except for SL-205.
Required:
What was the balance in Finished Goods inventory at the end of January?
The Finished Goods inventory consists of job SL-205 only. The balance in the account is computed as follows:

Beginning balance, job SL-205 $40,000
November charges to job SL-205
Direct materials 71,800
Direct labour 27,000
Manufacturing overhead applied* 40,400
Ending balance, job SL-205 $179,200
* Predetermined overhead rate = $1,960,000 ÷ 98,000 MH = $20 per MH

Overhead applied = 2,020 machine-hours × $20 per MH = $40,400

2.

In a normal job-order costing system, the journal entry to record the application of overhead cost to jobs includes which of the
following?
 A credit to the Work in Process inventory account.
 A credit to the Manufacturing Overhead account.
 A debit to Cost of Goods Sold.
 A debit to the Manufacturing Overhead account.
https://ezto.mheducation.com/hm.tpx 1/46

3.

In a normal job-order costing system, the salary of the factory supervisor would usually be recorded as a debit to which of the following
accounts?
 Manufacturing Overhead.
 Salary Expense.
 Work in Process.
 Finished Goods.

4.
Process costing systems are best used when many different products and services are produced each period.
 True
 False
Process costing systems are best used when a single homogenous product is produced for long periods of time.

5.

GHI Inc. has commenced work on three jobs during its first year of operations. Costs incurred for each of these jobs are as follows:

Job 1 Job 2 Job 3
Direct Materials $ 150,000 $ 350,000 $ 200,000
Direct Labour $ 250,000 $ 250,000 $ 250,000
Overhead is applied to jobs at a rate of $0.80 per direct labour dollar spent. During the year, Job 1 was completed, while Job 2 was
completed and sold. Job 3 is still process at the end of the year. GHI's Ending Work-in-Process at the end of the year was:
 $250,000
 $600,000
 $350,000
 $650,000
Ending Work-in-Process = $200,000 + $250,000 + (0.80 × $250,000) = $650,000.

6.

Which of the following statements is true if a company applies overhead to jobs on the basis of a predetermined overhead rate and
reports a credit balance in the Manufacturing Overhead account at the end of any period?
 More overhead cost has been charged to jobs than has been incurred during the period.
 More overhead cost has been incurred during the period than has been charged to jobs.
 The amount of overhead cost charged to jobs is greater than the estimated cost for the period.
 The amount of overhead cost charged to jobs is less than the estimated overhead cost for the period.

7.
A document that records the materials, labour and overhead costs assigned to a job is called a production order.
 True
 False
A document that records the materials, labour and overhead costs assigned to a job is called a job cost sheet.

8.

At the beginning of the year, manufacturing overhead for the year was estimated to be $300,960 At the end of the year, actual direct
labor-hours for the year were 22,000 hours, the actual manufacturing overhead for the year was $250,900, and manufacturing
overhead for the year was underapplied by $12,420. The predetermined overhead rate is based on direct labour-hours.
Required:
What must have been the estimated direct labor-hours at the beginning of the year used in setting the predetermined overhead rate?
Actual mfg. overhead - Applied mfg. overhead = Underapplied mfg. overhead

$250,900 - Applied manufacturing overhead = $12,420
Applied manufacturing overhead = $238,480

Applied manufacturing Actual direct labour-hours x (Estimated manufacturing
overhead = overhead/Estimated direct
labour-hours)
$238,480 = 22,000 x ($300,960 /Estimated direct
labour-hours)
$10.84 = (300,960/Estimated direct
labour hours)
Estimated direct labor-hours = 27,764 direct labour-hours (rounded)

9.

Baine Company is a manufacturing firm that uses job-order costing. At the beginning of the year, the company's inventory balances
were as follows:
Raw materials: $26,000

Work in process: $47,000
Finished goods: $133,000
The company applies overhead to jobs using a predetermined overhead rate based on machine hours. At the beginning of the year,
the company estimated that it would work 31,000 machine hours and incur $248,000 in manufacturing overhead cost. The following
transactions were recorded for the year:
a.) Raw materials purchased: $400,000.

b.) Raw materials requisitioned for use in production: $390,000 ($375,000 direct and $15,000 indirect).
c.) The following employee costs were incurred:
Direct labour: $150,000

Indirect labour: $55,000
Administrative salaries: $200,000
d.) Selling costs: $150,000

e.) Factory utility costs: $10,000
f.) Depreciation for the year: $115,000, of which $109,000 is related to factory operations and $6,000 is related to selling and
administrative activities.
g.) Manufacturing overhead was applied to jobs. The actual level of activity for the year was 29,000 machine hours.
h.) Cost of goods manufactured for the year: $800,000.
i.) Sales for the year: $1,107,000; the costs on the job cost sheets of the goods that were sold: $768,000.
j.) The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.
Required:
Prepare the appropriate journal entry for each of the items above (a. through j.). You can assume that all transactions with employees,
customers, and suppliers were conducted in cash.
a.) Raw materials inventory 400,000

Cash 400,000
b.) Work in process inventory 375,000
Manufacturing overhead 15,000
Raw materials inventory 390,000
c.) Work in process inventory 150,000
Administrative salary expense 200,000
Cash 405,000
d.) Selling expenses 150,000
Cash 150,000
e.) Manufacturing overhead 10,000
Cash 10,000
f.) Manufacturing overhead 109,000
Depreciation expense 6,000
Accumulated depreciation 115,000
g.) Work in process 232,000
h) Finished goods 800,000
Work in process 800,000
i.) Cash 1,107,000
Sales 1,107,000
Cost of goods sold 768,000
Finished goods 768,000
j.) Manufacturing overhead 43,000

10.

A document that details all costs incurred to date in a job or jobs is known as a time ticket.
 True
 False
A document that details all costs incurred to date in a job or jobs is known as a job cost sheet.

11.
DEF Inc. has commenced work on three jobs during its first year of operations. Costs incurred for each of these jobs are as follows: DEF
Inc. has commenced work on three jobs during its first year of operations. Costs incurred for each of these jobs are as follows:

Job 1 Job 2 Job 2
Direct Materials $100,000 $ 150,000 $200,000
Direct Labour $100,000 $200,000 $ 180,000

Overhead is applied to jobs at a rate of $0.40 per Direct Labour dollar spent. During the year, Job 1 was completed, while Job 2 was
completed and sold. Job 3 is still process at the end of the year. Actual manufacturing overhead costs incurred amounted to $300,000.
DEF employees worked a total of 80,000 hours during the year. DEF’s overhead application rate (per hour) was:
 $4.80
 $2.40
 $10
 $9.60
Direct labour rate = ($100,000 + $200,000 + $180,000) / 80,000 hours = $6 per hour.
Overhead application rate (per hour) = $6 DL rate per hour × 0.40 = $2.40 per hour.

12.

Beaver Company used a predetermined overhead rate last year of $2 per direct labour hour based on an estimate of 25,000 direct
labour hours to be worked during the year. Actual costs and activity during the year were:

Actual manufacturing overhead cost incurred $47,000
Actual direct labour hours worked 24,000
What was the under- or overapplied overhead last year?
 $1,000 underapplied.
 $1,000 overapplied.
 $3,000 overapplied.
(24,000@ $2) - 47,000 = $1,000 overapplied.

13.

A bill of materials shows the type and quantity of each item of materials needed to produce a unit of product.
 True
 False
A bill of materials shows the type and quantity of each item of materials needed to produce a unit of product.

14.
DEF Inc. has commenced work on three jobs during its first year of operations. Costs incurred for each of these jobs are as follows:

Job 1 Job 2 Job 2
Direct Materials $100,000 $ 150,000 $200,000
Direct Labour $100,000 $200,000 $250,000

completed and sold. Job 3 is still process at the end of the year. DEF’s Cost of Goods Available for Sale for the year was:
 $250,000
 $450,000
 $1,275,000
 $640,000
The Cost of Goods Available for Sale would be the Cost of Jobs 1 and 2 or $640,000. Note that since there are no Beginning Work-In-
Process Inventories, Cost of Goods Manufactured=Cost of Goods Available for sale.

Job 1 cost = $100,000 + $100,000 + (0.30 × $100,000) = $230,000.
Job 2 cost = $150,000 + $200,000 + (0.30 × $200,000) = $410,000.

15.
The following cost data pertains to DEF Inc. for December 31st, 2022:

Beginning Work-in-Process: $ 30,000
Ending Work-in-Process: $ 10,000
Direct Materials Used: $ 20,000
Direct Labour Costs Incurred in Production: $ 30,000
Indirect costs incurred in Production: $ 40,000
Beginning Finished Goods Inventories: $ 40,000
Ending Finished Goods Inventories: $ 20,000
Sales: $ 190,000
Selling and Administrative Expenses: $ 40,000

DEF’s Cost of Goods Sold for the period was:
 $110,000
 $120,000
 $130,000
 $150,000

16.

Only variable costs are included when determining job costs.
 True
 False
Both fixed and variable costs are included when determining job costs.

17.

Job 1 Job 2 Job 3
Direct Labour $ 100,000 $ 200,000 $ 250,000
GHI employees worked a total of 55,000 hours during the year. To dispose of any over or under-applied overhead, GHI must:
 Credit Cost of Goods Sold by $25,000
 Debit Cost of Goods Sold by $25,000
 Credit Cost of Goods Sold by $55,000
 Debit Cost of Goods Sold by $55,000
Overhead applied during the year = ($100,000 + $200,000 + $250,000) × 0.50 = $275,000.

$300,000 actual overhead − $275,000 applied overhead = $25,000 Underapplied. Therefore, a debit to Cost of Goods Sold for
$25,000 is required.

18.
For Candy Company, overhead is overapplied for the year by $2,500. The unadjusted cost of goods sold is $360,000. Closing
manufacturing overhead into the cost of goods sold will result in which of the following?
 Adjusted cost of goods sold of $363,000.
 A credit balance in manufacturing overhead of $6,000.
 Adjusted cost of goods sold of $357,000.
 Adjusted cost of goods sold of $357,500
Adjusted cost of goods sold = $360,000 - 2,500 overapplied= $357,500.

19.


Direct Costs Incurred in Production: $ 30,000

Raw Materials on hand at the start of the period were $100,000. Raw Materials purchases were $100,000. Raw materials on hand at the
end of the period were $120,000. The amount of Indirect Materials used in production during the period was:
 $100,000
 $120,000
 $35,000
 $50,000
$100,000 + $100,000 − $120,000 − $45,000 = $35,000.

20.
In a job-order costing system, direct labour costs usually are recorded initially with a debit to which of the following accounts?
 Manufacturing Overhead.
 Finished Goods inventory.
 Direct Labour Expense.
 Work in Process.

21.

Kong Company reported the following actual costs data for the year:

Purchase of raw materials (all direct) $200,000
Direct labour (average hourly rate of $25) 400,000
Manufacturing overhead costs 100,000
Change in inventories:
Increase in raw materials $25,000
Increase in work in process 16,000
Increase in finished goods 30,000
Kong Company used a predetermined overhead rate based on direct labour hours. Estimated annual manufacturing overhead cost and
direct labour hours were $150,000 and 20,000, respectively.
Required:
a. What was the pre-determined manufacturing overhead rate?

b. Calculate the cost of goods manufactured.
c. What was the cost of goods sold before adjusting for any under or overapplied overhead?
d. By how much was manufacturing overhead cost under or overapplied?
e. Prepare a summary journal entry to close any under or overapplied manufacturing overhead cost to cost of goods sold. Is such an
entry appropriate in this situation? Why or why not?
f. Analyze the under or overapplied manufacturing overhead costs calculated in part c above into two separate components: amount
due to incorrect estimate of the annual manufacturing overhead costs and an amount due to incorrect estimate of the annual direct
labour cost.
a. Predetermined manufacturing overhead rate = $150,000/20,000

= $7.50 per direct labour hour (DLH)
b.
Cost of goods manufactured:
Direct materials used
Purchase of raw materials $200,000
Less: Increase in raw materials 25,000 $175,000
inventory
Direct labour costs 400,000
Applied manufacturing 120,000
overhead ($7.50 × 16,000
DLHs*)
Total manufacturing cost added $695,000
Less: Increase in work in 16,000
process inventory
Cost of goods manufactured $679,000
*Actual DLHs = $400,000/25
c.
Unadjusted cost of goods sold:
Cost of goods manufactured (from Part b) $679,000
Less: Increase in finished goods inventory 30,000
Unadjusted cost of goods sold $649,000
d.
Actual manufacturing overhead costs $100,000
Less: applied manufacturing overhead costs 120,000
($7.50 × 16,000 DLHs)
Overapplied manufacturing overhead costs $20,000
e.
Journal entry:
Manufacturing overhead $20,000
Cost of goods sold $20,000
No, closing the entire amount to cost of goods sold does not seem appropriate in this situation because the amount is relatively large
and, therefore, material, that is, 20% of actual manufacturing overhead cost or 13.33% of the estimated manufacturing overhead cost.
f. Two components of the $20,000 net overapplied manufacturing overhead cost:
Incorrect estimate of the manufacturing overhead costs alone would have caused over-application of $50,000, that is, $100,000 -
$150,000.
Incorrect estimate of direct labour hours alone would have caused under-application of $30,000, that is, $7.50 × (16,000 DLHs - 20,000
DLHs).
Net of $50,000 over-application and $30,000 under-application is $20,000 over-application.

22.
Over- or underapplied overhead may be closed off entirely to Cost of Goods Sold if the amount is insignificant.
 True
 False
Over- or underapplied overhead costs may be closed off to Cost of Goods Sold only if the amount is immaterial. If the amount is
significant it may either be deferred (capitalized/recorded on the balance sheet) or pro-rated between Cost of Goods Sold, Work-In-
Process, and Finished Goods Inventories.

23.

The following cost data pertains to GHI Inc. for December 31st, 2022:

Actual Indirect costs incurred in Production: $ 40,000
Sales: $ 190,000
The dollar value of production transferred to finished goods inventory during the period was:
 $75,000
 $70,000
 $60,000
 $80,000
$10,000 + $30,000 + $40,000 − $5,000 = $75,000.

24.

Normally, a job cost sheet is NOT prepared for a job until after the job has been completed.
 True
 False

25.
Simplex Company has the following estimated costs for next year:

Direct materials $15,000
Sales commissions 75,000
Salary of production supervisor 35,000
Indirect materials 5,000
Advertising expenses 11,000
Rent on factory equipment 16,000
Simplex estimates that 10,000 direct labour and 16,000 machine hours will be worked during the year. If overhead is applied on the
basis of machine hours, what will be the overhead rate per hour?
 $3.50
 $6.94
 $7.63
 $8.56
(35,000 + 5,000 + 16,000)/16,000m.hrs = $3.5/m.hr.

26.

Job 1 Job 2 Job 2
Direct Materials $ 100,000 $ 150,000 $200,000
Direct Labour $200,000 $300,000 $220,000

Overhead is applied to jobs at a rate of $0.50 per Direct Labour dollar spent. During the year, Job 1 was completed, while Job 2 was
DEF employees worked a total of 30,000 hours during the year. DEF’s direct labour rate per hour was:
 $12
 $24
 $10
 $15
($200,000 + $300,000 + $220,000) / 30,000 hours = $24 per hour.

27.

Job-order costing is used in manufacturing companies and process costing is used in service firms.
 True
 False

28.
For the current year, Paxman Company incurred $160,000 in actual manufacturing overhead cost. The Manufacturing Overhead
account showed that overhead was overapplied in the amount of $6,000 for the year. If the predetermined overhead rate was $10.00
per direct labour hour, how many hours were worked during the year?
 16,600 hours.
 18,000 hours.
 18,750 hours.
 19,500 hours.
Applied Overhead = $160,000 + $6,000 = $166,000; DL Hours = $166,000/ $10.00/hr = 16,600 hrs.

29.

When completed goods are sold, the transaction is recorded as a debit to Cost of Goods Sold and a credit to Work in Process.
 True
 False

30.

When a job is completed and transferred to the finished goods warehouse the journal entry to record this is debit Cost of Goods Sold
and credit Work in Process Inventory.
 True
 False

31.

What was the amount of direct materials used during November if $20,000 in raw materials were purchased during the month, all raw
materials are direct, and if the inventories were as follows?

Balance November 1 Balance November 30
Raw materials $4,000 $3,000
Work in process $12,000 $15,000
Finished goods $24,000 $27,000
 $15,000
 $20,000
 $21,000
 $24,000
DM used = 4,000 + 20,000 - 3,000 = $21,000.

32.

The Collins Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of
materials used in production. At the beginning of the most recent year, the following estimates were made as a basis for computing the
predetermined overhead rate for the year:
Manufacturing overhead cost: $400,000

Direct materials cost: $200,000
The following transactions took place during the year (all purchases and services were acquired on account):
a.) Raw materials purchased: $90,000.

b.) Raw materials requisitioned for use in production (all direct materials): $100,000
c.) Utility costs incurred in the factory: $23,000.
d.) Salaries and wages incurred as follows:

Indirect labour: $100,000
Administrative salaries: $125,000
e.) Maintenance costs incurred in the factory: $25,000

f.) Advertising costs incurred: $106,000
g.) Depreciation recorded for the year: $80,000, of which 80% relates to factory assets and the remainder relates to selling and
administrative assets.
h.) Rental cost incurred on buildings: $75,500 (75% of the space is occupied by the factory, and 25% is occupied by sales and
administration).
i.) Miscellaneous selling and administrative costs incurred: $11,000.
j.) Manufacturing overhead cost was applied to jobs as per company policy.
k.) Cost of goods manufactured for the year: $575,000
l.) Sales for the year (all on account): $1,000,000. These goods cost $500,000 to manufacture.
Required:
Prepare journal entries to record the information above. Key your entries by the letters a through l.
a.) Raw materials 90,000

Accounts payable 90,000
b.) Work in process 100,000
Raw materials 100,000
c.) Manufacturing overhead 23,000
d.) Work in process 200,000
Salaries expense 125,000
Salaries and wages payable 425 ,000
e.) Manufacturing overhead 25,000
f.) Advertising expense 106,000
g.) Manufacturing overhead 64,000
Depreciation expense 16,000
Accumulated depreciation 80,000
h.) Manufacturing overhead 56,525
Rent expense 18,875
i.) Miscellaneous expense 11,000
j.) Work in process 200,000
(($400,000/200,000) * $100,000
k.) Finished goods 575,000
l.) Accounts receivable 1,000,000
Sales 1,000,000

33.


Job 1 Job 2 Job 3
Direct Materials $ 100,000 $ 150,000 $200,000
Direct Labour $200,000 $300,000 $250,000

completed and sold. Job 3 is still process at the end of the year. DEF’s Cost of Goods Sold for the year was:
 $510,000
 $800,000
 $1,275,000
 $1,050,000
Job 2: $150,000 + $300,000 + ($300,000 × 0.20)

34.

Freeman Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. At the
beginning of the year, the company estimated manufacturing overhead would be $200,100 and direct labour hours would be 16,000.
The actual figures for the year were $196,000 for manufacturing overhead and 20,000 direct labour hours. The cost records for the
year will show which of the following? (Round predetermined overhead rate to 2 decimal places.)
 Overapplied overhead of $54,200.
 Underapplied overhead of $30,000.
 Underapplied overhead of $54,200.
 Overapplied overhead of $6,000.
OH Rate = $200,100/16,000 hrs. = $12.51/hr.; Applied = 20,000 hrs. @ $12.51/hr = $250,200; $250,200-$196,000 = $54,200
overapplied.

35.

An audit firm s 10 full-time professionals who provide services to clients. All professional labour compensation is traced directly to
clients on a per professional labour-hour basis. Any other costs are included in a single indirect-cost pool (same as overhead) and
allocated to individual clients according to billable professional labour-hours.
Operating costs and data for the year included the following:

Estimated Actual
Overhead (indirect) costs $1,000,000 $1,200,000
Number of billable professional 40,000 50,000
labour-hours
Total professional compensation 750,000 750,000
Required:
a. By how much, if any, was the overhead cost underapplied or overapplied?

b. Prepare a summary journal entry to close any underapplied or overapplied overhead cost to a Cost of Services Provided account.
c. Explain qualitatively and quantitatively (in as much detail as possible) the source(s) of any underapplied or overapplied overhead
cost.
a). Amount of underapplied or overapplied overhead costs:
Predetermined rate = $1,000,000/40,000

= $25 per professional labour-hour (PLH)

Actual overhead costs $1,200,000
Applied overhead costs (50,000 * $25) 1,250,000
Overapplied overhead $50,000
b). Summary journal entry to close underapplied or overapplied overhead costs to Cost of Services Provided account.
In this case, overhead costs were overapplied implying a credit balance in the Overhead Control account. This credit has to be
transferred to the Cost of Services Provided account to reduce it.

Overhead control $50,000
Cost of services provided $50,000
c). Explain qualitatively and quantitatively (in as much detail as possible) the source(s) of any underapplied or overapplied overhead
cost.
Note that the situation is one of overapplied overhead costs.
Qualitative explanations: The predetermined rate ($25 per PLH) was higher than the actual rate of $24 (that is, $1,200,000/50,000).
This was caused by the fact that both estimates (costs and professional labour hours) were incorrect. Specifically, number of billable
hours increased (25%) more than the overhead costs (20%).
Quantitative explanations: One source is the fact that the estimated costs were less than the actual costs by $200,000 (underapplied)
while the actual professional labour hours were 10,000 more than the estimated. The latter is an equivalent of $250,000 overapplied
(that is, 10,000 × $2.50). The net result is an overapplied of $50,000.

36.

Riba Sportswear manufactures a specialty line of T-shirts. The company uses a job-order costing system. During May, the following
costs were incurred on Job 790:

Direct materials: $14,400
In addition, selling and shipping costs of $6,000 were incurred on the job. Manufacturing overhead was applied at the rate of $30 per
machine hour, and Job 790 required 1,000 machine hours. If Job 790 consisted of 10,000 shirts, what was the Cost of Goods Sold per
shirt?
 $5.50
 $5.70
 $4.85
 $6.50
Total Cost = DM + DL + OH Applied = $14,400 + 4,100 + (1,000hrs @ $30/hr) = $48,500; COGS = $48,500/10,000 shirts = $4.85/shirt.

37.
Kelly Sportswear manufactures a specialty line of T-shirts. The company uses a job-order costing system. During March, the following
costs were incurred on Job 1052:

Manufacturing overhead was applied at the rate of $30 per machine hour, and Job 1052 required 800 machine hours. In addition,
selling and shipping costs of $7,000 were incurred. Job 1052 consisted of 7,000 shirts and was completed on March 24. The total cost
of job 1052 transferred from Work in Process to Finished Goods on March 24 is:
 $33,700.
 $39,000.
 $18,500.
 $20,000.
Direct material = $10,000

Direct labour = $5,000
OH applied (800 hrs. @ $30 /hr.) = $24,000
Total Cost = $39,000.

38.
Stan Wilson, a newly hired worker at Superior Molding, was puzzled by the job cost sheets attached to the jobs he worked on. He
understood the materials and labour cost entries; these entries represent the actual costs of materials he requisitioned for the job and
the cost of the labour hours he recorded for the job. However, he did not understand the entry for Manufacturing Overhead. This entry
was made at the end of the day by the accountants, and he had no idea where this number came from. He asked the company's
controller, Mary Donner, but the only part of the explanation he understood was that the overhead entries do not represent actual
overhead costs.
Required:
Explain to Stan what the Manufacturing Overhead entries on the job cost sheet mean.
The Manufacturing Overhead entries on the job cost sheet are arrived at by applying a predetermined overhead rate to the base, which
most likely is direct labour hours. This number does not represent actual overhead costs. By definition, it is difficult or impossible to
trace overhead costs to particular jobs. Therefore, actual overhead costs cannot really be traced to the jobs Stan works on. Even so, an
"actual" rate could be used instead of a predetermined rate for spreading overhead costs among jobs. However, most companies
choose to use a predetermined rate since actual rates tend to fluctuate and cannot be determined until the close of the accounting
period.

39.

Assigning manufacturing overhead to units of product can be a difficult task as it consists of a verity of costs.
 True
 False

40.
Although direct labour may not be an appropriate allocation base in some industries, in others it continues to be a significant driver of
manufacturing overhead.
 True
 False

41.

Harrell Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. At the
beginning of the year, the company estimated its total manufacturing overhead cost at $400,000 and its direct labour hours at 100,000
hours. The actual overhead cost incurred during the year was $350,000 and the actual direct labour hours incurred on jobs during the
year was 90,000 hours. What would be the manufacturing overhead for the year?
Rate = $400,000/100,000 hrs. = $4/hr.

Applied = 90,000 hrs @$4/hr. = $360,000
Actual OH = $350,000 therefore overapplied by $10,000.

42.

Bitter Company incurs a direct labour rate of $15 per hour applies overhead to jobs on the basis of $1.25 per direct labour hour. If Job
107 shows $86,000 of direct material and $10,000 of manufacturing overhead applied, what is the total cost of job 107?
 $96,000
 $120,000
 $130,000
 $216,000
DL hours worked = $10,000/$1.25 per hour = 8,000 hours.

Total cost = $86,000 + (8,000 hrs. @ $15/hr) + $10,000 = $216,000.

43.

Direct Materials Used in Production: $ 20,000
Direct Labour Costs Incurred in Production: $ 30,000
Inventory transferred to finished goods inventory during the period $ 85,000
Sales: $ 190,000

The dollar value of inventory in work in process inventory at the end of the period was:
 $5,000
 $20,000
 $25,000
 $115,000
$20,000 + $20,000 + $30,000 + $40,000 − $85,000 = $25,000.

44.

Kanuck Company applies overhead to completed jobs on the basis of $0.70 per machine hour. If Job 501 shows $28,000 of
manufacturing overhead applied, how many machine hours were used for the job?
 19,600
 28,000
 30,000
 40,000
$28,000/$0.70/hr = 40,000 machine hours.

45.

In a normal job-order costing system, the use of indirect materials would usually be recorded as a debit to which account?
 Raw Materials.
 Work in Process.
 Manufacturing Overhead.
 Finished Goods.

46.

When the predetermined overhead rate is based on direct labour-hours, the amount of overhead applied to a job is proportional to the
amount of actual direct labour-hours incurred on the job.
 True
 False

47.

Sharp Company's records show that overhead was overapplied by $10,000 last year. This overapplied overhead was closed out to the
Cost of Goods Sold account at the end of the year. In trying to determine why overhead was overapplied by such a large amount, the
company has discovered that $6,000 of depreciation on factory equipment was charged to administrative expense in error. Given the
above information, which of the following statements is true?
 Manufacturing overhead was actually overapplied by $16,000 for the year.
 The company's net income is understated by $6,000 for the year.
 Under the circumstances described above, the error in recording depreciation would have no effect on net income for the
year.
 The $6,000 in depreciation should have been charged to Work in Process rather than to administrative expense.
Although the actual overhead should have been $6,000 greater and therefore overapplied overhead of $4,000 the effect on NI is zero
because the depreciation was still deducted (as an operating expense instead of CGS) to compute NI therefore no error on the NI
amount.

48.
At the beginning of the current year CR Company estimated the following costs:

Rent on factory building 15,000
Sales salaries 25,000
Depreciation on factory equipment 8,000
Indirect labour 10,000
Production supervisor's salary 12,000
CR Company estimated 20,000 labour hours to be worked during the year. Actual labour hours worked were 22,000 hours. If overhead
is applied on the basis of direct labour hours, what will be the overhead applied for the year?
 $55,000
 $49,500
 $103,400
 $75,900
OH rate = (15,000 + 8,000 + 10,000 + 12,000)/20,000 hrs. = $2.25/hr.

Applied = 22,000 hrs. @ $2.25/hr = $49,500.

49.

X Company reported the following actual cost data for the year:

Purchase of raw materials (all direct) $300,000
Direct labour cost 200,000
Manufacturing overhead costs 269,000
Change in inventories:
Decrease in raw materials $12,000
Decrease in work in process 10,000
Decrease in finished goods 20,000
X Company used a 150% predetermined overhead rate based on direct labour cost. The rate was based on annual estimated overhead
cost and direct labour cost of $252,000 and $168,000, respectively.
Required:
a. Calculate the cost of goods manufactured.

b. What was the cost of goods sold before adjusting for any under or overapplied overhead?
c. By how much was manufacturing overhead cost under or overapplied?
d. Prepare a summary journal entry to close any under or overapplied manufacturing overhead cost to cost of goods sold. Is such an
entry appropriate in this situation? Why or why not?
e. Analyze the under or overapplied manufacturing overhead costs calculated in part c above into two separate components: amount
due to incorrect estimate of the annual manufacturing overhead costs and an amount due to incorrect estimate of the annual direct
labour cost.
a.
Cost of goods manufactured:
Direct materials used
Purchase of raw materials $300,000
Add: Decrease in raw materials 12,000 $312,000
inventory
Direct labour costs 200,000
Applied manufacturing 300,000
overhead (150% × $200,000)
Total manufacturing cost added $812,000
Add: Decrease in work in 10,000
process inventory
b.
Unadjusted cost of goods sold:
Cost of goods manufactured (from Part a) $784,000
Add: Decrease in finished goods inventory 16,000
Unadjusted cost of goods sold $800,000
c.
Actual manufacturing overhead costs $246,000
Less: applied manufacturing overhead costs 240,000
(150% × $160,000)
Underapplied manufacturing overhead costs $6,000
d.
Journal entry:
Manufacturing overhead $6,000
Yes, closing the entire amount to cost of goods sold seems appropriate in this situation because the amount is not material, about
2.44% of actual manufacturing overhead cost or 2.38% of the estimated manufacturing overhead cost.
e. Two components of the $6,000 net underapplied manufacturing overhead cost:
Incorrect estimate of the manufacturing overhead costs alone would have caused over-application of $6,000, that is, $246,000 -
$252,000.
Incorrect estimate of the direct labour cost alone would have caused under-application of $12,000, that is, 150% × ($168,000 -
$160,000).
Net of $6,000 over-application and $12,000 under-application is $6,000 under-application.

50.

During the year, Paul Company used a predetermined overhead rate of $3.50 per direct labour hour, based on an estimate of 22,000
direct labour hours to be worked during the year. Actual overhead cost and activity during the year were:

Actual manufacturing overhead cost incurred $90,000
Actual direct labour hours worked 25,000
What was the under- or overapplied overhead for the year?
 $2,500 underapplied.
$90,000 - (25,000 @ $3.50) = $2,500 underapplied.

51.

Spirit Company applies overhead to completed jobs on the basis of 75% of direct labour cost. If Job 501 shows $12,000 of
manufacturing overhead applied, what was the direct labour cost on the job?
 $14,700
 $21,000
 $16,000
 $27,300
$12,000/0.75 = $16,000.

52.

In a job-order costing system, when a job remains incomplete at the end of a period, how is the amount of overhead cost that has been
applied to that job treated?
 It is deducted on the Income Statement as overapplied overhead.
 It is closed out to Cost of Goods Sold.
 It is transferred to Finished Goods.
 It is part of the ending balance of the Work in Process inventory account.

53.

(Appendix 5A) Which level of activity, if used to set a predetermined overhead rate, may encourage managers to increase selling prices
as demand falls?
 Budgeted level of activity.
 Actual level of activity.
 Capacity (maximum) level of activity.
 Normal level of activity.

54.
In a normal job-order costing system, the Work in Process inventory account contains the actual costs of direct labour, direct materials,
and manufacturing overhead incurred on partially completed jobs.
 True
 False

55.


Beginning Work-in-Process: $40,000
Actual Indirect costs incurred in Production: $ 60,000 ($30,000 of which is fixed)

Budgeted Fixed Factory Overhead was $35,000 based on an expected activity level of 5,000 hours. During the period, DEF employees
worked a total of 6,000 direct labour hours. DEF uses a job-order costing system and applies overhead costs using direct labour hours.
What was DEF’s predetermined overhead rate (POHR)?
 $5 per direct labour hour
 $4.50 per direct labour hour
 $7 per direct labour hour
POHR = $35,000 budgeted overhead cost / 5,000 direct labour hours = $7 per direct labour hour.

56.
Dowan Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. During
the year, Dowan Company incurred $156,000 in actual manufacturing overhead cost. The Manufacturing Overhead account showed
that overhead was underapplied by $14,000 for the year. If the predetermined overhead rate is $8.00 per direct labour-hour, how many
hours did the company work during the year?
 17,750 hours.
 25,000 hours.
 26,000 hours.
 28,200 hours.
$156,000 - $14,000 = $142,000 applied. Actual hours worked = $142,000/$8/hr. = 17,750 hrs.

57.

Absorption costing requires that all costs be included when determining job costs.
 True
 False
In absorption costing, all manufacturing costs, fixed and variable, are assigned to units of product-units are said to fully absorb
manufacturing costs. The absorption costing approach is also known as full costing. Absorption costing requires that only product costs
be included in job costs. Period costs are not absorbed, but rather, are expensed in the current period.

58.

Job 1 Job 2 Job 3
Direct Labour $ 300,000 $ 200,000 $ 500,000

completed and sold. Job 3 is still process at the end of the year. GHI's Cost of Goods Sold for the year was:
 $250,000
 $450,000
 $350,000
 $400,000
Cost of Goods Sold = $200,000 + $150,000 + (0.25 × $200,000) = $400,000.

59.

Job 1 Job 2 Job 3
Direct Labour $ 200,000 $ 300,000 $ 250,000
completed and sold. Job 3 is still in process at the end of the year. GHI's Cost of Goods Available for sale for the year was:
 $250,000
 $450,000
 $1,275,000
 $1,050,000
Since there are no Beginning Work-in-Process inventories, the Cost of Goods Available for Sale would be equal to the Cost of Goods
Manufactured, which would be the Cost of Jobs 1 and 2 or $1,050,000.

Job 1 cost = $100,000 + $200,000 + (0.60 × $200,000) = $420,000.

Job 2 cost = $150,000 + $300,000 + (0.60 × $300,000) = $630,000.

60.
The most common accounting treatment of underapplied manufacturing overhead is to transfer it to the Manufacturing Overhead
control account.
 True
 False

61.

Scanlon Company has a job-order costing system and applies manufacturing overhead cost to products on the basis of machine hours.
The following estimates were used in preparing the predetermined overhead rate for the most recent year:
Machine hours: 95,000

Manufacturing overhead cost: $1,710,000
During the most recent year, a severe recession in the company's industry caused the curtailment of production and a buildup of
inventory in the company's warehouses. The company's cost records revealed the following actual cost and operating data for the year:
Machine hours: 75,000

Manufacturing overhead cost: $1,687,500
Amount of applied overhead in inventories at year-end:
Work in process: $337,500

Finished goods: 253,125
Amount of applied overhead in cost of goods sold for the year: 759,375
Required:
(a.) Compute the company's predetermined overhead rate for the year and the amount of under- or overapplied overhead for the year.
(b.) Determine the difference between net income for the year if the under- or overapplied overhead is allocated to the appropriate
accounts rather than closed out directly to Cost of Goods Sold.
The company's predetermined overhead rate for the year is:

$1,710,000 ÷ 95,000 = $18 per machine hour
The amount of under-/overapplied overhead is:

Actual overhead $1,687,500
Applied overhead ($18 * 75,000) 1,350,000
Underapplied overhead $337,500
Allocation of underapplied overhead:

Overhead applied in $337,500 25.00% $84,375
work in process
Overhead applied in 253,125 18.75% 63,281
finished goods
Overhead applied in 759,375 56.25% 189,844
cost of goods sold
Total overhead applied $1,350,000 100.00% $337,500
The entire amount of $337,500 underapplied overhead is added to Cost of Goods Sold where no allocation occurs. Allocation results in
only $189,844 being added to Cost of Goods Sold. Net income would be higher under allocation by $337,500 - $189,844 = $147,656.

62.
Over- or under applied overhead should always be closed off to Cost of Goods Sold.
 True
 False
Over- or underapplied overhead costs are closed off to Cost of Goods Sold only if the amount is immaterial. If the amount is significant
it may either be deferred (capitalized/recorded on the balance sheet) or pro-rated between Cost of Goods Sold, Work-In-Process, and
Finished Goods Inventories.

63.

Direct Materials Used: $40,000
Direct Costs Incurred in Production: $60,000
Actual Indirect costs incurred in Production: $76,000 ($36,000 of which is fixed)
Beginning Finished Goods Inventories: $80,000
Ending Finished Goods Inventories: $40,000

Budgeted Fixed Factory Overhead was $40,000 based on an expected activity level of 10,000 hours. During the period, GHI
employees worked a total of 8,000 direct labour hours. GHI uses a job-order costing system and applies overhead costs using direct
labour hours. What was GHI's applied overhead for the year?
 $36,000
 $22,500
 $20,000
 $32,000
POHR = $40,000 budgeted factory overhead / 10,000 direct labour hours = $4 per direct labour hour.

Applied overhead = POHR × actual activity level = $4/hour × 8,000 hours = $32,000.

64.


Job 1 Job 2 Job 3
Direct Labour $ 100,000 $ 200,000 $ 250,000
GHI employees worked a total of 55,000 hours during the year. To dispose of any over or under-applied overhead, GHI must:
 Credit Manufacturing Overhead Control Account by $25,000
 Debit Manufacturing Overhead Control Account by $25,000
 Credit Manufacturing Overhead Control Account by $55,000

$300,000 actual overhead − $275,000 applied overhead = $25,000 Underapplied. Therefore, a credit to the Manufacturing Overhead
Control Account for $25,000 is required.

65.
The predetermined overhead rate is computed by dividing the total estimated manufacturing overhead cost for the period by the
estimated total amount of the allocation base.
 True
 False

66.


Job 1 Job 2 Job 3
Direct Materials $700,000 $400,000 $600,000
Direct Labour $ 100,000 $200,000 $250,000

DEF employees worked a total of 55,000 hours during the year. To dispose of any over or under-applied Overhead, DEF must:
 Credit Manufacturing Overhead Control Account by $15,000
 Credit Manufacturing Overhead Control Account by $55,000
$290,000 actual overhead − $275,000 applied overhead = $15,000 Underapplied. Therefore, a credit to the Manufacturing Overhead
Control Account for $15,000 is required.

67.


Direct Materials Used: $20,000
Direct Costs Incurred in Production: $30,000
Actual Indirect costs incurred in Production: $38,000 ($20,000 of which is fixed)
Beginning Finished Goods Inventories: $40,000
Ending Finished Goods Inventories: $20,000

Budgeted Fixed Factory Overhead was $25,000 based on an expected activity level of 5,000 hours. During the period, GHI employees
worked a total of 8,000 direct labour hours. GHI uses a job-order costing system and applies overhead costs using direct labour hours.
What was GHI's actual fixed overhead rate?
 $4 per direct labour hour
Budgeted POHR = $20,000 budgeted factory overhead/5,000 direct labor hours = $4.00 per direct labour hour.
Actual fixed overhead rate = $20,000 / 8,000 direct labour hours = $2.50 per direct labour hour.

68.


Job 1 Job 2 Job 3
Direct Labour $ 250,000 $ 250,000 $ 250,000
completed and sold. Job 3 is still process at the end of the year. GHI's Applied Overhead was for the year was:
 $250,000
 $600,000
 $350,000
 $650,000
Applied Overhead = $250,000 × 3 × 80% = $600,000.

69.
Sawyer Manufacturing Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead
to jobs. Last year, the company worked 60,000 actual direct labour hours and used 42,100 machine hours. The company had estimated
that it would work 55,000 direct labour hours using 51,000 machine hours during the year and incur $330,000 of manufacturing
overhead cost. What was the company's manufacturing overhead applied for the year?
 $342,000
 $360,000
 $330,000
 $388,235
OH Rate = $330,000/ 55,000 = $6/DLH; Applied = 60,000 * $6/DLH = $360,000.

70.


Budgeted Fixed Factory Overhead was $25,000 based on an expected activity level of 10,000 hours. During the period, DEF
employees worked a total of 12,000 direct labour hours. DEF uses a job-order costing system and applies overhead costs using direct
labour hours. What was DEF’s applied overhead for the year?
 $36,000
 $22,500
 $20,000
 $30,000
Applied overhead = POHR × actual activity level = $2.50/hour × 12,000 hours = $30,000.

71.
Kelsh Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs. The company
has provided the following estimated costs for next year:

Sales commissions 40,000
Salary of production supervisor 20,000
Indirect materials 4,000
Advertising expenses 8,000
Rent on factory equipment 10,000
Kelsh estimates that 5,000 direct labour hours and 10,000 machine hours will be worked during the year. What will be the
predetermined overhead rate per hour?
 $6.80
 $6.40
 $3.40
 $8.20
($20,000 + 4,000 + 10,000)/10,000m. hrs. = $3.40/m.hr.

72.

Process costing systems would be best suited to:
 Aircraft manufacturers.
 Bottlers of a popular soft drink.
 Construction contractors.
 Manufacturers of custom furniture.
Since soft drinks are bottled very large quantities and are homogenous (for a given size/beverage), process costing systems could well
be used to track their manufacturing costs.

73.
A job cost sheet only contains the costs assigned to a job in a given period.
 True
 False
A job cost sheet contains ALL the costs assigned to a job. Thus, the costs assigned in the current period and Beginning Work-In-
Process costs which pertain to a given job would also be included in its job cost.

74.

Manufacturers of high-end hand-made furniture are well suited to job-order costing systems
 True
 False
This is true since this entails the production of (presumably) small quantities of customized, non-homogeneous items.

75.

A job cost sheet is a form prepared for each separate job that records the materials, labour, and overhead costs charged to the job.
 True
 False

76.


Budgeted Fixed Factory Overhead was $40,000 based on an expected activity level of 20,000 hours. During the period, DEF
employees worked a total of 21,000 direct labour hours. DEF uses a job-order costing system and applies overhead costs using direct
labour hours. DEF’s fixed overhead during the period was:
 $2,000 Overapplied.
 $2,000 Underapplied.
 $4,000 Overapplied
 $4,000 Underapplied
POHR = $40,000 budgeted overhead cost / 20,000 direct labour hours = $2 per direct labour hour.
$2/hour × 21,000 hours = $42,000 − $40,000 = $2,000 Overapplied.
The following partially completed T-accounts summarize last year's transactions for Kelshaw Company:

Raw Materials Accounts Payable Work in Process
Beg Bal 4,000 20,000 (2) 18,000 (1) Beg Bal 8,000 50,000 (7)
(1) 18,000 4,000 (5) (2) 12,000
(4) 15,000
(6) 28,000

Finished Goods Manufacturing Overhead Wages & Salaries Payable
Beg Bal 17,000 (2) 8,000 28,000 (6) 6,000 Beg Bal
(7) 50,000 (3) 12,000 30,000 (4)
End Bal 12,000 (4) 5,000
(5) 4,000

Sales Salaries Expense Cost of Goods Sold Accumulated Amortization (Factory)
(4) 10,000 90,000 Beg Bal
12,000 (3)
At the end of the year, the company closes out the balance in the Manufacturing Overhead account to Cost of Goods Sold.

77.
What is the indirect labour cost?
 $5,000
 $12,000
 $15,000
 $35,000
The debit to OH represents the indirect labour of $5,000. Credit to Wages and Salaries payable i.e.$30,000. Debit WIP = DL $15,000,
Debit sales Salaries expense = 10,000 and debit OH = $5,000.

78.
What is the cost of goods manufactured?
 $50,000
 $55,000
 $56,000
 $61,000
This is the debit to finished goods and the credit to WIP which represents CGM = $50,000.

79.

What is the cost of goods sold (after adjustment for under- or over applied overhead)?
 $51,000
 $54,000
 $55,000
 $56,000
Total debits to Man. OH = $29,000 = actual less #6 applied 28,000 = $1,000 underapplied. From Fin. Goods t-account the unadjusted
CGS = 17,000 + 50,000 - 12,000 = $55,000. Therefore, CGS adjusted = 55,000 + 1,000 underapplied = $56,000.

80.

What is the manufacturing overhead applied?
 $27,000
 $28,000
 $29,000
 $36,000
transaction #6 MOH applied = $28,000.

81.

What is the cost of direct materials used?
 $11,000
 $12,000
 $15,000
 $20,000
WIP account transaction #2 = $12,000.

82.

What would be the ending Work in Process account balance?
 $2,000
 $13,000
 $50,000
 $55,000
From WIP t-account; 8,000 + 12,000 + 15,000 + 28,000 - 50,000 = $13,000.

83.
What is the total manufacturing cost for the year?
 $27,000
 $50,000
 $55,000
 $63,000
DM + DL + OH applied = 12,000 + 15,000 + 28,000 = $55,000.
Mallet Company has only Job 844 in process on March 1 of the current year. The job has been charged with $2,000 of direct material
cost, $2,100 of direct labour cost, and $1,750 of manufacturing overhead cost. The company assigns overhead cost to jobs at a
predetermined rate of 70% of direct labour cost. Any under- or overapplied overhead cost is closed out to Cost of Goods Sold at the end
of the month.
During March, the following activity and amounts were recorded by the company:
Raw materials (all direct materials):

Purchased during the month $20,200
Used in production $30,600
Labour:

Direct labour hours worked during the month 2,100
Direct labour cost incurred $25,000
Indirect labour costs incurred $5,100
Manufacturing overhead costs incurred (total) $16,000
Inventories:

Raw materials (all direct) March 31 $8,000
Work in process, March 31 $18,000
Work in Process inventory contains $5,150 of direct labour cost.

84.
What is the amount of direct materials cost in the March 31 work in process inventory account?
 $9,330
 $9,350
 $9,000
 $3,850
DM = WIP E.I. - DL - OH applied = $18,000- $5,100 - ($5,100 * 0.7) = $9,330.

85.
What is the cost of goods manufactured for March?
 $67,250
 $60,950
 $81,800
 $75,550
CGM = 2,100 + 2,000 + 1,750 + 30,600 + 25,000 + (25,000 *.7) - 18,000 = $60,950.

86.

Which of the following would be included in the entry to dispose of the under- or over applied overhead cost for the month?
 A debit of $50 to Cost of Goods Sold.
 A debit of $50 to Manufacturing Overhead.
 A debit of $1,500 to Manufacturing Overhead.
 A credit of $5,500 to Cost of Goods Sold.
OH applied = $25,000 * 0.7 = $17,500 - $16,000 = $1,500 overapplied.

87.

What was the March 1 balance in the Raw Materials inventory?
 $10,500
 $9,500
 $6,500
 $18,400
Op.RM inventory = $8,000 + $30,600 - $20,200 = $18,400.
The Milo Company's records for May contain the following information:

Actual direct labour hours 9,000 hours
Actual direct labour cost $47,000
Direct material purchased $16,000
Direct material used $14,000
Overapplied overhead $5,000
Ending inventories:

Raw materials $30,000
The company uses a predetermined overhead rate of $5.00 per direct labour hour to apply manufacturing overhead to jobs.

88.

What was the actual overhead cost incurred during the month?
 $50,000
 $55,000
 $40,000
 $45,000
Actual OH = 9,000 hrs. @$5/hr = $45,000 less overapplied 5,000 = $40,000.

89.

What was the total cost added to Work in Process during May?
 $101,000
 $106,000
 $61,000
 $111,000
Total cost = 14,000 + 47,000 + (9,000 hrs @$5) = $106,000.

90.
Assuming no beginning inventory for Work in Process, the cost of goods manufactured is:
 $156,000
 $51,000
 $56,000
 $11,000
CGM = 14,000 + 47,000 + (9,000 hrs @$5) = $106,000 less 50,000 E.I = $56,000.
The information below has been taken from the cost records of Tercel Company for the past year:

Raw materials used in production (all direct) $326,000
Total manufacturing costs charged to jobs during the year (includes raw $660,600
materials, direct labour, and manufacturing overhead applied at the rate
of 60% of direct labour cost)
Cost of goods available for sales $826,000
Selling and administrative expenses $45,000

Inventories
Beginning Ending
Raw materials (all direct) $80,000 $85,000
Work in process 100,000 50,000
Finished goods 110,500 120,500

91.

What was the cost of raw materials purchased during the year?
 $411,000
 $331,000
 $316,000
 $336,000
RM purchased = $85,000 + $326,000 - $80,000 = $331,000.

92.

What amount of direct labour cost was charged to production during the year?
 $135,000
 $209,125
 $360,000
 $216,000
MC - RM used = $660,600 - $326,000 = $334,600, therefore DL Cost = $334,600/1.6 = $209,125.

93.
What was the cost of goods manufactured during the year?
 $636,000
 $766,000
 $710,600
 $716,000
CGM = $100,000 + $660,600 - $50,000 = $710,600.

94.

What was the cost of goods sold for the year (before disposition of any under- or overapplied overhead)?
 $736,000
 $700,600
 $691,000
 $801,000
CGS = $110,500 + ($100,000 + $660,600 - $50,000) - $120,500 = $700,600.
The following data are for Abel Company:

Beginning Ending
Finished goods inventory $40,000 $50,000
Work-in-process inventory 20,000 13,000
Raw materials inventory 26,000 30,000
Purchases of raw materials 71,000
Factory depreciation 7,000
Other factory costs 12,500
Indirect labour 6,500
Selling expense 10,000
Over- or underapplied overhead -0

95.

What is the cost of raw materials used in production?
 $26,000
 $71,000
 $76,000
 $67,000
RM used in production = $26,000 + $71,000 - $30,000 = $67,000.

96.

What is the cost of goods manufactured?
 $130,000
 $133,000
 $121,000
 $138,000
OH applied = OH actual since no variance.

CGM = $67,000 + $30,000 + $26,000 + $20,000 - $13,000 = $130,000.

97.
What is the cost of goods sold?
 $131,000
 $91,000
 $81,000
 $120,000
CGM = 130,000 as in previous question;

CGS = 40,000 + 130,000 - 50,000 = $120,000.
The Bus Company uses a job-order costing system. The following information was recorded for September:
Added During September

Job Number September 1 Inventory Direct Materials Direct Labour
1 $1,000 $300 $200
2 1,400 250 300
3 500 1,500 150
4 750 4,000 400
The direct labour wage rate is $10 per hour. Overhead is applied at the rate of $5 per direct labour hour. Jobs 1, 2, and 3 have been
completed and transferred to finished goods. Job 2 has been delivered to the customer.

98.
What is the ending Work in Process inventory?
 $7,575
 $5,350
 $4,325
 $5,150
Direct labour hours = $400/$10 per hour = 40 hours.

Job 4 = EI = 750 + 4,000 + 400 + 40 hrs @ $5/hr = $5,350.

99.

What is the cost of goods manufactured for September?
 $10,750
 $11,275
 $5,925
 $7,625
CGM = total cost of jobs 1, 2 and 3 BI + DM + DL + OH applied

= 2,900 + 2,050 + 650 + (650 * $5/$10) = $5,925.

100.

What is the cost of goods sold for September (before disposition of any under- or overapplied overhead)?
 $2,100
 $5,925
 $3,700
 $1,950
CGS = total cost of Job #2 = 1,400 + 250 + 300 + (300 * $5/$10) = $2,100.
The following journal entries (without dollar data) were taken from the accounting records of Case Company. Case Company has a job-
order costing system and applies overhead to jobs using a predetermined overhead rate.

1. Work in process XXX
Manufacturing overhead XXX
Wages payable XXX
2. Salary expense XXX
Wages payable XXX
3. Manufacturing overhead XXX
Accumulated amortization XXX
Raw materials XXX
Manufacturing overhead XXX
6. Manufacturing overhead XXX
Raw materials XXX
7. Finished goods XXX
Work in process XXX
8. Raw materials XXX
Accounts payable XXX

101.

Which entry records the purchase of raw materials?
 8.
 4.
 6.
 1.

102.

Which entry transfers the cost of goods manufactured for the period?
 1.
 4.
 7.
 5.

103.
Which entry records the application of overhead?
 1.
 5.
 6.
 3.

104.
Which entry records amortization on manufacturing equipment?
 1.
 3.
 4.
 5.
Summit Company has provided the following inventory balances and manufacturing cost data for the month of January:

Inventories: January 1 January 31
Direct materials $30,000 $40,000
Work in process 15,000 20,000
Finished goods 65,000 50,000

Month of January
Manufacturing overhead applied 150,000
Direct materials used 190,000
Actual manufacturing overhead 144,000
Under Summit's job-order costing system, any over- or underapplied overhead is closed out to the Cost of Goods Sold account at the
end of the calendar year (that is, December 31).

105.

What was the total amount of direct material purchases during January?
 $180,000
 $190,000
 $195,000
 $200,000
DM Purchased = DM Used + Ending DM - Beginning DM = $190,000 + $40,000 - $30,000 = $200,000.

106.
How much direct labour cost was incurred during January?
 $170,000
 $175,000
 $180,000
 $186,000
DL = 515,000 + 20,000 - 15,000 - 190,000 - 150,000 = $180,000.
The Sky Manufacturing Company uses a job-order costing system and applies overhead to jobs using a predetermined overhead rate.
The company closes out any balance in the Manufacturing Overhead account to Cost of Goods Sold. During the year the company's
Finished Goods inventory account was debited for $130,000 and credited for $110,000. The ending balance in the Finished Goods
inventory account was $30,000. At the end of the year, manufacturing overhead was overapplied by $4,500.

107.

What was the balance in the Finished Goods inventory account at the beginning of the year?
 $28,000
 $10,000
 $17,500
 $8,500
Beginning FG = $30,000 + $110,000 - $130,000 = $10,000.

108.
If the estimated manufacturing overhead for the year was $24,000, and the applied overhead was $26,500, what was the actual
manufacturing overhead cost for the year?
 $19,500
 $22,000
 $28,500
 $31,000
Actual MOH = 26,500 - 4,500 overapplied = $22,000.
Sai Company uses a job order cost system and applies manufacturing overhead costs to jobs using a predetermined overhead rate
based on direct labour-hours. The following data were extracted from the company's accounting records for Year 6

Estimated Actual
Manufacturing overhead costs $60,000 $66,000
Direct labour hours 20,000 hours 26,500 hours
Job #461 was completed during the year and the following costs had been incurred on that job:

Direct labour: $1,500 (at $5.00 per direct labour hour)

109.
Suppose Job #461 contained 100 units. What unit cost would appear on the job cost sheet for job #461?
 $55.00 per unit.
 $61.00 per unit.
 $61.75 per unit.
 $74.00 per unit.
DLH = $1,500/$5/DLH = 300 hrs.

OH rate = $60,000 /20,000 DLH = $3.00.
Cost of Job = 5,000 + 1,500 + (300 hrs. @ $3.00/hr) = $7,400
Therefore $7,400 /100 units = $74.00 per unit.

110.

What was the underapplied or over applied overhead for the year?
Applied = 26,500 hrs @ $3.00 /hr. = $79,500 - 66,000 actual = $13,500 overapplied.

111.
How much of any underapplied or overapplied overhead would have been due to the fact that the estimated overhead allocation base
was different from the actual?
 $4,000
 $6,000
 $19,500
 $14,000
Actual hours - estimated hours = 6,500 hours @ $3.00 /hr = $19,500.

112.
How much of any underapplied or overapplied overhead would have been due to the fact that the estimated overhead costs were
different from the actual?
 $4,000
 $6,000
 $10,000
 $14,000
Causes are explained further in chapter 10.
(Appendix 5A) Secrease Corporation uses machine-hours as the allocation base for applying its manufacturing overhead.

Estimated manufacturing overhead cost for the $594,000
year
Capacity 110,000 machine-hours
Estimated amount of the allocation base for the 108,000 machine-hours
year
Amount of the allocation base for the actual 88,000 machine-hours
output of the year
Actual manufacturing overhead cost for the year $589,000
All of the company's manufacturing overhead is fixed.

113.
(Appendix 5A) What is the predetermined overhead rate based on capacity to 2 decimal places?
 $5.35
 $6.69
 $5.50
 $5.40
OH rate = $594,000/110,000 hours = $5.40.

114.
(Appendix 5A) If the predetermined overhead rate is based on capacity, by how much was manufacturing overhead for the year over
applied or underapplied?
 Manufacturing overhead underapplied $113,800
 Manufacturing overhead overapplied $113,800
 Manufacturing overhead overapplied $105,000
 Manufacturing overhead underapplied $105,000
88,000 @ $5.40/hr = $475,200 applied therefore underapplied $113,800.

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12/16/21, 1:29 PM Assignment Print View

* Predetermined overhead rate = $1,960,000 ÷ 98,000 MH = $20 per MH

 A credit to the Work in Process inventory account.

 A credit to the Manufacturing Overhead account.

 A debit to Cost of Goods Sold.

 A debit to the Manufacturing Overhead account.

Ending Work-in-Process = $200,000 + $250,000 + (0.80 × $250,000) = $650,000.

Actual mfg. overhead - Applied mfg. overhead = Underapplied mfg. overhead

Estimated direct labor-hours = 27,764 direct labour-hours (rounded)

Raw materials: $26,000

a.) Raw materials purchased: $400,000.

Direct labour: $150,000

d.) Selling costs: $150,000

a.) Raw materials inventory 400,000

What was the under- or overapplied overhead last year?

(24,000@ $2) - 47,000 = $1,000 overapplied.

Only variable costs are included when determining job costs.

 Credit Cost of Goods Sold by $25,000

 Debit Cost of Goods Sold by $25,000

 Credit Cost of Goods Sold by $55,000

 Debit Cost of Goods Sold by $55,000

 Adjusted cost of goods sold of $363,000.

 A credit balance in manufacturing overhead of $6,000.

 Adjusted cost of goods sold of $357,000.

 Adjusted cost of goods sold of $357,500

Adjusted cost of goods sold = $360,000 - 2,500 overapplied= $357,500.

$100,000 + $100,000 − $120,000 − $45,000 = $35,000.

 Finished Goods inventory.

 Direct Labour Expense.

a. What was the pre-determined manufacturing overhead rate?

a. Predetermined manufacturing overhead rate = $150,000/20,000

*Actual DLHs = $400,000/25

f. Two components of the $20,000 net overapplied manufacturing overhead cost:

$10,000 + $30,000 + $40,000 − $5,000 = $75,000.

(35,000 + 5,000 + 16,000)/16,000m.hrs = $3.5/m.hr.

($200,000 + $300,000 + $220,000) / 30,000 hours = $24 per hour.

DM used = 4,000 + 20,000 - 3,000 = $21,000.

Manufacturing overhead cost: $400,000

a.) Raw materials purchased: $90,000.

Direct labour: $200,000

e.) Maintenance costs incurred in the factory: $25,000

a.) Raw materials 90,000

Job 2: $150,000 + $300,000 + ($300,000 × 0.20)

 Overapplied overhead of $54,200.

 Underapplied overhead of $30,000.

 Underapplied overhead of $54,200.

 Overapplied overhead of $6,000.

a. By how much, if any, was the overhead cost underapplied or overapplied?

a). Amount of underapplied or overapplied overhead costs:

Predetermined rate = $1,000,000/40,000

Direct material = $10,000

Rate = $400,000/100,000 hrs. = $4/hr.

DL hours worked = $10,000/$1.25 per hour = 8,000 hours.

$20,000 + $20,000 + $30,000 + $40,000 − $85,000 = $25,000.

$28,000/$0.70/hr = 40,000 machine hours.

 Manufacturing overhead was actually overapplied by $16,000 for the year.

 The company's net income is understated by $6,000 for the year.

OH rate = (15,000 + 8,000 + 10,000 + 12,000)/20,000 hrs. = $2.25/hr.

a. Calculate the cost of goods manufactured.