Systems Design: Job-Order Costing

Chapter 2 Systems Design: Job-Order Costing True/False 1. Process costing is used in those situations where many different products or services are produced each period to customer specifications. Level: Easy LO: 1 Ans: F 2. The basic approach in job-order costing is to accumulate costs in a particular operation or department for an entire period (month, quarter, year) and then to divide this total by the number of units produced during the period. Level: Easy LO: 1 Ans: F 3. If a company uses predetermined overhead rates, actual manufacturing overhead costs of a period will be recorded in the Manufacturing Overhead account, but they will not be recorded on the job cost sheets for the period. Level: Medium LO: 2 Ans: T 4. In a job-order cost system, indirect labor is assigned to a job by using the labor time ticket as a source document. Level: Medium LO: 2 Ans: F 5. The formula for computing the predetermined overhead rate is: Estimated total units in base ÷ Estimated total manufacturing costs Level: Easy LO: 3 Ans: F 6. The fact that one department may be labor intensive while another department is machine intensive may explain in part the existence of multiple predetermined overhead rates in larger companies. Level: Easy LO: 3 Ans: T 7. If a company closes any underapplied or overapplied overhead to the Cost of Goods Sold account, then Cost of Goods Sold will be credited if manufacturing overhead is overapplied for the period. Level: Medium LO: 4,8 Ans: T 8. The following entry would be used to record the transfer of material from the storeroom to production if 80% of the material was direct material and 20% was indirect material: Level: Easy LO: 4 Ans: T 54 9. If a job is not completed at the end of the year, then no manufacturing overhead cost should be applied to that job. Level: Medium LO: 5 Ans: F 10. When raw materials are purchased, they are recorded as an expense. Level: Medium LO: 7 Ans: F 11. In a job-order cost system, depreciation on factory equipment should be charged directly to the Work in Process account. Level: Medium LO: 7 Ans: F 12. The entire difference between the actual manufacturing overhead cost for a period and the applied manufacturing overhead cost is typically closed to the Work In Process account. Level: Easy LO: 8 Ans: F 13. If the actual manufacturing overhead costs for a period exceed the manufacturing overhead costs applied, then overhead would be considered to be overapplied. Level: Medium LO: 8 Ans: F 14. The absorption cost approach is so named because it provides for the absorption of all manufacturing costs, fixed and variable, into units of product. Level: Easy LO: 10 Ans: T Multiple Choice 15. Which of the following industries would be most likely to use a process costing system? A) Ship builder B) Movie studio C) Oil refinery D) Hospital Level: Easy LO: 1 Ans: C 16. A process cost system is employed in those situations where: A) many different products, jobs, or batches of production are being produced each period. B) where manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis. C) a service is performed such as in a law firm or an accounting firm. D) full or absorption cost approach is not employed. Level: Easy LO: 1 Ans: B 55 17. Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company misclassified a portion of direct labor cost as indirect labor. The effect of this misclassification will be to: A) understate the predetermined overhead rate. B) overstate the predetermined overhead rate. C) have no effect on the predetermined overhead rate. D) cannot be determined from the information given. Level: Medium LO: 3 Ans: B 18. Which of the following entries would record correctly the application of overhead cost? A) A Above B) B Above C) C Above D) D Above Level: Easy LO: 4,5 Ans: D 19. The operations of Kalispell Company resulted in overapplied overhead for the month just completed. Which of the following journal entries can be correct if Kalispell allocates underapplied or overapplied overhead among accounts? A) A Above B) B Above C) C Above D) D Above Level: Medium LO: 4,8 Ans: D 56 20. Which of the following entries would record correctly the monthly salaries earned by the top management of a manufacturing company? A) A Above B) B Above C) C Above D) D Above Level: Easy LO: 4 Ans: B 21. The journal entry to record applying overhead during the production process is: A) A Above B) B Above C) C Above D) D Above Level: Easy LO: 4 Ans: D 22. When manufacturing overhead is applied to production, it is added to: A) the Cost of Goods Sold account. B) the Raw Materials account. C) the Work in Process account. D) the Finished Goods inventory account. Level: Easy LO: 5,7 Ans: C 57 23. Which of the following statements is true? A) Only statement I is true. B) Only statement II is true. C) Both statements I and II are true. D) Statements I, II, and III are all true. Level: Easy LO: 5 Ans: D 24. On the Schedule of Cost of Goods Manufactured, the final Cost of Goods Manufactured figure represents: A) the amount of cost charged to Work in Process during the period. B) the amount of cost transferred from Finished Goods to Cost of Goods Sold during the period. C) the amount of cost placed into production during the period. D) the amount of cost of goods completed during the current year whether they were started before or during the current year. Level: Hard LO: 6 Ans: D 25. Under a job-order costing system, the dollar amount transferred from Work in Process to Finished Goods is the sum of the costs charged to all jobs: A) started in process during the period. B) in process during the period. C) completed and sold during the period. D) completed during the period. Level: Medium LO: 7 Ans: D 26. If a company applies overhead to production on the basis of a predetermined rate, a debit balance in the Manufacturing Overhead account at the end of the period means that: A) actual overhead cost was greater than the amount charged to production. B) actual overhead cost was less than the amount of direct labor cost. C) more overhead cost has been charged to production than has been charged to finished goods during the period. D) actual overhead cost was less than the amount charged to production. Level: Medium LO: 8 Ans: A 27. Overapplied overhead means that: A) the applied overhead cost was less than the actual overhead cost. B) the applied overhead cost was greater than the actual overhead cost. C) the estimated overhead cost was less than the actual overhead cost. D) the estimated overhead cost was less than the applied overhead cost. Level: Easy LO: 8 Ans: B 58 28. A job order cost system uses a predetermined overhead rate based on estimated activity and estimated manufacturing overhead cost. At the end of the year, underapplied overhead might be explained by which of the following situations? A) A Above B) B Above C) C Above D) D Above Source: CPA, adapted Level: Medium LO: 8 Ans: C 29. Departmental overhead rates are generally preferred to plant-wide overhead rates when: A) the activities of the various departments in the plant are not homogeneous. B) the activities of the various departments in the plant are homogeneous. C) most of the overhead costs are fixed. D) all departments in the plant are heavily automated. Source: CMA, adapted Level: Easy LO: 10 Ans: A 30. The Work in Process inventory account of a manufacturing company shows a balance of $18,000 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of $6,000 and $3,000 for materials, and charges of $4,000 and $2,000 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of: A) 50% B) 200% C) 300% D) 20% Level: Medium LO: 2,3,5 Ans: A 59 31. Blackwood Co. uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. The predetermined overhead rates for the year are 200% for Department A and 50% for Department B. Job 123, started and completed during the year, was charged with the following costs: The total manufacturing costs associated with Job 123 should be: A) $135,000 B) $180,000 C) $195,000 D) $240,000 Source: CPA, adapted Level: Medium LO: 2,5 Ans: A 32. Fisher Company uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. The following information about Fisher Company’s Work in Process inventory account has been provided for the month of May: During the month, Fisher Company’s Work in Process inventory account was credited for $120,500, which represented the Cost of Goods Manufactured for the month. Only one job remained in process on May 31; this job had been charged with $9,600 of applied overhead cost. The amount of direct materials cost in the unfinished job would be: A) $10,600 B) $16,700 C) $12,800 D) $23,400 Level: Hard LO: 3,5,6,7 Ans: A 33. At the beginning of the year, manufacturing overhead for the year was estimated to be $477,590. At the end of the year, actual direct labor-hours for the year were 29,000 hours, the actual manufacturing overhead for the year was $472,590, and manufacturing overhead for the year was overapplied by $110. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been: A) 29,300 direct labor-hours B) 28,987 direct labor-hours C) 28,993 direct labor-hours D) 29,000 direct labor-hours Level: Hard LO: 3,5,8 Ans: A 60 34. At the beginning of the year, manufacturing overhead for the year was estimated to be $670,700. At the end of the year, actual direct labor-hours for the year were 36,200 hours, the actual manufacturing overhead for the year was $665,700, and manufacturing overhead for the year was overapplied by $22,100. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been: A) 35,037 direct labor-hours B) 35,300 direct labor-hours C) 36,200 direct labor-hours D) 33,874 direct labor-hours Level: Hard LO: 3,5,8 Ans: B 35. At the beginning of the year, manufacturing overhead for the year was estimated to be $670,530. At the end of the year, actual direct labor-hours for the year were 29,400 hours, the actual manufacturing overhead for the year was $665,530, and manufacturing overhead for the year was underapplied by $27,550. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been: A) 30,900 direct labor-hours B) 29,400 direct labor-hours C) 30,670 direct labor-hours D) 31,939 direct labor-hours Level: Hard LO: 3,5,8 Ans: A 36. Bradbeer Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 17,500 hours. At the end of the year, actual direct laborhours for the year were 16,000 hours, the actual manufacturing overhead for the year was $233,000, and manufacturing overhead for the year was underapplied by $15,400. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been: A) $249,375 B) $217,600 C) $228,000 D) $238,000 Level: Hard LO: 3,5,8 Ans: D 37. Braam Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 11,500 hours. At the end of the year, actual direct labor-hours for the year were 9,700 hours, the actual manufacturing overhead for the year was $143,350, and manufacturing overhead for the year was underapplied by $18,220. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been: A) $164,023 B) $125,130 C) $148,350 D) $138,350 Level: Hard LO: 3,5,8 Ans: C 61 38. Braaten Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 14,100 hours. At the end of the year, actual direct laborhours for the year were 13,500 hours, the actual manufacturing overhead for the year was $291,100, and manufacturing overhead for the year was underapplied by $7,600. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been: A) $286,100 B) $296,100 C) $298,816 D) $283,500 Level: Hard LO: 3,5,8 Ans: B 39. Cribb Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 17,900 hours and the total estimated manufacturing overhead was $341,890. At the end of the year, actual direct labor-hours for the year were 16,700 hours and the actual manufacturing overhead for the year was $336,890. Overhead at the end of the year was: A) $22,920 underapplied B) $17,920 overapplied C) $17,920 underapplied D) $22,920 overapplied Level: Medium LO: 3,5,8 Ans: C 40. Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 21,800 hours and the total estimated manufacturing overhead was $497,040. At the end of the year, actual direct labor-hours for the year were 21,500 hours and the actual manufacturing overhead for the year was $492,040. Overhead at the end of the year was: A) $6,840 overapplied B) $6,840 underapplied C) $1,840 underapplied D) $1,840 overapplied Level: Medium LO: 3,5,8 Ans: C 41. Crick Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 14,400 hours and the total estimated manufacturing overhead was $355,680. At the end of the year, actual direct labor-hours for the year were 15,200 hours and the actual manufacturing overhead for the year was $350,680. Overhead at the end of the year was: A) $24,760 underapplied B) $24,760 overapplied C) $19,760 underapplied D) $19,760 overapplied Level: Medium LO: 3,5,8 Ans: B 62 42. Dagger Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $423,870. At the end of the year, actual direct labor-hours for the year were 19,400 hours, manufacturing overhead for the year was underapplied by $5,650, and the actual manufacturing overhead was $418,870. The predetermined overhead rate for the year must have been closest to: A) $21.59 B) $20.76 C) $21.30 D) $21.85 Level: Hard LO: 3,5,8 Ans: C 43. Daget Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $364,140. At the end of the year, actual direct labor-hours for the year were 24,000 hours, manufacturing overhead for the year was overapplied by $8,060, and the actual manufacturing overhead was $359,140. The predetermined overhead rate for the year must have been closest to: A) $15.43 B) $15.30 C) $15.17 D) $14.96 Level: Hard LO: 3,5,8 Ans: B 44. Dafoe Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $221,100. At the end of the year, actual direct labor-hours for the year were 14,400 hours, manufacturing overhead for the year was overapplied by $21,500, and the actual manufacturing overhead was $216,100. The predetermined overhead rate for the year must have been closest to: A) $15.01 B) $17.73 C) $15.35 D) $16.50 Level: Hard LO: 3,5,8 Ans: D 45. Juanita Corporation uses a job-order cost system and applies overhead on the basis of direct labor cost. At the end of October, Juanita had one job still in process. The job cost sheet for this job contained the following information: An additional $100 of labor was needed in November to complete this job. For this job, how much should Juanita have transferred to finished goods inventory in November when it was completed? A) $1,330 B) $500 C) $1,230 D) $1,730 Level: Medium LO: 3,5 Ans: D 63 46. Wall Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. The company’s estimated costs for the next year are: It is estimated that 10,000 direct labor hours will be worked during the year. The predetermined overhead rate will be: A) $3.90 B) $5.90 C) $6.80 D) $9.10 Level: Medium LO: 3 Ans: A 47. The following information relates to Spock Manufacturing Company: The company closes out the balance in the Manufacturing Overhead to Cost of Goods Sold at the end of the year. In the journal entry to close out the balance, the company would: A) debit cost of goods sold for $2,000 B) credit cost of goods sold for $2,000 C) credit cost of goods sold for $7,000 D) debit cost of goods sold for $7,000 Level: Hard LO: 4,5,8 Ans: C 48. Rio Manufacturing Company uses a job order cost system. At the beginning of February, Rio only had one job in process, Job #594. The direct costs assigned to this job at that time were $800 of materials and $650 of labor. Job #594 was finished during February incurring additional direct costs of $120 for materials and $370 for labor. Job #595 was started and finished during February. The direct costs assigned to this job were $310 for materials and $190 for labor. Job #596 was started during February but was not finished by the end of the month. The direct costs assigned to this job were $740 for materials and $300 for labor. Rio applies manufacturing overhead to its products at a rate of 200% of direct labor cost. What is Rio’s cost of goods manufactured for February? A) $2,440 B) $3,750 C) $4,860 D) $6,500 Level: Hard LO: 5,6 Ans: C 64 49. Serenje Manufacturing Company produces nameplates and uses a job-order cost system. The following amounts relate to nameplate production for the month of June: Serenje applies overhead at a predetermined overhead rate of 60% of direct material cost. At the end of June, only one job was in Work in Process inventory. This job had been charged with $150 of direct material cost. What is the direct labor cost assigned to this job? A) $100 B) $160 C) $225 D) $530 Level: Hard LO: 5,7 Ans: B 50. Dukes Company used a predetermined overhead rate this year of $2 per direct labor hour, based on an estimate of 20,000 direct labor hours to be worked during the year. Actual costs and activity during the year were: The underapplied or overapplied overhead for the year was: A) $1,000 underapplied B) $1,000 overapplied C) $3,000 underapplied D) $3,000 overapplied Level: Easy LO: 5,8 Ans: A 51. Sargent Company applies overhead cost to jobs on the basis of 80 percent of direct labor cost. If Job 210 shows $10,000 of manufacturing overhead cost applied, how much was the direct labor cost on the job? A) $12,500 B) $11,000 C) $8,000 D) $10,000 Level: Medium LO: 5 Ans: A 65 52. In the Vasquez Company, any over- or underapplied overhead is closed out to Cost of Goods Sold. Last year, the company incurred $27,000 in actual manufacturing overhead cost, and applied $29,000 of overhead cost to jobs. The beginning and ending balances of Finished Goods were equal, and the Company’s Cost of Goods Manufactured for the year totaled $71,000. Given this information, Cost of Goods Sold, after adjustment for any over- or underapplied overhead, for the year must have been: A) $98,000 B) $73,000 C) $71,000 D) $69,000 Level: Hard LO: 6,8 Ans: D 53. In reviewing the accounting records at year-end, Garff Company’s accountant has determined that the following items and amounts were debited to the Manufacturing Overhead account during the year: Including the items listed above, the debits to the Manufacturing Overhead account totaled $245,000 for the year. Credits to the account totaled $240,000 for the year. Based on this information, if all entries had been made correctly during the year the Manufacturing Overhead account would have been: A) overapplied by $4,000 B) overapplied by $12,000 C) underapplied by $5,000 D) overapplied by $2,000 Level: Hard LO: 7,8 Ans: D 54. Compute the October cost of direct materials used if raw material purchases for the month were $30,000 and the inventories were as follows: The cost of direct materials used would be: A) $31,500 B) $29,500 C) $27,000 D) $33,000 Level: Easy LO: 7 Ans: D 66 55. Hardin Company’s manufacturing overhead account showed a $20,000 underapplied overhead balance on December 31. Other data as of December 31 appear below: If the company allocates the underapplied overhead among Cost of Goods Sold and the appropriate inventory accounts based on the amount of overhead applied during the year in the accounts, Cost of Goods Sold after allocation will be: A) $790,000 B) $820,000 C) $810,000 D) $780,000 Level: Medium LO: 8 Ans: C 56. Job 593 was recently completed. The following data have been recorded on its job cost sheet: The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $14 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 593 would be: A) $6,705 B) $3,219 C) $5,249 D) $4,255 Level: Easy LO: 2,5 Ans: A 57. The following data have been recorded for recently completed Job 323 on its job cost sheet. Direct materials cost was $2,260. A total of 37 direct labor-hours and 141 machine-hours were worked on the job. The direct labor wage rate is $13 per labor-hour. The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $14 per machine-hour. The total cost for the job on its job cost sheet would be: A) $3,259 B) $2,741 C) $4,715 D) $2,287 Level: Easy LO: 2,5 Ans: C 67 58. Kaleohano Corporation has provided data concerning the company’s Manufacturing Overhead account for the month of July. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $62,000 and the total of the credits to the account was $73,000. Which of the following statements is true? A) Manufacturing overhead for the month was underapplied by $11,000. B) Manufacturing overhead applied to Work in Process for the month was $62,000. C) Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $73,000. D) Actual manufacturing overhead for the month was $62,000. Level: Medium LO: 4,8 Ans: D 59. Bretthauer Corporation has provided data concerning the company’s Manufacturing Overhead account for the month of July. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $51,000 and the total of the credits to the account was $64,000. Which of the following statements is true? A) Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $51,000. B) Manufacturing overhead applied to Work in Process for the month was $64,000. C) Manufacturing overhead for the month was underapplied by $13,000. D) Actual manufacturing overhead incurred during the month was $64,000. Level: Medium LO: 4,8 Ans: B 60. Arvay Corporation has provided data concerning the company’s Manufacturing Overhead account for the month of October. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $62,000 and the total of the credits to the account was $52,000. Which of the following statements is true? A) Actual manufacturing overhead incurred during the month was $52,000. B) Manufacturing overhead applied to Work in Process for the month was $62,000. C) Manufacturing overhead for the month was underapplied by $10,000. D) Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $62,000. Level: Medium LO: 4,8 Ans: C 61. On February 1, Manwill Corporation had $24,000 of raw materials on hand. During the month, the company purchased an additional $60,000 of raw materials. During February, $54,000 of raw materials were requisitioned from the storeroom for use in production. The debits to the Raw Materials account for the month of February total: A) $84,000 B) $54,000 C) $60,000 D) $24,000 Level: Easy LO: 4 Ans: C 68 62. At the beginning of December, Sneeden Corporation had $32,000 of raw materials on hand. During the month, the company purchased an additional $71,000 of raw materials. During December, $75,000 of raw materials were requisitioned from the storeroom for use in production. The credits to the Raw Materials account for the month of December total: A) $32,000 B) $75,000 C) $71,000 D) $103,000 Level: Easy LO: 4 Ans: B 63. Donham Corporation had $25,000 of raw materials on hand on May 1. During the month, the company purchased an additional $65,000 of raw materials. During May, $66,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The debits to the Work in Process account as a consequence of the raw materials transactions in May total: A) $0 B) $62,000 C) $65,000 D) $66,000 Level: Easy LO: 4 Ans: B 64. During May at Shatswell Corporation, $57,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $7,000. The journal entry to record this requisition would include a debit to Manufacturing Overhead of: A) $52,000 B) $7,000 C) $0 D) $64,000 Level: Easy LO: 4 Ans: B 65. Soledad Corporation had $36,000 of raw materials on hand on December 1. During the month, the company purchased an additional $71,000 of raw materials. The journal entry to record the purchase of raw materials would include a: A) credit to Raw Materials of $71,000 B) debit to Raw Materials of $71,000 C) credit to Raw Materials of $107,000 D) debit to Raw Materials of $107,000 Level: Easy LO: 4 Ans: B 69 66. During February at Iniquez Corporation, $79,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The journal entry to record the requisition from the storeroom would include a: A) debit to Work in Process of $79,000 B) debit to Work in Process of $75,000 C) credit to Manufacturing Overhead of $4,000 D) debit to Raw Materials of $79,000 Level: Easy LO: 4 Ans: B 67. In July, Essinger Inc. incurred $72,000 of direct labor costs and $3,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a: A) debit to Manufacturing Overhead of $3,000 B) credit to Manufacturing Overhead of $3,000 C) credit to Work in Process of $75,000 D) debit to Work in Process of $75,000 Level: Easy LO: 4 Ans: A 68. Firlit Corporation incurred $69,000 of actual Manufacturing Overhead costs during October. During the same period, the Manufacturing Overhead applied to Work in Process was $70,000. The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a: A) debit to Work in Process of $70,000 B) credit to Work in Process of $70,000 C) debit to Manufacturing Overhead of $69,000 D) credit to Manufacturing Overhead of $69,000 Level: Easy LO: 4 Ans: C 69. Traves Corporation incurred $69,000 of actual Manufacturing Overhead costs during October. During the same period, the Manufacturing Overhead applied to Work in Process was $68,000. The journal entry to record the application of Manufacturing Overhead to Work in Process would include a: A) debit to Manufacturing Overhead of $68,000 B) credit to Manufacturing Overhead of $68,000 C) debit to Work in Process of $69,000 D) credit to Work in Process of $69,000 Level: Easy LO: 4 Ans: B 70. During October, Beidleman Inc. transferred $52,000 from Work in Process to Finished Goods and recorded a Cost of Goods Sold of $55,000. The journal entries to record these transactions would include a: A) credit to Cost of Goods Sold of $55,000 B) credit to Work in Process of $52,000 C) debit to Finished Goods of $55,000 D) credit to Finished Goods of $52,000 Level: Easy LO: 4 Ans: B 70 71. During October, Dorinirl Corporation incurred $60,000 of direct labor costs and $5,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a: A) credit to Work in Process of $60,000 B) credit to Work in Process of $65,000 C) debit to Work in Process of $65,000 D) debit to Work in Process of $60,000 Level: Easy LO: 4 Ans: D 72. Stelmack Corporation, a manufacturing company, has provided data concerning its operations for September. The beginning balance in the raw materials account was $20,000 and the ending balance was $27,000. Raw materials purchases during the month totaled $63,000. Manufacturing overhead cost incurred during the month was $53,000, of which $3,000 consisted of raw materials classified as indirect materials. The direct materials cost for September was: A) $56,000 B) $53,000 C) $70,000 D) $63,000 Level: Medium LO: 6 Ans: B 73. Hudek Inc., a manufacturing company, has provided the following data for the month of July. The balance in the Work in Process inventory account was $20,000 at the beginning of the month and $10,000 at the end of the month. During the month, the company incurred direct materials cost of $50,000 and direct labor cost of $22,000. The actual manufacturing overhead cost incurred was $58,000. The manufacturing overhead cost applied to Work in Process was $56,000. The cost of goods manufactured for July was: A) $138,000 B) $140,000 C) $130,000 D) $128,000 Level: Medium LO: 6 Ans: A 74. Cerrone Inc. has provided the following data for the month of July. The balance in the Finished Goods inventory account at the beginning of the month was $39,000 and at the end of the month was $47,000. The cost of goods manufactured for the month was $188,000. The actual manufacturing overhead cost incurred was $71,000 and the manufacturing overhead cost applied to Work in Process was $67,000. The adjusted cost of goods sold that would appear on the income statement for July is: A) $196,000 B) $184,000 C) $180,000 D) $188,000 Level: Medium LO: 6 Ans: B 71 75. The actual manufacturing overhead incurred at Fraze Corporation during November was $79,000, while the manufacturing overhead applied to Work in Process was $65,000. The company’s Cost of Goods Sold was $385,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true? A) Manufacturing overhead for the month was underapplied by $14,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $399,000 B) Manufacturing overhead for the month was overapplied by $14,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $371,000 C) Manufacturing overhead for the month was overapplied by $14,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $399,000 D) Manufacturing overhead for the month was underapplied by $14,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $371,000 Level: Medium LO: 8 Ans: A 76. Smallwood Corporation has provided the following data concerning manufacturing overhead for January: The company’s Cost of Goods Sold was $223,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true? A) Manufacturing overhead for the month was overapplied by $5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $228,000 B) Manufacturing overhead for the month was underapplied by $5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $218,000 C) Manufacturing overhead for the month was underapplied by $5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $228,000 D) Manufacturing overhead for the month was overapplied by $5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $218,000 Level: Medium LO: 8 Ans: C 72 Use the following to answer 77-80 The accounting records of Omar Company contained the following information for last year: *Does not include over- or underapplied overhead. 77. The amount of direct material purchased during the year was: A) $66,000 B) $70,000 C) $65,000 D) $74,000 Level: Medium LO: 6 Ans: B 78. The total costs added to Work in Process during the year were: A) $206,000 B) $162,000 C) $176,000 D) $182,000 Level: Medium LO: 6 Ans: C 79. If Omar Company applies overhead to jobs on the basis of direct labor hours and Job 3 took 120 hours, how much overhead should be applied to that job? A) $960 B) $360 C) $528 D) $288 Level: Medium LO: 3,5 Ans: D 73 80. The cost of goods manufactured for the year was: A) $190,000 B) $162,000 C) $168,000 D) $135,000 Level: Medium LO: 6 Ans: B Use the following to answer 81-83 Acton Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its most recent year of operations. The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company’s predetermined overhead rate for the year. 81. The predetermined overhead rate is closest to: A) $36.60 B) $36.41 C) $36.24 D) $36.05 Level: Easy LO: 3 Ans: A 82. The applied manufacturing overhead for the year is closest to: A) $136,269 B) $138,348 C) $136,987 D) $137,630 Level: Easy LO: 5 Ans: B 83. The overhead for the year was: A) $732 underapplied B) $1,348 underapplied C) $732 overapplied D) $1,348 overapplied Level: Easy LO: 8 Ans: D Use the following to answer 84-86 Baker Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $210,600 and 6,000 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $209,000 and actual direct labor-hours were 5,980. 74 84. The predetermined overhead rate for the year was closest to: A) $34.95 B) $34.83 C) $34.98 D) $35.10 Level: Easy LO: 3 Ans: D 85. The applied manufacturing overhead for the year was closest to: A) $208,283 B) $209,001 C) $209,898 D) $209,180 Level: Easy LO: 5 Ans: C 86. The overhead for the year was: A) $702 underapplied B) $898 underapplied C) $702 overapplied D) $898 overapplied Level: Easy LO: 8 Ans: D Use the following to answer 87-89 Caber Corporation applies manufacturing overhead on the basis of machine-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $60,600. Actual manufacturing overhead for the year amounted to $59,000 and actual machine-hours were 5,900. The company’s predetermined overhead rate for the year was $10.10 per machine-hour. 87. The predetermined overhead rate was based on how many estimated machine-hours? A) 5,783 B) 6,000 C) 5,900 D) 5,842 Level: Medium LO: 3 Ans: B 88. The applied manufacturing overhead for the year was closest to: A) $58,017 B) $59,590 C) $60,600 D) $58,597 Level: Easy LO: 5 Ans: B 75 89. The overhead for the year was: A) $1,010 underapplied B) $590 overapplied C) $590 underapplied D) $1,010 overapplied Level: Easy LO: 8 Ans: B Use the following to answer 90-92 Dapper Company had only one job in process on May 1. The job had been charged with $3,400 of direct materials, $4,640 of direct labor, and $9,200 of manufacturing overhead cost. The company assigns overhead cost to jobs using the predetermined overhead rate of $23.00 per direct labor-hour. During May, the activity was recorded: Work in process inventory on May 30 contains $7,540 of direct labor cost. Raw materials consist solely of items that are classified as direct materials. 90. The balance in the raw materials inventory account on May 30 was: A) $33,500 B) $2,000 C) $40,000 D) $6,500 Level: Medium LO: 6 Refer To: 02_05 Ans: B 91. The cost of goods manufactured for May was: A) $109,670 B) $124,620 C) $143,300 D) $126,820 Level: Hard LO: 6 Ans: A 76 92. The entry to dispose of the underapplied or overapplied overhead cost for the month would include a: A) debit of $2,200 to Manufacturing Overhead B) debit of $14,950 to Manufacturing Overhead C) credit of $14,950 to Manufacturing Overhead D) credit of $2,200 to Manufacturing Overhead Level: Hard LO: 5,8 Ans: D Use the following to answer 93-96 The direct labor rate in Brent Company is $9.00 per hour, and manufacturing overhead is applied to products using a predetermined overhead rate of $6.00 per direct labor hour. During May, the company purchased $60,000 in raw materials (all direct materials) and worked 3,200 direct labor hours. The Raw Materials inventory (all direct materials) decreased by $3,000 between the beginning and end of May. The Work in Process inventory on May 1 consisted of one job which had been charged with $4,000 in direct materials and on which 300 hours of direct labor time had been worked. There was no Work in Process inventory on May 31. 93. The balance in the Work in Process inventory account on May 1 was: A) $0 B) $6,700 C) $4,500 D) $8,500 Level: Medium LO: 4 Ans: D 94. The debit to Work in Process for the cost of direct materials used during May was: A) $63,000 B) $61,000 C) $57,000 D) $67,000 Level: Medium LO: 4 Ans: A 95. The debit to Work in Process for direct labor cost during May was: A) $21,000 B) $26,100 C) $28,800 D) $31,500 Level: Medium LO: 4 Ans: C 96. If overhead was underapplied by $2,500 during May, the actual overhead cost for the month must have been: A) $16,700 B) $21,700 C) $18,500 D) $23,500 Level: Hard LO: 5,8 Ans: B 77 Use the following to answer 97-100 Chelm Music Company manufactures violins, violas, cellos, and fiddles and uses a job-order cost system. 97. What account should Chelm debit when the workers who carve the wood for the instruments are paid? A) Direct Labor B) Work in Process C) Manufacturing Overhead D) Salaries and Wages Receivable E) Salaries and Wages Expense Level: Easy LO: 4 Ans: B 98. What account should Chelm debit when the production manager is paid? A) Direct Labor B) Work in Process C) Manufacturing Overhead D) Salaries and Wages Receivable E) Salaries and Wages Expense Level: Medium LO: 4 Ans: C 99. What account should Chelm debit when the president of the company is paid? A) Direct Labor B) Work in Process C) Manufacturing Overhead D) Salaries and Wages Receivable E) Salaries and Wages Expense Level: Easy LO: 4 Ans: E 100. What is one of the accounts that Chelm should credit when goods are sold? A) Finished Goods B) Work in Process C) Cost of Goods Sold D) Manufacturing Overhead E) Cost of Goods Manufactured Level: Easy LO: 4 Ans: A 78 Use the following to answer 101-105 The following partially completed T-accounts summarize transactions for Western Company during the year: 101. The Cost of Goods Manufactured is: A) $20,000 B) $34,000 C) $22,500 D) $25,000 Level: Medium LO: 6,7 Ans: D 102. The direct labor cost was: A) $9,000 B) $12,000 C) $10,000 D) $14,000 Level: Hard LO: 7 Ans: A 79 103. The direct materials cost was: A) $8,000 B) $6,500 C) $9,000 D) $6,000 Level: Hard LO: 7 Ans: B 104. The manufacturing overhead applied was: A) $9,000 B) $3,000 C) $500 D) $7,000 Level: Hard LO: 5,7 Ans: D 105. The manufacturing overhead was: A) $250 overapplied B) $750 underapplied C) $250 underapplied D) $750 overapplied Level: Medium LO: 7,8 Ans: C Reference: 02_09 Kapanga Manufacturing Company uses a job-order costing system and started the month of October with a zero balance in its work in process and finished goods inventory accounts. During October, Kapanga worked on three jobs and incurred the following direct costs on those jobs: Kapanga applies manufacturing overhead at a rate of 150% of direct labor cost. During October, Kapanga completed Jobs B18 and B19 and sold Job B19. 106. What is Kapanga’s cost of goods manufactured for October? A) $ 50,000 B) $ 55,000 C) $ 78,000 D) $ 82,000 Level: Medium LO: 5,6 Ans: D 80 107. What is Kapanga’s work in process inventory balance at the end of October? A) $23,000 B) $30,500 C) $32,000 D) $43,000 Level: Medium LO: 5,6 Ans: B Use the following to answer 108-111 Dillon Company applies manufacturing overhead to jobs using a predetermined overhead rate of 75% of direct labor cost. Any under or overapplied overhead cost is closed out to Cost of Goods Sold at the end of the month. During May, the following transactions were recorded by the company: *Contains $4,400 in direct labor cost. 108. The balance on May 1 in the Raw Materials inventory account was: A) $11,000 B) $5,000 C) $7,000 D) $9,000 Level: Medium LO: 6 Ans: B 109. The amount of direct materials cost in the May 31 Work in Process inventory account was: A) $7,600 B) $2,000 C) $6,300 D) $4,300 Level: Hard LO: 6 Ans: D 110. The entry to dispose of the under or overapplied overhead cost for the month would include: A) a debit of $2,000 to the Manufacturing Overhead account B) a credit of $2,500 to the Manufacturing Overhead account C) a debit of $2,000 to Cost of Goods Sold D) a credit of $2,500 to Cost of Goods Sold Level: Hard LO: 8 Ans: C 81 111. The Cost of Goods Manufactured for May was: A) $84,500 B) $95,000 C) $75,500 D) $81,500 Level: Medium LO: 6 Ans: A Use the following to answer 112-114 Farber Corporation uses a job-order cost system. The information below is from the financial records of the company for last year: Applied overhead was 30% of total manufacturing costs. The Work in Process inventory at January 1 was 75% of the Work in Process inventory at December 31. 112. Farber Company’s total direct labor cost was: A) $750,000 B) $600,000 C) $900,000 D) $937,500 Source: CMA, adapted Level: Hard LO: 6 Ans: D 113. Total cost of direct material used by Farber Company was: A) $750,000 B) $812,500 C) $850,000 D) $1,150,000 Source: CMA, adapted Level: Hard LO: 6 Ans: B 114. The Work in Process inventory at December 31 was: A) $300,000 B) $225,000 C) $100,000 D) $75,000 Source: CMA, adapted Level: Hard LO: 6 Ans: A 82 Use the following to answer 115-117 Killian Company began operations on January 1. The predetermined overhead rate was set at $6.00 per direct labor-hour. Debits to Work in Process for the year totaled $550,000. Credits to Work in Process totaled $480,000. Analysis of the Company’s records indicates that direct labor cost totaled $250,000 for the year, which represents 20,000 direct labor-hours. 115. The direct materials used in production during the year totaled: A) $180,000 B) $240,000 C) $130,000 D) $120,000 Level: Hard LO: 7 Ans: A 116. If the actual manufacturing overhead cost for the year totaled $145,000, then overhead was: A) overapplied by $25,000 B) overapplied by $10,000 C) underapplied by $25,000 D) underapplied by $10,000 Level: Medium LO: 7,8 Ans: C 117. The Company’s ending work in process inventory consisted of one job, Job 42. The job had been charged with $28,000 of direct labor cost, which consisted of 2,000 actual labor-hours. The direct materials cost in Job 42 totaled: A) $33,000 B) $42,000 C) $17,000 D) $30,000 Level: Hard LO: 7 Ans: D Use the following to answer 118-119 Echo Corporation uses a job-order costing system and applies overhead to jobs using a predetermined overhead rate. During the year the company’s Finished Goods inventory account was debited for $360,000 and credited for $338,800. The ending balance in the Finished Goods inventory account was $36,600. At the end of the year, manufacturing overhead was overapplied by $15,900. 118. The balance in the Finished Goods inventory account at the beginning of the year was: A) $15,900 B) $15,400 C) $21,200 D) $36,600 Level: Medium LO: 7 Ans: B 83 119. If the applied manufacturing overhead was $169,300, the actual manufacturing overhead cost for the year was: A) $168,800 B) $153,400 C) $190,000 D) $185,200 Level: Medium LO: 7 Ans: B Use the following to answer 120-124 The following partially completed T-accounts summarize transactions for Farwest Company during the year: 120. The Cost of Goods Manufactured was: A) $22,900 B) $26,300 C) $6,400 D) $49,200 Level: Medium LO: 7 Refer To: 02_14 Ans: B 84 121. The direct labor cost was: A) $8,000 B) $12,300 C) $12,600 D) $11,000 Level: Hard LO: 7 Ans: A 122. The direct materials cost was: A) $8,000 B) $10,000 C) $7,400 D) $4,600 Level: Hard LO: 7 Ans: C 123. The manufacturing overhead applied was: A) $1,900 B) $6,800 C) $12,900 D) $3,000 Level: Medium LO: 7 Ans: B 124. The manufacturing overhead was: A) $1,900 underapplied B) $700 underapplied C) $400 overapplied D) $3,200 overapplied Level: Medium LO: 7 Ans: B Use the following to answer 125-130 On August 1, Shead Corporation had $35,000 of raw materials on hand. During the month, the company purchased an additional $56,000 of raw materials. During August, $69,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $6,000. Prepare journal entries to record these events. Use those journal entries to answer the following questions: 125. The debits to the Raw Materials account for the month of August total: A) $91,000 B) $69,000 C) $35,000 D) $56,000 Level: Easy LO: 4 Ans: D 85 126. The credits to the Raw Materials account for the month of August total: A) $35,000 B) $91,000 C) $56,000 D) $69,000 Level: Easy LO: 4 Ans: D 127. The debits to the Work in Process account as a consequence of the raw materials transactions in August total: A) $56,000 B) $0 C) $63,000 D) $69,000 Level: Easy LO: 4 Ans: C 128. The credits to the Work in Process account as a consequence of the raw materials transactions in August total: A) $56,000 B) $63,000 C) $0 D) $69,000 Level: Easy LO: 4 Ans: C 129. The debits to the Manufacturing Overhead account as a consequence of the raw materials transactions in August total: A) $6,000 B) $69,000 C) $0 D) $63,000 Level: Easy LO: 4 Ans: A 130. The credits to the Manufacturing Overhead account as a consequence of the raw materials transactions in August total: A) $0 B) $63,000 C) $69,000 D) $6,000 Level: Easy LO: 4 Ans: A Use the following to answer 131-132 On March 1, Metevier Corporation had $37,000 of raw materials on hand. During the month, the company purchased an additional $62,000 of raw materials. During March, $69,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $6,000. 86 131. The journal entry to record the purchase of raw materials would include a: A) credit to Raw Materials of $62,000 B) credit to Raw Materials of $99,000 C) debit to Raw Materials of $99,000 D) debit to Raw Materials of $62,000 Level: Easy LO: 4 Ans: D 132. The journal entry to record the requisition from the storeroom would include a: A) debit to Work in Process of $69,000 B) debit to Work in Process of $63,000 C) debit to Raw Materials of $69,000 D) credit to Manufacturing Overhead of $6,000 Level: Easy LO: 4 Ans: B Use the following to answer 133-134 During February, Irving Corporation incurred $65,000 of actual Manufacturing Overhead costs. During the same period, the Manufacturing Overhead applied to Work in Process was $60,000. 133. The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a: A) debit to Manufacturing Overhead of $65,000 B) credit to Manufacturing Overhead of $65,000 C) credit to Work in Process of $60,000 D) debit to Work in Process of $60,000 Level: Easy LO: 4 Ans: A 134. The journal entry to record the application of Manufacturing Overhead to Work in Process would include a: A) debit to Work in Process of $65,000 B) credit to Work in Process of $65,000 C) credit to Manufacturing Overhead of $60,000 D) debit to Manufacturing Overhead of $60,000 Level: Easy LO: 4 Ans: C 87 Use the following to answer 135-137 Messana Corporation reported the following data for the month of August: Additional information: 135. The direct materials cost for August is: A) $73,000 B) $69,000 C) $81,000 D) $57,000 Level: Hard LO: 6 Ans: A 136. The cost of goods manufactured for August is: A) $227,000 B) $229,000 C) $219,000 D) $217,000 Level: Hard LO: 6 Ans: B 137. The adjusted cost of goods sold that appears on the income statement for August is: A) $229,000 B) $211,000 C) $209,000 D) $247,000 Level: Hard LO: 6 Ans: C 88 Use the following to answer 138-139 Tondre Inc. has provided the following data for the month of July: Additional information: 138. The cost of goods manufactured for July is: A) $210,000 B) $205,000 C) $208,000 D) $207,000 Level: Medium LO: 6 Ans: A 139. The adjusted cost of goods sold that appears on the income statement for July is: A) $201,000 B) $198,000 C) $219,000 D) $210,000 Level: Medium LO: 6 Ans: B 89 Essay 140. Aladili Company is a manufacturing firm that uses job-order costing. At the beginning of the year, the company’s inventory balances were as follows: 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 21,000 machine-hours and incur $210,000 in manufacturing overhead cost. The following transactions were recorded for the year: 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. Level: Medium LO: 3,4,5,8 90 Ans: 141. Quark Spy Equipment manufactures espionage equipment. Quark uses a job-order cost system and applies overhead to jobs the basis of direct labor-hours. For the current year, Quark estimated that it would work 100,000 direct labor-hours and incur $20,000,000 of manufacturing overhead cost. The following summarized information relates to January of the current year. The raw materials purchased include both direct and indirect materials. 91 Required: Prepare journal entries to record Quark’s transactions for the month of January. Do not close out the manufacturing overhead account. Level: Medium LO: 3,4,5 Ans: 142. Baar Company is a manufacturing firm that uses job-order costing. The company’s inventory balances were as follows at the beginning and end of the year: 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 44,000 machine-hours and incur $176,000 in manufacturing overhead cost. The following transactions were recorded for the year: 92 Required: Level: Medium LO: 3,5,6,8 Ans: 93 143. Gonzalez, Inc. manufactures stereo speakers in two factories; one in Vandalia, Illinois and another in Modesto, California. The Vandalia factory uses DL$ for its overhead rate and the Modesto factory uses machine-hours (MHs) for its overhead rate. Information related to both plants for last year is presented below: Required: Fill in the lettered blanks above. SHOW YOUR CALCULATIONS. Level: Medium LO: 3,5,8 94 Ans: (a) = $100,000; $1,000,000/$10 (b) = $101,000; $1,010,000/$10 (c) = $82,500 underapplied; $1,092,500 - $1,010,000 (d) = $8 per MH; $1,600,000/200,000 (e) = $1,520,000; 190,000 × $8 (f) = ($47,500) overapplied; $1,472,500 - $1,520,000 144. Hacken Company has a job-order costing system. The company applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor cost. The information below has been taken from the cost records of Hacken Company for the past year: Required: (a.) Compute the cost of direct materials purchased during the year. (b.) Compute the predetermined overhead rate that was used during the past year. (c.) Compute the Cost of Goods Manufactured for the past year. (d.) Compute the Cost of Goods Sold for the past year. Level: Hard LO: 3,6 Ans: 95 145. The Simkins Company uses a job order costing system. The following activities took place during the month of May: Required: Prepare journal entries to record the information given above. Key your entries by the letters a through i. Level: Medium LO: 4,5,6 96 Ans: 146. The Commonwealth Company uses a job-order cost system and applies manufacturing overhead cost to jobs using a predetermined overhead rate based on the cost of materials used in production. At the beginning of the year, the following estimates were made as a basis for computing the predetermined overhead rate: manufacturing overhead cost, $186,000; direct materials cost, $155,000. The following transactions took place during the year (all purchases and services were acquired on account): 97 Required: Prepare journal entries to record the information above. Key your entries to the letters a through l. Level: Medium LO: 4,5,6 Ans: 147. The following cost data relate to the manufacturing activities of the Kanaba Company last year: The company uses a predetermined overhead rate to apply manufacturing overhead cost to production. The rate last year was $5.00 per machine-hour; a total of 5,000 machine-hours were recorded for the year. Required: (a.) Compute the amount of underapplied or overapplied overhead cost for the year. (b.) Prepare a schedule of Cost of Goods Manufactured for the year. Level: Medium LO: 5,6,8 98 Ans: 148. Testor Products uses a job-order costing system with a predetermined overhead rate based on machine-hours. The company closes out any underapplied or overapplied overhead to Cost of Goods Sold. Required: If overhead is overapplied, what adjustment does the company make to Cost of Goods Sold? Is Cost of Goods Sold increased or decreased? Why? Level: Easy LO: 8 Ans: If overhead is overapplied, too much overhead has been applied to inventories and they are therefore overcosted. Since these excess costs flow through to Cost of Goods Sold when finished goods are sold, it is necessary to reduce Cost of Goods Sold in order to eliminate this overstatement of costs. 149. A number of companies in different industries are listed below: (1.) Synthetic rubber manufacturer (2.) Contract printer that produces posters, books, and pamphlets to order (3.) Dress manufacturer that makes clothing on contract for department stores (4.) Aluminum refiner that makes aluminum ingots from bauxite ore (5.) Asparagus cannery (6.) Winery that produces a number of varietal wines Required: For each company, indicate whether the company is most likely to use job-order costing or process costing. Level: Easy LO: 1 99 Ans: (1.) Synthetic rubber manufacturer; Process Costing (2.) Contract printer that produces posters, books, and pamphlets to order; Job-Order Costing (3.) Dress manufacturer that makes clothing on contract for department stores; Job-Order Costing (4.) Aluminum refiner that makes aluminum ingots from bauxite ore; Process Costing (5.) Asparagus cannery; Process Costing (6.) Winery that produces a number of varietal wines; Job-Order Costing 150. Whether a company uses process costing or job-order costing depends on its industry. A number of companies in different industries are listed below: (1.) Contract printer that produces posters, books, and pamphlets to order (2.) Asparagus cannery (3.) Brick manufacturer (4.) Contract oil drilling company (5.) Custom boat builder (6.) Flour mill Required: For each company, indicate whether the company is most likely to use job-order costing or process costing. Level: Easy LO: 1 Ans: (1.) Contract printer that produces posters, books, and pamphlets to order; Job-Order Costing (2.) Asparagus cannery; Process Costing (3.) Brick manufacturer; Process Costing (4.) Contract oil drilling company; Job-Order Costing (5.) Custom boat builder; Job-Order Costing (6.) Flour mill; Process Costing 151. Some companies use process costing and some use job-order costing. Which method a company uses depends on its industry. A number of companies in different industries are listed below: (1.) Contract printer that produces posters, books, and pamphlets to order (2.) Corn meal mill (3.) Cattle feedlot that fattens cattle prior to slaughter (4.) Shirt manufacturer that makes clothing on contract for department stores (5.) Commercial photographer Required: For each company, indicate whether the company is most likely to use job-order costing or process costing. Level: Easy LO: 1 Ans: (1.) Contract printer that produces posters, books, and pamphlets to order; Job-Order Costing (2.) Corn meal mill; Process Costing (3.) Cattle feedlot that fattens cattle prior to slaughter; Process Costing (4.) Shirt manufacturer that makes clothing on contract for department stores; Job-Order Costing (5.) Commercial photographer; Job-Order Costing 100 152. Job 231 was recently completed. The following data have been recorded on its job cost sheet: The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $11 per machine-hour. Required: Compute the unit product cost that would appear on the job cost sheet for this job. Level: Easy LO: 2,5 Ans: Cost Summary 153. Job 397 was recently completed. The following data have been recorded on its job cost sheet: The company applies manufacturing overhead on the basis of direct labor-hours. The predetermined overhead rate is $37 per direct labor-hour. Required: Compute the unit product cost that would appear on the job cost sheet for this job. Level: Easy LO: 2,5 Ans: Cost Summary 101 154. During December, Deller Corporation purchased $79,000 of raw materials on credit to add to its raw materials inventory. A total of $68,000 of raw materials was requisitioned from the storeroom for use in production. These requisitioned raw materials included $4,000 of indirect materials. Required: Prepare journal entries to record the purchase of materials and their use in production. Level: Easy LO: 4 Ans: 155. During December, Mccroskey Corporation incurred $66,000 of actual Manufacturing Overhead costs. During the same period, the Manufacturing Overhead applied to Work in Process was $69,000. Required: Prepare journal entries to record the incurrence of manufacturing overhead and the application of manufacturing overhead to Work in Process. Level: Easy LO: 4 Ans: 156. Pirkl Corporation has provided the following data for the month of March: Additional information: 102 Required: Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold in good form. Level: Medium LO: 6 Ans: Cost of Goods Manufactured Cost of Goods Sold 103 157. Schoff Corporation has provided the following data for the most recent month: Transactions: Required: Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, Manufacturing Overhead, and Cost of Goods Sold. Record the beginning balances and each of the transactions listed above. Finally, determine the ending balances. Level: Medium LO: 7 Ans: 104 158. During January, Shanker Corporation recorded the following: Transactions: Required: Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, and Manufacturing Overhead, and Cost of Goods Sold. Record the beginning balances and each of the transactions listed above. Finally, determine the ending balances. Level: Medium LO: 7 105 Ans: 159. Sowers Inc. has provided the following data for October: 106 Transactions: Required: Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, and Manufacturing Overhead, and Cost of Goods Sold. Record the beginning balances and each of the transactions listed above. Finally, determine the ending balances. Level: Medium LO: 7 Ans: 107