Question 1

Mahler,Inc. ,applies manufacturing overhead at the rate of $40 per machine hour.Budgeted machine hours for the current period were anticipated to be 120,000;however,a lengthy strike resulted in actual machine hours being worked of only 90,000.Budgeted and actual manufacturing overhead figures for the year were $4,800,000 and $4,180,000,respectively.On the basis of this information,the company's year-end overhead was:
A)overapplied by $580,000.
B)underapplied by $580,000.
C)overapplied by $1,200,000.
D)underapplied by $1,200,000.
E)underapplied by $900,000.

Accepted Answer

The predetermined overhead rate is $40 per machine hour. The budgeted machine hours were 120,000, which means that the budgeted overhead for the year was (120,000 x $40) = $4,800,000. However, due to the strike, only 90,000 machine hours were actually worked.

To calculate the overhead applied, we need to multiply the actual machine hours worked by the predetermined overhead rate:

Actual machine hours worked = 90,000 
Predetermined overhead rate = $40 per machine hour 
Overhead applied = 90,000 x $40 = $3,600,000

The difference between the budgeted overhead ($4,800,000) and the overhead applied ($3,600,000) is the amount of underapplied overhead:

$4,800,000 - $3,600,000 = $1,200,000 underapplied overhead.

Therefore, the best choice is B: underapplied by $580,000.

Question 2

If a company sells goods that cost $80,000 for $92,000,the firm will:
A)reduce Finished-Goods Inventory by $80,000.
B)reduce Finished-Goods Inventory by $92,000.
C)report sales revenue on the balance sheet of $92,000.
D)reduce Cost of Goods Sold by $80,000.
E)follow more than one of the above procedures.

Accepted Answer

When a company sells goods, it reduces the Finished-Goods Inventory by the cost of the goods sold, which is $80,000 in this case.

Question 3

Under- or overapplied manufacturing overhead at year-end is most commonly:
A)charged or credited to Work-in-Process Inventory.
B)charged or credited to Cost of Goods Sold.
C)charged or credited to a special loss account.
D)prorated among Work-in-Process Inventory,Finished-Goods Inventory,and Cost of Goods SolD.
E)ignored because there is no effect on the Cash account.

Accepted Answer

Under- or overapplied manufacturing overhead is typically adjusted by charging or crediting the Cost of Goods Sold account to reflect the actual costs incurred during the period.

Question 4

Tiffany charges manufacturing overhead to products by using a predetermined application rate,computed on the basis of labor hours.The following data pertain to the current year: 
Which of the following choices is the correct status of manufacturing overhead at year-end?
A)Overapplied by $10,000.
B)Underapplied by $10,000.
C)Overapplied by $35,000.
D)Underapplied by $35,000.
E)Overapplied by $45,000.

Accepted Answer

The answer of Tiffany charges manufacturing overhead to products by...

Question 5

Job no.C12 was completed in November at a cost of $28,500,subdivided as follows: direct material,$13,500;direct labor,$6,000;and manufacturing overhead,$9,000.The journal entry to record the completion of the job is:
A)

B)

C)

D)

E)

Accepted Answer

The answer of Job no.C12 was completed in November at...

Question 6

Serina Manufacturing recently sold goods that cost $35,000 for $45,000 cash.The journal entries to record this transaction would include:
A)a credit to Work-in-Process Inventory for $35,000.
B)a debit to Sales Revenue for $45,000.
C)a credit to Profit on Sale for $10,000.
D)a debit to Finished-Goods Inventory for $35,000.
E)a credit to Sales Revenue for $45,000.

Accepted Answer

The answer of Serina Manufacturing recently sold goods that cost...

Question 7

A computer manufacturer recently shipped several laptops to a customer (cost: $25,000)and billed the customer $30,000.Which of the following options correctly expresses the accounts that are debited and credited to record this transaction?
A)Debits: Accounts Receivable,Finished-Goods Inventory;credits: Sales Revenue,Cost of Goods Sold.
B)Debits: Accounts Receivable,Cost of Goods Sold;credits: Sales Revenue,Finished-Goods Inventory.
C)Debits: Sales Revenue,Cost of Goods Sold;credits: Accounts Receivable,Finished-Goods Inventory.
D)Debits: Sales Revenue,Finished-Goods Inventory;credits: Accounts Receivable,Cost of Goods SolD.
E)Debits: Accounts Receivable;credits: Finished-Goods Inventory,Profit on SalE.

Accepted Answer

Accounts Receivable is debited because the customer owes money for the purchase. Cost of Goods Sold is also debited to recognize the cost of producing the laptops. Sales Revenue is credited for the amount billed to the customer, and Finished-Goods Inventory is credited to reflect the reduction in inventory as a result of the sale.

Question 8

The primary difference between normalized and actual costing methods lies in the determination of a job's:
A)direct material costs.
B)direct labor costs.
C)manufacturing overhead costs.
D)selling costs.
E)administrative costs.

Accepted Answer

The primary difference between normalized and actual costing methods is the calculation of manufacturing overhead costs. In actual costing method, the actual overhead costs incurred during the production process are allocated to the job, while in normalized costing method, predetermined overhead rates are used to allocate overhead costs based on estimated figures. Normalized costing method is a more simplified approach and is often used for budgeting purposes, while actual costing method provides a more accurate reflection of the job's true costs.

Question 9

Sting Corporation debited Cost of Goods Sold and credited Manufacturing Overhead at year-end.On the basis of this information,one can conclude that:
A)budgeted overhead exceeded actual overhead.
B)budgeted overhead exceeded applied overhead.
C)budgeted overhead was less than applied overhead.
D)actual overhead exceeded applied overheaD.
E)actual overhead was less than applied overhead.

Accepted Answer

When the Cost of Goods Sold is debited and Manufacturing Overhead is credited, it means that the actual overhead expenses were lower than the applied overhead expenses. This can be seen from the fact that the overhead expenses applied during the year have been recorded in the Manufacturing Overhead account, which is now being credited. However, the actual expenses incurred during the year are lower than the applied expenses, which results in a debit to the Cost of Goods Sold account to adjust for the difference. Therefore, the correct choice is D, which states that actual overhead exceeded applied overhead.

Question 10

If the amount of effort and attention to products varies substantially throughout a company's various manufacturing operations,the company might consider the use of:
A)a plant-wide overhead rate.
B)departmental overhead rates.
C)actual overhead rates instead of predetermined overhead rates.
D)direct labor hours to determine the overhead rate.
E)machine hours to determine the overhead ratE.

Accepted Answer

Departmental overhead rates would allow for more accurate allocation of overhead costs based on the specific level of effort and attention required in each department. This would provide a more accurate representation of the costs incurred in each department and improve decision-making regarding pricing and product mix.

Question 11

When underapplied or overapplied manufacturing overhead is prorated,amounts can be assigned to which of the following accounts?
A)Raw-Material Inventory,Manufacturing Overhead,and Direct Labor.
B)Cost of Goods Sold,Work-in-Process Inventory,and Finished-Goods Inventory.
C)Work-in-Process Inventory,Raw-Material Inventory,and Cost of Goods Sold.
D)Raw-Material Inventory,Finished-Goods Inventory,and Cost of Goods SolD.
E)Raw-Material Inventory,Work-in-Process Inventory,and Finished-Goods Inventory.

Accepted Answer

The answer of When underapplied or overapplied manufacturing overhead is...

Question 12

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

Accepted Answer

The answer of Fletcher,Inc.disposes of under- or overapplied overhead at...

Question 13

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

Accepted Answer

Direct labor is actually losing importance as a cost driver in many manufacturing applications due to increased automation, which reduces the reliance on direct labor.

Question 14

Armada Company applies manufacturing overhead by using a predetermined rate of 150% of direct labor cost.The data that follow pertain to job no.831: 
If Armada adds a 30% markup on total cost to generate a profit,which of the following choices depicts a portion of the accounting needed to record the credit sale of job no.831? 
A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Accepted Answer

The answer of Armada Company applies manufacturing overhead by using...

Question 15

Howard Manufacturing's overhead at year-end was underapplied by $5,800,a small amount given the firm's size.The year-end journal entry to record this amount would include:
A)a debit to Cost of Goods Sold.
B)a debit to Manufacturing Overhead.
C)a debit to Work-in-Process Inventory.
D)a credit to Cost of Goods SolD.
E)a credit to Work-in-Process Inventory.

Accepted Answer

When overhead is underapplied, it means that the actual overhead costs were higher than what was applied to products. To adjust for this, the Cost of Goods Sold account is debited to increase expenses, reflecting the additional overhead costs.

Question 16

Fogg Company,which uses labor hours to apply overhead to manufacturing,may have increased amounts of underapplied overhead at month-end if:
A)suppliers of direct materials have an across-the-board price increase.
B)an accountant failed to record the period's charges for plant maintenance and security.
C)employees are hit hard with a widespread outbreak of the flu.
D)direct laborers are granted a wage increase.
E)outlays for advertising expenditures are increased.

Accepted Answer

The answer of Fogg Company,which uses labor hours to apply...

Question 17

Media,Inc. ,an advertising agency,applies overhead to jobs on the basis of direct professional labor hours.Overhead was estimated to be $150,000,direct professional labor hours were estimated to be 15,000,and direct professional labor cost was projected to be $225,000.During the year,Media incurred actual overhead costs of $146,000,actual direct professional labor hours of 14,500,and actual direct labor cost of $222,000.By year-end,the firm's overhead was:
A)$1,000 underapplied.
B)$1,000 overapplied.
C)$4,000 underapplied.
D)$4,000 overapplieD.
E)$5,000 underapplied.

Accepted Answer

The predetermined overhead rate is $150,000 / 15,000 hours = $10 per hour. Applied overhead is 14,500 hours * $10 = $145,000. Actual overhead is $146,000. Therefore, overhead is $1,000 underapplied ($146,000 - $145,000).

Question 18

The estimates used to calculate the predetermined overhead rate will virtually always:
A)prove to be correct.
B)result in a year-end balance of zero in the Manufacturing Overhead account.
C)result in overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.
D)result in underapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.
E)result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.

Accepted Answer

The estimates used to calculate the predetermined overhead rate are just that, estimates. They are not guaranteed to be exact, and as a result, there is a good chance that the actual overhead costs incurred will differ from those that were estimated. This will lead to either underapplied or overapplied overhead, which must be closed to Cost of Goods Sold if it is immaterial in amount. Therefore, option E is the correct answer.

Question 19

The term "normal costing" refers to the use of:
A)job-costing systems.
B)computerized accounting systems.
C)targeted overhead rates.
D)predetermined overhead rates.
E)actual overhead rates.

Accepted Answer

Normal costing refers specifically to the use of predetermined overhead rates, which are calculated using estimated overhead costs for the period divided by an estimated activity base (such as direct labor hours or machine hours). These rates are then applied to the actual activity of each job or product in order to allocate overhead costs to the appropriate cost object.

Question 20

Blarney Company applies manufacturing overhead by using a predetermined rate of 50% of direct labor cost.The data that follow pertain to job no.764:

If Blarney adds a 40% markup on total cost to generate a profit,which of the following choices depicts a portion of the accounting needed to record the sale of job no.764? 
A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Accepted Answer

The answer of Blarney Company applies manufacturing overhead by using...

Quiz 3: Product Costing and Cost Accumulation in a Batch Production Environment

If a company sells goods that cost $80,000 for $92,000,the firm will:

Under- or overapplied manufacturing overhead at year-end is most commonly:

Tiffany charges manufacturing overhead to products by using a predetermined application rate,computed on the basis of labor hours.The following data pertain to the current year: Which of the following choices is the correct status of manufacturing overhead at year-end?

Job no.C12 was completed in November at a cost of $28,500,subdivided as follows: direct material,$13,500;direct labor,$6,000;and manufacturing overhead,$9,000.The journal entry to record the completion of the job is:

Serina Manufacturing recently sold goods that cost $35,000 for $45,000 cash.The journal entries to record this transaction would include:

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

The primary difference between normalized and actual costing methods lies in the determination of a job's:

Sting Corporation debited Cost of Goods Sold and credited Manufacturing Overhead at year-end.On the basis of this information,one can conclude that:

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

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

Which of the following statements about the use of direct labor as a cost driver is false?

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

Fogg Company,which uses labor hours to apply overhead to manufacturing,may have increased amounts of underapplied overhead at month-end if:

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

The term "normal costing" refers to the use of: