Question 1

M.A.E.charged the following amounts of overhead to jobs during the year: $20,000 to jobs still in process; $60,000 to jobs completed but not sold; and $120,000 to jobs finished and sold.At year-end,M.A.E.Company's Factory Overhead account has a credit balance of $5,000,which is not a material amount.What entry should M.A.E.make at year-end?
A.$\text { No entry is needed.}$

B.  
$\begin{array}{llr}
  \text {Factory Overhead  } &5,000\
 \text { Cost of Goods Sold } &&5,000  \
\end{array}$

C.  
$\begin{array}{llr}
  \text {  Cost of Goods Sold} &5,000\
 \text {Factory Overhead   } &&5,000\
\end{array}$

D. 
$\begin{array}{llr}
  \text { Factory Overhead } &5,000\
 \text {Goods in Process Inventory  } &&5,000\
\end{array}$

E. 
$\begin{array}{llr}
  \text { Factory Overhead  } &5,000\
 \text {  Finished Goods} &&5,000\
\end{array}$

A) A
B) B
C) C
D) D
E) E

Accepted Answer

The answer of M.A.E.charged the following amounts of overhead to...

Question 2

If overhead applied is less than actual overhead,it is:
A) Fully applied.
B) Underapplied.
C) Overapplied.
D) Expected.
E) Normal.

Accepted Answer

When overhead applied is less than actual overhead, it means that there is an underapplication of overhead. This occurs when the predetermined overhead rate used to apply overhead to production is too low or when actual overhead costs are higher than estimated.

Question 3

A manufacturing company uses a job order cost accounting system.Overhead is applied using direct labor hours as an allocation base.Total costs for a particular job were $5,720.Of this amount $2,600 was direct labor and $1,040 was direct material.The company pays $26 per hour of direct labor and $2 per pound of direct materials.What is this company's overhead rate?
A) $26.00 per direct labor hour.
B) $20.80 per direct labor hour.
C) $ 4.00 per direct labor hour.
D) $80.00 per direct labor hour.
E) $2,080 per direct labor hour.

Accepted Answer

DM + DL + OH = Total cost
$1,040 + $2,600 + OH = $5,720
OH = $2,080 applied overhead
Total DL cost / DL cost per hour = Number of DL hours
$2,600/ $26 = 100 direct labor hours
Predetermined overhead rate (POHR) x Allocation base = Applied overhead
POHR x 100 DL hours = $2,080
POHR = $2,080/100
POHR = $20.80 per DL hour

Question 4

The amount by which the overhead applied to jobs during a period exceeds the overhead incurred during the period is known as:
A) Adjusted overhead.
B) Estimated overhead.
C) Predetermined overhead.
D) Underapplied overhead.
E) Overapplied overhead.

Accepted Answer

Overapplied overhead occurs when the overhead applied to jobs (based on the predetermined overhead rate) exceeds the actual overhead costs incurred.

Question 5

A manufacturing company uses a job order cost accounting system.Overhead is applied using pounds of direct materials used as an allocation base.Total costs for a particular job were $5,720.Of this amount $2,600 was direct labor and $1,040 was direct material.The company pays $26 per hour of direct labor and $2 per pound of direct materials.What is this company's overhead rate?
A) $2 per pound of direct material used.
B) $1,040 per pound of direct material used.
C) $520 per pound of direct material used.
D) $4 per pound of direct material used.
E) $2,080 per pound of direct material used.

Accepted Answer

DM + DL + OH = Total cost
$1,040 + $2,600 + OH = $5,720
OH = $2,080 applied overhead
Total DM cost / DM cost per pound = Number of DM pounds
$1,040/ $2 = 520 pounds of DM
Predetermined overhead rate (POHR) x Allocation base = Applied overhead
POHR x 520 DM pounds = $2,080
POHR = $2,080/520
POHR = $4.00 per pound of DM

Question 6

If one unit of Product X used $2.50 of direct materials and $3.00 of direct labor,sold for $8.00,and was assigned overhead at the rate of 30% of direct labor costs,how much gross profit was realized from this sale?
A) $8.00
B) $5.50
C) $2.50
D) $1.60
E) $0.90

Accepted Answer

Cost of goods sold = DM + DL + OH
= $2.50 + $3.00 + .3($3.00) = $6.40
Gross profit = Sales - cost of goods sold
= $8.00 - $6.40 = $1.60

Question 7

Deltan Corp.allocates overhead to production on the basis of direct labor costs.If Deltan's total estimated overhead is $450,000 and estimated direct labor cost is $180,000,determine the amount of overhead to be allocated to finished goods inventory.There is $20,000 of total direct labor cost in the jobs in the finished goods inventory.
A) $8,000
B) $20,000
C) $70,000
D) $50,000
E) $90,000

Accepted Answer

OH rate = $450,000/$180,000 = 250%
OH allocated = 250% x $20,000 = $50,000

Question 8

The Goods in Process Inventory account of a manufacturing company that uses an overhead rate based on direct labor cost has a $7,750 debit balance after all posting is completed.The cost sheet of the one job still in process shows direct material cost of $6,000 and direct labor cost of $1,000.Therefore,the company's overhead application rate is:
A) 10.7%
B) 75.0%
C) 133.0%
D) 90.3%
E) 111.0%

Accepted Answer

GIP = DM + DL + OH
$7,750 = $6,000 + $1,000 + OH
OH = $750
OH rate = $750/$1,000 = 75.0%

Question 9

The ending inventory of finished goods has a total cost of $10,000 and consists of 500 units.If the overhead applied to these goods is $2,000,and the overhead rate is 50% of direct labor,how much direct materials cost was incurred in producing these units?
A) $4,000
B) $6,000
C) $3,000
D) $7,000
E) $10,000

Accepted Answer

DM + DL + OH = Total cost
DM + ($2000/.5) + $2,000 = $10,000
DM + $4,000 + $2,000 = $10,000
DM = $4,000

Question 10

Using the following accounts and an overhead rate of 90% of direct labor cost,determine the amount of applied overhead.

A) $79,200
B) $167,200
C) $34,320
D) $88,000
E) $35,376

Accepted Answer

$17,600 + 52,800 + DL + OH - $201,520 = $36,080
DL + OH = $167,200
DL + .9DL = $167,200
1.9DL = $167,200
DL = $88,000
$88,000 + OH = $167,200
OH = $79,200

Question 11

If one unit of Product X used $.75 of direct materials and $6.00 of direct labor,sold for $12.00,and was assigned overhead at the rate of 20% of direct labor costs,how much gross profit was realized from this sale?
A) $12.00
B) $6.75
C) $.75
D) $1.20
E) $4.05

Accepted Answer

Cost of goods sold = DM + DL + OH
= $.75 + $6.00 + .2($6.00)
= $7.95
Gross profit = Sales - cost of goods sold
= $12.00 - $7.95 = $4.05

Question 12

Austin Company uses a job order cost accounting system.The company's executives estimated that direct labor would be $2,000,000 (200,000 hours at $10/hour)and that factory overhead would be $1,500,000 for the current period.At the end of the period,the records show that there had been 180,000 hours of direct labor and $1,200,000 of actual overhead costs.Using direct labor hours as the allocation base,calculate the under- or overapplied overhead for the period.
A) $150,000 overapplied.
B) $150,000 underapplied.
C) $300,000 underapplied.
D) $300,000 overapplied.
E) $200,000 underapplied.

Accepted Answer

OH rate = $1,500,000/200,000 hours = $7.50/hour
OH applied = (180,000)(7.50) = $1,350,000; OH actual = $1,200,000
OH is $150,000 overapplied

Question 13

Using the following accounts and an overhead rate of 80% of direct labor cost,determine the amount of applied overhead.

A) $135,000
B) $75,000
C) $60,000
D) $101,000
E) $17,000

Accepted Answer

$53,000 + 48,000 + DL + OH - 200,000 = $36,000
DL + OH = $135,000
DL + .8DL = $135,000
1.8DL = $135,000
DL = 75,000
$75,000 + OH = $135,000
OH = $60,000

Question 14

At the current year-end,Hardly Company found that its overhead was underapplied by $2,500,and this amount was not deemed to be a material amount.Based on this information,Hardly should:
A) Close the $2,500 to Cost of Goods Sold.
B) Close the $2,500 to Finished Goods Inventory.
C) Do nothing about the $2,500 since it is not material, and it is likely that overhead will be overapplied by the same amount next year.
D) Carry the $2,500 to the income statement as Other Expense.
E) Carry the $2,500 to the next period.

Accepted Answer

When overhead is underapplied, this means that the actual overhead costs incurred were greater than the overhead costs allocated to production. This can happen due to various reasons such as unexpected increases in costs or inefficient production processes. Underapplied overhead is a debit balance that needs to be closed out at the end of the accounting period. Since the amount of underapplied overhead is not material, it can be closed to Cost of Goods Sold. This will increase the cost of goods sold and decrease the net income by the same amount, which is a conservative approach that ensures that the income statement reflects the actual costs incurred. Choice B is not appropriate since the underapplied overhead is not related to finished goods inventory. Choice C is not appropriate since it is not certain that the overhead will be overapplied next year. Choice D is not appropriate since the underapplied overhead is not an other expense. Choice E is not appropriate since underapplied overhead should be closed out at the end of the current accounting period.

Question 15

The Goods in Process Inventory account of a manufacturing company that uses an overhead rate based on direct labor cost has a $4,400 debit balance after all posting is completed.The cost sheet of the one job still in process shows direct material cost of $2,000 and direct labor cost of $800.Therefore,the company's overhead application rate is:
A) 40%
B) 50%
C) 80%
D) 200%
E) 220%

Accepted Answer

GIP = DM + DL + OH
$4,400 = $2,000 + $800 + OH
OH = $1,600
OH rate = $1,600/$800 = 200%

Question 16

A company allocates overhead to production on the basis of direct labor cost.If the company's total estimated overhead is $870,000 and estimated direct labor cost is $1,160,000,determine the amount of overhead to be allocated to finished goods inventory.There is $791,000 of total direct labor cost in the jobs in the finished goods inventory.
A) $1,054,667
B) $593,250
C) $1,275,853
D) $1,079,482
E) $79,000

Accepted Answer

OH rate = $870,000/$1,160,000 = 75%
OH allocated = 75% x $791,000 = $593,250

Question 17

The R&R Company's manufacturing costs for August are: direct labor,$13,000; indirect labor,$6,500; direct materials,$15,000; taxes on raw materials and work in process,$800; heat,lights,and power,$1,000; and insurance on plant and equipment,$200.R&R Company's factory overhead incurred for August is:
A) $2,000
B) $6,500
C) $8,500
D) $21,500
E) $36,500

Accepted Answer

$6,500+1,000+200+800 = $8,500

Question 18

The amount by which overhead incurred during a period exceeds the overhead applied to jobs is:
A) Balanced overhead.
B) Predetermined overhead.
C) Actual overhead.
D) Underapplied overhead.
E) Overapplied overhead.

Accepted Answer

Underapplied overhead represents the amount by which actual overhead costs exceed the overhead applied to jobs. It is considered unfavorable and must be closed out to the Cost of Goods Sold account at the end of the period.

Question 19

The ending inventory of finished goods has a total cost of $9,000 and consists of 600 units.If the overhead applied to these goods is $3,000,and the overhead rate is 75% of direct labor,how much direct materials cost was incurred in producing these units?
A) $3,750
B) $2,000
C) $4,000
D) $6,000
E) $9,000

Accepted Answer

DM + DL + OH = Total cost
DM + ($3,000/.75) + $3,000 = $9,000
DM + $4,000 + $3,000 = $9,000
DM = $2,000

Question 20

If a company applies overhead to production with a predetermined rate,a credit balance in the Factory Overhead account at the end of the period means that:
A) The bookkeeper has made an error because the debits don't equal the credits.
B) The balance will be carried forward to the next period as an overhead cost.
C) Actual overhead was less than the overhead amount charged to production.
D) The overhead was underapplied for the period.
E) Actual overhead was greater than the overhead amount charged to production.

Accepted Answer

A credit balance in the Factory Overhead account indicates that the overhead applied to production was greater than the actual overhead incurred, meaning actual overhead was less than the overhead amount charged to production.

Quiz 15: Job Order Costing and Analysis

If overhead applied is less than actual overhead,it is:

The amount by which the overhead applied to jobs during a period exceeds the overhead incurred during the period is known as:

If one unit of Product X used $2.50 of direct materials and $3.00 of direct labor,sold for $8.00,and was assigned overhead at the rate of 30% of direct labor costs,how much gross profit was realized from this sale?

The ending inventory of finished goods has a total cost of $10,000 and consists of 500 units.If the overhead applied to these goods is $2,000,and the overhead rate is 50% of direct labor,how much direct materials cost was incurred in producing these units?

Using the following accounts and an overhead rate of 90% of direct labor cost,determine the amount of applied overhead.

If one unit of Product X used $.75 of direct materials and $6.00 of direct labor,sold for $12.00,and was assigned overhead at the rate of 20% of direct labor costs,how much gross profit was realized from this sale?

Using the following accounts and an overhead rate of 80% of direct labor cost,determine the amount of applied overhead.

At the current year-end,Hardly Company found that its overhead was underapplied by $2,500,and this amount was not deemed to be a material amount.Based on this information,Hardly should:

The amount by which overhead incurred during a period exceeds the overhead applied to jobs is:

The ending inventory of finished goods has a total cost of $9,000 and consists of 600 units.If the overhead applied to these goods is $3,000,and the overhead rate is 75% of direct labor,how much direct materials cost was incurred in producing these units?

If a company applies overhead to production with a predetermined rate,a credit balance in the Factory Overhead account at the end of the period means that: