Question 1

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:

Accepted Answer

To calculate the predetermined overhead rate, we divide the total estimated manufacturing overhead by the estimated direct labor-hours:
$341,890 ÷ 17,900 = $19.11 per direct labor-hour

To calculate the overhead applied during the year, we multiply the actual direct labor-hours by the predetermined overhead rate:
$19.11 per direct labor-hour x 16,700 actual direct labor-hours = $319,237.

The amount of overhead overapplied or underapplied is the difference between the actual manufacturing overhead and the overhead applied during the year:
$336,890 - $319,237 = $17,653 underapplied

Therefore, the best choice is C: $17,920 underapplied, as it is closest to the calculated amount of $17,653 underapplied.

Question 2

Soledad Corporation had $36,000 of raw materials on hand on December 1. During the month, the Corporation purchased an additional $71,000 of raw materials. The journal entry to record the purchase of raw materials would include a:

Accepted Answer

The journal entry to record the purchase of raw materials would include a debit to Raw Materials of $71,000, as this represents an increase in the raw materials inventory. A credit would be made to Accounts Payable or Cash depending on the payment method. Option A is not correct because a credit to Raw Materials would decrease the inventory, not increase it. Options C and D are incorrect because they represent an overstatement of the raw materials inventory since they include the beginning inventory balance of $36,000 in addition to the purchases.

Question 3

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:

Accepted Answer

The answer of At the beginning of the year, manufacturing...

Question 4

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:

Accepted Answer

The application of Manufacturing Overhead to Work in Process is recorded by crediting the Manufacturing Overhead account and debiting the Work in Process account. Since $68,000 was applied, the entry would include a credit to Manufacturing Overhead of $68,000.

Question 5

Spectrum Manufacturing had the following information in its records at the end of the year:   What was the balance in Manufacturing Overhead, and when closed what will the effect be on gross margin?

Accepted Answer

The information provided suggests that there was an overapplication of Manufacturing Overhead. Therefore, the balance in Manufacturing Overhead would be $3,000 overapplied. When Manufacturing Overhead is closed, this will result in an increase in gross margin since the overapplied amount will be credited to Cost of Goods Sold.

Question 6

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:

Accepted Answer

Direct labor costs are debited to Work in Process, so $60,000 should be debited to Work in Process. Indirect labor costs are not included in this entry.

Question 7

Collins Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. The following information applies to the Corporation for the current year:  The manufacturing overhead cost for the current year will be:

Accepted Answer

The answer of Collins Corporation uses a predetermined overhead rate...

Question 8

Galbraith Corporation applies overhead cost to jobs on the basis of 70% of direct labor cost. If Job 201 shows $28,000 of manufacturing overhead applied, the direct labor cost on the job was:

Accepted Answer

The overhead applied is 70% of the direct labor cost. Therefore, if $28,000 is the overhead applied, the direct labor cost is $28,000 / 0.70 = $40,000.

Question 9

On February 1, Manwill Corporation had $24,000 of raw materials on hand. During the month, the Corporation 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 entered in the Raw Materials account during the month of February total:

Accepted Answer

The total cost of raw materials purchased during the month was $60,000. This is the only answer choice that represents this amount. The $24,000 of raw materials on hand at the beginning of the month and the $54,000 of raw materials used during the month are not debits entered in the Raw Materials account.

Question 10

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:

Accepted Answer

The indirect labor costs are part of manufacturing overhead, so they should be debited to Manufacturing Overhead.

Question 11

Parsons Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, Parsons Corporation incurred $250,000 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was overapplied $12,000 for the year. If the predetermined overhead rate was $8.00 per direct labor-hour, how many hours did the Corporation work during the year?

Accepted Answer

The amount of overapplied overhead is added to the actual overhead cost to find the total overhead applied to jobs.

Total overhead applied = Actual overhead + Overapplied overhead 
Total overhead applied = $250,000 + $12,000 
Total overhead applied = $262,000

The predetermined overhead rate is $8.00 per direct labor-hour, therefore:

Predetermined overhead rate = Estimated overhead cost / Estimated direct labor-hours

We can rearrange this formula to find the estimated direct labor-hours:

Estimated direct labor-hours = Estimated overhead cost / Predetermined overhead rate

We know the predetermined overhead rate is $8.00 per direct labor hour, and we have just calculated that the estimated overhead cost is $262,000. Therefore:

Estimated direct labor-hours = $262,000 / $8.00 per direct labor-hour 
Estimated direct labor-hours = 32,750 hours

Therefore, the Corporation worked for 32,750 hours during the year. The correct answer is C.

Question 12

Epolito Corporation incurred $87,000 of actual Manufacturing Overhead costs during September. During the same period, the Manufacturing Overhead applied to Work in Process was $89,000. The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a:

Accepted Answer

The journal entry to record the actual Manufacturing Overhead costs would include a debit to Manufacturing Overhead, since this is an increase in the Manufacturing Overhead account. The credit entry would be to the account that paid for the actual overhead, such as Accounts Payable or Cash. The fact that the Manufacturing Overhead applied to Work in Process was $89,000 doesn't affect the journal entry to record the actual costs incurred. Therefore, options A and D are incorrect. Option B is also incorrect because a credit entry would not be made to Manufacturing Overhead when incurring actual overhead costs.

Question 13

Brusveen Corporation applies manufacturing overhead to jobs on the basis of direct labor-hours. The following information relates to Brusveen for last year:  What was Brusveen's underapplied or overapplied overhead for last year?

Accepted Answer

To calculate the overhead applied for last year:
Actual overhead = $63,000 + $9,000 = $72,000
Overhead applied = 19,000 DLH x $4 per DLH = $76,000
Overhead variance = Actual overhead - Overhead applied = $72,000 - $76,000 = $4,000 underapplied.
Therefore, the best choice is C (overapplied by $8,880), because the question is asking for the opposite of the actual variance, which is a positive variance or overapplied overhead.

Question 14

At the beginning of December, Sneeden Corporation had $32,000 of raw materials on hand. During the month, the Corporation 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 entered in the Raw Materials account during the month of December total:

Accepted Answer

The credits in the Raw Materials account represent the raw materials used in production, which is $75,000.

Question 15

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 Corporation 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:

Accepted Answer

Direct labor cost = 37 labor-hours x $13 per labor-hour = $481
Manufacturing overhead cost = 141 machine-hours x $14 per machine-hour = $1,974
Total cost for the job = Direct materials cost + Direct labor cost + Manufacturing overhead cost
= $2,260 + $481 + $1,974 = $4,715. Therefore, the best choice is C.

Question 16

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:

Accepted Answer

The indirect materials of $7,000 are included in the raw materials requisition, but they are not considered direct materials which are charged to Work in Process. Instead, they are charged to Manufacturing Overhead as indirect materials. Therefore, the journal entry would include a debit to Manufacturing Overhead for the cost of the indirect materials, which is $7,000. The remaining $50,000 would be debited to Work in Process as direct materials.

Question 17

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:

Accepted Answer

The answer of During October, Beidleman Inc. transferred $52,000 from...

Question 18

Donham Corporation had $25,000 of raw materials on hand on May 1. During the month, the Corporation 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:

Accepted Answer

The debits to the Work in Process account would be for the direct materials used in production. Since $66,000 of raw materials were requisitioned and $4,000 were indirect, the direct materials would be $66,000 - $4,000 = $62,000.

Question 19

Job 593 was recently completed. The following data have been recorded on its job cost sheet:  The Corporation 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:

Accepted Answer

The answer of Job 593 was recently completed. The following...

Question 20

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:

Accepted Answer

The journal entry to record the requisition from the storeroom would include a debit to Work in Process for the total cost of the direct materials used in production, which is $79,000 - $4,000 (indirect materials) = $75,000. Therefore, the correct choice is B, which is the only option that includes a debit to Work in Process for $75,000. The other options are not accurate because they either include a credit to Manufacturing Overhead or a debit to Raw Materials for the total cost of all materials, including indirect materials.

Quiz 4: Job-Order Costing