Question 1

Alex Constructors uses job-order costing for production of custom playground sets. The company incurred the following costs during March: $\begin{array}{ll}
\text { Direct materi als used } & \$ 22,000 \
\text { Direct labor } & \$ 14,000 \
\text { Applied overhead } & \$ 18,000 \
\text { Actual overhead } & \$ 20,000
\end{array}$ If Alex Constructors closes out any under or overapplied overhead directly to cost of goods sold, which entry will the company make to eliminate the over or underapplied amount in March? $\begin{array}{ll}
A.&\text {Cost of Goods Sold }&2,000\
&\text { Work in Process Inventory}&&2,000\
B.&\text {Manufacturing Overhead }&2,000\
&\text {Work in Frocess Inventory }&&2,000\
C.&\text { Manufacturing Overhead}&2,000\
&\text { Cost of Goods Sold}&&2,000\
D.&\text { Cost of Goods Sold}&2,000\
&\text {Manufacturing Overhead }&&2,000\
\end{array}$

Accepted Answer

The answer of Alex Constructors uses job-order costing for production...

Question 2

If the amount of underapplied overhead or overapplied overhead is small in amount, the Manufacturing Overhead account is closed to

Accepted Answer

If the amount of underapplied overhead or overapplied overhead is small, it means that the difference between actual overhead and applied overhead is not significant enough to affect the overall cost of goods sold. Therefore, the Manufacturing Overhead account can be closed directly to Cost of Goods Sold without having to allocate it to any of the inventory accounts.

Question 3

Mudd Shoe Company has expected overhead costs of $864,000. The majority of the overhead costs are incurred providing production support to the direct labor force. Direct labor rates vary from $12 to $21 per hour, and more complex tasks are assigned to more skilled workers who have higher pay rates. Management projects direct labor costs to be $540,000 with 39,273 direct labor hours. More complex tasks require proportionally more support than do the less complex tasks.
Each model/size of shoe is produced in a separate production batch and constitutes a job. Mudd allocates overhead based on direct labor hours. During the year, the company produced 6,600 pairs of the size 8 Beachcomber shoes. A total of 4,200 direct labor hours, costing $54,600, were assigned to the job. How much overhead will be assigned to the size 8 Beachcomber shoes?

Accepted Answer

The answer of Mudd Shoe Company has expected overhead costs...

Question 4

Reef Shoe Company has expected overhead costs of $864,000. The majority of the overhead costs are incurred providing production support to the direct labor force. Direct labor rates vary from $12 to $21 per hour, and more complex tasks are assigned to more skilled workers who have higher pay rates. Management projects direct labor costs to be $540,000 with 39,273 direct labor hours. More complex tasks require proportionally more support than do the less complex tasks.
Each model/size of shoe is produced in a separate production batch and constitutes a job. During the year, the company produced 6,600 pairs of the size 8 Beachcomber flip flop. A total of 4,200 direct labor hours, costing $54,600, were assigned to the job. Which method of assigning overhead should management prefer?

Accepted Answer

Direct labor cost is the preferred allocation base because it reflects the complexity of the tasks, with higher-paid workers handling more complex jobs that incur more overhead costs.

Question 5

Wunder Builders estimates the following overhead costs for 2013: $\begin{array}{lr}
\text { Equipment depreciation } & \$ 30,000 \
\text { Equipment maintenance } & 64,000 \
\text { Factory management salaries } & 150,000 \
\text { Factory rent } & 50,000 \
\text { Total manufacturing overhead } & \$ 294,000
\end{array}$

$\text { Wunder } B \text { uilders incurred the following costs for } 2013 \text { for job } 23 \text { : }$
Direct material $\quad\quad\quad \$ 80,000 $ Direct labor$\quad$$\quad$$ 60,000
Wunder applies manufacturing overhead based on direct labor cost. Other jobs incurred $320,000 of direct labor. Wunder Builders budgeted $350,000 in direct labor costs and 20,000 machine hours for 2013. Actual manufacturing overhead for 2013 was $300,000. How much overhead will Wunder Builders apply to job 23?

Accepted Answer

The overhead rate is calculated as Total Budgeted Overhead ($294,000) divided by Total Budgeted Direct Labor ($350,000), which gives 84%. Applying this rate to Job 23's direct labor cost ($60,000) results in $50,400.

Question 6

Haskell Construction began the month of July with jobs 60 and 63 completed and waiting to be shipped to customers. At the end of June, jobs 61, 64, and 65 were in production. During July, jobs 66, 67, 68, 69 and 70 were begun. The company completed Jobs 61, 65, 66, 68, and 69 during July. Jobs 60, 61, 63, 66, and 68 were shipped to customers during July. Which jobs are in work in process on July 31?

Accepted Answer

Jobs 64, 67, and 70 are in work in process on July 31 because they were not completed or shipped during July.

Question 7

Haskell Construction began the month of July with jobs 60 and 63 completed and waiting to be shipped to customers. At the end of June, jobs 61, 64, and 65 were in production. During July, jobs 66, 67, 68, 69 and 70 were begun. The company completed Jobs 61, 65, 66, 68, and 69 during July. Jobs 60, 61, 63, 66, and 68 were shipped to customers during July. Which jobs are in finished goods on July 31?

Accepted Answer

Jobs 60, 61, 63, 66, and 68 were shipped to customers during July. This means that jobs 64, 65, 67, and 70 are the only jobs that could potentially be in finished goods on July 31. However, we know that jobs 61, 65, 66, 68, and 69 were completed during July, and we also know that job 65 was shipped to a customer. Therefore, the only jobs that could be in finished goods on July 31 are jobs 65 and 69.

Question 8

If Duffy Company budgets total overhead costs for the next year of $40,000 and anticipates using machine hours as the overhead allocation base, which of the following statements is true?

Accepted Answer

The answer of If Duffy Company budgets total overhead costs...

Question 9

Mudd Shoe Company has expected overhead costs of $864,000. The majority of the overhead costs are incurred providing production support to the direct labor force. Direct labor rates vary from $12 to $21 per hour, and more complex tasks are assigned to more skilled workers who have higher pay rates. Management projects direct labor costs to be $540,000 with 39,273 direct labor hours. More complex tasks require proportionally more support than do the less complex tasks.
Each model/size of shoe is produced in a separate production batch and constitutes a job. Mudd allocates overhead based on direct labor cost. During the year, the company produced 6,600 pairs of the size 8 Beachcomber shoes. A total of 4,200 direct labor hours, costing $54,600, were assigned to the job. How much overhead will be assigned to the size 8 Beachcomber shoes?

Accepted Answer

First, we calculate the predetermined overhead rate:

Predetermined overhead rate = Estimated overhead costs ÷ Estimated direct labor costs 
Predetermined overhead rate = $864,000 ÷ $540,000 
Predetermined overhead rate = $1.60 per direct labor dollar

Then, we can use the predetermined overhead rate to calculate the amount of overhead assigned to the job:

Overhead assigned to job = Predetermined overhead rate x Actual direct labor cost 
Overhead assigned to job = $1.60 x $54,600 
Overhead assigned to job = $87,360

Therefore, the answer is C) $87,360.

Question 10

Osprey Production uses job-order costing for batches of customer printed t-shirts. For job R45, the company incurred the following costs: $\begin{array}{lr}
\text { Direct materials used } & \$ 4,235 \
\text { Direct labor } & \$ 1,300 \
\text { Applied overhead } & \$ 450
\end{array}$ Actual overhead for Osprey for the month totaled $24,840, based on a total of 2,300 shirts for the month. If Job R45 consisted of 570 shirts, how much is the cost per shirt for this job?

Accepted Answer

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Question 11

Why is overhead applied using a predetermined overhead rate?

Accepted Answer

Predetermined overhead rates are used because the actual amount of overhead is not known until yearend, so the company needs timely cost information. A predetermined rate is calculated at the beginning of the period based on estimated overhead costs and an estimated activity level, which allows for a more accurate allocation of costs to products or services throughout the period.

Question 12

Assume that managers are rewarded for reducing product costs as calculated by the accounting system. In keeping with the theme that "you get what you measure," if a company switches its overhead application basis from direct labor hours to machine hours, what would you expect to happen?

Accepted Answer

If managers are rewarded for reducing product costs as calculated by the accounting system, then they will try to reduce direct labor hours in order to reduce costs. If the overhead application basis is switched from direct labor hours to machine hours, managers will now try to reduce machine hours instead. This will result in a decrease in machine hours, as managers try to minimize them in order to maximize their rewards. However, this may not necessarily lead to a decrease in total costs or output, as there are other factors that can affect these measures.

Question 13

Stalk Products has $27,000 of underapplied overhead at the end of the year. Management has asked you what the impact on income will be if you prorate the underapplied overhead to the appropriate accounts. What will you tell them?

Accepted Answer

Prorating underapplied overhead typically allocates costs to work in process, finished goods, and cost of goods sold, which can result in a smaller impact on cost of goods sold and thus higher income compared to closing it entirely to cost of goods sold.

Question 14

Builder Giant estimates the following overhead costs for 2013: $\begin{array}{lr}
\text { Equipment depreciation } & \$ 30,000 \
\text { Equipment maintenance } & 64,000 \
\text { Factory management salaries } & 150,000 \
\text { Factory rent } & 50,000 \
\text { Total manufacturing overhead } & \$ 294,000
\end{array}$
$\text { Buil der Giant incurred the following costs for } 2013 \text { for job A.56: }$
Direct material $\quad\quad\quad \$ 40,000 $ 
Direct labor$\quad\quad\quad\quad \$ 12,800 $ Other jobs incurred $183,200 of direct labor. Builder Giant also budgeted $210,000 in direct labor costs and 20,000 machine hours for 2013. Actual manufacturing overhead for 2013 was $336,000. How much is the predetermined overhead rate using direct labor cost as the allocation base?

Accepted Answer

The answer of Builder Giant estimates the following overhead costs...

Question 15

During 2013, Anhover Wedding Planners applied overhead using a job-order costing system at a rate of $3.25 per direct labor hour. Estimated direct labor hours totaled 220,000 and estimated overhead was $715,000 for the year. Actual direct labor hours for 2013 totaled 215,000 and actual overhead was $702,000. What is the amount of under or over applied overhead for the year?

Accepted Answer

The answer of During 2013, Anhover Wedding Planners applied overhead...

Question 16

Ansley Products applies overhead using a predetermined overhead rate. Overhead is applied based on direct labor hours. At the beginning of the year, it is estimated that $500,000 in overhead will be incurred and 25,000 hours will be worked. At year-end, the company had used 24,000 hours of labor, and actual overhead costs were $470,000. What can be concluded from this?

Accepted Answer

The answer of Ansley Products applies overhead using a predetermined...

Question 17

Sharp Tables produces go carts designed to a customer's specification with the customer's logo. Job 65 consists of producing 40 carts for Race Around for a new store opening. Overhead is applied on the basis of direct labor hours using a predetermined overhead rate of $18 per hour. Job 65 inc $\begin{array}{ll}
\text { Direct materials }&\$2,200\
\text { Direct labor }&28 \text { hours at } \$ 15 \text { per hour }
\end{array}$
 urred the following amounts:
How much is the cost of Job 65?

Accepted Answer

The cost of Job 65 is the sum of direct materials, direct labor, and overhead. Direct materials are $2,200, direct labor is 28 hours at $15 per hour = $420, and overhead is 28 hours at $18 per hour = $504. Therefore, the total cost of Job 65 is $2,200 + $420 + $504 = $3,124.

Question 18

Walsam Tools applies manufacturing overhead based on direct labor hours. Information concerning manufacturing overhead and labor for August follows: $$\begin{array} { l r r } 
&  \text { Estimated } & \text { Actual } \
\text { Overhead cost } & \$ 160,000 & \$ 161,000 \
\text { Direct labor hours } & 8,000 & 8,200 \
\text { Direct labor cost } & \$ 120,000 & \$ 115,800
\end{array}$$ How much is the predetermined overhead rate?

Accepted Answer

The answer of Walsam Tools applies manufacturing overhead based on...

Question 19

Lnsing Productions estimated it would use $360 of materials and take 20 hours at $14.50 per hour to complete job 456. It calculated a predetermined overhead rate of $9.00 per direct labor hour. Job 456 required $380 of material and took employees a total of 19.25 hours at a cost of $15.20 per hour to complete the job. Actual manufacturing overhead costs totaled $223,000 for the year for the company. How much is the cost of Job 456?

Accepted Answer

The answer of Lnsing Productions estimated it would use $360...

Question 20

Brothers Construction uses a predetermined overhead rate of $6.00 per direct labor hour. Budgeted overhead was $720,000 and actual overhead incurred was $700,000. Actual direct labor hours worked were 125,000 hours. How many labor hours did Brothers plan to work during the year?

Accepted Answer

We can use the formula: 
Budgeted Overhead = Predetermined Overhead Rate x Actual Direct Labor Hours
$720,000 = $6.00 x Actual Direct Labor Hours
Actual Direct Labor Hours = $720,000 / $6.00
Actual Direct Labor Hours = 120,000 hours
Therefore, Brothers Construction planned to work 120,000 hours during the year.

Quiz 2: Job-Order Costing for Manufacturing and Service Companies