Question 1

Sybil,Inc.uses a predetermined overhead allocation rate to allocate manufacturing overhead costs to jobs.The company recently completed Job 300X.This job used 11 machine hours and 5 direct labor hours.The predetermined overhead allocation rate is calculated to be $43 per machine hour.What is the amount of manufacturing overhead allocated to Job 300X using machine hours as the allocation base?

Accepted Answer

Allocated manufacturing overhead cost = Predetermined overhead allocation rate × Actual quantity of the allocation base used by each job
Allocated manufacturing overhead cost = $43 × 11 machine hours = $473.

Question 2

Which of the following describes the allocation base for allocating manufacturing overhead costs?

Accepted Answer

The allocation base for allocating manufacturing overhead costs is the primary cost driver of indirect manufacturing costs, which is a measure of the level of activity that drives the overhead costs. This can be a measure such as direct labor hours or machine hours.

Question 3

Arabica Manufacturing uses a predetermined overhead allocation rate based on the number of machine hours.At the beginning of the year,it estimated total manufacturing overhead costs to be $1,050,000,total number of direct labor hours to be 4000,and total number of machine hours to be 20,000 hours.What was the predetermined overhead allocation rate? (Round your answer to the nearest cent.)

Accepted Answer

$\begin{array}{llcc}
  \text {Estimated manufacturing overhead costs for the year (A)  } &\$1,050,000  \
 \text { Estimated total number of machine hours (B) } &\underline{20,000}\
 \text {Predetermined overhead allocation rate per machine hour $ (A / B) $  } &\underline{\underline{\$52.50}}\
\end{array}$

Question 4

Archangel Manufacturing calculated a predetermined overhead allocation rate at the beginning of the year based on direct labor costs.The production details for the year are given below: $\begin{array} { | l | l | } 
\hline \text { Total manufacturing overhead costs estimated at the beginning of the year } & \$ 150,000 \
\hline \text { Total direct labor costs estimated at the beginning of the year } & \$ 340,000 \
\hline \text { Total direct labor hours estimated at the beginning of the year } & 10,000 \text { direct labor hours } \
\hline \text { Actual manufacturing overhead costs for the year } & \$ 150,000 \
\hline \text { Actual direct labor costs for the year } & \$ 360,000 \
\hline \text { Actual direct labor hours for the year } & 11,000 \text { direct labor hours }\
\hline
\end{array}$ Calculate the manufacturing overhead allocation rate for the year based on the above data.(Round your final answer to two decimal places.)

Accepted Answer

$\begin{array}{llcc}
  \text { Total manufacturing overhead estimated at the beginning of the year } &\$150,000  \
 \text {  Total direct labor costs estimated at the beginning of the year } &\underline{/340,000}\
 \text {Predetermined overhead allocation rate  } &\underline{\underline{44.12\%}}\
\end{array}$

Question 5

Zephyros Corporation had estimated manufacturing overhead costs for the coming year to be $303,000.The total estimated direct labor hours and machine hours for the coming year are 7000 and 12,000,respectively.Manufacturing overhead costs are allocated based on direct labor hours.What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.)

Accepted Answer

Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base
Predetermined overhead allocation rate = $303,000 / 7000 labor hours = $43.29 per labor hour

Question 6

Which of the following will be categorized as a manufacturing overhead cost?

Accepted Answer

Manufacturing overhead costs are indirect costs that cannot be directly traced to a specific product or job. Depreciation on factory plant and equipment is an example of a manufacturing overhead cost because it is necessary for producing goods, but its cost cannot be directly attributed to any specific product. Wages paid to assembly line workers and the cost of direct materials used are considered direct costs because they can be traced directly to a specific product. Administration charges of showroom, on the other hand, are not related to the production of goods and would be classified as a period cost instead of a manufacturing overhead cost.

Question 7

Manufacturing overhead is allocated by debiting the Finished Goods Inventory account.

Accepted Answer

Manufacturing overhead is allocated by debiting the Manufacturing Overhead account and then allocating the total overhead cost to the appropriate cost objects, such as products or jobs, through predetermined overhead rates or actual overhead incurred. The finished goods inventory account is only credited (not debited) when finished goods are transferred out of production and into inventory.

Question 8

The predetermined overhead allocation rate for a given production year is calculated ________.

Accepted Answer

The predetermined overhead allocation rate is calculated before the accounting period begins. This rate is used to allocate overhead costs to products or services as they are produced. It is based on estimated overhead costs and expected activity levels for the upcoming production year.

Question 9

The Equinox Fabrication Plant suffered a fire incident in August,and most of the records for the year were destroyed.The following accounting data for the year were recovered: $\begin{array} { | l | l | } 
\hline \text { Total manufacturing overhead estimated at the beginning of the year } & \$ 103,520 \
\hline \text { Total direct labor costs estimated at the beginning of the year } & \$ 185,000 \
\hline \text { Total direct labor hours estimated at the beginning of the year } & 3500 \text { direct labor hours } \
\hline \text { Actual manufacturing overhead costs for the year } & \$ 99,570 \
\hline \text { Actual direct labor costs for the year } & \$ 150,000 \
\hline \text { Actual direct labor hours for the year } & 2950 \text { direct labor hours } \
\hline
\end{array}$ The company bases its manufacturing overhead allocation on the number of direct labor hours.What was the predetermined overhead allocation rate for the year? (Round your answer to the nearest cent.)

Accepted Answer

$\begin{array}{llcc}
  \text { Estimated manufacturing overhead } & \$103,520 \
 \text { Estimated direct labor hours } &\underline{3500 hours}\
 \text {Predetermined overhead allocation rate (per direct labor hour)*   } &\underline{\underline{\$ 29.58}}\
 \text { *(\$103,520/ 3500 direct labor hours) } &\
\end{array}$

Question 10

Manufacturing overhead is allocated by debiting the Work-in-Process Inventory account and crediting the Manufacturing Overhead account.

Accepted Answer

This is correct. Manufacturing overhead is allocated by debiting the Work-in-Process Inventory account and crediting the Manufacturing Overhead account.

Question 11

Jeremy Corporation estimated manufacturing overhead costs for the year to be $540,000.Jeremy also estimated 9000 machine hours and 2000 direct labor hours for the year.It bases the predetermined overhead allocation rate on machine hours.On January 31,Job 25 was completed.It required 6 machine hours and 4 direct labor hours.What is the amount of manufacturing overhead allocated to the completed job? (Round intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

Accepted Answer

Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base
Predetermined overhead allocation rate = $540,000 / 9000 machine hours = $60.00 per machine hour
Allocated manufacturing overhead cost = Predetermined overhead allocation rate × Actual quantity of the allocation base used by each job
Allocated manufacturing overhead cost = $60.00 × 6 machine hours = $360

Question 12

Which of the following will be debited to the Manufacturing Overhead account of a watch manufacturer?

Accepted Answer

The Manufacturing Overhead account includes all costs incurred in the production process that are not directly related to the cost of materials or labor. These indirect costs may include factory rent, utilities, depreciation on factory equipment, etc. Among the options given, only factory electricity costs are related to the production process and therefore should be debited to the Manufacturing Overhead account.

Question 13

The predetermined overhead allocation rate is the rate used to ________.

Accepted Answer

The predetermined overhead allocation rate is calculated at the beginning of a period and is used to allocate estimated manufacturing overhead costs to jobs based on a chosen cost driver, such as direct labor hours or machine hours. This rate is not used to assign direct material costs to jobs or trace costs to jobs, and it is not based on actual costs incurred during a period.

Question 14

Aaron,Inc.estimates direct labor costs and manufacturing overhead costs for the coming year to be $750,000 and $550,000,respectively.Aaron allocates overhead costs based on machine hours.The estimated total labor hours and machine hours for the coming year are 18,000 hours and 7000 hours,respectively.What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.)

Accepted Answer

Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base
Predetermined overhead allocation rate = $550,000 / 7000 machine hours = $78.57 per machine hour

Question 15

The accounting for the allocation of overhead costs is a three-step process and occurs at three different points in the accounting cycle.List each of the three steps.For each step indicate when the step occurs and why the step is needed.

Accepted Answer

The answer of The accounting for the allocation of overhead...

Question 16

Which of the following correctly describes the term cost driver?

Accepted Answer

Cost driver is the primary factor that causes a cost to be incurred. It is the activity or input that drives the level of costs within an organization. The other options (A, B, and D) do not accurately describe the term cost driver.

Question 17

The total amount of manufacturing overhead costs incurred during the period is recorded on the credit side of the Manufacturing Overhead account.

Accepted Answer

The total amount of manufacturing overhead costs incurred during the period is recorded on the debit side of the Manufacturing Overhead account, as these costs represent expenses to the business.

Question 18

Manufacturing overhead costs are allocated to the Work-in-Process Inventory account by a debit to the Manufacturing Overhead account.

Accepted Answer

Manufacturing overhead costs are allocated to the Work-in-Process Inventory account by a debit to the Work-in-Process Inventory account and a credit to the Manufacturing Overhead account.

Question 19

When a job order costing system is used,actual manufacturing overhead costs are debited to ________.

Accepted Answer

In a job order costing system, manufacturing overhead costs are accumulated in the Manufacturing Overhead account as indirect expenses until they are allocated to specific job orders. Thus, when actual overhead costs are incurred, they are debited to the Manufacturing Overhead account, not to expense accounts, cost of goods sold account, or work-in-process inventory account.

Question 20

The predetermined overhead allocation rate is calculated by dividing ________.

Accepted Answer

The predetermined overhead allocation rate is calculated by dividing the estimated overhead costs by total estimated quantity of the overhead allocation base. This helps in allocating overhead costs to products or services based on their usage of the overhead allocation base. Options A and B are incorrect because they do not use the estimated overhead costs, while option C uses actual costs and not estimated costs.

Quiz 2: Job Order Costing