Question 1

At the beginning of the year, Monroe Company estimates annual overhead costs to be $2,400,000 and that 300,000 machine hours will be operated. Using machine hours as a base, the amount of overhead applied during the year if actual machine hours for the year was 315,000 hours is

Accepted Answer

The predetermined overhead rate is calculated as follows:

Predetermined overhead rate = Estimated annual overhead costs / Estimated annual machine hours
= $2,400,000 / 300,000 machine hours
= $8 per machine hour

The amount of overhead applied during the year is calculated by multiplying the actual machine hours by the predetermined overhead rate:

Overhead applied = Actual machine hours x Predetermined overhead rate
= 315,000 machine hours x $8 per machine hour
= $2,520,000

Therefore, the correct answer is D.

Question 2

Overhead application is recorded with a

Accepted Answer

Overhead application involves allocating the manufacturing overhead costs to the products being produced. This is done by debiting the Work in Process Inventory account and crediting the Manufacturing Overhead account, reflecting the allocation of overhead costs to production.

Question 3

When determining costs of jobs, how does a company account for indirect materials?

Accepted Answer

Indirect materials, which are materials that cannot be directly traced to a specific job, are included in manufacturing overhead. Therefore, when these materials are used, they are transferred out of raw materials inventory and into manufacturing overhead. From there, they are allocated to the appropriate jobs through the application of overhead costs.

Question 4

Simmons Inc. applies overhead to production at a predetermined rate of 90% based on direct labor cost. Job No. 250, the only job still in process at the end of August, has been charged with manufacturing overhead of $8,100. What was the amount of direct materials charged to Job 250 assuming the balance in Work in Process inventory is $30,000?

Accepted Answer

To find the amount of direct materials charged to Job 250, we need to use the following formula:
Total manufacturing costs = Direct materials + Direct labor + Manufacturing overhead
We know the balance in Work in Process inventory is $30,000 and the manufacturing overhead charged to Job 250 is $8,100. Let's assume that the direct labor cost for Job 250 is $9,000 (we do not know this for certain, but we can assume it for the purposes of this problem). 
We can use the predetermined overhead rate of 90% to calculate the total manufacturing costs for Job 250: 
Total manufacturing costs = Direct labor / 0.9 
Total manufacturing costs = $9,000 / 0.9 
Total manufacturing costs = $10,000 
Now we can solve for the amount of direct materials charged to Job 250: 
Total manufacturing costs = Direct materials + Direct labor + Manufacturing overhead 
$10,000 = Direct materials + $9,000 + $8,100 
Direct materials = $10,000 - $9,000 - $8,100 
Direct materials = $900 
Therefore, the amount of direct materials charged to Job 250 is $900.

Question 5

In a job order cost system, a credit to Manufacturing Overhead will be accompanied by a debit to

Accepted Answer

In a job order cost system, Manufacturing Overhead is a control account that accumulates all indirect costs related to production such as rent, utilities, and supplies. When a credit is made to this account, it is an indication that some indirect costs have been incurred. To maintain the balance of the accounting equation, the debit must be made to a corresponding asset account, which in this case is Work in Process Inventory as it represents the cost of goods that are currently being produced. Therefore, the correct answer is C.

Question 6

The predetermined overhead rate is based on the relationship between

Accepted Answer

The predetermined overhead rate is calculated by estimating the annual overhead costs and dividing it by the expected annual activity level (such as machine hours or labor hours). This provides a per-unit rate that can be applied to each job or product based on its expected usage of overhead resources. Therefore, option B is the correct choice.

Question 7

Spencer Inc. applies overhead to production at a predetermined rate of 80% based on direct labor cost. Job No. 130, the only job still in process at the end of August, has been charged with manufacturing overhead of $6,400. What was the amount of direct materials charged to Job 130 assuming the balance in Work in Process inventory is $20,000?

Accepted Answer

The manufacturing overhead applied to Job No. 130 is $6,400, which is 80% of the direct labor cost. To find the direct labor cost, we divide the overhead by the overhead rate: $6,400 / 0.80 = $8,000 (direct labor cost). The total work in process for Job No. 130 is $20,000, which includes direct materials, direct labor, and manufacturing overhead. Subtracting direct labor ($8,000) and manufacturing overhead ($6,400) from the total gives us the direct materials cost: $20,000 - $8,000 - $6,400 = $5,600.

Question 8

Debits to Work in Process Inventory are accompanied by a credit to all but which one of the following accounts?

Accepted Answer

Debits to Work in Process Inventory represent the cost of production, so the credit should be to an account that represents the same cost. Raw materials, factory labor, and manufacturing overhead are all costs of production, but Cost of Goods Sold represents the cost of goods that have already been sold and is not a part of the production process. Therefore, the credit would not be to Cost of Goods Sold.

Question 9

During 2019, Tanner Manufacturing expected Job No. 26 to cost $300,000 of overhead, $500,000 of materials, and $200,000 in labor. Tanner applied overhead based on direct labor cost. Actual production required an overhead cost of $290,000, $550,000 in materials used, and $220,000 in labor. All of the goods were completed. What amount was transferred to Finished Goods?

Accepted Answer

The answer of During 2019, Tanner Manufacturing expected Job No....

Question 10

The predetermined overhead rate is

Accepted Answer

The predetermined overhead rate is determined at the beginning of the year by dividing the estimated overhead costs by the estimated amount of activity, such as direct labor hours or machine hours, that will be incurred during the year. This allows for the overhead costs to be allocated to the products or services produced during the year based on an estimated amount of activity rather than waiting until actual overhead costs are incurred.

Question 11

Simpson Company applies overhead on the basis of 200% of direct labor cost. Job No. 305 is charged with $180,000 of direct materials costs and $200,000 of manufacturing overhead. The total manufacturing costs for Job No. 305 is:

Accepted Answer

Manufacturing overhead is applied at 200% of direct labor cost. Therefore, if manufacturing overhead is $200,000, direct labor cost is $100,000 ($200,000 / 200%). Total manufacturing costs include direct materials, direct labor, and manufacturing overhead. Thus, for Job No. 305, the total is $180,000 (direct materials) + $100,000 (direct labor) + $200,000 (manufacturing overhead) = $480,000.

Question 12

The labor costs that have been identified as indirect labor should be charged to

Accepted Answer

Indirect labor costs cannot be traced to a specific product or job, and are therefore considered part of manufacturing overhead. Manufacturing overhead is then allocated to individual products or jobs based on a predetermined rate.

Question 13

For Wilton Company, the predetermined overhead rate is 70% of direct labor cost. During the month, $720,000 of factory labor costs are incurred of which $200,000 is indirect labor. Actual overhead incurred was $360,000. The amount of overhead debited to Work in Process Inventory should be:

Accepted Answer

The answer of For Wilton Company, the predetermined overhead rate...

Question 14

Which of the following is not viewed as part of accumulating manufacturing costs in a job order cost system?

Accepted Answer

Cost of goods sold is not a part of accumulating manufacturing costs in a job order cost system. Instead, it is recognized as an expense when the finished goods are sold. Raw materials, factory labor, and manufacturing overhead are all part of accumulating manufacturing costs in this system.

Question 15

In calculating a predetermined overhead rate, a recent trend in automated manufacturing operations is to choose an activity base related to

Accepted Answer

In automated manufacturing operations, machines are used extensively, and machine hours are a better activity base for allocating overhead costs than direct labor hours or raw materials dollars. Indirect labor dollars may also be included in calculating the predetermined overhead rate but are not the best choice as an activity base.

Question 16

For Jacobs Company, the predetermined overhead rate is 70% of direct labor cost. During the month, $600,000 of factory labor costs are incurred of which $140,000 is indirect labor. Actual overhead incurred was $320,000. The amount of overhead debited to Work in Process Inventory should be:

Accepted Answer

The answer of For Jacobs Company, the predetermined overhead rate...

Question 17

If annual overhead costs are expected to be $750,000 and direct labor costs are expected to be $1,000,000, then if the activity base is direct labor costs:

Accepted Answer

The predetermined overhead rate is calculated by dividing the estimated total overhead costs by the estimated total amount of the allocation base, in this case, direct labor costs. So, $750,000 / $1,000,000 = 0.75 or 75 cents of manufacturing overhead for every dollar of direct labor.

Question 18

Manufacturing overhead applied is added to direct labor incurred and to what other item to equal total manufacturing costs for the period?

Accepted Answer

Direct materials used, along with direct labor incurred and manufacturing overhead applied, are added together to equal total manufacturing costs for the period.

Question 19

Manufacturing overhead is applied to each job

Accepted Answer

Manufacturing overhead is applied to each job by means of a predetermined overhead rate. This rate is calculated before the start of the accounting period and is based on estimates of the total amount of overhead costs that will be incurred during the period and the total amount of activity that will be used to allocate these costs to the various jobs.

Question 20

Cost of goods sold is obtained from

Accepted Answer

The cost of goods sold is primarily derived from the finished goods inventory records, which track the cost of manufactured goods that are sold to customers.

Quiz 2: Job Order Costing