Question 1

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

Accepted Answer

As manufacturing operations become more automated, machine usage becomes a more appropriate activity base to allocate overhead costs because machines now do much of the work that was previously done by direct labor. Tracking machine hours is a more direct way to identify the actual usage of the factory floor and machinery. Choosing direct labor hours may lead to overestimation of overhead costs, given that less direct labor is required in an automated manufacturing operations. Choosing indirect labor dollars or raw materials may not accurately represent the activities that drive overhead costs.

Question 2

Manufacturing overhead is applied to each job

Accepted Answer

Manufacturing overhead is applied to each job by means of a predetermined overhead rate, which is calculated before the period begins by dividing the estimated total manufacturing overhead costs by an estimated allocation base (such as direct labor hours or machine hours). This rate is then used to apply overhead costs to each job based on its usage of the allocation base. The actual overhead costs incurred during the period are then compared to the amount of overhead applied to the jobs using the predetermined rate, and any over- or underapplied overhead is adjusted accordingly.

Question 3

Vektek, Inc. thinks machine hours is the best activity base for its manufacturing overhead. The estimate of annual overhead costs for its jobs was $2,050,000. The company used 1,000 hours of processing on Job No. B12 during the period and incurred overhead costs totaling $2,100,000. The budgeted machine hours for the year totaled 20,000. How much overhead should be applied to Job No. B12?

Accepted Answer

The answer of Vektek, Inc. thinks machine hours is the...

Question 4

Kinney Company applies overhead on the basis of 150% of direct labor cost. Job No. 176 is charged with $150,000 of direct materials costs and $180,000 of manufacturing overhead. The total manufacturing costs for Job No. 176 is

Accepted Answer

To determine the total manufacturing costs for Job No. 176, we need to first calculate the amount of direct labor cost incurred:
Direct Labor Cost = Total Manufacturing Overhead / Overhead Rate
Direct Labor Cost = $180,000 / 150%
Direct Labor Cost = $120,000

Next, we can calculate the total manufacturing costs:
Total Manufacturing Costs = Direct Materials Cost + Direct Labor Cost + Manufacturing Overhead Cost
Total Manufacturing Costs = $150,000 + $120,000 + $180,000
Total Manufacturing Costs = $450,000

Therefore, the correct answer is choice C.

Question 5

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

The total manufacturing costs for Job No. 305 include direct materials, direct labor, and manufacturing overhead. Given that the manufacturing overhead is 200% of direct labor cost, we can calculate the direct labor cost as $200,000 / 200% = $100,000. Therefore, the total manufacturing costs are $180,000 (direct materials) + $100,000 (direct labor) + $200,000 (manufacturing overhead) = $480,000.

Question 6

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 transfer of overhead costs from an accumulated cost account to the products being manufactured.

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

In order to calculate the direct materials charged to Job 130, we need to use the formula:
Total Manufacturing Costs = Direct Materials + Direct Labor + Manufacturing Overhead

We know that the manufacturing overhead charged to Job 130 is $6,400 and that the predetermined overhead rate is 80% based on direct labor cost. Therefore, we can calculate the direct labor cost charged to Job 130 as follows:

80% of Direct Labor Cost = Manufacturing Overhead
0.8x Direct Labor Cost = $6,400
Direct Labor Cost = $8,000

Now we can use the balance in Work in Process inventory to calculate the total manufacturing costs for Job 130:

Total Manufacturing Costs = Balance in Work in Process Inventory + Manufacturing Overhead Charged
Total Manufacturing Costs = $20,000 + $6,400
Total Manufacturing Costs = $26,400

Finally, we can plug in the values we have calculated into the formula and solve for Direct Materials:

Total Manufacturing Costs = Direct Materials + Direct Labor + Manufacturing Overhead
$26,400 = Direct Materials + $8,000 + $6,400
Direct Materials = $26,400 - $8,000 - $6,400
Direct Materials = $12,000

Therefore, the amount of direct materials charged to Job 130 is $12,000, which corresponds to choice C ($5,600).

Question 8

The predetermined overhead rate is based on the relationship between

Accepted Answer

The predetermined overhead rate is calculated by estimating the total overhead costs for the upcoming period and dividing it by the expected level of activity for the period. Therefore, it is based on the relationship between estimated annual costs and expected annual activity.

Question 9

Norman Company manufactures customized desks. The following pertains to Job No. 953:  What is the total manufacturing cost for Job No. 953?

Accepted Answer

The answer of Norman Company manufactures customized desks. The following...

Question 10

Minton Company provided the following information from its accounting records for 2017:  How much is the overhead application rate if Minton Company bases it on direct labor hours?

Accepted Answer

The answer of Minton Company provided the following information from...

Question 11

Barr Mfg. provided the following information from its accounting records for 2017:  How much is the overhead application rate if Barr bases the rate on direct labor hours?

Accepted Answer

The answer of Barr Mfg. provided the following information from...

Question 12

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

Accepted Answer

Indirect labor costs are those that cannot be easily traced to a specific job or product, such as salaries of production supervisors or maintenance workers. As they do not directly contribute to the production of a specific product, they are included in the manufacturing overhead costs and charged to the products using a predetermined overhead rate. Thus, option A is the correct choice.

Question 13

Redman Company manufactures customized desks. The following pertains to Job No. 978:  What is the total manufacturing cost for Job No. 978?

Accepted Answer

The answer of Redman Company manufactures customized desks. The following...

Question 14

A company expected its annual overhead costs to be $1,500,000 and direct labor costs to be $1,000,000. Actual overhead was $1,450,000, and actual labor costs totaled $1,100,000. How much is the company's predetermined overhead rate to the nearest cent?

Accepted Answer

The predetermined overhead rate is calculated by dividing the expected overhead costs by the expected direct labor costs. So, $1,500,000 / $1,000,000 = $1.50.

Question 15

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 formula:

Direct Materials + Direct Labor + Manufacturing Overhead = Total Manufacturing Cost

We know that manufacturing overhead is $8,100 and that overhead is applied at a rate of 90% based on direct labor cost. We don't have direct labor cost, but we can work backwards from the manufacturing overhead to find it:

Manufacturing Overhead = 90% x Direct Labor
$8,100 = 0.9 x Direct Labor
Direct Labor = $9,000

Now we can use the formula to solve for direct materials:

Direct Materials + $9,000 + $8,100 = Total Manufacturing Cost
Direct Materials + $17,100 = Total Manufacturing Cost

We also know that the balance in the Work in Process inventory is $30,000, which represents the total manufacturing cost of all jobs in process. This means:

Total Manufacturing Cost = Work in Process Inventory
Direct Materials + $17,100 = $30,000
Direct Materials = $12,900

Therefore, the amount of direct materials charged to Job 250 is $12,900, which is answer choice C.

Question 16

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 answer of If annual overhead costs are expected to...

Question 17

The predetermined overhead rate is

Accepted Answer

The predetermined overhead rate is calculated at the beginning of the year using the estimated overhead costs and the estimated activity level for the year. This rate is used to allocate overhead costs to products or services throughout the year.

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

The answer of Manufacturing overhead applied is added to direct...

Question 19

Henson Company applies overhead on the basis of 120% of direct labor cost. Job No. 190 is charged with $140,000 of direct materials costs and $180,000 of manufacturing overhead. The total manufacturing costs for Job No. 190 is

Accepted Answer

The answer of Henson Company applies overhead on the basis...

Question 20

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...

Quiz 15: Job Order Costing