Question 1

Which of the following statements about materials is false?

Accepted Answer

The answer of Which of the following statements about materials...

Question 2

Farrina Manufacturing uses a predetermined overhead application rate of $8 per direct labor hour. A review of the company's accounting records for the year just ended discovered the following:
Underapplied manufacturing overhead: $7,200
Actual manufacturing overhead: $392,000
Budgeted labor hours: 50,000
Simone's actual labor hours worked totaled:

Accepted Answer

The predetermined overhead rate is $8 per direct labor hour. The underapplied overhead is $7,200, which means the applied overhead was $7,200 less than the actual overhead of $392,000. Therefore, the applied overhead was $392,000 - $7,200 = $384,800. Since the overhead application rate is $8 per direct labor hour, the actual labor hours worked can be calculated as $384,800 / $8 per hour = 48,100 hours.

Question 3

The journal entry needed to record $5,000 of advertising for Oxner Manufacturing would include:

Accepted Answer

Advertising expenses are recorded as a debit to the Advertising Expense account to reflect the cost incurred.

Question 4

Boxer Industries worked on four jobs during its first year of operation: nos. 401, 402, 403, and 404. A review of job no. 403's cost record revealed direct material charges of $40,000 and total manufacturing costs of $50,000. If Boxer applies overhead at 150% of direct labor cost, the overhead applied to job no. 403 must have been:

Accepted Answer

The answer of Boxer Industries worked on four jobs during...

Question 5

Boston, Inc. applies manufacturing overhead at the rate of $40 per machine hour. Budgeted machine hours for the current period were anticipated to be 120,000; however, a lengthy strike resulted in actual machine hours being worked of only 90,000. Budgeted and actual manufacturing overhead figures for the year were $4,800,000 and $4,180,000, respectively. On the basis of this information, the company's year-end overhead was:

Accepted Answer

The answer of Boston, Inc. applies manufacturing overhead at the...

Question 6

Terrence Industries charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of labor hours. The following data pertain to the current year:

Which of the following choices is the correct status of manufacturing overhead at year-end?

Accepted Answer

The answer of Terrence Industries charges manufacturing overhead to products...

Question 7

The left side of the Manufacturing Overhead account is used to accumulate:

Accepted Answer

The left side of the Manufacturing Overhead account is used to accumulate actual manufacturing overhead costs incurred throughout the accounting period. This includes all indirect costs related to manufacturing, such as indirect labor, indirect materials, and other overhead costs.

Question 8

Travers Manufacturing incurred $106,000 of direct labor and $11,000 of indirect labor. The proper journal entry to record these events would include a debit to Work in Process for:

Accepted Answer

Direct labor costs are debited to the Work in Process account because they are directly attributable to the production of goods. Indirect labor costs are not debited to Work in Process; instead, they are typically debited to Manufacturing Overhead.

Question 9

A computer manufacturer recently shipped several laptops to a customer (cost: $25,000) and billed the customer $30,000. Which of the following options correctly expresses the accounts that are debited and credited to record this transaction?

Accepted Answer

The correct entry to record this transaction involves debiting Accounts Receivable for the sale amount ($30,000) to recognize the revenue expected to be received, and debiting Cost of Goods Sold for the cost of the laptops ($25,000) to recognize the expense related to the sale. The credits are to Sales Revenue for the sale amount ($30,000) to recognize the income earned from the sale, and to Finished-Goods Inventory for the cost of the laptops ($25,000) to remove the cost of the sold goods from inventory.

Question 10

Rogers Manufacturing's overhead at year-end was underapplied by $5,800, a small amount given the firm's size. The year-end journal entry to record this amount would include:

Accepted Answer

When overhead is underapplied, it means that the actual overhead costs were higher than what was allocated. The common practice for small amounts is to adjust the Cost of Goods Sold (COGS) directly. Therefore, COGS is debited to reflect the additional overhead costs that were not initially applied.

Question 11

Electricity costs that were incurred by a company's production processes should be debited to:

Accepted Answer

Electricity costs incurred by a company's production processes are considered part of the manufacturing overhead because they are indirect costs associated with manufacturing the product but cannot be directly traced to specific units produced.

Question 12

The estimates used to calculate the predetermined overhead rate will virtually always:

Accepted Answer

The predetermined overhead rate is an estimate of the manufacturing overhead costs, which rarely matches the actual overhead costs exactly. This discrepancy leads to either underapplied or overapplied overhead. When the amount is immaterial, it is common practice to close it to the Cost of Goods Sold to simplify the accounting process.

Question 13

A review of a company's Work-in-Process Inventory account found a debit for materials of $67,000. If all procedures were performed in the correct manner, this means that the firm:

Accepted Answer

When a company debits the Work-in-Process Inventory for materials, it indicates that direct materials have been moved from the Raw-Material Inventory to the production process. Therefore, the corresponding credit would be to the Raw-Material Inventory, reflecting the decrease in raw materials, and it shows the accounting for the usage of direct materials in production.

Question 14

Hsu Company incurred $90,000 of depreciation for the year. Eighty percent relates to the firm's production facilities, and 20% relates to sales and administrative offices. If all items are handled in the proper manner, a review of the company's accounting records should reveal a:

Accepted Answer

Depreciation related to production facilities (80% of $90,000 = $72,000) should be debited to Manufacturing Overhead, reflecting the portion of depreciation expense that is associated with the production process.

Question 15

Mountain Man Corporation debited Cost of Goods Sold and credited Manufacturing Overhead at year-end. On the basis of this information, one can conclude that:

Accepted Answer

When Cost of Goods Sold is debited and Manufacturing Overhead is credited at year-end, it indicates that the actual overhead costs incurred were higher than the overhead costs that were applied (estimated and allocated) to the products. This adjustment is made to correct the under-applied overhead, showing that actual overhead exceeded applied overhead.

Question 16

Templeton Corporation recently used $75,000 of direct materials and $9,000 of indirect materials in production activities. The journal entries reflecting these transactions would include:

Accepted Answer

The indirect materials used in production are recorded as a debit to Manufacturing Overhead, reflecting the $9,000 cost.

Question 17

An accountant recently debited Work-in-Process Inventory and credited Manufacturing Overhead at a company that uses normal costing. The accountant was:

Accepted Answer

This action represents the application of a predetermined overhead rate to allocate manufacturing overhead costs to the Work-in-Process Inventory, which is common in normal costing systems.

Question 18

Throughout the accounting period, the credit side of the Manufacturing Overhead account is used to accumulate:

Accepted Answer

The credit side of the Manufacturing Overhead account is used to accumulate overhead applied to Work-in-Process Inventory, reflecting the allocation of estimated overhead costs to production.

Question 19

Flores Company, which uses labor hours to apply overhead to manufacturing, may have increased amounts of underapplied overhead at month-end if:

Accepted Answer

If employees are hit hard with a widespread outbreak of the flu, fewer labor hours will be worked, leading to less overhead being applied, which can result in underapplied overhead.

Question 20

Armour, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $150,000, direct professional labor hours were estimated to be 15,000, and direct professional labor cost was projected to be $225,000. During the year, Armour incurred actual overhead costs of $146,000, actual direct professional labor hours of 14,500, and actual direct labor cost of $222,000. By year-end, the firm's overhead was:

Accepted Answer

Overhead was estimated to be $150,000 and actual overhead costs incurred were $146,000, resulting in an underapplied overhead of $4,000.

Quiz 3: Product Costing and Cost Accumulation in a Batch Production Environment