Question 1

Andrew Industries purchased $165,000 of raw materials on account during the month of March. The beginning Raw Materials Inventory balance was $22,000, and the materials used to complete jobs during the month were $141,000 of direct materials and $13,000 of indirect materials. What journal entry should Andrew use to account for direct materials used in March:
A) Debit Raw Materials Inventory $141,000; credit Accounts Payable $141,000.
B) Debit Work in Process Inventory $141,000; credit Raw Materials Inventory $141,000.
C) Debit Work in Process Inventory $141,000; credit Accounts Payable $141,000.
D) Debit Finished Goods Inventory $22,000; credit Raw Materials Inventory $22,000.
E) Debit Raw Materials Inventory $153,000; credit Work in Process Inventory $153,000.

Accepted Answer

The journal entry should reflect the use of direct materials in production, which increases the Work in Process Inventory and decreases the Raw Materials Inventory. Therefore, option B is correct as it debits the Work in Process Inventory $141,000 (reflecting the increase in inventory) and credits the Raw Materials Inventory $141,000 (reflecting the decrease in inventory). Option A is incorrect because it only reflects the purchase of raw materials on account, not their use in production. Option C is incorrect because it only reflects the purchase of raw materials on account, not their use in production. Option D is incorrect because it reflects a transfer of inventory from Raw Materials to Finished Goods, which does not reflect the use of materials in production. Option E is incorrect because it reflects a transfer of inventory from Raw Materials to Work in Process, but the amount is incorrect as it includes both direct and indirect materials instead of just direct materials.

Question 2

Clemmens Company applies overhead based on direct labor cost. Estimated overhead and direct labor costs for the year were $112,500 and $125,000, respectively. During the year, actual overhead was $107,400 and actual direct labor cost was $120,000. The entry to close the over- or underapplied overhead at year-end, assuming an immaterial amount, would include:
A) A debit to Cost of Goods Sold for $600.
B) A credit to Factory Overhead for $600.
C) A credit to Finished Goods Inventory for $600.
D) A debit to Work in Process Inventory for $600.
E) A credit to Cost of Goods Sold for $600.

Accepted Answer

The answer of Clemmens Company applies overhead based on direct...

Question 3

Morris Company applies overhead based on direct labor costs. For the current year, Morris Company estimated total overhead costs to be $400,000, and direct labor costs to be $2,000,000. Actual overhead costs for the year totaled $380,000, and actual direct labor costs totaled $1,800,000. At year-end, the balance in the Factory Overhead account is a:
A) $380,000 Debit balance.
B) $360,000 Debit balance.
C) $20,000 Debit balance.
D) $400,000 Credit balance.
E) $20,000 Credit balance.

Accepted Answer

The overhead rate is calculated as:
Overhead Rate = Estimated Overhead Costs / Estimated Direct Labor Costs
Overhead Rate = $400,000 / $2,000,000
Overhead Rate = 0.20 or 20%

If Morris Company applied overhead based on the overhead rate, then the amount of overhead applied would be:
Overhead Applied = Overhead Rate x Actual Direct Labor Costs
Overhead Applied = 0.20 x $1,800,000
Overhead Applied = $360,000

The difference between actual overhead costs and applied overhead is called the overhead variance, which can be either favorable or unfavorable. In this case, the overhead variance is:
Overhead Variance = Actual Overhead Costs - Overhead Applied
Overhead Variance = $380,000 - $360,000
Overhead Variance = $20,000 unfavorable

Since the overhead variance is unfavorable, the balance in the Factory Overhead account will be a debit balance equal to the amount of the overhead variance, which is $20,000. Therefore, the correct answer is C.

Question 4

Mango Company applies overhead based on direct labor costs. For the current year, Mango Company estimated total overhead costs to be $300,000, and direct labor costs to be $150,000. Actual overhead costs for the year totaled $330,000, and actual direct labor costs totaled $170,000. At year-end, Factory Overhead account is:
A) Overapplied by $10,000.
B) Overapplied by $170,000.
C) Underapplied by $10,000.
D) Overapplied by $20,000.
E) Neither overapplied nor underapplied.

Accepted Answer

The predetermined overhead rate is calculated based on the estimated costs: $300,000 / $150,000 = 2.0 (or 200%). The actual direct labor costs were $170,000, so the applied overhead would be 200% of $170,000 = $340,000. Since the actual overhead costs were $330,000, the overhead is overapplied by $10,000 ($340,000 - $330,000).

Question 5

The Marina Corp. has applied overhead to jobs during the period as follows:  The application of overhead has resulted in a $5,600 credit balance in the Factory Overhead account, and this amount is not material. The entry to dispose of this remaining factory overhead balance is:
A) Debit Cost of Goods Sold $5,600; credit Factory Overhead $5,600.
B) Debit Factory Overhead $5,600; credit Cost of Goods Sold $5,600.
C) Debit Factory Overhead $5,600; credit Work in Process Inventory $5,600.
D) Debit Work in Process Inventory $5,600; credit Factory Overhead $5,600.
E) No entry is needed.

Accepted Answer

The credit balance in the Factory Overhead account indicates that the overhead has been overapplied. To dispose of this balance, the amount should be transferred to Cost of Goods Sold through a closing entry. Option B correctly records the entry by debiting Factory Overhead $5,600 and crediting Cost of Goods Sold $5,600. Option A and C are incorrect since Work in Process Inventory should not be affected at this point. Option D is incorrect since the overapplied overhead balance is in the Factory Overhead account, not Work in Process Inventory. Option E is incorrect since an entry is needed to close out the overapplied overhead balance.

Question 6

Mango Company applies overhead based on direct labor costs. For the current year, Mango Company estimated total overhead costs to be $300,000, and direct labor costs to be $150,000. Actual overhead costs for the year totaled $330,000, and actual direct labor costs totaled $170,000. At year-end, the balance in the Factory Overhead account is a:
A) $330,000 Debit balance.
B) $170,000 Debit balance.
C) $10,000 Credit balance.
D) $340,000 Credit balance.
E) $10,000 Debit balance.

Accepted Answer

The predetermined overhead rate is calculated as $300,000 ÷ $150,000 = $2 per direct labor dollar. 
Actual overhead costs are $330,000, which is $30,000 more than estimated. 
Actual direct labor costs are $170,000, which is $20,000 more than estimated. 
The amount of overhead applied to production is $170,000 x $2 = $340,000. 
The Factory Overhead account should have a Debit balance of the applied overhead ($340,000) minus the actual overhead costs incurred ($330,000), which equals $10,000. Therefore, the answer is C.

Question 7

If overapplied or underapplied overhead is material, it should be disposed of by allocating it to:
A) Cost of goods sold and finished goods inventory.
B) Finished goods inventory and work in process inventory.
C) Work in process inventory, finished goods inventory, and cost of goods sold.
D) Work in process inventory.
E) Raw materials inventory, work in process inventory, and finished goods inventory.

Accepted Answer

Overapplied or underapplied overhead should be allocated to all three major inventory accounts (work in process, finished goods, and cost of goods sold) to ensure that the total cost of goods sold and ending inventory are correctly stated.

Question 8

If one unit of Product Z2 used $2.50 of direct materials and $3.00 of direct labor, sold for $8.00, and was assigned overhead at the rate of 30% of direct labor costs, how much gross profit was realized from this sale?
A) $8.00.
B) $5.50.
C) $2.50.
D) $1.60.
E) $0.90.

Accepted Answer

The answer of If one unit of Product Z2 used...

Question 9

Andrew Industries purchased $165,000 of raw materials on account during the month of March. The beginning Raw Materials Inventory balance was $22,000, and the materials used to complete jobs during the month were $141,000 of direct materials and $13,000 of indirect materials. What is the ending Raw Materials Inventory balance for March?
A) $46,000
B) $11,000
C) $33,000
D) $24,000
E) $9,000

Accepted Answer

To find the ending Raw Materials Inventory balance, we need to subtract the materials used during the month from the total materials purchased on account and add the beginning balance.

Ending balance = Beginning balance + Purchases on account - Direct materials used - Indirect materials used

= $22,000 + $165,000 - $141,000 - $13,000

= $33,000

Therefore, the correct answer is C) $33,000.

Question 10

Morris Company applies overhead based on direct labor costs. For the current year, Morris Company estimated total overhead costs to be $400,000, and direct labor costs to be $2,000,000. Actual overhead costs for the year totaled $380,000, and actual direct labor costs totaled $1,800,000. At year-end, Factory Overhead is:
A) Overapplied by $20,000.
B) Overapplied by $190,000.
C) Underapplied by $20,000.
D) Overapplied by $40,000.
E) Neither overapplied nor underapplied.

Accepted Answer

Morris Company applies overhead based on direct labor costs, which means that the predetermined overhead rate for the year is $400,000 ÷ $2,000,000 = $0.20 per dollar of direct labor cost. Therefore, the amount of overhead applied to production during the year is $0.20 × $1,800,000 = $360,000. 
Since actual overhead costs (which are not the same as applied overhead costs) are lower than the estimated amount, there will be underapplied overhead. The amount of underapplied overhead is calculated by subtracting actual overhead costs from applied overhead costs: 
$360,000 (applied overhead) - $380,000 (actual overhead) = ($20,000) 
Therefore, the correct answer is (C) Underapplied by $20,000.

Question 11

The amount by which the overhead applied to jobs during a period exceeds the overhead incurred during the period is known as:
A) Adjusted overhead.
B) Estimated overhead.
C) Predetermined overhead.
D) Underapplied overhead.
E) Overapplied overhead.

Accepted Answer

Overapplied overhead occurs when the overhead applied to jobs (based on the predetermined overhead rate) exceeds the actual overhead costs incurred.

Question 12

Andrew Industries purchased $165,000 of raw materials on account during the month of March. The beginning Raw Materials Inventory balance was $22,000, and the materials used to complete jobs during the month were $141,000 direct materials and $13,000 indirect materials. How should Andrews journalize the purchase of raw materials for March?
A) Debit Raw Materials Inventory $165,000; credit Accounts Payable $165,000
B) Debit Work in Process Inventory $165,000; credit Raw Materials Inventory $165,000
C) Debit Raw Materials Inventory $187,000; credit Cash $187,000
D) Debit Accounts Payable $165,000; credit Raw Materials Inventory $165,000
E) Debit Accounts Payable $187,000; credit Raw Materials Inventory $187,000

Accepted Answer

Raw materials are purchased on account, which means that the company will pay for them later. The journal entry to record the purchase of raw materials is to debit Raw Materials Inventory for the amount of the purchase and credit Accounts Payable for the same amount.

Question 13

At the current year-end, Simply Company found that its overhead was underapplied by $2,500, and this amount was not considered material. Based on this information, Simply should:
A) Close the $2,500 to Cost of Goods Sold.
B) Close the $2,500 to Finished Goods Inventory.
C) Do nothing about the $2,500, since it is not material, and it is likely that overhead will be overapplied by the same amount next year.
D) Carry the $2,500 to the income statement as "Other Expense".
E) Carry the $2,500 to the next period.

Accepted Answer

If overhead is underapplied, it means that the amount of overhead incurred during the period is more than the amount allocated to products. As a result, the cost of goods sold was understated, and the company's net income is overstated. Closing the $2,500 to cost of goods sold will adjust for this and provide a more accurate representation of the company's financial statements. Choices B, C, D, and E are incorrect because they do not accurately reflect the impact of underapplied overhead on the company's financial statements.

Question 14

Andrew Industries purchased $165,000 of raw materials on account during the month of March. The beginning Raw Materials Inventory balance was $22,000, and the materials used to complete jobs during the month were $141,000 of direct materials and $13,000 of indirect materials. What amount will Andrew debit to Work in Process Inventory for the month of March?
A) $165,000
B) $154,000
C) $13,000
D) $141,000
E) $33,000

Accepted Answer

To calculate the amount to be debited to Work in Process Inventory for the month of March, we need to use the following formula:

Beginning raw materials inventory + Purchases of raw materials during the month - Ending raw materials inventory = Raw materials used

$22,000 + $165,000 - Ending raw materials inventory = $141,000 + $13,000

Simplifying the equation, we get:

Ending raw materials inventory = $33,000

We know that the materials used to complete jobs during the month were $141,000 of direct materials and $13,000 of indirect materials. Therefore, the total amount of materials used in production during the month was $141,000 + $13,000 = $154,000.

This means that Andrew will debit Work in Process Inventory for the amount of direct and indirect materials used in production, which is $154,000.

Therefore, the answer is D ( $141,000).

Question 15

If overhead applied is less than actual overhead incurred, it is:
A) Fully applied.
B) Underapplied.
C) Overapplied.
D) Expected.
E) Normal.

Accepted Answer

If overhead applied is less than actual overhead incurred, it means not enough overhead was allocated to the products or services produced. This situation is known as underapplied overhead.

Question 16

The amount by which overhead incurred during a period exceeds the overhead applied to jobs is:
A) Balanced overhead.
B) Predetermined overhead.
C) Actual overhead.
D) Underapplied overhead.
E) Overapplied overhead.

Accepted Answer

The amount by which overhead incurred during a period exceeds the overhead applied to jobs is known as underapplied overhead. This happens when the actual overhead incurred is greater than the amount of overhead that was allocated to the job or product.

Question 17

The ending inventory of finished goods has a total cost of $9,000 and consists of 600 units. If the overhead applied to these goods is $3,000, and the overhead rate is 75% of direct labor, how much direct materials cost was incurred in producing these units?
A) $3,750.
B) $2,000.
C) $4,000.
D) $6,000.
E) $9,000.

Accepted Answer

The answer of The ending inventory of finished goods has...

Question 18

Marshall Enterprises charged the following amounts of overhead to jobs during the year: $20,000 to jobs still in process, $60,000 to jobs completed but not sold, and $120,000 to jobs finished and sold. At year-end, Marshall Enterprise's Factory Overhead account has a credit balance of $5,000, which is not a material amount. What entry should Marshall make at year-end?
A) No entry is needed.
B) Debit Factory Overhead $5,000; credit Cost of Goods Sold $5,000.
C) Debit Cost of Goods Sold $5,000; credit Factory Overhead $5,000.
D) Debit Factory Overhead $5,000; credit Work in Process Inventory $5,000.
E) Debit Factory Overhead $5,000; credit Finished Goods Inventory $5,000.

Accepted Answer

The answer of Marshall Enterprises charged the following amounts of...

Question 19

If a company applies overhead to production with a predetermined overhead rate, a credit balance in the Factory Overhead account at the end of the period means that:
A) The bookkeeper has made an error because the debits don't equal the credits.
B) The balance will be carried forward to the next period as an overhead cost.
C) Actual overhead incurred was less than the overhead amount applied to production.
D) The overhead was underapplied for the period.
E) Actual overhead was greater than the overhead amount applied to production.

Accepted Answer

A credit balance in the Factory Overhead account at the end of the period means that the actual overhead incurred was less than the overhead amount applied to production. This indicates that the predetermined overhead rate was set too high and that the company overestimated the amount of overhead that would be incurred during the period.

Question 20

Using the following accounts and an overhead rate of 90% of direct labor cost, determine the amount of applied overhead.  
A) $79,200.
B) $167,200.
C) $34,320.
D) $88,000.
E) $35,376.

Accepted Answer

The answer of Using the following accounts and an overhead...

Quiz 2: Job Order Costing and Analysis

The Marina Corp. has applied overhead to jobs during the period as follows: The application of overhead has resulted in a $5,600 credit balance in the Factory Overhead account, and this amount is not material. The entry to dispose of this remaining factory overhead balance is:

If overapplied or underapplied overhead is material, it should be disposed of by allocating it to:

If one unit of Product Z2 used $2.50 of direct materials and $3.00 of direct labor, sold for $8.00, and was assigned overhead at the rate of 30% of direct labor costs, how much gross profit was realized from this sale?

The amount by which the overhead applied to jobs during a period exceeds the overhead incurred during the period is known as:

At the current year-end, Simply Company found that its overhead was underapplied by $2,500, and this amount was not considered material. Based on this information, Simply should:

If overhead applied is less than actual overhead incurred, it is:

The amount by which overhead incurred during a period exceeds the overhead applied to jobs is:

The ending inventory of finished goods has a total cost of $9,000 and consists of 600 units. If the overhead applied to these goods is $3,000, and the overhead rate is 75% of direct labor, how much direct materials cost was incurred in producing these units?

If a company applies overhead to production with a predetermined overhead rate, a credit balance in the Factory Overhead account at the end of the period means that:

Using the following accounts and an overhead rate of 90% of direct labor cost, determine the amount of applied overhead.