Question 1

If the manufacturing overhead was overapplied, then the:

Accepted Answer

If manufacturing overhead was overapplied, it means that the actual overhead expenses were less than the amount applied to Work in Process. Therefore, the manufacturing overhead account would have a lower total debits balance than the total credits balance from applying overhead, causing an overapplied balance.

Question 2

On May 5, a firm purchased 20 units of materials at a unit price of $2.20. On May 15, the firm purchased 35 units at a unit price of $2.45. If the firm uses the LIFO method of inventory pricing, the total cost of 30 units issued on May 20 would be:

Accepted Answer

Under the LIFO (Last In, First Out) method, the most recently purchased items are issued first. Therefore, for the 30 units issued on May 20, the cost calculation would be as follows: 35 units were purchased on May 15 at $2.45 each. All 30 units issued would come from this batch. So, 30 units x $2.45 = $73.50.

Question 3

Job order cost sheets constitute a subsidiary ledger that supports:

Accepted Answer

Job order cost sheets are used to accumulate the direct materials, direct labor, and manufacturing overhead costs associated with a specific job or a batch of similar products. This information is then used to update and support the Work in Process Inventory account, which is the account that reflects the cost of goods that are currently in the production process. Therefore, the correct answer is B.

Question 4

What is the subsidiary ledger that contains a record for each overhead item called?

Accepted Answer

The subsidiary ledger that contains a record for each overhead item is called the Manufacturing Overhead Ledger. This ledger provides detailed information about the overhead costs incurred by a company, allowing for better tracking and management of these costs.

Question 5

Martinez Manufacturing applies overhead based on direct labor hours. The company estimates that their overhead for the year will be $180,000, and that they will use 72,000 direct labor hours. During the year, Martinez Manufacturing actually used 71,000 direct labor hours and actual overhead costs were $184,000. At the end of the year, manufacturing overhead was:

Accepted Answer

The predetermined overhead rate is calculated as estimated overhead divided by estimated direct labor hours, which is $180,000 / 72,000 hours = $2.50 per direct labor hour. The applied overhead for the actual 71,000 direct labor hours used is 71,000 hours * $2.50 = $177,500. Since the actual overhead costs were $184,000, the overhead was underapplied by $184,000 - $177,500 = $6,500.

Question 6

A raw material subsidiary ledger:

Accepted Answer

The raw material subsidiary ledger contains a raw materials card for each item of direct materials and indirect materials, tracking the quantities and costs associated with each type of material.

Question 7

The total direct labor charged to all job cost sheets must agree with the direct labor debited to:

Accepted Answer

The total direct labor charged to all job cost sheets must agree with the direct labor debited to Work in Process Inventory because direct labor is considered a part of the manufacturing costs that are allocated to the goods being produced.

Question 8

The McGreen Company employees worked 12,200 hours last year with an average hourly rate of
$13 per hour. The overhead was $793,000. If overhead is based on direct labor costs, then the overhead rate per direct labor dollar is

Accepted Answer

The total direct labor cost is calculated by multiplying the total hours worked by the average hourly rate, which is 12,200 hours * $13/hour = $158,600. The overhead rate per direct labor dollar is found by dividing the total overhead by the total direct labor cost, which is $793,000 / $158,600 = $5.00.

Question 9

Wilson Enterprises applies overhead based on direct labor cost. The company estimates that their overhead for the year will be $240,000, and direct labor cost to be $300,000. Actual direct labor cost for Martinez Manufacturing was $316,000 and actual overhead costs were $254,000. At the end of the year, manufacturing overhead was:

Accepted Answer

First, we need to calculate the predetermined overhead rate:

Predetermined Overhead Rate = Estimated Overhead / Estimated Direct Labor Cost
Predetermined Overhead Rate = $240,000 / $300,000
Predetermined Overhead Rate = $0.80 per direct labor dollar

Next, we can calculate the total overhead applied to Martinez Manufacturing:

Overhead Applied = Actual Direct Labor Cost x Predetermined Overhead Rate
Overhead Applied = $316,000 x $0.80
Overhead Applied = $252,800

Finally, we can calculate the difference between the overhead applied and the actual overhead costs:

Overhead Difference = Actual Overhead - Overhead Applied
Overhead Difference = $254,000 - $252,800
Overhead Difference = $1,200 underapplied

Therefore, the answer is D) Underapplied by $1,200.

Question 10

The------------- is a record of all manufacturing costs charged to a specific job.

Accepted Answer

The Job Order Cost Sheet is a document that records and tracks the direct materials, direct labor, and manufacturing overhead costs associated with a specific job in a job order costing system.

Question 11

On June 1, a firm purchased 40 units of materials at a unit price of $1.42. On June 15, the firm purchased 45 units with a unit price of $1.18. If the firm uses the FIFO method of inventory pricing, the total cost of 65 units issued on June 20 would be:

Accepted Answer

The answer of On June 1, a firm purchased 40...

Question 12

Manufacturing overhead includes all of the following except

Accepted Answer

Manufacturing overhead includes all indirect costs that are incurred in the production process, such as indirect labor, factory utilities, and payroll taxes on factory labor. Direct labor, on the other hand, is a direct cost that can be traced to specific products or services and is not considered part of manufacturing overhead. Therefore, the correct answer is D, which is the option that is not included in manufacturing overhead.

Question 13

Wilson Enterprises applies overhead based on direct labor cost. The company estimates that their overhead for the year will be $240,000, and direct labor cost to be $300,000. Actual direct labor cost for Martinez Manufacturing was $316,000. The journal entry to record manufacturing overhead would include a:

Accepted Answer

Manufacturing overhead is applied based on the estimated overhead rate, which in this case is $240,000 / $300,000 = 0.8 or 80%. Therefore, the manufacturing overhead applied to Martinez Manufacturing would be $316,000 x 0.8 = $252,800. The entry to record this would be a credit to Manufacturing Overhead Applied for $252,800. The other options are incorrect because they either debit Work in Process Inventory for the entire direct labor cost or credit Work in Process Inventory for the full amount of manufacturing overhead applied, which does not reflect the overhead rate.

Question 14

At the end of the year the Manufacturing Overhead account is closed into what account?

Accepted Answer

The Manufacturing Overhead account is a temporary account used to accumulate indirect manufacturing costs throughout the year. At the end of the year, the balance of this account is closed out and transferred to the Cost of Goods Sold account, which reflects the total costs incurred to produce the goods that were sold during the year. Thus, the correct answer is B.

Question 15

Finished Goods beginning and ending balances are $23,000 and $17,000, respectively. The cost of goods manufactured for the period was $187,500. Actual manufacturing overhead for the period was $32,000 and applied overhead was $34,000. The adjusted cost of goods sold was:

Accepted Answer

Adjusted cost of goods sold = (Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory)
Adjusted cost of goods sold = ($23,000 + $187,500 - $17,000)
Adjusted cost of goods sold = $193,500
Since the applied overhead was greater than the actual overhead, we can ignore it in the calculation of adjusted cost of goods sold. Therefore, the correct answer is A.

Question 16

Process cost accounting is appropriate:

Accepted Answer

Process cost accounting is suitable for companies that have continuous operations and produce standard types of products. This method is commonly used in industries such as oil refining, chemical processing, and beverages, where products are manufactured in large volumes and have very little variation.

Option B is incorrect because batch production is managed using job costing or job order costing. Option C is incorrect because custom production requires job costing or activity-based costing methods. Option D is incorrect because even companies that produce only one product can use either job costing or process costing depending on the nature of their operations.

Question 17

On June 1, a firm purchased 40 units of materials at a unit price of $1.42. On June 15, the firm purchased 45 units with a unit price of $1.18. If the firm uses the LIFO method of inventory pricing, the total cost of 65 units issued on June 20 would be:

Accepted Answer

The answer of On June 1, a firm purchased 40...

Question 18

If manufacturing overhead is applied at a rate of $1.62 per direct labor dollar and the Department B employee worked 198 hours at $12.50 an hour on Job L1147, then the applied overhead would be

Accepted Answer

The applied overhead is calculated by multiplying the direct labor cost by the overhead rate. The direct labor cost is 198 hours * $12.50/hour = $2,475. The overhead rate is $1.62 per direct labor dollar, so the applied overhead is $2,475 * $1.62 = $4,009.50.

Question 19

Job Z2 requires $1,350 of material, $100 of which is indirect material. If manufacturing overhead is applied at a rate of 150% of direct labor cost and there were 232 labor hours charged to Job Z2 at $13 an hour, the total cost of Job Z2 would be:

Accepted Answer

Direct material cost for Job Z2 is $1,350 - $100 = $1,250.

Direct labor cost for Job Z2 is 232 hours x $13 = $3,016.

Manufacturing overhead applied is 150% x $3,016 = $4,524.

Total cost of Job Z2 is $1,250 + $3,016 + $4,524 = $8,790.

Therefore, the answer is B.

Question 20

Martinez Manufacturing applies overhead based on direct labor hours. The company estimates that their overhead for the year will be $180,000, and that they will use 72,000 direct labor hours. Martinez Manufacturing actually used 71,000 direct labor hours. The journal entry to record manufacturing overhead would include a:

Accepted Answer

The correct overhead application rate is calculated as estimated overhead ($180,000) divided by estimated direct labor hours (72,000), which equals $2.50 per direct labor hour. The actual direct labor hours used were 71,000, so the applied overhead is 71,000 hours * $2.50 = $177,500. This amount is debited to Work in Process Inventory to reflect the application of overhead to production.

Quiz 27: Job Order Cost Accounting