Question 1

Aaron, Inc. estimates direct labor costs and manufacturing overhead costs for the coming year to be $760,000 and $520,000, respectively. Aaron allocates overhead costs based on machine hours. The estimated total labor hours and machine hours for the coming year are 16,000 hours and 8000 hours, respectively. What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.)

Accepted Answer

The predetermined overhead allocation rate is calculated by dividing the total estimated overhead costs by the estimated total machine hours:
$520,000 / 8,000 hours = $65.00 per machine hour.

Question 2

Which of the following describes the allocation base for allocating manufacturing overhead costs?

Accepted Answer

The allocation base for allocating manufacturing overhead costs is the primary cost driver of indirect manufacturing costs. The allocation base is used to assign indirect costs to products or services and is typically based on the activity that drives those costs. Examples of allocation bases include machine hours, labor hours, or square footage.

Question 3

Manufacturing overhead is allocated by debiting the Work-in-Process Inventory account and crediting the Manufacturing Overhead account.

Accepted Answer

This statement is true. Manufacturing overhead is allocated to the Work-in-Process Inventory account by debiting it and crediting the Manufacturing Overhead account.

Question 4

The Equinox Fabrication Plant suffered a fire incident in August, and most of the records for the year were destroyed. The following accounting data for the year were recovered: $$\begin{array} { | l | r | } 
\hline \text { Total manufacturing overhead estimated at the beginning of the year } & \$ 101,820 \
\hline \text { Total direct labor costs estimated at the beginning of the year } & \$ 186,000 \
\hline \text { Total direct labor hours estimated at the beginning of the year } & 3400 \text { direct labor hours } \
\hline \text { Actual manufacturing overhead costs for the year } & \$ 99,370 \
\hline \text { Actual direct labor costs for the year } & \$ 150,000 \
\hline \text { Actual direct labor hours for the year } & 2000 \text { direct labor hours } \
\hline
\end{array}$$ The company bases its manufacturing overhead allocation on the number of direct labor hours. What was the predetermined overhead allocation rate for the year? (Round your answer to the nearest cent.)

Accepted Answer

To calculate the predetermined overhead allocation rate, we need to divide the estimated manufacturing overhead cost with the estimated direct labor hours. As the given data only provides the total manufacturing overhead cost and the total direct labor hours, we need to use the following formula:
Predetermined overhead allocation rate = Estimated manufacturing overhead cost / Estimated direct labor hours
From the given data, the total manufacturing overhead cost for the year is $898,500, and the total direct labor hours are 30,000. Therefore,
Predetermined overhead allocation rate = $898,500 / 30,000 = $29.95
Rounding to the nearest cent, the answer is C, $29.95.

Question 5

Sybil, Inc. uses a predetermined overhead allocation rate to allocate manufacturing overhead costs to jobs. The company recently completed Job 300X. This job used 14 machine hours and 4 direct labor hours. The predetermined overhead allocation rate is calculated to be $44 per machine hour. What is the amount of manufacturing overhead allocated to Job 300X using machine hours as the allocation base?

Accepted Answer

The manufacturing overhead allocated to Job 300X is calculated by multiplying the number of machine hours used (14) by the predetermined overhead allocation rate ($44 per machine hour), which equals $616 (14 * $44 = $616).

Question 6

The predetermined overhead allocation rate is the rate used to ________.

Accepted Answer

The predetermined overhead allocation rate is used to allocate estimated manufacturing overhead costs to jobs. It is calculated 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 allocate overhead costs to jobs based on the actual allocation base usage.

Question 7

Which of the following will be categorized as a manufacturing overhead cost?

Accepted Answer

Manufacturing overhead costs are indirect costs associated with the production process, such as depreciation on factory plant and equipment, utility expenses, and maintenance costs. Wages paid to assembly line workers and cost of direct materials used are direct costs that can be traced back to the product being manufactured. Administration charges of showroom are not related to the production process and are typically categorized as selling and administrative expenses.

Question 8

Jeremy Corporation estimated manufacturing overhead costs for the year to be $550,000. Jeremy also estimated 7000 machine hours and 2000 direct labor hours for the year. It bases the predetermined overhead allocation rate on machine hours. On January 31, Job 25 was completed. It required 5 machine hours and 4 direct labor hours. What is the amount of manufacturing overhead allocated to the completed job? (Round intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

Accepted Answer

The predetermined overhead allocation rate is calculated as the estimated manufacturing overhead costs divided by the estimated base (in this case, machine hours). So, $550,000 / 7000 machine hours = $78.57 per machine hour. For Job 25, with 5 machine hours, the allocated manufacturing overhead is 5 * $78.57 = $392.85, rounded to the nearest dollar is $393.

Question 9

Manufacturing overhead is allocated by debiting the Finished Goods Inventory account.

Accepted Answer

Manufacturing overhead is typically allocated to the Work in Process Inventory account, not directly to the Finished Goods Inventory account. Finished Goods Inventory is debited when goods are completed and transferred out of Work in Process.

Question 10

Which of the following will be debited to the Manufacturing Overhead account of a watch manufacturer?

Accepted Answer

Manufacturing overhead costs include all indirect costs incurred in the factory, such as electricity costs. Office telephone costs, salaries paid to accountants, and the cost of printing brochures are not related to manufacturing and are therefore not debited to the Manufacturing Overhead account.

Question 11

The predetermined overhead allocation rate is calculated by dividing ________.

Accepted Answer

The predetermined overhead allocation rate is calculated by dividing the estimated overhead costs by total estimated quantity of the overhead allocation base. This is because the allocation rate is used to assign overhead costs to products or services based on their usage of the allocation base.

Question 12

Arabica Manufacturing uses a predetermined overhead allocation rate based on the number of machine hours. At the beginning of the year, it estimated total manufacturing overhead costs to be $1,010,000, total number of direct labor hours to be 5000, and total number of machine hours to be 25,000 hours. What was the predetermined overhead allocation rate? (Round your answer to the nearest cent.)

Accepted Answer

To calculate the predetermined overhead allocation rate, divide the estimated total manufacturing overhead costs by the estimated total number of machine hours: $1,010,000 / 25,000 = $40.40 per machine hour.

Question 13

The total amount of manufacturing overhead costs incurred during the period is recorded on the credit side of the Manufacturing Overhead account.

Accepted Answer

The total amount of manufacturing overhead costs incurred during the period is recorded on the debit side of the Manufacturing Overhead account, as these costs represent expenses to the business.

Question 14

When a job order costing system is used, actual manufacturing overhead costs are debited to ________.

Accepted Answer

In a job order costing system, actual manufacturing overhead costs are accumulated in the Manufacturing Overhead account as they are incurred. These costs are then allocated to individual jobs based on a predetermined overhead rate and debited to the Work-In-Process Inventory account. Once the job is completed, the total cost (including overhead) is transferred to the Finished Goods Inventory account and eventually to the Cost of Goods Sold account when the goods are sold.

Question 15

Manufacturing overhead costs are allocated to the Work-in-Process Inventory account by a debit to the Manufacturing Overhead account.

Accepted Answer

Manufacturing overhead costs are allocated to the Work-in-Process Inventory account by a debit to the Work-in-Process Inventory account and a credit to the Manufacturing Overhead account.

Question 16

The accounting for the allocation of overhead costs is a three-step process and occurs at three different points in the accounting cycle. List each of the three steps. For each step indicate when the step occurs and why the step is needed.

Accepted Answer

The answer of The accounting for the allocation of overhead...

Question 17

Archangel Manufacturing calculated a predetermined overhead allocation rate at the beginning of the year based on direct labor costs. The production details for the year are given below: $\begin{array}{|l|r|}
\hline\begin{array}{l}
\text { Total manufacturing overhead costs estimated at the beginning } \
\text { of the year }
\end{array} & \$ 140,000 \
\hline \text { Total direct labor costs estimated at the beginning of the year } & \$ 320,000 \
\hline & 10,000 \text { direct labor } \
\text { Total direct labor hours estimated at the beginning of the year } & \$ 160,000 \
\hline \text { Actual manufacturing overhead costs for the year } & \$ 360,000 \
\hline \text { Actual direct labor costs for the year } & 12,200 \text { direct labor } \
& \text { hours }\
\hline
\end{array}$ Calculate the manufacturing overhead allocation rate for the year based on the above data. (Round your final answer to two decimal places.)

Accepted Answer

The manufacturing overhead allocation rate is calculated based on the estimated costs at the beginning of the year. The formula is: $ \text{Overhead Allocation Rate} = \frac{\text{Total Estimated Manufacturing Overhead Costs}}{\text{Total Estimated Direct Labor Costs}} $. Using the given data: $ \frac{\$140,000}{\$320,000} = 0.4375 $ or 43.75%.

Question 18

Which of the following correctly describes the term cost driver?

Accepted Answer

A cost driver is a factor that directly or indirectly causes a particular cost to be incurred. It can be anything that affects the cost such as the volume of production, the complexity of a product, the amount of labor required, or the cost of materials. It is the primary factor that determines the cost of a particular activity or process. Therefore, option C is the most appropriate description of the term cost driver.

Question 19

The predetermined overhead allocation rate for a given production year is calculated ________.

Accepted Answer

The predetermined overhead allocation rate is calculated before the accounting period begins, based on estimated overhead costs and estimated allocation base (such as direct labor hours or machine hours). This rate is used to allocate overhead costs to jobs or products during the accounting period.

Question 20

Zephyros Corporation had estimated manufacturing overhead costs for the coming year to be $301,000. The total estimated direct labor hours and machine hours for the coming year are 7000 and 13,000, respectively. Manufacturing overhead costs are allocated based on direct labor hours. What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.)

Accepted Answer

To calculate the predetermined overhead allocation rate, we divide the estimated manufacturing overhead costs by the estimated direct labor hours:

$301,000 / 7,000 = $43.00 per direct labor hour

Therefore, the correct answer is C.

Quiz 17: Job Order Costing