Question 1

Olson Corporation constructs new homes.Assume that Olson uses a job costing system.During May of the current year, the following transactions occurred: Olson purchased $4,500 of lumber on account.
Olson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.
Depreciation of $1,500 on equipment used to build new houses was recorded.
A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash
- 
The journal entry to record the requisition of lumber for Olson would include a
A) debit to Work-in-Process of $4,500.
B) debit to Materials Inventory of $3,750.
C) credit to Finished Goods of $3,750.
D) debit to Work-in-Process of $3,750.

Accepted Answer

The correct journal entry for the requisition of lumber used in production involves debiting Work-in-Process for the amount of lumber used, which is $3,750. This reflects the cost of materials being moved from inventory into the production process.

Question 2

The _____ method of allocation of support department cost recognizes that interactions among support departments occur.​
A) ​normal
B) ​sequential
C) ​direct
D) ​reversal
E) ​causal

Accepted Answer

The sequential method of allocation of support department cost recognizes that interactions among support departments occur. This method allocates support department costs in a sequence that reflects the interdepartmental support provided, unlike methods that ignore such interactions.

Question 3

Match each item with the correct statement below.
-An approach that assigns actual costs of direct materials, direct labor, and overhead to products
A)actual cost system
B)job-order costing system
C)normal cost system
D)process-costing system

Accepted Answer

An actual cost system assigns actual costs of direct materials, direct labor, and overhead to products.

Answer: B
 Job-order costing system is used when products are made to order or in batches, and assigns costs to each individual job or batch.

Answer: C
 Normal cost system uses predetermined rates to allocate costs to products, based on estimated costs for direct materials, direct labor, and overhead.

Answer: D
 Process-costing system is used when products are made in a continuous process, and assigns costs to each step or process within the production system.

Question 4

At the beginning of the year, Forest Corporation estimates overhead will be $175,000.If the actual overhead for the year is $165,000 and the applied overhead for the year is $120,000, what is the journal entry needed to reconcile the overhead variance? Assume that the overhead variance is immaterial.
A)

B)

C)

D)

E) None of these

Accepted Answer

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Question 5

Match each item with the correct statement below.
-The difference between actual overhead and applied overhead
A)predetermined overhead rate
B)plantwide overhead rate
C)departmental overhead rate
D)overhead variance
E)overapplied overhead
F)underapplied overhead
G)applied overhead
H)normal cost of goods sold

Accepted Answer

Overhead variance is the difference between actual overhead and applied overhead.

Answer: A
 Predetermined overhead rate is used to apply overhead to products and is calculated by dividing estimated total manufacturing overhead costs by estimated total allocation base.

Answer: B
 Plantwide overhead rate is calculated by dividing estimated total manufacturing overhead costs by estimated total allocation base across the entire plant.

Answer: C
 Departmental overhead rate is calculated separately for each department by dividing estimated total manufacturing overhead costs by estimated total allocation base for each department.

Answer: E
 Overapplied overhead occurs when applied overhead is greater than actual overhead.

Answer: F
 Underapplied overhead occurs when applied overhead is less than actual overhead.

Answer: G
 Applied overhead is the amount of manufacturing overhead assigned to products using the predetermined overhead rate.

Answer: H
 Normal cost of goods sold is the cost of goods sold, excluding any underapplied or overapplied overhead.

Question 6

Olson Corporation constructs new homes.Assume that Olson uses a job costing system.During May of the current year, the following transactions occurred: Olson purchased $4,500 of lumber on account.
Olson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.
Depreciation of $1,500 on equipment used to build new houses was recorded.
A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash
- 
The journal entry to record labor for Olson would include a
A) debit to Finished Goods of $750.
B) debit to Wages Payable of $750.
C) credit to Finished Goods of $750.
D) debit to Work-in-Process of $750.

Accepted Answer

SUPPORTING CALCULATIONS:
Labor is recorded as a debit to Work-in-Process: $15 × 50 = $750

Question 7

Match each item with the correct statement below.
-The amount by which actual overhead exceeds applied overhead
A)predetermined overhead rate
B)plantwide overhead rate
C)departmental overhead rate
D)overhead variance
E)overapplied overhead
F)underapplied overhead
G)applied overhead
H)normal cost of goods sold

Accepted Answer

Underapplied overhead occurs when the actual overhead costs are higher than the overhead costs that were applied to products or services, resulting in a shortfall that needs to be adjusted at the end of the accounting period.

Question 8

Match each item with the correct statement below.
-An overhead rate computed using estimated data
A)predetermined overhead rate
B)plantwide overhead rate
C)departmental overhead rate
D)overhead variance
E)overapplied overhead
F)underapplied overhead
G)applied overhead
H)normal cost of goods sold

Accepted Answer

A predetermined overhead rate is computed in advance for the upcoming period using estimated data.

Answer: B
 A plantwide overhead rate applies one overhead rate to the entire plant based on the estimated total amount of overhead and the estimated activity level.

Answer: C
 A departmental overhead rate applies overhead to a specific department based on that department's estimated total amount of overhead and estimated activity level.

Answer: D
 Overhead variance refers to the difference between actual overhead incurred during a period and the amount of overhead charged to production.

Answer: E
 Overapplied overhead occurs when the actual overhead incurred is less than the amount of overhead charged to production.

Answer: F
 Underapplied overhead occurs when the actual overhead incurred is greater than the amount of overhead charged to production.

Answer: G
 Applied overhead refers to the amount of overhead assigned or allocated to a particular job or product.

Answer: H
 The normal cost of goods sold is the actual cost of goods sold, including the actual amount of overhead incurred during the period.

Question 9

The _____ ignores support department interactions and assigns support department costs only to the producing departments.​
A) ​normal method
B) ​sequential method
C) ​direct method
D) ​reciprocal method
E) ​causal method

Accepted Answer

The direct method allocates support department costs directly to the producing departments, without taking into account interactions between support departments.

Question 10

Match each item with the correct statement below.
-A costing system in which costs are collected and assigned to units of production for each individual job
A)actual cost system
B)job-order costing system
C)normal cost system
D)process-costing system

Accepted Answer

A job-order costing system is designed to assign costs to individual units of production (also called jobs) based on the specific materials, labor, and overhead used to produce each unit. This system is commonly used in industries such as construction, manufacturing, and custom fabrication, where each job is unique and requires a different set of resources to complete.

Question 11

Which of the following statements is true of the sequential method of allocation?​
A) ​The sequential method is considered more accurate than the direct method.
B) ​The sequential method recognizes all interactions among the support departments.
C) ​In the sequential method, once a support department's costs are allocated, it receives a subsequent allocation from another support department.
D) ​In the sequential method, no cost from one support department is given to another support department.
E) ​The sequential method assigns support department costs only to the producing departments.

Accepted Answer

The sequential method is considered more accurate than the direct method because it partially recognizes interactions among support departments by allocating costs in a specific sequence.

Question 12

Following is the departmental data of Alpha Company.If calculated through the direct method, the support department costs assigned to the grinding department are _____.

A)  $100,000
B)  $350,000
C) $200,000
D)  $150,000
E)  $240,000

Accepted Answer

Usage or allocation ratio for the Grinding department = 400,000 / (400,000 + 100,000) = 80%
Cost of support department allocated to the Grinding department = 80% × $300,000 = $240,000

Question 13

Match each item with the correct statement below.
-An approach that assigns the actual costs of direct materials and direct labor to products but uses a predetermined rate to assign overhead costs
A)actual cost system
B)job-order costing system
C)normal cost system
D)process-costing system

Accepted Answer

The description matches the normal cost system, which uses actual direct materials and direct labor costs but estimates overhead costs using a predetermined rate.

Answer: B
 The job-order costing system is used when products are made to order or in small batches, allowing for the direct costs of materials and labor to be assigned to each job.

Answer: D
 The process-costing system is used when products are mass-produced, and the costs of materials, labor, and overhead are accumulated and averaged over all units produced.

Answer: A
 The actual cost system assigns the true costs of direct materials, direct labor, and overhead to products without using predetermined rates or estimates.

Question 14

Following is the departmental data of Omega Solution Company.If calculated using the sequential method, the cost of power department allocated to the Assembly department is _____.

A)  $15,000
B)  $35,000
C)  $20,000
D) $60,000
E)  $24,000

Accepted Answer

Usage or allocation ratio for the Assembly department = 100,000 / (100,000 + 300,000 + 100,000) = 20%
Cost of power department allocated to the Assembly department = 20% × $300,000 = $60,000

Question 15

Match each item with the correct statement below.
-Overhead assigned to production using predetermined rates
A)predetermined overhead rate
B)plantwide overhead rate
C)departmental overhead rate
D)overhead variance
E)overapplied overhead
F)underapplied overhead
G)applied overhead
H)normal cost of goods sold

Accepted Answer

Applied overhead refers to the amount of overhead assigned to production using predetermined rates, which is calculated based on the predetermined overhead rate and the actual amount of the allocation base incurred.

Question 16

Match each item with the correct statement below.
-A costing system that accumulates production costs by process or by department for a given period of time
A)actual cost system
B)job-order costing system
C)normal cost system
D)process-costing system

Accepted Answer

The process-costing system accumulates production costs by process or by department for a given period of time.

Question 17

Walter Company uses a job-order costing system to account for product costs.The following information pertains to the current year:  
 
 Plantwide overhead rate is $18 per direct labor hour
 
-
 
What is the total amount credited to Materials Inventory for Walter in the current year?
A) $480,000
B) $170,000
C) $140,000
D) $110,000

Accepted Answer

SUPPORTING CALCULATIONS: Materials used in production = $140,000

Question 18

On April 9 of the current year, Job XX4 was completed.The job cost sheet showed a total of $4,000 in direct materials and $6,000 in direct labor at a rate of $20 per direct labor hour.Plantwide overhead is applied at $30 per direct labor hour.The debit to Finished Goods Inventory to record the completion of Job XX4 is
A) $13,000.
B) $9,000.
C) $4,000.
D) $19,000.

Accepted Answer

SUPPORTING CALCULATIONS:
$4,000 + $6,000 + [$30 × ($6,000 / $20)] = $19,000

Question 19

Walter Company uses a job-order costing system to account for product costs.The following information pertains to the current year:  
 
 Plantwide overhead rate is $18 per direct labor hour
 
-
What is the total amount debited to Finished Goods Inventory in the current year?
A) $490,000
B) $510,000
C) $450,000
D) $550,000

Accepted Answer

SUPPORTING CALCULATIONS:
$140,000 + $160,000 + ($18 × 10,000) - $30,000 = $450,000

Question 20

Which of the following departments of the automobile industry provides essential services for producing departments but do not actually make the product or service being sold?​
A) ​Maintenance department
B) ​Grinding department
C) ​Painting department
D) ​Assembling department
E) ​Fabrication department

Accepted Answer

The maintenance department provides essential services for producing departments by ensuring equipment and machinery are functioning properly, but they do not actually make the product or service being sold. The other departments listed (grinding, painting, assembling, fabrication) are all directly involved in the production process.

Quiz 4: Job-Order Costing and Normal Cost Overhead Application

The _____ method of allocation of support department cost recognizes that interactions among support departments occur.​

Match each item with the correct statement below. -An approach that assigns actual costs of direct materials, direct labor, and overhead to products

Match each item with the correct statement below. -The difference between actual overhead and applied overhead

Match each item with the correct statement below. -The amount by which actual overhead exceeds applied overhead

Match each item with the correct statement below. -An overhead rate computed using estimated data

The _____ ignores support department interactions and assigns support department costs only to the producing departments.​

Match each item with the correct statement below. -A costing system in which costs are collected and assigned to units of production for each individual job

Which of the following statements is true of the sequential method of allocation?​

Following is the departmental data of Alpha Company.If calculated through the direct method, the support department costs assigned to the grinding department are _____.

Match each item with the correct statement below. -An approach that assigns the actual costs of direct materials and direct labor to products but uses a predetermined rate to assign overhead costs

Following is the departmental data of Omega Solution Company.If calculated using the sequential method, the cost of power department allocated to the Assembly department is _____.

Match each item with the correct statement below. -Overhead assigned to production using predetermined rates

Match each item with the correct statement below. -A costing system that accumulates production costs by process or by department for a given period of time

Walter Company uses a job-order costing system to account for product costs.The following information pertains to the current year: Plantwide overhead rate is $18 per direct labor hour - What is the total amount credited to Materials Inventory for Walter in the current year?

Walter Company uses a job-order costing system to account for product costs.The following information pertains to the current year: Plantwide overhead rate is $18 per direct labor hour - What is the total amount debited to Finished Goods Inventory in the current year?

Which of the following departments of the automobile industry provides essential services for producing departments but do not actually make the product or service being sold?​

The _____ method of allocation of support department cost recognizes that interactions among support departments occur.

The _____ ignores support department interactions and assigns support department costs only to the producing departments.

Which of the following statements is true of the sequential method of allocation?

Which of the following departments of the automobile industry provides essential services for producing departments but do not actually make the product or service being sold?