Question 1

The Harold Company forecasts that total overhead for the current year will be $12,000,000 and total machine hours will be 200,000 hours. However, the actual overhead is $4,000,000 and the actual machine hours are 100,000 hours. If the company uses a predetermined overhead rate based on machine hours for applying overhead, the overhead will be:

Accepted Answer

The answer of The Harold Company forecasts that total overhead...

Question 2

During the year, Cambridge Corporation applied factory overhead costs of $205,000 to production. At the end of the year, total overapplied factory overhead is $17,000. What was the amount of actual factory overhead cost incurred during the year?

Accepted Answer

To find the actual factory overhead cost incurred during the year, we need to subtract the overapplied factory overhead from the applied factory overhead:

Actual factory overhead cost = Applied factory overhead - Overapplied factory overhead
Actual factory overhead cost = $205,000 - $17,000
Actual factory overhead cost = $188,000

Therefore, the correct answer is D) $188,000.

Question 3

Which of the following is most likely to be a product cost?

Accepted Answer

Drill bits for a drill press used in the plant assembly area are most likely to be a product cost as they are directly related to the manufacturing process of the product. The other options are not directly related to the production of the product and would be considered period costs.

Question 4

The following information is available for the first month of operations for Crawford, Inc.: $\begin{array}{|l|l|}
\hline\$ 570,000 & \text { Sales } \
\hline 210,000 & \text { Gross profit } \
\hline 20,000 & \text { Indirect labor } \
\hline 9,000 & \text { Indirect materials } \
\hline 7,500 & \text { Other factory overhead } \
\hline 250,000 & \text { Materials purchased } \
\hline 420,000 & \text { Total manufacturing costs } \
\hline 10,000 & \text { Materials irventory, end of period } \
\hline
\end{array}$
 Refer to the information provided for Crawford Inc. Calculate direct materials cost used in production.

Accepted Answer

Direct materials cost used in production is calculated as: Materials purchased ($250,000) - Indirect materials ($9,000) - Ending materials inventory ($10,000) = $231,000.

Question 5

For Peterson Company, total overhead applied was $35,000,000 at the end of the year. Actual overhead was $35,800,000. Closing over/under applied overhead into cost of goods sold would cause net income to:

Accepted Answer

Since actual overhead was greater than the overhead applied, there is an overapplied amount of $800,000. This means that the cost of goods sold was overstated by $800,000, which would cause net income to be understated by $800,000. Therefore, closing the overapplied overhead into cost of goods sold would decrease net income by $800,000.

Question 6

The sale of a finished good on account would:

Accepted Answer

When a finished good is sold on account, it increases Accounts Receivable and Sales. However, since the good is no longer in inventory, it decreases Finished Goods. This means that the cost of the sold goods will be recognized in Cost of Goods Sold, increasing it. Therefore, B is the correct choice.

Question 7

The finished goods account is a controlling account for the subsidiary:

Accepted Answer

The finished goods account would be a controlling account for the subsidiary stock ledger, as it represents the final products that have been completed and are ready for sale. The sales ledger tracks customer accounts and payments, the materials ledger tracks raw material inventory and usage, and the work-in-process ledger tracks the costs and progress of partially completed products.

Question 8

Hudson, Inc. has estimated total factory overhead costs of $400,000 and 20,000 direct labor hours for the current fiscal year. If direct labor hours for the year totals 18,000 and actual factory overhead totals $350,000, what is the amount of overapplied or underapplied overhead for the year?

Accepted Answer

The predetermined overhead rate is calculated as estimated total factory overhead costs divided by estimated direct labor hours, which is $400,000 / 20,000 hours = $20 per direct labor hour. The applied overhead for the year is then the predetermined rate multiplied by the actual direct labor hours, which is $20 * 18,000 hours = $360,000. Since the actual factory overhead is $350,000, the difference is $360,000 - $350,000 = $10,000 overapplied.

Question 9

For a manufacturing business, inventory that is still in the process of being manufactured is referred to as:

Accepted Answer

Work-in-process inventory refers to inventory items that are still in the process of being manufactured, meaning that they are not yet finished goods but have undergone some level of production. Supplies inventory refers to raw materials and other items used in production, while finished goods inventory consists of fully completed and ready-to-be-sold items. Direct materials inventory refers specifically to the materials used in production, but does not encompass items that are still in process. Therefore, the best choice for inventory that is still in the process of being manufactured is work-in-process inventory (choice B).

Question 10

Direct materials, work-in-process, and finished goods inventory are most likely to be reported on the balance sheet of a(n):

Accepted Answer

Direct materials, work-in-process, and finished goods inventory are commonly found on the balance sheet of manufacturing companies, such as automobile companies, which inventory raw materials, partially completed goods, and finished products. Financial consultants, apparel boutiques, and insurance companies typically do not have significant inventory of physical products, so their balance sheets would not include these categories of inventory.

Question 11

Hudson, Inc. has estimated total factory overhead costs of $400,000, and 20,000 direct labor hours for the current fiscal year. If the direct labor hours for Job N41 is 1,500, calculate the total factory overhead applied to this job.

Accepted Answer

To calculate the total factory overhead applied to Job N41, we need to use the predetermined overhead rate, which is calculated by dividing the estimated factory overhead costs by the estimated direct labor hours. 
Predetermined overhead rate = $400,000 / 20,000 hours = $20 per direct labor hour 
Total overhead applied to Job N41 = Predetermined overhead rate × Direct labor hours for Job N41 
Total overhead applied to Job N41 = $20 × 1,500 = $30,000. 
Therefore, the correct answer is D) $30,000.

Question 12

Which of the following is not a product cost?

Accepted Answer

CEO salary is considered an overhead cost or period cost since it is not directly related to the production of a specific product or service. Product costs, on the other hand, are directly traceable to the production process of a specific product or service. B, C, and D are all product costs as they are directly related to the production process of specific products.

Question 13

The Anderson Company forecasts that total overhead for the current year will be $15,000,000 and total machine hours will be 200,000 hours. However, the actual overhead is $8,000,000 and the actual machine hours are 100,000 hours. If the company uses a predetermined overhead rate based on machine hours for applying overhead, what is predetermined overhead rate?

Accepted Answer

The answer of The Anderson Company forecasts that total overhead...

Question 14

Costs that are treated as assets until the product is sold are called:

Accepted Answer

Product costs are costs that are directly incurred in the production process of a product and are treated as assets until the product is sold. These costs include direct materials, direct labor, and manufacturing overhead. Once the product is sold, the costs are expensed as cost of goods sold.

Question 15

Which of the following is not a period cost?

Accepted Answer

A period cost is a cost that is not directly related to producing or acquiring a product. Choices A, B, and C are all examples of period costs, while choice D is a direct cost of producing a product and is therefore a product cost.

Question 16

Bell Manufacturers Inc. has estimated total factory overhead costs of $60,000, and 10,000 direct labor hours for the current fiscal year. If job number 117 incurred 2,000 direct labor hours, the work-in-process account will be increased and factory overhead will be decreased by:

Accepted Answer

Factory overhead is applied to jobs based on direct labor hours. Job number 117 incurred 2,000 direct labor hours, so it will be assigned $12,000 of factory overhead ($60,000 total factory overhead costs / 10,000 direct labor hours * 2,000 direct labor hours). The work-in-process account will be increased by $12,000 to reflect the cost of the factory overhead applied to the job, and factory overhead will be decreased by $12,000 to reflect the amount of factory overhead that has been applied to jobs.

Question 17

Which of the following would be a period costs for a textbooks printing company?

Accepted Answer

Period costs are expenses that are not directly related to the production of goods, but rather incurred during a certain period of time, such as a month or a year. Advertising expenses are considered period costs because they are incurred to promote the company and its products, regardless of how many textbooks are actually produced during that time. Wages of a press operator and paper costs are considered product costs because they are directly related to the production of the textbooks. Utility costs of the factory could be considered either period or product costs depending on how they are allocated.

Question 18

Which of the following is most likely be a period cost?

Accepted Answer

A period cost is a cost that is not directly related to the production of goods or services, but rather to the overall functioning of the business. The salary of a telephone receptionist in the sales office is a period cost as it is related to the overall functioning of the business, but not to the production of goods or services. Options A, C, and D are all related to the production of goods or services and are therefore likely to be classified as product costs rather than period costs.

Question 19

Upon completing a job, direct materials totaled $3,000; direct labor, $3,500; and factory overhead, $1,500. Units produced totaled 1,000. What is the per unit cost?

Accepted Answer

The answer of Upon completing a job, direct materials totaled...

Question 20

The following information is available for the first month of operations for Crawford, Inc.: $\begin{array}{|l|l|}
\hline \$ 570,000 & \text { Sales } \
\hline 210,000 & \text { Gross profit } \
\hline 20,000 & \text { Indirect labor } \
\hline 9,000 & \text { Indirect materials } \
\hline 7,500 & \text { Other factory overhead } \
\hline 250,000 & \text { Materials purchased } \
\hline 420,000 & \text { Total manufacturing costs } \
\hline 10,000 & \text { Materials irventory, end of period } \
\hline
\end{array}$
 Refer to the information provided for Crawford Inc. What is the cost of goods sold?

Accepted Answer

The cost of goods sold (COGS) can be calculated by subtracting the gross profit from sales: $570,000 - $210,000 = $360,000.

Quiz 10: Accounting Systems for Manufacturing Businesses