Verified Test Bank Chapter.7 Job Costing 6th Edition

Fundamentals of Cost Accounting, 6e (Lanen)

Chapter 7 Job Costing

1) A job is a product or service that can be easily and conveniently distinguished from other products/services.

2) Job cost sheets are used in accounting systems as a subsidiary ledger for the Work-in-Process account.

3) Job shops have three types of inventory accounts: Direct Materials, Work-in-Process, and Finished Goods.

4) The cost in the ending Finished Goods inventory account consists of the direct materials, direct labor, and manufacturing overhead of all jobs still in process at the end of the period.

5) Accounting for direct materials and direct labor is easier than accounting for manufacturing overhead costs.

6) Indirect materials and indirect labor are two examples of manufacturing overhead costs. 

7) The journal entry to record actual manufacturing overhead for indirect materials debits Manufacturing Overhead Control and credits Accounts Payable. 

8) The journal entry to record actual manufacturing overhead for indirect labor debits Manufacturing Overhead Control and credits Work-in-Process inventory. 

9) The periodic allocation of manufacturing overhead costs to job cost sheets is based on an event, not a transaction.

10) The predetermined overhead rate is computed by dividing the estimated manufacturing overhead costs by the estimated activity of the allocation base. 

11) The journal entry to apply manufacturing overhead costs to completed jobs credits either Applied Manufacturing Overhead or Manufacturing Overhead Control. 

12) At the end of the accounting period, manufacturing overhead costs are applied to uncompleted jobs using the same predetermined overhead rate that is used to apply manufacturing overhead costs to completed jobs.

13) Overapplied overhead occurs when the actual overhead costs incurred during a period are greater than the overhead costs applied during the period.

14) Underapplied overhead occurs when the actual overhead costs incurred during a period are greater than the overhead costs applied during the period.

15) Normal costing uses the actual allocation base activity to apply manufacturing overhead costs to jobs during the period.

16) Actual costing does not use a predetermined overhead rate to apply manufacturing overhead costs to jobs completed during the period.

17) Service organizations, by their nature, cannot have a balance in Work-in-Process Inventory.

18) Service organizations generally use the same job costing procedures as manufacturers.

19) It is unethical to intentionally charge costs to the wrong job.

20) Most major projects require budget and completion stage revisions at certain intervals due to their inherent uncertainty.

21) Which of the following statements is(are) true regarding product costing?

(A) A job is a cost object that can be easily and conveniently distinguished from other cost objects.

(B) Job cost sheets are used in accounting systems as a subsidiary ledger for the Work-in-Process account.

A) Only A is true.

B) Only B is true.

C) Both of these are true.

D) Neither of these is true.

22) For which of the following businesses would a job costing system be appropriate?  

A) Auto repair shop.

B) Crude oil refinery.

C) Drug manufacturer.

D) Root beer producer.

23) Which of the following is not a characteristic of job costing?

A) Each job is distinguishable from other jobs.

B) Identical units are produced on an ongoing basis.

C) Job cost data are used for setting prices and bids.

D) It is possible to compare actual costs with estimated costs.

24) Which of the following companies would most likely use job costing?

A) Paper manufacturer.

B) Paint producer.

C) Breakfast cereal maker.

D) Advertising agency.

25) The journal entry to record the completion of a job in a job costing system is:

A) Option A

B) Option B

C) Option C

D) Option D

26) The journal entry to record the requisition of direct materials for new jobs started during the period is:

A) Option A

B) Option B

C) Option C

D) Option D

27) Which of the following is used as the basis for posting to the direct materials section of the job cost sheet?  

A) Purchase requisition.

B) Materials requisition.

C) Receiving report.

D) Purchase order.

28) Which of the following documents would be used as the basis for posting to the direct labor section of the job cost sheet? 

A) Purchase requisition.

B) Purchase order.

C) Receiving report.

D) Time card.

29) Which of the following accounts is used to accumulate the actual manufacturing overhead costs incurred during a period?

A) Applied Manufacturing Overhead.

B) Work-in-Process Inventory.

C) Manufacturing Overhead Control.

D) Cost of Goods Sold.

30) Compute the Work-in-Process transferred to the finished goods warehouse on April 30 using the following information:

A) $650.

B) $675.

C) $700.

D) $750.

31) The following events took place at a manufacturing company for the current year:

(1) Purchased $95,000 in direct materials.

(2) Incurred labor costs as follows: (a) direct, $56,000 and (b) indirect, $13,600.

(3) Other manufacturing overhead was $107,000, excluding indirect labor.

(4) Transferred 80% of the materials to the manufacturing assembly line.

(5) Completed 65% of the Work-in-Process during the year.

(6) Sold 85% of the completed goods.

(7) There were no beginning inventories.

What is the company's Cost of Goods Sold?

A) $164,190.00.

B) $139,561.50.

C) $252,600.00.

D) $214,710.50.

32) The following events took place at a manufacturing company for the current year:

(1) Purchased $95,000 in direct materials.

(2) Incurred labor costs as follows: (a) direct, $56,000 and (b) indirect, $13,600.

(3) Other manufacturing overhead was $107,000, excluding indirect labor.

(4) Transferred 80% of the materials to the manufacturing assembly line.

(5) Completed 65% of the Work-in-Process during the year.

(6) Sold 85% of the completed goods.

(7) There were no beginning inventories.

What is the value of the ending Work-in-Process Inventory?

A) $13,261.50.

B) $14,259.00.

C) $88,410.00.

D) $95,060.50.

33) The following events took place at a manufacturing company for the current year:

(1) Purchased $95,000 in direct materials.

(2) Incurred labor costs as follows: (a) direct, $56,000 and (b) indirect, $13,600.

(3) Other manufacturing overhead was $107,000, excluding indirect labor.

(4) Transferred 80% of the materials to the manufacturing assembly line.

(5) Completed 65% of the Work-in-Process during the year.

(6) Sold 85% of the completed goods.

(7) There were no beginning inventories.

What is the journal entry to record the direct labor costs for the period?

A) Option A

B) Option B

C) Option C

D) Option D

34) The following events took place at a manufacturing company for the current year:

(1) Purchased $95,000 in direct materials.

(2) Incurred labor costs as follows: (a) direct, $56,000 and (b) indirect, $13,600.

(3) Other manufacturing overhead was $107,000, excluding indirect labor.

(4) Transferred 80% of the materials to the manufacturing assembly line.

(5) Completed 65% of the Work-in-Process during the year.

(6) Sold 85% of the completed goods.

(7) There were no beginning inventories.

What is the value of the ending Finished Goods Inventory?

A) $13,261.50.

B) $24,628.50.

C) $26,481.00.

D) $164,190.00.

35) The journal entry to record the actual manufacturing overhead costs for indirect materials is:

A) Option A

B) Option B

C) Option C

D) Option D

36) The journal entry to record the issuance of direct materials represented by the following materials requisitions for the month includes:

A) a debit to Materials Inventory, $15,945.

B) a debit to Materials Inventory, $16,670.

C) a debit to Work-in-Process Inventory, $15,945.

D) a credit to Work-in-Process Inventory, $15,945.

37) The financial records for the Harrison Manufacturing Company have been destroyed in a fire. The following information has been obtained from a separate set of books maintained by the cost accountant. The cost accountant now asks for your assistance in computing the missing amounts.

What is the amount of the materials purchased?

A) $14,400.

B) $16,400.

C) $18,000.

D) $19,600.

38) The financial records for the Harrison Manufacturing Company have been destroyed in a fire. The following information has been obtained from a separate set of books maintained by the cost accountant. The cost accountant now asks for your assistance in computing the missing amounts.

What is the value of the ending Work-in-Process inventory balance?

A) $0.

B) $4,200.

C) $7,500.

D) $8,000.

39) The financial records for the Harrison Manufacturing Company have been destroyed in a fire. The following information has been obtained from a separate set of books maintained by the cost accountant. The cost accountant now asks for your assistance in computing the missing amounts.

What is the value of the beginning Finished Goods Inventory?

A) $0.

B) $4,200.

C) $13,300.

D) $21,700.

40) Stock Co. uses a job costing system. The following debits (credits) appeared in Stock's work-in-process account for the month of April:

Stock applies overhead to production at a predetermined rate of 80% of direct labor cost. Job No. 5, the only job still in process on April 30 has been charged with direct labor of $2,000. What was the amount of direct materials charged to Job No. 5? (CPA adapted)  

A) $3,000.

B) $5,200.

C) $8,800.

D) $24,000.

41) The following are Margin Co.'s production costs for December:

What amount of costs should be traced to specific products in the production process? (CPA adapted)

A) $194,000.

B) $190,000.

C) $100,000.

D) $90,000.

42) Under Eagle Co.'s job costing system, manufacturing overhead is applied to Work-in-Process using a predetermined annual overhead rate. During February, Eagle's transactions included the following:

Eagle had neither beginning nor ending inventory in Work-in-Process Inventory. What was the cost of jobs completed in February? (CPA adapted)

A) $302,000.

B) $310,000.

C) $322,000.

D) $330,000.

43) Pigot Corporation uses job costing and has two production departments, M and A. Budgeted manufacturing costs for the year are as follows:

The actual direct materials and direct labor costs charged to Job. No. 432 during the year were as follows:

Pigot applies manufacturing overhead to production orders on the basis of direct labor cost using departmental rates predetermined at the beginning of the year based on the annual budget. The total cost associated with Job. No. 432 for the year should be:

A) $50,000.

B) $55,000.

C) $65,000.

D) $75,000.

44) The Falcon Company does not maintain backup documents for its computer files. In June, some of the current data were lost, and you have been asked to help reconstruct the data. The following beginning balances on June 1 are known:

Reviewing old documents and interviewing selected employees have generated the following additional information:

The production superintendent's job cost sheets indicated that materials of $2,600 were included in the June 30 Work-in-Process Inventory. Also, 300 direct labor-hours had been paid at $6.00 per hour for the jobs in process on June 30.

The Accounts Payable account is only for direct material purchases. The clerk remembers clearly that the balance in the Accounts Payable on June 30 was $8,000. An analysis of canceled checks indicated payments of $40,000 were made to suppliers during June.

Payroll records indicate that 5,200 direct labor-hours were recorded for June. It was verified that there were no variations in pay rates among employees during June.

Records at the warehouse indicate that the Finished Goods Inventory totaled $16,000 on June 30.

Another record kept manually indicates that the Cost of Goods Sold in June totaled $84,000.

The predetermined overhead rate was based on an estimated 60,000 direct labor-hours for the year and an estimated $180,000 in manufacturing overhead costs.

What is the ending balance in the Work-in-Process Inventory on June 30?

A) $4,800.

B) $5,300.

C) $9,300.

D) $9,800.

45) The Falcon Company does not maintain backup documents for its computer files. In June, some of the current data were lost, and you have been asked to help reconstruct the data. The following beginning balances on June 1 are known:

Reviewing old documents and interviewing selected employees have generated the following additional information:

The production superintendent's job cost sheets indicated that materials of $2,600 were included in the June 30 Work-in-Process Inventory. Also, 300 direct labor-hours had been paid at $6.00 per hour for the jobs in process on June 30.

The Accounts Payable account is only for direct material purchases. The clerk remembers clearly that the balance in the Accounts Payable on June 30 was $8,000. An analysis of canceled checks indicated payments of $40,000 were made to suppliers during June.

Payroll records indicate that 5,200 direct labor-hours were recorded for June. It was verified that there were no variations in pay rates among employees during June.

Records at the warehouse indicate that the Finished Goods Inventory totaled $16,000 on June 30.

Another record kept manually indicates that the Cost of Goods Sold in June totaled $84,000.

The predetermined overhead rate was based on an estimated 60,000 direct labor-hours for the year and an estimated $180,000 in manufacturing overhead costs.

What is the amount of direct materials purchased during June?

A) $38,000.

B) $40,000.

C) $42,000.

D) $43,000.

46) What document is used to determine the actual amount of direct labor to record on a job cost sheet?

A) Time ticket.

B) Payroll register.

C) Production order.

D) Wages payable account.

47) The Falcon Company does not maintain backup documents for its computer files. In June, some of the current data were lost, and you have been asked to help reconstruct the data. The following beginning balances on June 1 are known:

Reviewing old documents and interviewing selected employees have generated the following additional information:

The production superintendent's job cost sheets indicated that materials of $2,600 were included in the June 30 Work-in-Process Inventory. Also, 300 direct labor-hours had been paid at $6.00 per hour for the jobs in process on June 30.

The Accounts Payable account is only for direct material purchases. The clerk remembers clearly that the balance in the Accounts Payable on June 30 was $8,000. An analysis of canceled checks indicated payments of $40,000 were made to suppliers during June.

Payroll records indicate that 5,200 direct labor-hours were recorded for June. It was verified that there were no variations in pay rates among employees during June.

Records at the warehouse indicate that the Finished Goods Inventory totaled $16,000 on June 30.

Another record kept manually indicates that the Cost of Goods Sold in June totaled $84,000.

The predetermined overhead rate was based on an estimated 60,000 direct labor-hours for the year and an estimated $180,000 in manufacturing overhead costs. 

What is the Cost of Goods Manufactured for June?

A) $89,000.

B) $84,000.

C) $94,000.

D) $99,000.

48) In a job costing system, direct material cost is ordinarily debited to:  

A) Manufacturing Overhead.

B) Cost of Goods Sold.

C) Finished Goods Inventory.

D) Work-in-Process Inventory. 

49) Which of the following accounts is debited when direct labor is recorded?

A) Work-in-Process Inventory.

B) Salaries and wages expense

C) Salaries and wages payable.

D) Manufacturing overhead.

50) The balance in the Work-in-Process Inventory account equals: 

A) the balance in the Finished Goods Inventory account.

B) the balance in the Cost of Goods Sold account.

C) the balances on the job cost sheets of uncompleted jobs.

D) the balance in the Manufacturing Overhead account.

51) Grayson Inc. has provided the following data for the month of October. The balance in the Finished Goods Inventory account at the beginning of the month was $49,000 and at the end of the month was $45,000. The cost of goods manufactured for the month was $226,000. The actual manufacturing overhead cost incurred was $74,000 and the manufacturing overhead cost applied to Work-in-Process was $70,000. The adjusted cost of goods sold that would appear on the income statement for October is:  

A) $226,000.

B) $230,000.

C) $222,000.

D) $234,000.

52) Delgato Corporation, a manufacturing company, has provided data concerning its operations for September. The beginning balance in the raw materials account was $37,000 and the ending balance was $29,000. Raw materials purchases during the month totaled $57,000. Manufacturing overhead cost incurred during the month was $102,000, of which $2,000 consisted of raw materials classified as indirect materials. The direct materials cost for November was:

A) $63,000.

B) $57,000.

C) $65,000.

D) $49,000.

53) Under Lamar Company's job costing system, manufacturing overhead is applied to Work-in-Process Inventory using a predetermined overhead rate. During June, Lamar's transactions included the following:

Lamar Company had no beginning or ending inventories. What was the cost of goods manufactured for June? (CMA adapted)

A) $302,000.

B) $310,000.

C) $322,000.

D) $330,000.

54) Demur Inc., a manufacturing company, has provided the following data for the month of April. The balance in the Work-in-Process Inventory account was $10,000 at the beginning of the month and $22,000 at the end of the month. During the month, the company incurred direct materials cost of $63,000 and direct labor cost of $39,000. The actual manufacturing overhead cost incurred was $40,000. The manufacturing overhead cost applied to Work-in-Process was $43,000. The cost of goods manufactured for April was:  

A) $133,000.

B) $142,000.

C) $145,000.

D) $130,000.

55) Fogel Flight Company uses a job costing system. The direct materials for Job #045391 were purchased in September and put into production in October. The job was not completed by the end of October. At the end of October, in what account would the direct materials cost assigned to Job #045391 be located?  

A) Raw Materials Inventory.

B) Work-in-Process Inventory.

C) Finished Goods Inventory. 

D) Cost of Goods Manufactured.

56) Carson Inc. has provided the following data for the month of May. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.

Manufacturing overhead for the month was underapplied by $10,000.

The company allocates any underapplied or overapplied overhead among work-in-process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.

The journal entry to record the allocation of any underapplied or overapplied overhead for May would include a:

A) credit to Finished Goods Inventory of $900.

B) debit to Finished Goods Inventory of $29,200.

C) credit to Finished Goods Inventory of $29,200.

D) debit to Finished Goods Inventory of $900.

57) The following selected data were taken from the books of the Owens O-Rings Company. The company uses job costing to account for manufacturing costs. The data relate to April operations.

(1) Materials and supplies were requisitioned from the stores clerk as follows:

Job 405, material X, $7,000.

Job 406, material X, $3,000; material Y, $6,000.

Job 407, material X, $7,000; material Y, $3,200.

For general factory use: materials A, B, and C, $2,300.

(2) Time tickets for the month were chargeable as follows:

(3) Other information:

Factory paychecks for $36,700 were issued during the month.

Various factory overhead charges of $19,400 were incurred on account.

Depreciation of factory equipment for the month was $5,400.

Factory overhead was applied to jobs at the rate of $3.50 per direct labor hour.

Job orders completed during the month: Job 405 and Job 406.

Selling and administrative costs were $2,100.

Factory overhead is closed out only at the end of the year.

If Job 406 was sold on account for $41,500, how much gross profit would be recognized for the job?  

A) $3,800.

B) $5,900.

C) $18,500.

D) $35,600.

58) The following selected data were taken from the books of the Owens O-Rings Company. The company uses job costing to account for manufacturing costs. The data relate to April operations.

(1) Materials and supplies were requisitioned from the stores clerk as follows:

Job 405, material X, $7,000.

Job 406, material X, $3,000; material Y, $6,000.

Job 407, material X, $7,000; material Y, $3,200.

For general factory use: materials A, B, and C, $2,300.

(2) Time tickets for the month were chargeable as follows:

(3) Other information:

Factory paychecks for $36,700 were issued during the month.

Various factory overhead charges of $19,400 were incurred on account.

Depreciation of factory equipment for the month was $5,400.

Factory overhead was applied to jobs at the rate of $3.50 per direct labor hour.

Job orders completed during the month: Job 405 and Job 406.

Selling and administrative costs were $2,100.

Factory overhead is closed out only at the end of the year.

The end of the month Work-in-Process Inventory balance would be:

A) $18,200.

B) $24,850.

C) $64,100.

D) $88,950.

59) The following selected data were taken from the books of the Owens O-Rings Company. The company uses job costing to account for manufacturing costs. The data relate to April operations.

(1) Materials and supplies were requisitioned from the stores clerk as follows:

Job 405, material X, $7,000.

Job 406, material X, $3,000; material Y, $6,000.

Job 407, material X, $7,000; material Y, $3,200.

For general factory use: materials A, B, and C, $2,300.

(2) Time tickets for the month were chargeable as follows:

(3) Other information:

Factory paychecks for $36,700 were issued during the month.

Various factory overhead charges of $19,400 were incurred on account.

Depreciation of factory equipment for the month was $5,400.

Factory overhead was applied to jobs at the rate of $3.50 per direct labor hour.

Job orders completed during the month: Job 405 and Job 406.

Selling and administrative costs were $2,100.

Factory overhead is closed out only at the end of the year.

The balance in the factory overhead account would represent the fact that overhead was:

A) $1,050 underapplied.

B) $3,150 underapplied.

C) $1,250 overapplied.

D) $4,350 overapplied.

60) What are the transfers from the Finished Goods Inventory called?  

A) Cost of Goods Manufactured.

B) Cost of Goods Available.

C) Cost of Goods Completed.

D) Cost of Goods Sold.

61) In a job costing system, the dollar amount in the journal entry that transfers the costs of jobs from Work-in-Process Inventory to Finished Goods Inventory is the sum of the costs charged to all jobs:

A) sold during the period.

B) completed during the period.

C) in process during the period.

D) started in process during the period.

62) Which of the following events or transactions will not result in manufacturing overhead being applied to production?

A) Completion of a job in the current period that was started in a prior period.

B) Completion of a job in the current period that was started in the current period.

C) Preparing financial statements when work is in process at the end of the period.

D) Preparing financial statements when there is no work-in-process at the end of the period.

63) The journal entry to record the completion of a job in a job costing system is:

A) Option A

B) Option B

C) Option C

D) Option D

64) It is possible that the total cost of a job started in April and completed in May will not include:

A) direct materials added in April.

B) direct labor added in May.

C) applied overhead in April.

D) direct materials purchased in May.

65) Underapplied overhead occurs when the balance in the Manufacturing Overhead Control account is:

A) greater than the balance in the Applied Manufacturing Overhead account.

B) equal to the balance in the Applied Manufacturing Overhead account.

C) less than the balance in the Applied Manufacturing Overhead account.

D) less than the balance in the Finished Goods Inventory account.

66) Which of the following statements is(are) true regarding the application of manufacturing overhead?

(A) Manufacturing overhead is only recorded on the job cost sheets when financial statements are prepared or a job is completed.

(B) Overapplied overhead occurs when the actual overhead costs incurred during a period are greater than the overhead costs applied during the period.

A) Only A is true.

B) Only B is true.

C) Both of these are true.

D) Neither of these is true. 

67) The journal entry to write-off an insignificant underapplied overhead balance at the end of an accounting period is:

A) Option A

B) Option B

C) Option C

D) Option D

68) The journal entry to write-off a significant underapplied overhead balance at the end of an accounting period is:

A) Option A

B) Option B

C) Option C

D) Option D

69) If a company multiplies its predetermined overhead rate by the actual activity level of its allocation base, it is using:

A) standard costing.

B) normal costing.

C) actual costing.

D) budget costing.

70) If a company multiplies its actual overhead rate by the actual activity level of its allocation base, it is using:

A) standard costing.

B) normal costing.

C) actual costing.

D) budget costing.

71) The journal entry to write-off an insignificant overapplied overhead balance at the end of an accounting period for a service firm is:

A) Option A

B) Option B

C) Option C

D) Option D

72) Manufacturing overhead applied on the basis of direct labor-hours was $120,000, while actual manufacturing overhead incurred was $124,000 for the month of April. Which of the following is always true given the statement above?

A) Overhead was overapplied by $4,000.

B) Overhead was underapplied by $4,000.

C) Actual direct labor-hours exceeded budgeted direct labor-hours.

D) Actual direct labor-hours were less than budgeted direct labor-hours.

73) Travis Company's records show that overhead was overapplied by $10,000 last year. This overapplied overhead was closed out to the Cost of Goods Sold account at the end of the year. In trying to determine why overhead was overapplied by such a large amount, the company has discovered that $6,000 of depreciation on factory equipment was charged to administrative expense in error. Given the above information, which of the following statements is true?

A) Manufacturing overhead was actually overapplied by $16,000 for the year.

B) The company's net income is understated by $6,000 for the year.

C) Under the circumstances posed above, the error in recording depreciation would have no effect on operating income for the year.

D) The $6,000 in depreciation should have been charged to Work-in-Process rather than to administrative expense.

74) The actual manufacturing overhead incurred at Liberty Industries during May was $59,000, while the manufacturing overhead applied to Work-in-Process was $74,000. The company's Cost of Goods Sold was $289,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?

A) Manufacturing overhead was overapplied by $15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $274,000.

B) Manufacturing overhead was underapplied by $15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $274,000.

C) Manufacturing overhead was overapplied by $15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $304,000.

D) Manufacturing overhead was underapplied by $15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $304,000.

75) The predetermined overhead rate for manufacturing overhead for 2020 is $4.00 per direct labor hour. Employees are expected to earn $5.00 per hour and the company is planning on paying its employees $100,000 during the year. However, only 75% of the employees are classified as "direct labor." What was the estimated manufacturing overhead for 2020?  

A) $60,000.

B) $75,000.

C) $80,000.

D) $93,750.

76) Before prorating the manufacturing overhead costs at the end of 2020, the Cost of Goods Sold and Finished Goods Inventory accounts had applied overhead costs of $57,500 and $20,000 in them, respectively. There was no Work-in-Process at the beginning or end of 2020. During the year, manufacturing overhead costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at the end of 2020. If the under or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, how much will be allocated to the Finished Goods Inventory? (rounded to the nearest whole dollar) 

A) $903.

B) $1,217.

C) $1,283.

D) $2,597.

77) Before prorating the manufacturing overhead costs at the end of 2020, the Cost of Goods Sold and Finished Goods Inventory accounts had applied overhead costs of $57,500 and $20,000 in them, respectively. There was no Work-in-Process at the beginning or end of 2020. During the year, manufacturing overhead costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at the end of 2020. If the under- or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, what will be the Cost of Goods Sold balance after the proration? (rounded to the nearest whole dollar) 

A) $58,403.

B) $56,597.

C) $60,197.

D) $54,903.

78) In a traditional job costing system, the use of indirect labor in the production department increases: (CPA adapted) 

A) Stores Control.

B) Work-in-Process Control.

C) Manufacturing Overhead Control.

D) Manufacturing Overhead Applied.

79) Which of the following actions do not cause an impropriety in job costing?

A) Misstating the stage of completion.

B) Choosing to use normal costing rather than actual costing.

C) Charging costs to the wrong job.

D) Choosing an allocation method based on the results rather than choosing the method based on resource usage.

80) Which of the following approaches allocates overhead by multiplying a predetermined overhead rate × actual activity?

A) Actual costing.

B) Normal costing.

C) Regression costing.

D) Standard costing.

81) Which of the following approaches allocates overhead by multiplying an actual overhead rate × actual activity?

A) Actual costing.

B) Normal costing.

C) Regression costing.

D) Standard costing.

82) Which of the following approaches allocates overhead by multiplying a predetermined rate × standard activity?

A) Actual costing.

B) Normal costing.

C) Regression costing.

D) Standard costing.

83) Reyes Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-hours were 19,050. How much overhead would be applied to production?

A) $266,400.

B) $274,320.

C) $279,607.

D) $287,920.

84) Reyes Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-hours were 19,050. How much is the over- or underapplied overhead?

A) $21,520 underapplied.

B) $13,600 underapplied.

C) $7,920 overapplied.

D) $0.

85) Reyes Corporation applies overhead using an actual costing approach. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-hours were 19,050. How much overhead would be applied to production?

A) $266,400.

B) $274,320.

C) $279,607.

D) $287,920.

86) Reyes Corporation applies overhead using an actual costing approach. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-hours were 19,050. How much is the over- or underapplied overhead?

A) $21,520 underapplied.

B) $13,600 underapplied.

C) $7,920 overapplied.

D) $0.

87) Reyes Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $232,750, budgeted machine-hours were 17,500. Actual factory overhead was $227,830, actual machine-hours were 16,150. How much overhead would be applied to production?

A) $214,795.

B) $227,830.

C) $232,750.

D) $246,875.

88) Reyes Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $232,750, budgeted machine-hours were 17,500. Actual factory overhead was $227,830, actual machine-hours were 16,150. How much is the over- or underapplied overhead?

A) $13,035 overapplied.

B) $13,035 underapplied.

C) $4,920 overapplied.

D) $4,920 underapplied.

89) Which terms will make the following statement true?

When manufacturing overhead is overapplied, the Manufacturing Overhead Control account has a ________ balance and applied manufacturing overhead is greater than ________ manufacturing overhead.  

A) debit, actual

B) credit, actual

C) debit, estimated

D) credit, estimated

90) Which of the following is correct with respect to closing out overapplied manufacturing overhead to Cost of Goods Sold versus closing it out to Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold?  

A) The balance in the Work-in-Process account after allocation will be higher if the overapplied overhead is closed out by allocating it to all appropriate accounts.

B) The balance in the Work-in-Process account after allocation will be the same under either method.

C) Operating income will be higher if all of the overapplied overhead is closed out to Cost of Goods Sold.

D) Cost of Goods Sold will be lower if the overapplied overhead is closed out by allocating it to the inventory accounts as well as to Cost of Goods Sold.

91) Duran Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $224,580. At the end of the year, actual direct labor-hours for the year were 18,200 hours, manufacturing overhead for the year was underapplied by $12,100, and the actual manufacturing overhead was $219,580. The predetermined overhead rate for the year must have been closest to:

A) $11.40.

B) $12.34.

C) $12.06.

D) $10.53.

92) Nexus Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. Last year, the company's estimated manufacturing overhead was $1,200,000 and its estimated level of activity was 50,000 direct labor-hours. The company's direct labor wage rate is $12 per hour. Actual manufacturing overhead amounted to $1,240,000, with actual direct labor cost of $650,000. For the year, manufacturing overhead was:

A) overapplied by $60,000.

B) underapplied by $60,000.

C) overapplied by $40,000.

D) underapplied by $44,000.

93) Perion Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 11,200 hours and the total estimated manufacturing overhead was $259,840. At the end of the year, actual direct labor-hours for the year were 10,800 hours and the actual manufacturing overhead for the year was $254,840. Overhead at the end of the year was:

A) $4,280 overapplied.

B) $9,280 overapplied.

C) $9,280 underapplied.

D) $4,280 underapplied.

94) At the beginning of the year, manufacturing overhead for the year was estimated to be $267,500. At the end of the year, actual direct labor-hours for the year were 22,100 hours, the actual manufacturing overhead for the year was $262,500, and manufacturing overhead for the year was overapplied by $13,750. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used to calculate the predetermined overhead rate was:  

A) 22,100 direct labor-hours.

B) 19,900 direct labor-hours.

C) 21,000 direct labor-hours.

D) 21,400 direct labor-hours.

95) Golden Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 21,600 hours. At the end of the year, actual direct labor-hours for the year were 20,400 hours, the actual manufacturing overhead for the year was $506,920, and manufacturing overhead for the year was underapplied by $23,440. The estimated manufacturing overhead at the beginning of the year used to calculate the predetermined overhead rate must have been:  

A) $501,920.

B) $531,445.

C) $483,480.

D) $511,920.

96) Fortune Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs.

The cost records for October will show:

A) Overapplied overhead of $1,500.

B) Underapplied overhead of $1,500.

C) Overapplied overhead of $3,500.

D) Underapplied overhead of $3,500.

97) The Work-in-Process Inventory account of a manufacturing firm shows a balance of $3,000 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $500 and $300 for materials, and charges of $400 and $600 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of:  

A) 83%.

B) 120%.

C) 40%.

D) 300%.

98) Faucette Corporation has provided the following data concerning manufacturing overhead for January:

The company's Cost of Goods Sold was $369,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?

A) Manufacturing overhead was underapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $392,000.

B) Manufacturing overhead was underapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $346,000.

C) Manufacturing overhead was overapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $346,000.

D) Manufacturing overhead was overapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $392,000.

99) In computing its predetermined overhead rate, Marple Company inadvertently left its indirect labor costs out of the computation. This oversight will cause:

A) Manufacturing Overhead to be overapplied.

B) the Cost of Goods Manufactured to be understated.

C) the debits to the Manufacturing Overhead account to be understated.

D) the ending balance in Work-in-Process to be overstated.

100) Which of the following is the correct formula to compute the predetermined overhead rate?

A) Estimated total units in the allocation base divided by estimated total manufacturing overhead costs.

B) Estimated total manufacturing overhead costs divided by estimated total units in the allocation base.

C) Actual total manufacturing overhead costs divided by estimated total units in the allocation base.

D) Estimated total manufacturing overhead costs divided by actual total units in the allocation base.

101) The Work-in-Process Inventory account of a manufacturing firm has a balance of $2,400 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $400 and $200 for materials used, and charges of $300 and $500 for direct labor used. Overhead is applied as a percentage of direct labor costs. The predetermined rate is:

A) 41.7%.

B) 80.0%.

C) 125.0%.

D) 240.0%.

102) Midwest Corporation has provided the following data concerning manufacturing overhead for 2020:

Two jobs were worked on during the year: Job A-101 and Job A-102. The number of direct labor-hours spent on Job A-101 and Job A-102 were 1,200 and 1,000, respectively. The actual manufacturing overhead was $37,000.

What is the predetermined manufacturing overhead rate per direct labor hour for the year?

A) $15.

B) $20.

C) $25.

D) $30.

103) Midwest Corporation has provided the following data concerning manufacturing overhead for 2020:

Two jobs were worked on during the year: Job A-101 and Job A-102. The number of direct labor-hours spent on Job A-101 and Job A-102 were 1,200 and 1,000, respectively. The actual manufacturing overhead was $37,000.

What was the amount of manufacturing overhead applied to Job A-101?

A) $16,000.

B) $18,000.

C) $24,000.

D) $44,000.

104) Midwest Corporation has provided the following data concerning manufacturing overhead for 2020:

Two jobs were worked on during the year: Job A-101 and Job A-102. The number of direct labor-hours spent on Job A-101 and Job A-102 were 1,200 and 1,000, respectively. The actual manufacturing overhead was $37,000.

What is the amount of the under- or overapplied manufacturing overhead?

A) $1,000 underapplied.

B) $3,000 overapplied.

C) $4,000 underapplied.

D) $7,000 overapplied.

105) In a traditional job costing system, the issuance of indirect materials to a production department increases: (CPA adapted)  

A) Stores Control.

B) Work-in-Process Control.

C) Manufacturing Overhead Control.

D) Manufacturing Overhead Applied.

106) One of the primary differences between job costing for service firms and job costing for manufacturing companies is service firms generally: 

A) use fewer direct materials.

B) have less direct labor.

C) do not use predetermined overhead rates.

D) have no Work-in-Process Inventory.

107) Which of the following is not a difference between job costing for service firms and job costing for manufacturing companies?

A) Service firms generally use fewer direct materials than manufacturing companies.

B) Service firms' overhead accounts have slightly different titles (e.g., Applied Service Overhead).

C) Service firms' finished jobs are charged to Cost of Services Billed instead of Cost of Goods Sold.

D) Service firms' costs are immediately expensed since all work is completed during a period.

108) The journal entry to record the completion of a contract in a job costing system for a service firm is:

A) Option A

B) Option B

C) Option C

D) Option D

109) Complex jobs that take multiple time periods and require the work of many different departments, divisions, or subcontractors are called:

A) clients.

B) projects.

C) customers.

D) contracts.

110) The financial records for the Lazer Manufacturing Company have been destroyed in a flood. The following information has been obtained from a separate set of books maintained by the cost accountant. The cost accountant now asks for your assistance in computing the missing amounts.

Required:

Compute the following:

(a) Direct materials purchased.

(b) Ending Work-in-process inventory.

(c) Beginning Finished goods inventory. 

111) The Duggart Company had the following transactions and events during its first year of operations. Estimated overhead for the year was $770,000; estimated direct labor cost for the year was $350,000. 

1. Purchased materials on account, $567,000.

2. Requisitioned materials for production as follows: direct materials - 85 percent of purchases, indirect materials - 12 percent of purchases.

3. Direct labor for production is $331,000, indirect labor is $125,000.

4. Overhead incurred (not including materials or labor): $529,000.

5. Overhead is applied to production based on direct labor cost at the rate of ________.

6. Goods costing $976,000 were completed during the period.

7. Goods costing $513,200 were sold on account for $776,000.

Required:

Determine the ending balances for:

(a) Materials Inventory

(b) Work-in-Process Inventory

(c) Finished Goods Inventory  

112) Mirror Lake Corporation recorded the following transactions for the just completed month:

1. $60,000 in raw materials were purchased on account.

2. $51,000 in raw materials were requisitioned for use in production. Of this amount, $42,000 was for direct materials and the remainder was for indirect materials.

3. Total labor wages of $92,000 were incurred and paid. Of this amount, $81,000 was for direct labor and the remainder was for indirect labor.

4. Additional manufacturing overhead cost of $155,000 were incurred. All were on account.

Required:

Record the above transactions in journal entries.

113) During April, Orbitz Corporation incurred $64,000 of actual manufacturing overhead costs. During the same period, the manufacturing overhead applied to Work-in-Process was $66,000.

Required:

Prepare journal entries to record the incurrence of manufacturing overhead and the application of manufacturing overhead to Work-in-Process.

114) The following cost data relate to the manufacturing activities of Falco Industries during the just completed year:

The company uses a predetermined overhead rate to apply manufacturing overhead cost to production. The predetermined overhead rate for the year was $15 per machine-hour. A total of 23,000 machine-hours was recorded for the year.

Required:

a. Compute the amount of underapplied or overapplied overhead cost for the year.

b. Prepare a Schedule of Cost of Goods Manufactured for the year.

115) The following selected data were taken from the books of the Fisher Foil Company. The company uses job costing to account for manufacturing costs. The data relate to June operations.

(1) Materials and supplies were requisitioned from the stores clerk as follows: 

Job 405, material X, $7,000.

Job 406, material X, $3,000; material Y, $6,000.

Job 407, material X, $7,000; material Y, $3,200.

For general factory use: materials A, B, and C, $2,300.

(2) Time tickets for the month were chargeable as follows:

(3) Other information:

There was no beginning work-in-process inventory.

Factory paychecks for $36,700 were issued during the month.

Various factory overhead charges of $19,400 were incurred on account.

Depreciation of factory equipment for the month was $5,400.

Factory overhead was applied to jobs at the rate of $35.00 per direct labor hour.

Job orders completed during the month: Job 405 and Job 406.

Selling and administrative costs were $2,100.

Factory overhead is closed out only at the end of the year.

Required:

(a) Determine the ending work-in-process balance on June 30.

(b) Determine the cost of goods manufactured for June.

(c) Is factory overhead over- or underapplied for June? What is the monthly value?

116) Prepare the necessary journal entries from the following information for Blalock Company.

a. Purchased materials on account, $56,700.

b. Requisitioned materials for production as follows: direct materials - 80 percent of purchases, indirect materials - 15 percent of purchases.

c. Direct labor for production is $33,100, indirect labor is $12,500.

d. Overhead incurred (not including indirect materials or indirect labor): $52,900.

e. Overhead is applied to production based on direct labor cost at the rate of 220 percent.

f. Goods costing $97,600 were completed during the period.

g. Goods costing $51,320 were sold on account for $77,600.

h. Close the overhead control account to Cost of Goods Sold.

117) On October 1, the general ledger of Morgan Industries had the following accounts and balances:

The subsidiary ledgers had the following information on October 1:

During October, the following costs were incurred on account:

A summary of the materials requisition slips and the labor time tickets for the month revealed the following distribution:

Overhead is applied based upon direct labor cost. Jobs B81, B83, and B84 were for 8,000, 6,000 and 4,800 units of product, respectively, and were completed during October. Jobs B80, B81, B82, and B83 were sold on account for $150,000.

Required:

Prepare T-accounts for a job costing system, posting the beginning balances and all transactions for the month. Clearly indicate the ending balances for the accounts and label the 'cost of goods manufactured' and 'cost of goods sold' amounts.

118) The Shotz Company had the following transactions and events during its first year of operations. Estimated overhead for the year was $770,000; estimated direct labor cost for the year was $350,000. 

1. Purchased materials on account, $567,000.

2. Requisitioned materials for production as follows: direct materials - 85 percent of purchases, indirect materials - 12 percent of purchases.

3. Direct labor for production is $331,000, indirect labor is $125,000.

4. Overhead incurred (not including materials or labor): $529,000.

5. Overhead is applied to production based on direct labor cost at the rate of ________.

6. Goods costing $976,000 were completed during the period.

7. Goods costing $513,200 were sold on account for $776,000.

Required:

(a) Prepare the journal entries to record the transactions for the year.

(b) Prepare the journal entry to prorate the over- or underapplied overhead to the appropriate accounts.

119) During July, Morris Corporation purchased $76,000 of raw materials on credit to add to its raw materials inventory. A total of $81,000 of raw materials was requisitioned from the storeroom for use in production. These requisitioned raw materials included $5,000 of indirect materials.

Required:

Prepare journal entries to record the purchase of materials and their use in production.

120) The following selected data were taken from the records of the Fisher Foil Company. The company uses a job costing system to account for its manufacturing costs. Fisher's fiscal year runs from January 1 to December 31; manufacturing overhead is closed out only at the end of the fiscal year. The following information relates to August operations. 

(1) Jobs in process on August 1.

(2) Jobs completed during August: W12, X13, Y14.

(3) Material requisitions and labor time tickets indicated the following:

(4) Jobs sold during August: W12, X13.

(5) Fisher applies overhead to production based upon labor costs.

(6) Selected account balances on August 1 were:

(7) Various overhead incurred (excluding indirect materials and indirect labor) during August, $13,500.

(8) Materials (direct and indirect) purchased during August, $10,905.

Required:

(a) What is the balance in the Materials Inventory account on August 31?

(b) Is the manufacturing overhead account over- or underapplied on August 31? By how much?

(c) Compute the cost of goods manufactured for August.

(d) Compute the cost of goods sold for August.

(e) What is the balance of the Work-in-Process Inventory account on August 31?

121) Augusta Test Systems manufactures automated test systems that perform quality inspections during and at the completion of the manufacturing process. As most manufacturing processes are unique, Augusta's test equipment is designed to customer specifications, and each system has a selling price in excess of $300,000. The company uses a job costing system based on the full absorption of actual costs and applies overhead on the basis of machine hours using a predetermined overhead rate. For the fiscal year ended November 30, budgeted manufacturing overhead was $1,960,000, and the expected activity level was 98,000 machine hours. Data regarding several jobs at Augusta are presented below.

By the end of November, all jobs but RX-115 were completed, and all completed jobs had been delivered to customers with the exception of SL-205.

Required:

(a) Determine the balance in the Finished Goods Inventory on November 30.

(b) Compute the cost of goods manufactured for November.

(c) Compute the Cost of Goods Sold for November.

(d) Determine the balance in Work-In-Process Inventory on November 30.

122) A manufacturing company employs job costing to account for its costs. There are three production departments, and separate departmental overhead application rates are employed because the operations of the departments are so different. All jobs generally pass through all three production departments. Data regarding the hourly direct labor rates, overhead application rates, and three jobs on which work was done during the month appear below. Job 101 and Job 102 were completed during the current month. (CIA Examination adapted)

Required:

(a) Compute the completed costs of Job 101 and Job 102.

(b) Compute the value of the Work-in-Process Inventory at the end of the month.

123) Kid's World Manufacturing Company is a manufacturer of furnishings for infants and children. The company uses job costing and employs a full absorption accounting method for cost accumulation. Kid's World Work-in-Process Inventory on April 30 consisted of the following jobs:

Kid's World applies manufacturing overhead on the basis of direct labor-hours. The company's estimated manufacturing overhead for the period ending May 31 totals $4,500,000; the company estimated it would use 600,000 direct labor-hours during the year.

At the end of April, the balance in Kid's World Materials Inventory, which includes both materials and purchased parts, was $668,000. Additions to, and requisitions from, the materials inventory during the month of May included the following:

During the month of May, Kid's World factory payroll consisted of the following:

Listed below are the jobs that were completed and the units that were sold during the month of May.

Required:

(a) Compute the value of Kid's World Work-in-Process Inventory on May 31.

(b) Compute the value of Kid's World Cost of Goods Manufactured for May.

124) Halston Manufacturing uses actual costing. The following events took place during the current year:

(1) Purchased $95,000 in direct materials.

(2) Incurred labor costs as follows: (a) direct, $56,000 and (b) indirect, $13,600.

(3) Other manufacturing overhead was $107,000, excluding indirect labor.

(4) Transferred 80% of the materials to the manufacturing assembly line.

(5) Completed 65% of the Work-in-Process during the year.

(6) Sold 85% of the completed goods.

(7) There were no beginning inventories.

Required:

(a) Determine the ending Direct Materials Inventory balance.

(b) Determine the ending Work-in-Process Inventory balance.

(c) Determine the ending Finished Goods Inventory balance.

(d) Determine the Cost of Goods Manufactured.

125) The Focus Company does not maintain backup documents for its computer files. In June, some of the current data were lost, and you have been asked to help reconstruct the data. The following beginning balances are known:

Reviewing old documents and interviewing selected employees have generated the following additional information:

The production superintendent's job cost sheets indicated that materials of $5,200 were included in the June 30 Work-in-Process Inventory. Also, 300 direct labor-hours had been paid at $12.00 per hour for the jobs in process on June 30.

The Accounts Payable account is only for direct material purchases. The clerk remembers clearly that the balance in the Accounts Payable on June 30 was $16,000. An analysis of canceled checks indicated payments of $80,000 were made to suppliers during June.

Payroll records indicate that 5,200 direct labor-hours were recorded for June. It was verified that there were no variations in pay rates among employees during June.

Records at the warehouse indicate that the Finished Goods Inventory totaled $32,000 on June 30.

Another record kept manually indicates that the Cost of Goods Sold in June totaled $168,000.

The predetermined overhead rate was based on an estimated 60,000 direct labor-hours for the year and an estimated $360,000 in manufacturing overhead costs.

Required:

(a) Compute the Cost of Goods Manufactured.

(b) Compute the ending Work-in-Process Inventory balance.

(c) Compute the ending Direct Materials Inventory balance.

126) Windham Manufacturing Company employs job costing to account for its costs. There are three production departments, and separate departmental overhead application rates are employed. All jobs generally pass through all three production departments. Data regarding the hourly direct labor rates, overhead application rates, and three jobs on which work was done during the month appear below. Job 611 and Job 613 were completed during the current month, Job 612 was still in process. (CIA Examination adapted)

Required:

(a) Compute the completed costs of Job 611 and Job 613.

(b) Compute the value of the Work-in-Process Inventory at the end of the month.

127) Carlson Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $266,400 and budgeted machine-hours were 18,500. Actual factory overhead was $287,920 and actual machine-hours were 19,050. Before disposition of over- or underapplied overhead, the cost of goods sold was $560,000 and ending inventories were as follows:

Required:

a. Compute the amount of overhead applied to production.

b. Prepare the journal entry to dispose of the over/underapplied overhead using the write-off to cost of goods sold approach.

c. Prepare the journal entry to dispose of the over/underapplied overhead using the proration approach.  

128) Job 7890 was recently completed. The following data have been recorded on its job cost sheet:

The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $12 per machine-hour.

Required:

Compute the unit product cost that would appear on the job cost sheet for Job 7890.

129) Job 5432 was recently completed. The following data have been recorded on its job cost sheet:

The company applies manufacturing overhead on the basis of direct labor-hours. The predetermined overhead rate is $20 per direct labor-hour.

Required:

Compute the unit product cost that would appear on the job cost sheet for Job 5432.

130) Island Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $375,000 and budgeted machine-hours were 12,500. Actual factory overhead was $387,920 and actual machine-hours were 13,150.

Required:

a. Compute the overhead application rate.

b. Compute the amount of overhead applied to production.

c. Determine the amount of over- or underapplied overhead.

131) Northface Company applies overhead based upon labor-hours. Budgeted factory overhead was $910,000 and budgeted labor-hours were 32,500. Actual factory overhead was $893,675 and actual labor-hours were 31,560.

Required:

a. Compute the overhead application rate.

b. Compute the amount of overhead applied to production.

c. Determine the amount of over- or underapplied overhead.

132) Yang Company applies overhead at a rate of $26 per direct labor hour. Budgeted labor hours were 25,000; actual labor hours exceeded the budget by 1,600 hours. Overhead was overapplied by $3,758.

Required:

(a) Compute the budgeted overhead for the year.

(b) Compute actual overhead for the year.

133) Wang's Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $325,000 and budgeted machine-hours were 13,000. Actual factory overhead was $312,330 and actual machine-hours were 12,660. Before disposition of over- or underapplied overhead, the cost of goods sold was $725,000 and ending inventories were as follows:

Required:

a. Compute the amount of overhead applied to production.

b. Prepare the journal entry to dispose of the over/underapplied overhead using the write-off to cost of goods sold approach.

c. Prepare the journal entry to dispose of the over/underapplied overhead using the proration approach.  

134) Harkin Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the upcoming year appear below:

Required:

Compute the company's predetermined overhead rate.

135) Hsu Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 32,000 labor-hours. The estimated variable manufacturing overhead was $7.17 per labor-hour and the estimated total fixed manufacturing overhead was $584,320. The actual labor-hours for the year turned out to be 33,300 labor-hours.

Required:

Compute the company's predetermined overhead rate for the recently completed year.

136) Ramos Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. Data for the most recently completed year appear below:

Required:

Compute the company's predetermined overhead rate for the recently completed year.

137) Calvin Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 13,000 labor-hours. The estimated variable manufacturing overhead was $2.35 per labor-hour and the estimated total fixed manufacturing overhead was $156,130.

Required:

Compute the company's predetermined overhead rate.

138) In June, Robust Engineering worked on three contracts: 1,200 hours for Tico Company, 1,100 hours for Navel LLC, and 3,400 hours for Lutron Corp. Robust bills clients at the rate of $150 per hour; labor cost for its engineering staff is $45 per hour. The total number of hours worked in June was 6,000 (any untraced hours are considered overhead), and non-labor overhead costs were $325,000. Overhead is applied to clients at $55 per labor-hour. In addition, Robust had $243,000 in marketing and administrative costs. All transactions are on account. All services were billed.

Required:

a. Determine the cost of each of the three jobs.

b. What is the amount of over- or underapplied overhead?

c. How much operating profit did Robust make in June? Assume the over- or underapplied overhead is not closed out each month.

139) The Maryland Company is a computer repair shop and had the following transactions and events during the year. Estimated overhead for the year was $175,000; estimated labor for the year was 6,000 hours. 

1. Purchased materials on account, $126,000.

2. Traced materials to repair jobs $110,880; general shop materials used $9,500.

3. Labor traced to repair jobs $165,000, untraced labor was $22,200.

4. Overhead incurred (not including materials or labor): $139,600.

5. Overhead is applied to repair jobs based on labor hours. All workers were paid $30/hr.

6. Ending work-in-process consisted of one repair job with a cost of $1,976. There was no beginning work-in-process.

7. Repair jobs were billed to the customers for $476,000.

Required:

(a) Prepare the journal entries to record the transactions for the year.

(b) Prepare the journal entry to write-off the over- or underapplied overhead to the cost of repair jobs.

(c) What would Maryland's operating profit for the year?

140) Music Master Components produces parts for concert hall sound systems. The parts are produced to specification by their customers, who pay either a fixed price (the price does not depend directly on the cost of the job) or price equal to recorded cost plus a fixed fee (cost plus). For the upcoming year (year 2), Music Master expects only two clients (Client 1 and Client 2). The work done for Client 1 will all be done under fixed-price contracts while the work done for Client 2 will all be done under cost-plus contracts.

Manufacturing overhead for year 2 is estimated to be $10 million. Other budgeted data for year 2 include:

Required:

a. Compute the predetermined rate assuming that Music Master Components uses machine-hours to apply overhead.

b. Compute the predetermined rate assuming that Music Master Components uses direct labor cost to apply overhead.

c. Which allocation base will provide a higher income for Music Master Components?

d. Is it ethical to choose an allocation method based on which one leads to higher income for the firm?

141) What are characteristics of companies that are likely to use a job costing system and what are examples of types of companies that are likely to use a job costing system?  

142) Why is control of materials important from a managerial planning perspective?

143) Describe two alternative approaches to the handling of over- or underapplied overhead.

144) Why might a company use a predetermined rate for applying overhead rather than just apply actual overhead?

145) Describe the difference between normal costing, actual costing, and standard costing.

146) How does job costing for a service organization differ from job costing for a manufacturer?

147) Describe three possible unethical actions that can cause impropriety in job costing and give examples.

1) Misstating the stage of completion; 2) charging costs to wrong jobs; 3) misrepresenting the cost of jobs.

148) ProBuild Contractors sells to government agencies using a cost-plus contract and to private firms using fixed price contracts. What choices does ProBuild have in the design of its job costing system that affect the cost of the government jobs?

149) Melbourne Consultants works for only two clients: a large for-profit corporation and a small environmental not-for-profit agency. The fee charged for work is based on cost. In deciding how to allocate overhead, the CFO of Melbourne Consultants decides to use the base that allocates the most cost to the large corporation. Is this ethical?

150) In the context of job costing, what are projects? What additional costing issues are there with projects?

151) Santos Company is a manufacturing firm that uses job costing. At the beginning of the year, the company's inventory balances were as follows:

The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 45,000 machine-hours and incur $180,000 in manufacturing overhead cost. The following transactions were recorded for the year: 

a. Raw materials were purchased, $416,000.

b. Raw materials were requisitioned for use in production, $420,000 ($380,000 direct and $40,000 indirect).

c. The following employee costs were incurred: direct labor, $414,000; indirect labor, $60,000; and administrative salaries, $212,000.

d. Selling costs, $141,000.

e. Factory utility costs, $20,000.

f. Depreciation for the year was $81,000 of which $73,000 is related to factory operations and $8,000 is related to selling, general, and administrative activities.

g. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 48,000 machine-hours.

h. The cost of goods manufactured for the year was $1,004,000.

i. Sales for the year totaled $1,416,000 and the costs on the job cost sheets of the goods that were sold totaled $989,000.

j. The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.

Required:

Prepare the appropriate journal entry for each of the items above (a) through (j). You can assume that all transactions with employees, customers, and suppliers were conducted in cash.  

152) Cherry Company is a manufacturing firm that uses job costing. The company's inventory balances were as follows at the beginning and end of the year:

The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 17,000 machine-hours and incur $272,000 in manufacturing overhead cost. The following transactions were recorded for the year: 

∙ Raw materials were purchased, $416,000.

∙ Raw materials were requisitioned for use in production, $412,000 ($376,000 direct and $36,000 indirect).

∙ The following employee costs were incurred: direct labor, $330,000; indirect labor, $69,000; and administrative salaries, $157,000.

∙ Selling costs, $113,000.

∙ Factory utility costs, $29,000.

∙ Depreciation for the year was $121,000 of which $114,000 is related to factory operations and $7,000 is related to selling, general, and administrative activities.

∙ Manufacturing overhead was applied to jobs. The actual level of activity for the year was 15,000 machine-hours.

∙ Sales for the year totaled $1,282,000.

Required:

a. Prepare a schedule of cost of goods manufactured in good form.

b. Was the overhead underapplied or overapplied? By how much?

c. Prepare an income statement for the year in good form. The company closes any underapplied or overapplied overhead to Cost of Goods Sold.

153) Dickerson Corporation has provided the following data for the month of April:

Required:

Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold in good form.

154) Townley Inc. has provided the following data for the month of February. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.

Manufacturing overhead for the month was overapplied by $3,000.

The company allocates any underapplied or overapplied overhead among Work-in-Process, Finished Goods, and Cost of Goods Sold at the end of the month on the basis of the overhead applied during the month in those accounts.

Required:

Provide the journal entry that would record the allocation of underapplied or overapplied among Work-in-Process, Finished Goods, and Cost of Goods Sold.  

155) Aardvark Inc. has provided the following data for the month of November. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.

Manufacturing overhead for the month was underapplied by $6,000.

The company allocates any underapplied or overapplied overhead among Work-in-Process, Finished Goods, and Cost of Goods Sold at the end of the month on the basis of the overhead applied during the month in those accounts.

Required:

Determine the cost of Work-in-Process, Finished Goods, and Cost of Goods Sold AFTER allocation of the underapplied or overapplied overhead for the period.  

156) The management of Satellite Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 13,000 machine-hours. In addition, capacity is 16,000 machine-hours and the actual activity for the year is 12,900 machine-hours. All of the manufacturing overhead is fixed and is $29,120 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year.

Required:

a. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.

b. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

157) The management of Atlas Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 19,000 machine-hours. In addition, capacity is 21,000 machine-hours and the actual activity for the year is 18,200 machine-hours. All of the manufacturing overhead is fixed and is $71,820 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year.

Required:

a. Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base.

b. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base.

c. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.

d. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

158) The management of Grainger Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 48,000 machine-hours. In addition, capacity is 53,000 machine-hours and the actual activity for the year is 47,700 machine-hours. All of the manufacturing overhead is fixed and is $1,144,800 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year. Job SUA-600, which required 40 machine-hours, is one of the jobs worked on during the year.

Required:

a. Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base.

b. Determine how much overhead would be applied to Job SUA-600 if the predetermined overhead rate is based on estimated amount of the allocation base.

c. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base.

d. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.

e. Determine how much overhead would be applied to Job SUA-600 if the predetermined overhead rate is based on the amount of the allocation base at capacity.

f. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

159) The management of Royal Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 70,000 machine-hours. In addition, capacity is 82,000 machine-hours and the actual activity for the year is 72,900 machine-hours. All of the manufacturing overhead is fixed and is $4,132,800 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year. Job 706H, which required 300 machine-hours, is one of the jobs worked on during the year.

Required:

a. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.

b. Determine how much overhead would be applied to Job 706H if the predetermined overhead rate is based on the amount of the allocation base at capacity.

c. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

160) The management of Philly Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 37,000 machine-hours. In addition, capacity is 46,000 machine-hours and the actual activity for the year is 36,900 machine-hours. All of the manufacturing overhead is fixed and is $697,820 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year.

Required:

a. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base.

b. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.