Deck 4: Systems Design: Process Costing

Question 1

In a normal costing system actual overhead costs are allocated to jobs.

Answer 1

False

Question 2

Normally a job cost sheet is not prepared for a job until after the job has been completed.

Answer 2

False

Question 3

A credit balance in the Manufacturing Overhead account at the end of the year means that overhead was underapplied.

Answer 3

False

Question 4

The most common accounting treatment of underapplied manufacturing overhead is to transfer it to the Manufacturing Overhead control account.

Question 5

Overhead costs tend to fluctuate with changes in the volume of units produced from period to period.

Question 6

Job cost sheets always contain entries for actual direct material,actual direct labour,and actual manufacturing overhead cost incurred in completing a job.

Question 7

Nonmanufacturing costs are expensed as incurred,rather than going into the Work in Process account.

Question 8

Job-order costing is used in manufacturing companies and process costing is used in service firms.

Question 9

When completed goods are sold the transaction is recorded as a debit to Cost of Goods Sold and a credit to Work in Process.

Question 10

In order to improve the accuracy of unit costs,most companies recompute the predetermined overhead rate each month.

Question 11

When the predetermined overhead rate is based on direct labour-hours,the amount of overhead applied to a job is proportional to the amount of actual direct labour-hours incurred on the job.

Question 12

Absorption costing includes both fixed and variable costs when computing the cost of a product.

Question 13

The labour time sheet contains a detailed summary of the direct and the indirect labour hours of an employee.

Question 14

Indirect labour costs are initially recorded in the Work in Process account and on the job cost sheets of the individual jobs worked on during a period.

Question 15

Job-order costing would be more likely to be used than process costing in situations where many different products or services are produced each period to customer specifications.

Question 16

In job-order costing,the Work in Process inventory account contains the actual costs of direct labour,direct materials,and manufacturing overhead incurred on partially completed jobs.

Question 17

Indirect materials are not charged to a specific job but rather are included in the Manufacturing Overhead account.

Question 18

The following journal entry would be made to apply overhead cost to jobs in a job-order costing system

Question 19

All costs that cannot be traced directly to a product or an activity are ignored for the purpose of costing.

Question 20

In a job-order costing system,costs are traced to departments and then allocated to units of product using an average process.

Question 21

In a job-order costing system,the journal entry to record the application of overhead cost to jobs would include:

A) a credit to the Manufacturing Overhead account.
B) a credit to the Work in Process inventory account.
C) a debit to Cost of Goods Sold.
D) a debit to the Manufacturing Overhead account.

Question 22

In job-order costing,all of the following statements are correct with respect to labour time and cost except:

A) time tickets are kept by employees showing the amount of work on specific jobs.
B) the job cost sheet for a job will contain all direct labour charges to that particular job.
C) labour cost that can be traced to a job only with a great deal of effort is treated as part of manufacturing overhead.
D) a machine operator performing routine annual maintenance work on a piece of equipment would charge the maintenance time to a specific job.

Question 23

Harrell Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.At the beginning of the year,the company estimated its total manufacturing overhead cost at $400,000 and its direct labour-hours at 100,000 hours.The actual overhead cost incurred during the year was $350,000 and the actual direct labour hours incurred on jobs during the year was 90,000 hours.The manufacturing overhead for the year would be?

A) $10,000 underapplied.
B) $10,000 overapplied.
C) $50,000 underapplied.
D) $50,000 overapplied.

Question 24

If the amount of underapplied or overapplied overhead is considered material at the end of a period,the preferred approach to dispose of such balances is to allocate the amounts proportionally to Cost of Goods Sold for the period and ending Work in Process and Finished Goods inventories.

Question 25

Sawyer Manufacturing Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.Last year,the company worked 57,000 actual direct labour hours and incurred $345,000 of actual manufacturing overhead cost.The Company had estimated that it would work 55,000 direct labour hours during the year and incur $330,000 of manufacturing overhead cost.The company's manufacturing overhead cost for the year was:

A) overapplied by $15,000.
B) underapplied by $15,000.
C) overapplied by $3,000.
D) underapplied by $3,000.

Question 26

In a job-order costing system,the amount of overhead cost that has been applied to a job that remains incomplete at the end of a period is:

A) deducted on the Income Statement as overapplied overhead.
B) closed to Cost of Goods Sold.
C) transferred to Finished Goods at the end of the period.
D) part of the ending balance of the Work in Process inventory account.

Question 27

The Work in Process inventory account of a manufacturing company shows a balance of $2,400 at the end of an accounting period.The job cost sheets of the two uncompleted jobs show charges of $400 and $200 for direct materials,and charges of $300 and $500 for direct labour.From this information,it appears that the company is using a predetermined overhead rate,as a percentage of direct labour costs,of:

A) 80%.
B) 125%.
C) 240%.
D) 300%.

Question 28

The use of different predetermined overhead rates in departments of larger companies may yield more accurate costing.

Question 29

The costing approach that meets the requirements of financial accounting and tax reporting requirements is:

A) variable costing.
B) absorption costing.
C) throughput costing.
D) standard costing

Question 30

The Watts Company uses predetermined overhead rates to apply manufacturing overhead to jobs.The predetermined overhead rate is based on labour cost in Dept.A and on machine hours in Dept.B.At the beginning of the year,the company made the following estimates: What predetermined overhead rates would be used in Dept A and Dept B,respectively?

A) 50% and $8.00.
B) 50% and $5.00.
C) 110% and $15.00.
D) 200% and $5.00.

Question 31

Carlo Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.The company estimated manufacturing overhead at $255,000 for the year and direct labour-hours at 100,000 hours.Actual manufacturing overhead costs incurred during the year totalled $270,000.Actual direct labour hours were 105,000.What was the overapplied or underapplied overhead for the year?

A) $2,250 overapplied.
B) $2,250 underapplied.
C) $15,000 overapplied.
D) $15,000 underapplied.

Question 32

For the current year,Paxman Company incurred $150,000 in actual manufacturing overhead cost.The Manufacturing Overhead account showed that overhead was overapplied in the amount of $6,000 for the year.If the predetermined overhead rate was $8.00 per direct labour hour,how many hours were worked during the year?

A) 17,750 hours.
B) 18,000 hours.
C) 18,750 hours.
D) 19,500 hours.

Question 33

Compton Company uses a predetermined overhead rate in applying overhead to production orders on a labour cost basis in Department A and on a machine hours basis in DepartmentB.At the beginning of the most recently completed year,the company made the following estimates: What predetermined overhead rate would be used in Department A and Department B,respectively?

A) 83% and $5.
B) 83% and $3.
C) 120% and $3.
D) 81% and $3.

Question 34

Freeman Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.At the beginning of the year,the company estimated manufacturing overhead would be $150,000 and direct labour hours would be 10,000.The actual figures for the year were $186,000 for manufacturing overhead and 12,000 direct labour hours.The cost records for the year will show:

A) overapplied overhead of $30,000.
B) underapplied overhead of $30,000.
C) underapplied overhead of $6,000.
D) overapplied overhead of $6,000.

Question 35

In a job-order costing system,direct labour costs are usually recorded initially with a debit to:

A) Manufacturing Overhead.
B) Finished Goods inventory.
C) Direct Labour Expense.
D) Work in Process.

Question 36

In a job-order costing system,the use of indirect materials would usually be recorded as a debit to:

A) Raw Materials.
B) Work in Process.
C) Manufacturing Overhead.
D) Finished Goods.

Question 37

Which of the following companies would be most likely to use a job-order costing system rather than a process costing system?

A) Fast food restaurant.
B) Shipbuilding.
C) Crude oil refining.
D) Candy making.

Question 38

Work in Process is a control account supported by detailed cost data contained in:

A) job cost sheets.
B) the Manufacturing Overhead account.
C) the Finished Goods inventory account.
D) purchase requisitions.

Question 39

If a company applies overhead to jobs on the basis of a predetermined overhead rate,a credit balance in the Manufacturing Overhead account at the end of any period means that:

A) more overhead cost has been charged to jobs than has been incurred during the period.
B) more overhead cost has been incurred during the period than has been charged to jobs.
C) the amount of overhead cost charged to jobs is greater than the estimated cost for the period.
D) the amount of overhead cost charged to jobs is less than the estimated overhead cost for the period.

Question 40

In a job-order costing system,the use of direct materials previously purchased usually is recorded as a debit to:

A) Work in Process inventory.
B) Finished Goods inventory.
C) Manufacturing Overhead.
D) Raw Materials inventory.

Question 41

During March total debits to Work in Process were:

A) $84,000.
B) $144,000.
C) $224,000.
D) $230,000.

Question 42

Dowan Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.Last year Dowan Company incurred $156,600 in actual manufacturing overhead cost.The Manufacturing Overhead account showed that overhead was underapplied by $12,600 for the year.If the predetermined overhead rate is $6.00 per direct labour hour,how many hours did the company work during the year?

A) 24,000 hours.
B) 25,000 hours.
C) 26,000 hours.
D) 28,200 hours.

Question 43

Sharp 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 net income for the year.
D) The amount of $6,000 in depreciation should have been charged to Work in Process rather than to administrative expense.

Question 44

Simplex Company has the following estimated costs for next year: Simplex estimates that 10,000 direct labour and 16,000 machine hours will be worked during the year.If overhead is applied on the basis of machine hours,the overhead rate per hour will be:

A) $3.50.
B) $6.94.
C) $7.63.
D) $8.56.

Question 45

Lucy Sportswear manufactures a specialty line of T-shirts.The company uses a job-order costing system.During March,the following costs were incurred on Job ICU2: direct materials $13,700 and direct labour $4,800.In addition,selling and shipping costs of $7,000 were incurred on the job.Manufacturing overhead was applied at the rate of $25 per machine-hour and Job ICU2 required 800 machine-hours.If Job ICU2 consisted of 7,000 shirts,the Cost of Goods Sold per shirt was:

A) $5.50.
B) $5.70.
C) $6.00.
D) $6.50.

Question 46

The Samuelson Company uses a job-order costing system.The following data were recorded for June: Overhead is charged to production at 70% of the direct materials cost.Jobs 475,477,and 478 have been delivered to the customer. Samuelson's Work in Process inventory balance on June 30 was:

A) $2,300.
B) $2,720.
C) $2,860.
D) $6,450.

Question 47

Kelsh Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs.The company has provided the following estimated costs for next year: Kelsh estimates that 5,000 direct labour hours and 10,000 machine hours will be worked during the year.The predetermined overhead rate per hour will be:

A) $3.40.
B) $6.40.
C) $6.80.
D) $8.20.

Question 48

Paul Company used a predetermined overhead rate during the year just completed of $3.50 per direct labour hour,based on an estimate of 22,000 direct labour hours to be worked during the year.Actual overhead cost and activity during the year were: The underapplied or overapplied overhead for the year was:

A) $13,000 underapplied.
B) $10,500 overapplied.
C) $2,500 overapplied.
D) $2,500 underapplied.

Question 49

Beaver Company used a predetermined overhead rate last year of $2 per direct labour hour,based on an estimate of 25,000 direct labour hours to be worked during the year.Actual costs and activity during the year were: The underapplied or overapplied overhead last year was:

A) $1,000 underapplied.
B) $1,000 overapplied.
C) $3,000 overapplied.
D) $2,000 underapplied.

Question 50

The Cost of Goods Manufactured for March was:

A) $212,000.
B) $218,000.
C) $230,000.
D) $236,000.

Question 51

CR Company has the following estimated costs for the next year: CR Company estimates that 20,000 labour hours will be worked during the year.If overhead is applied on the basis of direct labour hours,the overhead rate per hour will be?

A) $2.25.
B) $3.25.
C) $3.45.
D) $4.70.

Question 52

What was the amount of direct materials used during November if $20,000 in raw materials were purchased during the month and if the inventories were as follows?

A) $15,000.
B) $18,000.
C) $19,000.
D) $21,000.

Question 53

Sweet Company applies overhead to jobs on the basis of 125% of direct labour cost.If Job 107 shows $10,000 of manufacturing overhead applied,how much was the direct labour cost on the job:

A) $8,000.
B) $10,000.
C) $11,250.
D) $12,500.

Question 54

Worrell Corporation has a job-order costing system.The following debits (credits)appeared in the Work in Process account for the month of March: Worrell applies overhead at a predetermined rate of 90% of direct labour cost.Job No.232,the only job still in process at the end of March,has been charged with manufacturing overhead of $2,250.What was the amount of direct materials charged to Job No.232?

A) $2,250.
B) $2,500.
C) $4,250.
D) $9,000.

Question 55

The cost of goods manufactured for February was:

A) $77,700.
B) $78,000.
C) $79,700.
D) $85,000.

Question 56

Jimbob Co.has the following estimated costs for the next year: The company estimates that 20,000 labour hours will be worked and 1,000 machine hours incurred during the year.If overhead is applied on the basis of direct labour costs,the overhead rate will be:

A) 100%.
B) 200%.
C) 225%.
D) 400%.

Question 57

The balance in White Company's Work in Process inventory account was $15,000 on August 1 and $18,000 on August 31.The company incurred $30,000 in direct labour cost during August and requisitioned $25,000 in raw materials (all direct material).If the sum of the debits to the Manufacturing Overhead account total $28,000 for the month,and if the sum of the credits totalled $30,000,then:

A) Finished Goods was debited for $82,000 during the month.
B) Finished Goods was credited for $83,000 during the month.
C) Manufacturing Overhead was underapplied by $2,000 at the end of the month.
D) Finished Goods was debited for $85,000 during the month.

Question 58

Knowlton Company applies overhead to completed jobs on the basis of 70% of direct labour cost.If Job 501 shows $21,000 of manufacturing overhead applied,the direct labour cost on the job was:

A) $14,700.
B) $21,000.
C) $27,300.
D) $30,000.

Question 59

Under Lamprey Company's job-order costing system,manufacturing overhead is applied to Work in Process inventory using a predetermined overhead rate.During January,Lamprey's transactions included the following: Lamprey Company had no beginning or ending inventories.What was the cost of goods manufactured for January?

A) $302,000.
B) $310,000.
C) $322,000.
D) $330,000.

Question 60

Lucas Co.has a job-order costing system.For the month of April,the following debits (credits)appeared in the Work in Process account: Lucas applies overhead at a predetermined rate of 90% of direct labour cost.Job No.100,the only job still in process at the end of April,has been charged with manufacturing overhead of $4,500.The amount of direct materials charged to Job No.100 was:

A) $4,500.
B) $5,000.
C) $8,500.
D) $18,000.

Question 61

The manufacturing overhead applied is:

A) $24,000.
B) $31,000.
C) $38,000.
D) $42,000.

Question 62

The direct materials cost in the November 1 Work in Process inventory account totalled:

A) $3,000.
B) $3,600.
C) $6,000.
D) $6,600.

Question 63

The cost of raw materials purchased during the year amounted to:

A) $316,000.
B) $336,000.
C) $360,000.
D) $411,000.

Question 64

The balance in the March 1 Raw Materials inventory was:

A) $6,500.
B) $8,500.
C) $9,500.
D) $10,500.

Question 65

The actual direct labour hours worked during November totalled:

A) 2,800.
B) 3,300.
C) 3,500.
D) 3,600.

Question 66

The total cost added to Work in Process during May was:

A) $61,000.
B) $101,000.
C) $106,000.
D) $111,000.

Question 67

The Cost of Goods Manufactured during the year was:

A) $636,000.
B) $716,000.
C) $736,000.
D) $766,000.

Question 68

The cost of direct materials used is?

A) $14,000.
B) $15,000.
C) $18,000.
D) $24,000.

Question 69

The amount of direct labour cost in the November 30 Work in Process inventory was:

A) $2,800.
B) $3,300.
C) $3,500.
D) $6,300.

Question 70

For the month of February,the manufacturing overhead was:

A) $700 overapplied.
B) $1,000 overapplied.
C) $2,000 overapplied.
D) $2,000 underapplied.

Question 71

The cost of goods manufactured is:

A) $62,000.
B) $64,000.
C) $71,000.
D) $82,000.

Question 72

The actual overhead cost incurred during the month was:

A) $40,000.
B) $45,000.
C) $50,000.
D) $55,000.

Question 73

The amount of direct materials cost in the March 31 work in process inventory account was:

A) $3,850.
B) $5,150.
C) $9,000.
D) $9,350.

Question 74

The indirect labour cost is?

A) $8,000.
B) $15,000.
C) $18,000.
D) $37,000.

Question 75

The entry to dispose of the underapplied or overapplied overhead cost for the month would include:

A) a debit of $50 to Cost of Goods Sold.
B) a debit of $50 to Manufacturing Overhead.
C) a debit of $5,500 to Manufacturing Overhead.
D) a credit of $5,500 to Cost of Goods Sold.

Question 76

The cost of goods manufactured for March was:

A) $67,250.
B) $67,300.
C) $75,550.
D) $81,800.

Question 77

The raw materials purchased during November totalled:

A) $36,000.
B) $39,000.
C) $42,000.
D) $45,000.

Question 78

The cost of goods sold (after adjustment for underapplied or overapplied overhead)is:

A) $58,000.
B) $65,000.
C) $69,000.
D) $72,000.

Question 79

Direct labour costs charged to production during the year amounted to:

A) $135,000.
B) $216,000.
C) $225,000.
D) $360,000.

Question 80

The ending Work in Process account balance is?

A) $13,000.
B) $20,000.
C) $64,000.
D) $75,000.