Deck 5: Systems Design: Job-Order Costing

Question 1

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

A) Fast food restaurant
B) Shipbuilder
C) Crude oil refinery
D) Candy maker

Answer 1

B

Question 2

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

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

Answer 2

D

Question 3

Which of the following statements is true if a company applies overhead to jobs on the basis of a predetermined overhead rate and reports a credit balance in the Manufacturing Overhead account at the end of any period?

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.

Answer 3

A

Question 4

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.What would be the manufacturing overhead for the year?

A) $10,000 underapplied.
B) $10,000 overapplied.
C) $50,000 underapplied.
D) $50,000 overapplieD.
Rate = $400,000/100,000 hrs.= $4/hr.Actual OH = $350,000 therefore overapplied by $10,000

Question 5

Which of the following contain(s)the detailed cost data that support the Work in Process control account?

A) Job cost sheets.
B) The Manufacturing Overhead account.
C) The Finished Goods inventory account.
D) Purchase requisitions.

Question 6

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.DL Hours = $156,000/$8/hr = 19,500 hours

Question 7

Kelly 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 1052:
Manufacturing overhead was applied at the rate of $25 per machine hour,and Job 1052 required 800 machine hours.In addition,selling and shipping costs of $7,000 were incurred.Job 1052 consisted of 7,000 shirts and was completed on March 24.The total cost of job 1052 transferred from Work in Process to Finished Goods on March 24 is:

A) $33,700
B) $38,500
C) $18,500
D) $20,000

Question 8

In a job-order costing system,direct labour costs usually are recorded initially with a debit to which of the following accounts?

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

Question 9

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.
OH rate = $255,000/100,000 hrs.= $2.55/hr.Actual overhead = $270,000 therefore Underapplied $2,250

Question 10

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:
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,what was the Cost of Goods Sold per shirt?

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

Question 11

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 two uncompleted jobs show charges of $400 and $200 for direct materials and charges of $300 and $500 for direct labour.From this information,what predetermined overhead rate,as a percentage of direct labour costs,does the company appear to be using?

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

Question 12

(Appendix 5A)Which level of activity,if used to set a predetermined overhead rate,may encourage managers to increase selling prices as demand falls?

A) Budgeted level of activity.
B) Actual level of activity.
C) Capacity (maximum)level of activity.
D) Normal level of activity.

Question 13

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

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

Question 14

In a normal job-order costing system,the salary of the factory supervisor would usually be recorded as a debit to which of the following accounts?

A) Manufacturing Overhead.
B) Salary Expense.
C) Work in Process.
D) Finished Goods.

Question 15

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 used 40,000 machine hours.The company had estimated that it would work 55,000 direct labour hours using 44,000 machine hours during the year and incur $330,000 of manufacturing overhead cost.What was the company's manufacturing overhead applied for the year?

A) $345,000.
B) $342,000.
C) $330,000.
D) $300,000.Applied = 57,000 DLH @ $6/DLH = $342,000

Question 16

In a normal job-order costing system,the journal entry to record the application of overhead cost to jobs includes which of the following?

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

Question 17

At the beginning of the current year CR Company estimated the following costs:
CR Company estimated 20,000 labour hours to be worked during the year.Actual labour hours worked were 22,000 hours.If overhead is applied on the basis of direct labour hours,what will be the overhead applied for the year?

A) $55,000.
B) $49,500.
C) $103,400.
D) $75,900.Applied = 22,000 hrs.@ $2.25/hr = $49,500

Question 18

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,what will be the overhead rate per hour?

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

Question 19

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.What will be the predetermined overhead rate per hour?

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

Question 20

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 which of the following?

A) Overapplied overhead of $30,000.
B) Underapplied overhead of $30,000.
C) Underapplied overhead of $6,000.
D) Overapplied overhead of $6,000.Applied = 12,000 hours @ $15/hr = $180,000

Question 21

What is the cost of goods sold (after adjustment for under- or over applied overhead)?

A) $51,000.
B) $54,000.
C) $55,000.
D) $56,000.

Question 22

Manufacturing overhead is overapplied for the year by $3,000.The unadjusted cost of goods sold is $360,000.Closing manufacturing overhead into cost of goods sold will result in which of the following?

A) Adjusted cost of goods sold of $363,000.
B) A credit balance in manufacturing overhead of $6,000.
C) Adjusted cost of goods sold of $357,000.
D) Adjusted cost of goods sold of $360,000.

Question 23

What is the cost of direct materials used?

A) $11,000.
B) $12,000.
C) $15,000.
D) $20,000.

Question 24

During the year,Paul Company used a predetermined overhead rate 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:
What was the under- or overapplied overhead for the year?

A) $2,500 overapplied.
B) $2,500 underapplied.
C) $10,500 overapplied.
D) $13,000 underapplieD.
$90,000 - (25,000 @ $3.50)= $2,500 underapplieD.

Question 25

What is the cost of goods manufactured?

A) $50,000.
B) $55,000.
C) $56,000.
D) $61,000.

Question 26

Kanuck Company applies overhead to completed jobs on the basis of $0.70 per machine hour.If Job 501 shows $28,000 of manufacturing overhead applied,how many machine hours were used for the job?

A) 19,600.
B) 28,000.
C) 30,000.
D) 40,000.

Question 27

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

Question 28

The balances in White Company's Work in Process inventory account were $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).The sum of the debits to the Manufacturing Overhead account totalled $28,000 for the month while the sum of the credits totalled $30,000.Which of the following statements is correct?

A) Finished Goods was debited for $82,000 during the month.
B) Finished Goods was debited for $52,000 during the month.
C) Manufacturing Overhead was underapplied by $2,000 at the end of the month
D) Finished Goods was credited for $82,000 during the monthTherefore debit Finished Goods $82,000

Question 29

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:
What was the under- or overapplied overhead last year?

A) $1,000 underapplied.
B) $1,000 overapplied.
C) $2,000 underapplied.
D) $3,000 overapplieD.
(24,000@ $2)- 47,000 = $1,000 overapplied

Question 30

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) $318,000.
B) $310,000.
C) $322,000.
D) $330,000.

Question 31

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.DL = 2250/.9 = $2,500.DM = $9,000 - 2500 - 2250 = $4,250

Question 32

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,what was the direct labour cost on the job?

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

Question 33

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 described above,the error in recording depreciation would have no effect on net income for the year.
D) The $6,000 in depreciation should have been charged to Work in Process rather than to administrative expense.

Question 34

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.What was Samuelson's Work in Process inventory balance for Job 476 on June 30?

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

Question 35

What is the manufacturing overhead applied?

A) $27,000.
B) $28,000.
C) $29,000.
D) $36,000.

Question 36

What is the indirect labour cost?

A) $5,000.
B) $12,000.
C) $15,000.
D) $35,000.

Question 37

Dowan Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.During the 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 38

What would be the ending Work in Process account balance?

A) $2,000.
B) $13,000.
C) $50,000.
D) $55,000.

Question 39

Bitter Company incurs a direct labour rate of $15 per hour applies overhead to jobs on the basis of $1.25 per direct labour hour.If Job 107 shows $86,000 of direct material and $10,000 of manufacturing overhead applied,what is the total cost of job 107?

A) $96,000.
B) $120,000.
C) $130,000.
D) $216,000.Total cost = $86,000 + (8,000 hrs.@ $15/hr)+ $10,000 = $216,000

Question 40

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

A) $15,000.
B) $20,000.
C) $21,000.
D) $24,000.

Question 41

What is the cost of goods manufactured for March?

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

Question 42

What is the cost of goods sold?

A) $131,000.
B) $91,000.
C) $81,000.
D) $111,000.CGS = 30,000 + 121,000 - 40,000 = $111,000.

Question 43

What is the cost of goods sold for September (before disposition of any under- or overapplied overhead)?

A) $2,100.
B) $5,925.
C) $3,700.
D) $1,950.

Question 44

What was the total cost added to Work in Process during May?

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

Question 45

What was the cost of raw materials purchased during the year?

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

Question 46

Which of the following would be included in the entry to dispose of the under- or over applied overhead cost for the month?

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.
OH applied = 26,500 * .7 = 18,550 less actual of 18,500 = $50 overapplieD.

Question 47

What is the cost of goods manufactured?

A) $114,000.
B) $133,000.
C) $121,000.
D) $138,000.CGM = 66,000 + 27,000 + 21,000 + 20,000 - 13,000 = $121,000

Question 48

What amount of direct labour cost was charged to production during the year?

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

Question 49

Which entry records the purchase of raw materials?

A) 8.
B) 4.
C) 6.
D) 1.

Question 50

What is the amount of direct materials cost in the March 31 work in process inventory account?

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

Question 51

What was the March 1 balance in the Raw Materials inventory?

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

Question 52

What is the cost of raw materials used in production?

A) $26,000.
B) $71,000.
C) $76,000.
D) $66,000.

Question 53

What is the cost of goods manufactured for September?

A) $10,750.
B) $11,275.
C) $5,925.
D) $7,625.= 2,900 + 2,050 + 650 + (650 * $5/$10)= $5,925

Question 54

What was the cost of goods sold for the year (before disposition of any under- or overapplied overhead)?

A) $736,000.
B) $716,000.
C) $691,000.
D) $801,000.

Question 55

What was the actual overhead cost incurred during the month?

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

Question 56

Which entry records the application of overhead?

A) 1.
B) 5.
C) 6.
D) 3.

Question 57

What was the cost of goods manufactured during the year?

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

Question 58

Which entry transfers the cost of goods manufactured for the period?

A) 1.
B) 4.
C) 7.
D) 5.

Question 59

What is the total manufacturing cost for the year?

A) $27,000
B) $50,000
C) $55,000
D) $63,000

Question 60

What is the ending Work in Process inventory?

A) $7,575.
B) $5,350.
C) $4,325.
D) $5,150.Job 4 = EI = 750 + 4,000 + 400 + 40 hrs @ $5/hr = $5,350.

Question 61

Job cost sheets supporting a normal job-order costing system contain entries for actual direct material,actual direct labour,and actual manufacturing overhead cost incurred in completing a job.

Question 62

(Appendix 5A)If the predetermined overhead rate is based on capacity,by how much was manufacturing overhead for the year over applied or underapplied?

A) Manufacturing overhead underapplied $113,800
B) Manufacturing overhead overapplied $113,800
C) Manufacturing overhead overapplied $105,000
D) Manufacturing overhead underapplied $105,000

Question 63

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

Question 64

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

Question 65

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

Question 66

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

Question 67

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

Question 68

What was the underapplied or over applied overhead for the year?

A) $6,000 overapplied.
B) $4,000 underapplied.
C) $10,000 underapplied.
D) $10,000 overapplieD.
Applied = 24,000 hrs @ $2.50/hr.= $60,000 - 54,000 actual = $6,000 overapplieD.

Question 69

(Appendix 5A)What is the predetermined overhead rate based on capacity to 2 decimal places?

A) $5.35
B) $6.69
C) $5.50
D) $5.40

Question 70

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 71

How much of any underapplied or overapplied overhead would have been due to the fact that the estimated overhead allocation base was different from the actual?

A) $4,000.
B) $6,000.
C) $10,000.
D) $14,000.

Question 72

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 73

If the estimated manufacturing overhead for the year was $24,000,and the applied overhead was $26,500,what was the actual manufacturing overhead cost for the year?

A) $19,500.
B) $22,000.
C) $28,500.
D) $31,000.

Question 74

Which entry records amortization on manufacturing equipment?

A) 1.
B) 3.
C) 4.
D) 5.

Question 75

How much of any underapplied or overapplied overhead would have been due to the fact that the estimated overhead costs were different from the actual?

A) $4,000.
B) $6,000.
C) $10,000.
D) $14,000.

Question 76

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

Question 77

What was the balance in the Finished Goods inventory account at the beginning of the year?

A) $28,000.
B) $13,000.
C) $17,500.
D) $8,500.

Question 78

What was the total amount of direct material purchases during January?

A) $180,000.
B) $190,000.
C) $195,000.
D) $200,000.

Question 79

Suppose Job #461 contained 100 units.What unit cost would appear on the job cost sheet for job #461?

A) $55.00 per unit.
B) $61.00 per unit.
C) $61.75 per unit.
D) $62.50 per unit.OH rate = $50,000/20,000 DLH = $2.5.Therefore $6,250/100 units = $62.50 per unit.

Question 80

How much direct labour cost was incurred during January?

A) $170,000.
B) $175,000.
C) $180,000.
D) $186,000.