Question 1

If the under- or overapplied overhead amount is considered to be material,which of the following accounts would be the least likely to be used when closing the Manufacturing Overhead account at the end of the period?

Accepted Answer

If the under- or overapplied overhead amount is material, it means there is a substantial difference between the applied and actual overhead costs incurred. In such a case, the Manufacturing Overhead account cannot be closed directly to Cost of Goods Sold because it would distort the cost of goods sold and gross profit figures. Instead, the difference must be allocated among the work in process, finished goods, and cost of goods sold accounts based on their relative sizes.

Raw Materials Inventory is not a likely account to be used in this allocation process because it deals with the purchase and receipt of materials, and not with the manufacturing overhead costs. Therefore, Choice A is the best answer. Choice B, C, and D are all likely accounts to be used in the allocation process because they represent the different stages of the production cycle where overhead costs are incurred. However, none of these choices is the least likely account, so they are not the best answer.

Question 2

All of the following are reasons that companies prefer normal costing except:

Accepted Answer

Normal costing does not track actual direct materials, actual direct labor costs, and actual manufacturing overhead costs. Instead, it assigns overhead costs based on a predetermined overhead rate using estimated amounts. This provides a more stable cost for managers to use in their decision-making processes.

Question 3

The law firm,Keen and Sholer,assigns overhead to clients based on direct labor hours using normal costing.During June,they compiled the following information regarding hours worked and costs:
$$\begin{array} { l l } 
\text { Actual direct labor hours } & 900 \text { hours } \
\text { Actual overhead costs } & \$ 7,200 \
\text { Estimated direct labor hours } & 1,000 \text { hours } \
\text { Estimated overhead costs } & \$ 9,000
\end{array}$$
For June,overhead was:

Accepted Answer

The answer of The law firm,Keen and Sholer,assigns overhead to...

Question 4

The entry to record the requisition of indirect materials in a job cost system includes a:

Accepted Answer

Indirect materials are treated as manufacturing overhead costs, which are not directly traceable to a particular job. Therefore, the requisition of indirect materials is recorded by debiting Manufacturing Overhead and crediting Accounts Payable.

Question 5

Specialty Chocolates recently expanded its operations beyond its existing kitchen to serve its retail operations by establishing a new kitchen to serve a wholesale market for local specialty shops.With this new arrangement,Specialty Chocolates will continue to have a retail shop attached to its original kitchen (Department 1)and the new wholesale operations shipping out of the new kitchen (Department 2).Using normal costing,the company applies monthly overhead using predetermined overhead rates based on direct labor hours for the older operation in Department 1 and machine hours for overhead rates in the more automated Department 2.
$\begin{array}{lcc}
&\text { Department } 1 & \text { Department } 2\
\text { Monthly estimated overhead allocated to each }\
 \text { department } & \$ 4,800 & \$ 6,000 \
 \text { Dverhead cost driver } & \text { direct labor hours } & \text { machine hours } \
\text { Estimated number of direct labor hours per } & 320 & -\
\text { month }\
 \text { stimated number of machine hours per month } & - & 500 \
\text { Estimated direct labor hours per pound of } & 10 \text { minutes } &\
\text { chocolate }\
\text {Estimated machine hours per pound of chocolate}&&\text {4 minutes}
\end{array}$

Given this information,what are the respective overhead application rates to be used per pound of chocolate for Departments 1 and 2?

Accepted Answer

The answer of Specialty Chocolates recently expanded its operations beyond...

Question 6

The entry to record wages owed to the production supervisor should include a debit to:

Accepted Answer

The wages owed to the production supervisor are considered indirect labor costs and should be recorded as part of Manufacturing Overhead.

Question 7

All of the following are ways that a job costing system used by a service organization may differ from one used by a manufacturing company except:

Accepted Answer

While there may be some differences in the account names and the way costs are tracked, the biggest difference between a job costing system used by a service organization and one used by a manufacturing company is the way labor is tracked. Service organizations typically do not use a formal production process, so tracking labor is often done through timesheets, job codes, or other methods that are different from those used in a manufacturing environment. Costs in service organizations also tend to be tracked by customer rather than by product, and service organizations tend to use fewer materials, but these are not necessarily differences from a manufacturing company.

Question 8

Kaplan Inc.applies overhead on the basis of direct labor hours.During 2016,the predetermined overhead rate used was $9.00.If overhead was underapplied by $16,500 during 2016,which of the following would not be a reason for the underapplied overhead?

Accepted Answer

If applied overhead is higher than actual overhead, there should be no underapplied overhead. Therefore, D is the correct choice as it is not a reason for underapplied overhead. A, B, and C are all possible reasons for underapplied overhead.

Question 9

Assume Clayton Company has an immaterial credit balance in the Manufacturing Overhead account.The entry to close the Manufacturing Overhead account should include a:

Accepted Answer

A credit balance in the Manufacturing Overhead account indicates that overhead has been overapplied. Closing this account typically involves a credit to Manufacturing Overhead and a corresponding debit to Cost of Goods Sold, reducing the Cost of Goods Sold.

Question 10

Silo Manufacturing received timesheets submitted by employees reflecting $5,000 of direct labor costs to be paid next week.Which one of the following journal entries should Silo record for this transaction?

Accepted Answer

The correct journal entry to record direct labor costs involves debiting Work in Process Inventory and crediting Wages Payable. This reflects the increase in inventory due to labor costs and the obligation to pay employees.

Question 11

The entry to record depreciation on the factory building should include a:

Accepted Answer

Depreciation on the factory building represents a manufacturing overhead cost and thus should be debited to the Manufacturing Overhead account. Depreciation is not directly related to the cost of goods sold or work in process inventory, so choices A and C are incorrect. Choice D is also incorrect as the credit is not a necessary component of the entry. Choice E is incorrect as there is a correct answer choice available.

Question 12

Goodman Company has $30,000 in underapplied overhead, which is considered by the company to be a material amount. Other account balances include:

Work in Process Inventory	$140,000
Finished Goods Inventory	40,000
Cost of Goods Sold	20,000
Which one of the following would be the correct journal entry for closing the underapplied overhead?

Accepted Answer

The underapplied overhead is allocated based on the proportion of account balances. Work in Process, Finished Goods, and Cost of Goods Sold are adjusted by $21,000, $6,000, and $3,000 respectively, totaling $30,000.

Question 13

Nguyen Inc.applies overhead to products based on direct labor hours using normal costing.During 2016,total overhead costs were estimated to be $500,000.Actual overhead totaled $540,000 based on 32,000 actual direct labor hours.At the end of the year,overhead was overapplied by $20,000.Based on this information,what was the predetermined overhead rate used during 2016?

Accepted Answer

The answer of Nguyen Inc.applies overhead to products based on...

Question 14

When using a job cost system,which of the following will not appear on a job cost sheet?

Accepted Answer

Actual manufacturing overhead incurred is not recorded on a job cost sheet as it is not known until the end of the period. The estimated overhead is applied to each job during the period based on a predetermined overhead rate. The difference between the actual overhead and the applied overhead is recorded in the overhead account and is adjusted at the end of the period. Direct labor, direct materials, and manufacturing overhead applied are typically recorded on a job cost sheet.

Question 15

The law firm,Keen and Sholer,assigns overhead to clients based on direct labor hours using normal costing.During June,they compiled the following information regarding hours worked and costs:
$$\begin{array} { l l } 
\text { Actual direct labor hours } & 900 \text { hours } \
\text { Actual overhead costs } & \$ 7,200 \
\text { Estimated direct labor hours } & 1,000 \text { hours } \
\text { Estimated overhead costs } & \$ 9,000
\end{array}$$
The amount of applied overhead for June is:

Accepted Answer

Applied overhead = Estimated overhead costs x (Actual direct labor hours / Estimated direct labor hours)= $9,000 x (900 hours / 1,000 hours)= $8,100

Question 16

The Work in Process Inventory account for Baja Manufacturing Company shows a balance of $7,200 at the end of the accounting period.The job cost sheets of the only two uncompleted jobs,Jobs 4 and 7,show respective charges of $2,400 and $1,200 for direct materials used.Jobs 4 and 7 also show respective charges of $1,600 and $800 for direct labor used.Based on this information,what is the predetermined overhead rate as a percentage of direct labor costs that Morris is using?

Accepted Answer

The answer of The Work in Process Inventory account for...

Question 17

Adams Company placed $2,000 of direct materials into production.Which one of the following journal entries should Jones record for this transaction?

Accepted Answer

Direct materials are placed into production and are recorded in the Work in Process Inventory account with a corresponding credit to Raw Materials Inventory. Option D reflects this entry by debiting Work in Process Inventory for $2,000 and crediting Raw Materials Inventory for $2,000.

Question 18

If the Manufacturing Overhead account has a credit balance after overhead has been applied to products,manufacturing overhead:

Accepted Answer

If the Manufacturing Overhead account has a credit balance after overhead has been applied to products, it means that the actual manufacturing overhead incurred is less than the applied overhead, resulting in overapplied overhead. This can happen if the estimates made at the beginning of the period for the overhead costs are too high, or if the actual costs were lower than expected. The excess credit balance should be closed out at the end of the period.

Question 19

Records at Sandy Inc.indicate that indirect materials totaling $800 were requisitioned and placed in production.Which one of the following journal entries should Sandy record for this transaction?

Accepted Answer

When indirect materials are requisitioned and placed in production, the cost is typically recorded as Manufacturing Overhead. The corresponding credit is made to Raw Materials Inventory, reflecting the decrease in raw materials as they are moved out of inventory and into production.

Question 20

Burton Company purchased $45,000 of raw materials on account.Which one of the following journal entries should Burton record for this transaction?

Accepted Answer

When a company purchases raw materials on account, it is recorded as an increase to Raw Materials Inventory and an increase to Accounts Payable. Therefore, the journal entry that correctly records this transaction is Option B, where the Raw Materials Inventory account is debited for $45,000 and the Accounts Payable account is credited for $45,000.

Quiz 2: How Is Job Costing Used to Track Production Costs