Question 1

Total estimated overhead costs should be divided by actual direct labor hours to compute an overhead rate per direct labor hour.

Accepted Answer

The overhead rate per direct labor hour is computed by dividing total estimated overhead costs by estimated direct labor hours, not actual direct labor hours.

Question 2

The Overhead account is used to accumulate actual overhead costs.

Accepted Answer

The Overhead account is used to accumulate actual overhead costs incurred during production. This account is used in the calculation of the overhead rate used to apply overhead costs to the products.

Question 3

Overhead is said to be underapplied when actual overhead costs exceed the amount applied to production.

Accepted Answer

This statement is correct. When actual overhead costs are higher than the amount of overhead applied to production, it means that the overhead was underapplied.

Question 4

The cost of goods manufactured is added to the beginning balance of Finished Goods Inventory to obtain the total cost of goods available for sale during the period.

Accepted Answer

This is correct. The cost of goods manufactured represents the total cost of producing the goods that are ready for sale. When added to the beginning balance of Finished Goods Inventory, it gives the total cost of goods available for sale during the period.

Question 5

The changes in Work in Process Inventory and total manufacturing costs for a period are used to compute cost of goods manufactured.

Accepted Answer

Changes in Work in Process Inventory and total manufacturing costs are used to calculate the cost of goods manufactured, so the statement is true.

Question 6

Total manufacturing costs and the change in Finished Goods Inventory are used to compute cost of goods sold.

Accepted Answer

The answer of Total manufacturing costs and the change in...

Question 7

If overhead has been overapplied during the period, the adjusting entry could include a credit to the Cost of Goods Sold account.

Accepted Answer

If overhead has been overapplied during the period, it means that the actual overhead costs were lower than the estimated overhead costs that were applied to the products. To adjust for this overapplication, the overhead account would be credited and a corresponding debit would be made to another account, such as Cost of Goods Sold. This reduces the inventory value and increases the cost of goods sold, reflecting the lower actual overhead costs. Therefore, the adjusting entry would include a credit to the Cost of Goods Sold account.

Question 8

As actual overhead costs are incurred, the Overhead account is debited.

Accepted Answer

This statement is true. Overhead costs are recorded in the Overhead account through debits as they are incurred.

Question 9

If Company G uses an overhead rate of $3.50 per direct labor dollar, and 63,500 hours of direct labor at $9.00 per hour are actually incurred, $222,250 of overhead costs are allocated for that period.

Accepted Answer

The overhead costs allocated would be $1,999,125, calculated by multiplying the direct labor cost ($571,500) by the overhead rate ($3.50).

Question 10

The amount of underapplied or overapplied overhead is the difference between applied overhead and estimated overhead.

Accepted Answer

The amount of underapplied or overapplied overhead is the difference between actual overhead and applied overhead, not between applied overhead and estimated overhead.

Question 11

The entry to record the application of overhead costs includes a debit to the Overhead account.

Accepted Answer

The entry to record the application of overhead costs includes a credit to the Overhead account and a debit to Work in Process.

Question 12

Overhead costs generally are estimated as part of the normal budgeting function.

Accepted Answer

Overhead costs, which include various indirect expenses such as rent, utilities, and salaries for administrative staff, are typically included in budgeting as apart of planning and forecasting for business operations.

Question 13

A cost pool is a collection of overhead costs related to a cost object.

Accepted Answer

A cost pool is a grouping of indirect costs that are associated with a specific activity, department, or product. The costs in the cost pool are then allocated or assigned to the cost object based on an appropriate allocation base or cost driver.

Question 14

The amount for cost of goods manufactured should be the same as the amount transferred from the Work in Process Inventory account to the Finished Goods Inventory account during the year.

Accepted Answer

The cost of goods manufactured represents the total cost of products completed during the year, and this amount is transferred from the Work in Process Inventory account to the Finished Goods Inventory account. Therefore, the amount for cost of goods manufactured should be the same as the amount transferred to Finished Goods Inventory.

Question 15

By using a predetermined overhead rate and an allocation base, such as direct labor dollars or hours, one can assign overhead costs by debiting the Overhead account and crediting the Work in Process Inventory account.

Accepted Answer

Overhead costs are assigned by debiting the Work in Process Inventory account and crediting the Overhead account, not the other way around.

Question 16

Total manufacturing costs include all direct materials used as well as all direct labor costs and overhead costs incurred for a period.

Accepted Answer

Total manufacturing costs are the sum of direct materials, direct labor, and overhead costs incurred during a period in the manufacture of a product. Therefore, the statement is true.

Question 17

Manufacturing costs incurred in an accounting period cannot be included in cost of goods sold for the subsequent accounting period.

Accepted Answer

Manufacturing costs incurred in one accounting period can be included in the cost of goods sold for the subsequent period if the goods are sold in that later period.

Question 18

Actual overhead plus overapplied overhead equals applied overhead.

Accepted Answer

This is correct. Applied overhead is the total overhead costs allocated to a specific job or product. It consists of actual overhead costs and any overapplied or underapplied overhead. Therefore, actual overhead plus overapplied overhead equals applied overhead.

Question 19

Cost of goods manufactured appears on the income statement of a manufacturing company in a similar manner as purchases appear on the income statement of a merchandising company.

Accepted Answer

Cost of goods manufactured represents the total cost of the goods that were produced and are available for sale during the period. Similarly, purchases represent the total cost of the goods that were purchased by the merchandising company during the period, and are available for sale. Therefore, cost of goods manufactured and purchases are both direct costs that appear on the income statement of their respective companies.

Question 20

The product is the cost object when assigning indirect product costs.

Accepted Answer

Indirect product costs, also known as overhead costs, are assigned to the product as the cost object because they cannot be directly traced to a specific product or unit. Examples include rent, utilities, and salaries of managers.

Quiz 19: Cost Concepts and Cost Allocation