Question 1

Summers Corporation recently used $75,000 of direct materials and $9,000 of indirect materials in production activities. The journal entries reflecting these transactions would include:

Accepted Answer

Direct materials are debited to Work-in-Process Inventory, while indirect materials are debited to Manufacturing Overhead.

Question 2

The process of assigning overhead costs to the jobs that are worked on is commonly called:

Accepted Answer

The process of assigning overhead costs to the jobs that are worked on is commonly called overhead application. It involves identifying a predetermined overhead rate, based on estimated total overhead costs and an estimated allocation base (such as direct labor hours) and applying that rate to the actual amount of allocation base used by each job.

Question 3

Which of the following is the correct method to calculate a predetermined overhead rate?

Accepted Answer

Predetermined overhead rate is calculated by dividing the budgeted overhead cost by the budgeted amount of cost driver. This is because the predetermined overhead rate is used to allocate overhead costs to products based on the activity level of the cost driver.

Question 4

Simone uses a predetermined overhead application rate of $8 per direct labor hour. A review of the company's accounting records for the year just ended discovered the following:
Underapplied manufacturing overhead: $7,200
Actual manufacturing overhead: $392,000
Budgeted labor hours: 50,000
Simone's actual labor hours worked totaled:

Accepted Answer

The predetermined overhead rate is $8 per direct labor hour. The actual manufacturing overhead is $392,000. The underapplied manufacturing overhead is $7,200. This means that the actual manufacturing overhead is $7,200 more than the applied manufacturing overhead. The applied manufacturing overhead is the predetermined overhead rate multiplied by the actual labor hours worked. Therefore, the actual labor hours worked is $392,000 / $8 = 49,000 hours.

Question 5

Metro Corporation uses a predetermined overhead rate of $20 per machine hour. In deriving this figure, the company's accountant used:

Accepted Answer

The predetermined overhead rate is calculated by dividing estimated or budgeted overhead costs by an estimated or budgeted activity level. In this case, the activity level is the budgeted machine hours for the current accounting period. Therefore, choice A is the best option.

Question 6

The journal entry needed to record $5,000 of advertising for Westwood Manufacturing would include:

Accepted Answer

Advertising Expense is an operating expense and is the account to be debited when recording advertising costs.

Question 7

Electricity costs that were incurred by a company's production processes should be debited to:

Accepted Answer

Electricity costs that are incurred during the production processes are part of manufacturing overhead costs as they are indirect manufacturing costs. Therefore, these costs should be debited to the Manufacturing Overhead account.

Question 8

Dixie Company, which applies overhead at the rate of 190% of direct material cost, began work on job no. 101 during June. The job was completed in July and sold during August, having accumulated direct material and labor charges of $27,000 and $15,000, respectively. On the basis of this information, the total overhead applied to job no. 101 amounted to:

Accepted Answer

Overhead is applied at 190% of direct material cost. Direct material cost is $27,000. Therefore, overhead applied = $27,000 x 190% = $51,300.

Question 9

Trenton worked on four jobs during its first year of operation: nos. 401, 402, 403, and 404. A review of job no. 403's cost record revealed direct material charges of $40,000 and total manufacturing costs of $50,000. If Trenton applies overhead at 150% of direct labor cost, the overhead applied to job no. 403 must have been:

Accepted Answer

The answer of Trenton worked on four jobs during its...

Question 10

Othello Manufacturing incurred $106,000 of direct labor and $11,000 of indirect labor. The proper journal entry to record these events would include a debit to Work in Process for:

Accepted Answer

Direct labor is directly related to production, and therefore, it is debited to Work in Process. Indirect labor is not directly attributable to production and is not debited to Work in Process. The total direct and indirect labor costs incurred by Othello Manufacturing is $106,000 + $11,000 = $117,000, but only the direct labor cost of $106,000 is debited to Work in Process. Therefore, the correct answer choice is D, $106,000.

Question 11

The left side of the Manufacturing Overhead account is used to accumulate:

Accepted Answer

The left side of the Manufacturing Overhead account is used to accumulate actual manufacturing overhead costs incurred throughout the accounting period. This includes items such as rent for the manufacturing facility, utility bills, and salaries for production managers.

Question 12

Strong Company applies overhead based on machine hours. At the beginning of 20x1, the company estimated that manufacturing overhead would be $500,000, and machine hours would total 20,000. By 20x1 year-end, actual overhead totaled $525,000, and actual machine hours were 25,000. On the basis of this information, the 20x1 predetermined overhead rate was:

Accepted Answer

The answer of Strong Company applies overhead based on machine...

Question 13

The following information relates to October:
Production supervisor's salary: $3,500
Factory maintenance wages: 250 hours at $10 per hour
The journal entry to record the preceding information is:

Accepted Answer

The correct answer is A because the journal entry to record the production supervisor's salary and factory maintenance wages is to debit Manufacturing Overhead for $6,000 and credit Wages Payable for $6,000.

Question 14

The final step in recognizing the completion of production requires a company to:

Accepted Answer

The final step in recognizing the completion of production involves transferring the cost of the completed goods from Work-in-Process Inventory to Finished-Goods Inventory. This is done by debiting Finished-Goods Inventory (to increase it) and crediting Work-in-Process Inventory (to decrease it), reflecting the movement of goods from being in process to being finished.

Question 15

Throughout the accounting period, the credit side of the Manufacturing Overhead account is used to accumulate:

Accepted Answer

The credit side of the Manufacturing Overhead account is used to accumulate overhead applied to Work-in-Process Inventory, reflecting the allocation of estimated overhead costs to production.

Question 16

A review of a company's Work-in-Process Inventory account found a debit for materials of $67,000. If all procedures were performed in the correct manner, this means that the firm:

Accepted Answer

Recording a debit to Work-in-Process Inventory for materials means that the company has used raw materials in production. In order for the accounting equation (assets = liabilities + equity) to remain in balance, there must also be a credit entry to Raw-Material Inventory. This indicates that the raw materials were taken out of inventory and transferred to the production process. Therefore, choice E is the best choice as it states that the company recorded a credit to Raw-Material Inventory and was accounting for the usage of direct materials.

Question 17

Reynardo Company incurred $90,000 of depreciation for the year. Eighty percent relates to the firm's production facilities, and 20% relates to sales and administrative offices. If all items are handled in the proper manner, a review of the company's accounting records should reveal a:

Accepted Answer

Since 80% of the depreciation relates to the production facilities, it should be allocated to the Manufacturing Overhead account. Therefore, the correct entry would be a debit to Manufacturing Overhead for $72,000 (80% of $90,000). The remaining 20% of the depreciation, which relates to sales and administrative offices, should be allocated to the period expenses and recorded as a debit to Depreciation Expense for $18,000. None of the other answer choices accurately reflect the proper allocation of depreciation.

Question 18

Huxtable charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of machine hours. The following data pertain to the current year:
Budgeted manufacturing overhead: $480,000
Actual manufacturing overhead: $440,000
Budgeted machine hours: 20,000
Actual machine hours: 16,000
Overhead applied to production totaled:

Accepted Answer

To calculate the predetermined application rate, we divide the budgeted manufacturing overhead by the budgeted machine hours:

Predetermined application rate = $480,000 ÷ 20,000 machine hours = $24 per machine hour

Then, we can use the predetermined application rate to apply overhead to production:

Overhead applied = Actual machine hours × Predetermined application rate 
Overhead applied = 16,000 machine hours × $24 per machine hour = $384,000

Therefore, the answer is B).

Question 19

An accountant recently debited Work-in-Process Inventory and credited Manufacturing Overhead at a company that uses normal costing. The accountant was:

Accepted Answer

The accountant is applying a predetermined overhead amount to production. This is a common practice in normal costing, where a predetermined overhead rate is established at the beginning of the period and applied to production based on a predetermined allocation base (such as direct labor hours or machine hours). This helps to allocate overhead costs to products in a systematic and consistent manner.

Question 20

Which of the following statements about materials is false?

Accepted Answer

The answer of Which of the following statements about materials...

Quiz 3: Product Costing and Cost Accumulation in a Batch Production Environment