Accounting Chapter 25 Based This Report Cost Accountants Charge Labor

24) Jackson Manufacturing is using a manufacturing overhead application rate of 130% of direct labor

dollars. A job uses 17 direct labor hours at $27 per hour. How much overhead should be applied to the

job? (Round your answer to the nearest dollar.)

A) $353

B) $298

C) $597

D) $459

25) Brooks Manufacturing is using a manufacturing overhead application rate of 180% of machine cost. A

job uses 43 machine hours at $17/hour. How much overhead should be applied to the job? (Round your

answer to the nearest dollar.)

A) $731

B) $1,316

C) ($1,316)

D) ($731)

26) Baker Manufacturing has estimated manufacturing overhead at $133,000 and has estimated direct

labor of 10,000 direct labor hours at $19 per hour. The overhead rate per direct labor dollar would be:

(Round your answer to the nearest cent.)

A) $1.43.

B) $13.30.

C) $0.70.

D) $5.70.

27) Caper Manufacturing applies overhead based on direct labor hours. At the beginning of the year, it

estimated that overhead costs would be $153,000 and direct labor hours would be 16,000. The applied

overhead rate per direct labor hour is: (Round your answer to the nearest cent.)

A) $7.17.

B) $14.34.

C) $9.56.

D) None of the above

28) If the overhead applied rate based on direct labor hours is $10.00 and the actual labor hours are 520,

what is the amount credited to Manufacturing Overhead–Applied?

A) $5,200

B) $520

C) $52,000

D) None of the above

29) The estimated manufacturing overhead cost was $26,000 and estimated machine hours were 14,000.

Actual manufacturing overhead cost was $30,000 and actual machine hours were 12,000. The overhead

application rate per hour based on machine hours is: (Round your answer to the nearest cent.)

A) $1.86.

B) $2.50.

C) $2.14.

D) $2.17.

30) Estimated manufacturing overhead costs were $65,000 and the number of estimated machine hours

was 30,000. Actual overhead costs were $64,000 and the actual number of machine hours used was 28,500.

Based on machine hours, the overhead application rate per hour is: (Round your answer to the nearest

cent.)

A) $2.17.

B) $2.28.

C) $2.25.

D) $2.13.

31) ZTY Company has direct labor for the month of $44,000. ZTY’s annual overhead is $660,000 and

annual direct labor cost is $1,070,000. Overhead is applied based on direct labor. What is the entry to

charge direct labor to production? (Round your answer to the nearest dollar.)

A) Debit Work-in-Process Inventory $44,000; credit Payroll Payable $44,000

B) Debit Manufacturing Overhead-Applied $44,000; credit Work-in-Process Inventory $44,000

C) Debit Work-in–Process Inventory $27,140; credit Manufacturing Overhead-Applied $27,140

D) Debit Work-in-Process Inventory $71,333; credit Manufacturing Overhead–Applied $71,333

32) The following data are available for Starbrite Corporation:

Estimated direct labor hours 1,500

Estimated overhead costs $43,500

If overhead is applied based on direct labor hours, the predetermined overhead rate is: (Round your

answer to the nearest cent.)

A) $20.91.

B) $29.00.

C) $209.13.

D) $290.00.

33) The following data are available for Skyway:

Estimated machine hours 41,000 hours

Estimated overhead costs $90,000

If overhead is applied based on machine hours, the predetermined overhead rate is: (Round your answer

two decimal places.)

A) $2.20.

B) $21.95.

C) $0.46.

D) 219.51%.

34) The bill of lading is a formal document issued to the carrier for shipping the finished product to a

customer.

35) In entries to record the movement of material, labor, and overhead through the operation of a

company, the credit is the destination and the debit is the source.

36) The entry to record selling a product that cost $22,000 would be a credit to Finished Goods Inventory

$22,000, and a debit to Cost of Goods Sold $22,000.

37) Work-in-Process Inventory is credited when goods are transferred to finished goods.

38) Raw Material Inventory is credited and Finished Goods Inventory is debited when raw material is

transferred to production.

39) Work-in-Process is debited and Payroll is credited when supervisor pay is charged to production.

40) Finished Goods Inventory is credited when products are sold and debited when the products are

transferred from Work-in-Process Inventory.

41) Cost of Goods Sold is debited after items have been sold.

42) Overhead may be applied based on direct labor hours or sales salary expense.

43) The Manufacturing Overhead-Control account is used to apply overhead costs to production.

44) When actual overhead costs are not known until the end of the month, an estimated overhead

application rate should be determined so that the total weekly costs can be applied.

45) One way to determine an overhead application rate is to divide estimated annual overhead costs by

estimated annual direct labor hours.

46) Record in general journal form the following transactions for Max Manufacturing:

Feb. 4 Raw materials of $15,000 were issued from the storeroom.

Feb. 7 Charged $25,000 of direct labor to production.

Feb. 10 Supplies costing $6,000 were issued from the storeroom.

Feb. 15 The following expenses were charged to overhead: depreciation $5,000,

rent $4,000, and electricity $1,500.

Feb. 20 Overhead was applied at 75% of direct labor dollars.

Feb. 21 Transferred completed goods costing $8,000 to finished goods.

47) From the following transactions, prepare the appropriate general journal entries for the month of

April.

a. Raw materials costing $72,000 were issued from the storeroom.

b. Direct labor of $42,000 was charged to production.

c. Indirect labor costs of $17,000 were incurred.

d. Overhead was applied at the rate of 40% of direct labor dollars.

e. Completed products costing $38,000 were transferred to finished goods.

f. Products costing $32,000 were sold for $50,000 on account.

48) The following data are available for Convoy Trucks:

Estimated machine hours 40,000 hours

Actual machine hours 5,000 hours

Estimated manufacturing overhead costs $150,000

Actual manufacturing overhead costs 13,000

Required:

a. Compute the predetermined overhead rate assuming the rate is based on machine hours.

b. Prepare the journal entry to record the applied overhead.

49) The following data are available for Jefferson Company.

Annual estimated manufacturing overhead costs $ 90,000

Actual manufacturing overhead costs in May 16,200

Annual estimated direct labor hours 40,000

Actual direct labor hours in May 6,000

Required:

a. Compute the predetermined rate based on direct labor hours.

b. Prepare the journal entry to record the applied overhead for the month of May.

50) List four of the six source documents covered in this unit and explain the function of each in the

accounting process.

Given the following accounts:

[1] Expense accounts.

[2] Accounts receivable

[3] Finished goods inventory.

[4] Work in process inventory.

[5] Raw materials inventory.

[6] Factory supplies inventory.

[7] Manufacturing overhead applied

[8] Depreciation expense

[9] Accounts payable.

[10] Payroll payable

[11] Utilities expense

[12] Sales.

[13] Raw materials purchases.

[14] Manufacturing overhead-control.

[15] Cost of goods sold.

Indicate the account(s) to be debited and credited to record the following transactions.

51) Purchased raw materials on account.

Debit ________ Credit ________

52) Issued raw materials to production.

Debit ________ Credit ________

53) Charged direct labor to production.

Debit ________ Credit ________

54) Issued supplies to production.

Debit ________ Credit ________

55) Charged the following costs to overhead: utilities, salaries, and depreciation.

Debit ________ Credit ________ & ________ & ________

56) Applied overhead to production.

Debit ________ Credit ________

57) Transferred completed products to finished goods.

Debit ________ Credit ________

58) Sold products on account.

Debit ________ & ________ Credit ________ & ________

25.3 Learning Objective 25-3

1) The purchase of direct materials was recorded as the purchase of office supplies. This error will cause:

A) the cost of goods manufactured to be overstated.

B) the cost of goods sold to be overstated.

C) the net income to be overstated.

D) the office supplies to be overstated.

2) The direct costs were overstated. This error will cause:

A) the cost of goods manufactured to be understated.

B) the cost of goods sold to be understated.

C) the net income to be overstated.

D) None of these answers is correct.

3) The accrual for the direct labor at the end of the year was not prepared. This error will cause:

A) the cost of goods manufactured to be overstated.

B) the cost of goods sold to be overstated.

C) the net income to be understated.

D) None of these answers is correct.

4) The adjustment for factory depreciation expense was ignored. This error will cause:

A) the cost of goods manufactured to be overstated.

B) the cost of goods sold to be understated.

C) the net income to be understated.

D) the cost of goods manufacturing to be understated.

5) The work-in-process ending inventory was overstated. This error will cause:

A) the cost of goods manufactured to be understated.

B) the cost of goods sold to be understated.

C) the net income to be understated.

D) Answers A and B are correct.

6) The ending inventory for raw materials was overstated. This error will cause:

A) the cost of raw materials used to be understated.

B) the cost of goods sold to be overstated.

C) the net income to be understated.

D) Answers A and B are correct.

7) Indirect costs were understated. This error will cause:

A) the cost of goods manufactured to be overstated.

B) the cost of goods sold to be overstated.

C) the net income to be understated.

D) None of these answers is correct.

8) Finished goods ending inventory was understated. This error will cause:

A) the cost of goods manufactured to be overstated.

B) the cost of goods sold to be overstated.

C) the net income to be overstated.

D) All of these are correct.

9) The work-in-process beginning inventory was understated. This error will cause:

A) the cost of goods manufactured to be understated.

B) the cost of goods sold to be overstated.

C) the net income to be overstated.

D) Answers A and C are correct.

10) Work in Process Inventory appears on which of the following statements on the worksheet?

A) Statement of cost of goods manufactured and income statement

B) Statement of cost of goods manufactured and balance sheet

C) Income statement and balance sheet

D) Income statement and cost of goods sold statement

11) Factory Supplies Expense, Depreciation Expense-Factory, and Heat, Light, and Power-Factory appear

on which section of the worksheet?

A) Statement of cost of goods manufactured

B) Statement of Stockholders’ Equity

C) Income statement

D) Statement of cost of goods sold

12) A manufacturing company will have a new set of columns on the worksheet for the:

A) statement of finished goods.

B) statement of work-in-process inventories.

C) statement of cost of goods sold.

D) statement of cost of goods manufactured.

13) The major difference on the balance sheet of a manufacturing company when compared to a

merchandise company is to include:

A) a retained earnings section.

B) three inventory accounts, rather than one.

C) three inventory accounts, rather than two.

D) accrued payroll.

14) The Raw Materials Inventory, Work–in-Process Inventory, and Finished Goods Inventory accounts

appear on the manufacturing worksheet in the:

A) balance sheet columns.

B) income statement columns.

C) statement of cost of goods manufactured.

D) All of the above

For each of the following, identify in Column 1 the category to which the account belongs, in Column 2

the normal balance for the account, in Column 3 the financial statement(s) on which the account balance

is reported, and in Column 4 the account’s nature (permanent/temporary).

15)