Chapter 4
133. Warwick Company has the following transactions for the month of September:
Purchased materials on account for $220,384.
Materials requisitioned for $91,562.
Direct labor for the month was incurred (but not yet paid) of $69,000.
Actual overhead for the month was $41,000. It has not been paid yet. (Charge to various payables.)
Overhead is applied to production at the rate of 65% of direct labor.
Jobs totaling $42,500 were transferred from Work-in–Process to Finished Goods.
Jobs costing $23,000 were sold.
Balances at the beginning of the month were:
Materials 22,760
Work-in-Process 0
Finished Goods 10,040
What is the journal entry to record applied overhead for the month?
a. Work-in-Process 44,850
Overhead Control 44,850
b. Various Payables 44,850
Overhead Control 44,850
c. Overhead Control 44,850
Work-in-Process 44,850
d. Overhead Control 44,850
Various Payables 44,850
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134. Which of the following accounts is credited when the work-in-process account is debited for direct labor?
a. Finished Goods
b. Work in Process
c. Wages Payable
d. Overhead Control
e. Accounts Payable
135. When overhead is debited to Overhead Control, what is the credit?
a. Various payable accounts
b. Cost of Goods Sold
c. Work in Process
d. Finished Goods
e. Accounts Receivable
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136. When finished goods are sold, the _____ account is debited.
a. Work in Process
b. Overhead Control
c. Accounts Payable
d. Cost of Goods Sold
e. Sales Revenue
137. What account is credited when goods are sold?
a. Accounts receivable
b. Cost of Goods Sold
c. Finished Goods
d. Raw materials
e. Work–in-process
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138. What type of event would cause two separate journal entries to be made?
a. Transferring the good to Finished Goods
b. Applied overhead to production based on direct labor hours
c. Transferring the goods from Raw Materials to Work-in-Process
d. Closing overapplied overhead to Cost of Goods Sold
e. Selling the good
139. Which of the following accounts will increase when purchasing raw materials on account?
a. Revenues and Accounts Receivables
b. Cash and Miscellaneous Expenses
c. Liabilities and Revenues
d. Assets and Liabilities
e. Assets and expenses
Chapter 4
140. When a job costing $5,000 is completed, the following journal entry is made:
a. Finished Goods 5,000
Cost of Goods Sold 5,000
b. Cost of Goods Sold 5,000
Finished Goods 5,000
c. Work-in-Process 5,000
Finished Goods 5,000
d. Finished Goods 5,000
Work-in-Process 5,000
e. Cost of Goods Sold 5,000
Sales 5,000
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141. On April 9 of the current year, Job XX4 was completed. The job cost sheet showed a total of $4,000 in direct
materials and $6,000 in direct labor at a rate of $20 per direct labor hour. Plantwide overhead is applied at $30 per direct
labor hour. The debit to Finished Goods Inventory to record the completion of Job XX4 is
a. $13,000.
b. $9,000.
c. $4,000.
d. $19,000.
142. At the beginning of the year, Forest Corporation estimates overhead will be $175,000. If the actual overhead for the
year is $165,000 and the applied overhead for the year is $120,000, what is the journal entry needed to reconcile the
overhead variance? Assume that the overhead variance is immaterial.
a.
Cost of Goods Sold 45,000
Overhead Control 45,000
b.
Overhead Control 45,000
Cost of Goods Sold 45,000
c.
Cost of Goods Sold 27,000
Overhead Control 27,000
d.
Overhead Control 27,000
Cost of Goods Sold 27,000
e. None of these
Chapter 4
143. Olson Corporation constructs new homes. Assume that Olson uses a job costing system. During May of the current
year, the following transactions occurred:
Olson purchased $4,500 of lumber on account.
Olson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.
Depreciation of $1,500 on equipment used to build new houses was recorded.
A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash
The journal entry to record the requisition of lumber for Olson would include a
a. debit to Work-in-Process of $4,500.
b. debit to Materials Inventory of $3,750.
c. credit to Finished Goods of $3,750.
d. debit to Work-in-Process of $3,750.
Chapter 4
144. Olson Corporation constructs new homes. Assume that Olson uses a job costing system. During May of the current
year, the following transactions occurred:
Olson purchased $4,500 of lumber on account.
Olson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.
Depreciation of $1,500 on equipment used to build new houses was recorded.
A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash
The journal entry to record labor for Olson would include a
a. debit to Finished Goods of $750.
b. debit to Wages Payable of $750.
c. credit to Finished Goods of $750.
d. debit to Work-in-Process of $750.
145. Walter Company uses a job-order costing system to account for product costs. The following information pertains to
the current year:
Materials placed into production $140,000
Indirect labor 40,000
Direct labor (10,000 hours) 160,000
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Depreciation of factory building 60,000
Other plantwide overhead 100,000
Increase in work-in-process inventory 30,000
Plantwide overhead rate is $18 per direct labor hour
What is the total amount credited to Materials Inventory for Walter in the current year?
a. $480,000
b. $170,000
c. $140,000
d. $110,000
146. Walter Company uses a job-order costing system to account for product costs. The following information pertains to
the current year:
Materials placed into production $140,000
Indirect labor 40,000
Direct labor (10,000 hours) 160,000
Depreciation of factory building 60,000
Other plantwide overhead 100,000
Increase in work-in-process inventory 30,000
Plantwide overhead rate is $18 per direct labor hour.
What is the total amount debited to Finished Goods Inventory in the current year?
a. $490,000
b. $510,000
c. $450,000
d. $550,000
Chapter 4
147. The _____ ignores support department interactions and assigns support department costs only to the producing
departments.
a. normal method
b. sequential method
c. direct method
d. reciprocal method
e. causal method
Chapter 4
148. The _____ method of allocation of support department cost recognizes that interactions among support departments
occur.
a. normal
b. sequential
c. direct
d. reversal
e. causal
149. Following is the departmental data of Alpha Company. If calculated through the direct method, the support
department costs assigned to the grinding department are _____.
Support Department Producing Departments
Power Grinding Assembly
Direct overhead costs $300,000 $250,000 $100,000
Expected activity:
Kilowatt-hours 400,000 100,000
a. $100,000
b. $350,000
c. $200,000
d. $150,000
e. $240,000
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150. Which of the following departments of the automobile industry provides essential services for producing departments
but do not actually make the product or service being sold?
a. Maintenance department
b. Grinding department
c. Painting department
d. Assembling department
e. Fabrication department
151. Following is the departmental data of Omega Solution Company. If calculated using the sequential method, the cost
of power department allocated to the Assembly department is _____.
Support Department Producing Departments
Power Maintenance Grinding Assembly
Direct overhead costs $300,000 $120,000 $250,000 $100,000
Expected activity:
Kilowatt-hours ___ 100,000 300,000 100,000
Maintenance hours ___ ___
a. $15,000
b. $35,000
c. $20,000
d. $60,000
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e. $24,000
152. Which of the following statements is true of the sequential method of allocation?
a. The sequential method is considered more accurate than the direct method.
b. The sequential method recognizes all interactions among the support departments.
c. In the sequential method, once a support department’s costs are allocated, it receives a subsequent allocation from
another support department.
d. In the sequential method, no cost from one support department is given to another support department.
e. The sequential method assigns support department costs only to the producing departments.
Chapter 4
153. McElligott Doll Company had the following overhead costs and production for two months. The dolls are identical to
each other.
September January
Actual overhead $12,000 $12,000
Number of dolls 3,000 2,000
A. What is the overhead cost per doll per month?
B. What type of costing is McElligott using? What is the main issue with using this type of costing?
154. Williams Incorporated estimated overhead to be $440,000 and direct labor hours to be 100,000 for the year. Actual
direct labor ended up being 120,000 hours. Actual overhead for the year amounted to $500,000.
A. What is the predetermined overhead rate?
B. What is the applied overhead for the year?
C. What is the amount of under- or over-applied overhead at the end of the year?
Chapter 4
155. At the beginning of the year Grey Corporation estimated the following:
Assembly Department Packaging Department
Overhead $ 840,000 $ 210,000
Direct labor hours 80,000 hrs. 4,000 hrs.
Machine hours 20,000 hrs. 12,000 hrs.
Grey uses departmental overhead rates. In the assembly department , overhead is applied on direct labor hours. In the
packaging department, overhead is applied on the basis of machine hours. Actual data for the month of April are as
follows:
Assembly Department Packaging Department
Overhead $ 42,759 $ 20,400
Direct labor hours 4,000 hrs. 300 hrs.
Machine hours 1,000 hrs. 1,200 hrs.
Required:
A.) Calculate the predetermined overhead rate for the assembly and packaging departments.
B.) Calculate the overhead applied to production in each department for the month of April.
C.) Calculate how much each department’s overhead is overapplied/underapplied.
Chapter 4
156. A company has two departments that all goods pass through, machining and assembly. Machining overhead is
applied based on machine hours and assembly overhead is applied based on direct labor hours. Data on each department is
as follows:
Machining Assembly
Budgeted overhead $75,000 $40,000
Budgeted direct labor hours 5,000 hrs. 10,000 hrs.
Budgeted machine hours 25,000 hrs. 1,000 hrs.
Actual overhead $75,400 $39,200
Actual direct labor hours 5,203 hrs. 9,980 hrs.
Actual machine hours 25,040 hrs. 850 hrs.
A. Calculate the overhead rate for each department.
B. What is each department’s applied overhead?
C. Calculate each department’s overhead variance. Specify whether it is overapplied or underapplied.
Chapter 4
157. Elf Company produces ornamental trees and uses normal costing. Elf applies overhead based on direct labor hours.
The following data are provided:
Budgeted Actual
Overhead $400,000 $392,000
Machine hours 20,000 hrs. 18,000 hrs.
Direct labor hours 16,000 hrs. 17,840 hrs.
Direct materials cost $521,000
Direct labor cost $410,000
Units produced 10,000 units
A. Calculate applied overhead.
B. Calculate the unit cost.
Chapter 4
158. Pribil Farm Equipment is a job-order costing manufacturer that uses a plantwide overhead rate based on direct labor
hours. Estimations for the year include $420,000 in overhead and 30,000 direct labor hours. Pribil worked on five jobs in
March. Data are as follows:
Job 89 Job 90 Job 91 Job 92 Job 93
Balance, 3/1 $23,110 $18,240 $ 9,510 $ 0 $ 0
Direct materials 13,000 17,210 22,900 15,240 8,210
Direct labor cost 8,075 11,500 16,250 9,750 4,860
Direct labor hours 1,615 hrs. 2,300 hrs. 3,250 hrs. 1,950 hrs. 972 hrs.
By March 31, Jobs 89 and 91 were completed and sold. The rest of the jobs remained in process.
A. Calculate the plantwide overhead rate.
B. Calculate the Work in Process on March 31.
C. Calculate the cost of goods sold for March.
D. Assume Pribil marks up cost by 40%. What is the selling price of Jobs 89 and 91?
159. Ski Company produces various types of snow skis. Estimated overhead for the year was $720,000 and estimated
direct labor hours were 240,000. During the month of June, 17,400 direct labor hours were worked, $50,400 of direct
materials were used and the average wage was $12 per hour. In June, 15,000 pairs of skis were produced.
A. Calculate the predetermined overhead rate.
B. Calculate the overhead applied to production for June.
C. Calculate the unit cost for each pair of skis.
160. Wisteria Company provided the following data:
Budgeted overhead $80,000
Budgeted direct labor hours 10,000 hrs.
Actual overhead $86,000
Actual direct labor hours 10,860 hrs.
A. What is applied overhead?
B. What is the overhead variance? Is it overapplied or underapplied?
Chapter 4
161. Feline Company uses a normal job-order costing system. Currently, a plantwide overhead rate based on direct labor
is used. Lola Katz, the plant manager, has heard that departmental overhead rates can offer significantly better cost
assignments than a plantwide rate can offer. Some jobs spend most of their time in Department A, while others spend
most of their time in Department B. Feline has the following data for its two departments for the coming year:
Department A Department B
Expected overhead cost $75,000 $33,000
Expected direct labor hours 30,000 hrs. 24,000 hrs.
A. Compute the plantwide overhead rate.
B. Compute the departmental overhead rates. (Carry out your answers to 3 decimal places.)
C. Which overhead rate would you recommend and why?