Answer the following questions using the information below:
Comfort Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost
rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The
following estimates are provided for the coming year for the company and for the Winton High School
band jacket job.
Company Winton High School Job
Direct materials $40,000 $2,000
Direct labor $10,000 $400
Manufacturing overhead costs $45,000
Machine-hours 100,000 mh 900 mh
11) For Comfort Manufacturing, what is the annual manufacturing overhead cost-allocation rate?
A) $0.50
B) $0.80
C) $0.45
D) $33.33
12) What amount of manufacturing overhead costs will be allocated to this job?
A) $405
B) $425
C) $270
D) $465
13) What are the total manufacturing costs of this job?
A) $1,970
B) $2,805
C) $2,905
D) $1,920
14) What is the bid price for the Winton High School job if the company uses a 40% markup of total
manufacturing costs?
A) $2,310
B) $2,880
C) $2,058
D) $3,927
Answer the following questions using the information below:
Apple Valley Corporation uses a job cost system and has two production departments, A and B.
Budgeted manufacturing costs for the year are:
Department A Department B
Direct materials $700,000 $100,000
Direct manufacturing labor $200,000 $800,000
Manufacturing overhead $600,000 $400,000
The actual material and labor costs charged to Job #432 were as follows:
Total
Direct materials: $25,000
Direct labor:
Department A $ 8,000
Department B $12,000
$20,000
Apple Valley applies manufacturing overhead costs to jobs on the basis of direct manufacturing labor
cost using departmental rates determined at the beginning of the year.
15) For Department A, the manufacturing overhead allocation rate is ________.
A) 33%
B) 66%
C) 300%
D) 100%
16) For Department B, the manufacturing overhead allocation rate is ________.
A) 50%
B) 100%
C) 200%
D) 300%
17) Manufacturing overhead costs allocated to Job #432 total ________.
A) $30,000
B) $12,000
C) $24,000
D) $36,000
Answer the following questions using the information below:
Mark Papers employs 15 full-time employees and 10 trainees. Direct and indirect costs are applied on a
professional labor-hour basis that includes both employee and trainee hours. Following is information for
2014:
Budget Actual
Indirect costs $200,000 $300,000
Annual salary of each employee $100,000 $110,000
Annual salary of each trainee $ 25,000 $ 30,000
Total professional labor-hours 50,000 dlh 60,000 dlh
18) What are the budgeted direct-cost rate and the budgeted indirect-cost rate, respectively, per
professional labor-hour?
A) $30.00; $4.50
B) $35.00; $4.00
C) $32.40; $5.00
D) $27.00; $5.00
19) How much should a client be billed in a normal costing system when 1,000 professional labor-hours
are used?
A) $33,600
B) $29,800
C) $39,000
D) $41,000
20) When a normal costing system is used, clients using proportionately more full-time employees than
trainees will ________.
A) be overbilled for actual resources used
B) be underbilled for actual resources used
C) be billed accurately for actual resources used
D) result in an underallocation of direct costs
21) Actual costing helps managers get information earlier and take corrective measures to improve labor
efficiency.
22) The budgeted indirect cost rate is actual indirect costs divided by budgeted quantity of the cost
allocation base.
23) Direct costs are traced the same way for actual costing and normal costing.
24) Normal costing assigns indirect costs based on an actual indirect-cost rate.
25) A budgeted indirect-cost rate is computed for each cost pool using budgeted indirect costs and the
budgeted quantity of the cost-allocation base.
26) For normal costing, even though the indirect-cost rate is based on actuals, indirect costs are allocated
to products based on the normal capacity of the cost-allocation base.
27) Shotter Manufacturing is a small textile manufacturer using machine-hours to calculate the single
indirect-cost rate to allocate manufacturing overhead costs to various jobs contracted during the year. The
following estimates are provided for the coming year for the company and for the jackets to be made for
Jackson High School Science Olympiad.
Company Jackson High School Job
Direct materials $25,000 $600
Direct manufacturing labor $5,000 $150
Manufacturing overhead costs $30,000
Machine-hours (mh) 50,000 mh 800 mh
Required:
a. For Shotter Manufacturing, determine the annual manufacturing overhead cost-allocation rate.
b. Determine the amount of manufacturing overhead costs allocated to the Jackson High School job.
c. Determine the estimated total manufacturing costs for the Jackson High School job.
28) Toyz Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to
products. Manufacturing overhead costs are applied on the basis of machine-hours in the Machining
Department and on the basis of direct labor-hours in the Assembly Department. At the beginning of 2014,
the following estimates were provided for the coming year:
Machining Assembly
Direct labor-hours (dlh) 10,000 dlh 150,000 dlh
Machine-hours (mh) 100,000 mh 5,000 mh
Direct labor cost $ 80,000 $720,000
Manufacturing overhead costs $200,000 $450,000
The accounting records of the company show the following data for Job #897:
Machining Assembly
Direct labor-hours (dlh) 50 dlh 120 dlh
Machine-hours (mh) 170 mh 10 mh
Direct material cost $3,000 $1,600
Direct labor cost $400 $1,500
Required:
a. Compute the manufacturing overhead allocation rate for each department.
b. Compute the total cost of Job #897.
c. Provide possible reasons why Toyz Manufacturing uses two different cost allocation rates.
Objective 4.6
1) In a normal costing system, the Manufacturing Overhead Control account ________.
A) is increased by allocated manufacturing overhead
B) is credited with amounts transferred to Work-in-Process
C) is decreased by allocated manufacturing overhead
D) is debited with actual overhead costs
2) The Materials Control account is increased when ________.
A) direct materials are purchased
B) indirect materials are sold
C) materials are requisitioned for production
D) materials are converted to finished goods
3) Which of the following is true of the Work-in-Process Control account?
A) It tracks all direct material purchases.
B) Its balance is the sum of amounts from all in-process individual job-cost records.
C) It is an expense account.
D) It tracks overhead costs in-process from beginning through completion.
4) Which of the following general ledger accounts will have a subsidiary ledger account?
A) Cost of Goods Sold account
B) Work-in-Process Control account
C) Joe’s Accounts Receivable subsidiary account
D) Operating Expenses account
5) Which of the following increases (are debited to) the Work-in-Process Control account?
A) actual plant insurance costs
B) customer services costs
C) marketing expenses
D) direct manufacturing labor costs
6) When direct materials are requisitioned the ________ account is increased.
A) Manufacturing Overhead Control
B) Work-in-Process Control
C) Materials Control
D) Accounts Payable Control
7) Payment of the factory rent increases the ________.
A) Work-in-Process Control account
B) Manufacturing Overhead Control account
C) Cost of Goods Sold account
D) Factory Depreciation account
8) Which of the following is true of plant utility costs?
A) It increases the Materials Control account.
B) It increases the Manufacturing Overhead Control account.
C) It increases the Work-in-Process Control account.
D) It is a direct cost.
9) Actual (rather than allocated) manufacturing overhead costs are first recorded in the ________.
A) Work-in-Process Control account
B) Finished Goods Control account
C) Manufacturing Overhead Control account
D) Cost of Goods Sold account
10) The ending balance in the Work-in-Process Control account represents the costs of all jobs that
________.
A) have not been completed
B) have been completed but not sold
C) have been completed and sold to customers
D) are reported on the income statement
11) For externally reported inventory costs, the Work-in-Process Control account is increased (debited) by
________.
A) marketing costs
B) allocated plant utility costs
C) the purchase costs of direct and indirect materials
D) customer-service costs
12) Which account is debited if materials costing $100,000 are sold?
A) Revenues account
B) Work-in-Process Control account
C) Materials Control account
D) Cost of Goods Sold account
13) Which account is credited if direct materials of $20,000 and indirect materials of $3,000 are sent to the
manufacturing plant floor?
A) Manufacturing Overhead Control for $23,000
B) Work-in-Process Control for $23,000
C) Accounts Payable Control for $17,000
D) Materials Control for $23,000
14) Which of the following items is debited to the Work-in-Process account?
A) allocated manufacturing overhead
B) completed goods transferred out of the plant
C) accumulated depreciation on fixed assets
D) accounts receivable
15) Which account would be credited if the following labor wages were incurred in a furniture
manufacturing company?
Assembly workers $20,000
Janitors $10,000
A) Work-in-Process Control, 30,000
B) Manufacturing Overhead Control, 30,000
C) Wages Payable Control, 30,000
D) Accounts Payable Control, 30,000
16) Manufacturing overhead costs incurred for the month are:
Utilities $30,000
Depreciation on equipment $25,000
Repairs $20,000
Which account is debited assuming utilities and repairs were on account?
A) Manufacturing Overhead Control, 75,000
B) Utilities Overhead Control, 30,000
C) Accumulated Depreciation Control, 25,000
D) Accounts Payable Control, 50,000
17) Which of the following statements regarding manufacturing overhead allocation is true?
A) It includes all manufacturing costs that cannot be directly traced to a product or service.
B) The costs can be grouped only as a single indirect-cost pool.
C) Total costs are unknown at the end of the accounting period.
D) Allocated amounts are debited to Manufacturing Overhead Control.
18) When a job is complete ________.
A) actual indirect manufacturing labor is excluded from the total cost of the job
B) Finished Goods Control is debited
C) the cost of the job is transferred to Manufacturing Overhead Control
D) it is reduced from Manufacturing Overhead Control account
19) During an accounting period, job costs are computed on an ongoing basis by the use of ________.
A) actual allocation rates
B) budgeted indirect-cost rates
C) overallocated indirect-cost rates
D) underallocated indirect-cost rates
20) The advantage of using normal costing instead of actual costing is ________.
A) indirect costs are assigned at the end of the year when they are known
B) the job cost is more accurate under normal costing
C) indirect costs are assigned to a job on a timely basis
D) normal costing provides a higher gross profit margin
Answer the following questions using the information below:
Pearl Corp. applies manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per
direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of a necklace.
Estimates for this order include: Direct materials of $50,000; 400 direct manufacturing labor-hours at $20
per hour; and a 30% markup rate on total manufacturing costs.
21) Estimated total product costs for this special order equal ________.
A) $96,000
B) $76,000
C) $80,000
D) $82,000
22) The bid price for this special order is ________.
A) $66,000
B) $106,600
C) $86,600
D) $116,600
Filex Company manufactures pipes and applies manufacturing overhead costs to production at a
budgeted indirect-cost rate of $18 per direct labor-hour. The following data are obtained from the
accounting records for June 2014:
Direct materials $140,000
Direct labor (4,000 hours @ $10/hour) 40,000
Indirect labor 13,000
Plant facility rent 30,000
Depreciation on plant machinery and equipment 22,500
Sales commissions 24,000
Administrative expenses 28,000
23) The amount of manufacturing overhead allocated to all jobs during June 2014 totals ________.
A) $93,500
B) $72,000
C) $89,000
D) $65,500
24) For June 2014, manufacturing overhead is ________.
A) overallocated by $6,500
B) underallocated by $21,500
C) overallocated by $21,500
D) underallocated by $6,500
Answer the following questions using the information below:
Bauer Manufacturing uses departmental cost driver rates to allocate manufacturing overhead costs to
products. Manufacturing overhead costs are allocated on the basis of machine-hours in the Machining
Department and on the basis of direct labor-hours in the Assembly Department. At the beginning of
20X3, the following estimates were provided for the coming year:
Machining Assembly
Direct labor-hours 30,000 60,000
Machine-hours 80,000 20,000
Direct labor cost $500,000 $900,000
Manufacturing overhead costs $420,000 $240,000
The accounting records of the company show the following data for Job #316:
Machining Assembly
Direct labor-hours 120 70
Machine-hours 60 5
Direct material cost $300 $200
Direct labor cost $100 $400
25) For Bauer Manufacturing, what is the annual manufacturing overhead cost-allocation rate for the
Machining Department?
A) $4.00
B) $4.20
C) $4.67
D) $5.25
26) What amount of manufacturing overhead costs will be allocated to Job #316?
A) $439
B) $502
C) $595
D) $532
27) What are the total manufacturing costs of Job #316?
A) $715
B) $880
C) $1,595
D) $1,000
Wayland Manufacturing uses a normal cost system and had the following data available for 2010:
Direct materials purchased on account $ 148,000
Direct materials requisitioned 82,000
Direct labor cost incurred 130,000
Factory overhead incurred 146,000
Cost of goods completed 292,000
Cost of goods sold 256,000
Beginning direct materials inventory 26,000
Beginning WIP inventory 64,000
Beginning finished goods inventory 58,000
Overhead application rate, as a percent of direct-labor costs 125 percent
28) The journal entry to record the materials placed into production would include a ________.
A) credit to Direct Materials Inventory for $82,000
B) debit to Direct Materials Inventory for $148,000
C) credit to WIP Inventory for $82,000
D) debit to WIP Inventory for $148,000
29) The ending balance of direct materials inventory is ________.
A) $92,000
B) $174,000
C) $82,000
D) $108,000
30) The ending balance of work-in-process inventory is ________.
A) $438,500
B) $146,500
C) $130,000
D) $422,000
31) The ending balance of finished goods inventory is ________.
A) $58,000
B) $36,000
C) $94,000
D) $292,000
32) Answer the following questions using the information below:
Beta Corporation uses a job cost system and has two production departments, A and B. Budgeted
manufacturing costs for the year are:
Department A Department B
Direct materials $800,000 $200,000
Direct manufacturing labor $200,000 $900,000
Manufacturing overhead $500,000 $450,000
The actual material and labor costs charged to Job #432 were as follows:
Total
Direct materials: $25,000
Direct labor:
Department A $10,000
Department B $12,000
$22,000
Beta applies manufacturing overhead costs to jobs on the basis of direct manufacturing labor cost using
departmental rates determined at the beginning of the year.
Proportion of manufacturing overhead with respect to the total cost of the job is ________.
A) 39.74%
B) 38.62%
C) 26.62%
D) 42%
33) Work-in-Process Control will be decreased (credited) for the amount of direct-labor costs incurred.
34) The Cost of Goods Sold account tracks job costs from the time jobs are started until they are
completed.
35) Purchases of materials are credited to materials control.
36) The Salaries Payable Control account has underlying subsidiary ledgers.
37) The sum of all entries in underlying subsidiary ledgers equals the total amount in the corresponding
general ledger control accounts.
38) In a job-cost system, each indirect-cost pool is clubbed under one account in the general ledger.
39) Indirect manufacturing costs are credited to Manufacturing Overhead Control.
40) The Finished Goods Control account consists of actual manufacturing overhead costs rather than
allocated manufacturing overhead costs.
41) The ending balance in Work-in–Process Control represents the total costs of all jobs that have NOT yet
been completed.
42) Direct materials and direct manufacturing labor become a part of work-in-process inventory on the
balance sheet because the direct manufacturing labor transforms the direct materials to another asset,
work-in-process inventory.
43) Goods are ready to be sold when their respective costs are debited to work-in-process inventory.
44) Euphoria Company has two departments, X and Y. Overhead is applied based on direct labor cost in
Department X and machine-hours in Department Y. The following additional information is available:
Budgeted Amounts Department X Department Y
Direct labor cost $180,000 $165,000
Factory overhead $225,000 $200,000
Machine-hours 51,000 mh 40,000 mh
Actual data for Job #25 Department X Department Y
Direct materials requisitioned $15,000 $18,000
Direct labor cost $11,000 $14,000
Machine-hours 5,000 mh 3,000 mh
Required:
a. Compute the budgeted factory overhead rate for Department X.
b. Compute the budgeted factory overhead rate for Department Y.
c. What is the total overhead cost of Job 25?
d. If Job 25 consists of 50 units of product, what is the profit per unit if selling price is $2,000 per unit?
e. What is the proportion of the direct labor cost incurred with respect to the total cost of the job?
f. Should the company go ahead with this job?