5
As production takes place all manufacturing costs, including direct material, direct labour
:and manufacturing overhead are charged (debited) to the
raw materials inventory account
(A
(B
work in process inventory account
(C
finished goods inventory account
cost of goods sold account
(D
6
:As raw materials are purchased, they are charged (debited) to the
raw material inventory account
work in process inventory account
finished goods inventory account
cost of goods sold account
(A
(B
(C
(D
7
:When valuing inventory, Australian accounting standards require
the capitalisation of upstream costs
the capitalisation of upstream and downstream costs
(A
(B
upstream costs to be expensed in the period in which they were incurred
upstream and downstream costs to be expensed in the period in which they
were incurred
(C
(D
8
Jason Zammit, a recently appointed trainee accountant, has been assigned the task of
accounting for manufacturing overhead for a large multinational manufacturing
organisation. Jason seems to have forgotten what he learned in his management
accounting studies at university and asks you the following question: What is
?manufacturing overhead
Manufacturing overhead includes direct materials, indirect materials, direct
.labour and indirect labour
.Manufacturing overhead is easily traced to products
.Manufacturing overhead includes all selling and administration costs
Manufacturing overhead consists of a heterogeneous pool of indirect
production costs, such as indirect material, indirect labour, electricity and gas
costs, equipment depreciation and insurance and council rates paid for the
.factory
(A
(B
(C
(D
9
Jason Zammit a recently appointed trainee accountant has been assigned the task of
accounting for manufacturing overhead for a large multinational manufacturing
organisation. Jason is reading information contained in the general ledger for the past
three months and he asks you the following question: When I am looking at the right side
(credit side) of the manufacturing overhead account, what do these credits represent?
:You reply with the correct answer which is
the right side (credit side) of the manufacturing overhead account represents
the actual manufacturing overhead costs incurred throughout the accounting
period, in this case the past three months
(A
the right side (credit side) of the manufacturing overhead account represents
(B
the manufacturing overhead applied to work in process inventory over the past
three months
the right side (credit side) of the manufacturing overhead account represents
the underapplied manufacturing overhead
(C
the right side (credit side) of the manufacturing overhead account represents
the overapplied manufacturing overhead
(D
Neville’s Gnomes Pty Ltd manufactures decorative garden items. The company incurred
the following costs to produce job number 33 which consisted of 1 000 Collingwood footy
:gnomes
Material requisitions numbers 40-45: $8400 <BR> Direct labour: 420 hours @ $10 per
hour <BR> Manufacturing overhead: applied on the basis of direct labour hours at an
application rate of $18 per direct labour hour
Job number 33 was completed during the year and the company sold 800 Collingwood
.footy gnomes. Determine the correct balances in each of the accounts at year-end
.Work in process inventory $4032; finished goods inventory $16 128
(A
(B
.Finished goods inventory $20 160
(C
.Work in process inventory $4032; cost of goods sold $16 128
(D
.Finished goods inventory $4032; cost of goods sold $16 128
Peters Plumbing Company uses a job order costing system. At the beginning of
August, the company had two jobs in process with the following costs:
Job 456
Direct Material
Direct Labour
Manufacturing Overhead
$3400
$510
$204
1
0
Job 461
1100
290
?
Peters Plumbing pays its workers $10 per hour and applies overhead on a direct
labour hour basis. The predetermined manufacturing overhead rate per direct labour
hour is:
$0.075
A)
$0.50
B)
$4
C)
$4.25
D)
2
Peters Plumbing Company uses a job order
costing system. At the beginning of
August, the company had two jobs in
process with the following costs:
Direct
Direct
Materia Labour
l
Manufacturi
ng
Overhead
Job
456
$3400
$510
$204
Job
461
1100
290
?
Peters Plumbing pays its workers $10 per
hour and applies overhead on a direct
labour hour basis. The manufacturing
overhead included in the cost of Job 461 at
the beginning of August was:
$144.50
A)
$153.00
B)
$2200.00
C)
$116.00
D)
3
Peters Plumbing Company uses a job order
costing system. At the beginning of
August, the company had two jobs in
process with the following costs:
Direct
Direct
Materia Labour
l
Manufacturi
ng
Overhead
Job
456
$3400
$510
$204
Job
461
1100
290
?
Peters Plumbing pays its workers $10 per
hour and applies overhead on a direct
labour hour basis. During August, Peters
Plumbing employees worked on Job 476.
At the end of the month, $500 of
manufacturing overhead had been applied
to this job. Total work in process inventory
at the end of the month was $12 451 and
all other jobs had a total cost of $6133. The
amount of direct material included in Job
476 is:
$1391
A)
$2142
B)
$3267
C)
$4568
D)
4
Doncaster Company uses a predetermined
manufacturing overhead application rate of
$0.50 per direct labour hour. During the
year, Doncaster incurred $575 000 of
actual manufacturing overhead, but it
planned to incur $625 000 of
manufacturing overhead. The company
applied $605 000 of manufacturing during
the year. How many direct labour hours did
the company plan to incur?
1 190 000.
A)
1 200 000.
B)
1 210 000.
C)
1 250 000.
D)
5
If manufacturing overhead is overapplied,
this indicates:
actual manufacturing overhead costs
are higher than manufacturing
overhead applied to production
A)
actual manufacturing overhead costs
are higher than budgeted
manufacturing overhead
B)
actual manufacturing overhead costs
are lower than budgeted
manufacturing overhead
C)
actual manufacturing overhead costs
are lower than manufacturing
overhead applied to production
D)
6
The Components Manufacturing Company
uses a predetermined manufacturing
overhead application rate of $4 per direct
labour hour. During the year, 40 000 direct
labour hours were worked. Actual
manufacturing overhead costs for the year
were $150 000. The Components
Manufacturing Company’s manufacturing
overhead was:
$5000 underapplied
A)
$5000 overapplied
B)
$10 000 underapplied
C)
$10 000 overapplied
D)
7
The schedule of cost of goods
manufactured details the movements
through:
raw materials inventory
A)
work in process inventory
B)
finished goods inventory
C)
raw materials inventory and work in
process inventory
D)
8
The schedule of cost of goods sold details
the movements through:
raw materials inventory
A)
work in process inventory
B)
finished goods inventory
C)
raw materials inventory and work in
process inventory
D)
9
The Heidelberg Manufacturing Company
has zero balances in its work in process
and finished goods inventory accounts on
December 31 of the previous year. The
balances in Heidelberg’s accounts as of
December 31 of the current year are as
follows:
Cost of goods sold
$5 000
000
Selling and Administrative
expenses
450 000
Sales Revenue
10 000
000
Actual manufacturing
overhead
850 000
Applied manufacturing
overhead
900 000
If Heidelberg Manufacturing Company
writes off over or underapplied
manufacturing overhead to the cost of
goods sold, the net profit before taxes for
the current year is:
$5 000 000
A)
$3 700 000
B)
$4 600 000
C)
$4 500 000
D)
10
Process costing is used by companies that:
produce a single product (or a small
range of very similar products) in
large quantities
A)
produce a single product (or a small
range of very similar products) in
small quantities
B)
produce products in distinct batches
and there are significant differences
between the batches
C)
produce products individually and
they are of a unique nature
D)
5
Buker Corporation bases its predetermined overhead rate on the estimated machinehours for the upcoming year. Data for the upcoming year appear below:
The predetermined overhead rate for the recently completed year was closest to:
A.
B.
C.
D.
$22.04
$29.59
$7.67
$29.71
Estimated total manufacturing overhead = $1,630,960 + ($7.67 per machine-hour ×
74,000 machine-hours) = $2,198,540
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated
total amount of the allocation base = $2,198,540 ÷ 74,000 machine-hours = $29.71
per machine-hour
Hibshman Corporation bases its predetermined overhead rate on the estimated
machine-hours for the upcoming year. At the beginning of the most recently
completed year, the Corporation estimated the machine-hours for the upcoming year
at 10,000 machine-hours. The estimated variable manufacturing overhead was $6.82
per machine-hour and the estimated total fixed manufacturing overhead was
$230,200. The predetermined overhead rate for the recently completed year was
closest to:
A. $29.84 per machine-hour
B. $23.15 per machine-hour
C. $23.02 per machine-hour
D. $6.82 per machine-hour
Estimated total manufacturing overhead = $230,200 + ($6.82 per machine-hour ×
10,000 machine-hours) = $298,400
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated
total amount of the allocation base = $298,400 ÷ 10,000 machine-hours = $29.84 per
machine-hour
CR Corporation has the following estimated costs for the next year:
CR Corporation estimates that 20,000 labor-hours will be worked during the
year. If overhead is applied on the basis of direct labor-hours, the overhead rate
per hour will be:
30.
A.
B.
C.
D.
$2.25
$3.25
$3.45
$4.70
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷
Estimated total amount of the allocation base = $45,000 ÷ 20,000 direct laborhours = $2.25 per direct labor-hour
31.
Jameson Corporation uses a predetermined overhead rate based on direct laborhours to apply manufacturing overhead to jobs. The Corporation has provided
the following estimated costs for the next year:
Jameson estimates that 24,000 direct labor-hours will be worked during the
year. The predetermined overhead rate per hour will be:
A.
B.
C.
D.
$2.00
$2.79
$3.00
$4.00
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷
Estimated total amount of the allocation base
Predetermined overhead rate = $48,000 ÷ 24,000 direct labor-hours = $2.00 per
direct labor-hour
Paulson Corporation uses a predetermined overhead rate based on machinehours to apply manufacturing overhead to jobs. The Corporation has provided
the following estimated costs for next year:
Paulson estimated that 40,000 direct labor-hours and 20,000 machine-hours
would be worked during the year. The predetermined overhead rate per
machine-hour will be:
32.
A.
B.
C.
D.
$1.60
$2.10
$1.00
$1.05
Predetermined overhead rate = Estimated total manufacturing overhead ÷
Estimated total amount of the allocation base
Predetermined overhead rate = $42,000 ÷ 20,000 machine-hours = $2.10 per
machine-hour
33.
Aksamit Corporation bases its predetermined overhead rate on the estimated
machine-hours for the upcoming year. Data for the most recently completed
year appear below:
The predetermined overhead rate for the recently completed year was closest
to:
A.
B.
C.
D.
$23.97
$31.00
$7.03
$31.35
Estimated total manufacturing overhead = $1,486,140 + ($7.03 per machinehour × 62,000 machine-hours) = $1,922,000
Predetermined overhead rate = Estimated total manufacturing overhead ÷
Estimated total amount of the allocation base = $1,922,000 ÷ 62,000 machine-
hours = $31.00 per machine-hour
34.
Sirmons Corporation bases its predetermined overhead rate on the estimated
labor-hours for the upcoming year. At the beginning of the most recently
completed year, the Corporation estimated the labor-hours for the upcoming
year at 70,000 labor-hours. The estimated variable manufacturing overhead
was $9.93 per labor-hour and the estimated total fixed manufacturing overhead
was $1,649,200. The actual labor-hours for the year turned out to be 74,000
labor-hours. The predetermined overhead rate for the recently completed year
was closest to:
A. $32.22
B. $9.93
C. $33.49
D. $23.56
Estimated total manufacturing overhead = $1,649,200 + ($9.93 per labor-hour
× 70,000 labor-hours) = $2,344,300
Predetermined overhead rate = Estimated total manufacturing overhead ÷
Estimated total amount of the allocation base = $2,344,300 ÷ 70,000 laborhours = $33.49 per labor-hour
35.
The Work in Process inventory account of a manufacturing Corporation shows
a balance of $18,000 at the end of an accounting period. The job cost sheets of
the two uncompleted jobs show charges of $6,000 and $3,000 for materials,
and charges of $4,000 and $2,000 for direct labor. From this information, it
appears that the Corporation is using a predetermined overhead rate, as a
percentage of direct labor costs, of:
A. 50%
B. 200%
C. 300%
D. 20%
($10,000 + $4,000X) + ($5,000 + $2,000X) = $18,000
$6,000X = $3,000
X = 0.50
36.
The following T-accounts have been constructed from last year’s records at
C&C Manufacturing:
C&C Manufacturing uses job-order costing with a predetermined overhead rate
and applies manufacturing overhead to jobs based on direct labor costs. What is
the predetermined overhead rate?
A.
B.
C.
D.
125%
120%
100%
105%
Entry (b) refers to materials from the Raw Materials account. Entry (c) in the
Manufacturing Overhead account must
Refer To indirect labor because the corresponding entry in the Work In Process
account must be for direct labor. Entry (c) could not be for manufacturing
overhead because there would be no entry in Work In Process. Therefore, entry
(c) must be for direct and indirect labor. The direct labor must be $154,000 and
the manufacturing overhead applied is the $192,500 credit entry (e) in the
Manufacturing Overhead account. Therefore,
Overhead applied = Predetermined overhead rate × Amount of the allocation
base incurred
$192,500 = Predetermined overhead rate × $154,000
Predetermined overhead rate = $192,500 ÷ $154,000 = 1.25
Bradbeer Corporation uses direct labor-hours in its predetermined overhead
rate. At the beginning of the year, the estimated direct labor-hours were 17,500
hours. At the end of the year, actual direct labor-hours for the year were 16,000
hours, the actual manufacturing overhead for the year was $233,000, and
manufacturing overhead for the year was underapplied by $15,400. The
estimated manufacturing overhead at the beginning of the year used in the
predetermined overhead rate must have been:
A. $249,375
B. $217,600
C. $228,000
D. $238,000
37.
Underapplied (overapplied) manufacturing overhead = Actual manufacturing
overhead – Manufacturing overhead applied
Manufacturing overhead applied = Actual manufacturing overhead –
Underapplied manufacturing overhead
= $233,000 – $15,400
= $217,600
Overhead applied = Predetermined overhead rate × Amount of the allocation
base incurred
Predetermined overhead rate = Overhead applied ÷ Amount of the allocation
base incurred
Predetermined overhead rate = $217,600 ÷ 16,000 direct labor-hours
= $13.60 per direct labor-hour
Predetermined overhead rate = Estimated total manufacturing overhead ÷
Estimated total amount of the allocation base
Estimated total manufacturing overhead = Predetermined overhead rate ×
Estimated total amount of the allocation base
= $13.60 per direct labor-hour × 17,500 direct labor-hours
= $238,000
38.
Dagger Corporation uses direct labor-hours in its predetermined overhead rate.
At the beginning of the year, the total estimated manufacturing overhead was
$423,870. At the end of the year, actual direct labor-hours for the year were
19,400 hours, manufacturing overhead for the year was underapplied by
$5,650, and the actual manufacturing overhead was $418,870. The
predetermined overhead rate for the year must have been closest to:
A. $21.59
B. $20.76
C. $21.30
D. $21.85
Underapplied (overapplied) manufacturing overhead = Actual manufacturing
overhead – Manufacturing overhead applied
Manufacturing overhead applied = Actual manufacturing overhead –
Underapplied manufacturing overhead
= $418,870 – $5,650
= $413,220
Predetermined overhead rate = Estimated total manufacturing overhead ÷
Estimated total amount of the allocation base = $413,220 ÷ 19,400 direct laborhours = $21.30 per direct labor-hour
39.
Sawyer Manufacturing Corporation uses a predetermined overhead rate based
on direct labor-hours to apply manufacturing overhead to jobs. Last year, the
Corporation worked 57,000 actual direct labor-hours and incurred $345,000 of
actual manufacturing overhead cost. The Corporation had estimated that it
would work 55,000 direct labor-hours during the year and incur $330,000 of
manufacturing overhead cost. The Corporation’s manufacturing overhead cost
for the year was:
A. overapplied by $15,000
B. underapplied by $15,000
C. overapplied by $3,000
D. underapplied by $3,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷
Estimated total amount of the allocation base = $330,000 ÷ 55,000 direct laborhours = $6 per direct labor-hour
Overhead over or underapplied
Clear Colors Corporation uses a predetermined overhead rate based on direct labor
costs to apply manufacturing overhead to jobs. At the beginning of the year the
Corporation estimated its total manufacturing overhead cost at $350,000 and its direct
labor costs at $200,000. The actual overhead cost incurred during the year was
$362,000 and the actual direct labor costs incurred on jobs during the year was
$208,000. The manufacturing overhead for the year would be:
A. $12,000 underapplied.
B. $12,000 overapplied.
C. $2,000 underapplied.
D. $2,000 overapplied.
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷
Estimated total amount of the allocation base = $350,000 ÷ $200,000 = 1.75
Overhead over or underapplied
Cribb Corporation uses direct labor-hours in its predetermined overhead rate.
At the beginning of the year, the estimated direct labor-hours were 17,900
hours and the total estimated manufacturing overhead was $341,890. At the end
of the year, actual direct labor-hours for the year were 16,700 hours and the
actual manufacturing overhead for the year was $336,890. Overhead at the end
of the year was:
A. $22,920 underapplied
B. $17,920 overapplied
C. $17,920 underapplied
D. $22,920 overapplied
41.
Predetermined overhead rate = Estimated total manufacturing overhead ÷
Estimated total amount of the allocation base
= $341,890 ÷ 17,900 direct labor-hours
= $19.10 per direct labor-hour
Overhead applied = Predetermined overhead rate × Amount of the allocation
base incurred
= $19.10 per direct labor-hour × 16,700 direct labor-hours
= $318,970
Overhead over or underapplied
Brusveen Corporation applies manufacturing overhead to jobs on the basis of
direct labor-hours. The following information relates to Brusveen for last year:
What was Brusveen’s underapplied or overapplied overhead for last year?
42.
A.
B.
C.
D.
$4,000 underapplied
$8,880 underapplied
$8,880 overapplied
$9,000 underapplied
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷
Estimated total amount of the allocation base = $300,000 ÷ 15,000 direct laborhours = $20 per direct labor-hour
Overhead over or underapplied
43.
Collins Corporation uses a predetermined overhead rate based on direct labor
cost to apply manufacturing overhead to jobs. The following information
applies to the Corporation for the current year:
The manufacturing overhead cost for the current year will be:
A.
B.
C.
D.
$17,000 overapplied
$17,000 underapplied
$55,000 overapplied
$55,000 underapplied
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷
Estimated total amount of the allocation base = $240,000 ÷ $300,000 = 0.80
Overhead over or underapplied
At the beginning of the year, manufacturing overhead for the year was
estimated to be $477,590. At the end of the year, actual direct labor-hours for
the year were 29,000 hours, the actual manufacturing overhead for the year was
$472,590, and manufacturing overhead for the year was overapplied by $110.
If the predetermined overhead rate is based on direct labor-hours, then the
estimated direct labor-hours at the beginning of the year used in the
predetermined overhead rate must have been:
A. 29,300 direct labor-hours
B. 28,987 direct labor-hours
C. 28,993 direct labor-hours
D. 29,000 direct labor-hours
44.
Underapplied (overapplied) manufacturing overhead = Actual manufacturing
overhead – Manufacturing overhead applied
-$110 = $472,590 – Overhead applied
Manufacturing overhead applied = $472,590 + $110 = $472,700
Manufacturing overhead applied = Predetermined overhead rate × Actual direct
labor-hours
Predetermined overhead rate = Manufacturing overhead applied ÷ Actual direct
labor-hours
= $472,700 ÷ 29,000 direct labor-hours
= $16.30 per direct labor-hour
Predetermined overhead rate = Estimated total manufacturing overhead ÷
Estimated direct labor-hours
Estimated direct labor-hours = Estimated total manufacturing overhead ÷
Predetermined overhead rate
= $477,590 ÷ $16.30 per direct labor-hour
= 29,300 direct labor-hours
45.
Galbraith Corporation applies overhead cost to jobs on the basis of 70% of
direct labor cost. If Job 201 shows $28,000 of manufacturing overhead applied,
the direct labor cost on the job was:
A. $40,000
B. $19,600
C. $28,000
D. $36,400
Manufacturing overhead applied = Predetermined overhead rate × Amount of
the allocation base incurred
$28,000 = 0.70 × Direct labor cost
Direct labor cost = $28,000 ÷ 0.70 = $40,000