Question 1

Jackson Company estimated that its manufacturing employees would work 88,000 direct labor hours during the current year.During the year,its manufacturing employees actually worked 80,000 direct labor hours.Actual manufacturing overhead costs amounted to $344,000.Jackson applies overhead cost on the basis of direct labor hours.The manufacturing overhead account was overapplied by $16,000 during the current year.Based on this information the predetermined overhead rate was:

Accepted Answer

A)   $5.70 per labor hour.
B)   $4.10 per labor hour.
C)   $4.59 per labor hour.
D)   $4.50 per labor hour.E) A) and D)
F) B) and C)

Question 2

Applied overhead costs are recorded as decreases in the Manufacturing Overhead account.

Accepted Answer

A) True 
 B)False

Question 3

Which is required for preparation of a company's external financial statements: absorption costing or variable costing? Which is frequently used for internal decision making?

Accepted Answer

Absorption costing is required...

Question 4

Washington Company made the following estimates for the current accounting period: Overhead costs: $250,000
Direct labor hours: 50,000
If 7,000 hours of labor are actually used in February,how much overhead cost would be allocated to work in process during the month? Assume overhead to be allocated on the basis of direct labor hours.

Accepted Answer

A)   $7,000
B)   $35,714
C)   $35,000
D)   $20,833E) A) and C)
F) B) and C)

Question 5

The Winchester Company estimates that its overhead costs will amount to $595,000 and the company's manufacturing employees will work 85,000 direct labor hours during the current year.If actual overhead costs for the year amounted to $599,000 and actual labor hours amounted to 87,000,then overhead would be:

Accepted Answer

A)   overapplied by $10,000.
B)   underapplied by $10,000.
C)   overapplied by $14,000.
D)   underapplied by $4,000.E) B) and C)
F) A) and C)

Question 6

A product costing system is needed to determine the amount of product costs that should be reported on the income statement as selling and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 7

Cost information for services or products produced by a company is needed for:

Accepted Answer

A)   determining the company's selling prices.
B)   external reporting.
C)   managerial decisions.
D)   All of these answers are correct.E) All of the above
F) B) and C)

Question 8

Winken,Blinken,and Nod is a law firm specializing in real estate litigation.In addition to the three partners,the firm employs nine associates who work directly with clients.The average budgeted compensation for the twelve professionals is $240,000.Each lawyer is budgeted at 1,500 billable hours per year.All professional labor costs are included in a single direct cost pool and are traced to jobs on a per-hour basis.All non-professional labor costs are included in a single overhead cost pool and are allocated to jobs using professional labor hours as the allocation base.Budgeted overhead costs total $1,800,000.The firm is considering bidding on some work with a local university.The job is expected to require 100 hours of professional labor.
Required:
1)Compute the budgeted direct cost rate per hour of professional labor.
2)Compute the budgeted (that is,predetermined)overhead cost rate per hour of professional labor.
3)Compute the budgeted cost for the university job.

Accepted Answer

Answers will vary
1)Budgeted direct cost...

Question 9

Ferguson Company recognized $400 of estimated manufacturing overhead costs at the end of the month.How does this transaction affect the financial statements?

Accepted Answer

A)    (400) +NA=NA+(400) NA−400=400\begin{array} { | l | l | l | l | l | l | l | l | l | l | l|l|} \hline (400)  & +&\mathrm { NA } & = &\mathrm { NA }&+ & (400) & \mathrm { NA } & - &400& =&400\\hline\end{array}(400) ​+​NA​=​NA​+​(400) ​NA​−​400​=​400​​ 
B)    (400) +NA=400+NANA−NA=NA\begin{array} { | l | l | l | l | l | l | l | l | l | l | l|l|} \hline (400)  & +&\mathrm { NA } & = &400&+ &\mathrm { NA }& \mathrm { NA } & - &\mathrm { NA }& =&\mathrm { NA }\\hline\end{array}(400) ​+​NA​=​400​+​NA​NA​−​NA​=​NA​​ 
C)    (400) +400=NA+NANA−NA=NA\begin{array} { | l | l | l | l | l | l | l | l | l | l | l|l|} \hline (400)  & +&400& = &\mathrm { NA }&+ &\mathrm { NA }& \mathrm { NA } & - &\mathrm { NA }& =&\mathrm { NA }\\hline\end{array}(400) ​+​400​=​NA​+​NA​NA​−​NA​=​NA​​ 
D)    400+(400) =NA+NANA−NA=NA\begin{array} { | l | l | l | l | l | l | l | l | l | l | l|l|} \hline 400 & +&(400) & = &\mathrm { NA }&+ &\mathrm { NA }& \mathrm { NA } & - &\mathrm { NA }& =&\mathrm { NA }\\hline\end{array}400​+​(400) ​=​NA​+​NA​NA​−​NA​=​NA​​  E) B) and C)
F) C) and D)

Question 10

If more overhead was applied than had been incurred,the balance in the Manufacturing Overhead account represents the amount of overapplied overhead.

Accepted Answer

A) True 
 B)False

Question 11

The Work in Process account increases when production workers are paid.

Accepted Answer

A) True 
 B)False

Question 12

Ringgold Company had beginning finished goods of $36,000.During the period,the company produced goods that cost $150,000.If the ending balance in the Finished Goods Inventory account was $24,000,the amount of cost of goods sold was:

Accepted Answer

A)   $162,000.
B)   $150,000.
C)   $138,000.
D)   none of these answers are correct.E) B) and D)
F) B) and C)

Question 13

Which of the following statements is true assuming the manufacturing overhead account is underapplied?

Accepted Answer

A)   The predetermined overhead rate is too high.
B)   The amount of costs in work in process is more than actual production costs.
C)   Cost of goods sold will be debited at the end of the period when the manufacturing overhead account is adjusted.
D)   The manufacturing overhead applied must be less than the manufacturing overhead estimated.E) None of the above
F) C) and D)

Question 14

The predetermined overhead rate is found by dividing total estimated overhead costs by the total estimated volume of the overhead allocation base.

Accepted Answer

A) True 
 B)False

Question 15

The cost structure for Chiang Company,which began operations on January 1,is provided below:
 $\begin{array}{ll}
\text { Direct materials } & \$ 18 \text { per unit } \
\text { Direct labor } & \$ 14 \text { per unit } \
\text { Manufacturing overhead: } & \
\text { Variable } & \$ 8 \text { per unit } \
\text { Fixed } & \$ 20,000(\$ 5.00 \text { per unit })
\end{array}$ $$\text { Fixed selling and administative } \quad\quad  \$  12,000$$ Variable selling and administrative costs are $4 per unit sold.
During the year,the company produced 4,000 units and sold 3,500 units at the $60 selling price.
Required:
1)Prepare an income statement under absorption costing.
2)Prepare an income statement under variable costing.
3)Explain the difference between the two income amounts.
4)What absorption costing disadvantage does this exercise emphasize?

Accepted Answer

Answers will vary
1)Income statement und...

Question 16

Actual overhead costs are charged to the Work in Process account as they occur.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is true for a company that uses variable costing?

Accepted Answer

A)   The manufacturing cost per unit decreases when the volume of production increases.
B)   Net income is not affected by fluctuations in production.
C)   Fixed manufacturing overhead is treated like a product cost.
D)   Fixed manufacturing overhead costs incurred in the current period may be recognized as expense in a later period.E) A) and B)
F) All of the above

Question 18

Lake Manufacturing estimated its product costs and production volume for the upcoming year by quarter as follows:
  The company expects a significant increase in volume in the fourth quarter due to holiday sales.The company does not expect overhead costs,which are predominately fixed,to vary with production volume or to vary significantly from previous years.Selling prices are established using a cost-plus pricing strategy where cost is the product's estimated quarterly cost.However,the company finds the wide variations in short-term unit cost difficult to use.Specifically,unit cost fluctuations complicate pricing decisions and many other decisions where cost is a consideration.
Required:
1)Compute the company's expected cost per unit for each quarter of the year.
2)How would you suggest that overhead costs be estimated to solve the company's unit cost problem? Calculate the unit cost per quarter based on your recommendation.

Accepted Answer

1)Expected quarterly cost per unit:

2...

Question 19

Product costs are reported on the income statement above gross margin.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is false?

Accepted Answer

A)   Under variable costing, the income statement is prepared using a contribution margin approach.
B)   Variable costing is not allowed for external financial reporting, but many companies find it useful for internal managerial reports.
C)   Under variable costing, an increase in production increases the amount of profit reported on the income statement, even if the additional units are not sold.
D)   Under variable costing, fixed manufacturing costs are expensed in the period incurred.E) A) and D)
F) None of the above

Exam 11: Product Costing in Service and Manufacturing Entities

Which is required for preparation of a company's external financial statements: absorption costing or variable costing? Which is frequently used for internal decision making?

Correct Answer
verified
Absorption costing is required...
View Answer

Actual overhead costs are charged to the Work in Process account as they occur.

Correct Answer
verified

Which of the following statements is true for a company that uses variable costing?

Correct Answer
verified

If more overhead was applied than had been incurred,the balance in the Manufacturing Overhead account represents the amount of overapplied overhead.

Correct Answer
verified

The Work in Process account increases when production workers are paid.

Correct Answer
verified

Correct Answer
verified

A product costing system is needed to determine the amount of product costs that should be reported on the income statement as selling and administrative expenses.

Correct Answer
verified

Product costs are reported on the income statement above gross margin.

Correct Answer
verified

The predetermined overhead rate is found by dividing total estimated overhead costs by the total estimated volume of the overhead allocation base.

Correct Answer
verified

Correct Answer
verified
Answers will vary
1)Income statement und...
View Answer

Correct Answer
verified

Which of the following statements is false?

Correct Answer
verified

Applied overhead costs are recorded as decreases in the Manufacturing Overhead account.

Correct Answer
verified

Correct Answer
verified
1)Expected quarterly cost per unit:

2...
View Answer

Ringgold Company had beginning finished goods of $36,000.During the period,the company produced goods that cost $150,000.If the ending balance in the Finished Goods Inventory account was $24,000,the amount of cost of goods sold was:

Correct Answer
verified

Correct Answer
verified

Which of the following statements is true assuming the manufacturing overhead account is underapplied?

Correct Answer
verified

Correct Answer
verified
Answers will vary
1)Budgeted direct cost...
View Answer

Cost information for services or products produced by a company is needed for:

Correct Answer
verified

Correct Answer
verified

Exam 11: Product Costing in Service and Manufacturing Entities

Which is required for preparation of a company's external financial statements: absorption costing or variable costing? Which is frequently used for internal decision making?

Correct AnswerverifiedAbsorption costing is required...View AnswerShow Answer

Actual overhead costs are charged to the Work in Process account as they occur.

Correct AnswerverifiedShow Answer

Which of the following statements is true for a company that uses variable costing?

Correct AnswerverifiedShow Answer

If more overhead was applied than had been incurred,the balance in the Manufacturing Overhead account represents the amount of overapplied overhead.

Correct AnswerverifiedShow Answer

The Work in Process account increases when production workers are paid.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A product costing system is needed to determine the amount of product costs that should be reported on the income statement as selling and administrative expenses.

Correct AnswerverifiedShow Answer

Product costs are reported on the income statement above gross margin.

Correct AnswerverifiedShow Answer

The predetermined overhead rate is found by dividing total estimated overhead costs by the total estimated volume of the overhead allocation base.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedAnswers will vary1)Income statement und...View AnswerShow Answer

Ferguson Company recognized $400 of estimated manufacturing overhead costs at the end of the month.How does this transaction affect the financial statements?

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

Applied overhead costs are recorded as decreases in the Manufacturing Overhead account.

Correct AnswerverifiedShow Answer

Correct Answerverified1)Expected quarterly cost per unit: 2...View AnswerShow Answer

Ringgold Company had beginning finished goods of $36,000.During the period,the company produced goods that cost $150,000.If the ending balance in the Finished Goods Inventory account was $24,000,the amount of cost of goods sold was:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is true assuming the manufacturing overhead account is underapplied?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedAnswers will vary1)Budgeted direct cost...View AnswerShow Answer

Cost information for services or products produced by a company is needed for:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified
Absorption costing is required...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Answers will vary
1)Income statement und...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
1)Expected quarterly cost per unit:

2...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Answers will vary
1)Budgeted direct cost...
View Answer

Correct Answer
verified

Correct Answer
verified