Chapter 2 Systems Design: Job-Order Costing

True/False 1. Process costing is used in those situations where many different products or services are produced each period to customer specifications. Level: Easy LO: 1 Ans: F 2. he !asic approach in "o!#order costing is to accumulate costs in a particular operation or department for an entire period $month% &uarter% year' and then to divide this total !y the num!er of units produced during the period. Level: Easy LO: 1 Ans: F (. )f a company uses predetermined overhead rates% actual manufacturing overhead costs of a period will !e recorded in the *anufacturing Overhead account% !ut they will not !e recorded on the "o! cost sheets for the period. Level: *edium LO: 2 Ans: +. )n a "o!#order cost system% indirect la!or is assigned to a "o! !y using the la!or time tic,et as a source document. Level: *edium LO: 2 Ans: F -. he formula for computing the predetermined overhead rate is: Estimated total units in !ase . Estimated total manufacturing costs Level: Easy LO: ( Ans: F /. he fact that one department may !e la!or intensive while another department is machine intensive may e0plain in part the e0istence of multiple predetermined overhead rates in larger companies. Level: Easy LO: ( Ans: 1. )f a company closes any underapplied or overapplied overhead to the 2ost of 3oods 4old account% then 2ost of 3oods 4old will !e credited if manufacturing overhead is overapplied for the period. Level: *edium LO: +%5 Ans: 5. he following entry would !e used to record the transfer of material from the storeroom to production if 567 of the material was direct material and 267 was indirect material:

Level: Easy LO: + Ans:

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8. )f a "o! is not completed at the end of the year% then no manufacturing overhead cost should !e applied to that "o!. Level: *edium LO: - Ans: F 16. 9hen raw materials are purchased% they are recorded as an e0pense. Level: *edium LO: 1 Ans: F 11. )n a "o!#order cost system% depreciation on factory e&uipment should !e charged directly to the 9or, in Process account. Level: *edium LO: 1 Ans: F 12. he entire difference !etween the actual manufacturing overhead cost for a period and the applied manufacturing overhead cost is typically closed to the 9or, )n Process account. Level: Easy LO: 5 Ans: F 1(. )f the actual manufacturing overhead costs for a period e0ceed the manufacturing overhead costs applied% then overhead would !e considered to !e overapplied. Level: *edium LO: 5 Ans: F 1+. he a!sorption cost approach is so named !ecause it provides for the a!sorption of all manufacturing costs% fi0ed and varia!le% into units of product. Level: Easy LO: 16 Ans:

Multiple Choice 15. 9hich of the following industries would !e most li,ely to use a process costing system: A' 4hip !uilder ;' *ovie studio 2' Oil refinery <' =ospital Level: Easy LO: 1 Ans: 2 1/. A process cost system is employed in those situations where: A' many different products% "o!s% or !atches of production are !eing produced each period. ;' where manufacturing involves a single% homogeneous product that flows evenly through the production process on a continuous !asis. 2' a service is performed such as in a law firm or an accounting firm. <' full or a!sorption cost approach is not employed. Level: Easy LO: 1 Ans: ;

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11. Emco 2ompany uses direct la!or cost as a !asis for computing its predetermined overhead rate. )n computing the predetermined overhead rate for last year% the company misclassified a portion of direct la!or cost as indirect la!or. he effect of this misclassification will !e to: A' understate the predetermined overhead rate. ;' overstate the predetermined overhead rate. 2' have no effect on the predetermined overhead rate. <' cannot !e determined from the information given. Level: *edium LO: ( Ans: ; 15. 9hich of the following entries would record correctly the application of overhead cost:

A' A A!ove ;' ; A!ove 2' 2 A!ove <' < A!ove Level: Easy LO: +%- Ans: < 18. he operations of >alispell 2ompany resulted in overapplied overhead for the month "ust completed. 9hich of the following "ournal entries can !e correct if >alispell allocates underapplied or overapplied overhead among accounts:

A' A A!ove ;' ; A!ove 2' 2 A!ove <' < A!ove Level: *edium LO: +%5 Ans: <

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26. 9hich of the following entries would record correctly the monthly salaries earned !y the top management of a manufacturing company:

A' A A!ove ;' ; A!ove 2' 2 A!ove <' < A!ove Level: Easy LO: + Ans: ; 21. he "ournal entry to record applying overhead during the production process is:

A' A A!ove ;' ; A!ove 2' 2 A!ove <' < A!ove Level: Easy LO: + Ans: < 22. 9hen manufacturing overhead is applied to production% it is added to: A' the 2ost of 3oods 4old account. ;' the ?aw *aterials account. 2' the 9or, in Process account. <' the Finished 3oods inventory account. Level: Easy LO: -%1 Ans: 2

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2(. 9hich of the following statements is true:

A' Only statement ) is true. ;' Only statement )) is true. 2' ;oth statements ) and )) are true. <' 4tatements )% ))% and ))) are all true. Level: Easy LO: - Ans: < 2+. On the 4chedule of 2ost of 3oods *anufactured% the final 2ost of 3oods *anufactured figure represents: A' the amount of cost charged to 9or, in Process during the period. ;' the amount of cost transferred from Finished 3oods to 2ost of 3oods 4old during the period. 2' the amount of cost placed into production during the period. <' the amount of cost of goods completed during the current year whether they were started !efore or during the current year. Level: =ard LO: / Ans: < 2-. @nder a "o!#order costing system% the dollar amount transferred from 9or, in Process to Finished 3oods is the sum of the costs charged to all "o!s: A' started in process during the period. ;' in process during the period. 2' completed and sold during the period. <' completed during the period. Level: *edium LO: 1 Ans: < 2/. )f a company applies overhead to production on the !asis of a predetermined rate% a de!it !alance in the *anufacturing Overhead account at the end of the period means that: A' actual overhead cost was greater than the amount charged to production. ;' actual overhead cost was less than the amount of direct la!or cost. 2' more overhead cost has !een charged to production than has !een charged to finished goods during the period. <' actual overhead cost was less than the amount charged to production. Level: *edium LO: 5 Ans: A 21. Overapplied overhead means that: A' the applied overhead cost was less than the actual overhead cost. ;' the applied overhead cost was greater than the actual overhead cost. 2' the estimated overhead cost was less than the actual overhead cost. <' the estimated overhead cost was less than the applied overhead cost. Level: Easy LO: 5 Ans: ;

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25. A "o! order cost system uses a predetermined overhead rate !ased on estimated activity and estimated manufacturing overhead cost. At the end of the year% underapplied overhead might !e e0plained !y which of the following situations:

A' A A!ove ;' ; A!ove 2' 2 A!ove <' < A!ove Source: CPA, adapted Level: *edium LO: 5 Ans: 2 28. <epartmental overhead rates are generally preferred to plant#wide overhead rates when: A' the activities of the various departments in the plant are not homogeneous. ;' the activities of the various departments in the plant are homogeneous. 2' most of the overhead costs are fi0ed. <' all departments in the plant are heavily automated. Source: CMA, adapted Level: Easy LO: 16 Ans: A (6. he 9or, in Process inventory account of a manufacturing company shows a !alance of A15%666 at the end of an accounting period. he "o! cost sheets of the two uncompleted "o!s show charges of A/%666 and A(%666 for materials% and charges of A+%666 and A2%666 for direct la!or. From this information% it appears that the company is using a predetermined overhead rate% as a percentage of direct la!or costs% of: A' -67 ;' 2667 2' (667 <' 267 Level: *edium LO: 2%(%- Ans: A

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(1. ;lac,wood 2o. uses a predetermined overhead rate !ased on direct la!or cost to apply manufacturing overhead to "o!s. he predetermined overhead rates for the year are 2667 for <epartment A and -67 for <epartment ;. Bo! 12(% started and completed during the year% was charged with the following costs:

he total manufacturing costs associated with Bo! 12( should !e: A' A1(-%666 ;' A156%666 2' A18-%666 <' A2+6%666 4ource: CPA, adapted Level: *edium LO: 2%- Ans: A (2. Fisher 2ompany uses a predetermined overhead rate !ased on direct la!or cost to apply manufacturing overhead to "o!s. he following information a!out Fisher 2ompanyCs 9or, in Process inventory account has !een provided for the month of *ay:

<uring the month% Fisher 2ompanyCs 9or, in Process inventory account was credited for A126%-66% which represented the 2ost of 3oods *anufactured for the month. Only one "o! remained in process on *ay (1D this "o! had !een charged with A8%/66 of applied overhead cost. he amount of direct materials cost in the unfinished "o! would !e: A' A16%/66 ;' A1/%166 2' A12%566 <' A2(%+66 Level: =ard LO: (%-%/%1 Ans: A ((. At the !eginning of the year% manufacturing overhead for the year was estimated to !e A+11%-86. At the end of the year% actual direct la!or#hours for the year were 28%666 hours% the actual manufacturing overhead for the year was A+12%-86% and manufacturing overhead for the year was overapplied !y A116. )f the predetermined overhead rate is !ased on direct la!or#hours% then the estimated direct la!or#hours at the !eginning of the year used in the predetermined overhead rate must have !een: A' 28%(66 direct la!or#hours ;' 25%851 direct la!or#hours 2' 25%88( direct la!or#hours <' 28%666 direct la!or#hours Level: =ard LO: (%-%5 Ans: A

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(+. At the !eginning of the year% manufacturing overhead for the year was estimated to !e A/16%166. At the end of the year% actual direct la!or#hours for the year were (/%266 hours% the actual manufacturing overhead for the year was A//-%166% and manufacturing overhead for the year was overapplied !y A22%166. )f the predetermined overhead rate is !ased on direct la!or#hours% then the estimated direct la!or#hours at the !eginning of the year used in the predetermined overhead rate must have !een: A' (-%6(1 direct la!or#hours ;' (-%(66 direct la!or#hours 2' (/%266 direct la!or#hours <' ((%51+ direct la!or#hours Level: =ard LO: (%-%5 Ans: ; (-. At the !eginning of the year% manufacturing overhead for the year was estimated to !e A/16%-(6. At the end of the year% actual direct la!or#hours for the year were 28%+66 hours% the actual manufacturing overhead for the year was A//-%-(6% and manufacturing overhead for the year was underapplied !y A21%--6. )f the predetermined overhead rate is !ased on direct la!or#hours% then the estimated direct la!or#hours at the !eginning of the year used in the predetermined overhead rate must have !een: A' (6%866 direct la!or#hours ;' 28%+66 direct la!or#hours 2' (6%/16 direct la!or#hours <' (1%8(8 direct la!or#hours Level: =ard LO: (%-%5 Ans: A (/. ;rad!eer 2orporation uses direct la!or#hours in its predetermined overhead rate. At the !eginning of the year% the estimated direct la!or#hours were 11%-66 hours. At the end of the year% actual direct la!or# hours for the year were 1/%666 hours% the actual manufacturing overhead for the year was A2((%666% and manufacturing overhead for the year was underapplied !y A1-%+66. he estimated manufacturing overhead at the !eginning of the year used in the predetermined overhead rate must have !een: A' A2+8%(1;' A211%/66 2' A225%666 <' A2(5%666 Level: =ard LO: (%-%5 Ans: < (1. ;raam 2orporation uses direct la!or#hours in its predetermined overhead rate. At the !eginning of the year% the estimated direct la!or#hours were 11%-66 hours. At the end of the year% actual direct la!or#hours for the year were 8%166 hours% the actual manufacturing overhead for the year was A1+(%(-6% and manufacturing overhead for the year was underapplied !y A15%226. he estimated manufacturing overhead at the !eginning of the year used in the predetermined overhead rate must have !een: A' A1/+%62( ;' A12-%1(6 2' A1+5%(-6 <' A1(5%(-6 Level: =ard LO: (%-%5 Ans: 2

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(5. ;raaten 2orporation uses direct la!or#hours in its predetermined overhead rate. At the !eginning of the year% the estimated direct la!or#hours were 1+%166 hours. At the end of the year% actual direct la!or# hours for the year were 1(%-66 hours% the actual manufacturing overhead for the year was A281%166% and manufacturing overhead for the year was underapplied !y A1%/66. he estimated manufacturing overhead at the !eginning of the year used in the predetermined overhead rate must have !een: A' A25/%166 ;' A28/%166 2' A285%51/ <' A25(%-66 Level: =ard LO: (%-%5 Ans: ; (8. 2ri!! 2orporation uses direct la!or#hours in its predetermined overhead rate. At the !eginning of the year% the estimated direct la!or#hours were 11%866 hours and the total estimated manufacturing overhead was A(+1%586. At the end of the year% actual direct la!or#hours for the year were 1/%166 hours and the actual manufacturing overhead for the year was A((/%586. Overhead at the end of the year was: A' A22%826 underapplied ;' A11%826 overapplied 2' A11%826 underapplied <' A22%826 overapplied Level: *edium LO: (%-%5 Ans: 2 +6. 2rich 2orporation uses direct la!or#hours in its predetermined overhead rate. At the !eginning of the year% the estimated direct la!or#hours were 21%566 hours and the total estimated manufacturing overhead was A+81%6+6. At the end of the year% actual direct la!or#hours for the year were 21%-66 hours and the actual manufacturing overhead for the year was A+82%6+6. Overhead at the end of the year was: A' A/%5+6 overapplied ;' A/%5+6 underapplied 2' A1%5+6 underapplied <' A1%5+6 overapplied Level: *edium LO: (%-%5 Ans: 2 +1. 2ric, 2orporation uses direct la!or#hours in its predetermined overhead rate. At the !eginning of the year% the estimated direct la!or#hours were 1+%+66 hours and the total estimated manufacturing overhead was A(--%/56. At the end of the year% actual direct la!or#hours for the year were 1-%266 hours and the actual manufacturing overhead for the year was A(-6%/56. Overhead at the end of the year was: A' A2+%1/6 underapplied ;' A2+%1/6 overapplied 2' A18%1/6 underapplied <' A18%1/6 overapplied Level: *edium LO: (%-%5 Ans: ;

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+2. <agger 2orporation uses direct la!or#hours in its predetermined overhead rate. At the !eginning of the year% the total estimated manufacturing overhead was A+2(%516. At the end of the year% actual direct la!or#hours for the year were 18%+66 hours% manufacturing overhead for the year was underapplied !y A-%/-6% and the actual manufacturing overhead was A+15%516. he predetermined overhead rate for the year must have !een closest to: A' A21.-8 ;' A26.1/ 2' A21.(6 <' A21.5Level: =ard LO: (%-%5 Ans: 2 +(. <aget 2orporation uses direct la!or#hours in its predetermined overhead rate. At the !eginning of the year% the total estimated manufacturing overhead was A(/+%1+6. At the end of the year% actual direct la!or#hours for the year were 2+%666 hours% manufacturing overhead for the year was overapplied !y A5%6/6% and the actual manufacturing overhead was A(-8%1+6. he predetermined overhead rate for the year must have !een closest to: A' A1-.+( ;' A1-.(6 2' A1-.11 <' A1+.8/ Level: =ard LO: (%-%5 Ans: ; ++. <afoe 2orporation uses direct la!or#hours in its predetermined overhead rate. At the !eginning of the year% the total estimated manufacturing overhead was A221%166. At the end of the year% actual direct la!or#hours for the year were 1+%+66 hours% manufacturing overhead for the year was overapplied !y A21%-66% and the actual manufacturing overhead was A21/%166. he predetermined overhead rate for the year must have !een closest to: A' A1-.61 ;' A11.1( 2' A1-.(<' A1/.-6 Level: =ard LO: (%-%5 Ans: < +-. Buanita 2orporation uses a "o!#order cost system and applies overhead on the !asis of direct la!or cost. At the end of Octo!er% Buanita had one "o! still in process. he "o! cost sheet for this "o! contained the following information:

An additional A166 of la!or was needed in Eovem!er to complete this "o!. For this "o!% how much should Buanita have transferred to finished goods inventory in Eovem!er when it was completed: A' A1%((6 ;' A-66 2' A1%2(6 <' A1%1(6 Level: *edium LO: (%- Ans: <

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+/. 9all 2ompany uses a predetermined overhead rate !ased on direct la!or hours to apply manufacturing overhead to "o!s. he companyCs estimated costs for the ne0t year are:

)t is estimated that 16%666 direct la!or hours will !e wor,ed during the year. he predetermined overhead rate will !e: A' A(.86 ;' A-.86 2' A/.56 <' A8.16 Level: *edium LO: ( Ans: A +1. he following information relates to 4poc, *anufacturing 2ompany:

he company closes out the !alance in the *anufacturing Overhead to 2ost of 3oods 4old at the end of the year. )n the "ournal entry to close out the !alance% the company would: A' de!it cost of goods sold for A2%666 ;' credit cost of goods sold for A2%666 2' credit cost of goods sold for A1%666 <' de!it cost of goods sold for A1%666 Level: =ard LO: +%-%5 Ans: 2 +5. ?io *anufacturing 2ompany uses a "o! order cost system. At the !eginning of Fe!ruary% ?io only had one "o! in process% Bo! F-8+. he direct costs assigned to this "o! at that time were A566 of materials and A/-6 of la!or. Bo! F-8+ was finished during Fe!ruary incurring additional direct costs of A126 for materials and A(16 for la!or. Bo! F-8- was started and finished during Fe!ruary. he direct costs assigned to this "o! were A(16 for materials and A186 for la!or. Bo! F-8/ was started during Fe!ruary !ut was not finished !y the end of the month. he direct costs assigned to this "o! were A1+6 for materials and A(66 for la!or. ?io applies manufacturing overhead to its products at a rate of 2667 of direct la!or cost. 9hat is ?ioCs cost of goods manufactured for Fe!ruary: A' A2%++6 ;' A(%1-6 2' A+%5/6 <' A/%-66 Level: =ard LO: -%/ Ans: 2

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+8. 4eren"e *anufacturing 2ompany produces nameplates and uses a "o!#order cost system. he following amounts relate to nameplate production for the month of Bune:

4eren"e applies overhead at a predetermined overhead rate of /67 of direct material cost. At the end of Bune% only one "o! was in 9or, in Process inventory. his "o! had !een charged with A1-6 of direct material cost. 9hat is the direct la!or cost assigned to this "o!: A' A166 ;' A1/6 2' A22<' A-(6 Level: =ard LO: -%1 Ans: ; -6. <u,es 2ompany used a predetermined overhead rate this year of A2 per direct la!or hour% !ased on an estimate of 26%666 direct la!or hours to !e wor,ed during the year. Actual costs and activity during the year were:

he underapplied or overapplied overhead for the year was: A' A1%666 underapplied ;' A1%666 overapplied 2' A(%666 underapplied <' A(%666 overapplied Level: Easy LO: -%5 Ans: A -1. 4argent 2ompany applies overhead cost to "o!s on the !asis of 56 percent of direct la!or cost. )f Bo! 216 shows A16%666 of manufacturing overhead cost applied% how much was the direct la!or cost on the "o!: A' A12%-66 ;' A11%666 2' A5%666 <' A16%666 Level: *edium LO: - Ans: A

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-2. )n the Gas&ueH 2ompany% any over# or underapplied overhead is closed out to 2ost of 3oods 4old. Last year% the company incurred A21%666 in actual manufacturing overhead cost% and applied A28%666 of overhead cost to "o!s. he !eginning and ending !alances of Finished 3oods were e&ual% and the 2ompanyCs 2ost of 3oods *anufactured for the year totaled A11%666. 3iven this information% 2ost of 3oods 4old% after ad"ustment for any over# or underapplied overhead% for the year must have !een: A' A85%666 ;' A1(%666 2' A11%666 <' A/8%666 Level: =ard LO: /%5 Ans: < -(. )n reviewing the accounting records at year#end% 3arff 2ompanyCs accountant has determined that the following items and amounts were de!ited to the *anufacturing Overhead account during the year:

)ncluding the items listed a!ove% the de!its to the *anufacturing Overhead account totaled A2+-%666 for the year. 2redits to the account totaled A2+6%666 for the year. ;ased on this information% if all entries had !een made correctly during the year the *anufacturing Overhead account would have !een: A' overapplied !y A+%666 ;' overapplied !y A12%666 2' underapplied !y A-%666 <' overapplied !y A2%666 Level: =ard LO: 1%5 Ans: < -+. 2ompute the Octo!er cost of direct materials used if raw material purchases for the month were A(6%666 and the inventories were as follows:

he cost of direct materials used would !e: A' A(1%-66 ;' A28%-66 2' A21%666 <' A((%666 Level: Easy LO: 1 Ans: <

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--. =ardin 2ompanyCs manufacturing overhead account showed a A26%666 underapplied overhead !alance on <ecem!er (1. Other data as of <ecem!er (1 appear !elow:

)f the company allocates the underapplied overhead among 2ost of 3oods 4old and the appropriate inventory accounts !ased on the amount of overhead applied during the year in the accounts% 2ost of 3oods 4old after allocation will !e: A' A186%666 ;' A526%666 2' A516%666 <' A156%666 Level: *edium LO: 5 Ans: 2 -/. Job 593 was recently completed. The following data have been recorded on its job cost sheet:

The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $14 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 593 would be: A) $6,705 B) $3,219 C) $5,249 D) $4,255 Level: Easy LO: 2,5 Ans: A

57. The following data have been recorded for recently completed Job 323 on its job cost sheet. Direct materials cost was $2,260. A total of 37 direct labor-hours and 141 machine-hours were worked on the job. The direct labor wage rate is $13 per labor-hour. The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $14 per machine-hour. The total cost for the job on its job cost sheet would be: A) $3,259 B) $2,741 C) $4,715 D) $2,287 Level: Easy LO: 2,5 Ans: C

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58. Kaleohano Corporation has provided data concerning the companys Manufacturing Overhead account for the month of July. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $62,000 and the total of the credits to the account was $73,000. Which of the following statements is true? A) Manufacturing overhead for the month was underapplied by $11,000. B) Manufacturing overhead applied to Work in Process for the month was $62,000. C) Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $73,000. D) Actual manufacturing overhead for the month was $62,000. Level: Medium LO: 4,8 Ans: D

59. Bretthauer Corporation has provided data concerning the companys Manufacturing Overhead account for the month of July. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $51,000 and the total of the credits to the account was $64,000. Which of the following statements is true? A) Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $51,000. B) Manufacturing overhead applied to Work in Process for the month was $64,000. C) Manufacturing overhead for the month was underapplied by $13,000. D) Actual manufacturing overhead incurred during the month was $64,000. Level: Medium LO: 4,8 Ans: B

60. Arvay Corporation has provided data concerning the companys Manufacturing Overhead account for the month of October. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $62,000 and the total of the credits to the account was $52,000. Which of the following statements is true? A) Actual manufacturing overhead incurred during the month was $52,000. B) Manufacturing overhead applied to Work in Process for the month was $62,000. C) Manufacturing overhead for the month was underapplied by $10,000. D) Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $62,000. Level: Medium LO: 4,8 Ans: C

61. On February 1, Manwill Corporation had $24,000 of raw materials on hand. During the month, the company purchased an additional $60,000 of raw materials. During February, $54,000 of raw materials were requisitioned from the storeroom for use in production. The debits to the Raw Materials account for the month of February total: A) $84,000 B) $54,000 C) $60,000 D) $24,000 Level: Easy LO: 4 Ans: C

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62. At the beginning of December, Sneeden Corporation had $32,000 of raw materials on hand. During the month, the company purchased an additional $71,000 of raw materials. During December, $75,000 of raw materials were requisitioned from the storeroom for use in production. The credits to the Raw Materials account for the month of December total: A) $32,000 B) $75,000 C) $71,000 D) $103,000 Level: Easy LO: 4 Ans: B

63. Donham Corporation had $25,000 of raw materials on hand on May 1. During the month, the company purchased an additional $65,000 of raw materials. During May, $66,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The debits to the Work in Process account as a consequence of the raw materials transactions in May total: A) $0 B) $62,000 C) $65,000 D) $66,000 Level: Easy LO: 4 Ans: B

64. During May at Shatswell Corporation, $57,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $7,000. The journal entry to record this requisition would include a debit to Manufacturing Overhead of: A) $52,000 B) $7,000 C) $0 D) $64,000 Level: Easy LO: 4 Ans: B

65. Soledad Corporation had $36,000 of raw materials on hand on December 1. During the month, the company purchased an additional $71,000 of raw materials. The journal entry to record the purchase of raw materials would include a: A) credit to Raw Materials of $71,000 B) debit to Raw Materials of $71,000 C) credit to Raw Materials of $107,000 D) debit to Raw Materials of $107,000 Level: Easy LO: 4 Ans: B

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66. During February at Iniquez Corporation, $79,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The journal entry to record the requisition from the storeroom would include a: A) debit to Work in Process of $79,000 B) debit to Work in Process of $75,000 C) credit to Manufacturing Overhead of $4,000 D) debit to Raw Materials of $79,000 Level: Easy LO: 4 Ans: B

67. In July, Essinger Inc. incurred $72,000 of direct labor costs and $3,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a: A) debit to Manufacturing Overhead of $3,000 B) credit to Manufacturing Overhead of $3,000 C) credit to Work in Process of $75,000 D) debit to Work in Process of $75,000 Level: Easy LO: 4 Ans: A

68. Firlit Corporation incurred $69,000 of actual Manufacturing Overhead costs during October. During the same period, the Manufacturing Overhead applied to Work in Process was $70,000. The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a: A) debit to Work in Process of $70,000 B) credit to Work in Process of $70,000 C) debit to Manufacturing Overhead of $69,000 D) credit to Manufacturing Overhead of $69,000 Level: Easy LO: 4 Ans: C

69. Traves Corporation incurred $69,000 of actual Manufacturing Overhead costs during October. During the same period, the Manufacturing Overhead applied to Work in Process was $68,000. The journal entry to record the application of Manufacturing Overhead to Work in Process would include a: A) debit to Manufacturing Overhead of $68,000 B) credit to Manufacturing Overhead of $68,000 C) debit to Work in Process of $69,000 D) credit to Work in Process of $69,000 Level: Easy LO: 4 Ans: B

70. During October, Beidleman Inc. transferred $52,000 from Work in Process to Finished Goods and recorded a Cost of Goods Sold of $55,000. The journal entries to record these transactions would include a: A) credit to Cost of Goods Sold of $55,000 B) credit to Work in Process of $52,000 C) debit to Finished Goods of $55,000 D) credit to Finished Goods of $52,000 Level: Easy LO: 4 Ans: B

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71. During October, Dorinirl Corporation incurred $60,000 of direct labor costs and $5,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a: A) credit to Work in Process of $60,000 B) credit to Work in Process of $65,000 C) debit to Work in Process of $65,000 D) debit to Work in Process of $60,000 Level: Easy LO: 4 Ans: D

72. Stelmack Corporation, a manufacturing company, has provided data concerning its operations for September. The beginning balance in the raw materials account was $20,000 and the ending balance was $27,000. Raw materials purchases during the month totaled $63,000. Manufacturing overhead cost incurred during the month was $53,000, of which $3,000 consisted of raw materials classified as indirect materials. The direct materials cost for September was: A) $56,000 B) $53,000 C) $70,000 D) $63,000 Level: Medium LO: 6 Ans: B

73. Hudek Inc., a manufacturing company, has provided the following data for the month of July. The balance in the Work in Process inventory account was $20,000 at the beginning of the month and $10,000 at the end of the month. During the month, the company incurred direct materials cost of $50,000 and direct labor cost of $22,000. The actual manufacturing overhead cost incurred was $58,000. The manufacturing overhead cost applied to Work in Process was $56,000. The cost of goods manufactured for July was: A) $138,000 B) $140,000 C) $130,000 D) $128,000 Level: Medium LO: 6 Ans: A

74. Cerrone Inc. has provided the following data for the month of July. The balance in the Finished Goods inventory account at the beginning of the month was $39,000 and at the end of the month was $47,000. The cost of goods manufactured for the month was $188,000. The actual manufacturing overhead cost incurred was $71,000 and the manufacturing overhead cost applied to Work in Process was $67,000. The adjusted cost of goods sold that would appear on the income statement for July is: A) $196,000 B) $184,000 C) $180,000 D) $188,000 Level: Medium LO: 6 Ans: B

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75. The actual manufacturing overhead incurred at Fraze Corporation during November was $79,000, while the manufacturing overhead applied to Work in Process was $65,000. The companys Cost of Goods Sold was $385,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true? A) Manufacturing overhead for the month was underapplied by $14,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $399,000 B) Manufacturing overhead for the month was overapplied by $14,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $371,000 C) Manufacturing overhead for the month was overapplied by $14,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $399,000 D) Manufacturing overhead for the month was underapplied by $14,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $371,000 Level: Medium LO: 8 Ans: A

76. Smallwood Corporation has provided the following data concerning manufacturing overhead for January:

The companys Cost of Goods Sold was $223,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true? A) Manufacturing overhead for the month was overapplied by $5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $228,000 B) Manufacturing overhead for the month was underapplied by $5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $218,000 C) Manufacturing overhead for the month was underapplied by $5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $228,000 D) Manufacturing overhead for the month was overapplied by $5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $218,000 Level: Medium LO: 8 Ans: C

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@se the following to answer 11#56 he accounting records of Omar 2ompany contained the following information for last year:

I<oes not include over# or underapplied overhead. 11. he amount of direct material purchased during the year was: A' A//%666 ;' A16%666 2' A/-%666 <' A1+%666 Level: *edium LO: / Ans: ; 15. he total costs added to 9or, in Process during the year were: A' A26/%666 ;' A1/2%666 2' A11/%666 <' A152%666 Level: *edium LO: / Ans: 2 18. )f Omar 2ompany applies overhead to "o!s on the !asis of direct la!or hours and Bo! ( too, 126 hours% how much overhead should !e applied to that "o!: A' A8/6 ;' A(/6 2' A-25 <' A255 Level: *edium LO: (%- Ans: <

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56. he cost of goods manufactured for the year was: A' A186%666 ;' A1/2%666 2' A1/5%666 <' A1(-%666 Level: *edium LO: / Ans: ; @se the following to answer 51#5( Acton 2orporation% which applies manufacturing overhead on the !asis of machine#hours% has provided the following data for its most recent year of operations.

he estimates of the manufacturing overhead and of machine#hours were made at the !eginning of the year for the purpose of computing the companyCs predetermined overhead rate for the year. 51. he predetermined overhead rate is closest to: A' A(/./6 ;' A(/.+1 2' A(/.2+ <' A(/.6Level: Easy LO: ( Ans: A 52. he applied manufacturing overhead for the year is closest to: A' A1(/%2/8 ;' A1(5%(+5 2' A1(/%851 <' A1(1%/(6 Level: Easy LO: - Ans: ; 5(. he overhead for the year was: A' A1(2 underapplied ;' A1%(+5 underapplied 2' A1(2 overapplied <' A1%(+5 overapplied Level: Easy LO: 5 Ans: < @se the following to answer 5+#5/ ;a,er 2orporation applies manufacturing overhead on the !asis of direct la!or#hours. At the !eginning of the most recent year% the company !ased its predetermined overhead rate on total estimated overhead of A216%/66 and /%666 estimated direct la!or#hours. Actual manufacturing overhead for the year amounted to A268%666 and actual direct la!or#hours were -%856.

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5+. he predetermined overhead rate for the year was closest to: A' A(+.8;' A(+.5( 2' A(+.85 <' A(-.16 Level: Easy LO: ( Ans: < 5-. he applied manufacturing overhead for the year was closest to: A' A265%25( ;' A268%661 2' A268%585 <' A268%156 Level: Easy LO: - Ans: 2 5/. he overhead for the year was: A' A162 underapplied ;' A585 underapplied 2' A162 overapplied <' A585 overapplied Level: Easy LO: 5 Ans: < @se the following to answer 51#58 2a!er 2orporation applies manufacturing overhead on the !asis of machine#hours. At the !eginning of the most recent year% the company !ased its predetermined overhead rate on total estimated overhead of A/6%/66. Actual manufacturing overhead for the year amounted to A-8%666 and actual machine#hours were -%866. he companyCs predetermined overhead rate for the year was A16.16 per machine#hour. 51. he predetermined overhead rate was !ased on how many estimated machine#hours: A' -%15( ;' /%666 2' -%866 <' -%5+2 Level: *edium LO: ( Ans: ; 55. he applied manufacturing overhead for the year was closest to: A' A-5%611 ;' A-8%-86 2' A/6%/66 <' A-5%-81 Level: Easy LO: - Ans: ;

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58. he overhead for the year was: A' A1%616 underapplied ;' A-86 overapplied 2' A-86 underapplied <' A1%616 overapplied Level: Easy LO: 5 Ans: ; @se the following to answer 86#82 <apper 2ompany had only one "o! in process on *ay 1. he "o! had !een charged with A(%+66 of direct materials% A+%/+6 of direct la!or% and A8%266 of manufacturing overhead cost. he company assigns overhead cost to "o!s using the predetermined overhead rate of A2(.66 per direct la!or#hour. <uring *ay% the activity was recorded:

9or, in process inventory on *ay (6 contains A1%-+6 of direct la!or cost. ?aw materials consist solely of items that are classified as direct materials. 86. he !alance in the raw materials inventory account on *ay (6 was: A' A((%-66 ;' A2%666 2' A+6%666 <' A/%-66 Level: *edium LO: / ?efer o: 62J6- Ans: ; 81. he cost of goods manufactured for *ay was: A' A168%/16 ;' A12+%/26 2' A1+(%(66 <' A12/%526 Level: =ard LO: / Ans: A

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82. he entry to dispose of the underapplied or overapplied overhead cost for the month would include a: A' de!it of A2%266 to *anufacturing Overhead ;' de!it of A1+%8-6 to *anufacturing Overhead 2' credit of A1+%8-6 to *anufacturing Overhead <' credit of A2%266 to *anufacturing Overhead Level: =ard LO: -%5 Ans: < @se the following to answer 8(#8/ he direct la!or rate in ;rent 2ompany is A8.66 per hour% and manufacturing overhead is applied to products using a predetermined overhead rate of A/.66 per direct la!or hour. <uring *ay% the company purchased A/6%666 in raw materials $all direct materials' and wor,ed (%266 direct la!or hours. he ?aw *aterials inventory $all direct materials' decreased !y A(%666 !etween the !eginning and end of *ay. he 9or, in Process inventory on *ay 1 consisted of one "o! which had !een charged with A+%666 in direct materials and on which (66 hours of direct la!or time had !een wor,ed. here was no 9or, in Process inventory on *ay (1. 8(. he !alance in the 9or, in Process inventory account on *ay 1 was: A' A6 ;' A/%166 2' A+%-66 <' A5%-66 Level: *edium LO: + Ans: < 8+. he de!it to 9or, in Process for the cost of direct materials used during *ay was: A' A/(%666 ;' A/1%666 2' A-1%666 <' A/1%666 Level: *edium LO: + Ans: A 8-. he de!it to 9or, in Process for direct la!or cost during *ay was: A' A21%666 ;' A2/%166 2' A25%566 <' A(1%-66 Level: *edium LO: + Ans: 2 8/. )f overhead was underapplied !y A2%-66 during *ay% the actual overhead cost for the month must have !een: A' A1/%166 ;' A21%166 2' A15%-66 <' A2(%-66 Level: =ard LO: -%5 Ans: ;

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@se the following to answer 81#166 2helm *usic 2ompany manufactures violins% violas% cellos% and fiddles and uses a "o!#order cost system. 81. 9hat account should 2helm de!it when the wor,ers who carve the wood for the instruments are paid: A' <irect La!or ;' 9or, in Process 2' *anufacturing Overhead <' 4alaries and 9ages ?eceiva!le E' 4alaries and 9ages E0pense Level: Easy LO: + Ans: ; 85. 9hat account should 2helm de!it when the production manager is paid: A' <irect La!or ;' 9or, in Process 2' *anufacturing Overhead <' 4alaries and 9ages ?eceiva!le E' 4alaries and 9ages E0pense Level: *edium LO: + Ans: 2 88. 9hat account should 2helm de!it when the president of the company is paid: A' <irect La!or ;' 9or, in Process 2' *anufacturing Overhead <' 4alaries and 9ages ?eceiva!le E' 4alaries and 9ages E0pense Level: Easy LO: + Ans: E 166. 9hat is one of the accounts that 2helm should credit when goods are sold: A' Finished 3oods ;' 9or, in Process 2' 2ost of 3oods 4old <' *anufacturing Overhead E' 2ost of 3oods *anufactured Level: Easy LO: + Ans: A

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@se the following to answer 161#16he following partially completed #accounts summariHe transactions for 9estern 2ompany during the year:

161. he 2ost of 3oods *anufactured is: A' A26%666 ;' A(+%666 2' A22%-66 <' A2-%666 Level: *edium LO: /%1 Ans: < 162. he direct la!or cost was: A' A8%666 ;' A12%666 2' A16%666 <' A1+%666 Level: =ard LO: 1 Ans: A

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16(. he direct materials cost was: A' A5%666 ;' A/%-66 2' A8%666 <' A/%666 Level: =ard LO: 1 Ans: ; 16+. he manufacturing overhead applied was: A' A8%666 ;' A(%666 2' A-66 <' A1%666 Level: =ard LO: -%1 Ans: < 16-. he manufacturing overhead was: A' A2-6 overapplied ;' A1-6 underapplied 2' A2-6 underapplied <' A1-6 overapplied Level: *edium LO: 1%5 Ans: 2 ?eference: 62J68 >apanga *anufacturing 2ompany uses a "o!#order costing system and started the month of Octo!er with a Hero !alance in its wor, in process and finished goods inventory accounts. <uring Octo!er% >apanga wor,ed on three "o!s and incurred the following direct costs on those "o!s:

>apanga applies manufacturing overhead at a rate of 1-67 of direct la!or cost. <uring Octo!er% >apanga completed Bo!s ;15 and ;18 and sold Bo! ;18. 16/. 9hat is >apangaCs cost of goods manufactured for Octo!er: A' A -6%666 ;' A --%666 2' A 15%666 <' A 52%666 Level: *edium LO: -%/ Ans: <

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161. 9hat is >apangaCs wor, in process inventory !alance at the end of Octo!er: A' A2(%666 ;' A(6%-66 2' A(2%666 <' A+(%666 Level: *edium LO: -%/ Ans: ; @se the following to answer 165#111 <illon 2ompany applies manufacturing overhead to "o!s using a predetermined overhead rate of 1-7 of direct la!or cost. Any under or overapplied overhead cost is closed out to 2ost of 3oods 4old at the end of the month. <uring *ay% the following transactions were recorded !y the company:

I2ontains A+%+66 in direct la!or cost. 165. he !alance on *ay 1 in the ?aw *aterials inventory account was: A' A11%666 ;' A-%666 2' A1%666 <' A8%666 Level: *edium LO: / Ans: ; 168. he amount of direct materials cost in the *ay (1 9or, in Process inventory account was: A' A1%/66 ;' A2%666 2' A/%(66 <' A+%(66 Level: =ard LO: / Ans: < 116. he entry to dispose of the under or overapplied overhead cost for the month would include: A' a de!it of A2%666 to the *anufacturing Overhead account ;' a credit of A2%-66 to the *anufacturing Overhead account 2' a de!it of A2%666 to 2ost of 3oods 4old <' a credit of A2%-66 to 2ost of 3oods 4old Level: =ard LO: 5 Ans: 2

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111. he 2ost of 3oods *anufactured for *ay was: A' A5+%-66 ;' A8-%666 2' A1-%-66 <' A51%-66 Level: *edium LO: / Ans: A @se the following to answer 112#11+ Far!er 2orporation uses a "o!#order cost system. he information !elow is from the financial records of the company for last year:

Applied overhead was (67 of total manufacturing costs. he 9or, in Process inventory at Banuary 1 was 1-7 of the 9or, in Process inventory at <ecem!er (1. 112. Far!er 2ompanyCs total direct la!or cost was: A' A1-6%666 ;' A/66%666 2' A866%666 <' A8(1%-66 4ource: CMA, adapted Level: =ard LO: / Ans: < 11(. otal cost of direct material used !y Far!er 2ompany was: A' A1-6%666 ;' A512%-66 2' A5-6%666 <' A1%1-6%666 4ource: CMA, adapted Level: =ard LO: / Ans: ; 11+. he 9or, in Process inventory at <ecem!er (1 was: A' A(66%666 ;' A22-%666 2' A166%666 <' A1-%666 4ource: CMA, adapted Level: =ard LO: / Ans: A

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@se the following to answer 11-#111 >illian 2ompany !egan operations on Banuary 1. he predetermined overhead rate was set at A/.66 per direct la!or#hour. <e!its to 9or, in Process for the year totaled A--6%666. 2redits to 9or, in Process totaled A+56%666. Analysis of the 2ompanyCs records indicates that direct la!or cost totaled A2-6%666 for the year% which represents 26%666 direct la!or#hours. 11-. he direct materials used in production during the year totaled: A' A156%666 ;' A2+6%666 2' A1(6%666 <' A126%666 Level: =ard LO: 1 Ans: A 11/. )f the actual manufacturing overhead cost for the year totaled A1+-%666% then overhead was: A' overapplied !y A2-%666 ;' overapplied !y A16%666 2' underapplied !y A2-%666 <' underapplied !y A16%666 Level: *edium LO: 1%5 Ans: 2 111. he 2ompanyCs ending wor, in process inventory consisted of one "o!% Bo! +2. he "o! had !een charged with A25%666 of direct la!or cost% which consisted of 2%666 actual la!or#hours. he direct materials cost in Bo! +2 totaled: A' A((%666 ;' A+2%666 2' A11%666 <' A(6%666 Level: =ard LO: 1 Ans: < @se the following to answer 115#118 Echo 2orporation uses a "o!#order costing system and applies overhead to "o!s using a predetermined overhead rate. <uring the year the companyCs Finished 3oods inventory account was de!ited for A(/6%666 and credited for A((5%566. he ending !alance in the Finished 3oods inventory account was A(/%/66. At the end of the year% manufacturing overhead was overapplied !y A1-%866. 115. he !alance in the Finished 3oods inventory account at the !eginning of the year was: A' A1-%866 ;' A1-%+66 2' A21%266 <' A(/%/66 Level: *edium LO: 1 Ans: ;

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118. )f the applied manufacturing overhead was A1/8%(66% the actual manufacturing overhead cost for the year was: A' A1/5%566 ;' A1-(%+66 2' A186%666 <' A15-%266 Level: *edium LO: 1 Ans: ; @se the following to answer 126#12+ he following partially completed #accounts summariHe transactions for Farwest 2ompany during the year:

126. he 2ost of 3oods *anufactured was: A' A22%866 ;' A2/%(66 2' A/%+66 <' A+8%266 Level: *edium LO: 1 ?efer o: 62J1+ Ans: ;

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121. he direct la!or cost was: A' A5%666 ;' A12%(66 2' A12%/66 <' A11%666 Level: =ard LO: 1 Ans: A 122. he direct materials cost was: A' A5%666 ;' A16%666 2' A1%+66 <' A+%/66 Level: =ard LO: 1 Ans: 2 12(. he manufacturing overhead applied was: A' A1%866 ;' A/%566 2' A12%866 <' A(%666 Level: *edium LO: 1 Ans: ; 12+. he manufacturing overhead was: A' A1%866 underapplied ;' A166 underapplied 2' A+66 overapplied <' A(%266 overapplied Level: *edium LO: 1 Ans: ; @se the following to answer 12-#1(6 On August 1, Shead Corporation had $35,000 of raw materials on hand. During the month, the company purchased an additional $56,000 of raw materials. During August, $69,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $6,000. Prepare journal entries to record these events. Use those journal entries to answer the following questions:

125. The debits to the Raw Materials account for the month of August total: A) $91,000 B) $69,000 C) $35,000 D) $56,000 Level: Easy LO: 4 Ans: D

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126. The credits to the Raw Materials account for the month of August total: A) $35,000 B) $91,000 C) $56,000 D) $69,000 Level: Easy LO: 4 Ans: D

127. The debits to the Work in Process account as a consequence of the raw materials transactions in August total: A) $56,000 B) $0 C) $63,000 D) $69,000 Level: Easy LO: 4 Ans: C

128. The credits to the Work in Process account as a consequence of the raw materials transactions in August total: A) $56,000 B) $63,000 C) $0 D) $69,000 Level: Easy LO: 4 Ans: C

129. The debits to the Manufacturing Overhead account as a consequence of the raw materials transactions in August total: A) $6,000 B) $69,000 C) $0 D) $63,000 Level: Easy LO: 4 Ans: A

130. The credits to the Manufacturing Overhead account as a consequence of the raw materials transactions in August total: A) $0 B) $63,000 C) $69,000 D) $6,000 Level: Easy LO: 4 Ans: A @se the following to answer 1(1#1(2 On March 1, Metevier Corporation had $37,000 of raw materials on hand. During the month, the company purchased an additional $62,000 of raw materials. During March, $69,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $6,000.

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131. The journal entry to record the purchase of raw materials would include a: A) credit to Raw Materials of $62,000 B) credit to Raw Materials of $99,000 C) debit to Raw Materials of $99,000 D) debit to Raw Materials of $62,000 Level: Easy LO: 4 Ans: D

132. The journal entry to record the requisition from the storeroom would include a: A) debit to Work in Process of $69,000 B) debit to Work in Process of $63,000 C) debit to Raw Materials of $69,000 D) credit to Manufacturing Overhead of $6,000 Level: Easy LO: 4 Ans: B @se the following to answer 1((#1(+ During February, Irving Corporation incurred $65,000 of actual Manufacturing Overhead costs. During the same period, the Manufacturing Overhead applied to Work in Process was $60,000.

133. The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a: A) debit to Manufacturing Overhead of $65,000 B) credit to Manufacturing Overhead of $65,000 C) credit to Work in Process of $60,000 D) debit to Work in Process of $60,000 Level: Easy LO: 4 Ans: A

134. The journal entry to record the application of Manufacturing Overhead to Work in Process would include a: A) debit to Work in Process of $65,000 B) credit to Work in Process of $65,000 C) credit to Manufacturing Overhead of $60,000 D) debit to Manufacturing Overhead of $60,000 Level: Easy LO: 4 Ans: C

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@se the following to answer 1(-#1(1 Messana Corporation reported the following data for the month of August:

Additional information:

135. The direct materials cost for August is: A) $73,000 B) $69,000 C) $81,000 D) $57,000 Level: Hard LO: 6 Ans: A

136. The cost of goods manufactured for August is: A) $227,000 B) $229,000 C) $219,000 D) $217,000 Level: Hard LO: 6 Ans: B

137. The adjusted cost of goods sold that appears on the income statement for August is: A) $229,000 B) $211,000 C) $209,000 D) $247,000 Level: Hard LO: 6 Ans: C

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@se the following to answer 1(5#1(8 Tondre Inc. has provided the following data for the month of July:

Additional information:

138. The cost of goods manufactured for July is: A) $210,000 B) $205,000 C) $208,000 D) $207,000 Level: Medium LO: 6 Ans: A

139. The adjusted cost of goods sold that appears on the income statement for July is: A) $201,000 B) $198,000 C) $219,000 D) $210,000 Level: Medium LO: 6 Ans: B

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Essay 140. Aladili 2ompany is a manufacturing firm that uses "o!#order costing. At the !eginning of the year% the companyCs inventory !alances were as follows:

he company applies overhead to "o!s using a predetermined overhead rate !ased on machine#hours. At the !eginning of the year% the company estimated that it would wor, 21%666 machine#hours and incur A216%666 in manufacturing overhead cost. he following transactions were recorded for the year:

?e&uired: Prepare the appropriate "ournal entry for each of the items a!ove $a. through ".'. Kou can assume that all transactions with employees% customers% and suppliers were conducted in cash. Level: *edium LO: (%+%-%5

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Ans:

1+1. Luar, 4py E&uipment manufactures espionage e&uipment. Luar, uses a "o!#order cost system and applies overhead to "o!s the !asis of direct la!or#hours. For the current year% Luar, estimated that it would wor, 166%666 direct la!or#hours and incur A26%666%666 of manufacturing overhead cost. he following summariHed information relates to Banuary of the current year. he raw materials purchased include !oth direct and indirect materials.

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?e&uired: Prepare "ournal entries to record Luar,Cs transactions for the month of Banuary. <o not close out the manufacturing overhead account. Level: *edium LO: (%+%Ans:

1+2. ;aar 2ompany is a manufacturing firm that uses "o!#order costing. he companyCs inventory !alances were as follows at the !eginning and end of the year:

he company applies overhead to "o!s using a predetermined overhead rate !ased on machine#hours. At the !eginning of the year% the company estimated that it would wor, ++%666 machine#hours and incur A11/%666 in manufacturing overhead cost. he following transactions were recorded for the year:

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?e&uired:

Level: *edium LO: (%-%/%5 Ans:

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1+(. 3onHaleH% )nc. manufactures stereo spea,ers in two factoriesD one in Gandalia% )llinois and another in *odesto% 2alifornia. he Gandalia factory uses <LA for its overhead rate and the *odesto factory uses machine#hours $*=s' for its overhead rate. )nformation related to !oth plants for last year is presented !elow:

?e&uired: Fill in the lettered !lan,s a!ove. 4=O9 KO@? 2AL2@LA )OE4. Level: *edium LO: (%-%5

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Ans: $a' M A166%666D A1%666%666NA16 $!' M A161%666D A1%616%666NA16 $c' M A52%-66 underappliedD A1%682%-66 # A1%616%666 $d' M A5 per *=D A1%/66%666N266%666 $e' M A1%-26%666D 186%666 O A5 $f' M $A+1%-66' overappliedD A1%+12%-66 # A1%-26%666 1++. =ac,en 2ompany has a "o!#order costing system. he company applies manufacturing overhead to "o!s using a predetermined overhead rate !ased on direct la!or cost. he information !elow has !een ta,en from the cost records of =ac,en 2ompany for the past year:

?e&uired: $a.' 2ompute the cost of direct materials purchased during the year. $!.' 2ompute the predetermined overhead rate that was used during the past year. $c.' 2ompute the 2ost of 3oods *anufactured for the past year. $d.' 2ompute the 2ost of 3oods 4old for the past year. Level: =ard LO: (%/ Ans:

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1+-. he 4im,ins 2ompany uses a "o! order costing system. he following activities too, place during the month of *ay:

?e&uired: Prepare "ournal entries to record the information given a!ove. >ey your entries !y the letters a through i. Level: *edium LO: +%-%/

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Ans:

1+/. he 2ommonwealth 2ompany uses a "o!#order cost system and applies manufacturing overhead cost to "o!s using a predetermined overhead rate !ased on the cost of materials used in production. At the !eginning of the year% the following estimates were made as a !asis for computing the predetermined overhead rate: manufacturing overhead cost% A15/%666D direct materials cost% A1--%666. he following transactions too, place during the year $all purchases and services were ac&uired on account':

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?e&uired: Prepare "ournal entries to record the information a!ove. >ey your entries to the letters a through l. Level: *edium LO: +%-%/ Ans:

1+1. he following cost data relate to the manufacturing activities of the >ana!a 2ompany last year:

he company uses a predetermined overhead rate to apply manufacturing overhead cost to production. he rate last year was A-.66 per machine#hourD a total of -%666 machine#hours were recorded for the year. ?e&uired: $a.' 2ompute the amount of underapplied or overapplied overhead cost for the year. $!.' Prepare a schedule of 2ost of 3oods *anufactured for the year. Level: *edium LO: -%/%5

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Ans:

1+5. estor Products uses a "o!#order costing system with a predetermined overhead rate !ased on machine#hours. he company closes out any underapplied or overapplied overhead to 2ost of 3oods 4old. ?e&uired: )f overhead is overapplied% what ad"ustment does the company ma,e to 2ost of 3oods 4old: )s 2ost of 3oods 4old increased or decreased: 9hy: Level: Easy LO: 5 Ans: )f overhead is overapplied% too much overhead has !een applied to inventories and they are therefore overcosted. 4ince these e0cess costs flow through to 2ost of 3oods 4old when finished goods are sold% it is necessary to reduce 2ost of 3oods 4old in order to eliminate this overstatement of costs. 1+8. A number of companies in different industries are listed below: (1.) Synthetic rubber manufacturer (2.) Contract printer that produces posters, books, and pamphlets to order (3.) Dress manufacturer that makes clothing on contract for department stores (4.) Aluminum refiner that makes aluminum ingots from bauxite ore (5.) Asparagus cannery (6.) Winery that produces a number of varietal wines Required: For each company, indicate whether the company is most likely to use job-order costing or process costing. Level: Easy LO: 1

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Ans: (1.) Synthetic rubber manufacturer; Process Costing (2.) Contract printer that produces posters, books, and pamphlets to order; Job-Order Costing (3.) Dress manufacturer that makes clothing on contract for department stores; Job-Order Costing (4.) Aluminum refiner that makes aluminum ingots from bauxite ore; Process Costing (5.) Asparagus cannery; Process Costing (6.) Winery that produces a number of varietal wines; Job-Order Costing

150. Whether a company uses process costing or job-order costing depends on its industry. A number of companies in different industries are listed below: (1.) Contract printer that produces posters, books, and pamphlets to order (2.) Asparagus cannery (3.) Brick manufacturer (4.) Contract oil drilling company (5.) Custom boat builder (6.) Flour mill Required: For each company, indicate whether the company is most likely to use job-order costing or process costing. Level: Easy LO: 1 Ans: (1.) Contract printer that produces posters, books, and pamphlets to order; Job-Order Costing (2.) Asparagus cannery; Process Costing (3.) Brick manufacturer; Process Costing (4.) Contract oil drilling company; Job-Order Costing (5.) Custom boat builder; Job-Order Costing (6.) Flour mill; Process Costing

151. Some companies use process costing and some use job-order costing. Which method a company uses depends on its industry. A number of companies in different industries are listed below: (1.) Contract printer that produces posters, books, and pamphlets to order (2.) Corn meal mill (3.) Cattle feedlot that fattens cattle prior to slaughter (4.) Shirt manufacturer that makes clothing on contract for department stores (5.) Commercial photographer Required: For each company, indicate whether the company is most likely to use job-order costing or process costing. Level: Easy LO: 1 Ans: (1.) Contract printer that produces posters, books, and pamphlets to order; Job-Order Costing (2.) Corn meal mill; Process Costing (3.) Cattle feedlot that fattens cattle prior to slaughter; Process Costing (4.) Shirt manufacturer that makes clothing on contract for department stores; Job-Order Costing (5.) Commercial photographer; Job-Order Costing

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152. Job 231 was recently completed. The following data have been recorded on its job cost sheet:

The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $11 per machine-hour. Required: Compute the unit product cost that would appear on the job cost sheet for this job. Level: Easy LO: 2,5 Ans: Cost Summary

153. Job 397 was recently completed. The following data have been recorded on its job cost sheet:

The company applies manufacturing overhead on the basis of direct labor-hours. The predetermined overhead rate is $37 per direct labor-hour. Required: Compute the unit product cost that would appear on the job cost sheet for this job. Level: Easy LO: 2,5 Ans: Cost Summary

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154. During December, Deller Corporation purchased $79,000 of raw materials on credit to add to its raw materials inventory. A total of $68,000 of raw materials was requisitioned from the storeroom for use in production. These requisitioned raw materials included $4,000 of indirect materials. Required: Prepare journal entries to record the purchase of materials and their use in production. Level: Easy LO: 4 Ans:

155. During December, Mccroskey Corporation incurred $66,000 of actual Manufacturing Overhead costs. During the same period, the Manufacturing Overhead applied to Work in Process was $69,000. Required: Prepare journal entries to record the incurrence of manufacturing overhead and the application of manufacturing overhead to Work in Process. Level: Easy LO: 4 Ans:

156. Pirkl Corporation has provided the following data for the month of March:

Additional information:

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Required: Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold in good form. Level: Medium LO: 6 Ans: Cost of Goods Manufactured

Cost of Goods Sold

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157. Schoff Corporation has provided the following data for the most recent month:

Transactions:

Required: Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, Manufacturing Overhead, and Cost of Goods Sold. Record the beginning balances and each of the transactions listed above. Finally, determine the ending balances. Level: Medium LO: 7 Ans:

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158. During January, Shanker Corporation recorded the following:

Transactions:

Required: Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, and Manufacturing Overhead, and Cost of Goods Sold. Record the beginning balances and each of the transactions listed above. Finally, determine the ending balances. Level: Medium LO: 7

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Ans:

159. Sowers Inc. has provided the following data for October:

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Transactions:

Required: Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, and Manufacturing Overhead, and Cost of Goods Sold. Record the beginning balances and each of the transactions listed above. Finally, determine the ending balances. Level: Medium LO: 7 Ans:

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