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## Freeman Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. At the beginning of the year, ...

2012-03-06
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Question:

Freeman Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated manufacturing overhead would be \$150,000 and direct labor-hours would be 10,000. The actual figures for the year were \$186,000 for manufacturing overhead and 12,000 direct labor-hours. The cost records for the year will show:

a)            Under applied overhead of \$30,000

b)            Over applied overhead of \$6,000

c)            Under applied overhead of \$6,000

d)            Over applied overhead of \$30,000

2.            Harrell Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. At the beginning of the year the company estimated its total manufacturing overhead cost at \$400,000 and its direct labor-hours at 100,000 hours. The actual overhead cost incurred during the year was \$350,000 and the actual direct labor-hours incurred on jobs during the year were 90,000 hours. The manufacturing overhead for the year would be:

a)            \$10,000 over applied

b)            \$50,000 over applied

c)            \$50,000 Under applied

d)            \$10,000 under applied

3.            Crimp Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 15,000 hours and the total estimated manufacturing overhead was \$258,000. At the end of the year, actual direct labor-hours for the year were 13,100 hours and the actual manufacturing overhead for the year was \$253,000. Overhead at the end of the year was:

a)            \$27,680 over applied

b)            \$27,680 under applied

c)            \$32,680 Over applied

d)            \$32,680 under applied

4.            Simplex Company has the following estimated costs for next year:

Direct material                                                  \$15,000

Direct labor                                                         \$55,000

Sales commission                                             \$75,000

Salary of production supervisor                 \$35,000

Indirect material                                               \$5,000

Rent on Factory Equipment                         \$16,000

Simplex estimates that 10,000 direct labor and 16,000 machine-hours will be worked during the year. If overhead is applied on the basis of machine-hours, the overhead rate per hour will be:

a)            \$3.50

b)            \$7.63

c)            \$8.56

d)            \$6.94

5.            In a job-order costing system, the journal entry to record the application of overhead cost to jobs would include:

a)            A credit to the Manufacturing Overhead account.

b)            a credit to the Work in Process inventory account.

c)            a debit to Cost of Goods Sold.

d)            a debit to the Manufacturing Overhead account.

6.            Ivory Company uses a job-order costing system. What year-end journal entry could Ivory make to dispose of (close out) \$4,150 of over applied manufacturing overhead cost?

A)           Finished Goods                                \$4,150

B)            Cost of Goods sold                         \$4,150

Finished Goods                                 \$4,150

Cost of Goods sold                          \$4,150

a)            D

b)            B

c)            C

d)            A

7.            In a job-order costing system, the use of indirect materials would usually be recorded as a debit to:

a)            Finished Goods.

b)            Raw Materials.

d)            Work in Process.

8.            In a job-order costing system, the entry to record depreciation on manufacturing equipment would include:

a)            a credit to the Work in Process inventory account.

b)            a debit to the Depreciation Expense account.

c)            a debit to the Work in Process inventory account.

d)            a debit to the Manufacturing Overhead account.

9.            Which of the following accounts is debited when indirect labor is recorded?

a)            Work in Process

b)            Salaries and Wages Expense

d)            Salaries and Wages Payable

10.          Melillo Corporation has provided data concerning the company\'s Manufacturing Overhead account for the month of October. Prior to the closing of the over applied or under applied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was \$67,000 and the total of the credits to the account was \$57,000. Which of the following statements is true?

a)            Manufacturing overhead for the month was over applied by \$10,000.

b)            Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was \$57,000.

c)            Actual manufacturing overhead for the month was \$67,000.

d)            Manufacturing overhead applied to Work in Process for the month was \$67,000.

11.          Waldvogel Corporation has provided data concerning the company\'s Manufacturing Overhead account for the month of April. Prior to the closing of the over applied or under applied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was \$55,000 and the total of the credits to the account was \$56,000. Which of the following statements is true?

a)            Manufacturing overhead for the month was under applied by \$1,000.

b)            Manufacturing overhead applied to Work in Process for the month was \$56,000.

c)            Actual manufacturing overhead incurred during the month was \$56,000.

d)            Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was \$55,000.

12.          Danoff Corporation has provided data concerning the company\'s 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 \$68,000 and the total of the credits to the account was \$77,000. Which of the following statements is true?

a)            Manufacturing overhead for the month was overapplied by \$9,000.

b)            Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was \$68,000.

c)            actual manufacturing overhead incurred during the month was \$77,000.

d)            Manufacturing overhead applied to Work in Process for the month was \$68,000.

13.          Lucy Sportswear manufactures a specialty line of T-shirts. The company uses a job-order costing system. During March, the following costs were incurred on Job ICU2: direct materials \$13,700 and direct labor \$4,800. In addition, selling and shipping costs of \$7,000 were incurred on the job. Manufacturing overhead was applied at the rate of \$25 per machine-hour and Job ICU2 required 800 machine-hours. If Job ICU2 consisted of 7,000 shirts, the Cost of Goods Sold per shirt was:

a)            \$5.70

b)            \$6.00

c)            \$5.50

d)            \$6.50

14.          Freeman Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated manufacturing overhead would be \$222,600 and direct labor-hours would be 10,600. The actual figures for the year were \$265,000 for manufacturing overhead and 12,600 direct labor-hours. The cost records for the year will show:

a)            Under applied overhead of \$42,000

b)            Over applied overhead of \$42,000

c)            Under applied overhead of \$400

d)            Over applied overhead of \$400

15.          Lucy Sportswear manufactures a specialty line of T-shirts. The company uses a job-order costing system. During March, the following costs were incurred on Job ICU2: direct materials \$14,600 and direct labor \$5,700. In addition, selling and shipping costs of \$7,900 were incurred on the job. Manufacturing overhead was applied at the rate of \$34 per machine-hour and Job ICU2 required 890 machine-hours. If Job ICU2 consisted of 7,900 shirts, the Cost of Goods Sold per shirt was

a)            \$6.6

b)            \$6.4

c)            \$7.4

d)            \$6.9

16.          Sweet Company applies overhead to jobs on the basis of 116% of direct labor cost. If Job 107 shows \$30,160 of manufacturing overhead applied, how much was the direct labor cost on the job?

a)            \$30,160

b)            \$26,000

c)            \$34,986

d)            \$32,573

17.          The Lee Company uses a job-order costing system. The following data were recorded for June:

Job Number                       June 1 Work in Process Inventory             Direct Materials                                Direct Labor

235                                                         \$2,570                                                   \$770                                       \$530

236                                                         \$1,680                                                   \$990                                       \$1,060

237                                                         \$1,090                                                   \$1,390                                   \$1,870

238                                                         \$940                                                       \$1,540                                   \$2,290

Overhead is charged to production at 60% of direct materials cost. Jobs 235, 237, and 238 were completed during June and transferred to finished goods. Jobs 235 and 238 have been delivered to customers.

Lee\'s Work in Process inventory balance on June 30 was:

a)            \$4,690

b)            \$4,044

c)            \$4,324

d)            \$3,730

18.          Eccles Corporation uses a job-order costing system and applies overhead to jobs using a predetermined overhead rate. During the year the company\'s Finished Goods inventory account was debited for \$372,000 and credited for \$344,900. The ending balance in the Finished Goods inventory account was \$71,000. At the end of the year, manufacturing overhead was under applied by \$4,400.

The balance in the Finished Goods inventory account at the beginning of the year was:

a)            \$71,000

b)            \$4,400

c)            \$43,900

d)            \$27,100

19.          If a company applies overhead to jobs on the basis of a predetermined overhead rate, a credit balance in the Manufacturing Overhead account at the end of any period means that:

a)            The amount of overhead cost charged to jobs is greater than the estimated cost for the period.

b)            More overhead cost has been incurred during the period than has been charged to jobs.

c)            More overhead cost has been charged to jobs than has been incurred during the period.

d)            The amount of overhead cost charged to jobs is less than the estimated overhead cost for the period.

20.          Which of the following situations always results in under applied overhead?

21. When closing over applied manufacturing overhead to cost of goods sold, which of the following would be true?

a)            Gross margin will increase.

b)            Cost of goods sold will increase.

c)            Work in process will decrease.

d)            Net income will decrease.

22.          The actual manufacturing overhead incurred at Huberty Corporation during January was \$73,000, while the manufacturing overhead applied to Work in Process was \$78,000. The company\'s Cost of Goods Sold was \$349,000 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 was over applied by \$5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is \$354,000

b)            Manufacturing overhead was under applied by \$5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is \$344,000

c)            Manufacturing overhead was under applied by \$5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is \$354,000

d)            Manufacturing overhead was over applied by \$5,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is \$344,000

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