Exam 14 August 2019, questions and answers PDF

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Chapter 3Systems Design: Job-Order CostingTrue/False1.TEasyJob-order costing would be more likely to be used than process costing in situations where many different products or services are produced each period to customer specifications.2. F EasyJob-order costing is used in manufacturing companies ...

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Chapter 3 Systems Design: Job-Order Costing

True/False 1. T Easy

Job-order costing would be more likely to be used than process costing in situations where many different products or services are produced each period to customer specifications.

2. F Easy

Job-order costing is used in manufacturing companies and process costing is used in service firms.

3. F Easy

In a job-order costing system, costs are traced to departments and then allocated to units of product using an average process.

4. F Medium

Normally a job cost sheet is not prepared for a job until after the job has been completed.

5. F Easy

Job cost sheets contain entries for actual direct material, actual direct labor, and actual manufacturing overhead cost incurred in completing a job.

6. F Medium

In order to improve the accuracy of unit costs, most companies recompute the predetermined overhead rate each month.

7. T Medium

The following journal entry would be made to apply overhead cost to jobs in a job-order costing system: Work in Process ............... XXX Manufacturing Overhead ...

XXX

8. T Easy

When the predetermined overhead rate is based on direct labor-hours, the amount of overhead applied to a job is proportional to the amount of actual direct labor-hours incurred on the job.

9. F Medium

When completed goods are sold the transaction is recorded as a debit to Cost of Goods Sold and a credit to Work in Process.

10. F Hard

The most common accounting treatment of underapplied manufacturing overhead is to transfer it to the Manufacturing Overhead control account.

11. F Medium

In job-order costing, the Work in Process inventory account contains the actual costs of direct labor, direct materials, and manufacturing overhead incurred on partially completed jobs.

12. T Easy

Nonmanufacturing costs are expensed as incurred, rather than going into the Work in Process account.

13. F

A credit balance in the Manufacturing Overhead account at the end of the year means that overhead was underapplied.

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Medium 14. T Easy

Indirect materials are not charged to a specific job but rather are included in manufacturing overhead.

15. T Easy

The labor time ticket contains a detailed summary of the direct and the indirect labor hours of an employee.

Multiple Choice 16. B Easy

Which of the following companies would be most likely to use a joborder costing system rather than a process costing system? a. fast food restaurant b. shipbuilding c. crude oil refining d. candy making

17. B Easy CMA adapted

The computation of unit product costs involves an averaging process in:

18. A Easy

Work in Process is a control account supported by detailed cost data contained in: a. job cost sheets. b. the Manufacturing Overhead account. c. the Finished Goods inventory account. d. purchase requisitions.

19. D Medium

In job-order costing, all of the following statements are correct respect to labor time and cost except: a. time tickets are kept by employees showing the amount of on specific jobs. b. the job cost sheet for a job will contain all direct labor charges to that particular job. c. labor cost that can be traced to a job only with a great of effort is treated as part of manufacturing overhead. d. a machine operator performing routine annual maintenance on a piece of equipment would charge the maintenance time to a specific job.

a. b. c. d.

Job-order costing Yes Yes No No

Process costing No Yes Yes No

20. A Medium

In a job order cost 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.

21. C Medium

In a job-order cost system, the use of indirect materials would usually be recorded as a debit to: a. Raw Materials. b. Work in Process. c. Manufacturing Overhead. d. Finished Goods.

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22. A Easy CPA adapted

In a job order cost system, the use of direct materials previously purchased usually is recorded as a debit to: a. Work in Process inventory. b. Finished Goods inventory. c. Manufacturing Overhead. d. Raw Materials inventory.

23. D Easy

In a job-order cost system, direct labor costs usually are recorded initially with a debit to: a. Manufacturing Overhead. b. Finished Goods inventory. c. Direct Labor Expense. d. Work in Process.

24. A Medium

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. more overhead cost has been charged to jobs than has been incurred during the period. b. more overhead cost has been incurred during the period than has been charged to jobs. c. the amount of overhead cost charged to jobs is greater than the estimated cost for the period. d. the amount of overhead cost charged to jobs is less than the estimated overhead cost for the period.

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25. D Medium

In a job order cost system, the amount of overhead cost that has been applied to a job that remains incomplete at the end of a period: a. is deducted on the Income Statement as overapplied overhead. b. is closed to Cost of Goods Sold. c. is transferred to Finished Goods at the end of the period. d. is part of the ending balance of the Work in Process inventory account.

26. B Hard

The Work in Process inventory account of a manufacturing company shows a balance of P2,400 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of P400 and P200 for direct materials, and charges of P300 and P500 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of: a. 80%. b. 125%. c. 300%. d. 240%.

27. C Medium

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 P150,000 and direct labor hours would be 10,000. The actual figures for the year were P186,000 for manufacturing overhead and 12,000 direct labor hours. The cost records for the year will show: a. overapplied overhead of P30,000. b. underapplied overhead of P30,000. c. underapplied overhead of P6,000. d. overapplied overhead of P6,000.

28. B Medium

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 P400,000 and its direct labor-hours at 100,000 hours. The actual overhead cost incurred during the year was P350,000 and the actual direct labor hours incurred on jobs during the year was 90,000 hours. The manufacturing overhead for the year would be: a. P10,000 underapplied. b. P10,000 overapplied. c. P50,000 underapplied. d. P50,000 overapplied.

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29. A Hard

For the current year, Paxman Company incurred P150,000 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was overapplied in the amount of P6,000 for the year. If the predetermined overhead rate was P8.00 per direct labor hour, how many hours were worked during the year? a. 19,500 hours b. 18,000 hours c. 18,750 hours d. 17,750 hours

30. B Medium CPA adapted

Carlo Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. The company estimated manufacturing overhead at P255,000 for the year and direct labor-hours at 100,000 hours. Actual manufacturing overhead costs incurred during the year totaled P270,000. Actual direct labor hours were 105,000. What was the overapplied or underapplied overhead for the year? a. P2,250 overapplied. b. P2,250 underapplied. c. P15,000 overapplied. d. P15,000 underapplied.

31. D Medium

Sawyer Manufacturing Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. Last year, the company worked 57,000 actual direct labor hours and incurred P345,000 of actual manufacturing overhead cost. The Company had estimated that it would work 55,000 direct labor hours during the year and incur P330,000 of manufacturing overhead cost. The company's manufacturing overhead cost for the year was: a. overapplied by P15,000. b. underapplied by P15,000. c. overapplied by P3,000. d. underapplied by P3,000.

32. D Easy

The Watts Company uses manufacturing overhead based on labor cost in beginning of the year,

predetermined overhead rates to apply to jobs. The predetermined overhead rate is Dept. A and on machine hours in Dept. B. At the the company made the following estimates: Dept. A Dept. B Direct labor cost ........ P30,000 P40,000 Manufacturing overhead ... 60,000 50,000 Direct labor hours ....... 6,000 8,000 Machine hours ............ 2,000 10,000

What predetermined overhead rates would be used in Dept A and Dept B, respectively? a. 50% and P8.00 b. 50% and P5.00 c. P15 and 110% d. 200% and P5.00

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33. C Easy

Compton Company uses a predetermined to production orders on a labor cost machine hours basis in Department B. recently completed year, the company Direct labor cost ........ Factory overhead ......... Direct labor hours ....... Machine hours ............

overhead rate in applying overhead basis in Department A and on a At the beginning of the most made the following estimates:

Dept. A P56,000 67,200 8,000 4,000

Dept. B P33,000 45,000 9,000 15,000

What predetermined overhead rate would be used in Department A and Department B, respectively? a. 83% and P5 b. 83% and P3 c. 120% and P3 d. 83% and P3 34. C Medium

Kelsh Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for next year: Direct materials .................. Direct labor ...................... Sales commissions ................. Salary of production supervisor ... Indirect materials ................ Advertising expense ............... Rent on factory equipment .........

P10,000 30,000 40,000 20,000 4,000 8,000 10,000

Kelsh estimates that 5,000 direct labor hours and 10,000 machine hours will be worked during the year. The predetermined overhead rate per hour will be: a. P6.80. b. P6.40. c. P3.40. d. P8.20.

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35. D Medium

Simplex Company has the following estimated costs for next year: Direct materials .................... Direct labor ........................ Sales commissions ................... Salary of production supervisor ..... Indirect materials .................. Advertising expense ................. Rent on factory equipment ...........

P15,000 55,000 75,000 35,000 5,000 11,000 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. P8.56. b. P7.63. c. P6.94. d. P3.50. 36. A Medium

CR Company has the following estimated costs for the next year: Direct materials ..................... Direct labor ......................... Rent on factory building ............. Sales salaries ....................... Depreciation on factory equipment .... Indirect labor ....................... Production supervisor’s salary .......

P 4,000 20,000 15,000 25,000 8,000 10,000 12,000

CR Company 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: a. P2.25. b. P3.25. c. P3.45. d. P4.70. 37. D Medium

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 P13,700 and direct labor P4,800. In addition, selling and shipping costs of P7,000 were incurred on the job. Manufacturing overhead was applied a the rate of P25 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. P6.50 b. P6.00 c. P5.70 d. P5.50

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38. B Hard CPA adapted

Lucas Co. has a job order cost system. For the month of April, the following debits (credits) appeared in the Work in Process account: April 1 30 30 30 30

Balance .................. P 24,000 Direct materials ......... 80,000 Direct labor ............. 60,000 Manufacturing overhead ... 54,000 To finished goods ........ (200,000)

Lucas applies overhead at a predetermined rate of 90% of direct labor cost. Job No. 100, the only job still in process at the end of April, has been charged with manufacturing overhead of P4,500. The amount of direct materials charged to Job No. 100 was: a. P18,000. b. P8,500. c. P5,000. d. P4,500. 39. C Hard CPA adapted

Worrell Corporation has a job-order cost system. The following debits (credits) appeared in the Work in Process account for the month of March: March March March March March

1, balance ....................... 31, direct materials ............. 31, direct labor ................. 31, manufacturing overhead applied 31, to finished goods ............

P

12,000 40,000 30,000 27,000 (100,000)

Worrell applies overhead at a predetermined rate of 90% of direct labor cost. Job No. 232, the only job still in process at the end of March, has been charged with manufacturing overhead of P2,250. What was the amount of direct materials charged to Job No. 232? a. P2,250 b. P2,500 c. P4,250 d. P9,000

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40. D Medium

The Samuelson Company uses a job-order cost system. The following data were recorded for June:

Job Number 475 476 477 478

June 1 Work in Process Inventory P1,000 P 900 P 800 P 600

Added During June Direct Direct Materials Labor P 400 P 200 P 600 P 800 P 900 P1,400 P 1,100 P1,900

Overhead is charged to production at 70% of the direct materials cost. Jobs 475, 477, and 478 have been delivered to the customer. Samuelson’s Work in Process inventory balance on June 30 was: a. P6,450. b. P2,860. c. P2,300. d. P2,720. 41. B Easy

Beaver Company used a predetermined overhead rate last year of P2 per direct labor hour, based on an estimate of 25,000 direct labor hours to be worked during the year. Actual costs and activity during the year were: Actual manufacturing overhead cost incurred Actual direct labor hours worked ..........

P47,000 24,000

The under- or overapplied overhead last year was: a. P1,000 underapplied. b. P1,000 overapplied. c. P3,000 overapplied. d. P2,000 underapplied. 42. B Hard

Dowan Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. Last year Dowan Company incurred P156,600 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was underapplied by P12,600 for the year. If the predetermined overhead rate is P6.00 per direct labor hour, how many hours did the company work during the year? a. 26,000 hours b. 24,000 hours c. 28,200 hours d. 25,000 hours

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43. D Medium

Paul Company completed of direct labor and activity

used a predetermined overhead rate during the year just P3.50 per direct labor hour, based on an estimate of 22,000 hours to be worked during the year. Actual overhead cost during the year were:

Actual manufacturing overhead cost incurred .. Actual direct labor hours worked .............

P90,000 25,000

The under- or overapplied overhead for the year would be: a. P13,000 underapplied. b. P10,500 overapplied. c. P2,500 overapplied. d. P2,500 underapplied. 44. A Medium

Sweet Company applies overhead to jobs on the basis of 125% of direct labor cost. If Job 107 shows P10,000 of manufacturing overhead applied, how much was the direct labor cost on the job? a. P8,000 b. P12,500 c. P11,250 d. P10,000

45. C Medium

Knowlton Company applies overhead to completed jobs on the basis of 70% of direct labor cost. If Job 501 shows P21,000 of manufacturing overhead applied, the direct labor cost on the job was: a. P14,700. b. P21,000. c. P30,000. d. P27,300.

46. A Hard

The balance in White Company's Work in Process inventory account was P15,000 on August 1 and P18,000 on August 31. The company incurred P30,000 in direct labor cost during August and requisitioned P25,000 in raw materials (all direct material). If the sum of the debits to the Manufacturing Overhead account total P28,000 for the month, and if the sum of the credits totaled P30,000, then: a. Finished Goods was debited for P82,000 during the month. b. Finished Goods was credited for P83,000 during the month. c. Manufacturing Overhead was underapplied by P2,000 at the end of the month. d. Finished Goods was debited for P85,000 during the month.

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47. B Medium

Under Lamprey Company's job-order costing system, manufacturing overhead is applied to Work in Process inventory using a predetermined overhead rate. During January, Lamprey's transactions included the following: Direct materials issued to production .... Indirect materials issued to production .. Manufacturing overhead cost incurred ..... Manufacturing overhead cost applied ...... Direct labor cost incurred ...............

P 90,000 8,000 125,000 113,000 107,000

Lamprey Company had no beginning or ending inventories. What was the cost of goods manufactured for January? a. P302,000 b. P310,000 c. P322,000 d. P330,000 48. A Easy

Compute the amount of direct materials used during November if P20,000 in raw materials were purchased during the month and if the inventories were as follows: Balance November 1 Raw materials .... P 4,000 Work in process .. 12,000 Finished goods ... 24,000 a. b. c. d.

49. C Hard

Balance November 30 P 3,000 15,000 27,000

P21,000. P19,000. P18,000. P15,000.

Sharp Company's records show that overhead was overapplied by P10,000 last year. This overapplied overhead was closed out to the Cost of Goods Sold account at the end of the year. In trying to determine why overhead was overapplied by such a large amount, the company has discovered that P6,000 of depreciation on factory equipment was charged to administrative expense in error. Given the above information, which of the following statements is true? a. Manufacturing overhead was actually overapplied by P16,000 for the year. b. The company's net income is understated by P6,000 for the year. c. Under t...