Exam Practice Questions - Chapter 2
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Which of the following statements is false?
Multiple Choice
Manufacturing costs include direct materials, direct labor, and manufacturing overhead.
Indirect labor is included in manufacturing overhead.
Raw materials include direct materials and exclude indirect materials.
Direct labor can be easily traced to individual units of product.
Raw materials include direct materials and exclude indirect materials.
Cost classifications used for assigning costs to cost objects include:
Multiple Choice
Variable cost and fixed cost.
Direct cost and indirect cost.
Product cost and period cost.
Relevant cost and irrelevant cost.
Direct cost and indirect cost.
Which of the following statements is true with respect to the cost of goods sold equation?
Multiple Choice
Cost of goods sold = beginning merchandise inventory + purchases − ending merchandise inventory
Cost of goods sold = beginning merchandise inventory − purchases + ending merchandise inventory
Cost of goods sold = ending merchandise inventory + purchases − beginning merchandise inventory
Cost of goods sold = ending merchandise inventory + purchases + beginning merchandise inventory
Cost of goods sold = beginning merchandise inventory + purchases − ending merchandise inventory
Which of the following statements is false?
Multiple Choice
Conversion costs include manufacturing overhead.
Prime costs include direct labor.
Conversion costs include direct labor.
Prime costs include manufacturing overhead.
Prime costs include manufacturing overhead.
If the conversion costs are $70,000, manufacturing overhead costs are $21,000, and direct material costs are $40,000, then the prime costs must be:
Multiple Choice
$49,000.
$89,000.
$30,000.
$9,000.
$89,000.
Step 1: Calculate the direct labor cost:
Conversion costs (a) | $ 70,000 |
Manufacturing overhead (b) | $ 21,000 |
Direct labor cost (a) − (b) | $ 49,000 |
Step 2: Calculate the total prime cost:
Direct materials (a) | $ 40,000 |
Direct labor cost (b) | 49,000 |
Prime cost (a) + (b) | $ 89,000 |
Which of the following is not a product cost?
Multiple Choice
Sales commissions
Direct materials
Direct labor
Variable manufacturing overhead
Sales commissions
Which of the following is not a period cost?
Multiple Choice
Sales commissions
Indirect materials
Advertising expense
Shipping expense
Indirect materials
Which of the following is a product cost?
Multiple Choice
Sales commissions
Sales salaries
Direct labor
Costs of finished goods warehousing
Direct labor
Which of the following is a period cost?
Multiple Choice
Executive compensation
Indirect materials
Direct materials
Insurance costs related to factory equipment
Executive compensation
Assume that a manufacturing company incurred the following costs:
Direct labor | $ 90,000 |
Advertising | $ 40,000 |
Factory supervision | $ 38,000 |
Sales commissions | $ 15,000 |
Depreciation, office equipment | $ 4,000 |
Indirect materials | $ 5,000 |
Depreciation, factory building | $ 20,000 |
Administrative office salaries | $ 1,000 |
Utilities, factory | $ 2,500 |
Direct materials | $ 108,000 |
Insurance, factory | $ 11,000 |
Property taxes, factory | $ 7,000 |
What is the total amount of manufacturing overhead?
Multiple Choice
$173,500
$80,500
$78,500
$83,500
$83,500
Manufacturing overhead includes all manufacturing costs except direct materials and direct labor.
Indirect materials | $ 5,000 |
Utilities, factory | 2,500 |
Factory supervision | 38,000 |
Depreciation, factory building | 20,000 |
Insurance, factory | 11,000 |
Property taxes, factory | 7,000 |
Total manufacturing overhead | $ 83,500 |
Assume that a manufacturing company incurred the following costs:
Direct labor | $ 90,000 |
Advertising | $ 40,000 |
Factory supervision | $ 35,000 |
Sales commissions | $ 15,000 |
Depreciation, office equipment | $ 4,000 |
Indirect materials | $ 5,000 |
Depreciation, factory building | $ 20,000 |
Administrative office salaries | $ 1,000 |
Utilities, factory | $ 2,500 |
Direct materials | $ 105,000 |
Insurance, factory | $ 6,000 |
Property taxes, factory | $ 7,000 |
What is the total amount of manufacturing overhead?
Multiple Choice
$165,500
$72,500
$70,500
$75,500
$75,500
Manufacturing overhead includes all manufacturing costs except direct materials and direct labor.
Indirect materials | $ 5,000 |
Utilities, factory | 2,500 |
Factory supervision | 35,000 |
Depreciation, factory building | 20,000 |
Insurance, factory | 6,000 |
Property taxes, factory | 7,000 |
Total manufacturing overhead | $ 75,500 |
Which of the following statements is true regarding job-order costing?
Multiple Choice
It is used in situations where many different products, each with unique features, are produced each period.
It is used for manufacturing companies, but not service companies.
It relies on a predetermined overhead rate to apply direct material cost to units of product.
It relies on a predetermined overhead rate to apply direct labor cost to units of product.
It is used in situations where many different products, each with unique features, are produced each period.
A predetermined overhead rate includes:
Multiple Choice
estimated total manufacturing overhead cost in the numerator.
Correct
only the fixed portion of the estimated manufacturing overhead cost in the numerator.
only the variable portion of the estimated manufacturing overhead cost in the numerator.
estimated total manufacturing overhead cost in the denominator.
estimated total manufacturing overhead cost in the numerator.
A predetermined overhead rate includes:
Multiple Choice
the actual total amount of the allocation base in the denominator.
the fixed portion of the estimated manufacturing overhead cost in the denominator.
the fixed portion of the actual manufacturing overhead cost in the denominator.
the estimated total amount of the allocation base in the denominator.
the estimated total amount of the allocation base in the denominator.
Which of the following statements is true regarding the formula used in normal costing for applying overhead cost to a specific job?
Multiple Choice
The predetermined overhead rate is multiplied by the estimated amount of the allocation base used by the job.
The actual overhead rate is multiplied by the actual amount of the allocation base used by the job.
The predetermined overhead rate is multiplied by the actual amount of the allocation base used by the job.
The actual overhead rate is multiplied by the estimated amount of the allocation base used by the job.
The predetermined overhead rate is multiplied by the actual amount of the allocation base used by the job.
A unit product cost includes:
Multiple Choice
Actual direct material cost used by the job.
Estimated direct material cost used by the job.
Estimated direct labor cost used by the job.
Actual manufacturing overhead cost used by the job.
Actual direct material cost used by the job.
A unit product cost includes:
Multiple Choice
Actual nonmanufacturing cost allocated to the job.
Estimated nonmanufacturing cost allocated to the job.
Actual direct labor cost used by the job.
Actual manufacturing overhead cost used by the job.
Actual direct labor cost used by the job.
A unit product cost is calculated by:
Multiple Choice
Dividing the total nonmanufacturing costs assigned to a job by the total number of units contained in the job.
Dividing the total manufacturing costs assigned to a job by the total number of units contained in the job.
Correct
Dividing the total manufacturing and nonmanufacturing costs assigned to a job by the total number of units contained in the job.
Dividing the total nonmanufacturing costs and normal costs assigned to job by the total number of units contained in the job.
Dividing the total manufacturing costs assigned to a job by the total number of units contained in the job.
Overhead application refers to applying:
Multiple Choice
Direct material costs to jobs.
Direct labor costs to jobs.
Nonmanufacturing overhead costs to jobs.
Manufacturing overhead costs to jobs.
Manufacturing overhead costs to jobs.
Assume the following:
Actual machine-hours worked during the period of 54,000 hours
Estimated machine-hours to be worked during the coming period of 55,000 hours
Manufacturing overhead applied to production during the period of $432,000
Estimated variable manufacturing overhead per machine-hour of $1.90.
The estimated fixed manufacturing overhead cost is closest to:
Multiple Choice
$335,500.
$327,500.
$329,400.
$331,300.
$335,500.
Step 1: Calculate the predetermined overhead rate.
Manufacturing overhead applied to production (a) | $ 432,000 |
Actual machine-hours worked during the period (b) | 54,000 |
Predetermined overhead rate (a) ÷ (b) | $ 8.00 |
Step 2: Calculate the estimated total manufacturing overhead cost.
Predetermined overhead rate (a) | $ 8.00 |
Estimated machine-hours for the coming period (b) | 55,000 |
Estimated total manufacturing overhead cost (a) × (b) | $ 440,000 |
Step 3: Calculate the estimated fixed manufacturing overhead cost.
Estimated total manufacturing overhead cost (a) | $ 440,000 |
Estimated variable manufacturing overhead cost (55,000 MH × $1.90) (b) | 104,500 |
Estimated fixed manufacturing overhead cost (a) − (b) | $335,500 |
Assume the following:
A company’s plantwide predetermined overhead rate is $15.50 per direct labor-hour
Its job cost sheet for Job X shows that this job used 18 direct labor-hours and incurred direct materials and direct labor charges of $500 and $360, respectively.
What is the total cost of Job X?
Multiple Choice
$905.00
$779.00
$875.50
$1,139.00
$1,139.00
The total cost of Job X is:
Direct materials | $ 500.00 |
Direct labor | 360.00 |
Manufacturing overhead applied (18 hours × $15.50 per DLH) | 279.00 |
Total job cost of Job X | $ 1,139.00 |
Assume the following:
A company’s plantwide predetermined overhead rate is $13.00 per direct labor-hour
Its job cost sheet for Job X shows that this job used 18 direct labor-hours and incurred direct materials and direct labor charges of $500 and $360, respectively.
If Job X contains 60 units, then its unit product cost is closest to:
Multiple Choice
$18.23.
$12.23.
$15.71.
$14.63.
$18.23.
The unit product cost of Job X is:
Direct materials | $ 500 |
Direct labor | 360 |
Manufacturing overhead applied (18 hours × $13.00 per DLH) | 234 |
Total job cost of Job X (a) | $ 1,094 |
Number of units in the job (b) | 60 |
Unit product cost (a) ÷ (b) | $ 18.23 |
At the beginning of the year, a company estimated a predetermined plantwide overhead rate of $8.50 per machine-hour. Job X used 10 machine-hours and it was charged $200 and $288 for direct materials and direct labor, respectively. What is the total job cost for Job X?
Multiple Choice
$488.00
$85.00
$452.00
$573.00
$573.00
Direct materials | $ 200.00 |
Direct labor | 288.00 |
Overhead applied to Job X ($8.50 per MH × 10 MHs) | 85.00 |
Total job cost of Job X | $ 573.00 |
At the beginning of the year, a company estimated a predetermined plantwide overhead rate of 140% of direct labor cost. Job X was charged $200 and $250 for direct materials and direct labor, respectively.
What is the total job cost for Job X?
Multiple Choice
$800
$550
$600
$850
$800
Direct materials | $ 200 |
Direct labor | 250 |
Overhead applied to Job X ($250 × $140%) | 350 |
Total job cost of Job X | $ 800 |
Assume a company has two manufacturing departments – Assembly and Fabrication. The company considers all of its manufacturing overhead costs to be fixed costs. The first set of data below is budgeted data for the company as a whole that was estimated at the beginning of the year. The second set of data below is actual data for the company as a whole that was derived at the end of the year. The third set of data relates to one particular job completed during the year– Job Z.
Budgeted Data | Assembly | Fabrication |
Manufacturing overhead costs | $ 300,000 | $ 400,000 |
Direct labor hours | 25,000 | 15,000 |
Machine hours | 10,000 | 50,000 |
Actual Data | Assembly | Fabrication |
Manufacturing overhead costs | $ 330,000 | $ 380,000 |
Direct labor hours | 27,000 | 16,000 |
Machine hours | 10,500 | 48,000 |
Job Z | Assembly | Fabrication | ||
Direct labor hours | 10 | hours | 2 | hours |
Machine hours | 1 | hour | 7 | hours |
If the company uses a plantwide approach for applying overhead to production with machine-hours as the allocation base, the company’s plantwide predetermined overhead rate is closest to:
Multiple Choice
$12.44
$12.14
$11.67
$11.44
$11.67
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead ($300,000 + $400,000) (a) | $ 700,000 |
|
Estimated total machine-hours (10,000 + 50,000) (b) | 60,000 | MHs |
Predetermined plantwide overhead rate (rounded) (a) ÷ (b) | $ 11.67 | per MH |
Assume a company has two manufacturing departments – Assembly and Fabrication. The company considers all of its manufacturing overhead costs to be fixed costs. The first set of data below is budgeted data for the company as a whole that was estimated at the beginning of the year. The second set of data below is actual data for the company as a whole that was derived at the end of the year. The third set of data relates to one particular job completed during the year– Job Z.
Budgeted Data | Assembly | Fabrication | |
Manufacturing overhead costs | $ 300,000 | $ 400,000 | |
Direct labor hours | 25,000 | 15,000 | |
Machine hours | 10,000 | 50,000 |
Actual Data | Assembly | Fabrication |
Manufacturing overhead costs | $ 330,000 | $ 380,000 |
Direct labor hours | 27,000 | 16,000 |
Machine hours | 10,500 | 48,000 |
Job Z | Assembly | Fabrication | ||
Direct labor hours | 9.50 | hours | 5 | hours |
Machine hours | 1 | hour | 7 | hours |
If the company uses a plantwide approach for applying overhead to production with direct labor-hours as the allocation base, how much manufacturing overhead would be applied to Job Z?
Multiple Choice
$253.75
$175.99
$206.25
$203.18
$253.75
Step 1: Calculate the predetermined plantwide overhead rate is computed as follows:
Estimated total manufacturing overhead ($300,000 + $400,000) (a) | $ 700,000 |
|
Estimated total direct labor-hours (25,000 + 15,000) (b) | 40,000 | DLHs |
Predetermined plantwide overhead rate (a) ÷ (b) | $ 17.50 | per DLH |
Step 2: Calculate the manufacturing overhead applied to Job Z as follows:
Actual direct labor-hours worked on Job Z (9.50 + 5) (a) | 14.50 | DLH |
Predetermined plantwide overhead rate (b) | $ 17.50 | per DLH |
Manufacturing overhead applied to Job Z (a) × (b) | $ 253.75 |
|
Assume a company has two manufacturing departments – Assembly and Fabrication. The company considers all of its manufacturing overhead costs to be fixed costs. The first set of data below is budgeted data for the company as a whole that was estimated at the beginning of the year. The second set of data below is actual data for the company as a whole that was derived at the end of the year. The third set of data relates to one particular job completed during the year– Job Z.
Budgeted Data | Assembly | Fabrication |
Manufacturing overhead costs | $ 300,000 | $ 400,000 |
Direct labor hours | 25,000 | 15,000 |
Machine hours | 10,000 | 50,000 |
Actual Data | Assembly | Fabrication |
Manufacturing overhead costs | $ 330,000 | $ 380,000 |
Direct labor hours | 27,000 | 16,000 |
Machine hours | 10,500 | 48,000 |
Job z | Assembly | Fabrication | ||
Direct labor hours | 10 | hours | 2 | hours |
Machine hours | 1 | hour | 7 | hours |
Assume the company uses departmental predetermined overhead rates. It uses direct labor-hours as the allocation base in Assembly and machine-hours as the allocation base in Fabrication. What is the predetermined overhead rate in the Fabrication Department?
Multiple Choice
$7.92
$8.00
$7.60
$8.60
$8.00
Estimated total manufacturing overhead in Fabrication (a) | $ 400,000 |
|
Estimated total machine-hours in Fabrication (b) | 50,000 | MHs |
Predetermined overhead rate in Fabrication (a) ÷ (b) | $ 8.00 | per MH |
Assume a company has two manufacturing departments – Assembly and Fabrication. The company considers all of its manufacturing overhead costs to be fixed costs. The first set of data below is budgeted data for the company as a whole that was estimated at the beginning of the year. The second set of data below is actual data for the company as a whole that was derived at the end of the year. The third set of data relates to one particular job completed during the year– Job Z.
Budgeted Data | Assembly | Fabrication |
Manufacturing overhead costs | $ 300,000 | $ 400,000 |
Direct labor hours | 25,000 | 15,000 |
Machine hours | 10,000 | 50,000 |
Actual Data | Assembly | Fabrication |
Manufacturing overhead costs | $ 330,000 | $ 380,000 |
Direct labor hours | 27,000 | 16,000 |
Machine hours | 10,500 | 48,000 |
Job Z | Assembly | Fabrication | ||
Direct labor hours | 14.00 | hours | 2 | hours |
Machine hours | 1 | hour | 11.00 | hours |
Assume the company uses departmental predetermined overhead rates. It uses direct labor-hours as the allocation base in Assembly and machine-hours as the allocation base in Fabrication. How much manufacturing overhead would be applied from both departments to Job Z?
Multiple Choice
$222
$236
$250
$256
$256
Step 1: Calculate the predetermined overhead rate in Assembly as follows:
Estimated total manufacturing overhead in Assembly (a) | $ 300,000 |
|
Estimated total direct labor-hours in Assembly (b) | 25,000 | DLHs |
Predetermined overhead rate in Assembly (a) ÷ (b) | $ 12.00 | per DLH |
Step 2: Calculate the predetermined overhead rate in Fabrication as follows:
Estimated total manufacturing overhead in Fabrication (a) | $ 400,000 |
|
Estimated total machine-hours in Fabrication (b) | 50,000 | MHs |
Predetermined overhead rate in Fabrication (a) ÷ (b) | $ 8.00 | per MH |
Step 3: Apply overhead from both departments to Job Z as follows:
Assembly | Fabrication | Total | |
Predetermined overhead rate (per DLH/MH) (a) | $ 12.00 | $ 8.00 |
|
Quantity of the allocation base used (DLH/MH) (b) | 14.00 | 11.00 |
|
Overhead applied (a) × (b) | $ 168 | $ 88 | $ 256 |
Assume a company has two manufacturing departments – Assembly and Fabrication. The company considers all of its manufacturing overhead costs to be fixed costs. The first set of data below is budgeted data for the company as a whole that was estimated at the beginning of the year. The second set of data below is actual data for the company as a whole that was derived at the end of the year. The third set of data relates to one particular job completed during the year– Job Z.
Budgeted Data | Assembly | Fabrication |
Manufacturing overhead costs | $ 300,000 | $ 400,000 |
Direct labor hours | 25,000 | 15,000 |
Machine hours | 10,000 | 50,000 |
Actual Data | Assembly | Fabrication |
Manufacturing overhead costs | $ 330,000 | $ 380,000 |
Direct labor hours | 27,000 | 16,000 |
Machine hours | 10,500 | 48,000 |
Job Z | Assembly | Fabrication | ||
Direct labor hours | 13.00 | hours | 2 | hours |
Machine hours | 1 | hour | 10.00 | hours |
Assume the company uses departmental predetermined overhead rates. It uses direct labor-hours as the allocation base in Assembly and machine-hours as the allocation base in Fabrication. How much manufacturing overhead would be applied from both departments to Job Z?
Multiple Choice
$203
$216
$229
$236
$236
Step 1: Calculate the predetermined overhead rate in Assembly as follows:
Estimated total manufacturing overhead in Assembly (a) | $ 300,000 |
|
Estimated total direct labor-hours in Assembly (b) | 25,000 | DLHs |
Predetermined overhead rate in Assembly (a) ÷ (b) | $ 12.00 | per DLH |
Step 2: Calculate the predetermined overhead rate in Fabrication as follows:
Estimated total manufacturing overhead in Fabrication (a) | $ 400,000 |
|
Estimated total machine-hours in Fabrication (b) | 50,000 | MHs |
Predetermined overhead rate in Fabrication (a) ÷ (b) | $ 8.00 | per MH |
Step 3: Apply overhead from both departments to Job Z as follows:
Assembly | Fabrication | Total | |
Predetermined overhead rate (per DLH/MH) (a) | $ 12.00 | $ 8.00 |
|
Quantity of the allocation base used (DLH/MH) (b) | 13.00 | 10.00 |
|
Overhead applied (a) × (b) | $ 156 | $ 80 | $ 236 |
Note 
Flashcards (123)