MBA 700 Homework 3 – Concept Questions With
Detailed Solutions
A company makes bikes from recycled metal. For a recent job lot of 200 bikes,
the company incurred direct materials costs of $6,000 and direct labor costs
of $2,000. Factory overhead applied to this job uses a predetermined
overhead rate of 150% of the direct materials cost. What is the cost per bike?
a. $75
b. $85
c. $65
d. $55
e. $95 Correct Answer - b. 85
Overhead costs = Direct Materials * rate
OH = $6,000 * 150% = $9,000
Cost per bike = (Direct Materials + Direct Labor + Overhead costs)/number of
bikes
Cost of bike = ($6,000 + $2,000 + $9,000)/200
Cost of bike = $17,000/200
Cost of bike = $85
A company that uses job order costing reports the following information.
Overhead is applied at the rate of 60% of direct materials. The company has
no beginning Work in Process or Finished Goods inventories. Jobs 1 and 3 are
not finished by the end of March, and Job 2 is finished but not sold by the end
of March.
Job 1 Job 2 Job 3
Direct materials used $ 13,200 $ 17,200 $ 6,200
Direct labor used $ 21,200 $ 11,200 $ 9,200
Determine the total dollar amount of Work in Process Inventory at the end of
March.
a. $48,520
b. $98,240
c. $61,440
d. $36,800 Correct Answer - c. 61,440
, Jobs 1 and 3 to be calculated here
Overhead costs = Direct Materials * rate
OH = ($13,200 * 60%) + ($6,200 * 60%)
OH = $11,640
WIP = Direct Materials + Direct Labor + Overhead costs
WIP = ($13,200 + $6,200) + ($21,200 + 9,200) + $11,640
WIP = $61,440
A document used to assign direct labor costs to individual jobs and track how
much time employees spend on each job is called a:
a. Factory overhead ledger
b. Payroll register
c. Time ticket
d. General ledger
e. Factory payroll record Correct Answer - c. Time ticket
A job order costing system is most likely used by which of the following?
a. a stereo manufacturing company
b. a pet food manufacturer
c. a paper manufacturing company
d. an accounting firm specializing in tax returns Correct Answer - d. an
accounting firm specializing in tax returns
Materials requisitioned to Work In Process and Manufacturing Overhead
departments amounted totally to $20,000, of which $15,000 belongs to Direct
Materials and the remaining belongs to Indirect Materials.
A Journal Entry to record this transaction would include:
a. Debit to Work in Process by $15,000.
b. Debit to Materials Inventory by $20,000.
c. Debit to Work in Process by $20,000.
d. Debit to Materials Inventory by $15,000. Correct Answer - a. Debit to
Work in Process by $15,000.
Andrew Industries purchased $170,000 of raw materials on account during
the month of March. The beginning Raw Materials Inventory balance was
Detailed Solutions
A company makes bikes from recycled metal. For a recent job lot of 200 bikes,
the company incurred direct materials costs of $6,000 and direct labor costs
of $2,000. Factory overhead applied to this job uses a predetermined
overhead rate of 150% of the direct materials cost. What is the cost per bike?
a. $75
b. $85
c. $65
d. $55
e. $95 Correct Answer - b. 85
Overhead costs = Direct Materials * rate
OH = $6,000 * 150% = $9,000
Cost per bike = (Direct Materials + Direct Labor + Overhead costs)/number of
bikes
Cost of bike = ($6,000 + $2,000 + $9,000)/200
Cost of bike = $17,000/200
Cost of bike = $85
A company that uses job order costing reports the following information.
Overhead is applied at the rate of 60% of direct materials. The company has
no beginning Work in Process or Finished Goods inventories. Jobs 1 and 3 are
not finished by the end of March, and Job 2 is finished but not sold by the end
of March.
Job 1 Job 2 Job 3
Direct materials used $ 13,200 $ 17,200 $ 6,200
Direct labor used $ 21,200 $ 11,200 $ 9,200
Determine the total dollar amount of Work in Process Inventory at the end of
March.
a. $48,520
b. $98,240
c. $61,440
d. $36,800 Correct Answer - c. 61,440
, Jobs 1 and 3 to be calculated here
Overhead costs = Direct Materials * rate
OH = ($13,200 * 60%) + ($6,200 * 60%)
OH = $11,640
WIP = Direct Materials + Direct Labor + Overhead costs
WIP = ($13,200 + $6,200) + ($21,200 + 9,200) + $11,640
WIP = $61,440
A document used to assign direct labor costs to individual jobs and track how
much time employees spend on each job is called a:
a. Factory overhead ledger
b. Payroll register
c. Time ticket
d. General ledger
e. Factory payroll record Correct Answer - c. Time ticket
A job order costing system is most likely used by which of the following?
a. a stereo manufacturing company
b. a pet food manufacturer
c. a paper manufacturing company
d. an accounting firm specializing in tax returns Correct Answer - d. an
accounting firm specializing in tax returns
Materials requisitioned to Work In Process and Manufacturing Overhead
departments amounted totally to $20,000, of which $15,000 belongs to Direct
Materials and the remaining belongs to Indirect Materials.
A Journal Entry to record this transaction would include:
a. Debit to Work in Process by $15,000.
b. Debit to Materials Inventory by $20,000.
c. Debit to Work in Process by $20,000.
d. Debit to Materials Inventory by $15,000. Correct Answer - a. Debit to
Work in Process by $15,000.
Andrew Industries purchased $170,000 of raw materials on account during
the month of March. The beginning Raw Materials Inventory balance was
