ACNT 2402 Chapter 02 -Questions and Answers 2023& study guide with complete solution

1. The use of a predetermined overhead rate in a job-order cost system makes it possible to compute the total cost of a job before production is begun. FALSE 2. If direct labor-hours is used as the allocation base in a job-order costing system, but overhead costs are not caused by direct-labor hours, then jobs with high direct labor requirements will tend to be undercosted relative to jobs with low direct labor requirements. FALSE 3. The formula for computing the predetermined overhead rate is: Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base TRUE 4. When the predetermined overhead rate is based on direct labor-hours, the amount of overhead applied to a job is proportional to the estimated amount of direct labor-hours for the job. FALSE 5. The cost of a completed job in a job-order costing system typically consists of the actual direct materials cost of the job, the actual direct labor cost of the job, and the manufacturing overhead cost applied to the job. TRUE 6. Job cost sheets are used to record the costs of preparing routine accounting reports. FALSE 7. In a job-order cost system, direct labor is assigned to a job using information from the employee time ticket. TRUE 8. The cost categories that appear on a job cost sheet include selling expense, manufacturing expense, and administrative expense. FALSE Page 2 of 26 9. When completed goods are sold, the transaction is recorded as a debit to Cost of Goods Sold and a credit to Finished Goods. TRUE 11. The sum of all amounts transferred from the Work in Process account to the Finished Goods account represents the Cost of Goods Sold for the period. FALSE 12. Indirect materials are charged to specific jobs. FALSE 13. When a job is completed, the goods are transferred from the production department to the finished goods warehouse and the journal entry would include a debit to Work in Process. FALSE 14. Manufacturing overhead is overapplied if actual manufacturing overhead costs for a period are greater than the amount of manufacturing overhead cost that was charged to Work in Process. FALSE 15. If the actual manufacturing overhead cost for a period exceeds the manufacturing overhead cost applied, then manufacturing overhead would be considered to be underapplied. TRUE Page 3 of 26 16. Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company misclassified a portion of direct labor cost as indirect labor. The effect of this misclassification will be to: A. understate the predetermined overhead rate. B. overstate the predetermined overhead rate. C. have no effect on the predetermined overhead rate. D. cannot be determined from the informa