Test Bank for Introduction to Managerial Accounting 5th Edition Brewer, Garrison, Noreen

Chapter 02 Systems Design: Job-Order Costing True / False Questions 1. 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. True False 2. In a job-order costing system, costs are traced to departments and then allocated to units of product using an average process. True False 3. Job-order costing is used in those situations where units of a product are homogeneous, such as in the manufacture of sugar. True False 4. Job-order costing is usually not used in service organizations such as hospitals and law firms. True False 5. The three cost categories appearing on a job cost sheet are: selling expense, manufacturing expense, and administrative expense. True False 6. The labor time ticket contains the details of how much time an employee takes on each task throughout the day. True False Full file at Garrison,-Noreen 2-3 7. In order to improve the accuracy of unit costs, most companies recompute the predetermined overhead rate each month. True False 8. Use of a single, plantwide overhead rate is generally appropriate only for very large manufacturing companies. True False 9. Predetermined overhead rates are based on actual cost and activity data. True False 10. The following journal entry would be made to apply overhead cost to jobs in a job-order costing system: True False 11. When completed goods are sold, the transaction is recorded as a debit to Cost of Goods Sold and a credit to Work in Process. True False 12. 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. True False 13. Actual manufacturing overhead costs are traced to specific jobs. True False Full file at Garrison,-Noreen 2-4 14. A credit balance in the Manufacturing Overhead account at the end of the year means that overhead was underapplied. True False 15. The sum of all amounts transferred from the Work in Process account and into the Finished Goods account represents the Cost of Goods Manufactured for the period. True False 16. The most common accounting treatment of underapplied manufacturing overhead is to transfer it to the Manufacturing Overhead control account. True False Multiple Choice Questions 17. Which of the following companies would be most likely to use a job-order costing system rather than a process costing system? A. fast food restaurant B. shipbuilding C. crude oil refining D. candy making 18. Computing unit product costs involves averaging in: A. A B. B C. C D. D Full file at Garrison,-Noreen 2-5 19. For which situation(s) below would an organization be more likely to use a job-order costing system of accumulating product costs rather than a process costing system? A. a steel factory that processes iron ore into steel bars B. a factory that processes sugar and other ingredients into black licorice C. a costume maker that makes specialty costumes for figure skaters D. all of the above 20. In job-order costing, all of the following statements are correct with respect to labor time and cost except: A. time tickets are kept by employees showing the amount of work 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 deal of effort is treated as part of manufacturing overhead. D. a machine operator performing routine annual maintenance work on a piece of equipment would charge the maintenance time to a specific job. 21. Which of the following documents is used to specify the type and quantity of materials drawn from the storeroom, and identifies the job to which the costs of the materials are to be charged? A. Job Cost Sheet B. Bill of Materials C. Material Requisition Form D. Purchase Order 22. Choice of allocation base should be made based on: A. the relative size of the base. B. the base'srelation to direct labor. C. the base's activity. D. whether the base actually drives the cost being allocated. Full file at Garrison,-Noreen 2-6 23. 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. 24. Ivory Company uses a job-order costing system. What year-end journal entry could Ivory make to dispose of (close out) $4,150 of overapplied manufacturing overhead cost? A. A B. B C. C D. D 25. In a job-order costing 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. 26. In a job-order costing system, direct labor costs usually are recorded initially with a debit to: A. Manufacturing Overhead. B. Finished Goodsinventory. C. Direct Labor Expense. D. Work in Process. Full file at Garrison,-Noreen 2-7 27. In a job-order costing system, the entry to record depreciation on manufacturing equipment would include: A. a debit to the Work in Process inventory account. B. a debit to the Depreciation Expense account. C. a debit to the Manufacturing Overhead account. D. a credit to the Work in Process inventory account. 28. Which of the following accounts is debited when indirect labor is recorded? A. Work in Process B. Salaries and Wages Expense C. Salaries and Wages Payable D. Manufacturing Overhead 29. When applying manufacturing overhead to jobs, the formula to calculate the amount is as follows: A. Predetermined overhead rate divided by the actual manufacturing overhead incurred on the particular job. B. Predetermined overhead rate times the actual manufacturing overhead incurred on the particular job. C. Predetermined overhead rate divided by the actual units of allocation base charged to the particular job. D. Predetermined overhead rate times the actual units of allocation base charged to the particular job. 30. In a job-order costing 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. Full file at Garrison,-Noreen 2-8 31. 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. 32. Which of the following situations always results in underapplied overhead? A. actual overhead is greater than applied overhead B. actual overhead is less than applied overhead C. estimated overhead is greater than actual overhead D. estimated overhead is less than actual overhead 33. When closing overapplied manufacturing overhead to cost of goods sold, which of the following would be true? A. Work in process will decrease. B. Cost of goods sold will increase. C. Net income will decrease. D. Gross margin will increase. 34. The Work in Process inventory account of a manufacturing company shows a balance of $2,400 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of $400 and $200 for direct materials, and charges of $300 and $500 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% Full file at Garrison,-Noreen 2-9 35. Job 607 was recently completed. The following data have been recorded on its job cost sheet: The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $14 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 607 would be: A. $4,107 B. $6,319 C. $3,432 D. $4,863 36. The following data have been recorded for recently completed Job 501 on its job cost sheet. Direct materials cost was $3,067. A total of 30 direct labor-hours and 104 machinehours were worked on the job. The direct labor wage rate is $12 per labor-hour. The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $11 per machine-hour. The total cost for the job on its job cost sheet would be: A. $4,571 B. $3,757 C. $3,090 D. $3,427 37. 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 laborhours. The cost records for the year will show: A. overapplied overhead of $30,000 B. underapplied overhead of $30,000 C. underapplied overhead of $6,000 D. overapplied overhead of $6,000 Full file at Garrison,-Noreen 2-10 38. 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 was 90,000 hours. The manufacturing overhead for the year would be: A. $10,000 underapplied B. $10,000 overapplied C. $50,000 underapplied D. $50,000 overapplied 39. For the current year, Paxman Company incurred $150,000 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was overapplied in the amount of $6,000 for the year. If the predetermined overhead rate was $8.00 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 40. At the beginning of the year, manufacturing overhead for the year was estimated to be $702,450. At the end of the year, actual direct labor-hours for the year were 33,100 hours, the actual manufacturing overhead for the year was $697,450, and manufacturing overhead for the year was overapplied by $40,680. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been: A. 31,500 direct labor-hours B. 29,452 direct labor-hours C. 31,276 direct labor-hours D. 33,100 direct labor-hours Full file at Garrison,-Noreen 2-11 41. Brabo Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 15,700 hours. At the end of the year, actual direct labor-hours for the year were 16,700 hours, the actual manufacturing overhead for the year was $352,960, and manufacturing overhead for the year was overapplied by $27,800. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been: A. $327,124 B. $357,960 C. $380,760 D. $347,960 42. 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 laborhours 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 overapplied B. $32,680 overapplied C. $27,680 underapplied D. $32,680 underapplied 43. Dagnon Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $299,130. At the end of the year, actual direct labor-hours for the year were 17,400 hours, manufacturing overhead for the year was overapplied by $13,850, and the actual manufacturing overhead was $294,130. The predetermined overhead rate for the year must have been closest to: A. $17.70 B. $17.19 C. $18.22 D. $16.90 Full file at Garrison,-Noreen 2-12 44. The Watts Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and on machinehours in Dept. B. At the beginning of the year, the company made the following estimates: What predetermined overhead rates would be used in Dept A and Dept B, respectively? A. 50% and $8.00 B. 50% and $5.00 C. $15 and 110% D. 200% and $5.00 45. Simplex Company has the following estimated costs for next year: 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. $8.56 B. $7.63 C. $6.94 D. $3.50