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Exam 2: Job-Order Costing for Manufacturing and Service Companies

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Question 31

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Reason Apparel applied overhead totaling $140,000 during March. Inventories were as follows: $\begin{array} { l c c } & \text { Beginning } & \text { Ending } \\\text { Raw material } & \$ 15,000 & \$ 21,000 \\\text { Work in Process } & \$ 24,000 & \$ 26,000 \\\text { Finished Goods } & \$ 11,000 & \$ 15,000\end{array}$ How much is cost of goods manufactured?

A) $138,000
B) $136,000
C) $140,000
D) Not enough information provided

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Question 32

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At the end of 2013, Harbin Toys had the following balances in its accounts $\begin{array} { l r } \text { Raw Materials Inventory } & \$ 12,000 \\\text { Work in Process Inventory } & 30,000 \\\text { Finished Goods Inventory } & 48,000 \\\text { Cost of Goods Sold } & 360,000 \\\text { Manufacturing Overhead (credit) } & 3,200\end{array}$ Assuming the amount in Manufacturing Overhead is considered immaterial, which of the following accounts will be credited for $3,200 in eliminating the Manufacturing Overhead?

A) Raw Materials Inventory
B) Work in Process Inventory
C) Manufacturing Overhead
D) Cost of Goods Sold

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Question 33

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Which of the following is a manufacturing cost?

Kamins Company uses a predetermined overhead rate of $6.00 per machine hour. Overhead was underapplied by $40,000 for the year, and actual machine hours totaled 70,000. How much was the actual overhead cost?

To what should the allocation base used to apply overhead be most strongly associated?

To which of the following is the goal of minimizing raw materials and work in process inventories considered to be a key objective?

Raindrop Gear utilizes job-order costing for production of umbrellas. Each division establishes its own estimates regarding overhead, which are as follows: $\begin{array}{lrr}&\text { Division A }&\text { Division B }\\\text { Total estimated overhead } & \$ 78,750 & \$ 240,000 \\\text { Total estimated machine hours } & 26,250 & 15,000 \\\text { Total estimated direct labor costs } & \$ 262,500 & \$ 120,000\end{array}$ If Division A allocates overhead on the basis of direct labor costs, and Division B allocates overhead based on machine hours, what will be the predetermined overhead rate for each division? $\begin{array}{lll}&\text { Division A }&\text { Division B }\\\text { A. } & \$ 3.00 \text { per direct labor dollar } & \$ 16.00 \text { per machine hour } \\\text { B. } & \$ 3.00 \text { per machine direct labor dollar } & \$ 0.625 \text { per machine hour } \\\text { C. } & \$ 0.30 \text { per machine direct labor dollar } & \$ 16.00 \text { per machine hour } \\\text { D. } & \$ 0.30 \text { per machine direct labor dollar } & \$ 2.00 \text { per machine hour }\end{array}$

Product costs

Process costing systems are generally used by companies that produce large quantities of identical items.

Cost of goods manufactured equals $44,000 for 2013. Finished goods inventory is $2,500 at the beginning of the year and $5,500 at the end of the year. Total manufacturing overhead applied is $4,500. Beginning and ending work in process for 2013 are $6,000 and $5,000 respectively. How much is cost of goods sold for the year?

Westerhouse manufactures refrigerators. Which of the following items is most likely considered an indirect material cost for Westerhouse?

Which of the following costs is not part of manufacturing overhead?

Which of the following is a period cost?

Factory Containers allocates overhead based on machine hours. Estimated overhead costs for the year total $68,000 and the company estimates that it will use 16,000 machine hours during the year. Actual overhead for the year was $62,250 and the company used 15,000 machine hours. If Job J33 requires 420 machine hours, how much overhead will be allocated to Job J33?

Rent of the office building for the sales staff is a period cost.

Occi-Predictions manufactures weather forecasting circuits for meteorologists machines and uses a job-order costing system. During June, Occi-Predictions accounts included the following balances and transactions: $\begin{array} { l r l r } \text { Raw materials inventory, beginning } & \$ 700 & \text { Direct materials purchased } & \$ 45,000 \\\text { Raw materials inventory, ending } & 4,850 & \text { Direct labor cost incurred } & 16,400 \\\text { Manufacturing overhead cost applied } & 9,500 & \text { Administrative expenses } & 13,000 \\\text { Marketing expenses } & 11,000 & \text { Work in process inventory, beginning } & 7,800 \\\text { Sales } & 98,000 & \text { Work in process inventory, ending } & 6,600\end{array}$ How much is cost of goods manufactured?

One goal of just-in-time systems is to minimize inventory levels. 1 F 7 F 13 F 19 F 25 F 2 F 8 F 14 T 20 F 26 T 3 T 9 T 15 F 21 T 27 F 4 F 10 F 16 T 22 T 28 T 5 T 11 T 17 T 23 F 29 T 6 T 12 T 18 F 24 T Multiple choice

Why is factory overhead 'applied' to products and jobs by manufacturing companies?

Cost of goods manufactured

Mudd Shoe Company has expected overhead costs of $864,000. The majority of the overhead costs are incurred providing production support to the direct labor force. Direct labor rates vary from $12 to $21 per hour, and more complex tasks are assigned to more skilled workers who have higher pay rates. Management projects direct labor costs to be $540,000 with 39,273 direct labor hours. More complex tasks require proportionally more support than do the less complex tasks. Each model/size of shoe is produced in a separate production batch and constitutes a job. Mudd allocates overhead based on direct labor hours. During the year, the company produced 6,600 pairs of the size 8 Beachcomber shoes. A total of 4,200 direct labor hours, costing $54,600, were assigned to the job. How much overhead will be assigned to the size 8 Beachcomber shoes?