predetermined overhead rates

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					1.   Product costing information is used by managers:
     a.   to make decisions and strategy
     b.   for planning and control
     c.   for cost management
     *d. All of these answers are correct.

2.   __________ is the process of distributing indirect costs to products.
     *a. Cost allocation
     b.   Job order costing
     c.   Cost pooling
     d.   Cost tracing

3.   A __________ links an indirect cost to a cost object.
     *a. cost-allocation base or cost driver
     b.   cost pool
     c.   cost assignment
     d.   cost tracing

4.   A job that shows low profitability may be the result of:
     a.   wasting direct materials
     b.   inefficient labor
     c.   underpricing the job
     *d. All of these answers are correct.

5.   If pre-determined overhead rates were calculated monthly rather than annually, then
     for the month of February with only 28 days:
     a.    pre-determined overhead rates would be lower
     *b. pre-determined overhead rates would be higher
     c.    there would be no effect on pre-determined overhead rates
     d.    monthly output would be higher

6.   In a job-costing system, a manufacturing firm typically uses a pre-determined
     overhead rate to estimate the __________ allocated to a job.
     a.    direct materials
     b.    direct labor
     *c. manufacturing overhead costs
     d.    total costs

7.   A job-cost sheet details the:
     a.   direct materials purchased and paid for
      *b.   direct labor costs incurred
      c.    indirect labor costs incurred
      d.    actual overhead costs incurred

8.    All of the following are true of the Work-in-Process Control account EXCEPT that:
      *a. it tracks all direct material purchases
      b.    the balance equals the sum of amounts from all in-process individual job-cost
      c.    it is an asset account
      d.    it tracks job costs from beginning through completion

9.    All of the following increase the Work-in-Process Control account EXCEPT:
      a.    allocated manufacturing overhead costs
      b.    direct materials
      *c. actual plant insurance costs
      d.    direct manufacturing labor

10.   All of the following are true of plant utility costs EXCEPT:
      a.    the source document is the utility bill
      b.    the cost increases the Manufacturing Overhead account
      *c. the cost increases the Work-in-Process Control account
      d.    it is an indirect cost

11.   The ending balance in the Finished Goods Control account represents the costs of
      all jobs that:
      a.    have not been completed
      *b. have been completed but not sold
      c.    have been completed and sold to customers
      d.    are reported on the income statement

12.   When the allocated amount of overhead costs are more than the actual amount,
      overhead costs have been:
      a.   Both underapplied and underallocated are correct.
      b.   underapplied
      c.   underallocated
      *d. overapplied

13. The simplest approach to dealing with underallocated or overallocated overhead is
    the __________ approach.
    a.    adjusted allocation-rate
    b.    proration
    c.    write-off to cost of goods sold
    d.    Both a and b are correct.
14.   Sara employs 25 professional cleaners. Budgeted costs total $900,000 of which
      $525,000 are direct costs and $375,000 are overhead costs. Budgeted professional
      labor-hours are 500,000 and actual professional labor-hours were 504,000. What is
      the pre-determined overhead rate per professional labor-hour?
      a.    $1.80 per hour
      b.    $1.7857 per hour
      *c. $0.75 per hour
      d.    $1.05 per hour

      $375,000 / 500,000 = $.75

For 20X5, Marcotte’s Animal Supply Manufacturing uses machine-hours as the only
overhead cost-allocation base. The accounting records contain the following information:

                                                 Estimated           Actual
      Manufacturing overhead costs                $100,000         $120,000
      Machine-hours                                  20,000          25,000

      Using job order costing, the 20X5 pre-determined manufacturing overhead rate is:
      a.   $4.00 per machine-hour
      b.   $4.80 per machine-hour
      *c. $5.00 per machine-hour
      d.   $6.00 per machine-hour

      $100,000 / 20,000 mh = $5

16.   Using normal costing, the amount of manufacturing overhead costs allocated to jobs
      during 20X5 is:
      a.   $150,000
      *b. $125,000
      c.   $120,000
      d.   $100,000

      25,000 mh x $5.00 per machine-hour = $125,000

17. Joni’s Kitty Supplies applies manufacturing overhead costs to products at a pre-
determined manufacturing overhead rate of $60 per direct labor-hour. A retail outlet has
requested a bid on an order of the Toy Mouse product. Estimates for this order include:
Direct materials $40,000; 500 direct labor-hours. Each direct laborer is paid $20 per
direct labor-hour;
.     Estimated total product costs for this order, using job order costing, equal:
      a.   $96,000
      b.   $50,000
      *c. $80,000
      d.   None of these answers is correct.

      Direct Materials $40,000 + Direct Labor $10,000 (500 x $20) + MOH $30,000
      (500 x $60)= $80,000

Sunny Company manufactures pipes and applies manufacturing overhead costs to
production at a pre-determined overhead rate of $15 per direct labor-hour. The following
data are obtained from the accounting records for June 20X2:

               Direct materials                                     $280,000
               Direct labor (7,000 hours @ $11/hour)                $ 77,000
               Indirect labor                                       $ 20,000
               Plant facility rent                                  $ 60,000
               Depreciation on plant machinery and equipment        $ 30,000
               Sales commissions                                    $ 40,000
               Administrative expenses                              $ 50,000

      The actual amount of manufacturing overhead costs incurred in June 20X2 totals:
      a.   $557,000
      b.   $200,000
      *c. $110,000
      d.   $ 80,000

      Indirect labor $20,000 + Plant facility rent $60,000 + Depreciation on plant
      machinery and equipment $30,000 = $110,000

19.   The amount of manufacturing overhead allocated to all jobs during June 20X2
      a.    $77,000
      *b. $105,000
      c.    $110,000
      d.    $200,000

      7,000 direct labor-hour x $15 per direct labor hour = $105,000

20.   For June 20X2, manufacturing overhead was:
      a.   overallocated
      *b. underallocated
      c.   neither overallocated nor underallocated
      d.   indeterminable
Underallocated: Allocated overhead = $105,000 (7,000 x $15 per dlh) while actual
overhead =$110,000

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