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  1. 55) Job costing information is used: A) to develop strategies B) to make pricing decisions C) for external financial reporting D) All of these answers are correct.
  2. Answer: D Diff: 1 Terms: job Objective: 1 AACSB: Reflective thinking 56) 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.
  3. Answer: D Diff: 1 Terms: job-costing system Objective: 1 AACSB: Communication 57) A ________ is a grouping of individual indirect cost items. A) cost allocation base B) cost assignment C) cost pool D) job-costing system
  4. Answer: C Diff: 1 Terms: cost pool Objective: 1 AACSB: Reflective thinking 11 58) Each indirect-cost pool of a manufacturing firm: A) utilizes a separate cost-allocation rate B) is a subset of total indirect costs C) relates to one cost object D) All of these answers are correct.
  5. Answer: D Diff: 1 Terms: cost pool Objective: 1 AACSB: Reflective thinking 59) An updated costing system should: A) be installed even if the costs outweigh the additional benefits B) be tailored to fit the underlying operations rather than the current cost system C) focus specifically on the costing needs of the CFO D) provide all information for management decision needs
  6. Answer: B Diff: 2 Terms: job-costing system Objective: 1 AACSB: Reflective thinking 60) In a costing system: A) cost tracing allocates indirect costs B) cost allocation assigns direct costs C) a cost-allocation base can be either financial or nonfinancial D) a cost object should be a product and not a department or a geographic territory
  7.  Answer: C Diff: 2 Terms: cost-allocation base Objective: 1 AACSB: Reflective thinking 61) Assigning direct costs to a cost object is called: A) cost allocation B) cost assignment C) cost pooling D) cost tracing
  8. Answer: D Diff: 1 Terms: job-costing system Objective: 1 AACSB: Reflective thinking 12 62) ________ is the process of distributing indirect costs to products. A) Cost allocation B) Job cost recording C) Cost pooling D) Cost tracing
  9. Answer: A Diff: 1 Terms: cost allocation base Objective: 1 AACSB: Reflective thinking 63) A ________ links an indirect cost to a cost object. A) cost-allocation base B) cost pool C) cost assignment D) cost tracing
  10. Answer: A Diff: 1 Terms: cost allocation base Objective: 1 AACSB: Reflective thinking 64) Which of the following includes both traced direct costs and allocated indirect costs? A) cost tracing B) cost pools C) cost assignments D) cost allocations
  11. Answer: C Diff: 1 Terms: job-costing system Objective: 1 AACSB: Reflective thinking 65) Identifying department costs helps managers: A) control the costs for which they are responsible B) evaluate the performance of subordinates C) evaluate the performance of subunits D) All of these answers are correct.
  12. Answer: D Diff: 1 Terms: responsibility center Objective: 1 AACSB: Communication 13 66) ________ costing is a cost management system that measures the cost of products, services, and customers. A) Job B) Process C) Normal D) All of these answers are correct.
  13. Answer: D Diff: 2 Terms: job-costing system, process-costing system, normal costing Objective: 2 AACSB: Reflective thinking 67) Process costing: A) allocates all product costs, including materials and labor B) results in different costs for different units produced C) is commonly used by general contractors who construct custom-built homes D) is used exclusively in manufacturing
  14. Answer: A Diff: 2 Terms: process costing Objective: 2 AACSB: Reflective thinking 68) ________ costing is used by a business to price unique products for different jobs. A) Actual B) Job C) Process D) Traditional
  15. Answer: B Diff: 1 Terms: job-costing system Objective: 2 AACSB: Reflective thinking 69) Job costing: A) can only be used in manufacturing B) records the flow of costs for each customer C) allocates an equal amount of cost to each unit made during a time period D) is commonly used when each unit of output is identical
  16. Answer: B Diff: 2 Terms: job-costing system Objective: 2 AACSB: Reflective thinking 14 70) Job-costing may only be used by: A) service companies B) merchandising companies C) manufacturing companies D) All of these may use job-costing.
  17. Answer: D Diff: 2 Terms: job costing system Objective: 2 AACSB: Reflective thinking 71) Many large companies which have multiple production methods and processes have hybrid costing systems that are: A) job-costing B) actual costing C) process costing D) a mix of job-costing and process costing
  18. Answer: D Diff: 2 Terms: job costing system, process-costing system Objective: 2 AACSB: Reflective thinking 72) Actual costing is a costing method that allocates ________ indirect costs. A) actual B) budgeted C) estimated D) predetermined
  19. Answer: A Diff: 1 Terms: actual costing Objective: 2 AACSB: Reflective thinking 73) A job that shows low profitability may be the result of: A) wasting direct materials B) inefficient direct manufacturing labor C) underpricing the job D) All of these answers are correct.
  20. Answer: D Diff: 2 Terms: job-costing system Objective: 3 AACSB: Ethical reasoning 15 74) For a given job the direct costs associated with the job are: A) actual overhead B) direct material C) direct manufacturing labor D) Both b and c are correct.
  21. Answer: D Diff: 2 Terms: direct costs of a cost object Objective: 3 AACSB: Reflective thinking 75) Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs: A. Identify indirect costs B. Compute the total cost of the job C. Select cost-allocation bases D. Compute the indirect cost rate A) ACDB B) CADB C) BACD D) DCAB
  22. Answer: B Diff: 2 Terms: job-costing system Objective: 3 AACSB: Analytical skills 76) The basic source document for direct manufacturing labor is the: A) job-cost record B) materials-requisition record C) labor-time record D) All of these answers are correct.
  23. Answer: C Diff: 1 Terms: job-cost record Objective: 3 AACSB: Reflective thinking 16 77) Problems with accurate costing occur when: A) incorrect job numbers are recorded on source documents B) bar coding is used to record materials used on the job C) a computer screen requests an employee number before that employee is able to work on information related to a specific job D) All of these answers are correct.
  24. Answer: A Diff: 2 Terms: job-costing system Objective: 3 AACSB: Communication 78) If actual indirect-cost rates were calculated monthly rather than annually, then for the month of February with only 28 days: A) variable indirect-cost rates would be lower B) total indirect-cost rates would be higher C) fixed indirect-cost rates would be lower D) monthly output would be higher
  25. Answer: B Diff: 3 Terms: indirect-cost rate Objective: 3 AACSB: Analytical skills 79) If indirect-cost rates are calculated monthly, distortions might occur because of: A) rental costs paid monthly B) property tax payments made in July and December C) routine monthly preventive-maintenance costs that benefit future months D) Both B and C are correct.
  26. Answer: B Diff: 2 Terms: indirect-cost rate Objective: 3 AACSB: Analytical skills 17 80) Normandeau Company's actual manufacturing overhead is $1,400,000. Overhead is allocated on the basis of direct labor hours. The direct labor hours were 25,000 for the period. What is the manufacturing overhead rate? A) $47.00 B) $56.00 C) $75.00 D) None of the above are correct.
  27. Answer: B Explanation: B) 1,400,000/25,000 = 56.00 Diff: 2 Terms: actual manufacturing overhead rate Objective: 3 AACSB: Analytical skills 81) Copley Enterprises manufactures digital video equipment. For each unit $1,475 of direct material is used and there is $1,500 of direct manufacturing labor at $30 per hour. Manufacturing overhead is applied at $35 per direct manufacturing labor hour. Calculate the cost of each unit. A) $2,975 B) $4,025 C) $4,725 D) $3,150
  28. Answer: C Explanation: C) 1,475+1500+((1,500/30)*35) Diff: 2 Terms: job costing system Objective: 3 AACSB: Analytical skills 82) An example of a numerator reason for calculating annual indirect-cost rates includes: A) fewer production workdays in a month B) payment of estimated taxes four times a year C) higher snow-removal costs during the winter D) Both B and C are correct.
  29. Answer: D Diff: 3 Terms: indirect-cost rate Objective: 3 AACSB: Reflective thinking 18 83) An example of a denominator reason for calculating annual indirect-cost rates includes: A) higher heating bills in the winter B) semi-annual insurance payments in March and September C) higher levels of output demanded during the fall months D) All of these answers are correct.
  30. Answer: C Diff: 3 Terms: indirect-cost rate Objective: 3 AACSB: Reflective thinking 84) In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job. A) direct materials B) direct labor C) manufacturing overhead costs D) total costs
  31. Answer: C Diff: 2 Terms: indirect-cost rate Objective: 3 AACSB: Reflective thinking 85) A job-cost sheet details the: A) direct materials purchased and paid B) direct labor costs incurred C) indirect labor costs incurred D) actual indirect overhead costs incurred
  32. Answer: B Diff: 2 Terms: job-cost sheet Objective: 3 AACSB: Reflective thinking 86) A job-cost record uses information from: A) a materials requisition record to record raw material purchases from suppliers B) a receiving report that indicates the type and quantity of each item received in an order from a supplier C) a labor-time card to record an employee's wage rate and hours spent on a particular job D) All of these answers are correct.
  33. Answer: C Diff: 2 Terms: job-cost record Objective: 3 AACSB: Reflective thinking 19 87) Costs that are subject to short-run fluctuations for given jobs are: A) actual costs B) budgeted direct costs C) budgeted indirect costs D) normal costs
  34. Answer: A Diff: 1 Terms: actual costing Objective: 3 AACSB: Reflective thinking 88) Annual cost rates are preferred over actual cost rates for all of the following reasons EXCEPT: A) budgeted costs allow managers to have cost information on a timely basis B) budgeted costs may be subject to short-run fluctuations C) budgeted indirect-cost rates are known prior to the inception of a new job D) budgeted-cost rates can be used to allocate direct or indirect costs
  35. Answer: B Diff: 2 Terms: budgeted indirect-cost rate Objective: 3 AACSB: Reflective thinking 89) Fixed costs remain constant at $200,000 per month. During high-output months variable costs are $160,000, and during low-output months variable costs are $40,000. What are the respective high and low indirect-cost rates if budgeted professional labor-hours are 8,000 for high-output months and 2,000 for low-output months? A) $45.00 per hour; $120.00 per hour B) $45.00 per hour; $45.00 per hour C) $25.00 per hour; $20.00 per hour D) $56.20 per hour; $120.00 per hour
  36. Answer: A Explanation: A) $200,000 / 8,000 = $25.00 $200,000 / 2,000 = $100.00 $160,000 / 8,000 = 20.00 $40,000 / 2,000 = 20.00 High Month = $45.00 Low Month = $120.00 Diff: 2 Terms: indirect-cost rate Objective: 3 AACSB: Analytical skills 20 90) Managers and accountants collect most of the cost information that goes into their systems through: A) an information databank B) computer programs C) source documents D) time surveys
  37. Answer: C Diff: 1 Terms: source document Objective: 3 AACSB: Reflective thinking 91) The budgeted indirect-cost rate is calculated: A) at the beginning of the year B) during the year C) at the end of each quarter D) at the end of the year
  38. Answer: A Diff: 1 Terms: budgeted indirect-cost rate Objective: 4 AACSB: Reflective thinking 92) The difference between actual costing and normal costing is: A) normal costing uses actual direct-cost rates B) actual costing uses actual quantities of direct-cost inputs C) normal costing uses budgeted indirect-cost rates D) actual costing uses actual quantities of cost-allocation bases
  39. Answer: C Diff: 1 Terms: actual costing, normal costing Objective: 4 AACSB: Reflective thinking 93) Which of the following statements about normal costing is TRUE? A) Direct costs and indirect costs are traced using an actual rate. B) Direct costs and indirect costs are traced using budgeted rates. C) Direct costs are traced using a budgeted rate, and indirect costs are allocated using an actual rate. D) Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate.
  40. Answer: D Diff: 2 Terms: normal costing Objective: 4 AACSB: Reflective thinking 21 94) When using a normal costing system, manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base. A) budgeted; actual B) budgeted; budgeted C) actual; budgeted D) actual; actual
  41. Answer: A Diff: 1 Terms: normal costing Objective: 4 AACSB: Reflective thinking 95) Which of the following statements about actual costing and normal costing is TRUE? A) Manufacturing costs of a job are available earlier under actual costing. B) Corrective actions can be implemented sooner under normal costing. C) Manufacturing costs are available earlier under normal costing. D) Both B and C are correct.
  42. Answer: D Diff: 1 Terms: actual costing, normal costing Objective: 4 AACSB: Reflective thinking 96) In a normal costing system, the Manufacturing Overhead Control account: A) is increased by allocated manufacturing overhead B) is credited with amounts transferred to Work-in-Process C) is decreased by allocated manufacturing overhead D) is debited with actual overhead costs
  43. Answer: D Diff: 2 Terms: normal costing Objective: 5 AACSB: Reflective thinking 97) The Materials Control account is increased when: A) direct materials are purchased B) indirect materials are purchased C) materials are requisitioned for production D) Both A and B are correct.
  44. Answer: D Diff: 1 Terms: job-costing system Objective: 5 AACSB: Reflective thinking 22 98) 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 records C) it is an asset account D) it tracks job costs from beginning through completion
  45. Answer: A Diff: 2 Terms: job-costing system Objective: 5 AACSB: Use of Information Technology 99) All of the following are general ledger accounts EXCEPT: A) the Salaries Payable Control account B) the Prepaid Insurance Control account C) the Accounts Receivable subsidiary account for Ruben Electric D) the Advertising Costs account
  46. Answer: C Diff: 1 Terms: job-costing system Objective: 5 AACSB: Reflective thinking 100) All of the following increase (are debited to) the Work-in-Process Control account EXCEPT: A) actual plant insurance costs B) direct materials C) allocated manufacturing overhead costs D) direct manufacturing labor
  47. Answer: A Diff: 2 Terms: job-costing system Objective: 5 AACSB: Use of Information Technology 101) When indirect materials are requisitioned the ________ account is increased. A) Manufacturing Overhead Control B) Work-in-Process Control C) Materials Control D) Accounts Payable Control
  48. Answer: A Diff: 1 Terms: job-costing system Objective: 5 AACSB: Reflective thinking 23 102) Payment of the total manufacturing payroll decreases the: A) Work-in-Process Control account B) Manufacturing Overhead Control account C) Wages Payable Control account D) None of these answers are correct.
  49. Answer: C Diff: 1 Terms: job-costing system Objective: 5 AACSB: Reflective thinking 103) 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 Control account C) the cost increases the Work-in-Process Control account D) it is an indirect cost
  50. Answer: C Diff: 1 Terms: job-costing system Objective: 5 AACSB: Reflective thinking 104) Actual (rather than allocated) manufacturing overhead costs are included in the: A) Work-in-Process Control account B) Finished Goods Control account C) Manufacturing Overhead Control account D) Both A and B are correct.
  51. Answer: C Diff: 2 Terms: job-costing system Objective: 5 AACSB: Reflective thinking 105) 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
  52. Answer: B Diff: 1 Terms: job-costing system Objective: 5 AACSB: Use of Information Technology 24 106) For externally reported inventory costs, the Work-in-Process Control account is increased (debited) by: A) marketing costs B) allocated plant utility costs C) the purchase costs of direct and indirect materials D) customer-service costs
  53. Answer: B Diff: 2 Terms: job-costing system Objective: 5 AACSB: Use of Information Technology 107) What is the appropriate journal entry if $100,000 of materials were purchased on account for the month of August? A) Materials Control 100,000 Accounts Payable Control 100,000 B) Work-in-Process Control 100,000 Accounts Payable Control 100,000 C) Manufacturing Overhead Control 100,000 Accounts Receivable Control 100,000 D) Manufacturing Allocated 100,000 Accounts Receivable Control 100,000
  54. Answer: A Diff: 2 Terms: job-costing system Objective: 5 AACSB: Analytical skills 108) What is the appropriate journal entry if direct materials of $50,000 and indirect materials of $3,000 are sent to the manufacturing plant floor? A) Work-in-Process Control 50,000 Materials Control 50,000 B) Work-in-Process Control 53,000 Materials Control 53,000 C) Manufacturing Overhead Control 3,000 Materials Control 50,000 Work-in-Process Control 53,000 D) Work-in-Process Control 50,000 Manufacturing Overhead Control 3,000 Materials Control 53,000
  55. Answer: D Diff: 2 Terms: job-costing system Objective: 5 AACSB: Analytical skills 25 109) All of the following items are debited to Work-in-Process EXCEPT: A) allocated manufacturing overhead B) completed goods being transferred out of the plant C) direct labor consumed D) direct materials consumed
  56. Answer: B Diff: 2 Terms: job-costing system Objective: 5 AACSB: Reflective thinking 110) What would be the appropriate journal entry if the following labor wages were incurred in a furniture manufacturing company? Assembly workers $30,000 Janitors $20,000 A) Work-in-Process Control 50,000 Wages Payable Control 50,000 B) Work-in-Process Control 30,000 Manufacturing Overhead Control 20,000 Wages Payable Control 50,000 C) Manufacturing Overhead Control 50,000 Wages Payable Control 50,000 D) Wages Payable Control 50,000 Work-in-Process Control 50,000
  57. Answer: B Diff: 2 Terms: job-costing system Objective: 5 AACSB: Analytical skills 26 111) Manufacturing overhead costs incurred for the month are: Utilities $15,000 Depreciation on equipment $25,000 Repairs $10,000 Which is the correct journal entry assuming utilities and repairs were on account? A) Manufacturing Overhead Control 50,000 Accounts Payable Control 25,000 Accumulated Depreciation Control 25,000 B) Manufacturing Overhead Control 50,000 Accounts Payable Control 50,000 C) Manufacturing Overhead Control 50,000 Accumulated Depreciation Control 50,000 D) Accumulated Depreciation Control 25,000 Accounts Payable Control 25,000 Manufacturing Overhead Control 50,000
  58. Answer: A Diff: 2 Terms: job-costing system Objective: 5 AACSB: Analytical skills 112) Which of the following statements regarding manufacturing overhead allocation is FALSE? A) It includes all manufacturing costs that cannot be directly traced to a product or service. B) The costs can be grouped in either a single indirect-cost pool or in multiple indirect-cost pools. C) Total costs are unknown at the end of the accounting period. D) Allocated amounts are debited to Work-in-Process.
  59. Answer: C Diff: 2 Terms: manufacturing overhead allocated Objective: 5 AACSB: Reflective thinking 113) When a job is complete: A) Work-in-Process Control is debited B) Finished Goods Control is credited C) the cost of the job is transferred to Manufacturing Overhead Control D) actual direct materials, actual direct manufacturing labor, and allocated manufacturing overhead will comprise the total cost of the job
  60. Answer: D Diff: 2 Terms: job-costing system Objective: 5 AACSB: Reflective thinking 27 114) During an accounting period, job costs are computed on an ongoing basis by the use of: A) actual allocation rates B) budgeted indirect-cost rates C) overallocated indirect-cost rates D) underallocated indirect-cost rates
  61. Answer: B Diff: 1 Terms: budgeted indirect-cost rate Objective: 5 AACSB: Use of Information Technology 115) The advantage of using normal costing instead of actual costing is: A) indirect costs are assigned at the end of the year when they are known B) the job cost is more accurate under normal costing C) indirect costs are assigned to a job on a timely basis D) normal costing provides a higher gross profit margin
  62. Answer: C Diff: 1 Terms: actual costing, normal costing Objective: 6 AACSB: Reflective thinking 116) The spreading of underallocated or overallocated overhead among ending work-in-process, finished goods, and cost of goods sold is called: A) the adjusted allocation rate approach B) the proration approach C) the write-off of cost of goods sold approach D) None of these answers are correct.
  63. Answer: B Diff: 1 Terms: proration Objective: 6 AACSB: Reflective thinking 117) The Manufacturing Overhead Control account is the record of: A) actual direct material and direct manufacturing labor costs B) actual overhead costs C) allocated overhead when using normal costing D) Both A and B are correct answers when using normal costing.
  64. Answer: B Diff: 2 Terms: manufacturing overhead allocated Objective: 6 AACSB: Reflective thinking 28 118) When the allocated amount of indirect costs are less than the actual amount, indirect costs have been: A) overabsorbed B) underapplied C) underallocated D) Both underapplied and underallocated are correct.
  65. Answer: D Diff: 2 Terms: underallocated indirect costs, underapplied indirect costs Objective: 6 AACSB: Reflective thinking 119) One reason indirect costs may be overapplied is because: A) the actual allocation base quantity exceeds the budgeted quantity B) budgeted indirect costs exceed actual indirect costs C) requisitioned direct materials exceed budgeted material costs D) Both A and B are correct.
  66. Answer: B Diff: 3 Terms: overapplied indirect costs Objective: 6 AACSB: Analytical skills 120) The ________ approach adjusts individual job-cost records to account for underallocated or overallocated overhead. A) adjusted allocation-rate B) proration C) write-off to cost of goods sold D) Both A and B are correct.
  67. Answer: A Diff: 1 Terms: adjusted allocation-rate approach Objective: 6 AACSB: Reflective thinking 121) The adjusted allocation approach yields the benefits of: A) timeliness and convenience of normal costing B) allocation of of actual manufacturing overhead costs at the end of the year C) Both A and B are correct. D) Neither A nor B are correct.
  68. Answer: C Diff: 1 Terms: actual costing, normal costing Objective: 6 AACSB: Reflective thinking 29 122) 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.
  69. Answer: C Diff: 1 Terms: overallocated indirect costs, underallocated indirect costs Objective: 6 AACSB: Reflective thinking 123) The ________ approach carries the underallocated or overallocated amounts to overhead accounts in the following year. A) adjusted allocation-rate B) proration C) write-off to cost of goods sold D) None of these answers are correct.
  70. Answer: D Diff: 2 Terms: overallocated indirect costs, underallocated indirect costs Objective: 6 AACSB: Reflective thinking 124) A company would use multiple cost-allocation bases: A) if managers believed the benefits exceeded the additional costs of that costing system B) because there is more than one way to allocate overhead C) because this is a simpler approach than using one cost allocation base D) if managers believe that using multiple cost-allocation bases is the only acceptable method
  71. Answer: A Diff: 2 Terms: multiple overhead cost pools Objective: 6 AACSB: Ethical reasoning 125) In the service sector: A) direct labor costs are always easy to trace to jobs B) a budgeted direct-labor cost rate may be used to apply direct labor to jobs C) normal costing may not be used D) overhead is generally applied using an actual cost-allocation rate
  72. Answer: B Diff: 2 Terms: budgeted indirect-cost rate Objective: 7 AACSB: Reflective thinking 30 126) In the service sector, to achieve timely reporting on the profitability of an engagement, a company will use: A) budgeted rates for all direct costs B) budgeted rates for indirect costs C) actual costing D) budgeted rates for some direct costs and indirect costs
  73. Answer: D Diff: 2 Terms: normal costing, budgeted direct cost rate, budgeted indirect cost rate Objective: 7 AACSB: Reflective thinking 127) Sara employs 25 professional cleaners. Budgeted costs total $900,000 of which $525,000 is direct costs. Budgeted indirect costs are $375,000 and actual indirect costs were $396,900. Budgeted professional labor-hours are 500,000 and actual hours were 504,000. What is the budgeted direct cost-allocation rate? A) $1.80 per hour B) $1.7857 per hour C) $0.75 per hour D) $1.05 per hour
  74. Answer: D Explanation: D) $525,000 / 500,000 = $1.05 Diff: 2 Terms: budgeted direct cost rate Objective: 7 AACSB: Analytical skills 128) The budgeted direct-labor cost rate includes ________ in the calculation. A) budgeted total costs in indirect cost pool B) budgeted total direct-labor costs in the denominator C) budgeted total direct-labor costs in the numerator D) budgeted total direct-labor hours in the numerator
  75. Answer: C Diff: 2 Terms: budgeted direct cost rate Objective: 7 AACSB: Reflective thinking 31 129) The law firm of Smith & Jones has a staff of 30 lawyers and administrative staff. Budgeted total costs of the firm total $2,100,000 of which $1,200,000 is direct-labor costs. Assuming that the remaining costs are indirect and direct-labor cost is the allocation base, calculate the budgeted indirect cost rate. A) 57% of direct-labor cost B) 75% of direct-labor cost C) 43% of direct-labor cost D) 175% of direct-labor cost
  76. Answer: B Explanation: B) 900,000/1,200,000 Diff: 2 Terms: budgeted indirect-cost rate Objective: 7 AACSB: Analytical skills Answer the following questions using the information below: For 20X5, Marcotte's Animal Supply Manufacturing uses machine-hours as the only overhead cost-allocation base. The accounting records contain the following information: Manufacturing overhead costs Machine-hours Estimated $100,000 20,000 Actual $120,000 25,000 130) Using job costing, the 20X5 budgeted 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
  77. Answer: C Explanation: C) $100,000 / 20,000 mh = $5 Diff: 2 Terms: budgeted indirect-cost rate Objective: 4 AACSB: Analytical skills 32 131) 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 Answer: B Explanation: B) 25,000 mh $100,000 / 20,000 mh allocation rate = $125,000 Diff: 2 Terms: normal costing Objective: 4 AACSB: Analytical skills 132) Using job costing, the 20X5 actual indirect-cost 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
  78. Answer: B Explanation: B) $120,000 / 25,000 mh = $4.80 Diff: 2 Terms: indirect-cost rate Objective: 3 AACSB: Analytical skills 133) Using actual 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
  79. Answer: C Explanation: C) 25,000 mh $120,000 / 25,000 mh allocation rate = $120,000 Diff: 2 Terms: actual costing Objective: 3 AACSB: Analytical skills 33
  80. Answer the following questions using the information below: Rhett Company has two departments, Machining and Assembly. The following estimates are for the coming year: Direct manufacturing labor-hours Machine-hours Manufacturing overhead Machining 10,000 40,000 $200,000 Assembly 50,000 20,000 $400,000 134) A single indirect-cost rate based on direct manufacturing labor-hours for the entire plant is: A) $ 8 per direct labor-hour B) $10 per direct labor-hour C) $20 per direct labor-hour D) None of these answers is correct.
  81. Answer: B Explanation: B) $600,000 / 60,000 dlh = $10 Diff: 2 Terms: indirect-cost rate Objective: 4 AACSB: Analytical skills 135) The budgeted indirect-cost driver rate for the Machining Department based on the number of machine-hours in that department is: A) $5 per machine-hour B) $10 per machine-hour C) $20 per machine-hour D) None of these answers is correct.
  82. Answer: A Explanation: A) $200,000 / 40,000 mh = $5 Diff: 1 Terms: budgeted indirect-cost rate Objective: 4 AACSB: Analytical skills 34 Answer the following questions using the information below: Joni's Kitty Supplies applies manufacturing overhead costs to products at a budgeted rate indirectcost of $60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy Mouse product. Estimates for this order include: Direct materials $40,000; 500 direct manufacturing labor-hours at $20 per hour; and a 20% markup rate on total manufacturing costs. 136) Manufacturing overhead cost estimates for this special order total: A) $10,000 B) $30,000 C) $36,000 D) None of these answers is correct.
  83. Answer: B Explanation: B) $60 500 dlh = $30,000 Diff: 1 Terms: normal costing Objective: 4 AACSB: Analytical skills 137) Estimated total product costs for this special order equal: A) $96,000 B) $50,000 C) $80,000 D) None of these answers is correct.
  84. Answer: C Explanation: C) DM $40,000 + DML (500 $20) + MOH $30,000 = $80,000 Diff: 2 Terms: normal costing Objective: 5 AACSB: Analytical skills 138) The bid price for this special order is: A) $50,000 B) $60,000 C) $80,000 D) $96,000
  85. Answer: D Explanation: D) (DU $40,000 + DML (500 $20) + MOH 30,000) 120% = $96,000 Diff: 2 Terms: normal costing Objective: 5 AACSB: Analytical skills 35
  86. Answer the following questions using the information below: Sunny Company manufactures pipes and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $15 per direct labor-hour. The following data are obtained from the accounting records for June 20X2: Direct materials Direct labor (7,000 hours @ $11/hour) Indirect labor Plant facility rent Depreciation on plant machinery and equipment Sales commissions Administrative expenses $280,000 $ 77,000 $ 20,000 $ 60,000 $ 30,000 $ 40,000 $ 50,000 139) The actual amount of manufacturing overhead costs incurred in June 20X2 totals: A) $557,000 B) $200,000 C) $110,000 D) $ 80,000
  87. Answer: C Explanation: C) $20,000 + $60,000 + $30,000 = $110,000 Diff: 2 Terms: job-costing system Objective: 3 AACSB: Analytical skills 140) The amount of manufacturing overhead allocated to all jobs during June 20X2 totals: A) $77,000 B) $105,000 C) $110,000 D) $200,000
  88. Answer: B Explanation: B) 7,000 $15 per dlh = $105,000 Diff: 2 Terms: manufacturing overhead allocated Objective: 5 AACSB: Analytical skills 36 141) For June 20X2, manufacturing overhead was: A) overallocated B) underallocated C) neither overallocated nor underallocated D) indeterminable
  89. Answer: B Explanation: B) Underallocated: Allocated only $105,000 (7,000 $15 per dlh) of the $110,000 actual overhead Diff: 2 Terms: underallocated indirect costs Objective: 6 AACSB: Analytical skills
  90. Answer the following questions using the information below: Gibson Manufacturing is a small textile manufacturer using machine-hours as the single indirectcost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Winfield High School band jacket job. Direct materials Direct labor Manufacturing overhead costs Machine-hours Company $40,000 $10,000 $30,000 100,000 mh Winfield High School Job $1,000 $200 900 mh 142) For Gibson Manufacturing, what is the annual manufacturing overhead cost-allocation rate? A) $0.50 B) $0.80 C) $0.30 D) $33.33
  91. Answer: C Explanation: C) $30,000/100,000mh = $0.30 per mh Diff: 2 Terms: indirect-cost rate Objective: 5 AACSB: Analytical skills 37 143) What amount of manufacturing overhead costs will be allocated to this job? A) $270 B) $720 C) $450 D) $30,000
  92. Answer: A Explanation: A) 900 mh $30,000 / 100,000 mh = $270 Diff: 2 Terms: indirect-cost rate Objective: 5 AACSB: Analytical skills 144) What are the total manufacturing costs of this job? A) $1,200 B) $1,470 C) $1,650 D) $1,920
  93. Answer: B Explanation: B) DM $1,000 + DML $200 + MOH $270 = $1,470 Diff: 3 Terms: indirect-cost rate Objective: 5 AACSB: Analytical skills 145) What is the bid price for the Winfield High School job if the company uses a 40% markup of total manufacturing costs? A) $2,310 B) $588 C) $1,680 D) $2,058
  94. Answer: D Explanation: D) (DM $1,000 + DML $200 + MOH $270) 1.40 = $2,058 Diff: 3 Terms: job-costing system Objective: 5 AACSB: Analytical skills 38
  95. Answer the following questions using the information below: Bauer Manufacturing uses departmental cost driver rates to allocate manufacturing overhead costs to products. Manufacturing overhead costs are allocated on the basis of machine-hours in the Machining Department and on the basis of direct labor-hours in the Assembly Department. At the beginning of 20X3, the following estimates were provided for the coming year: Direct labor-hours Machine-hours Direct labor cost Manufacturing overhead costs Machining 30,000 80,000 $500,000 $420,000 Assembly 60,000 20,000 $900,000 $240,000 The accounting records of the company show the following data for Job #316: Direct labor-hours Machine-hours Direct material cost Direct labor cost Machining 120 60 $300 $100 Assembly 70 5 $200 $400 146) For Bauer Manufacturing, what is the annual manufacturing overhead cost-allocation rate for the Machining Department? A) $4.00 B) $4.20 C) $4.67 D) $5.25
  96. Answer: D Explanation: D) $420,000/80,000mh = $5.25 per mh Diff: 2 Terms: indirect-cost rate Objective: 5 AACSB: Analytical skills 147) What amount of manufacturing overhead costs will be allocated to Job #316? A) $439 B) $502 C) $595 D) $532
  97. Answer: C Explanation: C) ($420,000 / 80,000 mh 60 mh) + [($240,000/60,000) 70dlh] = $595 Diff: 3 Terms: manufacturing overhead allocated Objective: 5 AACSB: Analytical skills 39 148) What are the total manufacturing costs of Job #316? A) $715 B) $880 C) $1,595 D) $1,000
  98. Answer: C Explanation: C) DM $500 + DML $500 + MOH $595 = $1,595 Diff: 3 Terms: manufacturing overhead allocated Objective: 5 AACSB: Analytical skills
  99. Answer the following questions using the information below: Wayland Manufacturing uses a normal cost system and had the following data available for 20X5: Direct materials purchased on account Direct materials requisitioned Direct labor cost incurred Factory overhead incurred Cost of goods completed Cost of goods sold $ 74,000 41,000 65,000 73,000 146,000 128,000 Beginning direct materials inventory 13,000 Beginning WIP inventory 32,000 Beginning finished goods inventory 29,000 Overhead application rate, as a percent of direct-labor costs 125 percent
  100. 149) The journal entry to record the materials placed into production would include a: A) credit to Direct Materials Inventory for $41,000 B) debit to Direct Materials Inventory for $74,000 C) credit to WIP Inventory for $41,000 D) debit to WIP Inventory for $74,000
  101. Answer: A Diff: 2 Terms: job-costing system Objective: 5 AACSB: Analytical skills 40 150) The ending balance of direct materials inventory is: A) $46,000 B) $87,000 C) $41,000 D) $54,000
  102. Answer: A Explanation: A) $13,000 + $74,000 - $41,000 = $46,000 Diff: 2 Terms: job-costing system Objective: 5 AACSB: Analytical skills
  103. 151) The ending balance of work-in-process inventory is: A) $219,250 B) $73,250 C) $65,000 D) $211,000
  104. Answer: B Explanation: B) $32,000 + $41,000 + $65,000 + 1.25 ($65,000) - $146,000 = $73,250 Diff: 3 Terms: job-costing system Objective: 5 AACSB: Analytical skills
  105. 152) The ending balance of finished goods inventory is: A) $29,000 B) $18,000 C) $47,000 D) $146,000
  106. Answer: C Explanation: C) $29,000 + $146,000 - $128,000 = $47,000 Diff: 3 Terms: job-costing system Objective: 5 AACSB: Analytical skills 41
  107. Answer the following questions using the information below: Apple Valley Corporation uses a job cost system and has two production departments, A and B. Budgeted manufacturing costs for the year are: Direct materials Direct manufacturing labor Manufacturing overhead Department A $700,000 $200,000 $600,000 Department B $100,000 $800,000 $400,000 The actual material and labor costs charged to Job #432 were as follows: Direct materials: Direct labor: Department A Department B Total $25,000 $ 8,000 $12,000 $20,000 Apple Valley applies manufacturing overhead costs to jobs on the basis of direct manufacturing labor cost using departmental rates determined at the beginning of the year.
  108. 153) For Department A, the manufacturing overhead allocation rate is: A) 33% B) 66% C) 300% D) 100%
  109. Answer: C Explanation: C) $600,000 / $200,000 = 300% Diff: 2 Terms: indirect-cost rate Objective: 4 AACSB: Analytical skills
  110. 154) For Department B, the manufacturing overhead allocation rate is: A) 50% B) 100% C) 200% D) 300%
  111. Answer: A Explanation: A) $400,000 / $800,000 = 50% Diff: 2 Terms: indirect-cost rate Objective: 4 AACSB: Analytical skills 42
  112. 155) Manufacturing overhead costs allocated to Job #432 total: A) $30,000 B) $12,000 C) $24,000 D) $36,000
  113. Answer: A Explanation: A) [($8,000 $600,000 / $200,000)] + [$12,000 $400,000/$800,000] = $30,000 Diff: 3 Terms: manufacturing overhead allocated Objective: 4 AACSB: Analytical skills
  114. 156) Manufacturing costs estimated for Job #432 total: A) $55,000 B) $65,000 C) $70,000 D) $75,000
  115. Answer: D Explanation: D) DM $25,000 + DML $20,000 + MOH $30,000 [($8,000 $600,000 / $200,000)] + [$12,000 $400,000/$800,000] = $75,000 Diff: 3 Terms: manufacturing overhead allocated Objective: 5 AACSB: Analytical skills 43
  116. Answer the following questions using the information below: Because the Abernathy Company used a budgeted indirect-cost rate for its manufacturing operations, the amount allocated ($200,000) was different from the actual amount incurred ($225,000). Ending balances in the relevant accounts are: Work-in-Process $ 10,000 Finished Goods 20,000 Cost of Goods Sold 170,000
  117. 157) What is the journal entry used to write off the difference between allocated and actual overhead directly to cost of goods sold? A) Manufacturing Overhead Allocated 200,000 Cost of Goods Sold 25,000 Manufacturing Overhead Control 225,000 B) Manufacturing Overhead Control 200,000 Cost of Goods Sold 25,000 Manufacturing Overhead Allocated 225,000 C) Manufacturing Overhead Allocated 200,000 Work-in-Process Control 30,000 Cost of Goods Sold 170,000 D) Manufacturing Overhead Control 225,000 Work-in-Process Control 55,000 Cost of Goods Sold 170,000
  118. Answer: A Diff: 2 Terms: overapplied indirect costs, underapplied indirect costs Objective: 6 AACSB: Analytical skills 44 158) What is the journal entry used to write off the difference between allocated and actual overhead using the proration approach? A) Manufacturing Overhead Allocated 200,000 Work-in-Process Control 10,000 Finished Goods Control 20,000 Manufacturing Overhead Control 230,000 B) Manufacturing Overhead Allocated 225,000 Work-in-Process Control 1,250 Finished Goods Control 2,500 Cost of Goods Sold 21,250 Manufacturing Overhead Control 200,000 C) Manufacturing Overhead Control 225,000 Work-in-Process Control 1,250 Finished Goods Control 2,500 Cost of Goods Sold 21,250 Manufacturing Overhead Allocated 200,000 D) Manufacturing Overhead Allocated 200,000 Work-in-Process Control 1,250 Finished Goods Control 2,500 Cost of Goods Sold 21,250 Manufacturing Overhead Control 225,000
  119. Answer: D Explanation: D) Work-in-process $ 10,000 5% x $25,000 = $ 1,250 Finished goods 20,000 10% x 25,000 = 2,500 Cost of goods sold 170,000 85% x 25,000 = 21,250 $200,000 100% $25,000 Diff: 2 Terms: proration Objective: 6 AACSB: Analytical skills 45
  120. Answer the following questions using the information below: Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 20X3: Budget Actual Indirect costs $270,000 $300,000 Annual salary of each attorney $100,000 $110,000 Annual salary of each paraprofessional $ 29,000 $ 30,000 Total professional labor-hours 50,000 dlh 60,000 dlh 159) What are the actual direct-cost rate and the actual indirect-cost rate, respectively, per professional labor-hour? A) $27.00; $4.17 B) $29.80; $5.40 C) $32.40; $5.00 D) $27.00; $5.00
  121.  Answer: D Explanation: D) [($110,000 12) + ($30,000 10)] / 60,000 = $27.00 actual direct rate $300,000 / 60,000 = $5.00 actual indirect rate Diff: 2 Terms: indirect-cost rate Objective: 3 AACSB: Analytical skills 160) What are the budgeted direct-cost rate and the budgeted indirect-cost rate, respectively, per professional labor-hour? A) $27.00; $4.17 B) $29.80; $5.40 C) $32.40; $5.00 D) $27.00; $5.00
  122. Answer: B Explanation: B) [($100,000 12) + ($29,000 10)] / 50,000 = $29.80 budgeted direct rate $270,000 / 50,000 = $5.40 budgeted indirect rate Diff: 2 Terms: indirect-cost rate Objective: 4 AACSB: Analytical skills 46 161) How much should the client be billed in an actual costing system if 200 professional laborhours are used? A) $5,000 B) $6,960 C) $7,480 D) $6,400
  123. Answer: D Explanation: D) [($110,000 12) + ($30,000 10)] / 60,000 200 = $5,400 + $300,000 / 60,000 200 = $1,000 = $6,400 Diff: 3 Terms: actual costing Objective: 3 AACSB: Analytical skills 162) How much should a client be billed in a normal costing system when 1,000 professional labor-hours are used? A) $32,000 B) $29,800 C) $35,200 D) $27,000
  124. Answer: C Explanation: C) [($100,000 12) + ($29,000 10)] / 50,000 1,000 = $29,800 + $270,000 / 50,000 1000 1,000 = $5,400 $29,800 + $5,400 = $35,200 Diff: 3 Terms: normal costing Objective: 4 AACSB: Analytical skills 163) When a normal costing system is used, clients using proportionately more attorney time than paraprofessional time will: A) be overbilled for actual resources used B) be underbilled for actual resources used C) be billed accurately for actual resources used D) result in an underallocation of direct costs
  125. Answer: B Diff: 3 Terms: normal costing Objective: 4 AACSB: Reflective thinking 47 164) When using a normal costing system, year-end accounting records will show that indirect costs are: A) applied improperly B) underallocated C) overbudgeted D) overallocated
  126. Answer: D Explanation: D) Overallocated: Allocated $324,000 ($270,000 / 50,000 60,000 dlh) when actual is only $300,000 Diff: 3 Terms: normal costing Objective: 6 AACSB: Reflective thinking
  127. Answer the following questions using the information below: A local accounting firm employs 20 full-time professionals. The budgeted annual compensation per employee is $40,500. The average chargeable time is 500 hours per client annually. All professional labor costs are included in a single direct-cost category and are allocated to jobs on a per-hour basis. Other costs are included in a single indirect-cost pool, allocated according to professional laborhours. Budgeted indirect costs for the year are $787,500, and the firm expects to have 90 clients during the coming year. 165) What is the budgeted direct labor cost rate per hour? A) $18.00 per hour B) $17.50 per hour C) $4.05 per hour D) $2,000 per hour
  128. Answer: A Explanation: A) Total direct labor cost = $40,500 20 = $810,000 Total hours = 500 90 = 45,000 hours Direct labor cost rate per hour = $810,000 / 45,000 = $18.00 per hour Diff: 2 Terms: budgeted indirect-cost rate Objective: 7 AACSB: Analytical skills 48 166) What is the budgeted indirect-cost rate per hour? A) $1,575.00 per hour B) $78.75 per hour C) $18.00 per hour D) $17.50 per hour
  129. Answer: D Explanation: D) Indirect-cost rate per hour = $787,500 / 500 90 = $17.50 per hour Diff: 2 Terms: budgeted indirect-cost rate Objective: 7 AACSB: Analytical skills 167) If ten clients are lost and the workforce stays at 20 employees, then the direct labor cost rate per hour: A) will remain the same as before B) will increase C) will decrease D) is indeterminable
  130. Answer: B Explanation: B) Total direct cost = $40,500 20 = $810,000 Total hours = 500 80 = 40,000 hours Direct cost rate per hour = $810,000 / 40,000 = $20.25 per hour The direct labor cost rate per hour increased from $18.00 per hour to $20.25 per hour Diff: 2 Terms: budgeted indirect-cost rate Objective: 7 AACSB: Analytical skills 49