Managerial Accounting Ray Garrison 16th Edition- Test Bank

 

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Sample Test

Managerial Accounting, 16e (Garrison)

Chapter 3  Job Order Costing: Cost Flows and External Reporting

 

1) When raw materials are purchased, they are recorded as an asset.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

2) The absorption cost approach provides for the absorption of all manufacturing costs, fixed and variable, into units of product.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

3) The following entry would be used to record depreciation on manufacturing equipment:

 

Manufacturing Overhead	XXX
Accumulated Depreciation		XXX

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

4) If a company uses a predetermined overhead rate, actual manufacturing overhead costs of a period will be recorded in the Manufacturing Overhead account and will be recorded on the job cost sheets.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

5) The journal entry for cost of goods manufactured includes the costs of units that are partially completed.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

6) Advertising costs should NOT be charged to the Manufacturing Overhead account.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

7) The following entry would be used to record the transfer of $40,000 of direct material and $10,000 of indirect material from the storeroom to production:

 

Direct Materials	40,000
Indirect Materials	10,000
Raw Materials		50,000

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

8) Entry (16) in the below T-account represents the cost of goods manufactured transferred to Finished Goods from Work in Process.

 

Finished Goods
Bal.	40,000	(16)	520,000
(15)	540,000
Bal.	60,000

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

9) Entry (11) in the below T-account could represent overhead cost applied to Work in Process.

 

Work In Process
Bal.	40,000	(11)	330,000
(2)	100,000
(3)	90,000
(7)	120,000
Bal.	20,000

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

10) Entry (1) in the below T-account represents the purchase rather than use of raw materials.

 

Raw Materials
Bal.	10,000	(2)	60,000
(1)	70,000
Bal.	20,000

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

11) Entry (4) in the below T-account could represent the cost of overhead applied to Work in Process.

 

Manufacturing Overhead
(2)	4,000	(7)	180,000
(3)	30,000
(4)	80,000
(5)	40,000
(6)	36,000
	190,000		180,000
Bal.	10,000

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

12) Entry (4) in the T-account below represents raw materials requisitioned for use in production.

 

Raw Materials
Bal.	15,000	(4)	87,000
(3)	94,000
Bal.	22,000

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

13) Entry (4) in the below T-account could represent the cost of property taxes and insurance incurred on the factory.

 

Manufacturing Overhead
(2)	4,000	(7)	180,000
(3)	30,000
(4)	80,000
(5)	40,000
(6)	36,000
	190,000		180,000
Bal.	10,000

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

14) The $5,000 balance in the T-account below represents overapplied manufacturing overhead for the period.

 

Manufacturing Overhead
(2)	4,000	(7)	180,000
(3)	30,000
(4)	80,000
(5)	40,000
(6)	36,000
	190,000		180,000
Bal.	10,000

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing; Underapplied and Overapplied Overhead

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.; 03-04 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

15) In the Schedule of Cost of Goods Manufactured, Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory – Ending work in process inventory.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Schedule of Cost of Goods Manufactured and Cost of Goods Sold

Learning Objective:  03-03 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

16) Assume that a company closes out any manufacturing overhead overapplied or underapplied to cost of goods sold. Then in the Schedule of Cost of Goods Sold, Adjusted cost of goods sold = Unadjusted cost of goods sold + Overapplied overhead – Underapplied overhead.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Schedule of Cost of Goods Manufactured and Cost of Goods Sold

Learning Objective:  03-03 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

17) In the Schedule of Cost of Goods Manufactured, Total raw materials available = Ending raw materials inventory + Purchases of raw materials.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Schedule of Cost of Goods Manufactured and Cost of Goods Sold

Learning Objective:  03-03 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

18) In the Schedule of Cost of Goods Sold, Cost of goods available for sale = Ending finished goods inventory + Cost of goods manufactured.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Schedule of Cost of Goods Manufactured and Cost of Goods Sold

Learning Objective:  03-03 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

19) In the Schedule of Cost of Goods Sold, Unadjusted cost of goods sold = Beginning finished goods inventory + Cost of goods manufactured − Ending finished goods inventory.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Schedule of Cost of Goods Manufactured and Cost of Goods Sold

Learning Objective:  03-03 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

20) On a manufacturing company’s income statement, direct labor is separately listed as an expense.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Schedule of Cost of Goods Manufactured and Cost of Goods Sold

Learning Objective:  03-03 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

21) In the Schedule of Cost of Goods Manufactured, Raw materials used in production = Beginning raw materials inventory + Purchases of raw materials − Ending raw materials inventory.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Schedule of Cost of Goods Manufactured and Cost of Goods Sold

Learning Objective:  03-03 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

22) The schedule of cost of goods manufactured contains three elements of product costs—direct materials, direct labor, and manufacturing overhead—and it summarizes the portions of those costs that remain in ending Work in Process inventory and that are transferred out of Work in Process into Finished Goods.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Schedule of Cost of Goods Manufactured and Cost of Goods Sold

Learning Objective:  03-03 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

23) In the Schedule of Cost of Goods Manufactured, Total direct materials = Raw materials used in production – Ending raw materials inventory.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Schedule of Cost of Goods Manufactured and Cost of Goods Sold

Learning Objective:  03-03 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

24) If a company closes any underapplied or overapplied manufacturing overhead to the Cost of Goods Sold account, then Cost of Goods Sold will be debited if manufacturing overhead is overapplied for the period.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Underapplied and Overapplied Overhead

Learning Objective:  03-04 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

25) A credit balance in the Manufacturing Overhead account at the end of the year means that manufacturing overhead was overapplied.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Underapplied and Overapplied Overhead

Learning Objective:  03-04 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

26) Two of the reasons why manufacturing overhead may be underapplied are: (1) the estimated total manufacturing overhead cost may have been too high; and (2) the estimated total amount of the allocation base may have been too low.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Underapplied and Overapplied Overhead

Learning Objective:  03-04 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

27) If the actual manufacturing overhead cost for a period exceeds the manufacturing overhead cost applied, then manufacturing overhead would be considered to be overapplied.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Underapplied and Overapplied Overhead

Learning Objective:  03-04 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

28) The entire difference between the actual manufacturing overhead cost for a period and the applied manufacturing overhead cost is typically closed to the Work In Process account.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Underapplied and Overapplied Overhead

Learning Objective:  03-04 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

29) Which of the following statements is true?

 

I.	Overhead can be applied slowly as a job is worked on.
II.	Overhead can be applied when the job is completed.
III.	Overhead should be applied to any job not completed at year-end in order to properly value the work in process inventory.

1.   A) Only statement I is true.

2.   B) Only statement II is true.

3.   C) Both statements I and II are true.

4.   D) Statements I, II, and III are all true.

 

Answer:  D

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

30) In a job-order costing system, indirect labor cost is usually recorded as a debit to:

1.   A) Manufacturing Overhead.

2.   B) Finished Goods.

3.   C) Work in Process.

4.   D) Cost of Goods Sold.

 

Answer:  A

Difficulty: 2 Medium

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

31) In a job-order costing system, manufacturing overhead applied is recorded as a debit to:

1.   A) Raw Materials inventory.

2.   B) Finished Goods inventory.

3.   C) Work in Process inventory.

4.   D) Cost of Goods Sold.

 

Answer:  C

Difficulty: 2 Medium

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

32) In a job-order costing system, which of the following events would trigger recording data on a job cost sheet?

1.   A) the purchase of direct materials

2.   B) the payment of fire insurance on the factory building

3.   C) the payment for product advertising

4.   D) none of the choices

 

Answer:  D

Difficulty: 2 Medium

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

33) The journal entry to record applying overhead during the production process is:

1.   A)

Manufacturing Overhead	XXX
Work In Process		XXX

1.   B)

Finished Goods	XXX
Manufacturing Overhead		XXX

1.   C)

Manufacturing Overhead	XXX
Finished Goods		XXX

1.   D)

Work In Process	XXX
Manufacturing Overhead		XXX

 

Answer:  D

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

34) Refer to the T-account below:

 

Manufacturing Overhead
(2)	9,000	(2)	167,000
(3)	15,000
(4)	80,000
(5)	30,000
(6)	25,000
	159,000		167,000
		Bal.	8,000

 

The ending balance of $8,000 represents which of the following?

1.   A) Underapplied overhead.

2.   B) Manufacturing overhead that will be carried over to the next period.

3.   C) Overapplied overhead.

4.   D) A bookkeeping error.

 

Answer:  C

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

35) Refer to the T-account below:

 

Raw Materials
Bal.	15,000	(9)	75,000
(5)	85,000
Bal.	25,000

 

Entry (5) could represent which of the following?

1.   A) Payments for raw materials.

2.   B) Requisitions of raw materials to be used in production.

3.   C) Purchases of raw materials.

4.   D) Overhead cost applied to Work in Process.

 

Answer:  C

Difficulty: 2 Medium

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

36) Refer to the T-account below:

 

Prepaid Insurance
Bal.	30,000	(8)	9,000

 

Entry (8) could represent which of the following?

1.   A) Payment of insurance for the upcoming period.

2.   B) Insurance cost incurred on the factory which is added to the Manufacturing Overhead account.

3.   C) Overhead cost applied to Work in Process.

4.   D) Overhead cost applied to Finished Goods.

 

Answer:  B

Difficulty: 2 Medium

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

37) When manufacturing overhead is applied to production, it is added to:

1.   A) the Cost of Goods Sold account.

2.   B) the Raw Materials account.

3.   C) the Work in Process account.

4.   D) the Finished Goods inventory account.

 

Answer:  C

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

38) Under a job-order costing system, the dollar amount transferred from Work in Process to Finished Goods is the sum of the costs charged to all jobs:

1.   A) started in process during the period.

2.   B) in process during the period.

3.   C) completed and sold during the period.

4.   D) completed during the period.

 

Answer:  D

Difficulty: 2 Medium

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

39) Refer to the T-account below:

 

Manufacturing Overhead
(2)	4,000	(7)	150,000
(3)	15,000
(4)	80,000
(5)	30,000
(6)	25,000
	154,000		150,000
Bal.	4,000

 

Entry (4) could represent which of the following except?

1.   A) Indirect labor cost incurred.

2.   B) Factory insurance cost.

3.   C) Overhead cost applied to Work in Process.

4.   D) Depreciation on factory equipment.

 

Answer:  C

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

40) Refer to the T-account below:

 

Work In Process
Bal.	30,000	(12)	270,000
(4)	90,000
(6)	70,000
(9)	110,000
Bal.	30,000

 

Entry (12) could represent which of the following?

1.   A) Direct labor cost incurred in production.

2.   B) Purchases of raw materials.

3.   C) The cost of goods manufactured transferred to Finished Goods.

4.   D) The cost of indirect materials incurred in production.

 

Answer:  C

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-02 Use T-accounts to show the flow of costs in a job-order costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

41) In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the “Total raw materials available” is computed by adding together the “Beginning raw materials inventory” and:

1.   A) Ending raw materials inventory

2.   B) Raw materials used in production

3.   C) Purchases of raw materials

4.   D) Indirect materials included in manufacturing overhead

 

Answer:  C

Difficulty: 2 Medium

Topic:  Schedule of Cost of Goods Manufactured and Cost of Goods Sold

Learning Objective:  03-03 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

42) In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the cost of goods manufactured is computed according to which of the following equations?

1.   A) Cost of goods manufactured = Total manufacturing costs + Ending work in process inventory – Beginning work in process inventory

2.   B) Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory – Ending work in process inventory

3.   C) Cost of goods manufactured = Total manufacturing costs + Beginning finished goods inventory – Ending finished goods inventory

4.   D) Cost of goods manufactured = Total manufacturing costs + Ending finished goods inventory – Beginning finished goods inventory

 

Answer:  B

Difficulty: 2 Medium

Topic:  Schedule of Cost of Goods Manufactured and Cost of Goods Sold

Learning Objective:  03-03 Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

43) When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the following would be true?

1.   A) Work in Process will decrease.

2.   B) Cost of Goods Sold will increase.

3.   C) Net income will decrease.

4.   D) Gross margin will increase.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Underapplied and Overapplied Overhead

Learning Objective:  03-04 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

44) If manufacturing overhead is underapplied, then:

1.   A) actual manufacturing overhead cost is less than estimated manufacturing overhead cost.

2.   B) the amount of manufacturing overhead cost applied to Work in Process is less than the actual manufacturing overhead cost incurred.

3.   C) the predetermined overhead rate is too high.

4.   D) the Manufacturing Overhead account will have a credit balance at the end of the year.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Underapplied and Overapplied Overhead

Learning Objective:  03-04 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

45) Overapplied manufacturing overhead would result if:

1.   A) the plant was operated at less than normal capacity.

2.   B) manufacturing overhead costs incurred were less than estimated manufacturing overhead costs.

3.   C) manufacturing overhead costs incurred were less than manufacturing overhead costs charged to production.

4.   D) manufacturing overhead costs incurred were greater than manufacturing overhead costs charged to production.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Underapplied and Overapplied Overhead

Learning Objective:  03-04 Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

46) During July at Loeb Corporation, $83,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The journal entry to record the requisition from the storeroom would include a:

1.   A) debit to Work in Process of $79,000

2.   B) debit to Work in Process of $83,000

3.   C) credit to Manufacturing Overhead of $4,000

4.   D) debit to Raw Materials of $83,000

 

Answer:  A

Explanation:

Work in Process	79,000
Manufacturing Overhead	4,000
Raw Materials		83,000

Difficulty: 2 Medium

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

47) Gullett Corporation had $26,000 of raw materials on hand on November 1. During the month, the Corporation purchased an additional $75,000 of raw materials. The journal entry to record the purchase of raw materials would include a:

1.   A) debit to Raw Materials of $101,000

2.   B) credit to Raw Materials of $75,000

3.   C) debit to Raw Materials of $75,000

4.   D) credit to Raw Materials of $101,000

 

Answer:  C

Explanation:

Raw Materials	75,000
Accounts Payable		75,000

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

48) Gallon Corporation had $24,000 of raw materials on hand on April 1. During the month, the Corporation purchased an additional $52,000 of raw materials. During April, $62,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $2,000. The debits to the Work in Process account as a consequence of the raw materials transactions in April total:

1.   A) $60,000

2.   B) $62,000

3.   C) $0

4.   D) $52,000

 

Answer:  A

Explanation:

Work in Process	60,000
Manufacturing Overhead	2,000
Raw Materials		62,000

 

Difficulty: 2 Medium

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

49) Farrel Corporation is a manufacturer that uses job-order costing. The company has supplied the following data for the just completed year:

Direct labor cost	$	574,000
Manufacturing overhead:
Indirect labor cost	$	163,000
Other manufacturing overhead costs incurred	$	584,000

 

What is the journal entry to record the direct and indirect labor costs incurred during the year?

1.   A)

Wages Payable	737,000
Direct Labor		574,000
Manufacturing Overhead		163,000

1.   B)

Work in Process	574,000
Manufacturing Overhead	163,000
Wages Payable		737,000

1.   C)

Wages Payable	737,000
Work in Process		574,000
Manufacturing Overhead		163,000

1.   D)

Direct Labor	574,000
Manufacturing Overhead	163,000
Wages Payable		737,000

 

Answer:  B

Explanation:  The journal entry to record the direct and indirect labor costs is:

 

Work in Process	574,000
Manufacturing Overhead	163,000
Wages Payable or cash		737,000

 

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

50) Piekos Corporation incurred $90,000 of actual Manufacturing Overhead costs during June. During the same period, the Manufacturing Overhead applied to Work in Process was $92,000. The journal entry to record the application of Manufacturing Overhead to Work in Process would include a:

1.   A) debit to Manufacturing Overhead of $92,000

2.   B) debit to Work in Process of $90,000

3.   C) credit to Manufacturing Overhead of $92,000

4.   D) credit to Work in Process of $90,000

 

Answer:  C

Explanation:  To record application of Manufacturing Overhead to Work In Process:

Work in Process	$	92,000
Manufacturing Overhead			$	92,000

 

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

51) Lister Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year:

Estimated total manufacturing overhead at the beginning of the year		$624,000
Estimated direct labor-hours at the beginning of the year		39,000	direct labor-hours

 

Results of operations:

 

Actual direct labor-hours		36,000	direct labor-hours
Manufacturing Overhead
Indirect labor cost	$	131,000
Other manufacturing overhead costs incurred	$	543,000

 

The total amount of manufacturing overhead applied to production is:

1.   A) $1,547,000

2.   B) $576,000

3.   C) $624,000

4.   D) $674,000

 

Answer:  B

Explanation:  Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base

 

= $624,000 ÷ 39,000 direct labor-hours = $16.00 per direct labor-hour

 

Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred

 

= $16.00 per direct labor-hour × 36,000 direct labor-hours = $576,000

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

52) Leelanau Corporation uses a job-order costing system. The following data are for last year:

 

Work in process beginning balance	$	10,500
Work in process ending balance	$	19,000
Cost of goods manufactured	$	323,000
Direct materials	$	115,000
Direct Labor	$	78,000

 

Leelanau applies overhead using a predetermined rate. What amount of overhead was applied to work in process last year?

1.   A) $138,500

2.   B) $121,500

3.   C) $130,000

4.   D) $203,500

 

Answer:  A

Explanation:  Cost of Goods Manufactured

Direct materials	$	115,000
Direct labor	$	78,000
Manufacturing overhead cost applied to work in process		X
Total manufacturing costs	$	193,000 + X
	$	10,500
Add: Beginning work in process inventory	$	203,500 + X
Deduct: Ending work in process inventory	$	19,000
Cost of goods manufactured	$	184,500 + X

 

$323,000 = $184,500 + X

 

X = $323,000 –$184,500 = $138,500

Difficulty: 3 Hard

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

53) During March, Zea Inc. transferred $50,000 from Work in Process to Finished Goods and recorded a Cost of Goods Sold of $56,000. The journal entries to record these transactions would include a:

1.   A) credit to Cost of Goods Sold of $56,000.

2.   B) debit to Finished Goods of $56,000.

3.   C) credit to Work in Process of $50,000.

4.   D) credit to Finished Goods of $50,000.

 

Answer:  C

Explanation:

Finished Goods	50,000
Work in Process		50,000

 

Cost of Goods Sold	56,000
Finished Goods		56,000

 

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

54) Firlit Corporation incurred $69,000 of actual Manufacturing Overhead costs during October. During the same period, the Manufacturing Overhead applied to Work in Process was $70,000. The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a:

1.   A) debit to Work in Process of $70,000

2.   B) credit to Work in Process of $70,000

3.   C) debit to Manufacturing Overhead of $69,000

4.   D) credit to Manufacturing Overhead of $69,000

 

Answer:  C

Explanation:  To record the incurrence of actual Manufacturing Overhead costs:

 

Manufacturing Overhead	69,000
Accounts Payable, Cash, other asset accounts		69,000

 

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

55) Brendal Corporation is a manufacturer that uses job-order costing. The company has supplied the following data for the just completed year:

 

Estimated total manufacturing overhead at the beginning of the year		$693,000
Estimated direct labor-hours at the beginning of the year		42,000	direct labor-hours

 

Results of operations:

 

Raw materials (all direct) requisitioned for use in production	$	525,000
Direct labor cost	$	690,000
Actual direct labor-hours		49,000	direct labor-hours
Manufacturing Overhead
Indirect labor cost	$	138,000
Other manufacturing overhead costs incurred	$	506,000

 

How much is the total manufacturing cost added to Work in Process during the year?

1.   A) $1,215,000

2.   B) $1,803,000

3.   C) $1,498,500

4.   D) $2,023,500

 

Answer:  D

Explanation:  Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base

 

= $693,000 ÷ 42,000 direct labor-hours = $16.50 per direct labor-hour

 

Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred

 

= $16.50 per direct labor-hour × 49,000 direct labor-hours = $808,500

 

Direct materials	$	525,000
Direct labor		690,000
Manufacturing overhead applied		808,500
Total manufacturing cost	$	2,023,500

 

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

56) Firebaugh Corporation is a manufacturer that uses job-order costing. The company has supplied the following data for the just completed year:

 

Raw materials purchased on account	$	520,000
Raw materials (all direct) requisitioned for use in production	$	467,000

 

What is the journal entry to record raw materials used in production?

1.   A)

Raw Materials	520,000
Work In Process		520,000

1.   B)

Raw Materials	467,000
Work In Process		467,000

1.   C)

Work In Process	520,000
Raw Materials		520,000

1.   D)

Work In Process	467,000
Raw Materials		467,000

 

Answer:  D

Explanation:  The journal entry to record the raw materials used in production is:

 

Raw Materials	467,000
Work In Process		467,000

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

57) On December 1, Mogro Corporation had $26,000 of raw materials on hand. During the month, the Corporation purchased an additional $60,000 of raw materials. During December, $62,000 of raw materials were requisitioned from the storeroom for use in production. The debits entered in the Raw Materials account during the month of December total:

1.   A) $26,000

2.   B) $86,000

3.   C) $60,000

4.   D) $62,000

 

Answer:  C

Explanation:

Raw Materials	60,000
Accounts Payable		60,000

 

Work in Process	62,000
Raw Materials		62,000

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

58) In October, Raddatz Inc. incurred $73,000 of direct labor costs and $6,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a:

1.   A) debit to Manufacturing Overhead of $6,000

2.   B) debit to Work in Process of $79,000

3.   C) credit to Manufacturing Overhead of $6,000

4.   D) credit to Work in Process of $79,000

 

Answer:  A

Explanation:

Work in Process	73,000
Manufacturing Overhead	6,000
Salaries and Wages Payable		79,000

 

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

59) During June, Buttrey Corporation incurred $67,000 of direct labor costs and $7,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a:

1.   A) debit to Work in Process of $67,000.

2.   B) credit to Work in Process of $74,000.

3.   C) debit to Work in Process of $74,000.

4.   D) credit to Work in Process of $67,000.

 

Answer:  A

Explanation:

Work in Process	67,000
Manufacturing Overhead	7,000
Salaries and Wages Payable		74,000

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

60) At the beginning of December, Altro Corporation had $26,000 of raw materials on hand. During the month, the Corporation purchased an additional $76,000 of raw materials. During December, $72,000 of raw materials were requisitioned from the storeroom for use in production. The credits entered in the Raw Materials account during the month of December total:

1.   A) $26,000

2.   B) $102,000

3.   C) $76,000

4.   D) $72,000

 

Answer:  D

Explanation:

Raw Materials	76,000
Accounts Payable		76,000

 

Work in Process	72,000
Raw Materials		72,000

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

61) During September at Renfro Corporation, $65,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The journal entry to record this requisition would include a debit to Manufacturing Overhead of:

1.   A) $65,000

2.   B) $4,000

3.   C) $0

4.   D) $61,000

 

Answer:  B

Explanation:

Work in Process	61,000
Manufacturing Overhead	4,000
Raw Materials		65,000

 

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

62) Tomlison Corporation is a manufacturer that uses job-order costing. The company has supplied the following data for the just completed year:

Cost of goods manufactured	$	1,589,000
Cost of goods sold (unadjusted)	$	1,517,000

 

The journal entry to record the unadjusted Cost of Goods Sold is:

1.   A)

Finished Goods	1,517,000
Cost of Goods Sold		1,517,000

1.   B)

Cost of Goods Sold	1,517,000
Finished Goods		1,517,000

1.   C)

Finished Good	1,589,000
Cost of Goods Sold		1,589,000

1.   D)

Cost of Goods Sold	1,589,000
Finished Goods		1,589,000

 

Answer:  B

Explanation:  The journal entry to record the unadjusted Cost of Goods Sold is:

Cost of Goods Sold	1,517,000
Finished Goods		1,517,000

Difficulty: 1 Easy

Topic:  The Flow of Costs in Job-Order Costing

Learning Objective:  03-01 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.

Bloom’s:  Apply

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement