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Horngren's Financial & Managerial Accounting, The Managerial Chapters, 4e (Nobles)Chapter 17 Job Order Costing

Learning Objective 17-1

1) Accounting firms, building contractors, and healthcare providers use process costing.Answer: FALSEDiff: 1LO: 17-1AACSB: ConceptAICPA Functional: Measurement

2) A job order costing system is used by companies that manufacture batches of unique products or provide specialized services.Answer: TRUEDiff: 1LO: 17-1AACSB: ConceptAICPA Functional: Measurement

3) A process costing system is used when a company produces identical units through a series of production steps.Answer: TRUEDiff: 1LO: 17-1AACSB: ConceptAICPA Functional: Measurement

4) Which of the following companies is most likely to use job order costing?A) a gold refineryB) a law firmC) a surfboard manufacturerD) a soft drink companyAnswer: BDiff: 2LO: 17-1AACSB: ApplicationAICPA Functional: Measurement

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5) Which of the following is true about ERP systems?A) as ERP systems are software based, they have given way to a more service-based economy.B) as ERP systems track costs more efficiently, the benefit from the cost information outweighs the cost of obtaining the information.C) as ERP systems track costs more efficiently, large quantities of similar products can be produced at lower costs.D) as ERP systems have the ability to trace all production costs to individual units, all product costs can now be classified as either direct materials or direct labor.Answer: BDiff: 2LO: 17-1AACSB: ConceptAICPA Functional: Measurement

6) Which of the following would use a process costing system rather than a job order costing system?A) a health-care service providerB) a music production studioC) a paint manufacturerD) a home remodeling contracting companyAnswer: CDiff: 2LO: 17-1AACSB: ApplicationAICPA Functional: Measurement

7) Which of the following is a reason why a job order costing system is appropriate for a custom furniture manufacturer?A) The cost incurred for each job will differ as per the order specifications.B) The direct costs incurred for each job are the same, only indirect costs vary.C) The raw materials used have already been accounted for using process costing.D) The products are sold to different customers.Answer: ADiff: 2LO: 17-1AACSB: ApplicationAICPA Functional: Measurement

8) Which of the following statements is true of costing systems?A) A process costing system would be used by manufacturers of custom-made perfumes.B) A job order costing system would be used by manufacturers of baking utensils.C) A construction company would likely use a process costing system.D) An accounting firm would likely use a job order costing system.Answer: DDiff: 2LO: 17-1AACSB: ApplicationAICPA Functional: Measurement

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9) Which of the following businesses is most likely to use a process costing system?A) a baker producing cakes to orderB) a legal service providerC) an audit service providerD) a candy manufacturerAnswer: DDiff: 2LO: 17-1AACSB: ApplicationAICPA Functional: Measurement

10) Cost accounting systems are used ________.A) to accumulate product cost informationB) to accumulate and assign period costs to productsC) by manufacturing companies, not service companiesD) by stockholders for decision-making purposesAnswer: ADiff: 2LO: 17-1AACSB: ApplicationAICPA Functional: Measurement

11) Which of the following is the correct order of the four steps of tracking product costs?A) assign → accumulate → allocate → adjustB) accumulate → assign → allocate → adjustC) adjust → allocate → accumulate → assignD) allocate → adjust → accumulate → assignAnswer: BDiff: 2LO: 17-1AACSB: ConceptAICPA Functional: Measurement

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1) When raw materials are requisitioned for a job, the Raw Materials Inventory account is debited.Answer: FALSEDiff: 1LO: 17-2AACSB: ConceptAICPA Functional: Measurement

2) Work-in-Process Inventory is debited when indirect labor costs are incurred in a job order costing system.Answer: FALSEDiff: 2LO: 17-2AACSB: ConceptAICPA Functional: Measurement

3) When direct materials are received on the production floor, they are recorded on the job cost record.Answer: TRUEDiff: 1LO: 17-2AACSB: ConceptAICPA Functional: Measurement

4) Manufacturing Overhead is a temporary account used to accumulate indirect production costs.Answer: TRUEDiff: 1LO: 17-2AACSB: ConceptAICPA Functional: Measurement

5) The cost of indirect materials is transferred out of the Manufacturing Overhead account and accumulated in the Raw Materials Inventory account.Answer: FALSEDiff: 1LO: 17-2AACSB: ConceptAICPA Functional: Measurement

6) The direct labor costs are assigned to individual jobs, and the total direct labor amount is recorded with a debit to Work-in-Process Inventory.Answer: TRUEDiff: 1LO: 17-2AACSB: ConceptAICPA Functional: Measurement

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7) The entry to record the purchase of direct materials on account would include a ________.A) debit to the Raw Materials Inventory accountB) debit to the Work-in-Process Inventory accountC) credit to the Work-in-Process Inventory accountD) credit to the Raw Materials Inventory accountAnswer: ADiff: 1LO: 17-2AACSB: ConceptAICPA Functional: Measurement

8) Which of the following accounts would be debited in the journal entry to record the requisition of direct materials?A) Cost of Goods SoldB) Work-in-Process InventoryC) Finished Goods InventoryD) Raw Materials InventoryAnswer: BDiff: 1LO: 17-2AACSB: ConceptAICPA Functional: Measurement

9) The journal entry to record direct labor costs actually incurred involves a debit to the ________.A) Work-in-Process Inventory accountB) Wages Payable accountC) Manufacturing Overhead accountD) Raw Materials Inventory accountAnswer: ADiff: 1LO: 17-2AACSB: ConceptAICPA Functional: Measurement

10) The journal entry to record indirect labor costs incurred involves a debit to the ________.A) Manufacturing Overhead accountB) Wages Payable accountC) Finished Goods Inventory accountD) Work-in-Process Inventory accountAnswer: ADiff: 1LO: 17-2AACSB: ConceptAICPA Functional: Measurement

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11) Manufacturing Overhead is a temporary account used to ________ indirect production costs during the accounting period.A) allocateB) assignC) accumulateD) approximateAnswer: CDiff: 1LO: 17-2AACSB: ConceptAICPA Functional: Measurement

12) The journal entry to issue indirect materials to production should include a debit to the ________.A) Finished Goods Inventory accountB) Raw Materials Inventory accountC) Manufacturing Overhead accountD) Work-in-Process Inventory accountAnswer: CDiff: 1LO: 17-2AACSB: ConceptAICPA Functional: Measurement

13) The journal entry to issue $500 of direct materials and $30 of indirect materials to production involves debit(s) to the ________.A) Work-in-Process Inventory account for $500 and Finished Goods Inventory account for $30B) Manufacturing Overhead account for $530C) Work-in-Process Inventory account for $500 and Manufacturing Overhead account for $30D) Work-in-Process Inventory account for $530Answer: CDiff: 2LO: 17-2AACSB: ApplicationAICPA Functional: Measurement

14) The journal entry to record $1,500 of direct labor and $200 of indirect labor incurred will include debit(s) to the ________.A) Manufacturing Overhead account for $1,700B) Work-in-Process Inventory account for $1,500 and Finished Goods Inventory account for $200C) Finished Goods Inventory account for $1,700D) Work-in-Process Inventory account for $1,500 and Manufacturing Overhead account for $200Answer: DDiff: 2LO: 17-2AACSB: ApplicationAICPA Functional: Measurement

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15) Altec Designs makes fashion clothing and reports the following data for the month of September:

Salaries paid to designers $140,000Wages paid to tailors 30,000Indirect wages 10,000

What is the journal entry to record the total labor charges incurred during September?A) Work-in-Process Inventory (direct labor) 170,000Manufacturing Overhead (indirect labor) 10,000 Wages payable 180,000

B) Work-in-Process Inventory (direct labor) 180,000 Wages Payable 180,000

C) Wages Payable 180,000 Finished Goods Inventory 150,000 Work-in-Process Inventory (direct labor) 30,000

D) Manufacturing Overhead (indirect labor) 180,000 Wages Payable 180,000

Answer: ADiff: 2LO: 17-2AACSB: ApplicationAICPA Functional: Measurement

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16) Adelphia Manufacturing issued $80,000 of direct materials and $10,000 of indirect materials for production. Which of the following journal entries would correctly record the transaction?A) Raw Materials Inventory 90,000 Finished Goods Inventory 80,000 Work-in-Process Inventory (direct materials) 10,000

B) Work-in-Process Inventory (direct and indirect materials) 90,000 Raw Materials Inventory 90,000

C) Work-in-Process Inventory (direct materials) 80,000Manufacturing Overhead (indirect materials) 10,000 Raw Materials Inventory 90,000

D) Manufacturing Overhead (direct and indirect materials) 90,000 Raw Materials Inventory 90,000

Answer: CDiff: 2LO: 17-2AACSB: ApplicationAICPA Functional: Measurement

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17) Uniq Works purchased raw materials amounting to $125,000 on account and $15,000 for cash. The materials will be used to manufacture upholstery for furniture manufacturers on a contract basis. Which of the following journal entries correctly records this transaction?A) Accounts Payable 125,000Cash 15,000 Raw Materials Inventory 140,000

B) Finished Goods Inventory 140,000 Accounts Payable 140,000

C) Work-in-Process Inventory 140,000 Accounts Payable 140,000

D) Raw Materials Inventory 140,000 Cash 15,000 Accounts Payable 125,000

Answer: DDiff: 1LO: 17-2AACSB: ApplicationAICPA Functional: Measurement

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18) The accounts of Delphinia Dreams Inc. showed the following balances at the beginning of October:

Account DebitRaw Materials Inventory $30,000Work-in-Process Inventory 40,000Finished Goods Inventory 50,000Manufacturing Overhead 20,000

During the month, direct materials amounting to $20,000 and indirect materials amounting to $5,000 was issued to production. What is the ending balance in the Work-in-Process Inventory account for the month of October?A) $40,000B) $60,000C) $20,000D) $25,000Answer: BExplanation: B) Beginning balance in WIP $40,000Add: Materials transferred 20,000Ending balance $60,000Diff: 1LO: 17-2AACSB: ApplicationAICPA Functional: Measurement

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19) The accounts of Melissa Manufacturing showed the following balances at the beginning of December:

Account DebitRaw Materials Inventory $50,000Work-in-Process Inventory 80,000Finished Goods Inventory 30,000Manufacturing Overhead 15,000

The following transactions took place during the month:December 2: Issued direct materials $25,000 and indirect materials $4,000 to production.December 15: Paid $6,000 and $3,000 toward factory's direct labor cost and indirect labor cost, respectively.What should be the balance in the Work-in-Process Inventory account at the end of December?A) $111,000B) $86,000C) $105,000D) $81,000Answer: AExplanation: A) Beginning balance in WIP $80,000Add:Materials transferred 25,000Direct factory labor cost 6,000Ending balance $111,000Diff: 1LO: 17-2AACSB: ApplicationAICPA Functional: Measurement

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20) On June 1, 2014, Dalton Productions had beginning balances as shown in the T-accounts below.

During June, the following transactions took place:June 2: Issued $2,400 of direct materials and $200 of indirect materials to productionWhat was the balance in the Manufacturing Overhead account following this transaction?A) $43,600B) $43,400C) $41,200D) $41,000Answer: CExplanation: C) Beginning balance in Manufacturing OH $41,000Add: indirect materials transferred 200Ending balance $41,200Diff: 1LO: 17-2AACSB: ApplicationAICPA Functional: Measurement

21) On June 1, 2014, Dalton Productions had beginning balances as shown in the T-accounts below.

During June, the following transactions took place:June 2: Issued $2,400 of direct materials and $200 of indirect materials to productionJune 13: Paid $7,500 of direct factory labor cost and $14,100 of indirect factory labor costWhat was the balance in the Manufacturing Overhead account following these transactions?A) $50,900B) $55,300C) $44,200D) $65,200Answer: BExplanation: B) Beginning balance in Manufacturing OH $41,000Add: indirect materials transferred 200Indirect labor 14,100Ending balance $55,300Diff: 2LO: 17-2AACSB: ApplicationAICPA Functional: Measurement

22) Specialty Wood Products Inc. had the following manufacturing labor costs last month:

Woodworkers' wages $100,000Indirect laborers' wages $20,000

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Maintenance personnel wages $10,000

Provide the journal entry to record the labor costs incurred, which will be paid at a later date.Answer: Work-in-Process Inventory 100,000Manufacturing Overhead 30,000 Wages Payable 130,000

Diff: 1LO: 17-2AACSB: ApplicationAICPA Functional: Measurement

23) Broxsie Fabrication Inc. issued $60,000 of direct materials and $15,500 of indirect materials to production. Prepare the journal entry to record the transaction.Answer: Work-in-Process Inventory (direct materials) 60,000Manufacturing Overhead (indirect materials) 15,500 Raw Materials Inventory 75,500


24) Pandora Manufacturing purchased $95,000 of raw materials on account and $5,000 raw materials for cash. The materials will be used to produce furniture. Provide the journal entry for the purchase of materials.Answer: Raw Materials Inventory 100,000 Accounts Payable 95,000 Cash 5,000


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1) Actual manufacturing overhead costs are credited to the Manufacturing Overhead account.Answer: FALSEDiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

2) In a manufacturing operation, depreciation of plant equipment should be debited to the Depreciation Expense account.Answer: FALSEDiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

3) Manufacturing overhead costs are allocated to the Work-in-Process Inventory account by a debit to the Manufacturing Overhead account.Answer: FALSEDiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

4) The amount of taxes and insurance incurred and paid for the plant of a manufacturing company should be debited to the Manufacturing Overhead account.Answer: TRUEDiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

5) Manufacturing overhead is allocated by debiting the Finished Goods Inventory account.Answer: FALSEDiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

6) Manufacturing overhead is allocated by debiting the Work-in-Process Inventory account and crediting the Manufacturing Overhead account.Answer: TRUEDiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

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7) The total amount of manufacturing overhead costs incurred and paid during the period is recorded on the credit side of the Manufacturing Overhead account.Answer: FALSEDiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

8) Which of the following describes the allocation base for allocating manufacturing overhead costs?A) the primary cost driver of indirect manufacturing costsB) the estimated base amount of manufacturing overhead costs in a yearC) the percentage used to allocate direct labor to Work in ProcessD) the main element that causes direct costsAnswer: ADiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

9) Which of the following correctly describes the term cost driver?A) the inflation rate that causes costs to riseB) the average inventory costs incurred at any point of timeC) the primary factor that causes a cost to be incurredD) the total material, labor, and overhead cost of a completed jobAnswer: CDiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

10) Which of the following will be categorized as a manufacturing overhead cost?A) depreciation on factory plant and equipmentB) salaries paid to assembly line workersC) administration charges of showroomD) cost of direct materials usedAnswer: ADiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

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11) Which of the following will be debited to the Manufacturing Overhead account of a watch manufacturer?A) office telephone expensesB) salaries paid to accountantsC) factory electricity expenseD) cost of printing brochuresAnswer: CDiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

12) The predetermined overhead allocation rate is the rate used to ________.A) assign direct material costs to jobsB) allocate actual manufacturing overhead costs incurred during a periodC) allocate estimated manufacturing overhead costs to jobsD) trace manufacturing and non-manufacturing costs to jobsAnswer: CDiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

13) The predetermined overhead allocation rate is calculated by dividing ________.A) the total estimated overhead costs by total number of days in a yearB) the estimated amount of cost driver by actual total overhead costsC) the actual overhead costs by actual amount of the cost driver or allocation baseD) the estimated overhead costs by total estimated quantity of the overhead allocation baseAnswer: DDiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

14) The predetermined overhead allocation rate for a given production year is calculated ________.A) at the end of the production yearB) before the production year beginsC) after completion of each jobD) after the preparation of financial statements for the yearAnswer: BDiff: 1LO: 17-3AACSB: ConceptAICPA Functional: Measurement

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15) Aaron Inc. estimates direct labor costs and manufacturing overhead costs for the coming year to be $800,000 and $500,000, respectively. Aaron allocates overhead costs based on machine hours. The estimated total labor hours and machine hours for the coming year are 16,000 hours and 10,000 hours, respectively. What is the predetermined overhead allocation rate?A) $80.00 per machine hourB) $31.25 per labor hourC) $81.25 per labor hourD) $50.00 per machine hourAnswer: DExplanation: D) Predetermined overhead allocation rate = Total estimated overhead costs ÷ Total estimated quantity of the overhead allocation basePredetermined overhead allocation rate = $500,000 ÷ 10,000 machine hours = $50.00 per machine hourDiff: 1LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

16) Zephyros Corporation had estimated manufacturing overhead costs for the coming year to be $316,000. The total estimated direct labor hours and machine hours for the coming year are 6,000 and 10,000, respectively. Manufacturing overhead costs are allocated based on direct labor hours. What is the predetermined overhead allocation rate?A) $31.60 per machine hourB) $19.75 per direct labor hourC) $52.67 per direct labor hourD) $39.50 per machine hourAnswer: CExplanation: C) Predetermined overhead allocation rate = Total estimated overhead costs ÷ Total estimated quantity of the overhead allocation basePredetermined overhead allocation rate = $316,000 ÷ 6,000 labor hours = $52.67 per labor hourDiff: 1LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

17) Sybil Inc. uses a predetermined overhead allocation rate to allocate manufacturing overhead costs to jobs. The company recently completed Job 300X. This job used 12 machine hours and 3 direct labor hours. The predetermined overhead allocation rate is calculated to be $45 per machine hour. What is the amount of manufacturing overhead allocated to Job 300X using machine hours as the allocation base?A) $540B) $135C) $675D) $405Answer: AExplanation: A) Allocated manufacturing overhead cost = Predetermined overhead allocation rate × Actual quantity of the allocation base used by each jobAllocated manufacturing overhead cost = $45 × 12 machine hours = $540.Diff: 1LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

18) Jeremy Corporation estimated manufacturing overhead costs for the year to be $500,000. Jeremy also estimated 8,000 machine hours and 2,000 direct labor hours for the

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year. It bases the predetermined overhead allocation rate on machine hours. On January 31, Job 25 was completed. It required 6 machine hours and 1 direct labor hour. What is the amount of manufacturing overhead allocated to the completed job? (Round your intermediate calculations to one decimal place.)A) $1,500.00B) $437.50C) $375.00D) $350.00Answer: CExplanation: C) Predetermined overhead allocation rate = Total estimated overhead costs ÷ Total estimated quantity of the overhead allocation basePredetermined overhead allocation rate = $500,000 ÷ 8,000 machine hours = $62.50 per machine hour

Allocated manufacturing overhead cost = Predetermined overhead allocation rate × Actual quantity of the allocation base used by each jobAllocated manufacturing overhead cost = $62.50 × 6 machine hours = $375.Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

19) The journal entry to record allocation of manufacturing overhead to a particular job includes a ________.A) debit to the Finished Goods Inventory account and credit to the Manufacturing Overhead accountB) debit to the Work-in-Process Inventory account and credit to the Cash accountC) debit to the Manufacturing Overhead account and credit to the Finished Goods Inventory accountD) debit to the Work-in-Process Inventory account and credit to the Manufacturing Overhead accountAnswer: DDiff: 2LO: 17-3AACSB: ConceptAICPA Functional: Measurement

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20) Iglesias Inc. completed Job 12 on November 30. The details of Job 12 are given below:

Direct labor cost $840Direct materials cost $1,100Machine hours 7Direct labor hours 22Predetermined overhead allocation rate

$90 per machine hour

What is the total cost of Job 12?A) $2,570B) $1,940C) $1,947D) $3,920Answer: AExplanation: A) Direct labor cost $840Direct materials cost 1,100Manufacturing overhead ($90 × 7 machine hours) 630Total cost of Job 12 $2,570Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

21) Gardner Machine Shop estimates manufacturing overhead costs for the coming year at $316,000. The manufacturing overhead costs will be allocated based on direct labor hours. Gardner estimates 5,000 direct labor hours for the coming year. In January, Gardner completed Job A33, which used 60 machine hours and 15 direct labor hours. What was the amount of manufacturing overhead allocated to job A33? (Round your intermediate calculations to one decimal place.)A) $948B) $4,740C) $3,792D) $990Answer: AExplanation: A) Estimated manufacturing overhead costs for the year $316,000.00Divided by: Estimated direct labor hours ÷ 5,000 hoursEstimated manufacturing overhead rate per direct labor hour $63.20Times: Direct labor hours used by Job A33 × 15 hoursManufacturing overhead allocated to Job A33 $948.00Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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22) Midtown Inc. uses a predetermined overhead allocation rate of $63.20 per direct labor hour. In January, the company completed Job A23 which utilized 15 direct labor hours. Which of the following correctly describes the journal entry to allocate overhead to the job?A) debit Finished Goods Inventory $948 and credit Manufacturing Overhead $948B) debit Manufacturing Overhead $63.20 and credit Work-in-Process Inventory $63.20C) debit Work-in-Process Inventory $948 and credit Manufacturing Overhead $948D) debit Cost of Goods Sold $63.20 and credit Finished Goods Inventory $63.20Answer: CExplanation: C) $948.00 (Manufacturing overhead to be allocated to Job A23) = 15 direct labor hours × $63.20 per direct labor hourDiff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

23) Halcyon Inc. completed Job 10B last month. The cost details of Job 10B are shown below.

Direct labor cost $2,040Direct materials cost $90Machine hours used 5Direct labor hours 75Predetermined overhead allocation rate per direct labor hour $34

Calculate the total job cost for Job 10B.A) $2,640B) $4,680C) $2,550D) $4,590Answer: BExplanation: B) Direct labor cost $2,040Direct materials cost 90Manufacturing overhead($34 × 75 direct labor hours = $2,550) 2,550Job cost of Job 10B $4,680Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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24) Haddows Inc. completed Job GH6 last month. The cost details of GH6 are shown below.

Direct labor cost $2,040Direct materials cost $90Direct labor hours 75Predetermined overhead allocation rate per direct labor hour $34Number of units of finished product 200

Calculate the cost per unit of finished product of Job GH6.A) $26.40B) $46.80C) $25.50D) $23.40Answer: DExplanation: D) Direct labor cost $2,040Direct materials cost 90Manufacturing overhead($34 × 75 direct labor hours = $2,550) 2,550Job cost of Job GH6 (A) $4,680Number of units of finished product (B) 200 unitsCost per unit of finished product of Job GH6 (A ÷ B) $23.40Diff: 3LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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25) Jezebel Inc. completed Job 12 and several other jobs in the last week. The cost details of Job 12 are shown below.

Direct labor cost $840Direct materials cost $1,100Machine hours 7 hoursDirect labor hours 22 hoursPredetermined overhead allocation rate per machine hour $90Number of units of finished product 25 units

What is the cost per unit of finished product produced under Job 12?A) $77.88B) $102.80C) $12.40D) $156.80Answer: BExplanation: B) Direct labor cost $840Direct materials cost 1,100Manufacturing overhead($90 × 7 machine hours = $630) 630Job cost of Job 12 (A) $2,570Number of units of finished product (B) 25 unitsCost per unit of finished product of Job 12 (A ÷ B)$102.80Diff: 3LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

26) Arabica Manufacturing uses a predetermined overhead allocation rate based on the number of machine hours. At the beginning of 2015, it estimated total manufacturing overhead costs to be $1,050,000, total number of direct labor hours to be 5,000, and total number of machine hours to be 25,000 hours. What was the predetermined overhead allocation rate?A) $35 per machine hourB) $210 per direct labor hourC) $42 per machine hourD) $35 per direct labor hourAnswer: CExplanation: C) Estimated manufacturing overhead costs for the year (A) $1,050,000Estimated total number of machine hours (B) 25,000Predetermined overhead allocation rate per machine hour (A ÷ B)$42Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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27) Olympia Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor cost. At the beginning of 2014, Olympia estimated total manufacturing overhead costs at $1,050,000 and total direct labor costs at $840,000. In June, 2014, Job 511 was completed. The details of Job 511 are shown below.

Direct materials cost $27,500Direct labor cost $13,000Direct labor hours 400 hoursUnits of product produced 200

What is the amount of manufacturing overhead costs allocated to Job 511?A) $16,250B) $10,400C) $5,000D) $34,375Answer: AExplanation: A) Estimated manufacturing overhead costs for the year $1,050,000Estimated total direct labor costs $840,000Predetermined overhead allocation rate as a percentage of direct labor cost($1,050,000/$840,000) 125%

Calculation of manufacturing overhead costs allocated to Job 511:Direct labor cost $13,000Manufacturing overhead costs allocated to Job 511 $16,250($13,000 × 125%)Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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28) Arabica Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor cost. At the beginning of 2015, Arabica estimated total manufacturing overhead costs at $1,050,000 and total direct labor costs at $840,000. In June, 2015, Arabica completed Job 511. The details of Job 511 are shown below.


How much was the total job cost of Job 511?A) $40,500B) $56,750C) $50,900D) $74,875Answer: BExplanation: B) Estimated manufacturing overhead costs for the year $1,050,000Estimated total direct labor costs $840,000Predetermined overhead allocation rate as a percentage of direct labor cost($1,050,000/$840,000) 125%

Calculation of total job cost of Job 511:Direct materials cost $27,500Direct labor cost 13,000Manufacturing overhead costs allocated to Job 511 ($13,000 × 125%) 16,250Total job cost of Job 511 $56,750Diff: 3LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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29) Irene Manufacturing uses a predetermined overhead allocation rate based on percentage of direct labor cost. At the beginning of 2014, the company estimated total manufacturing overhead costs at $1,050,000 and total direct labor costs at $840,000. In June, 2014, Job 711 was completed. The details of Job 711 are shown below.


How much was the cost per unit of finished product?A) $374.38B) $202.50C) $254.50D) $283.75Answer: DExplanation: D) Estimated manufacturing overhead costs for the year $1,050,000Estimated total direct labor costs 840,000Predetermined overhead allocation rate as a percentage of direct labor cost ($1,050,000/$840,000) 125%

Calculation of cost per unit:Direct materials cost $27,500Direct labor cost 13,000Manufacturing overhead costs allocated to Job 711($13,000 × 125%) 16,250Total job cost of Job 711(A) $56,750Number of units produced (B) 200Cost per unit (A ÷ B) $283.75Diff: 3LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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30) Venus Manufacturing uses a predetermined overhead allocation rate based on percentage of direct labor cost. At the beginning of the year, it fixed the manufacturing overhead rate at 20% of the direct labor cost. In the month of June, Venus completed Job 13C and its details are as follows:

Direct materials cost $6,220Direct labor cost $900Direct labor hours 32 hoursUnits of product produced 250 units

What is the total cost incurred for Job 13C?A) $8,364B) $6,400C) $7,120D) $7,300Answer: DExplanation: D) Direct materials cost $6,220Direct labor cost 900Manufacturing overhead ($900 × 20%) 180Total cost of Job 13C $7,300Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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31) Venus Manufacturing uses a predetermined overhead allocation rate based on percentage of direct labor cost. At the beginning of the year, it fixed the manufacturing overhead rate at 20% times the direct labor cost. In the month of June, Venus completed Job 13C and its details are as follows:

Direct materials cost $6,220Direct labor cost $900Direct labor hours 32 hoursUnits of product produced 250 units

What is the cost per unit of finished product of Job 13C?A) $29.20B) $33.46C) $28.48D) $36.70Answer: AExplanation: A) Direct materials cost $6,220Direct labor cost 900Manufacturing overhead 180Total cost of Job 13C 7,300Cost per unit ($7,300 ÷ 250 units) $29.20Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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32) Happy Clicks Inc. uses a predetermined overhead allocation rate of $4.75 per machine hour. Actual overhead costs incurred during the year are as follows:

Indirect materials $5,200Indirect labor $3,750Plant depreciation $4,800Plant utilities and insurance $9,530Other plant overhead costs $12,700Total machine hours used during the year 7,520 hours

What is the amount of manufacturing overhead cost allocated to Work-in-Process Inventory during the year?A) $35,980B) $8,950C) $27,030D) $35,720Answer: DExplanation: D) Total machine hours used during the year7,520 hoursPredetermined overhead allocation rate $4.75Predetermined overhead allocation (7,520 Hours × $4.75) $35,720Manufacturing overhead cost allocated to Work-in-Process Inventory$35,720Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

33) Doric Agricultural Corporation uses a predetermined overhead allocation rate based on direct labor cost. The predetermined overhead allocated during the year is $270,000. The details of production and costs incurred during the year are as follows:

Actual direct materials cost $812,500Actual direct labor cost $180,000Actual overhead costs incurred: $264,000Total direct labor hours 5,520 hours

What is the predetermined overhead allocation rate applied by the corporation?A) 50%B) 67%C) 150%D) 33%Answer: CExplanation: C) Actual direct labor cost $180,000Allocated manufacturing overhead cost $270,000Predetermined overhead allocation rate ($270,000 ÷ $180,000)150%Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

34) Equinox Fabrication Plant suffered a fire incident in August due to which most of the records for the year were destroyed. The following accounting data for the year that were recovered:

Total manufacturing overhead estimated at the beginning of the year $105,840Total direct labor costs estimated at the beginning of $186,000

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the yearTotal direct labor hours estimated at the beginning of the year

3,600 direct labor hours

Actual manufacturing overhead costs for the year $99,760Actual direct labor costs for the year $142,000

Actual direct labor hours for the year2,950 direct labor

hours

The company bases its manufacturing overhead allocation on direct labor hours. What was the predetermined overhead allocation rate for the year?A) $35.87B) $33.82C) $29.40D) $27.71Answer: CExplanation: C) Estimated manufacturing overhead $105,840Estimated direct labor hours 3,600 hoursPredetermined overhead allocation rate (per direct labor hour) $29.40($105,840 ÷ 3,600 direct labor hours)Diff: 1LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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35) The Quadrangle Fabrication Plant suffered a fire incident at the beginning of the year which resulted in loss of property including the accounting records. Some data for the year were retrieved and extracts from it are shown below:

Total manufacturing overhead estimated at the beginning of the year $105,840Total direct labor costs estimated at the beginning of the year $186,000Total direct labor hours estimated at the beginning of the year




hours

The company's manufacturing overhead allocation is based on direct labor hours. How much manufacturing overhead was allocated to production during the year? (Round intermediate calculations to one decimal place.)A) $105,840B) $86,730C) $152,417D) $186,000Answer: BExplanation: B) Estimated manufacturing overhead $105,840.00Estimated direct labor hours ÷ 3,600 hoursPredetermined overhead allocation rate (per direct labor hour) $29.40Actual direct labor hours for the year × 2,950 hoursManufacturing overhead allocated to production $86,730.00Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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36) The Quadrangle Fabrication Plant suffered a fire incident at the beginning of the year which resulted in loss of property including the accounting records. Some data for the year were retrieved and extracts from it are shown below:



Total machine hours estimated at the beginning of the year 9,000 machine hoursActual manufacturing overhead costs for the year $99,760Actual direct labor costs for the year $142,000


hoursActual machine hours for the year 10,000 machine hours

The company's manufacturing overhead allocation is based on the number of machine hours. What is the amount of manufacturing overhead cost allocated to Work-in-Process Inventory during the year? (Round your intermediate calculations to two decimal places)A) $86,730B) $60,977C) $152,417D) $117,600Answer: DExplanation: D) Estimated manufacturing overhead $105,840.00Estimated machine hours ÷ 9,000.00Predetermined overhead allocation rate (per machine hour)$11.76Actual machine hours for the year × 10,000Manufacturing overhead allocated to production $117,600Diff: 3LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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37) Archangel Manufacturing calculated a predetermined overhead allocation rate at the beginning of the year based on a percentage of direct labor costs. The production details for the year are given below:





hours

Calculate the allocation rate for the year based on the above data.A) 40%B) 44%C) 250%D) 228%Answer: AExplanation: A) Total manufacturing overhead estimated at the beginning of the year$140,000Total direct labor costs estimated at the beginning of the year÷ 350,000Predetermined overhead allocation rate 40%Diff: 1LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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38) Archangel Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor costs. The following are the details of production during the year:





hours

Calculate the amount of manufacturing overhead costs allocated to production.A) $140,000B) $164,452C) $144,800D) $159,280Answer: CExplanation: C) Total manufacturing overhead estimated at the beginning of the year$140,000Total direct labor costs estimated at the beginning of the year÷ $350,000Predetermined overhead allocation rate($140,000/$350,000) 40%Actual direct labor costs for the year × $362,000Manufacturing overhead costs allocated to production $144,800Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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39) Q-dot Manufacturing uses a predetermined overhead allocation rate based on direct labor hours. It has provided the following information for the year 2014:

Manufacturing overhead costs allocated to production $189,000Actual direct materials cost $560,000Actual direct labor cost $250,000

Actual direct labor hours9,450 direct labor

hoursEstimated machine hours 180,000 machine hours

Based on the above information, calculate Q-dot's predetermined overhead allocation rate.A) $5.43 per machine hourB) 76% of direct labor costC) 34% of direct materials costD) $20 per direct labor hourAnswer: DExplanation: D) Manufacturing overhead costs allocated to production $189,000Actual direct labor hours ÷ 9,450 hoursPredetermined overhead allocation rate per direct labor hour $20Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

40) Felton Quality Productions uses a predetermined overhead allocation rate based on machine hours. It has provided the following information for the year 2014:

Actual manufacturing overhead costs incurred $90,000Manufacturing overhead costs allocated to production $42,500Actual direct materials cost $220,000Actual direct labor cost $46,000Actual direct labor hours 2,000

Based on the above information, calculate the manufacturing overhead rate applied by Felton Quality.A) $1.42 per machine hourB) $1.53 per machine hourC) $7.33 per machine hourD) $3.00 per machine hourAnswer: AExplanation: A) Manufacturing overhead costs allocated to production (A)$42,500Actual machine hours (B) 30,000Predetermined overhead allocation rate (A) ÷ (B) $1.42Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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41) Davie Inc. used estimated direct labor hours of 250,000 and estimated manufacturing overhead costs of $1,000,000 in establishing its 2015 predetermined overhead allocation rate. Actual results showed:

Actual manufacturing overhead $900,000Allocated manufacturing overhead $875,000

What was the number of direct labor hours worked during 2015?A) 225,000 hoursB) 243,056 hoursC) 250,000 hoursD) 218,750 hoursAnswer: DExplanation: D) Estimated manufacturing overhead costs $1,000,000Estimated direct labor hours ÷ 250,000Predetermined overhead allocation rate per labor hour (A) $4.00Allocated manufacturing overhead (B) $875,000Number of direct labor hours worked (B ÷ A) 218,750Diff: 3LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

42) Forsyth Inc. uses estimated direct labor hours of 175,000 and estimated manufacturing overhead costs of $350,000 in establishing its 2014 predetermined overhead allocation rate. Actual results showed:

Actual manufacturing overhead $346,500Allocated manufacturing overhead $320,000

The number of direct labor hours worked during the period was:A) 175,000 hours.B) 160,000 hours.C) 173,250 hours.D) 191,406 hours.Answer: BExplanation: B) Estimated manufacturing overhead costs $350,000Estimated direct labor hours ÷ 175,000Predetermined overhead allocation rate per direct labor hour (A) $2Allocated manufacturing overhead (B) $320,000Number of direct labor hours worked (B ÷ A) 160,000Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

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43) The records at Smith and Jones Inc. show that Job 110 is charged with $11,000 of direct materials and $12,500 of direct labor. Smith and Jones Inc. allocate manufacturing overhead at 85% of direct labor cost. What is the total cost of Job No. 110?A) $20,625B) $34,125C) $22,500D) $21,625Answer: BExplanation: B) Direct labor cost incurred $12,500Predetermined overhead allocation rate on direct labor cost 85%Allocated manufacturing overhead ($12,500 × 85%) $10,625

Direct material cost $11,000Direct labor cost 12,500Allocated manufacturing overhead 10,625Cost of Job No. 110 $34,125Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

44) Haverhill Products completed Job 440 and several other jobs in the year 2014. In addition to direct labor and direct materials cost, Haverhill allocated $450 of manufacturing overhead to the job. It also incurred $300 and $75 on account of selling overhead and administration overhead. Provide the journal entry for the allocation of manufacturing overhead.Answer: Work-in-Process Inventory 450 Manufacturing Overhead 450


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45) Melinda Inc. estimates manufacturing overhead costs for the coming year at $225,000 which will be allocated based on direct labor hours. Melinda estimates 9,000 direct labor hours for the coming year. In January, Job A33 was completed which required 8 direct labor hours and 34 machine hours. Provide the journal entry to allocate manufacturing overhead to the job.Answer: Work-in-Process Inventory 200 Manufacturing Overhead 200

Estimated manufacturing overhead costs $225,000Estimated direct labor hours 9,000 hoursPredetermined overhead allocation rate ($225,000 ÷ 9,000 hours) $25Number of direct labor hours worked on Job A33 8 hoursAllocated manufacturing overhead ($25 × 8 hours) $200.00Diff: 2LO: 17-3AACSB: ApplicationAICPA Functional: Measurement

46) Ivade Inc. uses a predetermined overhead allocation rate of $75 per direct labor hour. In January, Ivade completed Job B23 which utilized 20 direct labor hours. Provide the journal entry to allocate overhead to the job.Answer: Work-in-process inventory 1,500 Manufacturing overhead 1,500


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1) The cost of goods manufactured is recorded with a debit to the Work-in-Process Inventory account and a credit to the Cost of Goods Manufactured account.Answer: FALSEDiff: 1LO: 17-4AACSB: ConceptAICPA Functional: Measurement

2) The cost of goods manufactured is recorded with a debit to the Finished Goods Inventory account and a credit to the Work-in-Process Inventory account.Answer: TRUEDiff: 1LO: 17-4AACSB: ConceptAICPA Functional: Measurement

3) When a job is completed, the total cost of the job is recorded with a debit to Finished Goods Inventory and a credit to Work-in-Process Inventory.Answer: TRUEDiff: 1LO: 17-4AACSB: ConceptAICPA Functional: Measurement

4) When goods are transferred from the Finished Goods Inventory account to the Cost of Goods Sold account, the product costs move from the balance sheet to the income statement.Answer: TRUEDiff: 1LO: 17-4AACSB: ConceptAICPA Functional: Measurement

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5) On January 1, 2014, Maywood Inc. Work-in-Process Inventory account had a balance of $30,000. During 2014, $58,000 of direct materials was placed into production. Manufacturing wages incurred amounted to $84,000, of which $66,000 were for direct labor. Manufacturing overhead is allocated on the basis of 120% of direct labor cost. Actual manufacturing overhead was $90,000. Jobs costing $220,400 were completed during 2014. What is the December 31, 2014 balance of Work-in-Process Inventory?A) $16,800B) $34,800C) $6,000D) $12,800Answer: DExplanation: D) Beginning balance in Work-in-Process Inventory $30,000Add:Direct materials 58,000Direct labor 66,000Manufacturing overhead (120% × $66,000) 79,200Less: Transfer to Finished Goods Inventory -220,400Ending balance in Work-in-Process Inventory $12,800Diff: 2LO: 17-4AACSB: ApplicationAICPA Functional: Measurement

6) On January 1, 2015, Jackson Inc.'s Work-in-Process Inventory account showed a balance of $65,000. During 2015, materials requisitioned for use in production amounted to $70,000 of which $66,000 represented direct materials. Factory wages for the period were $209,000 of which $186,400 were for direct labor. Manufacturing overhead is allocated on the basis of 60% of direct labor cost. Actual overhead was $116,440. Jobs costing $353,240 were completed during 2015. The December 31, 2015, balance in Work-in-Process Inventory is ________.A) $80,000B) $72,800C) $107,200D) $76,000Answer: DExplanation: D) Beginning balance in Work-in-Process Inventory $65,000Add:Direct materials 66,000Direct labor 186,400Manufacturing overhead (60% of $186,400) 111,840Less: Transfer to Finished Goods Inventory -353,240Ending balance in Work-in-Process Inventory $76,000Diff: 2LO: 17-4AACSB: ApplicationAICPA Functional: Measurement

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7) Caltran Inc. completed manufacturing Job 445. It included $320 of direct materials cost, $1,240 of direct labor cost, and $560 of allocated overhead. Which of the following is the correct journal entry needed to record the completed job?A) Work-in-Process Inventory 2,120 Finished Goods Inventory 2,120

B) Finished Goods Inventory 2,120 Materials Inventory 2,120

C) Work-in-Process Inventory 40,000 Cost of Goods Sold 40,000

D) Finished Goods Inventory 2,120 Work-in-Process Inventory 2,120

Answer: DExplanation: D) Cost of Job 445:Direct materials $320Direct labor 1,240Manufacturing overhead allocated 560Job cost for Job 445 $2,120

Journal entry:Finished Goods Inventory 2,120 Work-in-Process Inventory 2,120


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8) Altima Inc. finished Job A40 on the last working day of the year. It utilized $400 of direct materials and $3,600 of direct labor. Altima uses a predetermined overhead allocation rate based on percentage of direct labor costs which has been fixed at 40%. The entry to record the completion of the job should involve a ________.A) debit to Finished Goods Inventory $5,440 and a credit to Materials Inventory $5,440B) debit to Cost of Goods Sold $5,440 and a credit to Finished Goods Inventory $5,440C) debit to Finished Goods Inventory $5,440 and a credit to Work-in-Process Inventory $5,440D) debit to Work-in-Process Inventory $5,440 and a credit to Finished Goods Inventory $5,440Answer: CExplanation: C) Cost of Job A40:Direct materials utilized $400Direct labor 3,600Manufacturing overhead allocated 1,440Job cost for Job A40 $5,440

Journal entry:Finished Goods Inventory 5,440 Work-in-Process Inventory 5,440


9) On June 30, Caroline Inc. finished Job 750 with total job costs of $4,600 and transferred the costs to Finished Goods Inventory. On July 6, Caroline completed sale of the goods from Job 750 to a customer for $5,100 cash. In order to record the sale, two entries are necessary, one to record revenue, and one to record cost of goods sold. Which of the following is the correct entry needed to record the revenues?A) debit Finished Goods Inventory $4,600 and credit Sales Revenue $4,600B) debit Cash $5,100 and credit Sales Revenue $5,100C) debit Sales Revenue $5,100 and credit Cash $5,100D) debit Cost of Goods Sold $4,600 and credit Sales Revenue $4,600Answer: BExplanation: B) Journal entry:Cash 5,100 Sales Revenue 5,100


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10) On June 30, Coral Inc. finished Job 750 with total job costs of $4,600, and transferred the costs to Finished Goods Inventory. On July 6, it completed the sale of the goods to a customer for $5,100 cash. In order to record the sale, two entries are necessary—one to record revenue and one to record cost of goods sold. Which of the following is the correct journal entry to record the cost of goods sold?A) debit Finished Goods Inventory $4,600 and credit Cost of Goods Sold $4,600B) debit Cost of Goods Sold $4,600 and credit Work-in-Process Inventory $4,600C) debit Work-in-Process Inventory $4,600 and credit Cost of Goods Sold $4,600D) debit Cost of Goods Sold $4,600 and credit Finished Goods Inventory $4,600Answer: DExplanation: D) Journal entry:Cost of Goods Sold 4,600 Finished Goods Inventory 4,600


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11) At the beginning of 2015, Conway Manufacturing had the following account balances:

Following additional details are provided for the year:

Direct materials placed in production $80,000Direct labor incurred 190,000Manufacturing overhead incurred 300,000Manufacturing overhead allocated to production 295,000Cost of jobs completed and transferred 500,000

The ending balance in the Work-in-Process Inventory account is a ________.A) credit of $67,000B) debit of $65,000C) credit of $65,000D) debit of $67,000Answer: DExplanation: D) Beginning balance in Work-in-Process Inventory $2,000 DebitAdd:Direct materials utilized 80,000 DebitDirect labor 190,000 DebitManufacturing overhead allocated to production 295,000 DebitLess: Transfer to Finished Goods Inventory -500,000 CreditEnding balance in Work-in-Process Inventory $67,000 DebitDiff: 2LO: 17-4AACSB: ApplicationAICPA Functional: Measurement

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The ending balance in the Finished Goods Inventory account is a ________.A) debit of $508,000B) debit of $500,000C) debit of $573,000D) debit of $65,000Answer: AExplanation: A) Beginning balance in Finished Goods Inventory $ 8,000Add: Transfer of finished goods 500,000Ending balance in Finished Goods Inventory (debit balance)$508,000Diff: 2LO: 17-4AACSB: ApplicationAICPA Functional: Measurement

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The unadjusted balance in the Manufacturing Overhead account is a ________.A) credit of $295,000B) credit of $5,000C) debit of $5,000D) debit of $13,000Answer: CExplanation: C) Manufacturing overhead incurred $300,000Less: Manufacturing overhead allocated to production-295,000Balance in Manufacturing Overhead (debit) $ 5,000Diff: 2LO: 17-4AACSB: ApplicationAICPA Functional: Measurement

14) When goods are transferred from the Work-in-Process Inventory account to the Finished Goods Inventory account, ________.A) total assets and total liabilities increase by the same amountB) total assets of the company remain constantC) total equity and total assets increase by the same amountD) total liabilities increases and total equity decreases by the same amountAnswer: BDiff: 2LO: 17-4AACSB: ApplicationAICPA Functional: Measurement

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15) At January 1, 2015, Feldstein Manufacturing had a beginning balance in Work-in-Process Inventory of $80,000 and a beginning balance in Finished Goods Inventory of $20,000. During the year, Feldstein incurred manufacturing costs of $350,000.During the year, the following transactions occurred:Job A-12 was completed for a total cost of $120,000 and was sold for $125,000.Job A-13 was completed for a total cost of $200,000 and was sold for $210,000.Job A-15 was completed for a total cost $60,000, but was not sold as of year-end.

What was the balance in Finished Goods Inventory at the end of the year?A) $60,000 debit balanceB) $40,000 credit balanceC) $80,000 debit balanceD) $30,000 debit balanceAnswer: CExplanation: C) Beginning balance in Finished Goods Inventory $20,000Add: Transfer of finished goods:Job A-12 $120,000Job A-13 200,000Job A-15 60,000 380,000

400,000Less: Goods soldJob A-12 -120,000Job A-13 -200,000 -320,000Ending balance in Finished Goods Inventory (debit) $80,000Diff: 1LO: 17-4AACSB: ApplicationAICPA Functional: Measurement

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16) Jupiter Manufacturing began business on January 1, 2015. During its first year of operation, Jupiter worked on five industrial jobs and reported the following information at year-end:

Job 1 Job 2 Job 3 Job 4 Job 5Direct Materials 1,000 7,500 4,000 3,500 1,500Direct Labor 12,000 20,000 13,000 12,000 800Allocated Mfg. Overhead 1,500 6,000 2,500 7,500 200

Job completed: Jun 30 Sep 1 Oct 15 Nov 1Not

completedJob sold: Jul 10 Sep 12 Not sold Not sold N/ARevenues: 25,000 39,000 N/A N/A N/A

What was the balance in Work-in-Process Inventory at year-end?A) $2,500B) $25,500C) $45,000D) $15,500Answer: AExplanation: A) Job 5 is the only job on which work is in process at the end of the year.Ending balance in Work-in-Process Inventory (Job 5):Direct Materials $1,500Direct Labor 800Allocated Mfg. Overhead 200Ending balance in Work-in-Process Inventory (Job 5) $2,500Diff: 2LO: 17-4AACSB: ApplicationAICPA Functional: Measurement

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17) Jupiter Manufacturing began business on January 1, 2015. During its first year of operation, Jupiter worked on five industrial jobs, and reported the following information at year-end:




What was the balance in Finished Goods Inventory at year-end?A) $90,500B) $19,500C) $42,500D) $45,000Answer: CExplanation: C) Job 3 and Job 4 are the jobs that are completed and not sold at year end.

Ending balance in Finished Goods Inventory:Job 3:Direct Materials $4,000Direct Labor 13,000Allocated Mfg. Overhead 2,500 $19,500Job 4:Direct Materials 3,500Direct Labor 12,000Allocated Manufacturing Overhead 7,500 23,000Ending balance in Finished Goods Inventory $42,500Diff: 2LO: 17-4AACSB: ApplicationAICPA Functional: Measurement

18) Kalliste Inc. completed Job C50. C50 required $3,000 of direct materials cost, $2,000 of direct labor cost, and $600 of allocated overhead. Provide the journal entry needed to record completion and transfer of job.Answer: Finished Goods Inventory 5,600 Work-in-Process Inventory 5,600


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19) Hosanna Furnishings finished Job A40 which involved $4,000 of direct materials and $600 of direct labor. Hosanna uses a predetermined overhead allocation rate based on 40% of percent of direct labor costs. Provide the journal entry needed to record the completion of the job.Answer: Finished Goods Inventory 4,840 Work-in-Process Inventory 4,840

Explanation:Direct labor costs $600Predetermined overhead allocation rate on direct labor cost× 40%Manufacturing overhead allocated $240

Job cost of Job A40:Direct materials $4,000Direct labor 600Manufacturing overhead 240Total cost of Job A40 $4,840Diff: 2LO: 17-4AACSB: ApplicationAICPA Functional: Measurement

20) On June 30, Cleopatra Inc. finished Job 70 with total job costs of $40,000 and transferred the costs to Finished Goods Inventory. On July 6, Cleopatra completed the sale of the goods to a customer for $55,000 on account. Provide the journal entry to record the sales revenue.Answer: Accounts Receivable 55,000 Sales Revenue 55,000


21) On June 30, Cleopatra Inc. finished Job 70 with total job costs of $40,000 and transferred the costs to Finished Goods Inventory. On July 6, Cleopatra completed the sale of the goods to a customer for $55,000 on account. Provide the entry to record the cost of goods sold.Answer: Cost of Goods Sold 40,000 Finished Goods Inventory 40,000


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Direct materials placed in production $80,000Direct labor incurred 190,000Manufacturing overhead incurred 300,000Manufacturing overhead allocated to production 295,000Cost of jobs completed 500,000

Record these transactions in the T-accounts and calculate the ending balances for Work-in-Process Inventory, Finished Goods Inventory, and Manufacturing Overhead accounts (unadjusted.)Answer: Work-in-Process Inventory:Beginning balance $2,000Add:Direct materials placed in production 80,000Direct labor incurred 190,000Manufacturing overhead allocated to production 295,000Less:Cost of jobs completed -500,000Ending balance in Work-in-Process Inventory $67,000

Finished Goods Inventory:Beginning balance $8,000Add: Finished goods transferred from Work-in-Process Inventory500,000Ending balance $508,000

Manufacturing Overhead:Manufacturing overhead incurred $300,000Less: Manufacturing overhead allocated to production-295,000Balance to be cleared $5,000Diff: 2LO: 17-4AACSB: ApplicationAICPA Functional: Measurement

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1) Manufacturing overhead costs allocated to a job amounted to $492,000. The actual manufacturing costs incurred during the year was $500,000. Overhead costs have been underallocated.Answer: TRUEDiff: 1LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

2) During 2015, a company incurred $500,000 of manufacturing overhead costs and allocated $506,000 of manufacturing overhead costs. At the year-end, the adjustment entry needed to clear the overhead balance to zero will include a debit to Cost of Goods Sold.Answer: FALSEDiff: 1LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

3) During 2014, a company incurred $500,000 of manufacturing overhead costs and allocated $460,000 of manufacturing overhead costs. At year-end, the adjustment entry needed to clear the overhead balance to zero will include a debit to Cost of Goods Sold.Answer: TRUEDiff: 1LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

4) Overallocated manufacturing overhead occurs when the manufacturing overhead allocated to Work-in-Process Inventory is less than the amount actually incurred.Answer: FALSEDiff: 2LO: 17-5AACSB: ConceptAICPA Functional: Measurement

5) Overallocated manufacturing overhead is adjusted by debiting the Cost of Goods Sold account.Answer: FALSEDiff: 2LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

6) If the debit side of the Manufacturing Overhead account totals more than the credit side of the account, the manufacturing overhead is overallocated.Answer: FALSEDiff: 1LO: 17-5AACSB: ConceptAICPA Functional: Measurement

7) The journal entry for adjustment of overallocated manufacturing overhead includes a ________.A) credit to Finished Goods InventoryB) credit to Manufacturing OverheadC) debit to Work-in-Process Inventory

51

D) credit to Cost of Goods SoldAnswer: DDiff: 2LO: 17-5AACSB: ConceptAICPA Functional: Measurement

8) The journal entry for adjustment of underallocated manufacturing overhead includes a ________.A) credit to Finished Goods InventoryB) credit to Manufacturing OverheadC) debit to Work-in-Process InventoryD) credit to Cost of Goods SoldAnswer: BDiff: 2LO: 17-5AACSB: ConceptAICPA Functional: Measurement

9) Underallocated overhead occurs when ________.A) allocated overhead costs are less than actual overhead costsB) actual overhead costs are less than allocated overhead costsC) estimated overhead costs are greater than budgeted overhead costsD) estimated overhead costs are greater than actual overhead costsAnswer: ADiff: 2LO: 17-5AACSB: ConceptAICPA Functional: Measurement

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10) Neptune Fabrication Plant has provided you with the following information:





hours

The company bases its manufacturing overhead allocation on direct labor hours. What was the unadjusted ending balance in the manufacturing overhead account?A) $10,000 credit balanceB) $10,000 debit balanceC) $15,000 credit balanceD) $15,000 debit balanceAnswer: DExplanation: D) Estimated manufacturing overhead costs $250,000Divided by: Estimated total direct labor hours 5,000Predetermined overhead allocation rate per direct labor hour $50Actual direct labor hours 4,500Manufacturing overhead costs allocated ($50 × 4,500 hrs.) (A)$225,000Actual manufacturing overhead costs incurred (B) $240,000Manufacturing overhead costs underallocated (A - B) $15,000Unadjusted balance in manufacturing overhead account$15,000 (Dr.)Diff: 3LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

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11) Lakeside Inc. estimated manufacturing overhead costs for 2014 at $378,000, based on 180,000 estimated direct labor hours. Actual direct labor hours for 2014 totaled 195,000. The manufacturing overhead account contains debit entries totaling $391,500. The manufacturing overhead for 2014 was ________.(Round your intermediate calculations to one decimal place)A) $31,500 underallocatedB) $31,500 overallocatedC) $18,000 underallocatedD) $18,000 overallocatedAnswer: DExplanation: D) Estimated Manufacturing overhead costs $378,000.00Estimated total direct labor hours ÷ 180,000.00Predetermined overhead allocation rate per direct labor hour $2.10Actual direct labor hours 195,000.00Manufacturing overhead costs allocated ($2.10 × 195,000 hrs.)$409,500.00Less: Actual Manufacturing overhead costs incurred $391,500.00Manufacturing overhead costs overallocated $18,000.00Diff: 2LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

12) At the end of the year, Beta Inc. has an unadjusted debit balance in the Manufacturing Overhead account of $3,950. The adjusting journal entry needed to clear the balance to zero will include a ________.A) debit to Cost of Goods Sold $3,950 and credit to Manufacturing Overhead $3,950B) debit to Manufacturing Overhead $3,950 and credit to Cost of Goods SoldC) debit to Work-in-Process Inventory $3,950 and credit to Manufacturing Overhead $3,950D) debit to Gross Profit $3,950 and credit to Cost of Goods Sold $3,950Answer: ADiff: 1LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

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Direct materials placed in production $80,000Direct labor incurred 190,000Manufacturing overhead incurred 300,000Manufacturing overhead allocated to production 295,000Cost of jobs completed and transferred 500,000Total revenue 750,000Cost of goods sold 440,000

After adjusting the balance in Manufacturing Overhead, the ending balance in the Finished Goods Inventory account is a ________.A) credit of $52,000B) debit of $60,000C) credit of $432,000D) debit of $68,000Answer: DExplanation: D) Beginning balance in Finished Goods Inventory $8,000Add: Transfer of finished goods 500,000Less: Goods sold -440,000Ending balance in Finished Goods Inventory (debit) $68,000Diff: 3LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

14) At the end of the year, Metro Inc. has an unadjusted credit balance in the Manufacturing Overhead account of $950. Which of the following is the year-end adjusting entry needed to clear the balance to zero?A) debit Cost of Goods Sold $950 and credit Finished Goods Inventory $950B) debit Manufacturing Overhead $950 and credit Finished Goods Inventory $950C) debit Manufacturing Overhead $950 and credit Cost of Goods Sold $950D) debit Cost of Goods Sold $950 and credit Manufacturing Overhead $950Answer: CDiff: 1LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

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After recording all these transactions and adjusting for the over/underallocated overhead, the ending balance in the Cost of Goods Sold account is a ________.A) debit of $435,000B) debit of $445,000C) credit of $445,000D) debit of $440,000Answer: BExplanation: B) Cost of goods sold $440,000Adjustment to manufacturing overhead account:Manufacturing overhead incurred 300,000Manufacturing overhead allocated to production 295,000 5,000Balance in Cost of Goods Sold after adjusting $445,000underallocated overheadDiff: 2LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

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Calculate the gross profit will Conway report for the year 2015.A) $315,000B) $305,000C) $310,000D) $345,000Answer: BExplanation: B) Total revenue $750,000Less: Cost of Goods Sold:Cost of jobs sold $440,000Adjustment to Manufacturing Overhead:Manufacturing overhead incurred $300,000Manufacturing overhead allocated to production295,0005,000-445,000Gross Profit $305,000Diff: 2LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

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17) On January 1, 2014 Feldstein Manufacturing had a beginning balance in Work-in-Process Inventory of $80,000 and a beginning balance in Finished Goods Inventory of $20,000. During the year, Feldstein incurred manufacturing costs of $350,000.

Additionally, the following transactions occurred during the year:Job A-12 was completed for a total cost of $120,000 and was sold for $125,000Job A-13 was completed for a total cost of $200,000 and was sold for $210,000Job A-15 was completed for a total cost $60,000 but was not sold as of year-end

The Manufacturing Overhead account had an unadjusted credit balance of $12,000, and was cleared to zero at year-end.

What was the final balance in the Cost of Goods Sold account?A) $308,000 debit balanceB) $332,000 debit balanceC) $320,000 debit balanceD) $12,000 credit balanceAnswer: AExplanation: A) Cost of Goods Sold:Job A-12 $120,000Job A-13 200,000Adjustment to Manufacturing Overhead account:Overhead cost overallocated to be reduced from COGS -12,000Balance in Cost of Goods Sold (debit) $308,000Diff: 1LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

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18) At January 1, 2015, Feldstein Manufacturing had a beginning balance in Work-in-Process Inventory of $80,000 and a beginning balance in Finished Goods Inventory of $20,000. During the year, Feldstein incurred manufacturing costs of $350,000.

During the year, the following transactions occurred:Job A-12, was completed for a total cost of $120,000, and was sold for $125,000.Job A-13, was completed for a total cost of $200,000, and was sold for $210,000.Job A-15, was completed for a total cost $60,000, but was not sold as of year-end.


What was the amount of gross profit reported by Feldstein at the end of the year?A) $2,000B) $27,000C) $3,000D) $15,000Answer: BExplanation: B) Total revenue:Job A-12 $125,000Job A-13 210,000Less: Cost of Goods Sold:Job A-12 $120,000Job A-13 200,000Overhead overallocated to be reduced from COGS -12,000 -308,000Gross Profit $27,000Diff: 2LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

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19) Archangel Manufacturing has finished production activities for the year 2015. The company allocates manufacturing overhead based on a percentage of direct labor costs. The company has provided the following information:





hours

Based on the above data, calculate the unadjusted ending balance in the Manufacturing Overhead account.A) $19,000 credit balanceB) $19,000 debit balanceC) $14,200 credit balanceD) $14,200 debit balanceAnswer: DExplanation: D) Total manufacturing overhead estimated at the beginning of the year$140,000Total direct labor costs estimated at the beginning of the year÷ 350,000Manufacturing overhead allocation rate based on percentage of direct labor costs 40%Actual direct labor costs for the year × 362,000Manufacturing overhead costs allocated to production $144,800Less: Actual manufacturing overhead costs for the year - 159,000Unadjusted ending balance in Manufacturing Overhead account (debit) $ 14,200Diff: 3LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

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20) On January 1, 2015, Frederic Manufacturing had a beginning balance in Work-in-Process Inventory of $160,000 and a beginning balance in Finished Goods Inventory of $20,000. During the year, Frederic incurred manufacturing costs of $200,000.

During the year, the following transactions occurred:Job C-62 was completed for a total cost of $140,000 and was sold for $155,000.Job C-63 was completed for a total cost of $180,000 and was sold for $210,000.Job C-64 was completed for a total cost $80,000 but was not sold as of year-end.


What was the final balance in the Cost of Goods Sold account?A) $296,000 debit balanceB) $341,000 debit balanceC) $341,000 credit balanceD) $296,000 credit balanceAnswer: AExplanation: A) Cost of Goods Sold:Job C-62 $140,000Job C-63 180,000Adjustment to Manufacturing Overhead account:Overhead overallocated to be reduced from COGS -24,000Balance in Cost of Goods Sold (debit) $296,000Diff: 1LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

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21) On January 1, 2015, Frederic Manufacturing had a beginning balance in Work-in-Process Inventory of $160,000 and a beginning balance in Finished Goods Inventory of $20,000. During the year, Frederic incurred manufacturing costs of $200,000.

During the year, the following transactions occurred:Job C-62 was completed for a total cost of $140,000 and was sold for $155,000.Job C-63 was completed for a total cost of $180,000 and was sold for $210,000.Job C-64 was completed for a total cost $80,000 but was not sold as of year-end.


What was the amount of gross profit reported by Frederic at the end of the year?A) $21,000B) $69,000C) $201,000D) $161,000Answer: BExplanation: B) Total revenue:Job C-62 $155,000Job C-63 210,000Less: Cost of Goods Sold:Job C-62 $140,000Job C-63 180,000Manufacturing overhead overallocated to production-24,000 -296,000Gross Profit $69,000Diff: 2LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

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Jupiter's allocation of overhead costs left a debit balance of $1,200 in the Manufacturing Overhead account which was adjusted to zero at year-end. What was the final balance in Cost of goods sold?A) $48,000B) $49,200C) $46,800D) $91,700Answer: BExplanation: B) Cost of Goods Sold:Job 1 ($1,000 + $12,000 + $1,500)$14,500Job 2 ($7,500 + $20,000 + $6,000) 33,500Underallocated overhead costs 1,200Balance in Cost of Goods Sold $49,200Diff: 2LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

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Jupiter's allocation of overhead costs left a debit balance of $1,200 in the Manufacturing Overhead account which was adjusted to zero at year-end. What was the amount of gross profit earned in 2014?A) $14,800B) $16,000C) $17,200D) $1,700Answer: AExplanation: A) Sales Revenue:Job 1 $25,000Job 2 39,000 $64,000Less: Cost of Goods Sold:Job 1 ($1,000 + $12,000 + $1,500)14,500Job 2 ($7,500 + $20,000 + $6,000)33,500Underallocated overhead costs 1,200 -49,200Gross profit $14,800Diff: 3LO: 17-5AACSB: ApplicationAICPA Functional: Measurement

24) At the end of the year, Delta Inc. has an unadjusted debit balance in the Manufacturing Overhead account of $3,950. Provide the year-end adjusting entry needed to clear the balance to zero.Answer: Cost of Goods Sold 3,950 Manufacturing Overhead 3,950


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25) At the end of the year, Martin Inc. has an unadjusted credit balance in the Manufacturing Overhead account of $95. Provide the year-end adjusting entry needed to clear the balance to zero.Answer: Manufacturing Overhead 95 Cost of Goods Sold 95


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Direct materials placed in production $ 80,000Direct labor incurred 190,000Manufacturing overhead incurred 300,000Manufacturing overhead allocated to production295,000Cost of jobs completed 500,000Jobs sold for total revenue of 750,000Cost of jobs sold 440,000

The remaining balance of Manufacturing Overhead was cleared to zero. Calculate the ending balances in Work-in-Process Inventory, Finished Goods Inventory, Manufacturing Overhead (unadjusted), and Cost of Goods Sold (after adjustment.)Answer: Work-in-Process Inventory:Beginning balance $2,000Add:Direct materials placed in production 80,000Direct labor incurred 190,000Manufacturing overhead allocated to production 295,000Less:Cost of jobs completed -500,000Ending balance in Work-in-Process Inventory $67,000 Dr.

Finished Goods Inventory:Beginning balance $8,000Add: Finished goods transferred from Work-in-Process Inventory500,000Less: Cost of Goods Sold -440,000Ending balance $68,000 (Dr.)

Manufacturing Overhead:Manufacturing overhead incurred 300,000Less: Manufacturing overhead allocated to production -295,000Unadjusted balance 5,000 (Dr.)

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Cost of goods sold $440,000Adjustment to manufacturing overhead account:Manufacturing overhead incurred $300,000Manufacturing overhead allocated to production295,000 5,000Balance in Cost of Goods Sold (after adjustments) 445,000 (Dr.)Diff: 3LO: 17-5AACSB: ApplicationAICPA Functional: Measurement


1) Dezire Travel Services provided the following information:

Cost allocation rate for direct labor: $80 per hourCost allocation rate for indirect costs: $15 per direct labor hour

If Dezire receives $1,600 for a job requiring 8 hours of direct labor, then Dezire will make a profit of $440.Answer: FALSEExplanation: Revenue$1,600Less costs:Direct labor -640Indirect labor -120Profit $840Diff: 1LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

2) Dezire Travel Services provided the following information:

Cost allocation rate for direct labor: $40 per hourCost allocation rate for indirect costs: $22 per hour

If Dezire receives $350 for a job requiring 5 hours of direct labor, then Dezire will make a profit of $40.Answer: TRUEExplanation: Revenue$350Less costs:Direct labor -200Indirect labor -110Profit $40Diff: 1LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

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3) Pluto Travel Services provided the following information:

Cost allocation rate for direct labor: $40 per hourCost allocation rate for indirect costs: $22 per hour

Pluto is negotiating a job with a new client. The job will require 10 hours of direct labor. If Pluto wishes to make at least 15% gross profit on the revenues, it needs to receive $713 of revenues.Answer: FALSEExplanation: Costs:Direct labor $400Indirect labor 220Total costs $620

Revenues - Total Costs = Gross ProfitIf Revenues = X then,X - $620 = 0.15XOr, 0.85X = $620Therefore, X = 729.412Diff: 2LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

4) Job order costing is well suited for the service industry.Answer: TRUEDiff: 1LO: 17-6AACSB: ConceptAICPA Functional: Measurement

5) When job order costing is used in the service industry, the allocation of indirect costs is normally based on machine hours.Answer: FALSEDiff: 1LO: 17-6AACSB: ConceptAICPA Functional: Measurement

6) For a service company, such as an accounting firm, each client is considered a job.Answer: TRUEDiff: 1LO: 17-6AACSB: ConceptAICPA Functional: Measurement

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7) Unlike manufacturing companies, service companies use an allocation base for allocating both direct and indirect costs.Answer: FALSEDiff: 1LO: 17-6AACSB: ConceptAICPA Functional: Measurement

8) Process costing is more appropriate for service companies than job order costing.Answer: FALSEDiff: 1LO: 17-6AACSB: ConceptAICPA Functional: Measurement

9) The Rearland Inc. uses a job order costing system to accumulate client-related costs. The overhead rate is 60% of direct labor cost. Staff engineer's time is charged at a rate of $80 per hour. A recent job for a client involved 30 staff labor hours. How much was the total job cost?A) $1,600B) $2,400C) $3,840D) $360Answer: CExplanation: C) Direct labor ($80 × 30 staff labor hours)$2,400Overhead costs ($2400 × 60%) 1,440Total job cost $3,840Diff: 1LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

10) Neptune Accounting Services expects its accountants to work a total of 24,000 direct labor hours per year. The company's estimated total indirect costs are $240,000. The company uses direct labor hours as the allocation base for indirect costs. What is the indirect cost allocation rate?A) $10 per hourB) $20 per hourC) $100 per hourD) $120 per hourAnswer: AExplanation: A) Predetermined overhead allocation rate = Expected indirect costs ÷ Expected direct labor hours

Expected indirect costs $240,000Divided by: Expected direct labor hours ÷ 24,000 hoursPredetermined overhead allocation rate per direct labor hour $10Diff: 1LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

11) Neptune Accounting Services expects its accountants to work for 24,000 direct labor hours per year. The company's estimated total indirect costs are $240,000. The direct labor rate is $75 per hour. The company uses direct labor hours as the allocation base for indirect costs. If Neptune performs a job requiring 40 hours of direct labor, what is the total job cost?

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A) $7,000B) $400C) $3,400D) $3,000Answer: CExplanation: C) Expected indirect costs $240,000Divided by: Expected direct labor hours ÷ 24,000 hoursPredetermined overhead allocation rate per direct labor hour $10

Costs:Direct labor (40 hours × $75) $3,000Indirect labor 400Total job cost $3,400Diff: 2LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

12) Saturn Accounting Services expects its accountants to work a total of 30,000 direct labor hours per year. The company's estimated total indirect costs are $150,000. The direct labor rate is $100 per hour. The company uses direct labor hours as the allocation base for indirect costs. If Saturn performs a job requiring 50 hours of direct labor and bills the client using a standard markup of 40%, calculate the amount of the client's bill.A) $7,700B) $4,900C) $7,000D) $7,350Answer: DExplanation: D) Expected indirect costs $150,000Expected direct labor hours ÷ 30,000Predetermined overhead allocation rate per direct labor hour $5

Direct labor $5,000Indirect labor 250Total job cost (A) $5,250Times: Mark up percentage × 40%Mark up on total job cost (B) $2,100Total amount of client's bill (A + B) $7,350Diff: 2LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

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13) Bilkins Financial Advisors provides accounting and finance assistance to customers in the retail business. Bilkins has four professionals on staff, and an office with six clerical staff. Total compensation, including benefits, for the professional staff runs about $576,000 per year, and normal billable hours are 8,000 hours per year. Professional staff keeps detailed timesheets organized by the client number. The total office and administrative costs for the year is $754,000. What is the cost allocation rate that Bilkins will use for direct labor i.e. the cost of the professional staff?A) $75 per hourB) $36 per hourC) $72 per hourD) $76 per hourAnswer: CExplanation: C) Total compensation to professional staff (A) $576,000Total number of hours billed by professional staff (B) 8,000 hoursCost allocation rate used for direct labor (A ÷ B) $72Diff: 1LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

14) Bilkins Financial Advisors provides accounting and finance assistance to customers in the retail business. Bilkins has four professionals on staff, and an office with six clerical staff. Total compensation, including benefits, for the professional staff runs about $576,000 per year, and it normally has about 8,000 billable hours per year. Professional staff keeps detailed time sheets organized by the client number. The total office and administrative costs for the year is $754,000. Bilkins allocates professional time and office and administrative costs to clients monthly, using allocation rates based on billable hours. What is the cost allocation rate that Bilkins will use for office and administrative costs?A) $94.25 per hourB) $36.00 per hourC) $72.00 per hourD) $74.13 per hourAnswer: AExplanation: A) Office and administrative costs per year (A) $754,000.00Total number of hours billed by professional staff (B) 8,000 hoursCost allocation rate used for office and administrative costs (A ÷ B)$94.25Diff: 1LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

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15) Bilkins Financial Advisors provides accounting and finance assistance to customers in the retail business. Bilkins has four professionals on staff, and an office with six clerical staff. Total compensation, including benefits, for the professional staff runs about $754,000 per year, and it normally has about 8,000 billable hours per year. Professional staff keeps detailed time sheets organized by the client number. The total office and administrative costs for the year is $576,000.Bilkins allocates professional time and office and administrative costs to clients monthly, using allocation rates based on billable hours. During July, Bilkins' professionals spent 36 hours on their client, Soupy Sales. What is the total amount of cost that Bilkins will record for the client for the month? (Round your intermediate calculations to two decimal places.)A) $3,393B) $2,592C) $5,040D) $5,985Answer: DExplanation: D) Total compensation to professional staff (A) $754,000.00Total number of hours billed by professional staff (B) 8,000 hoursCost allocation rate used for direct labor (A ÷ B) $94.25

Office and administrative costs per year (A) $576,000Total number of hours billed by professional staff (B) 8,000 hoursCost allocation rate used for office and administrative costs (A ÷ B)$72

Costs:Direct labor $3,393Indirect labor 2,592Total job cost $5,985Diff: 2LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

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16) Bilkins Financial Advisors provides accounting and finance assistance to customers in the retail business. Bilkins has four professionals on staff, plus an office with six clerical staff. Total compensation, including benefits, for the professional staff runs about $754,000 per year, and it normally has about 8,000 billable hours per year. Professional staff keeps detailed time sheets organized by client number. The total office and administrative costs for the year is $576,000.Bilkins allocates professional time and office and administrative costs to clients monthly, using allocation rates based on billable hours. During July, Bilkins' professionals spent 36 hours on their client, Soupy Sales. Bilkins adds a 25% markup on their costs to calculate the amount billed to the customer. How much should the company charge Soupy Sales for the month of July? (Round your intermediate calculations to two decimal places.)A) $6,633.00B) $6,833.25C) $7,481.25D) $5,985.00Answer: CExplanation: C) Total compensation to professional staff (A)$754,000.00Total number of hours billed by professional staff (B) 8,000 hoursCost allocation rate used for direct labor (A ÷ B) $94.25


Costs:Direct labor $3,393.00Indirect labor 2,592.00Total job cost (A) $5,985.00Mark up percentage × 25%Mark up on total job cost (B) $1,496.25Total amount of client's bill (A + B) $7,481.25Diff: 3LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

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17) Bilkins Financial Advisors provides accounting and finance assistance to customers in the retail business. Bilkins has four professionals on staff, plus an office with six clerical staff. Total compensation, including benefits, for the professional staff runs up to $800,000 per year, and it normally has about 3,200 billable hours per year. Professional staff keeps detailed time sheets organized by client number. The total office and administrative costs for the year is $240,000.Bilkins allocates professional time and office and administrative costs to clients monthly, using allocation rates based on billable hours. During July, Bilkins' professionals spent 50 hours on their client, Soupy Sales. Bilkins adds a 30% markup on their costs to calculate the amount billed to the customer. How much gross profit did Bilkins earn from Soupy Sales in July?A) $21,125B) $16,250C) $3,750D) $4,875Answer: DExplanation: D) Gross profit is the mark-up charged on costs incurred.

Total compensation to professional staff (A) $800,000Total number of hours billed by professional staff (B) 3,200 hoursCost allocation rate used for direct labor (A ÷ B) $250


Costs:Direct labor $12,500Indirect labor 3,750Total job cost $16,250Mark up percentage × 30%Mark up on total job cost $4,875Diff: 3LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

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18) Fogelin Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances. Fogelin has four public relations specialists, and office staff. At the beginning of 2014, Fogelin estimated the total cost of salaries and benefits for the public relations specialists at $403,200, and a total of 7,200 billable hours for the year. The office and administrative costs were estimated at $676,800. What rate would Fogelin use for the cost of its specialists?A) $94 per hourB) $150 per hourC) $68 per hourD) $56 per hourAnswer: DExplanation: D) Total compensation to specialists (A) $403,200Total number of hours billed by specialists (B)7,200 hoursCost of specialists per hour (A ÷ B) $56Diff: 1LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

19) Fogelin Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances. Fogelin has four public relations specialists, and office staff. At the beginning of 2014, Fogelin estimated the total cost of salaries and benefits for the public relations specialists at $403,200, and a total of 7,200 billable hours for the year. The office and administrative costs were estimated at $676,800. The allocation base for office and administrative costs is billable hours. What rate would Fogelin use for allocating the cost of its office and administrative staff?A) $94 per hourB) $150 per hourC) $68 per hourD) $56 per hourAnswer: AExplanation: A) Office and administrative costs per year $676,800Total number of hours billed by specialists ÷ 7,200 hoursCost allocation rate used for office and administrative costs $94Diff: 1LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

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20) Fogelin Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances. Fogelin has four public relations specialists, plus an office staff. At the beginning of 2014, Fogelin estimated the total cost of salaries and benefits for the public relations specialists at $676,800, and a total of 7,200 billable hours for the year. All remaining office and administrative costs were estimated at $403,200. The allocation base for office and administrative costs is billable hours. In June, Fogelin signed a contract for a Russian ballet performance. It estimated it would require 34 hours of specialist time. What is the total cost estimate for this contract?A) $1,904B) $5,100C) $3,196D) $4,906Answer: BExplanation: B) Total compensation to specialists (A) $676,800Total number of hours billed by specialists (B) 7,200 hoursCost allocation rate (A ÷ B) $94

Office and administrative costs per year (A) $403,200Total number of hours billed by specialists (B) 7,200 hoursCost allocation rate used for office and administrative costs (A ÷ B)$56


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21) Fogelin Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances. Fogelin has four public relations specialists, and office staff. At the beginning of 2014, Fogelin estimated the total cost of salaries and benefits for the public relations specialists at $676,800, and a total of 7,200 billable hours for the year. The office and administrative costs were estimated at $403,200. The allocation base for office and administrative costs is billable hours. In June, Fogelin signed a contract for a Russian ballet performance. It negotiated a price of $6,400 for their services. When the job was complete, Fogelin's records showed that it had logged 36.50 billable hours. What was the actual total cost of the job for Fogelin?A) $5,475B) $2,044C) $3,431D) $4,906Answer: AExplanation: A) Total compensation to specialists $676,800Total number of hours billed by specialists 7,200 hoursCost allocation rate($676,800/7,200) $94

Office and administrative costs per year $403,200Total number of hours billed by specialists 7,200 hoursCost allocation rate used for office and administrative costs $56($403,200/7,200)


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22) Fogelin Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances. Fogelin has 4 public relations specialists, plus an office staff. At the beginning of 2014, Fogelin estimated the total cost of salaries and benefits for the public relations specialists at $403,200, and a total of 7,200 billable hours for the year. The office and administrative costs were estimated at $676,800. The allocation base for office and administrative costs is billable hours. In June, Fogelin signed a contract for a Russian ballet performance. It negotiated a price of $6,400 for their services. When the job was complete, Fogelin's records showed that it had logged 36.5 billable hours. What was the amount of gross profit that Fogelin made on the job?A) $1,494B) $2,969C) $925D) $4,356Answer: CExplanation: C) Total compensation to specialists $403,200Total number of hours billed by specialists 7,200 hoursCost allocation rate per hour ($403,200/7,200) $56


Revenue $6,400Less costs:Direct labor -2,044Indirect labor -3,431Gross profit $925Diff: 3LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

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23) Fogelin Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances. Fogelin has four public relations specialists, and office staff. At the beginning of 2014, Fogelin estimated the total cost of salaries and benefits for the public relations specialists at $403,200, and a total of 7,200 billable hours for the year. The office and administrative costs were estimated at $676,800. The allocation base for office and administrative costs is billable hours. A new client is contracting with Fogelin to promote a ballet tour in the U.S. Fogelin estimates that the job will require 40 billable hours of specialist time. If Fogelin wishes to make a 25% gross profit on the job, what price should Fogelin quote to the client?A) $2,800B) $6,000C) $7,500D) $4,700Answer: CExplanation: C) Total compensation to specialists $403,200Total number of hours billed by specialists 7,200 hoursCost allocation rate per hour($403,200/7,200) $56


Costs:Direct labor $2,240Indirect labor 3,760Total job cost (A) 6,000Mark up percentage × 25%Mark up on total job cost (B) 1,500Amount of clients' bill (A + B) $7,500Diff: 3LO: 17-6AACSB: ApplicationAICPA Functional: Measurement

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