Question 1

Which of the following statements is false?

Accepted Answer

A)  Under variable costing, the income statement is prepared using a contribution margin approach.
B)  Variable costing is not allowed for external financial reporting, but many companies find it useful for internal managerial reports.
C)  Under variable costing, an increase in production increases the amount of profit reported on the income statement, even if the additional units are not sold.
D)  Under variable costing, fixed manufacturing costs are expensed in the period incurred.

Question 2

Service companies generally do not have Work in Process and Finished Goods inventory accounts.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following costs would not increase the Work in Process Inventory account?

Accepted Answer

A)  Cost of direct labor
B)  Cost of allocated overhead
C)  Cost of direct materials
D)  Cost of selling supplies

Question 4

A credit to the Finished Goods Inventory account represents the:

Accepted Answer

A)  cost of goods available for sale.
B)  cost of goods manufactured.
C)  cost of goods sold.
D)  cost of goods used.

Question 5

Which of the following correctly computes cost of goods manufactured?

Accepted Answer

A)  Beginning work in process + Direct materials used + Direct labor + Overhead - Ending work in process
B)  Beginning work in process + Cost of goods sold - Ending finished goods
C)  Beginning work in process + Direct materials used + Direct labor + Overhead
D)  None of these.

Question 6

Selected T-accounts from the books of Street Manufacturing Company are provided below:
Required:
1) Assuming overhead was allocated on the basis of direct labor cost, compute the predetermined overhead rate.2) Compute the amount by which overhead was over- or underapplied. (Be sure to indicate whether over- or underapplied.)3) Compute the cost of goods sold assuming that the company writes off any over- or underapplied overhead directly against cost of goods sold.4) Compute net income for the period.5) Compute the total amount of inventory that will be reported on the end-of-year balance sheet, including the balances from all of the company's inventory accounts.

Accepted Answer

Answers will vary
1) Predetermined overh...

Question 7

By the end of the year, Shirley Company's manufacturing overhead account had a $1,500 credit balance. This means that overhead was underapplied during the year.

Accepted Answer

A) True 
 B)False

Question 8

McDonnell Industries estimated manufacturing overhead for the year at $290,000. Manufacturing overhead for the year was underapplied by $12,000. The company applied $235,000 to work in process. The amount of actual overhead would have been:

Accepted Answer

A)  $247,000.
B)  $278,000.
C)  $223,000.
D)  none of these.

Question 9

Virginia Company paid $7,500 cash for various manufacturing overhead costs. As a result of this transaction:

Accepted Answer

A)  total assets increase.
B)  total assets, total equity, and net income are not affected.
C)  total assets, total equity, and net income decrease.
D)  none of these.

Question 10

Lexington Company's predetermined overhead rate is $4.00 per direct labor hour. Which of the following equations correctly computes the amount of overhead cost that should be applied to work in process assuming a job required 100 hours but was estimated to require 90 hours?

Accepted Answer

A)  100 hours × $4 = $400
B)  90 hours × $4 = $360
C)  1 job × $4 = $4
D)  None of these.

Question 11

Selected accounts from Harper Company are provided below:
Required:
In the space provided, briefly describe each indicated transaction. Transaction (a) has been completed as an example.  $$\begin{array} { | l | l | } 
\hline \text { Transaction } & \text { Description of Transaction } \
\hline \text { (a) } & \text { Common stock issued for cash } \
\hline \text { (b) } & \
\hline \text { (c) } & \
\hline \text { (d) } & \
\hline \text { (e) } & \
\hline \text { (f) } & \
\hline \text { (g) } & \
\hline \text { (h) } & \
\hline \text { (i) } & \
\hline \text { (j) } & \
\hline
\end{array}$$

Accepted Answer

The answer of Selected accounts from Harper Company are provided...

Question 12

Winken, Blinken, and Nod is a law firm specializing in real estate litigation. In addition to the three partners, the firm employs nine associates who work directly with clients. The average budgeted compensation for the twelve professionals is $240,000. Each lawyer is budgeted at 1,500 billable hours per year. All professional labor costs are included in a single direct cost pool and are traced to jobs on a per-hour basis. All non-professional labor costs are included in a single overhead cost pool and are allocated to jobs using professional labor hours as the allocation base. Budgeted overhead costs total $1,800,000. The firm is considering bidding on some work with a local university. The job is expected to require 100 hours of professional labor.Required:
1) Compute the budgeted direct cost rate per hour of professional labor.2) Compute the budgeted (that is, predetermined) overhead cost rate per hour of professional labor.3) Compute the budgeted cost for the university job.

Accepted Answer

The answer of Winken, Blinken, and Nod is a law...

Question 13

Debits in the Work in Process account consist of actual direct material costs, actual direct labor costs, and estimated manufacturing overhead costs.

Accepted Answer

A) True 
 B)False

Question 14

Bates Company recognized $16,000 of estimated manufacturing overhead costs at the end of the month. As a result of this transaction the:

Accepted Answer

A)  temporary account Manufacturing Overhead increases and the Work in Process account decreases.
B)  temporary account Manufacturing Overhead decreases and the Work in Process account increases.
C)  temporary account Manufacturing Overhead decreases and the Wages Expense account increases.
D)  none of these.

Exam 11: Product Costing in Service and Manufacturing Entities

Correct Answer
verified
Answers will vary
1) Predetermined overh...
View Answer

Correct Answer
verified

McDonnell Industries estimated manufacturing overhead for the year at $290,000. Manufacturing overhead for the year was underapplied by $12,000. The company applied $235,000 to work in process. The amount of actual overhead would have been:

Correct Answer
verified

Service companies generally do not have Work in Process and Finished Goods inventory accounts.

Correct Answer
verified

Debits in the Work in Process account consist of actual direct material costs, actual direct labor costs, and estimated manufacturing overhead costs.

Correct Answer
verified

Bates Company recognized $16,000 of estimated manufacturing overhead costs at the end of the month. As a result of this transaction the:

Correct Answer
verified

Correct Answer
verified

A credit to the Finished Goods Inventory account represents the:

Correct Answer
verified

Lexington Company's predetermined overhead rate is $4.00 per direct labor hour. Which of the following equations correctly computes the amount of overhead cost that should be applied to work in process assuming a job required 100 hours but was estimated to require 90 hours?

Correct Answer
verified

Which of the following costs would not increase the Work in Process Inventory account?

Correct Answer
verified

Which of the following statements is false?

Correct Answer
verified

By the end of the year, Shirley Company's manufacturing overhead account had a $1,500 credit balance. This means that overhead was underapplied during the year.

Correct Answer
verified

Which of the following correctly computes cost of goods manufactured?

Correct Answer
verified

Virginia Company paid $7,500 cash for various manufacturing overhead costs. As a result of this transaction:

Correct Answer
verified

Exam 11: Product Costing in Service and Manufacturing Entities

Correct AnswerverifiedAnswers will vary1) Predetermined overh...View AnswerShow Answer

Correct AnswerverifiedShow Answer

McDonnell Industries estimated manufacturing overhead for the year at $290,000. Manufacturing overhead for the year was underapplied by $12,000. The company applied $235,000 to work in process. The amount of actual overhead would have been:

Correct AnswerverifiedShow Answer

Service companies generally do not have Work in Process and Finished Goods inventory accounts.

Correct AnswerverifiedShow Answer

Debits in the Work in Process account consist of actual direct material costs, actual direct labor costs, and estimated manufacturing overhead costs.

Correct AnswerverifiedShow Answer

Bates Company recognized $16,000 of estimated manufacturing overhead costs at the end of the month. As a result of this transaction the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A credit to the Finished Goods Inventory account represents the:

Correct AnswerverifiedShow Answer

Lexington Company's predetermined overhead rate is $4.00 per direct labor hour. Which of the following equations correctly computes the amount of overhead cost that should be applied to work in process assuming a job required 100 hours but was estimated to require 90 hours?

Correct AnswerverifiedShow Answer

Which of the following costs would not increase the Work in Process Inventory account?

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

By the end of the year, Shirley Company's manufacturing overhead account had a $1,500 credit balance. This means that overhead was underapplied during the year.

Correct AnswerverifiedShow Answer

Which of the following correctly computes cost of goods manufactured?

Correct AnswerverifiedShow Answer

Virginia Company paid $7,500 cash for various manufacturing overhead costs. As a result of this transaction:

Correct AnswerverifiedShow Answer

Correct Answer
verified
Answers will vary
1) Predetermined overh...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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