Quiz Chapter 3 - Solutions

1. The manufacturing operation that would be most likely to use a job-order costing
system is:
A)
B)
C)
D)

toy manufacturing.
candy manufacturing.
crude oil refining.
shipbuilding.

A is probably incorrect. Toys look like assembly line products (uniform)

B is probably incorrect. Candy looks like assembly line products (uniform)
C is incorrect. Barrels of oil are uniform, assembly line products
D is the best answer. Large ships are likely to be unique products
2. A proper journal entry to close over-applied overhead to Cost of Goods Sold
would be:
A) D. Cost of Goods Sold
Cr. Work In Progress

XXX

B) D. Cost of Goods Sold

Cr. Manufacturing Overhead
C) D. Cost of Goods Sold
Cr. Finished Goods

XXX

D) D. Manufacturing Overhead
Cr. Cost of Goods Sold

XXX

XXX
XXX
XXX
XXX
XXX

D is the best answer. If you are over-applied that means that you applied (credits) more
than you actually spent (debits). You therefore have a credit balance in your
Manufacturing Overhead account, and you need to debit it in order to zero
out the account.
Only D has a debit to Manufacturing Overhead. The credit would be to Cost of Goods
Sold if the variance were immaterial.

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3. A proper journal entry to record issuing raw materials to be used on a job would
be:
A) D. Finished Goods
Cr. Materials Inventory
B) D. Materials Inventory
Cr. Work In Process

XXX

C) D. Work In Process
Cr. Raw Materials
D) D. Materials Inventory
Cr. Finished Goods

XXX

XXX
XXX
XXX
XXX
XXX
XXX

C is correct. You are taking materials out of Materials Inventory. You need a credit to
such an account in order to reduce it. A & C are the only journal entries that do
that. The raw materials go into Work In Process. You need to increase Work In
Process with a debit. Only C does this.
4. Nil Co. uses a Predetermined Overhead Rate based on Direct Labor Cost to
apply Manufacturing Overhead to jobs. For the year ended December 31, Nil's
estimated Manufacturing Overhead was $600,000, based on an estimated
volume of 50,000 Direct Labor Hours, at a Direct Labor Rate of $6.00 per hour.
Actual Manufacturing Overhead amounted to $620,000, with actual Direct Labor
Cost of $325,000. For the year, Manufacturing Overhead was:
A)
B)
C)
D)

over-applied by $20,000.
under-applied by $22,000.
over-applied by $30,000.
under-applied by $30,000.

C is correct. The debit to Manufacturing Overhead is for actual overhead ($620,000).

The credit to Manufacturing Overhead is for the amount applied. With normal
costing, the amount applied is based on the predetermined application rate
calculated at the beginning of the year.
We are told that the Manufacturing Overhead is applied using direct labor cost as the
driver. The predetermined application rate using direct labor cost is calculated as
follows:
Estimated Overhead/Estimated Driver
$600,000/($6.00 x 50,000)
$600,000/$300,000
$2 of overhead is applied for every $1 of direct labor cost
Since the actual direct labor cost is $325,000, the company would have applied twice
that amount as overhead ($650,000).
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Manufacturing Overhead is $30,000 over-applied.

Manufacturing Overhead
$620,000
$650,000

5. Johansen Company uses a Predetermined Overhead Rate based on Direct

Labor Hours to apply Manufacturing Overhead to jobs. The company has
provided the following estimated costs for the next year:
Direct materials ......................................
Direct labor ............................................
Rent on factory building ........................
Sales salaries ..........................................
Depreciation on factory equipment........
Indirect labor ..........................................
Production supervisor's salary................

$ 6,000
20,000
15,000
25,000
8,000
12,000
15,000

Johansen estimates that 20,000 Direct Labor Hours will be worked during the
year. The Predetermined Overhead Rate per hour will be:
A)
B)
C)
D)

$2.50.
$3.50.
$3.75.
$5.05.

A is correct. Add up all of the Manufacturing Overhead and then divide by the
estimated driver (20,000):
Rent on Factory Buildings
Depreciation on Factory Equipment
Indirect Labor
Production Supervisors Salary
Total
Cost Per Direct Labor Hour ($50,000/20,000)

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$15,000
8,000
12,000
15,000
$50,000
$2.50

Use the following to answer questions 6-8:

Munos Publishing Company uses a Job-Order Costing system to collect costs related to
the manufacture of specialty publications for corporate training.
6. What journal entry would Munos make to record the application of $1,200 of
Manufacturing Overhead to Job KN672?
A) D. Work in Process
Cr. Manufacturing Overhead
B) D. Cost of Goods Manufactured
Cr. Manufacturing Overhead
C) D. Manufacturing Overhead
Cr. Work in Process
D) D. Cost of Goods Manufactured
Cr. Work in Process

$1,200
$1,200
$1,200
$1,200
$1,200
$1,200
$1,200
$1,200

A is correct. Applying overhead requires a debit to Work In Process. Only A has that.
The credit would be to Manufacturing Overhead.
7. What journal entry would Munos make to record the completion of Job KN668 at
a total cost of $7,600?
A) D. Work in Process
Cr. Finished Goods
B) D. Cost of Goods Manufactured
Cr. Work In Process
C) D. Finished Goods
Cr. Work In Process
D) D. Cost of Goods Manufactured
Cr. Finished Goods

$7,600
$7,600
$7,600
$7,600
$7,600
$7,600
$7,600
$7,600

C is correct. When a job is completed, Finished Goods is debited. Only B has that.
The credit would be to Work In Process.

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8. What journal entry would Munos make to record $9,500 of depreciation on its
printing presses?
A) D. Work in Process
Cr. Manufacturing Overhead
B) D. Depreciation Expense
Cr. Accumulated Depreciation
C) D. Manufacturing Overhead
Cr. Accumulated Depreciation
D) D. Manufacturing Overhead
Cr. Depreciation Expense

$9,500
$9,500
$9,500
$9,500
$9,500
$9,500
$9,500
$9,500

C is correct. Depreciation requires a credit to Accumulated Depreciation. Only B & C

have that. The debit should be to Manufacturing Overhead. Only C has that.
You would not expense a factory cost.
Use the following to answer questions 9-10:
Leija Manufacturing Company uses a Job-Order Costing system and started the month
of March with one job in process (Job #359). This job had $500 of cost assigned to it at
this time. During March, Leija assigned production costs as follows to the jobs worked
on during the month:
Total cost assigned to jobs during March

Job #359 Job #360 Job #361

$6,000
$8,100
$2,400

During March, Leija completed and sold Job #359. Job #360 was also completed but
was not sold by month end. Job #361 was not completed by the end of March.
9. What is Leija's cost of goods manufactured for March?
A)
B)
C)
D)

$ 6,500
$14,100
$14,600
$16,500

C is correct. Cost of Goods Manufactured is the cost of the jobs that you finished. You
finished jobs 359 & 360. The cost of these jobs is $14,600 ($500 + 6,000 + 8,100)

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10.
A)
B)
C)
D)

What is Leija's work in process inventory balance at the end of March?

$ 1,900
$ 2,400
$ 2,900
$10,000

B is correct. The ending balance of Work In Process would be cost (so far) of the
incomplete job (job 361), which is $2,400.

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Answer Key Quiz Chapter 5

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

D
D
C
C
A
A
C
C
C
B

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