CH 1 and 2

Ch1And2
Student: ___________________________________________________________________________
1. All of the following are examples of opportunity costs: salary given up to start a business; rental income
given up when you live in a house you own; interest income that could be earned on money spent for a
car.
True False
2. The cost of the cushions that are used to manufacture sofas is best described as a:
A. manufacturing overhead cost.
B. period cost.
C. variable cost.
D. conversion cost.
3. A security guard's wages at a factory would be an example of:
A.
B.
C.
D.
4. Which of the following is NOT a period cost?
A. Monthly depreciation of the equipment in a fitness room used by factory workers.
B. Salary of a billing clerk.
C. Insurance on a company showroom, where current and potential customers can view new products.
D. Cost of a seminar concerning tax law updates that was attended by the company's controller.
5. The annual insurance premium for the factory building would be a:
A. fixed cost, period cost, and indirect cost with regard to units of product.
B. fixed cost, product cost, and direct cost with regard to units of product.
C. variable cost, product cost, direct cost with regard to units of product.
D. fixed cost, product cost, indirect cost with regard to units of product.
6. Factory supplies in a manufacturing plant are most likely:
A. sunk costs.
B. period costs.
C. variable costs.
D. excluded from product costs.
7. Inventoriable (i.e., product) costs that have become expenses can be found in:
A. period costs.
B. selling expenses.
C. cost of goods sold.
D. administrative expenses.
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8. The fixed portion of the cost of electricity for a manufacturing plant is a:
A.
B.
C.
D.
9. Which of the following statements about product costs is true?
A. Product costs are deducted from revenue when the production process is completed.
B. Product costs are deducted from revenue as expenditures are made.
C. Product costs associated with unsold finished goods and work in process appear on the balance sheet
as assets.
D. Product costs appear on financial statements only when products are sold.
10. Rotonga Manufacturing Company leases a vehicle that it uses to deliver its finished products to
customers. Which of the following terms could be used to correctly describe the monthly lease payments
made on the delivery vehicle?
A.
B.
C.
D.
11. Which of the following production costs, if expressed on a per unit basis, would be most likely to change
significantly as the production level varies?
A. Direct materials.
B. Direct labor.
C. Fixed manufacturing overhead.
D. Responses A and B are both correct.
12. When the level of activity decreases within the relevant range, the fixed cost per unit will:
A. decrease.
B. increase.
C. remain the same.
D. The effect cannot be predicted.
13. Which of the following statements concerning direct and indirect costs is NOT true?
A. Whether a particular cost is classified as direct or indirect does not depend on the cost object.
B. A direct cost is one that can be easily traced to the particular cost object.
C. The factory manager's salary would be classified as an indirect cost of producing one unit of product.
D. A particular cost may be direct or indirect, depending on the cost object.
14. Cobra Mining Company spent $200 million five years ago to develop underground mining and milling
operations in a remote area of a western state. Metals prices have since declined precipitously and the
company is considering abandoning the operation. The term that would best describe the $200 million
expenditure when considering the abandonment decision is:
A. sunk cost.
B. variable cost.
C. differential cost.
D. opportunity cost.
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15. The following costs were incurred in July:
Prime costs during the month totaled:

A. $48,000
B. $28,000
C. $107,000
D. $63,000
16. Shown below are a number of costs incurred last year at Mecca Publishing Co., a manufacturer of
elementary school textbooks:
What is the total of the manufacturing overhead costs above?

A. $500
B. $2,500
C. $6,200
D. $6,700
17. Mammoser Manufacturing Corporation rents a building for $8,000 per month and uses it for a number of
different purposes. The building space is utilized by the various activities as follows:
How much of the $8,000 monthly rent cost should be classified as manufacturing overhead?
A. $5,600
B. $6,000
C. $6,800
D. $7,200
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18. Consider the following costs:
What is the total amount of manufacturing overhead included above?

A. $78,000
B. $139,000
C. $44,000
D. $37,000
19. Consider the following costs incurred in a recent period:
What was the total amount of the period costs listed above for the period?
A. $78,000
B. $71,000
C. $46,000
D. $37,000
20. The following inventory balances have been provided for the most recent year:
The cost of goods manufactured was $714,000. What was the cost of goods sold?
A. $738,000
B. $693,000
C. $714,000
D. $733,000
21. Haala Inc. is a merchandising company. Last month the company's cost of goods sold was $68,000. The
company's beginning merchandise inventory was $11,000 and its ending merchandise inventory was
$17,000. What was the total amount of the company's merchandise purchases for the month?
A. $96,000
B. $62,000
C. $68,000
D. $74,000
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22. Using the following data for July, calculate the cost of goods manufactured:
The cost of goods manufactured was:

A. $83,000
B. $96,000
C. $81,000
D. $82,000
23. Last year there was no change in either the raw materials or the work in process beginning and ending
inventories. However, finished goods, which had a beginning balance of $25,000, increased by $15,000.
If the manufacturing costs incurred totaled $600,000 during the year, the cost of goods available for sale
must have been:
A. $585,000
B. $600,000
C. $610,000
D. $625,000
24. Beginning work in process was $145,000. Manufacturing cost incurred for the month was $810,000. The
ending work in process was $200,000. What was the cost of goods manufactured during the month?
A. $900,000
B. $810,000
C. $755,000
D. $1,155,000
25. Last year, Vashanda Corporation incurred the following costs to produce 18,000 units:
What should be the cost per unit for the above costs if 20,000 units of product are produced next year?
A.
B.
C.
D.
Mendoza, Inc. manufactures and sells aluminum dishes for camping and outdoor enthusiasts through a
mail order catalog operation. Large rectangular sheets of aluminum are purchased by Mendoza. These
sheets are cut down into smaller squares and are then fed into a machine where they are trimmed down
into a circular shape. These aluminum circles are then fed into a stamping machine where they are
formed into plates and bowls. After production, the dishes are shipped to warehouses where they are
packed and then shipped to customers.
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26. Which of the following terms could be used to correctly describe the cost of the aluminum sheets?
A. fixed cost
B. period cost
C. direct cost
D. conversion cost
27. Which of the following terms could be used to correctly describe the cost of electricity used to run the
stamping machine?
A. variable cost
B. indirect cost
C. manufacturing overhead cost
D. All of these
A partial listing of costs incurred at Archut Corporation during September appears below:
28. The total of the manufacturing overhead costs listed above for September is:
A. $586,000
B. $50,000
C. $292,000
D. $30,000
29. The total of the product costs listed above for September is:
A. $292,000
B. $294,000
C. $50,000
D. $586,000
30. The total of the period costs listed above for September is:
A. $294,000
B. $344,000
C. $292,000
D. $50,000
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A partial listing of costs incurred during March at Febbo Corporation appears below:
31. The total of the period costs listed above for March is:
A. $68,000
B. $293,000
C. $291,000
D. $223,000
32. The total of the manufacturing overhead costs listed above for March is:
A. $68,000
B. $35,000
C. $516,000
D. $293,000
33. The total of the product costs listed above for March is:
A. $516,000
B. $68,000
C. $293,000
D. $223,000
The following data pertain to Graham Company's operations in May:
34. The ending materials inventory was:

A. $5,000
B. $10,000
C. $15,000
D. $20,000
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Boardman Company reported the following data for the month of January:
35. If raw materials costing $35,000 were purchased during January, the total manufacturing costs for the
month would be:
A. $145,000
B. $144,000
C. $151,000
D. $146,000
36. Boardman Company's total conversion cost for January would be:
A. $110,000
B. $170,000
C. $135,000
D. $130,000
Fassino Corporation reported the following data for the month of November:
37. The conversion cost for November was:

A. $187,000
B. $112,000
C. $136,000
D. $140,000
38. The prime cost for November was:
A. $136,000
B. $60,000
C. $105,000
D. $112,000
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Management of Mcgibboney Corporation has asked your help as an intern in preparing some key reports
for November. The beginning balance in the raw materials inventory account was $25,000. During the
month, the company made raw materials purchases amounting to $54,000. At the end of the month, the
balance in the raw materials inventory account was $37,000. Direct labor cost was $25,000 and
manufacturing overhead cost was $62,000. The beginning balance in the work in process account was
$22,000 and the ending balance was $23,000. The beginning balance in the finished goods account was
$44,000 and the ending balance was $50,000. Selling expense was $21,000 and administrative expense
was $38,000.
39. The conversion cost for November was:
A. $116,000
B. $79,000
C. $87,000
D. $129,000
40. The prime cost for November was:
A. $79,000
B. $59,000
C. $67,000
D. $87,000
Yokum Company has provided the following data for the month of August:
41. The cost of goods sold was:

A. $196,000
B. $206,000
C. $211,000
D. $190,000
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The following data (in thousands of dollars) have been taken from the accounting records of Karling
Corporation for the just completed year.
42. The cost of the raw materials used in production during the year (in thousands of dollars) was:
A. $190
B. $90
C. $150
D. $160
43. The cost of goods manufactured (finished) for the year (in thousands of dollars) was:
A. $540
B. $500
C. $570
D. $590
44. The cost of goods sold for the year (in thousands of dollars) was:
A. $700
B. $500
C. $660
D. $580
45. The net operating income for the year (in thousands of dollars) was:
A. $150
B. $200
C. $490
D. $250
Vignana Corporation manufactures and sells hand-painted clay figurines of popular sports heroes.
Shown below are some of the costs incurred by Vignana for last year:
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46. What is the total of the direct costs above?
A. $65,000
B. $112,000
C. $155,000
D. $202,000
47. What is the total of the inventoriable (product) costs above?
A. $0
B. $69,000
C. $155,000
D. $159,000
48. What is the total of the conversion costs above?
A. $65,000
B. $69,000
C. $90,000
D. $155,000
Gaeddert Corporation reported the following data for the month of July:
49. The total manufacturing cost for July was:

A. $190,000
B. $114,000
C. $199,000
D. $81,000
50. The cost of goods manufactured for July was:
A. $196,000
B. $190,000
C. $202,000
D. $199,000
51. The cost of goods sold for July was:
A. $244,000
B. $138,000
C. $190,000
D. $202,000
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52. The net operating income for July was:
A. $7,000
B. $60,000
C. $83,000
D. $9,000
Management of Jarva Corporation has asked your help as an intern in preparing some key reports for
May. The company started the month with raw materials inventories of $29,000. During the month, the
company made raw materials purchases amounting to $72,000. At the end of the month, raw materials
inventories totaled $33,000. Direct labor cost was $36,000 and manufacturing overhead cost was
$57,000. The beginning balance in the work in process account was $24,000 and the ending balance was
$16,000. The beginning balance in the finished goods account was $35,000 and the ending balance was
$46,000. Sales totaled $220,000. Selling expense was $14,000 and administrative expense was $36,000.
53. The total manufacturing cost for May was:
A. $93,000
B. $57,000
C. $165,000
D. $161,000
54. The cost of goods manufactured for May was:
A. $161,000
B. $165,000
C. $169,000
D. $153,000
55. The cost of goods sold for May was:
A. $107,000
B. $180,000
C. $158,000
D. $209,000
56. The net operating income for May was:
A. $77,000
B. $12,000
C. $62,000
D. $5,000
The following selected data for March were taken from Rubenstein Company's financial statements:
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57. The gross margin was:
A. $55,000
B. $54,000
C. $50,000
D. $40,000
58. The beginning finished goods inventory was:
A. $24,000
B. $9,000
C. $10,000
D. $14,000
59. The ending work in process inventory was:
A. $4,000
B. $8,000
C. $10,000
D. $0
Dauenhauer Corporation reported the following data for the month of April:
60. The total manufacturing cost for April was:

A. $61,000
B. $167,000
C. $91,000
D. $174,000
61. The cost of goods manufactured for April was:
A. $160,000
B. $174,000
C. $167,000
D. $188,000
62. The cost of goods sold for April was:
A. $240,000
B. $170,000
C. $150,000
D. $113,000
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63. The net operating income for April was:
A. $60,000
B. $15,000
C. $12,000
D. $91,000
Juart Corporation reported the following data for the month of December:
64. The cost of goods sold for December was:

A. $147,000
B. $97,000
C. $228,000
D. $151,000
65. The net operating income for December was:
A. $23,000
B. $83,000
C. $88,000
D. $10,000
Steenbergen Corporation reported the following data for the month of June:
66. The total manufacturing cost for June was:

A. $165,000
B. $71,000
C. $115,000
D. $172,000
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67. The net operating income for June was:
A. $37,000
B. $87,000
C. $79,000
D. $31,000
Management of Thede Corporation has asked your help as an intern in preparing some key reports for
July. The beginning balance in the raw materials inventory account was $29,000. During the month, the
company made raw materials purchases amounting to $55,000. At the end of the month, the balance in
the raw materials inventory account was $37,000. Direct labor cost was $41,000 and manufacturing
overhead cost was $61,000. The beginning balance in the work in process account was $22,000 and the
ending balance was $23,000. The beginning balance in the finished goods account was $42,000 and the
ending balance was $55,000. Sales totaled $230,000. Selling expense was $13,000 and administrative
expense was $32,000.
A. $157,000
B. $149,000
C. $61,000
D. $102,000
A. $149,000
B. $150,000
C. $148,000
D. $157,000
70. The cost of goods sold for July was:
A. $217,000
B. $135,000
C. $161,000
D. $115,000
71. The net operating income for July was:
A. $28,000
B. $95,000
C. $50,000
D. $83,000
The CFO of Claussen Corporation has provided the following data for June. The beginning balance in
the raw materials inventory account was $38,000. During the month, the company made raw materials
purchases amounting to $53,000. At the end of the month, the balance in the raw materials inventory
account was $27,000. Direct labor cost was $33,000 and manufacturing overhead cost was $74,000. The
beginning balance in the work in process account was $24,000 and the ending balance was $23,000. The
beginning balance in the finished goods account was $57,000 and the ending balance was $55,000. Sales
totaled $290,000. Selling expense was $17,000 and administrative expense was $43,000.
72. The cost of goods sold for June was:
A. $174,000
B. $170,000
C. $292,000
D. $124,000
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73. The net operating income for June was:
A. $56,000
B. $123,000
C. $70,000
D. $116,000
Downin Corporation has provided the following data for May. The beginning balance in the raw
materials inventory account was $34,000. During the month, the company made raw materials purchases
amounting to $65,000. At the end of the month, the balance in the raw materials inventory account was
$29,000. Direct labor cost was $30,000 and manufacturing overhead cost was $56,000. The beginning
balance in the work in process account was $15,000 and the ending balance was $16,000. The beginning
balance in the finished goods account was $41,000 and the ending balance was $57,000. Sales totaled
$220,000. Selling expense was $21,000 and administrative expense was $42,000.
74. The total manufacturing cost for May was:
A. $156,000
B. $86,000
C. $151,000
D. $56,000
75. The net operating income for May was:
A. $71,000
B. $81,000
C. $6,000
D. $18,000
Mcclean Corporation reported the following data for the month of October:
76. The total manufacturing cost for October was:

A. $177,000
B. $184,000
C. $64,000
D. $109,000
77. The cost of goods manufactured for October was:
A. $177,000
B. $175,000
C. $184,000
D. $179,000
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Vives Corporation reported the following data for the month of April:
78. The cost of goods manufactured for April was:

A. $212,000
B. $190,000
C. $201,000
D. $195,000
79. The cost of goods sold for April was:
A. $267,000
B. $205,000
C. $219,000
D. $132,000
Server Corporation has provided the following data for July. The beginning balance in the raw materials
inventory account was $22,000. During the month, the company made raw materials purchases
amounting to $76,000. At the end of the month, the balance in the raw materials inventory account was
$36,000. Direct labor cost was $25,000 and manufacturing overhead cost was $79,000. The beginning
balance in the work in process account was $11,000 and the ending balance was $20,000. The beginning
balance in the finished goods account was $43,000 and the ending balance was $39,000.
A. $166,000
B. $104,000
C. $79,000
D. $180,000
A. $166,000
B. $157,000
C. $180,000
D. $175,000
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The following cost data pertain to the operations of Ladwig Department Stores, Inc., for the month of
December.
The Brentwood Store is just one of many stores owned and operated by the company. The Shoe
Department is one of many departments at the Brentwood Store. The central warehouse serves all of the
company's stores.
82. What is the total amount of the costs listed above that are NOT direct costs of the Brentwood Store?
A. $74,000
B. $32,000
C. $157,000
D. $86,000
The following cost data pertain to the operations of Quinonez Department Stores, Inc., for the month of
September.
The Northridge Store is just one of many stores owned and operated by the company. The Cosmetics
Department is one of many departments at the Northridge Store. The central warehouse serves all of the
company's stores.
83. What is the total amount of the costs listed above that are NOT direct costs of the Northridge Store?
A. $152,000
B. $33,000
C. $45,000
D. $77,000
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84. The information below relates to Guzzardi Manufacturing Company. (Assume that all raw materials are
direct materials.):
Required:
What is Guzzardi's cost of goods sold?
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85. Mary Tappin, an assistant Vice President at Galaxy Toys, was disturbed to find on her desk a memo
from her boss, Gary Resnick, to the controller of the company. The memo appears below:
Galaxy Toys Internal Memo
Sept 15
To: Harry Wilson, Controller
Fm: Gary Resnick, Executive Vice President
As you know, we won't start recording many sales until October when stores start accepting shipments
from us for the Christmas season. Meanwhile, we are producing flat-out and are building up our finished
goods inventories so that we will be ready to ship next month.
Unfortunately, we are in a bind right now since it looks like the net income for the quarter ending on
Sept 30 is going to be pretty awful. This may get us in trouble with the bank since they always review
the quarterly financial reports and may call in our loan if they don't like what they see. Is there any
possibility that we could change the classification of some of our period costs to product costs–such as
the rent on the finished goods warehouse?
Please let me know as soon as possible. The President is pushing for results.
Mary didn't know what to do about the memo. It wasn't intended for her, but its contents were alarming.
Required:
a. Why has Gary Resnick suggested reclassifying some period costs as product costs?
b. Why do you think Mary was alarmed about the memo?
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86. A partial listing of costs incurred at Boylen Corporation during March appears below:
Required:
a. What is the total amount of product cost listed above? Show your work.
b. What is the total amount of period cost listed above? Show your work.
87. Marquess Corporation has provided the following partial listing of costs incurred during May:
Required:
a. What is the total amount of product cost listed above? Show your work.
b. What is the total amount of period cost listed above? Show your work.
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88. Classify the following costs for an auto manufacturer as either direct materials, direct labor,
manufacturing overhead, or period costs.
a. Steel used in automobiles
b. Assembly department employee wages
c. Utility costs used in executive building
d. Travel costs used by sales personnel
e. Cost of shipping goods to customers
f. Property taxes on assembly plant
g. Glass used in automobiles
h. Maintenance supplies
i. Depreciation on assembly plant
j. Plant manager's salary
k. CEO's salary
l. Depreciation on executive building
m. Salary of marketing executive
n. Tires installed on automobiles
o. Advertising
Required:
Complete the answer sheet above by placing an "X" under each heading that identifies the cost
involved.
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89. The following costs relate to one month's activity in Carr Company:
Required:
a. Prepare a schedule of Cost of Goods Manufactured in good form.
b. Determine the Cost of Goods Sold for the month.
90. Nish Corporation has provided the following data for the month of April:
Required:
a. Prepare a Schedule of Cost of Goods Manufactured in good form for April.
b. Prepare an Income Statement in good form for April.
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91. The following data were taken from the cost records of Morrey Company for last year:
Inventories at the beginning and at the end of the year were as follows:
Required:
Prepare a schedule of cost of goods manufactured in good form.
92. Pamer Corporation has provided the following data for the month of September:
Required:
Prepare a Schedule of Cost of Goods Manufactured in good form for September.
93. The sum of all costs of manufacturing costs except direct materials is called manufacturing overhead.
True False
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94. Conversion cost is the sum of direct labor and manufacturing overhead.
True False
95. Prime cost is the sum of direct labor and manufacturing overhead.
True False
96. Thread used in the production of mattresses, an indirect material, is classified as manufacturing
overhead.
True False
97. Period costs are also known as inventoriable costs.
True False
98. All costs in a merchandising company are period costs.
True False
99. The cost of goods sold of a manufacturing company equals beginning finished goods inventory + cost of
goods manufactured - ending finished goods inventory.
True False
100.A variable cost is constant if expressed on a per unit basis but the total dollar amount changes as the
number of units increases or decreases.
True False
101.As activity increases within the relevant range, fixed costs remain constant on a per unit basis.
True False
102.Direct costs are often difficult to trace to the specific cost object under consideration.
True False
103.All of the following are examples of opportunity costs: salary given up to start a business; rental income
given up when you live in a house you own; interest income that could be earned on money spent for a
car.
True False
104.The amount that was paid by a company for a building to house its operations is an example of a sunk
cost.
True False
105.Normally a job cost sheet is not prepared for a job until after the job has been completed.
True False
106.The journal entry for cost of goods manufactured includes only the costs of units that are finished.
True False
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107.The following entry would be used to record depreciation on manufacturing equipment:
True False
108.Including manufacturing overhead costs in product costs ensures that each product will earn a profit.
True False
109.A debit balance in the Manufacturing Overhead account at year end means that overhead was
underapplied.
True False
110.Which of the following statements is correct concerning job-order costing?
A. Job-order costing would be appropriate for a textbook publisher.
B. All the costs appearing on a job cost sheet are actual costs.
C. Indirect materials are charged to a specific job.
D. Job-order costing is mainly used in firms with homogeneous products such as oil refineries.
111.In a job-order cost system, which of the following events would trigger recording data on a job cost
sheet?
A. the purchase of direct materials
B. the payment of fire insurance on the factory building
C. the payment for product advertising
D. none of these
112.The job cost sheet:
A. summarizes all costs charged to a particular job.
B. contains only direct costs such as direct materials and direct labor.
C. is discarded after production is completed on a particular job.
D. is useful only in process costing.
113.What source document is used to determine the actual amount of direct materials to record on a job cost
sheet?
A. bill of materials
B. production order
C. materials purchase order
D. materials requisition form
114.Which of the terms below would make the following sentence correct? Multiple overhead rate costing
systems are usually more ____________ than plantwide overhead rates.
A.
B.
C.
D.
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115.In a job-order costing system, the application of manufacturing overhead would be recorded as a debit
to:
A. Manufacturing Overhead inventory.
B. Finished Goods inventory.
C. Work in Process inventory.
D. Cost of Goods Sold.
116.In a job-order costing system, the incurrence of indirect labor costs would usually be recorded as a debit
to:
A. Manufacturing Overhead.
B. Finished Goods.
C. Work in Process.
D. Cost of Goods Sold.
117.What journal entry is made in a job-order costing system when $8,000 of materials are requisitioned for
general factory use instead of for use in a particular job?
A.
B.
C.
D.
118.A good description of "cost of goods manufactured" is the recorded cost of the:
A. units completed during the period.
B. units started and completed during the period.
C. work done on all units during the period.
D. work done this period on units completed this period.
119.In a job-order costing system, the cost of a completed but unsold job is:
A. closed to Cost of Goods Sold.
B. part of the Work in Process inventory balance.
C. adjusted to exclude any applied overhead.
D. part of the Finished Goods inventory balance.
120.If overhead is underapplied, then:
A. actual overhead cost is less than estimated overhead cost.
B. the amount of overhead cost applied to Work in Process is less than the actual overhead cost incurred.
C. the predetermined overhead rate is too high.
D. the Manufacturing Overhead account will have a credit balance at the end of the year.
121.Overapplied overhead would result if:
A. the plant was operated at less than normal capacity.
B. overhead costs incurred were less than estimated overhead costs.
C. overhead costs incurred were less than overhead costs charged to production.
D. overhead costs incurred were greater than overhead charged to production.
27
122.Avery Co. uses a predetermined overhead rate based on direct labor-hours to apply manufacturing
overhead to jobs. For the month of October, Avery's estimated manufacturing overhead cost was
$300,000 based on an estimated activity level of 100,000 direct labor-hours. Actual overhead amounted
to $325,000 with actual direct labor-hours totaling 110,000 for the month. How much was the
overapplied or underapplied overhead?
A. $25,000 overapplied
B. $25,000 underapplied
C. $5,000 overapplied
D. $5,000 underapplied
123.Heller Cannery, Inc., uses a predetermined overhead rate based on machine-hours to apply
manufacturing overhead to jobs. The company estimated that it would incur $510,000 in manufacturing
overhead during the year and that it would work 100,000 machine-hours. The company actually worked
105,000 machine-hours and incurred $540,000 in manufacturing overhead costs. By how much was
manufacturing overhead underapplied or overapplied for the year?
124.Woodman Company uses a predetermined overhead rate based on direct labor-hours to apply
manufacturing overhead to jobs. Estimated and actual data for direct labor and manufacturing overhead
for last year are as follows:
The manufacturing overhead for Woodman Company for last year was:
A. overapplied by $20,000
B. overapplied by $40,000
C. underapplied by $20,000
D. underapplied by $40,000
125.Collins Company uses a predetermined overhead rate based on direct labor cost to apply manufacturing
overhead to jobs. The following information applies to the company for the current year:
The manufacturing overhead cost for the current year will be:
D. $55,000 underapplied.
28
126.Chipata Corporation applies manufacturing overhead to jobs on the basis of machine-hours. Chipata
estimated 25,000 machine-hours and $10,000 of manufacturing overhead cost for the year. During the
year, Chipata incurred 26,200 machine-hours and $11,300 of manufacturing overhead. What was
Chipata's underapplied or overapplied overhead for the year?
A. $480 overapplied
B. $820 underapplied
127.Linh Corporation applies manufacturing overhead to jobs on the basis of pounds of direct material used.
Linh estimated 160,000 pounds of material usage and $200,000 of manufacturing overhead cost for the
year. During the year, Linh actually used 150,000 pounds of material and incurred $171,000 of
manufacturing overhead cost. What was Linh's underapplied or overapplied overhead for the year?
A. $12,500 underapplied
B. $16,500 overapplied
C. $17,600 underapplied
D. $29,000 overapplied
128.Brusveen Corporation applies manufacturing overhead to jobs on the basis of direct labor-hours. The
following information relates to Brusveen for last year:
What was Brusveen's underapplied or overapplied overhead for last year?

A. $4,000 underapplied
129.Forbes Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing
overhead to jobs. At the beginning of the period, the company estimated manufacturing overhead would
be $18,000 and direct labor-hours would be 15,000. The actual figures were $19,500 for manufacturing
overhead and 16,000 direct labor-hours. The cost records for the period will show:
A. overapplied overhead of $300
B. overapplied overhead of $1,500
C. underapplied overhead of $1,500
D. underapplied overhead of $300
130.Crichman Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the
year, the estimated direct labor-hours were 14,900 hours and the total estimated manufacturing overhead
was $362,070. At the end of the year, actual direct labor-hours for the year were 16,000 hours and the
actual manufacturing overhead for the year was $357,070. Overhead at the end of the year was:
29
131.Washtenaw Corporation uses a job-order costing system. The following data are for last year:
Washtenaw applies overhead using a predetermined rate based on direct labor-hours. What amount of
overhead was applied to work in process last year?
A. $39,050
B. $42,600
C. $35,750
D. $36,960
132.Reamer Company uses a predetermined overhead rate based on machine-hours to apply manufacturing
overhead to jobs. The company has provided the following estimated costs for next year:
Reamer estimates that 500 direct labor-hours and 1,000 machine-hours will be worked during the year.
The predetermined overhead rate per hour will be:
A. $6.80
B. $6.00
C. $3.00
D. $3.40
133.At the beginning of June, Varetoni Manufacturing Company had a $320 balance in its Work in Process
inventory account. At the end of June, Varetoni's Work in Process inventory account had a balance of
$970. During June, Varetoni made the following journal entries:
Based on the information above, what is Varetoni's cost of goods manufactured for June?
A. $5,180
B. $5,510
C. $6,160
D. $6,480
30
134.Niebla Corporation has provided data concerning the company's Manufacturing Overhead account for
the month of July. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold,
the total of the debits to the Manufacturing Overhead account was $72,000 and the total of the credits to
the account was $77,000. Which of the following statements is true?
A. Manufacturing overhead applied to Work in Process for the month was $72,000.
B. Actual manufacturing overhead for the month was $72,000.
C. Manufacturing overhead for the month was underapplied by $5,000.
D. Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month
was $77,000.
135.Matthias Corporation has provided data concerning the company's Manufacturing Overhead account for
the month of May. Prior to the closing of the overapplied or underapplied balance to Cost of Goods
Sold, the total of the debits to the Manufacturing Overhead account was $53,000 and the total of the
credits to the account was $69,000. Which of the following statements is true?
A. Manufacturing overhead applied to Work in Process for the month was $69,000.
B. Manufacturing overhead for the month was underapplied by $16,000.
C. Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month
was $53,000.
D. Actual manufacturing overhead incurred during the month was $69,000.
136.Sagon Corporation has provided data concerning the company's Manufacturing Overhead account for
the month of September. Prior to the closing of the overapplied or underapplied balance to Cost of
Goods Sold, the total of the debits to the Manufacturing Overhead account was $76,000 and the total of
the credits to the account was $66,000. Which of the following statements is true?
A. Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month
was $76,000.
B. Actual manufacturing overhead incurred during the month was $66,000.
C. Manufacturing overhead applied to Work in Process for the month was $76,000.
D. Manufacturing overhead for the month was underapplied by $10,000.
137.Wayne Company's beginning and ending inventories for the month of June were as follows:
Production data for the month follow:
Wayne applies manufacturing overhead cost to jobs based on direct labor-hours, and the predetermined
rate is $5.75 per direct labor-hour. The company does not close underapplied or overapplied
manufacturing overhead to Cost of Goods Sold until the end of the year. What is the amount of cost of
goods manufactured?
A. $508,750
B. $502,000
C. $585,000
D. $487,750
31
138.The following information relates to Araceli Manufacturing Company:
What was Araceli's underapplied or overapplied overhead for last year?

D. $21,000 overapplied
139.Mackinaw Manufacturing Company uses a predetermined overhead rate based on direct labor-hours to
apply manufacturing overhead to jobs. Last year, the company worked 17,000 actual direct labor-hours
and incurred $145,000 of actual manufacturing overhead cost. They had estimated at the beginning of
the year that 16,000 direct labor-hours would be worked and $144,000 of manufacturing overhead costs
incurred. The company had calculated a predetermined overhead rate of $9 per direct labor-hour. The
company's manufacturing overhead for the year was:
A. overapplied by $8,000
B. underapplied by $8,000
C. overapplied by $1,000
D. underapplied by $1,000
140.Huang Aerospace Corporation manufactures aviation control panels in two departments, Fabrication and
Assembly. In the Fabrication department, Huang uses a predetermined overhead rate of $30 per
machine-hour. In the Assembly department, Huang uses a predetermined overhead rate of $12 per direct
labor-hour. During the current year, Job #X2984 incurred the following number of hours in each
department:
What is the total amount of manufacturing overhead that Huang should have applied to Job #X2984
during the current year?
A. $1,200
B. $1,500
C. $1,560
D. $1,734
141.Able Company uses a job-order costing system. In reviewing its records at the end of the year, the
company has discovered that $2,000 of raw materials has been drawn from the storeroom and used in the
production of Job 110, but that no entry has been made in the accounting records for the use of these
materials. Job 110 has been completed but it is unsold at year end. This error will cause:
A. Work in Process to be understated by $2,000 at year end.
B. Cost of Goods Manufactured to be overstated by $2,000 for the year.
C. Finished Goods to be understated by $2,000 at the end of the year.
D. Cost of Goods Sold to be overstated by $2,000 for the year.
32
142.Bottum Corporation, a manufacturing company, has provided data concerning its operations for May.
The beginning balance in the raw materials account was $20,000 and the ending balance was $36,000.
Raw materials purchases during the month totaled $63,000. Manufacturing overhead cost incurred
during the month was $111,000, of which $2,000 consisted of raw materials classified as indirect
materials. The direct materials cost for May was:
A. $63,000
B. $47,000
C. $79,000
D. $45,000
143.Rediger Inc., a manufacturing company, has provided the following data for the month of June. The
balance in the Work in Process inventory account was $22,000 at the beginning of the month and
$17,000 at the end of the month. During the month, the company incurred direct materials cost of
$55,000 and direct labor cost of $28,000. The actual manufacturing overhead cost incurred was $53,000.
The manufacturing overhead cost applied to Work in Process was $51,000. The cost of goods
manufactured for June was:
A. $141,000
B. $139,000
C. $134,000
D. $136,000
144.Luebke Inc. has provided the following data for the month of November. The balance in the Finished
Goods inventory account at the beginning of the month was $52,000 and at the end of the month was
$30,000. The cost of goods manufactured for the month was $212,000. The actual manufacturing
overhead cost incurred was $55,000 and the manufacturing overhead cost applied to Work in Process
was $58,000. The adjusted cost of goods sold that would appear on the income statement for November
is:
A. $231,000
B. $190,000
C. $234,000
D. $212,000
33
145.The following accounts are from last year's books of Sharp Manufacturing:
Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs.
What is the amount of direct materials used for the year?
A. $82,000
B. $77,000
C. $66,000
D. $84,000
146.The actual manufacturing overhead incurred at Gutekunst Corporation during March was $53,000, while
the manufacturing overhead applied to Work in Process was $73,000. The company's Cost of Goods
Sold was $451,000 prior to closing out its Manufacturing Overhead account. The company closes out its
Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?
A. Manufacturing overhead was overapplied by $20,000; Cost of Goods Sold after closing out the
Manufacturing Overhead account is $471,000
B. Manufacturing overhead was underapplied by $20,000; Cost of Goods Sold after closing out the
C. Manufacturing overhead was overapplied by $20,000; Cost of Goods Sold after closing out the
D. Manufacturing overhead was underapplied by $20,000; Cost of Goods Sold after closing out the
34
147.Faughn Corporation has provided the following data concerning manufacturing overhead for July:
The company's Cost of Goods Sold was $243,000 prior to closing out its Manufacturing Overhead
account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of
the following statements is true?
A. Manufacturing overhead was underapplied by $10,000; Cost of Goods Sold after closing out the
B. Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the
C. Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the
D. Manufacturing overhead was underapplied by $10,000; Cost of Goods Sold after closing out the
Parker Company has a job-order costing system and uses a predetermined overhead rate based on direct
labor-hours to apply manufacturing overhead to jobs. At the beginning of the year, manufacturing
overhead and direct labor-hours for the year were estimated at $50,000 and 20,000 hours, respectively.
In June, Job #461 was completed. Materials costs on the job totaled $4,000 and labor costs totaled
$1,500 at $5 per hour. At the end of the year it was determined that the company worked 24,000 direct
labor-hours for the year and incurred $54,000 in actual manufacturing overhead costs.
148.If Job #461 contained 100 units, the unit cost on the completed job cost sheet would be:
A. $61.75
B. $62.50
C. $63.10
D. $55.00
149.The manufacturing overhead for the year was:
Caple Corporation applies manufacturing overhead on the basis of machine-hours. At the beginning of
the most recent year, the company based its predetermined overhead rate on total estimated overhead of
$16,660. Actual manufacturing overhead for the year amounted to $25,000 and actual machine-hours
were 1,460. The company's predetermined overhead rate for the year was $11.90 per machine-hour.
150.The predetermined overhead rate was based on how many estimated machine-hours?
A. 1,400
B. 2,101
C. 2,742
D. 1,460
35
Mallet Company has only Job 844 in process on March 1 of the current year. The job has been charged
with $2,000 of direct material cost, $2,500 of direct labor cost, and $1,750 of manufacturing overhead
cost. The company assigns overhead cost to jobs at a predetermined rate of 70% of direct labor cost. Any
underapplied or overapplied overhead cost is closed to Cost of Goods Sold at the end of the month.
During March, the following activity and amounts were recorded by the company:
Work in process inventory contains $5,500 of direct labor cost.

151.The amount of direct materials cost in the March 31 work in process inventory account was:
A. $5,150
B. $9,350
C. $9,000
D. $3,850
36
The following T accounts are for Stanford Company:
152.The manufacturing overhead applied is:

A. $24,000
B. $31,000
C. $38,000
D. $42,000
37
Dacosta Company had only one job in process on May 1. The job had been charged with $1,800 of
direct materials, $6,966 of direct labor, and $9,936 of manufacturing overhead cost. The company
assigns overhead cost to jobs using the predetermined overhead rate of $18.40 per direct labor-hour.
During May, the activity was recorded:
Work in process inventory on May 30 contains $3,741 of direct labor cost. Raw materials consist solely
of items that are classified as direct materials.
153.The balance in the raw materials inventory account on May 30 was:
A. $7,200
B. $1,300
C. $29,500
D. $30,800
Hamilton Company uses job-order costing. Manufacturing overhead is applied using a predetermined
rate of 150% of direct labor cost. Any over- or underapplied manufacturing overhead is closed to the
Cost of Goods Sold account at the end of each month. Additional information is available as follows:
° Job 101 was the only job in process at January 31. The job cost sheet for this job contained the
following costs at the beginning of the month:
° Jobs 102, 103, and 104 were started during February.

° Direct materials requisitions for February totaled $26,000.
° Direct labor cost of $20,000 was incurred for February.
° Actual manufacturing overhead was $32,000 for February.
° The only job still in process at February 28 was Job 104, with costs of $2,800 for direct materials and
$1,800 for direct labor.
154.The cost of goods manufactured for February was:
A. $77,700
B. $78,000
C. $79,700
D. $85,000
38
155.For the month of February, the manufacturing overhead was:
A. $700 overapplied
Wayne Company uses a job costing system and applies overhead to jobs using a predetermined overhead
rate based on direct labor-hours. The company had the following inventories at the beginning and end of
March:
The following additional data pertain to operations during March:
156.During March total debits to Work in Process were:

A. $84,000
B. $220,000
C. $144,000
D. $230,000
157.The Cost of Goods Manufactured for March was:
A. $212,000
B. $218,000
C. $230,000
D. $236,000
The Milo Company's records for May contained the following information:
The company uses a predetermined overhead rate of $5.00 per direct labor-hour to apply manufacturing
overhead to jobs.
39
158.The actual overhead cost incurred during the month was:
A. $50,000
B. $55,000
C. $40,000
D. $45,000
159.The total cost added to Work in Process during May was:
A. $101,000
B. $106,000
C. $61,000
D. $111,000
Meyers Company had the following inventory balances at the beginning and end of November:
During November, $39,000 in raw materials (all direct materials) were drawn from inventory and used
in production. The company's predetermined overhead rate was $8 per direct labor-hour, and it paid its
direct labor workers $10 per hour. A total of 300 hours of direct labor time had been expended on the
jobs in the beginning Work in Process inventory account. The ending Work in Process inventory account
contained $4,700 of direct materials cost. The Company incurred $28,000 of actual manufacturing
overhead cost during the month and applied $26,400 in manufacturing overhead cost.
160.The raw materials purchased during November totaled:
A. $42,000
B. $45,000
C. $36,000
D. $39,000
161.The direct materials cost in the November 1 Work in Process inventory account totaled:
A. $6,600
B. $6,000
C. $3,600
D. $3,000
The information below has been taken from the cost records of Tercel Company for the past year:
40
162.The cost of raw materials purchased during the year amounted to:
A. $411,000
B. $360,000
C. $316,000
D. $336,000
163.The Cost of Goods Manufactured during the year was:
A. $636,000
B. $766,000
C. $736,000
D. $716,000
164.The Cost of Goods Sold for the year (before disposition of any overhead underapplied or overapplied)
was:
A. $736,000
B. $716,000
C. $691,000
D. $801,000
The following data are for Potras Company:
165.The cost of raw materials used in production was:

A. $26,000
B. $71,000
C. $76,000
D. $66,000
166.The cost of goods manufactured was:
A. $114,000
B. $133,000
C. $121,000
D. $138,000
167.The cost of goods sold was:
A. $131,000
B. $91,000
C. $81,000
D. $111,000
41
The Bus Company uses a job-order costing system. The following information was recorded for
September:
The direct labor wage rate is $10 per hour. Overhead is applied at the rate of $5 per direct labor-hour.
Jobs 1, 2, and 3 have been completed and transferred to finished goods. Job 2 has been delivered to the
customer.
168.The ending Work in Process inventory is:
A. $7,575
B. $5,350
C. $4,325
D. $5,150
169.The Cost of Goods Manufactured for September is:
A. $10,750
B. $11,275
C. $5,925
D. $7,625
170.The Cost of Goods Sold for September (before disposition of any underapplied or overapplied overhead)
is:
A. $2,100
B. $5,925
C. $3,700
D. $1,950
Koczela Inc. has provided the following data for the month of May:
171.The cost of goods manufactured for May is:

A. $205,000
B. $210,000
C. $207,000
D. $212,000
42
172.The adjusted cost of goods sold that appears on the income statement for May is:
A. $206,000
B. $214,000
C. $208,000
D. $210,000
Summit Company has provided the following inventory balances and manufacturing cost data for the
month of January:
Under Summit's job-order costing system, any over or underapplied overhead is closed to the Cost of
Goods Sold account at the end of the calendar year (i.e., December 31).
173.What was the total amount of direct material purchases during January?
A. $180,000
B. $190,000
C. $195,000
D. $200,000
Echher Corporation uses a job-order costing system and applies overhead to jobs using a predetermined
overhead rate. During the year the company's Finished Goods inventory account was debited for
$218,000 and credited for $218,500. The ending balance in the Finished Goods inventory account was
$13,000. At the end of the year, manufacturing overhead was overapplied by $36,700.
174.The balance in the Finished Goods inventory account at the beginning of the year was:
A. $13,500
B. $36,700
C. $500
D. $13,000
175.If the applied manufacturing overhead was $223,900, the actual manufacturing overhead cost for the
year was:
A. $200,700
B. $260,600
C. $200,200
D. $187,200
43
The following partially completed T-accounts summarize transactions for Faaberg Company during the
year:
176.The Cost of Goods Manufactured was:

A. $19,900
B. $21,700
C. $41,600
D. $7,700
177.The manufacturing overhead applied was:
A. $2,700
B. $3,000
C. $7,800
D. $13,700
178.The manufacturing overhead was:
A. $200 overapplied
C. $200 underapplied
44
179.Parker Company uses a job-order costing system and applies manufacturing overhead to jobs using a
predetermined overhead rate based on direct labor-hours. Last year manufacturing overhead and direct
labor-hours were estimated at $50,000 and 20,000 hours, respectively, for the year. In June, Job #461
was completed. Materials costs on the job totaled $4,000 and labor costs totaled $1,500 at $5 per hour.
At the end of the year, it was determined that the company worked 24,000 direct labor-hours for the year
and incurred $54,000 in actual manufacturing overhead costs.
Required:
a. Job #461 contained 100 units. Determine the unit cost that would appear on the job cost sheet.
b. Determine the underapplied or overapplied overhead for the year.
45
180.Alagan Company is a manufacturing firm that uses job-order costing. At the beginning of the year, the
company's inventory balances were as follows:
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At
the beginning of the year, the company estimated that it would work 37,000 machine-hours and incur
$222,000 in manufacturing overhead cost. The following transactions were recorded for the year:
Required:
Prepare the appropriate journal entry for each of the items above. You can assume that all transactions
with employees, customers, and suppliers were conducted in cash.
46
181.The Collins Company uses a job-order costing system and applies manufacturing overhead cost to jobs
on the basis of the cost of materials used in production. At the beginning of the most recent year, the
following estimates were made as a basis for computing the predetermined overhead rate for the year:
manufacturing overhead cost, $200,000; direct materials cost, $160,000. The following transactions took
place during the year (all purchases and services were acquired on account):
Required:
Prepare journal entries for each of the above transactions. Assume that all transactions with external
suppliers, employees, and customers were conducted in cash.
47
182.Baba Company is a manufacturing firm that uses job-order costing. The company's inventory balances
were as follows at the beginning and end of the year:
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At
the beginning of the year, the company estimated that it would work 40,000 machine-hours and incur
$200,000 in manufacturing overhead cost. The following transactions were recorded for the year:
• Raw materials were purchased, $412,000.
• Raw materials were requisitioned for use in production, $409,000 $(362,000 direct and $47,000
indirect).
• The following employee costs were incurred: direct labor, $324,000; indirect labor, $57,000; and
administrative salaries, $129,000.
• Selling costs, $135,000.
• Factory utility costs, $22,000.
• Depreciation for the year was $102,000 of which $94,000 is related to factory operations and $8,000 is
related to selling, general, and administrative activities.
• Manufacturing overhead was applied to jobs. The actual level of activity for the year was 44,000
machine-hours.
• Sales for the year totaled $1,198,000.
Required:
a. Prepare a schedule of cost of goods manufactured in good form.
b. Was the overhead underapplied or overapplied? By how much?
c. Prepare an income statement for the year in good form. The company closes any underapplied or
overapplied overhead to Cost of Goods Sold.
48
183.Dotsero Technology, Inc., has a job-order costing system. The company uses predetermined overhead
rates in applying manufacturing overhead cost to individual jobs. The predetermined overhead rate in
Department A is based on machine-hours, and the rate in Department B is based on direct materials cost.
At the beginning of the most recent year, the company's management made the following estimates for
the year:
Job 243 entered into production on April 1 and was completed on May 12. The company's cost records
show the following information about the job:
At the end of the year, the records of Dotsero showed the following actual cost and operating data for all
jobs worked on during the year:
Required:
a. Compute the predetermined overhead rates for Department A and Department B.
b. Compute the total overhead cost applied to Job 243.
c. Compute the amount of underapplied or overapplied overhead in each department at the end of the
current year.
49
184.Scanlon Company has a job-order costing system and applies manufacturing overhead cost to products
on the basis of machine-hours. The following estimates were used in preparing the predetermined
overhead rate for the most recent year:
During the most recent year, a severe recession in the company's industry caused a buildup of inventory
in the company's warehouses. The company's cost records revealed the following actual cost and
operating data for the year:
Required:
a. Compute the company's predetermined overhead rate for the year and the amount of underapplied or
overapplied overhead for the year.
b. Determine the difference between net operating income for the year if the underapplied or overapplied
overhead is allocated to the appropriate accounts rather than closed directly to Cost of Goods Sold.
50
185.Bushman Co., Inc., uses a job-order costing system in its manufacturing operations. The company
recorded the following transactions during the past week:
Required:
Prepare journal entries to record the transactions for the week. Assume all purchases are on account. Key
your answers to letters a. through j. above.
51
186.Mat Company's actual manufacturing overhead cost for the month ended March 31 was $78,000. The
company's predetermined overhead rate was 50% of direct labor cost. Other information pertaining to
Mat Company's inventories and production for the month of March is as follows:
Required:
a. Determine the amount of direct materials used during March.
b. Determine the underapplied or overapplied overhead for the month.
c. Determine the Cost of Goods Manufactured for the month.
52
187.Bledsoe Corporation has provided the following data for the month of November:
Required:
Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold in good
form.
53
188.Eppich Corporation has provided the following data for the most recent month:
Required:
Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, Manufacturing Overhead, and
Cost of Goods Sold. Record the beginning balances and each of the transactions listed above. Finally,
determine the ending balances.
54
189.During May, Sharpton Corporation recorded the following:
Required:
Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, and Manufacturing Overhead,
and Cost of Goods Sold. Record the beginning balances and each of the transactions listed above.
Finally, determine the ending balances.
55
190.Prahm Inc. has provided the following data for August:
Required:
Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, and Manufacturing Overhead,
and Cost of Goods Sold. Record the beginning balances and each of the transactions listed above.
Finally, determine the ending balances.
56
Ch1And2 Key
1. TRUE
2. C
3. B
4. A
5. D
6. C
7. C
8. C
9. C
10. C
11. C
12. B
13. A
14. A
15. A
16. B
17. B
18. A
19. D
20. A
21. D
22. C
23. D
24. C
25. C
26. C
27. D
28. B
29. A
30. A
1
31. D
32. A
33. C
34. A
35. D
36. A
37. C
38. C
39. C
40. C
41. A
42. B
43. A
44. B
45. B
46. C
47. C
48. C
49. C
50. A
51. C
52. A
53. D
54. C
55. C
56. B
57. C
58. D
59. A
60. D
61. A
62. B
63. C
64. A
2
65. A
66. D
67. D
68. B
69. C
70. B
71. C
72. A
73. A
74. A
75. D
76. A
77. B
78. A
79. C
80. A
81. B
82. C
83. A
84.
3
85. a. Gary Resnick has suggested reclassifying some period costs as product costs since the company is building up large finished goods
inventories in anticipation of the Christmas selling season. Product costs are inventoried and flow through to the income statement only when
products are sold. Period expenses, in contrast, flow directly to the income statement. Since most of the finished goods inventories will be held
over to the next quarter, reclassifying period costs as product costs will effectively defer recognition of expenses until next quarter and therefore
will improve the current quarter's net operating income.
b. Mary Tappin is probably alarmed by both the economic situation the company finds itself in and by the apparent willingness of top
management to bend the rules. Improperly reclassifying costs is an indication that top management does not feel like it has to play by the rules or
be honest in its dealings with the bank. With such loose ethical standards, Mary may wonder what other things they are doing that are unethical
and/or illegal.
86. a. Product costs consist of direct materials, direct labor, and manufacturing overhead:
b. Period costs consist of all costs other than product costs:
87. a. Product costs consist of direct materials, direct labor, and manufacturing overhead:
b. Period costs consist of all costs other than product costs:
88.
4
89. a.
b.
90. a.
b.
5
91.
92.
93. FALSE
94. TRUE
95. FALSE
96. TRUE
97. FALSE
98. FALSE
99. TRUE
100. TRUE
101. FALSE
102. FALSE
103. TRUE
104. TRUE
105. FALSE
6
106. TRUE
107. FALSE
108. FALSE
109. TRUE
110. A
111. D
112. A
113. D
114. A
115. C
116. A
117. D
118. A
119. D
120. B
121. C
122. C
123. B
124. C
125. B
126. B
127. B
128. C
129. D
130. A
131. C
132. D
133. C
134. B
135. A
136. D
137. D
138. B
139. A
7
140. B
141. C
142. D
143. B
144. A
145. C
146. C
147. B
148. B
149. A
150. A
151. A
152. B
153. A
154. A
155. D
156. D
157. D
158. C
159. B
160. A
161. C
162. D
163. C
164. B
165. D
166. C
167. D
168. B
169. C
170. A
171. B
172. C
173. D
8
174. A
175. D
176. B
177. C
178. C
179. a.
* $1,500 $5.00 per DLH = 300 DLHs

** $50,000 20,000 DLHs = $2.50 per DLH
b.
180.
9
181.
10
182. a. Schedule of cost of goods manufactured
b. Overhead underapplied or overapplied
c. Income Statement
11
183. a. Department A predetermined overhead rate:
Estimated overhead cost/Estimated machine-hours = $420,000/70,000 = $6.00
Department B predetermined overhead rate:
Estimated overhead cost/Estimated direct materials cost = $705,000/$282,000
= 250% of direct materials cost
b. Overhead applied to Job 243:
c.
184. The company's predetermined overhead rate for the year is:
$1,710,000/95,000 MHs = $18 per MH
The amount of underapplied/overapplied overhead is:
Allocation of underapplied overhead:
The entire amount of underapplied overhead $337,500 is added to Cost of Goods Sold where no allocation occurs. Allocation results in only
$189,844 being added to Cost of Goods Sold. Net operating income would be higher under allocation by $337,500 - $189,844 = $147,656.
12
185.
186. a.
b.
c.
13
187.
188.
14
189.
15
190.
16
Ch1And2 Summary
Category # of Questions
AACSB: Analytic 152
AACSB: Analytic 81
AACSB: Reflective Thinking 26
AACSB: Reflective Thinking 23
AICPA BB: Critical Thinking 178
AICPA BB: Critical Thinking 104
AICPA FN: Decision Making 2
AICPA FN: Decision Making 2
AICPA FN: Measurement 66
AICPA FN: Measurement 51
AICPA FN: Reporting 175
AICPA FN: Reporting 102
Brewer - Chapter 001 116
Learning Objective: 1 20
Level: Easy 11
Level: Medium 178
Level: Medium 93
Source: CMA, adapted 4
Source: CMA, adapted 4
Source: CPA, adapted 10
Source: CPA, adapted 2

CH 1 and 2

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CH 1 and 2

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Ch1And2

Prime costs during the month totaled:

What is the total of the manufacturing overhead costs above?

What is the total amount of manufacturing overhead included above?

The cost of goods manufactured was:

34. The ending materials inventory was:

37. The conversion cost for November was:

41. The cost of goods sold was:

49. The total manufacturing cost for July was:

60. The total manufacturing cost for April was:

64. The cost of goods sold for December was:

66. The total manufacturing cost for June was:

76. The total manufacturing cost for October was:

78. The cost of goods manufactured for April was:

What was Brusveen's underapplied or overapplied overhead for last year?

Production data for the month follow:

What was Araceli's underapplied or overapplied overhead for last year?

Work in process inventory contains $5,500 of direct labor cost.

152.The manufacturing overhead applied is:

° Jobs 102, 103, and 104 were started during February.

The following additional data pertain to operations during March:

156.During March total debits to Work in Process were:

165.The cost of raw materials used in production was:

171.The cost of goods manufactured for May is:

176.The Cost of Goods Manufactured was:

b. Period costs consist of all costs other than product costs:

b. Period costs consist of all costs other than product costs:

* $1,500 $5.00 per DLH = 300 DLHs

b. Overhead underapplied or overapplied

Allocation of underapplied overhead:

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