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Accounting 203

The document contains a practice test for an accounting course with multiple choice and true/false questions covering job order and process costing systems. It tests the ability to calculate predetermined overhead rates, determine costs added to Work in Process, and calculate unit product costs. It provides the answers to the test as well, showing the calculations for overhead application and variances.

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King Qasim
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246 views16 pages

Accounting 203

The document contains a practice test for an accounting course with multiple choice and true/false questions covering job order and process costing systems. It tests the ability to calculate predetermined overhead rates, determine costs added to Work in Process, and calculate unit product costs. It provides the answers to the test as well, showing the calculations for overhead application and variances.

Uploaded by

King Qasim
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ACCOUNTING 203

Chapter 2 Practice Test

True and False Statements

1. Both job order and process costing systems use averaging to compute unit product costs.

2. The three cost categories appearing on a job cost sheet are: selling expense, manufacturing expense, and administrative expense.

3. Under a job-order cost system the Work in Process account is debited with the cost of materials purchased.

4. The process of assigning overhead to jobs is known as overhead application.

5. Period costs are expensed as incurred, rather than going into the Work in Process account.

Multiple Choice Questions

6. In a job-order cost system, the application of manufacturing overhead usually would be recorded as a debit to:

A) Cost of Goods Sold

B) Work in Process inventory.

C) Manufacturing Overhead.

D) Finished Goods inventory.

7. Which of the following would probably be the least appropriate allocation base for allocating overhead in a highly automated manufacturer of specialty valves?

A) machine-hours

B) power consumption

C) direct labor-hours

D) machine setups

8. The Work in Process inventory account of a manufacturing firm shows a balance of $3,000 at the end of the accounting period. The job cost sheets of two uncompleted jobs show charges of $500 and $300 for materials, and charges of $400 and $600 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of:

A) 83%

B) 120%

C) 40%

D) 300%

9. Paulson 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:

Direct materials .$25,000

Direct labor..22,000

Advertising expense.15,000

Rent on factory building ..13,500

Depreciation on factory equipment....6,500

Indirect materials...10,000

Sales salaries..28,000

Insurance on factory equipment12,000

Paulsen estimated that 40,000 direct labor hours and 20,000 machine hours would be worked during the year. The predetermined overhead rate per machine hour will be:

A) $1.60.

B) $2.10.

C) $9.00

D) $1.05.

Use the following to answer questions 10-11.

Maverick Company had the following transactions last year:

1) Raw materials purchased on account totaled $165,000.

2) Raw materials issued from the storeroom, $140,000 (90% direct materials, 10% indirect materials).

3) Factory utility costs incurred, $35,000.

4) Employee salaries and wages incurred, $200,000 (80% direct labor, 10% indirect labor and 10% selling and administrative).

5) Depreciation on factory equipment, $30,000.

6) Depreciation on autos used by the sales staff, $15,000.

7) Overhead was applied to production at a rate of 50% of direct labor cost.

8) Goods costing $310,000 were transferred from Work in Process to Finished Goods.

10. The total cost added to Work in Process during the year was:

A) $366,000.

B) $340,000.

C) $420,000.

D) $286,000.

11. The cost of goods manufactured was:

A) $366,000.

B) $420,000.

C) $385,000.

D) $310,000.

12. Granite Company uses a job order cost system. The company applies manufacturing overhead to jobs using a predetermined overhead rat based on direct labor-hours. Last year, manufacturing overhead and direct labor-hours were estimated at $80,000 and 16,000 hours respectively, for the year. In June, job #315 was completed. Materials costs on the job total $1,500 and labor costs totaled $2,400 at $6 per hour. At the end of the year, it was determined that the company worked 15,000 direct labor-hours for the year, and incurred $78,000 in actual manufacturing overhead costs.

Required:

a. Determine the predetermined overhead rate for the year.

b. Determine the amount of overhead charged to jobs during the year.

c. Determine the amount of under- or overapplied overhead of the year.

d. Assuming that 100 units were completed, determine the unit product cost that would appear on the job cost sheet for Job #315.

ANSWERS

True and False

1. T 2. F 3. F 4. T 5. T

Multiple Choice

6. B 7. C 8. B 9. B 10. A 11. D

12. a. $80,000 / 16,000 DLH = $5/DLH

b. 15,000 DLH X $5?DLH = $75,000

c. Actual overhead costs .$78,000

Applied overhead costs 75,000

Underapplied overhead $ 3,000

d. Direct materials $1,500

Direct labor ... 2,400

Overhead applied

(400 DLH * X $5/DLH).2,000

Total cost$5,900

Unit product cost $ 5.90

*2,400 / $6?DLH = 400 DLH

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