Jaime Nazario Santiago

E00-29-4633
Módulo 3: Sistema de costo por orden de trabajo

MULTIPLE CHOICE QUESTIONS AND EXERCISES

I. Multiple Choice: Choose the correct answer by writing the appropriate letter in
the space provided.

___C___1.In a job-costing system, a manufacturing firm typically uses an indirect-cost

rate to estimate the __________ allocated to a job.
a. direct materials
b. direct labor
c. manufacturing overhead costs
d. total costs

___D___2.Which of the following would be accounted for using a job order cost system?
a. the production of personal computers
b. the production of automobiles
c. the refining of petroleum
d. the construction of a new campus building

___A___3. Which one of the following best describes a job cost sheet?
a. it is a form used to record the costs chargeable to a specific job and to
determine the total and unit costs of the completed job
b. it is used to track manufacturing overhead costs to specific jobs.
c. it is used by management to understand how direct costs affect
profitability
d. it is a daily form that management uses for tracking worker productivity
on which employee raises are based.

___C__4. The following information is available for completed Job No. 402: Direct
materials, $40,000; direct labor, $60,000; manufacturing overhead applied,
$30,000; units produced, 5,000 units; units sold, 4,000 units. The cost of the
finished goods on hand from this job is
a. $20,000.
b. $130,000.
c. $26,000.
d. $104,000.

___A__5. The labor costs that have been identified as indirect labor should be charged to
a. manufacturing overhead.
b. direct labor.
c. the individual jobs worked on.
d. salary expense.
Jaime Nazario Santiago
E00-29-4633
___D___6.When a job is completed and all costs have been accumulated on a job cost
sheet, the journal entry that should be made is
a. Finished Goods Inventory
Direct Materials
Direct Labor
Manufacturing Overhead
b. Work In Process Inventory
Direct Materials
Direct Labor
Manufacturing Overhead
c. Raw Materials Inventory
Work In Process Inventory
d. Finished Goods Inventory
Work In Process Inventory

___D___7.The entry to record the acquisition of raw materials on account is

a. Work in Process Inventory
Accounts Payable
b. Manufacturing Overhead Control
Raw Materials Inventory
Accounts Payable
c. Accounts Payable
Raw Materials Inventory
d. Raw Materials Inventory
Accounts Payable

___D___8.A materials requisition slip showed that direct materials requested were
$35,000 and indirect materials requested were $6,000. The entry to record the
transfer of materials from the storeroom is
a. Work In Process Inventory........................................... 35,000
Raw Materials Inventory...................................... 35,000
b. Direct Materials............................................................ 35,000
Indirect Materials.......................................................... 6,000
Work in Process Inventory...................................
41,000
c. Manufacturing Overhead Control................................. 41,000
Raw Materials Inventory......................................
41,000
d. Work In Process Inventory........................................... 35,000
Manufacturing Overhead Control................................. 6,000
Raw Materials Inventory......................................
41,000
Jaime Nazario Santiago
E00-29-4633

___B___9.Which one of the following should be equal to the balance of the work in
process inventory account at the end of the period?
a. the total of the amounts transferred from raw materials for the current
period
b. the sum of the costs shown on the job cost sheets of unfinished jobs
c. the total of manufacturing overhead applied to work in process for the
period
d. the total manufacturing costs for the period

___A___10. Peters Company provided the following information from its accounting
records for 2005:
Expected production 30,000 labor hours
Actual production 28,000 labor hours
Budgeted overhead $1,500,000
Actual overhead $1,450,000
How much is the overhead application rate if Peters Company bases it on
direct labor hours?
a. $50 per hour
b. $46.67 per hour
c. $51.79 per hour
d. $48.33 per hour

___B___11. Manufacturing overhead is applied to each job

a. at the time when the overhead cost is incurred.
b. by means of a predetermined overhead rate.
c. at the end of the year when actual costs are known.
d. only if the overhead costs can be directly traced to that job

___B___12. Overhead application is recorded with a

a. credit to Work in Process Inventory.
b. credit to Manufacturing Overhead Allocated.
c. debit to Manufacturing Overhead Control.
d. credit to job cost sheets.

___D___13.At the beginning of the year, Monroe Company estimates annual overhead
costs to be $900,000 and that 300,000 machine hours will be operated. Using
machine hours as a base, the amount of overhead applied during the year if
actual machine hours for the year was 315,000 hours is
a. $900,000.
b. $857,143.
c. $630,000.
d. $945,000.
Jaime Nazario Santiago
E00-29-4633

___D__14.A materials requisition slip showed that direct materials requested were
$35,000 and indirect materials requested were $6,000. The entry to record the
transfer of materials from the storeroom is

a. Work In Process Inventory................................................ 35,000

Raw Materials Inventory............................................... 35,000
b. Direct Materials................................................................ 35,000
Indirect Materials.............................................................. 6,000
Work in Process Inventory............................................ 41,000
c. Manufacturing Overhead Control..................................... 41,000
Raw Materials Inventory............................................... 41,000
d. Work In Process Inventory............................................... 35,000
Manufacturing Overhead Control..................................... 6,000
Raw Materials Inventory............................................... 41,000

___C___15.Gannon Company had the following information at December 31:

Finished goods inventory, January 1 $30,000
Finished goods inventory, December 31 90,000
If the cost of goods manufactured during the year amounted to $1,260,000 and
annual sales were $1,650,000, the amount of gross profit for the year is
a. $390,000.
b. $1,200,000.
c. $450,000.
d. $330,000.

___B__16.If the manufacturing overhead costs applied to jobs worked on were greater
than the actual manufacturing costs incurred during a period, overhead is said
to be
a. underapplied.
b. overapplied.
c. in error.
d. prepaid.

___A___17.The Manufacturing Overhead Control account shows debits of $30,000,

$24,000, and $28,000 and the Manufacturing Overhead Allocated account
shows one credit for $86,000. Based on this information, manufacturing
overhead
a. has been overapplied.
b. has been underapplied.
c. has not been applied.
d. shows a zero balance.
Jaime Nazario Santiago
E00-29-4633

___C__18.The simplest approach to dealing with underallocated or overallocated

overhead is the __________ approach.
a. adjusted allocation-rate
b. proration
c. write-off to cost of goods sold
d. both (a) and (b)

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 19 THROUGH 21.

Sunni Company manufactures pipes and applies manufacturing overhead costs to
production at a budgeted indirect-cost rate of $15 per direct labor-hour. The following
data are obtained from the accounting records for June 20x2:

Direct materials $280,000

Direct labor (7,000 hours @ $11/hour) $ 77,000
Indirect labor $ 20,000
Plant facility rent $ 60,000
Depreciation on plant machinery and equipment $ 30,000
Sales commissions $ 40,000
Administrative expenses $ 50,000

___C__19.The actual amount of manufacturing overhead costs incurred in June 2009

total
a. $557,000.
b. $200,000.
c. $110,000.
d. $ 80,000

___B_20. The amount of manufacturing overhead allocated to all jobs during June 2009
totals
a. $77,000
b. $105,000.
c. $110,000.
d. $200,000.

___B__21.For June 2009, manufacturing overhead was

a. overapplied.
b. underapplied.
c. neither overapplied nor underapplied.
d. unable to be determined.
Jaime Nazario Santiago
E00-29-4633

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 22 AND 23.

Because the Abernathy Company used a budgeted indirect-cost rate for its manufacturing
operations, the amount applied ($200,000) was different from the actual amount incurred
($225,000).
Ending balances in the relevant accounts are:
Work-in-Process $ 10,000
Finished Goods 20,000
Cost of Goods Sold 170,000

___A__22.What is the journal entry used to write off the difference between allocated
and actual overhead directly to cost of goods sold?
a. Manufacturing Overhead Allocated 200,000
Cost of Goods Sold 25,000
Manufacturing Overhead Control 225,000

b. Manufacturing Overhead Control 200,000

Cost of Goods Sold 25,000
Manufacturing Overhead Allocated 225,000

c. Manufacturing Overhead Allocated 200,000

Work-in-Process Control 30,000
Cost of Goods Sold 170,000

d. Manufacturing Overhead Control 225,000

Work-in-Process Control 55,000
Cost of Goods Sold 170,000

___D__23.What is the journal entry used to write off the difference between allocated
and actual overhead using the proration approach?

a. Manufacturing Overhead Allocated 200,000

Work-in-Process Control 10,000
Finished Goods Control 20,000
Manufacturing Overhead Control 230,000

b. Manufacturing Overhead Allocated 225,000

Work-in-Process Control 1,250
Finished Goods Control 2,500
Cost of Goods Sold 21,250
Manufacturing Overhead Control 200,000

c. Manufacturing Overhead Control 225,000

Work-in-Process Control 1,250
Finished Goods Control 2,500
Jaime Nazario Santiago
E00-29-4633
Cost of Goods Sold 21,250
Manufacturing Overhead Allocated 200,000
d. Manufacturing Overhead Allocated 200,000
Work-in-Process Control 1,250
Finished Goods Control 2,500
Cost of Goods Sold 21,250
Manufacturing Overhead Control 225,000

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 24 AND 25.

Because the Abernathy Company used a budgeted indirect-cost rate for its manufacturing
operations, the amount applied ($200,000) was different from the actual amount incurred
($225,000).
Ending balances in the relevant accounts are:
Work-in-Process $ 10,000
Finished Goods 20,000
Cost of Goods Sold 170,000

___A__24.What is the journal entry used to write off the difference between allocated
and actual overhead directly to cost of goods sold?
a. Manufacturing Overhead Allocated 200,000
Cost of Goods Sold 25,000
Manufacturing Overhead Control 225,000

b. Manufacturing Overhead Control 200,000

Cost of Goods Sold 25,000
Manufacturing Overhead Allocated 225,000

c. Manufacturing Overhead Allocated 200,000

Work-in-Process Control 30,000
Cost of Goods Sold 170,000

d. Manufacturing Overhead Control 225,000

Work-in-Process Control 55,000
Cost of Goods Sold 170,000

___D__25.What is the journal entry used to write off the difference between allocated
and actual overhead using the proration approach?
a. Manufacturing Overhead Allocated 200,000
Work-in-Process Control 10,000
Finished Goods Control 20,000
Manufacturing Overhead Control 230,000

b. Manufacturing Overhead Allocated 225,000

Work-in-Process Control 1,250
Finished Goods Control 2,500
Cost of Goods Sold 21,250
Jaime Nazario Santiago
E00-29-4633
Manufacturing Overhead Control 200,000

c. Manufacturing Overhead Control 225,000

Work-in-Process Control 1,250
Finished Goods Control 2,500
Cost of Goods Sold 21,250
Manufacturing Overhead Allocated 200,000

d. Manufacturing Overhead Allocated 200,000

Work-in-Process Control 1,250
Finished Goods Control 2,500
Cost of Goods Sold 21,250
Manufacturing Overhead Control 225,000
II. Manufacturing Company uses a job order cost accounting system
and keeps perpetual inventory records. Prepare journal entries to
record the following transactions during the month of June.

June 1 Purchased raw materials for $25,000 on account.

8 Raw materials requisitioned by production:

Direct materials $6,000

Indirect materials $1,000

15 Paid factory utilities, $2,100 and repairs for factory equipment,

$3,000.

25 Incurred $52,000 of factory labor.

25 Time tickets indicated the following:

Direct Labor (3,000 hrs × $12 per hr) = $36,000

Indirect Labor (2,000 hrs × $8 per hr) = 16,000
$52,000

25 Applied manufacturing overhead to production based on a

predetermined overhead rate of $9 per direct labor hour worked.

28 Goods costing $18,000 were completed in the factory and were

transferred to finished goods.

30 Goods costing $15,000 were sold for $20,000 on account.

Jaime Nazario Santiago
E00-29-4633

Date ACCOUNTS DEBIT CREDIT

June 1 Raw Materials Inventory 25,000

Accounts Payable 25,000

8 Work in Process Inventory 6,000

Jaime Nazario Santiago
E00-29-4633

Date ACCOUNTS DEBIT CREDIT

Manufacturing Overhead Control 1,000

Raw Materials 7,000

15 Manufacturing Overhead Control 5,100

Cash 5,100

25 Factory Labor 52,000

Factory Wages Payable 52,000

25 Work in Process Inventory 36,000

Manufacturing Overhead Control 16,000

Factory Labor 52,000

25 Work in Process Inventory 27,000

Manufacturing Overhead Allocated 27,000

28 Finished Goods Inventory 18,000

Work in Process Inventory 18,000

30 Accounts Receivable 5,000

Sales 5,000

30 Cost of Goods Sold 15,000

Finished Goods Inventory 15,000

Jaime Nazario Santiago
E00-29-4633

III. Watson Manufacturing Company employs a job order cost accounting system
and keeps perpetual inventory records. The following transactions occurred in
the first month of operations:

1. Direct materials requisitioned during the month:

Job 101 $22,000
Job 102 16,000
Job 103 24,000
$62,000

2. Direct labor incurred and charged to jobs during the month was:
Job 101 $30,000
Job 102 35,000
Job 103 20,000
$85,000

3. Manufacturing overhead was applied to jobs worked on using a

predetermined overhead rate based on 80% of direct labor costs.

4. Actual manufacturing overhead costs incurred during the month amounted

to $74,000.

5. Job 101 consisting of 1,000 units and Job 103 consisting of 200 units were
completed during the month.

Instructions:
(a) Prepare journal entries to record the above transactions.

DATE ACCOUNTS DEBIT CREDIT

1 Work in Process Inventory 62,000

Raw Materials Inventory 62,000

2 Work in Process Inventory 85,000

Factory Labor 85,000

3 Work in Process Inventory 85,000

Jaime Nazario Santiago
E00-29-4633

DATE ACCOUNTS DEBIT CREDIT

Manufacturing Overhead Allocated 85,000

4 Manufacturing Overhead Control 74,000

Cash 74,000

5 Finished Goods Inventory 136,000

Work in Process Inventory 136,000

(b) Answer the following questions:

1. How much manufacturing overhead was applied to Job 103

during the month?
20,000 x .80 = $16,000

2. Compute the unit cost of Jobs 101 and 103.

Jobs 101 Total Cost= $22,000 + $30,000 + $30,000(.80)
= $76,000
Jobs 101 Unit Cost = $76,000/ 1,000 = $76 per unit

Jobs 103 Total Cost= $24,000 + $20,000 + $20,000(.80)

= $60,000
Jobs 103 Unit Cost= $60,000/ 200 = $300 per unit

3. What is the balance in Work In Process Inventory at the end of

the month?
16,000 + 35,000 + 28,000 = $79,000
Ending Work In Process Inventory = $79,000

4. Determine if manufacturing overhead was under- or overapplied

during the month. How much?

Actual 74,000
Jaime Nazario Santiago
E00-29-4633
Applied - 68,000
6,000 = under applied