COST ACCOUNTING ASSIGNMENT
I - Multiple Choice
1. Which of the following is not a fixed overhead cost?
a. Depreciation on factory equipment.
b. Payroll taxes on factory employees.
c. Property taxes on factory building.
d. Property insurance on factory building.
2. The Jackson Company incurred the following direct labor costs in its factory departments: Shaping Department, $32,800; Painting Department, $26,400; Finishing Department, $20,800. If the company allocates the General Factory Department overhead on the basis of direct labor cost, what will be the percentage of allocation of general factory department costs to the Painting Department?
a. 41%.
b. 33 %.
c. 30 %.
d. 26 %.
3. The Building Services Department of the Tara Company had total manufacturing overhead costs of $63,000. This department provided services to the following departments, which occupied the amount of space shown: Cutting Department, 25,000 square feet; Assembly Department, 35,000 square feet; General Factory Department, 40,000 square feet. What portion of the overhead costs of the Building Services Department should be allocated to the Cutting Department?
a. $15,750.
b. $22,050.
c. $21,000.
d. $25,200.
4. International Corporation uses direct materials costs to apply overhead to specific jobs. The estimated manufacturing overhead is $75,000 and estimated direct materials costs are $50,000. How much overhead would be applied to a job that used $200 of direct materials?
a. $150.
b. $300.
c. $1,334.
d. $3,000.
5. Which of the following is not a criterion for choosing an overhead rate basis?
a. Ease in computing the rate.
b. Availability of data regarding the base.
c. Direct correlation between overhead costs and the base.
d. Base applies only to the final stages of production.
6. A highly automated factory might use which of the following overhead application rate bases?
a. Direct labor hours.
b. Direct labor costs.
c. Machine hours.
d. Units of production.
7. A company that manufactures one product using only one department might use which of the following overhead application rate bases?
a. Units of production.
b. Machine hours.
c. Direct labor costs.
d. Direct labor hours.
Use the following information to answer questions 8 and 9.
The following data are for the Hurley Company: actual overhead costs, $650,000; estimated manufacturing overhead costs, $600,000; estimated direct labor costs, $250,000; estimated direct labor hours, 50,000 hours.
8. What is the manufacturing overhead application rate if direct labor hours are used as the basis?
a. $24 per hour.
b. $13 per hour.
c. $12 per hour.
d. $5 per hour.
9. What is the manufacturing overhead application rate if direct labor costs are used as the basis?
a. 5 %.
b. 42%.
c. 240 %.
d. 250 %.
10. Postings from the manufacturing overhead applied journal to the general ledger include:
a. Debits to the departmental overhead accounts and a credit to Overapplied or Underapplied Manufacturing Overhead.
b. A debit to Work in Process and credits to the departmental overhead accounts.
c. Debits to the departmental overhead accounts and a credit to Work in Process.
d. A debit to Manufacturing Overhead Control and a credit to Work in Process.
11. Departmental manufacturing overhead accounts are closed at the end of each month to:
a. Manufacturing Overhead Control.
b. Work in Process.
c Cost of Goods Sold.
d. Overapplied or Underapplied Manufacturing Overhead.
12. A general journal entry to record the costs of jobs completed would consist of:
a. A debit to Cost of Goods Sold and a credit to Finished Goods.
b. A debit to Finished Goods and a credit to Cost of Goods Sold.
c. A debit to Finished Goods and a credit to Work in Process.
d. A debit to Accounts Receivable and a credit to Sales.
13. The total cost of all completed jobs not sold at the end of the month must agree with the balance of which of the following general ledger accounts?
a. Finished Goods.
b. Accounts Receivable.
c. Work in Process.
d. Cost of Goods Sold.
14 The costs related to raw materials for the Trent Company are as follows: Raw Materials, January 1, $36,000; Raw Materials, December 31, $42,000; and raw materials purchases, $200,000. What is the cost of raw materials used for the year ending December 31?
a. $194,000.
b. $200,000.
c. $208,000.
d. $236,000.
Use the following information to answer questions 15 through 17.
The following information is available for Boston Manufacturing for 2017:
Direct Materials Used - $10,500
Direct Labor - 16,000
Manufacturing Overhead - 24,000
Work in Process Inventory, January 1, 2017 - 8,000
Work in Process Inventory, December 31, 2017 - 9,500
Finished Goods Inventory, January 1, 2017 - 18,600
Finished Goods Inventory, December 31, 2017 - 17,200
Sales - 85,000
15 The total cost of goods manufactured for the year ended December 31, 2017 is:
a. $58,500.
b. $52,000.
c. $50,500.
d. $49,000.
16. The total cost of goods sold for the year ended December 31, 2017 is:
a. $47,600.
b. $49,000.
c. $50,400.
d. $67,600.
17. The total gross profit on sales for the year ended December 31, 2017 is:
a. $17,400.
b. $34,600.
c. $36,000.
d. $37,400.
18. If sales total $280,000 and the cost of goods sold is $182,000, the gross profit percentage is:
a. 65 %.
b. 49 %.
c. 35 %.
d. 151 %.
II - True and False
19. Generally, the costs of the service department that assists the greatest number of other departments are allocated first.
20. A service department provides no services to other service departments.
21. Service department overhead costs are allocated to production departments in direct proportion to the benefits the production department receives from the service department.
22. Total manufacturing overhead after service department overhead is allocated to producing departments will be the same as the total manufacturing overhead was prior to the allocation.
23. All of the manufacturing overhead costs charged to the Manufacturing Overhead Control account during an accounting period represent cash payments made for overhead items used to manufacture the product.
24. The individual departmental overhead accounts are closed into the Manufacturing Overhead Control account at the end of each month.
25. Predetermined overhead rates are used to charge actual overhead costs to producing departments.
26. To enable efficient recordkeeping, all departments in the factory should use the same overhead rates.
27. Separate overhead rates should be computed for departments that perform machine operations and departments that use manual labor.
28. Total actual overhead costs for each job are posted to the job cost sheet.
29. If a large portion of overhead costs relate to the use of machinery, the direct labor cost basis is generally used to determine the overhead application rates.
30. Overhead is applied to all jobs as they are completed as well as to each job still in process at the end of the accounting period.
31. The factor chosen as the basis for the formulation of an overhead application rate must be easily measurable.
32. At the end of the month, the entries in the manufacturing overhead applied journal are posted to the job cost sheets.
33. The Overapplied or Underapplied Manufacturing Overhead account in the general ledger reflects the cumulative overapplied or underapplied overhead for the year to date.
34. A credit balance in the Overapplied or Underapplied Manufacturing Overhead account at the end of the accounting period means that actual overhead was more than the overhead applied.
35. When interim financial statements are prepared, overapplied or underapplied overhead appears on the income statement as an adjustment to Cost of Goods Sold.
36. At the end of the year, the balance of the Overapplied or Underapplied Manufacturing Overhead account is closed into the Cost of Goods Sold account.
37. Overapplied overhead is reported under Other Revenues and Gains on the income statement.
38. The job cost sheet is the source document for entries in the completed jobs journal.
39. All completed jobs are recorded on stock ledger cards in the finished goods subsidiary ledger.
40. The schedule of work in process is prepared at the end of each month and the total must agree with the balance in the Work in Process account in the general ledger.
41. At the end of the month, the balance in the Finished Goods account in the general ledger must agree with the total of the balances shown on the materials ledger cards.
42. Shortages of finished goods discovered as a result of taking a physical inventory are usually charged to Cost of Goods Manufactured.
43. The sale of finished goods from stock is recorded at the selling price in the finished goods ledger.
44. The statement of cost of goods manufactured is usually a supporting schedule to the income statement.
III - Problem
45. Information for prorating service department costs of Samuel Manufacturing Company for the month of June 2017 is given below:
|
Department
|
Square Feet Occupied
|
Direct labor Hours
|
|
Building Services
|
2,500
|
|
|
General Factory
|
6,500
|
|
|
Shaping
|
8,500
|
8,100
|
|
Assembly
|
4,000
|
6,480
|
|
Finishing
|
6,000
|
3,420
|
|
Overhead Item
|
Building Services
|
General Factory
|
Shaping
|
Assembly
|
Finishing
|
Total
|
|
Indirect Labor
|
$9,500
|
$4,500
|
$3,500
|
$3,250
|
$2,250
|
$23,000
|
|
Indirect Materials
|
0
|
0
|
1,000
|
700
|
825
|
2,525
|
|
Payroll Taxes
|
550
|
450
|
300
|
225
|
200
|
1,725
|
|
Supplies
|
100
|
150
|
50
|
75
|
50
|
425
|
|
Property Taxes
|
2,250
|
1,950
|
1,800
|
1,450
|
1,750
|
9,200
|
|
Depreciation
|
4,300
|
1,700
|
3,000
|
2,800
|
2,000
|
13,800
|
|
Utilities
|
2,450
|
1,650
|
1,950
|
1,600
|
1,150
|
8,800
|
|
Insurance
|
750
|
1,500
|
800
|
500
|
500
|
4,050
|
|
Repairs
|
100
|
100
|
100
|
100
|
100
|
500
|
|
Totals
|
$20,000
|
$12,000
|
$12,500
|
$10,700
|
$8,825
|
$64,025
|
Required:
(a) Complete the worksheet for prorating service department costs. The Building Services Department costs are allocated on the basis of floor space occupied. The General Factory Department costs are then allocated to the producing departments on the basis of direct labor hours. Supporting schedules are provided for your use to show the calculations for your allocations.
(b) Prepare the general journal entries to close the Manufacturing Overhead Control account into the departmental manufacturing overhead accounts and to prorate the service department costs.
46. Jackson Manufacturing Company uses a job order cost system. The data below applies to Job 142, which is for 200 desks ordered by The Office Furniture Store. The job was started on May 1, 2017.
Materials
May 1 Requisition 608, $2,800
May 9 Requisition 617, $650
May 16 Requisition 632, $425
May 20 Returned Materials Report 15, $75 (materials returned to storeroom)
Labor
Week ended May 5:
Department 1: 120 hours, $1,100
Department 2: 50 hours, $525
Week ended May 12:
Department 1: 50 hours, $560
Department 2: 200 hours, $1,805
Week ended May 19:
Department 2: 20 hours, $245
Department 3: 100 hours, $970
The job was completed on May 23 and overhead was applied as follows:
Department 1 $3.00 per direct labor hour
Department 2 $4.50 per direct labor hour
Department 3 $6.20 per direct labor hour
Required: Complete a job cost sheet for this job.
47. Riley Manufacturing Company has accumulated the following data for the fiscal year ending June 30, 2017:
Administrative Expenses - $ 82,256
Cost of Goods Manufactured - 641,191
Finished Goods, July, 1, 2016 - 98,730
Finished Goods, June 30, 2017 - 94,520
Overapplied or Underapplied Overhead - 3,531 Cr. Balance
Provision for Income Taxes - 44,500
Sales - 960,540
Sales Returns and Allowances - 43,780
Selling Expenses - 65,496
Required: Prepare an income statement for the year ending June 30, 2017.