CH 7

ch7
Student: ___________________________________________________________________________
1. A job is a product or service that can be easily and conveniently distinguished from other products/services.
True False
2. Job cost sheets are used in accounting systems as a subsidiary ledger for the Work-in-Process account.
True False
3. Job shops have three types of inventory accounts: Finished Goods, Work-in-Process, and Direct Materials.
True False
4. The cost in the ending Finished Goods inventory account consists of the direct materials, direct labor, and
manufacturing overhead of all jobs still in process at the end of the period.
True False
5. Accounting for direct materials and direct labor is easier than accounting for manufacturing overhead costs.
True False
6. Indirect material and indirect labor are two examples of manufacturing overhead costs.
True False
7. The journal entry to record actual manufacturing overhead for indirect material debits Manufacturing
Overhead (Control) and credits Accounts Payable.
True False
8. The journal entry to record actual manufacturing overhead for indirect labor debits Manufacturing
Overhead (Control) and credits Work-in-Process inventory.
True False
9. The periodic allocation of manufacturing overhead costs to job cost sheets is based on an event, not a
transaction.
True False
10. The predetermined overhead rate is computed by dividing the estimated activity of the allocation base into
the estimated manufacturing overhead costs.
True False
11. The journal entry to apply manufacturing overhead costs to completed jobs credits either Applied
Manufacturing Overhead or Manufacturing Overhead (Control).
True False
12. At the end of the accounting period, manufacturing overhead costs are applied to uncompleted jobs using
the same predetermined overhead rate that is used to apply manufacturing overhead costs to completed
jobs.
True False
13. Overapplied overhead occurs when the actual overhead costs incurred during a period are greater than the
overhead costs applied during the period.
True False
14. Underapplied overhead occurs when the actual overhead costs incurred during a period are greater than the
overhead costs applied during the period.
True False
15. Normal costing uses the actual allocation base activity to apply manufacturing overhead costs to jobs
during the period.
True False
16. Actual costing does not use a predetermined overhead rate to apply manufacturing overhead costs to jobs
completed during the period.
True False
17. Service organizations, by their nature, cannot have a balance in Work-in-Process Inventory.
True False
18. Service organizations generally use the same job costing procedures as manufacturers.
True False
19. It is unethical to intentionally charge costs to the wrong job.
True False
20. One difference between jobs and projects is the account titles used in the costing process.
True False
21. Which of the following statements is (are) true regarding product costing?
(A) A job is a cost object that can be easily and conveniently distinguished from other cost objects.
(B) Job cost sheets are used in accounting systems as a subsidiary ledger for the Work-in-Process account.
A. Only A is true.
B. Only B is true.
C. Both A and B are true.
D. Neither A nor B is true.
22. For which of the following businesses would the job order cost system be appropriate?
A. Auto repair shop

B. Crude oil refinery
C. Drug manufacturer
D. Root beer producer
23. Which of the following is not a characteristic of job costing?
A. Each job is distinguishable from other jobs.

B. Identical units are produced on an ongoing basis.
C. Job cost data are used for setting prices and bids.
D. It is not possible to compare actual costs with estimated costs.
24. Which of the following companies would most likely use job costing?
A. Paper manufacturer
B. Paint producer
C. Breakfast cereal maker
D. Advertising agency
25. The journal entry to record the completion of a job in a job order cost system is
A. a
B. b
C. c
D. d
E. e
26. The journal entry to record requisitions of material for new jobs started during the period is
A. a
B. b
C. c
D. d
E. e
27. Which of the following documents is used as the basis for posting to the direct materials section of the job
cost sheet?
A. Purchase requisition.
B. Materials requisition.
C. Receiving report.
D. Purchase order.
E. Time card.
28. Which of the following documents is used as the basis for posting to the direct labor section of the job cost
sheet?
D. Purchase order.
E. Time card.
29. Which of the following accounts is used to accumulate the actual manufacturing overhead costs incurred
during a period?
A. Applied Manufacturing Overhead

B. Work-in-Process Inventory
C. Manufacturing Overhead Control
D. Cost of Goods Sold
E. Finished Goods Inventory
30. The journal entry to record the actual manufacturing overhead costs for indirect material is
A. a
B. b
C. c
D. d
E. e
31. What are the transfers-out from the Finished Goods Inventory called?
A. Cost of Goods Manufactured

B. Cost of Goods Available
C. Cost of Goods Completed
32. In a job costing system, the dollar amount in the journal entry that transfers the costs of jobs from Work-in-
Process Inventory to Finished Goods Inventory is the sum of the costs charged to all jobs
A. sold during the period.

B. completed during the period.
C. in process during the period.
D. started in process during the period.
E. completed and sold during the period.
33. Which of the following events or transactions will not result in manufacturing overhead being applied to
production?
A. Completion of a job in the current period that was started in a prior period
B. Completion of a job in the current period that was started in the current period
C. Preparing financial statements when work is in process at the end of the period
D. Preparing financial statements when there is no work in process at the end of the period
34. The journal entry to record the completion of a job in a job costing system is
A. a
B. b
C. c
D. d
E. e
35. It is possible that the total cost of a job started in April and completed in May will not include:
A. direct material added in April.

B. direct labor added in May.
C. applied overhead in April.
D. applied overhead in May.
E. direct material purchased in May.
36. Underapplied overhead occurs when the balance in the Manufacturing Overhead Control account is:
A. greater than the balance in the Applied Manufacturing Overhead account.

B. equal to the balance in the Applied Manufacturing Overhead account.
C. less than the balance in the Applied Manufacturing Overhead account.
D. less than the balance in the Finished Goods Inventory account.
37. Which of the following statements is (are) true regarding the application of manufacturing overhead?
(A) Manufacturing overhead is only recorded on the job cost sheets when (a) financial statements are
prepared or a job is completed.
(B) Overapplied overhead occurs when the actual overhead costs incurred during a period are greater than
the overhead costs applied during the period.
A. Only A is true.
B. Only B is true.
38. The journal entry to write-off an insignificant underapplied overhead balance at the end of an accounting
period is
A. a
B. b
C. c
D. d
39. The journal entry to write-off a significant underapplied overhead balance at the end of an accounting
period is
A. a
B. b
C. c
D. d
40. If a company multiplies its predetermined overhead rate by the actual activity level of its allocation base, it
is using
A. standard costing.
B. normal costing.
C. actual costing.
D. budget costing.
E. ideal costing.
41. If a company multiplies its actual overhead rate by the actual activity level of its allocation base, it is using
B. normal costing.
C. actual costing.
D. budget costing.
E. ideal costing.
42. One of the primary differences between job costing for service and manufacturing companies is service
firms generally
A. use fewer direct materials.

B. have less direct labor.
C. do not use predetermined overhead rates.
D. have no Work in Process Inventory.
43. Which of the following is not a difference between job costing for service firms and job costing for
manufacturing companies?
A. Service firms generally use fewer direct materials that manufacturing companies.
B. Service firms' overhead accounts have slightly different titles (e.g., Applied Service Overhead).
C. Service firms' finished jobs are charged to Cost of Services Billed instead of Cost of Goods Sold.
D. Service firms' costs are immediately expensed since all work is completed during a period.
44. The journal entry to record the completion of a contract in a job costing system for a service firm is
A. a
B. b
C. c
D. d
E. e
45. The journal entry to write-off an insignificant overapplied overhead balance at the end of an accounting
period for a service firm is
A. a
B. b
C. c
D. d
46. Complex jobs that take multiple time periods and require the work of many different departments,
divisions, or subcontractors are called
A. clients.
B. projects.
C. customers.
D. contracts.
E. vendors.
47. Manufacturing overhead applied on the basis of direct labor hours was $120,000, while actual
manufacturing overhead incurred was $124,000 for the month of April. Which of the following is always
true given the statement above?
A. Overhead was overapplied by $4,000.

B. Overhead was underapplied by $4,000.
C. Actual direct labor hours exceeded budgeted direct labor hours.
D. Actual direct labor hours were less than budgeted direct labor hours.
48. The predetermined overhead rate for manufacturing overhead for 2008 is $4.00 per direct labor hour.
Employees are expected to earn $5.00 per hour and the company is planning on paying its employees
$100,000 during the year. However, only 75% of the employees are classified as "direct labor." What was
the estimated manufacturing overhead for 2008?
A. $60,000
B. $75,000
C. $80,000
D. $93,750
49. Before prorating the manufacturing overhead costs at the end of 2008, the Cost of Goods Sold and Finished
Goods Inventory had applied overhead costs of $57,500 and $20,000 in them, respectively. There was
no Work-in-Process at the beginning or end of 2008. During the year, manufacturing overhead costs of
$74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at
the end of 2008. If the under or overapplied overhead is prorated between Cost of Goods Sold and the
inventory accounts, how much will be allocated to the Finished Goods Inventory?
A. $903
B. $1,217
C. $1,283
D. $2,597
50. Before prorating the manufacturing overhead costs at the end of 2008, the Cost of Goods Sold and Finished
Goods Inventory had applied overhead costs of $57,500 and $20,000 in them, respectively. There was no
work in process at the beginning or end of 2008. During the year, manufacturing overhead costs of $74,000
were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at the end of
2008. If the under- or overapplied overhead is prorated between Cost of Goods Sold and the inventory
accounts, how much will be the Cost of Goods Sold after the proration?
A. $58,403
B. $56,597
C. $60,197
D. $54,903
51. The Work-in-Process Inventory account of a manufacturing firm has a balance of $2,400 at the end of
an accounting period. The job cost sheets of two uncompleted jobs show charges of $400 and $200 for
materials used, and charges of $300 and $500 for direct labor used. Overhead is applied as a percentage of
direct labor costs. The predetermined rate is
A. 41.7%.
B. 80.0%.
C. 125.0%.
D. 240.0%.
52. The general journal entry to record the issuance of the materials represented by the following materials
requisitions for the month includes:
A. a debit to Materials Inventory, $15,945.

B. a debit to Materials Inventory, $16,670.
C. a debit to Work in Process Inventory, $15,945.
D. a credit to Work in Process Inventory, $15,945.
E. a credit to Factory Overhead, $725.
53. Tillman Corporation uses job costing and has two production departments, M and A. Budgeted
manufacturing costs for the year are as follows:
The actual direct material and direct labor costs charged to Job. No. 432 during the year were as follows:
Tillman applies manufacturing overhead to production orders on the basis of direct labor cost using
departmental rates predetermined at the beginning of the year based on the annual budget. The total cost
associated with Job. No. 432 for the year should be
A. $50,000.
B. $55,000.
C. $65,000.
D. $75,000.
The following selected data were taken from the books of the Bixby Box Company. The company uses job
costing to account for manufacturing costs. The data relate to June operations.
A) Materials and supplies were requisitioned from the stores clerk as follows:
Job 405, material X, $7,000.
Job 406, material X, $3,000; material Y, $6,000.
For general factory use: materials A, B, and C, $2,300.
B) Time tickets for the month were chargeable as follows:
C) Other information:
Factory paychecks for $36,700 were issued during the month.
Various factory overhead charges of $19,400 were incurred on account.
Depreciation of factory equipment for the month was $5,400.
Factory overhead was applied to jobs at the rate of $3.50 per direct labor hour.
Job orders completed during the month: Job 405 and Job 406.
Selling and administrative costs were $2,100.
Factory overhead is closed out only at the end of the year.
54. If Job 406 were sold on account for $41,500 how much gross profit would be recognized for the job?
A. $3,800
B. $5,900
C. $18,500
D. $35,600
55. The end of the month Work-in-Process Inventory balance would be
A. $18,200.
B. $24,850.
C. $64,100.
D. $88,950.
56. The balance in the factory overhead account would represent the fact that overhead was
A. $1,050 underapplied
B. $3,150 underapplied
C. $1,250 overapplied
D. $4,350 overapplied
57. Compute the Work-in-Process transferred to the finished goods warehouse on April 30 using the following
information:
A. $650
B. $675
C. $700
D. $750
The following events took place at a manufacturing company for the current year:
(1) Purchased $95,000 in direct materials.
(2) Incurred labor costs as follows: (a) direct, $56,000 and (b) indirect, $13,600.
(3) Other manufacturing overhead was $107,000, excluding indirect labor.
(4) Transferred 80% of the materials to the manufacturing assembly line.
(5) Completed 65% of the Work-in-Process during the year.
(6) Sold 85% of the completed goods.
(7) There were no beginning inventories.
58. What is the company's Cost of Goods Sold?
A. $164,190.00
B. $139,561.50
C. $252,600.00
D. $214,710.50
59. What is the value of the ending Work-in-Process Inventory?
A. $13,261.50
B. $14,259.00
C. $88,410.00
D. $95,060.50
60. What is the journal entry to record the direct labor costs for the period?
A. a
B. b
C. c
D. d
61. What is the value of the ending Finished Goods Inventory?
A. $13,261.50
B. $24,628.50
C. $26,481.00
D. $164,190.00
Two jobs were worked on during the year: Job A-101 and Job A-102. The number of direct labor hours
spent on Job A-101 and Job A-102 were 1,200 and 1,000, respectively. The actual manufacturing overhead
was $37,000.
62. What is the predetermined manufacturing overhead rate per direct labor hour for the year?
A. $15
B. $20
C. $25
D. $30
63. What was the amount of manufacturing overhead applied to Job A-101?
A. $16,000
B. $18,000
C. $24,000
D. $44,000
64. What is the amount of the under- or overapplied manufacturing overhead?
B. $3,000 overapplied
C. $4,000 underapplied
The Update Company does not maintain backup documents for its computer files. In June, some of the
current data were lost, and you have been asked to help reconstruct the data. The following beginning
balances on June 1 are known:
Reviewing old documents and interviewing selected employees have generated the following additional
information:
The production superintendent's job cost sheets indicated that materials of $2,600 were included in the June
30 Work-in-Process Inventory. Also, 300 direct labor hours had been paid at $6.00 per hour for the jobs in
process on June 30.
The Accounts Payable account is only for direct material purchases. The clerk remembers clearly that
the balance in the Accounts Payable on June 30 was $8,000. An analysis of canceled checks indicated
payments of $40,000 were made to suppliers during June.
Payroll records indicate that 5,200 direct labor hours were recorded for June. It was verified that there were
no variations in pay rates among employees during June.
Records at the warehouse indicate that the Finished Goods Inventory totaled $16,000 on June 30.
Another record kept manually indicates that the Cost of Goods Sold in June totaled $84,000.
The predetermined overhead rate was based on an estimated 60,000 direct labor hours for the year and an
estimated $180,000 in manufacturing overhead costs.
65. What is the ending balance in the Work-in-Process Inventory on June 30?
A. $4,800
B. $5,300
C. $9,300
D. $9,800
66. What is the amount of direct materials purchased during June?
A. $38,000
B. $40,000
C. $42,000
D. $43,000
67. What is the Cost of Goods Manufactured for June?
A. $89,000
B. $84,000
C. $94,000
D. $99,000
68. How much manufacturing overhead was applied to the Work-in-Process Inventory during June?
A. $12,000
B. $15,600
C. $18,400
D. $20,500
69. What is the ending balance in the Direct Materials Inventory on June 30?
A. $6,000
B. $10,500
C. $11,000
D. $15,000
The financial records for the Lee Manufacturing Company have been destroyed in a fire. The following
information has been obtained from a separate set of books maintained by the cost accountant. The cost
accountant now asks for your assistance in computing the missing amounts.
70. What is the amount of the materials purchased?
A. $14,400
B. $16,400
C. $18,000
D. $19,600
71. What is the value of the ending Work-in-Process inventory balance?
A. $-0-
B. $4,200
C. $7,500
D. $8,000
72. What is the value of the beginning Finished Goods Inventory?
A. $-0-
B. $4,200
C. $13,300
D. $21,700
73. Birk Co. uses a job order costing system. The following debits (credits) appeared in Birk's work-in-process
account for the month of April:
Birk applies overhead to production at a predetermined rate of 80% of direct labor cost. Job No. 5, the only
job still in process on April 30 has been charged with direct labor of $2,000. What was the amount of direct
material charged to Job No.5? (CPA adapted)
A. $3,000
B. $5,200
C. $8,800
D. $24,000
74. The following are Mill Co.'s production costs for October:
What amount of costs should be traced to specific products in the production process? (CPA adapted)
A. $194,000
B. $190,000
C. $100,000
D. $90,000
75. Under Pick Co.'s job order costing system manufacturing overhead is applied to work in process using a
predetermined annual overhead rate. During January, Pick's transactions included the following:
Pick had neither beginning nor ending inventory in Work-in-Process Inventory. What was the cost of jobs
completed in January? (CPA adapted)
A. $302,000
B. $310,000
C. $322,000
D. $330,000
76. In a traditional job order costing system, the issue of indirect materials to a production department
increases: (CPA adapted)
A. Stores control.
B. Work-in-Process control.
C. Factory overhead control.
D. Factory overhead applied.
77. Which of the following actions do not cause an impropriety in job costing?
A. Misstating the stage of completion.

B. Choosing to use normal costing rather than actual costing.
C. Charging costs to the wrong job.
D. Choosing an allocation method based on the results rather than choosing the method based on resource
usage.
78. Which of the following approaches allocates overhead by multiplying a predetermined overhead rate
actual activity?
A. Actual costing
B. Normal costing
C. Regression costing
D. Standard costing
79. Which of the following approaches allocates overhead by multiplying an actual overhead rate actual
activity?
A. Actual costing
B. Normal costing
D. Standard costing
80. Which of the following approaches allocates overhead by multiplying a predetermined rate standard
activity?
A. Actual costing
B. Normal costing
D. Standard costing
81. Scottso Corporation applies overhead using a normal costing approach based upon machine-hours.
Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead
was $287,920, actual machine-hours were 19,050. How much overhead would be applied to production?
A. $266,400.
B. $274,320.
C. $279,607.
D. $287,920.
was $287,920, actual machine-hours were 19,050. How much is the over- or underapplied overhead?
D. $0
83. Scottso Corporation applies overhead using an actual costing approach. Budgeted factory overhead was
$266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-
hours were 19,050. How much overhead would be applied to production?
A. $266,400.
B. $274,320.
C. $279,607.
D. $287,920.
84. Scottso Corporation applies overhead using an actual costing approach. Budgeted factory overhead was
$266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-
hours were 19,050. How much is the over- or underapplied overhead?
D. $0
was $227,830, actual machine-hours were 16,150. How much overhead would be applied to production?
A. $214,795
B. $227,830
C. $232,750
D. $246,875
was $227,830, actual machine-hours were 16,150. How much is the over- or underapplied overhead?
A. $13,035 overapplied
D. $4,920 underapplied
87. On October 1, the general ledger of Slipshod Company had the following accounts and balances:
The subsidiary ledgers had the following information on October 1:
During October, the following costs were incurred on account:
A summary of the materials requisition slips and the labor time tickets for the month revealed the following
distribution:
Overhead is applied based upon direct labor cost. Jobs B81, B83, and B84 were for 8,000, 6,000 and 4,800
units of product respectively, and were completed during October. Jobs B80, B81, B82, and B83 were sold
on account for $150,000.
Required: Prepare T-accounts for a job order cost system, posting the beginning balances and all
transactions for the month. Clearly indicate the ending balances for the accounts and label the 'cost of
goods manufactured' and 'cost of goods sold' amounts.
88. The following selected data were taken from the records of the Bixby Box Company. The company uses
a job costing system to account for its manufacturing costs. Bixby's fiscal year runs from January 1 to
December 31; manufacturing overhead is closed out only at the end of the fiscal year. The following
information relates to August operations.
(1.) Jobs in process on August 1.
(2.) Jobs completed during August: W12, X13, Y14.

(3.) Material requisitions and labor time tickets indicated the following:
(4.) Jobs sold during August: W12, X13.

(5.) Bixby applies overhead to production based upon labor costs.
(6.) Selected account balances on August 1 were:
(7.) Various overhead incurred (excluding indirect materials and indirect labor) during August, $13,500.
(8.) Materials (direct and indirect) purchased during August, $10,905.
Required:
(a) What is the balance in the Material Inventory account on August 31?
(b) Is the manufacturing overhead account over-or underapplied on August 31? By how much?
(c) Compute the cost of goods manufactured for August.
(d) Compute the cost of goods sold for August.
(e) What is the balance of the Work-in-Process Inventory account on August 31?
89. Carver Test Systems manufactures automated test systems that perform quality inspections during and
at the completion of the manufacturing process. As most manufacturing processes are unique, Carver's
test equipment is designed to customer specifications, and each system has a selling price in excess of
$300,000. The company uses a job-order cost system based on the full absorption of actual costs and
applies overhead on the basis of machine hours using a predetermined overhead rate. For the fiscal year
ended November 30 budgeted manufacturing overhead was $1,960,000, and the expected activity level was
98,000 machine hours. Data regarding several jobs at Carver are presented below.
By the end of November all jobs but RX-115 were completed, and all completed jobs had been delivered to
customers with the exception of SL-205.
Required:
(a) Determine the balance in the Finished Goods Inventory on November 30.
(b) Compute the cost of goods manufactured for November.
(c) Compute the Cost of Goods Sold for November.
(d) Determine the balance in Work-In-Process Inventory on November 30.
90. A manufacturing company employs job costing to account for its costs. There are three production
departments, and separate departmental overhead application rates are employed because the operations
of the departments are so different. All jobs generally pass through all three production departments. Data
regarding the hourly direct labor rates, overhead application rates, and three jobs on which work was done
during the month appear below. Job 101 and Job 102 were completed during the current month. (CIA
Examination adapted)
Required:
(a) Compute the completed costs of Job 101 and Job 102.
(b) Compute the value of the Work-in-Process Inventory at the end of the month.
91. Baby Care Manufacturing Company is a manufacturer of furnishings for infants and children. The company
uses job costing and employs a full absorption accounting method for cost accumulation. Baby Care's
Work-in-Process Inventory on April 30 consisted of the following jobs:
Baby Care applies manufacturing overhead on the basis of direct labor hours. The company's estimated
manufacturing overhead for the period ending May 31 totals $4,500,000; the company estimated it would
use 600,000 direct labor hours during the year.
At the end of April, the balance in Baby Care's Materials Inventory, which includes both materials and
purchased parts, was $668,000. Additions to, and requisitions from, the materials inventory during the
month of May included the following:
During the month of May, Baby Care's factory payroll consisted of the following:
Listed below are the jobs that were completed and the units that were sold during the month of May.
Required:
(a) Compute the value of Baby Care's Work-in-Process Inventory on May 31.
(b) Compute the value of Baby Care's Cost of Goods Manufactured for May.
92. Shawano Corporation applies overhead based upon machine-hours. Budgeted factory overhead was
$266,400 and budgeted machine-hours were 18,500. Actual factory overhead was $287,920 and actual
machine-hours were 19,050. Before disposition of over- or underapplied overhead, the cost of goods sold
was $560,000 and ending inventories were as follows:
Required:
a. Compute the amount of overhead applied to production.
b. Prepare the journal entry to dispose of the over/under-applied overhead using the write-off to cost of
goods sold approach.
c. Prepare the journal entry to dispose of the over/under-applied overhead using the proration approach.
93. Prepare the necessary journal entries from the following information for Beaulieu Company.
a. Purchased materials on account, $56,700.
b. Requisitioned materials for production as follows: direct materials - 80 percent of purchases, indirect
materials - 15 percent of purchases
c. Direct labor for production is $33,100, indirect labor is $12,500.
d. Overhead incurred (not including materials or overhead): $52,900.
e. Overhead is applied to production based on direct labor cost at the rate of 220 percent.
f. Goods costing $97,600 were completed during the period.
g. Goods costing $51,320 were sold on account for $77,600.
h. Close the overhead control account to Cost of Goods Sold.
94. Danner Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $375,000
and budgeted machine-hours were 12,500. Actual factory overhead was $387,920 and actual machine-
hours were 13,150.
Required:
a. Compute the overhead application rate.
b. Compute the amount of overhead applied to production.
c. Determine the amount of over- or underapplied overhead.
95. The following selected data were taken from the books of the Bixby Box Company. The company uses job
costing to account for manufacturing costs. The data relate to June operations.
Beginning work-in-process, June 1, $-0-
Required:
(a) Determine the ending work-in-process balance on June 30.
(b) Determine the cost of goods manufactured for June.
(c) Is factory overhead over- or underapplied for June? What is the monthly value?
96. Rosebud Manufacturing uses actual costing. The following events took place during the current year:
Required:
(a) Determine the ending Direct Materials Inventory balance.
(b) Determine the ending Work-in-Process Inventory balance.
(c) Determine the ending Finished Goods Inventory balance.
(d) Determine the Cost of Goods Manufactured.
97. The Cedar Company does not maintain backup documents for its computer files. In June, some of the
balances are known:
information:
The production superintendent's job cost sheets indicated that materials of $5,200 were included in the June
30 Work-in-Process Inventory. Also, 300 direct labor hours had been paid at $12.00 per hour for the jobs in
process on June 30.
Payroll records indicate that 5,200 direct labor hours were recorded for June. It was verified that there were
no variations in pay rates among employees during June.
The predetermined overhead rate was based on an estimated 60,000 direct labor hours for the year and an
estimated $360,000 in manufacturing overhead costs.
Required:
(a) Compute the Cost of Goods Manufactured.
(b) Compute the ending Work-in-process inventory balance.
(c) Compute the ending Direct Materials Inventory balance.
98. The financial records for the Lee Manufacturing Company have been destroyed in a flood. The following
Required: Compute the following:

(a) direct materials purchased
(b) ending Work-in-process inventory
(c) beginning Finished goods inventory
99. The Bisson Company had the following transactions and events during its first year of operations.
Estimated overhead for the year was $770,000; estimated direct labor cost for the year was $350,000.
d. Overhead incurred (not including materials or labor): $529,000.
e. Overhead is applied to production based on direct labor cost at the rate of ___ percent.
Required:
Determine the ending balances for:
(a) Materials inventory
(b) Work-in-process inventory
(c) Finished goods inventory
100.The Brisebois Company had the following transactions and events during its first year of operations.
Required:
(1) Prepare the journal entries to record the transactions for the year.
(2) Prepare the journal entry to prorate the over- or underapplied overhead to the appropriate accounts.
101.In February, Forester Engineering worked on three contracts: 1,200 hours for Tarvell Company, 1,100
hours for Natron LLC and 3,400 for Lisere Corp. Forester bills clients at the rate of $150 per hour; labor
cost for its engineering staff is $45 per hour. The total number of hours worked in February was 6,000 (any
untraced hours are considered overhead), and non-labor overhead costs were $325,000. Overhead is applied
to clients at $55 per labor-hour. In addition, Forester had $243,000 in marketing and administrative costs.
All transactions are on account. All services were billed.
Required:
a. Determine the cost of each of the three jobs.
b. What is the amount of over- or underapplied overhead?
c. How much operating profit did Forester make in February? Assume the over- or underapplied overhead is
not closed out each month.
102.Mounder Manufacturing Company employs job costing to account for its costs. There are three production
departments, and separate departmental overhead application rates are employed. All jobs generally pass
through all three production departments. Data regarding the hourly direct labor rates, overhead application
rates, and three jobs on which work was done during the month appear below. Job 611 and Job 613 were
completed during the current month, Job 612 was still in process. (CIA Examination adapted)
Required:
103.Misa Company applies overhead based upon labor-hours. Budgeted factory overhead was $910,000 and
budgeted labor-hours were 32,500. Actual factory overhead was $893,675 and actual labor-hours were
31,560.
Required:
104.Becker Company applies overhead at a rate of $26 per direct labor hour. Budgeted labor hours were
25,000; actual labor hours exceeded the budget by 1,600 hours. Overhead was overapplied by $3,758.
Required:
(a) Compute the budgeted overhead for the year.
(b) Compute actual overhead for the year.
105.Bailey's Corporation applies overhead based upon machine-hours. Budgeted factory overhead was
machine-hours were 12,660. Before disposition of over- or underapplied overhead, the cost of goods sold
was $725,000 and ending inventories were as follows:
Required:
106.The Perrot Company is a computer repair shop and had the following transactions and events during the
year. Estimated overhead for the year was $175,000; estimated labor for the year was 6,000 hours.
b. Traced materials to repair jobs $110,880; general shop materials used $9,500.
c. Labor traced to repair jobs $165,000, untraced labor was $22,200.
e. Overhead is applied to repair jobs based on labor hours. All workers were paid $30/hr.
f. Ending work-in-process consisted of one repair job with a cost of $1,976. There was no beginning work-
in-process.
g. Repair jobs were billed to the customers for $476,000.
Required:
(2) Prepare the journal entry to write-off the over- or underapplied overhead to the cost of repair jobs.
(3) What would Perrot's operating profit for the year?
107.Why might a company use a predetermined rate for applying overhead rather than just apply actual
overhead?
108.Describe the difference between normal costing, actual costing, and standard costing.
109.How does job costing for a service organization differ from job costing for a manufacturer?
110.Describe three possible unethical actions that can cause impropriety in job costing.
111.Describe two alternative approaches to the handling of over- or underapplied overhead.

ch7 Key
1. A job is a product or service that can be easily and conveniently distinguished from other products/
services.
TRUE
This is the definition of a job.
AACSB: Analytic
AICPA: FN-Measurement
Blooms: Knowledge
Difficulty: Easy
Lanen - Chapter 07 #1
Learning Objective: 1
Topic Area: Defining a Job
2. Job cost sheets are used in accounting systems as a subsidiary ledger for the Work-in-Process account.
TRUE
Job cost sheets contain the details of the unfinished work.
AACSB: Analytic
Blooms: Comprehension
Difficulty: Easy
3. Job shops have three types of inventory accounts: Finished Goods, Work-in-Process, and Direct
Materials.
TRUE
A fourth account, overhead, is not an inventory.
AACSB: Analytic
Difficulty: Easy
Topic Area: Computing the Cost of a Job
4. The cost in the ending Finished Goods inventory account consists of the direct materials, direct labor,
and manufacturing overhead of all jobs still in process at the end of the period.
FALSE
Cost of all jobs that are completed but unsold.
AACSB: Analytic
Difficulty: Medium
5. Accounting for direct materials and direct labor is easier than accounting for manufacturing overhead
costs.
TRUE
This is due to the traceability of direct costs.
AACSB: Analytic
Difficulty: Easy
6. Indirect material and indirect labor are two examples of manufacturing overhead costs.
TRUE
The key term is "indirect".
AACSB: Analytic
Difficulty: Easy
7. The journal entry to record actual manufacturing overhead for indirect material debits Manufacturing
Overhead (Control) and credits Accounts Payable.
FALSE
The credit would be to a materials inventory.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Topic Area: Manufacturing Overhead
8. The journal entry to record actual manufacturing overhead for indirect labor debits Manufacturing
Overhead (Control) and credits Work-in-Process inventory.
FALSE
The credit would be to Payroll or Wages Payable, not Work-in-process.
AACSB: Analytic
Blooms: Application
Difficulty: Easy
9. The periodic allocation of manufacturing overhead costs to job cost sheets is based on an event, not a
transaction.
TRUE
Either the completion of the job or the end of the period.
AACSB: Analytic
Difficulty: Hard
10. The predetermined overhead rate is computed by dividing the estimated activity of the allocation base
into the estimated manufacturing overhead costs.
TRUE
Rate = estimated overhead/estimated activity
AACSB: Analytic
Difficulty: Medium
11. The journal entry to apply manufacturing overhead costs to completed jobs credits either Applied
Manufacturing Overhead or Manufacturing Overhead (Control).
TRUE
The debit would be to Work-In-Process.
AACSB: Analytic
Blooms: Application
Difficulty: Easy
12. At the end of the accounting period, manufacturing overhead costs are applied to uncompleted jobs
using the same predetermined overhead rate that is used to apply manufacturing overhead costs to
completed jobs.
TRUE
The same rate is used for all of the work during the period.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Topic Area: Over- and Underapplied Overhead
13. Overapplied overhead occurs when the actual overhead costs incurred during a period are greater than
FALSE
Overapplied is when actual is less than applied.
AACSB: Analytic
Difficulty: Medium
14. Underapplied overhead occurs when the actual overhead costs incurred during a period are greater than
TRUE
Or when applied is less than actual.
AACSB: Analytic
Difficulty: Medium
15. Normal costing uses the actual allocation base activity to apply manufacturing overhead costs to jobs
during the period.
TRUE
It uses the estimated allocation base activity to determine the rate.
AACSB: Analytic
Difficulty: Easy
Topic Area: Using Normal, Actual, and Standard Costing
16. Actual costing does not use a predetermined overhead rate to apply manufacturing overhead costs to
jobs completed during the period.
TRUE
The application rate is determined at the end of the period based on actual costs.
AACSB: Analytic
Difficulty: Medium
17. Service organizations, by their nature, cannot have a balance in Work-in-Process Inventory.
FALSE
A service may take several accounting periods to complete so there may very well be a Work-In-
Process.
AACSB: Analytic
Difficulty: Medium
Topic Area: Using Job Costing in Service Organizations
18. Service organizations generally use the same job costing procedures as manufacturers.
TRUE
The difference is the "good" being produced is intangible.
AACSB: Analytic
Difficulty: Easy
19. It is unethical to intentionally charge costs to the wrong job.
TRUE
It is unethical to knowingly do something wrong.
AACSB: Analytic
Blooms: Application
Difficulty: Easy
Topic Area: Ethical Issues and Job Costing
20. One difference between jobs and projects is the account titles used in the costing process.
FALSE
The main difference is the length of time to complete the work.
AACSB: Analytic
Difficulty: Easy
Topic Area: Managing Projects
21. Which of the following statements is (are) true regarding product costing?
(A) A job is a cost object that can be easily and conveniently distinguished from other cost objects.
(B) Job cost sheets are used in accounting systems as a subsidiary ledger for the Work-in-Process
account.
A. Only A is true.
B. Only B is true.
Both statements are true.
AACSB: Analytic
Difficulty: Easy
22. For which of the following businesses would the job order cost system be appropriate?
A. Auto repair shop

B. Crude oil refinery
C. Drug manufacturer
D. Root beer producer
In auto repair, each job will require different resources.
AACSB: Analytic
Difficulty: Easy
23. Which of the following is not a characteristic of job costing?
A. Each job is distinguishable from other jobs.

B. Identical units are produced on an ongoing basis.
C. Job cost data are used for setting prices and bids.
D. It is not possible to compare actual costs with estimated costs.
Job costing is used when there is variety in the units produced.
AACSB: Analytic
Difficulty: Easy
24. Which of the following companies would most likely use job costing?
A. Paper manufacturer
B. Paint producer
C. Breakfast cereal maker
D. Advertising agency
Every advertising client has different requirements. The other three strive to have a uniform product.
AACSB: Analytic
Difficulty: Easy
25. The journal entry to record the completion of a job in a job order cost system is
A. a
B. b
C. c
D. d
E. e
When a job is complete it leaves work-in-process and goes to finished goods.
AACSB: Analytic
Blooms: Application
Difficulty: Easy
26. The journal entry to record requisitions of material for new jobs started during the period is
A. a
B. b
C. c
D. d
E. e
A requisition is a request for material from the production process, so it is materials entering production.
AACSB: Analytic
Blooms: Application
Difficulty: Easy
27. Which of the following documents is used as the basis for posting to the direct materials section of the
job cost sheet?
D. Purchase order.
E. Time card.
Purchase requisition, purchase order, and receiving report are documents when the materials are
purchased and received. This question asks about usage of materials.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
28. Which of the following documents is used as the basis for posting to the direct labor section of the job
cost sheet?
D. Purchase order.
E. Time card.
Only the time card has to do with laborthe other four are materials documents.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
29. Which of the following accounts is used to accumulate the actual manufacturing overhead costs
incurred during a period?
A. Applied Manufacturing Overhead

B. Work-in-Process Inventory
C. Manufacturing Overhead Control
E. Finished Goods Inventory
Since this is "actual" overhead it would not go to "Applied". Manufacturing Overhead Control would
get the actual overheads.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
30. The journal entry to record the actual manufacturing overhead costs for indirect material is
A. a
B. b
C. c
D. d
E. e
It would increase manufacturing overhead control. The materials are coming out of materials inventory.
AACSB: Analytic
Blooms: Application
Difficulty: Easy
31. What are the transfers-out from the Finished Goods Inventory called?
A. Cost of Goods Manufactured

B. Cost of Goods Available
C. Cost of Goods Completed
Product leaves finished goods when it is sold.
AACSB: Analytic
Blooms: Knowledge
Difficulty: Easy
32. In a job costing system, the dollar amount in the journal entry that transfers the costs of jobs from
Work-in-Process Inventory to Finished Goods Inventory is the sum of the costs charged to all jobs
A. sold during the period.

B. completed during the period.
C. in process during the period.
D. started in process during the period.
E. completed and sold during the period.
Goods produced enter the finished goods; goods sold leave the account.
AACSB: Analytic
Difficulty: Medium
33. Which of the following events or transactions will not result in manufacturing overhead being applied
to production?
A. Completion of a job in the current period that was started in a prior period
B. Completion of a job in the current period that was started in the current period
C. Preparing financial statements when work is in process at the end of the period
D. Preparing financial statements when there is no work in process at the end of the period
If there is no work-in-process inventory, there is nothing to apply overhead to.
AACSB: Analytic
Difficulty: Hard
34. The journal entry to record the completion of a job in a job costing system is
A. a
B. b
C. c
D. d
E. e
The completed goods go to finished goods, they come from work-in-process.
AACSB: Analytic
Blooms: Application
Difficulty: Easy
35. It is possible that the total cost of a job started in April and completed in May will not include:
A. direct material added in April.

B. direct labor added in May.
C. applied overhead in April.
D. applied overhead in May.
E. direct material purchased in May.
Materials purchased in the month of May may not make it into production that month.
AACSB: Analytic
Difficulty: Hard
36. Underapplied overhead occurs when the balance in the Manufacturing Overhead Control account is:
A. greater than the balance in the Applied Manufacturing Overhead account.

B. equal to the balance in the Applied Manufacturing Overhead account.
C. less than the balance in the Applied Manufacturing Overhead account.
D. less than the balance in the Finished Goods Inventory account.
Underapplied means less is applied than is actual; the balance in the applied would be smaller than the
actual amount.
AACSB: Analytic
Difficulty: Easy
37. Which of the following statements is (are) true regarding the application of manufacturing overhead?
(A) Manufacturing overhead is only recorded on the job cost sheets when (a) financial statements are
prepared or a job is completed.
(B) Overapplied overhead occurs when the actual overhead costs incurred during a period are greater
than the overhead costs applied during the period.
A. Only A is true.
B. Only B is true.
(B) is false because overapplied is when actual is less than applied.
AACSB: Analytic
Difficulty: Medium
38. The journal entry to write-off an insignificant underapplied overhead balance at the end of an
accounting period is
A. a
B. b
C. c
D. d
An insignificant amount is closed directly to cost of goods sold. Since it is underapplied, cost of goods
sold needs more overhead applied and would be debited.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Topic Area: Writing Off Over- and Underapplied Overhead
39. The journal entry to write-off a significant underapplied overhead balance at the end of an accounting
period is
A. a
B. b
C. c
D. d
A significant amount would be prorated to WIP, FG and COGS. Since it is underapplied, the accounts
need more overhead applied and would be debited.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Topic Area: Writing Off Over- and Underapplied Overhead
40. If a company multiplies its predetermined overhead rate by the actual activity level of its allocation
base, it is using
B. normal costing.
C. actual costing.
D. budget costing.
E. ideal costing.
Predetermined rate implies either standard or normal costing. Actual activity level is used by normal;
standard activity level is used by standard costing.
AACSB: Analytic
Difficulty: Medium
41. If a company multiplies its actual overhead rate by the actual activity level of its allocation base, it is
using
B. normal costing.
C. actual costing.
D. budget costing.
E. ideal costing.
Actual overhead rate implies an actual costing system.
AACSB: Analytic
Difficulty: Easy
42. One of the primary differences between job costing for service and manufacturing companies is service
firms generally
A. use fewer direct materials.

B. have less direct labor.
C. do not use predetermined overhead rates.
D. have no Work in Process Inventory.
Services are more intangible and have less materials.
AACSB: Analytic
Difficulty: Easy
43. Which of the following is not a difference between job costing for service firms and job costing for
manufacturing companies?
A. Service firms generally use fewer direct materials that manufacturing companies.
B. Service firms' overhead accounts have slightly different titles (e.g., Applied Service Overhead).
C. Service firms' finished jobs are charged to Cost of Services Billed instead of Cost of Goods Sold.
D. Service firms' costs are immediately expensed since all work is completed during a period.
Not all service jobs are completed in a period. There may very well be a work-in-process.
AACSB: Analytic
Difficulty: Easy
44. The journal entry to record the completion of a contract in a job costing system for a service firm is
A. a
B. b
C. c
D. d
E. e
There are no finished goodsrevenue is recognized when the service is complete.
AACSB: Analytic
Blooms: Application
Difficulty: Easy
45. The journal entry to write-off an insignificant overapplied overhead balance at the end of an accounting
period for a service firm is
A. a
B. b
C. c
D. d
Insignificant amount would be closed to the cost of services, same as a product-based company would
close to COGS. It is a credit since too much overhead was applied.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
46. Complex jobs that take multiple time periods and require the work of many different departments,
divisions, or subcontractors are called
A. clients.
B. projects.
C. customers.
D. contracts.
E. vendors.
This is the definition of a project.
AACSB: Analytic
Difficulty: Easy
Topic Area: Managing Projects
47. Manufacturing overhead applied on the basis of direct labor hours was $120,000, while actual
manufacturing overhead incurred was $124,000 for the month of April. Which of the following is
always true given the statement above?
A. Overhead was overapplied by $4,000.

B. Overhead was underapplied by $4,000.
C. Actual direct labor hours exceeded budgeted direct labor hours.
D. Actual direct labor hours were less than budgeted direct labor hours.
Actual $124,000 - Applied $120,000 = $4,000 underapplied.
AACSB: Analytic
Blooms: Analysis
Difficulty: Medium
48. The predetermined overhead rate for manufacturing overhead for 2008 is $4.00 per direct labor hour.
Employees are expected to earn $5.00 per hour and the company is planning on paying its employees
$100,000 during the year. However, only 75% of the employees are classified as "direct labor." What
was the estimated manufacturing overhead for 2008?
A. $60,000
B. $75,000
C. $80,000
D. $93,750
($100,000 .75)/$5.00 = 15,000 hours; 15,000 $4.00 = $60,000
AACSB: Analytic
Blooms: Application
Difficulty: Medium
49. Before prorating the manufacturing overhead costs at the end of 2008, the Cost of Goods Sold and
Finished Goods Inventory had applied overhead costs of $57,500 and $20,000 in them, respectively.
There was no Work-in-Process at the beginning or end of 2008. During the year, manufacturing
overhead costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead
was $77,500 at the end of 2008. If the under or overapplied overhead is prorated between Cost of Goods
Sold and the inventory accounts, how much will be allocated to the Finished Goods Inventory?
A. $903
B. $1,217
C. $1,283
D. $2,597
$77,500 - 74,000 = $3,500 overapplied overhead; [$20,000/(57,500 + 20,000)] $3,500 = $903
AACSB: Analytic
Blooms: Analysis
Difficulty: Medium
Topic Area: Allocating Over- or Underapplied Overhead
50. Before prorating the manufacturing overhead costs at the end of 2008, the Cost of Goods Sold and
Finished Goods Inventory had applied overhead costs of $57,500 and $20,000 in them, respectively.
There was no work in process at the beginning or end of 2008. During the year, manufacturing overhead
costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was
$77,500 at the end of 2008. If the under- or overapplied overhead is prorated between Cost of Goods
Sold and the inventory accounts, how much will be the Cost of Goods Sold after the proration?
A. $58,403
B. $56,597
C. $60,197
D. $54,903
$77,500 - 74,000 = $3,500 overapplied overhead; [$57,500/(57,500 + 20,000)] $3,500 = $2,597;

$57,500 - 2,597 = $54,903
AACSB: Analytic
Blooms: Analysis
Difficulty: Hard
Topic Area: Allocating Over- or Underapplied Overhead
51. The Work-in-Process Inventory account of a manufacturing firm has a balance of $2,400 at the end of
an accounting period. The job cost sheets of two uncompleted jobs show charges of $400 and $200 for
materials used, and charges of $300 and $500 for direct labor used. Overhead is applied as a percentage
of direct labor costs. The predetermined rate is
A. 41.7%.
B. 80.0%.
C. 125.0%.
D. 240.0%.
Overhead = $2,400 - (400 + 200) - (300 + 500) = $1,000; Overhead rate = $1,000/(300 + 500) = 125.0%
AACSB: Analytic
Blooms: Application
Difficulty: Medium
52. The general journal entry to record the issuance of the materials represented by the following materials
requisitions for the month includes:
A. a debit to Materials Inventory, $15,945.

B. a debit to Materials Inventory, $16,670.
C. a debit to Work in Process Inventory, $15,945.
D. a credit to Work in Process Inventory, $15,945.
E. a credit to Factory Overhead, $725.
$5,250 + 3,700 + 4,525 + 2,470 = $15,945 to Work-in-Process Inventory
AACSB: Analytic
Blooms: Application
Difficulty: Medium
53. Tillman Corporation uses job costing and has two production departments, M and A. Budgeted
manufacturing costs for the year are as follows:
The actual direct material and direct labor costs charged to Job. No. 432 during the year were as
follows:
Tillman applies manufacturing overhead to production orders on the basis of direct labor cost using
departmental rates predetermined at the beginning of the year based on the annual budget. The total cost
associated with Job. No. 432 for the year should be
A. $50,000.
B. $55,000.
C. $65,000.
D. $75,000.
[($600,000/200,000) $8,000] + [($400,000/800,000) $12,000] = $30,000; $25,000 + 20,000 +

30,000 = $75,000
AACSB: Analytic
Blooms: Application
Difficulty: Medium
The following selected data were taken from the books of the Bixby Box Company. The company uses
job costing to account for manufacturing costs. The data relate to June operations.
Lanen - Chapter 07
54. If Job 406 were sold on account for $41,500 how much gross profit would be recognized for the job?
A. $3,800
B. $5,900
C. $18,500
D. $35,600
$41,500 - [($3,000 + 6,000) + $14,000 + ($3.50 3,600)] = $5,900
AACSB: Analytic
Blooms: Application
Difficulty: Medium
55. The end of the month Work-in-Process Inventory balance would be
A. $18,200.
B. $24,850.
C. $64,100.
D. $88,950.
[($7,000 + 3,200) + $8,000 + ($3.50 1,900)] = $24,850
AACSB: Analytic
Blooms: Application
Difficulty: Medium
56. The balance in the factory overhead account would represent the fact that overhead was
Manufacturing Overhead Control = $2,300 + 3,700 + 19,400 + 5,400 = $30,800
AACSB: Analytic
Blooms: Application
Difficulty: Hard
57. Compute the Work-in-Process transferred to the finished goods warehouse on April 30 using the
following information:
A. $650
B. $675
C. $700
D. $750
$200 + 125 + 300 + 250 - 175 = $700 Cost of Goods Manufactured
AACSB: Analytic
Blooms: Application
Difficulty: Easy
The following events took place at a manufacturing company for the current year:
Lanen - Chapter 07
58. What is the company's Cost of Goods Sold?
A. $164,190.00
B. $139,561.50
C. $252,600.00
D. $214,710.50
[$0 + .80(95,000) + 56,000 + ($107,000 + 13,600)].65 = $164,190; .85($164,190) = $139,561.50
AACSB: Analytic
Blooms: Application
Difficulty: Medium
59. What is the value of the ending Work-in-Process Inventory?
A. $13,261.50
B. $14,259.00
C. $88,410.00
D. $95,060.50
[$0 + .80(95,000) + 56,000 + ($107,000 + 13,600)].35 = $88,410
AACSB: Analytic
Blooms: Application
Difficulty: Medium
60. What is the journal entry to record the direct labor costs for the period?
A. a
B. b
C. c
D. d
Direct labor costs are traced to the work in process; indirect labor would go to manufacturing overhead.
AACSB: Analytic
Blooms: Application
Difficulty: Easy
61. What is the value of the ending Finished Goods Inventory?
A. $13,261.50
B. $24,628.50
C. $26,481.00
D. $164,190.00
[$0 + .80(95,000) + 56,000 + ($107,000 + 13,600)].65 = $164,190; .15($164,190) = $24,628.50
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Two jobs were worked on during the year: Job A-101 and Job A-102. The number of direct labor hours
spent on Job A-101 and Job A-102 were 1,200 and 1,000, respectively. The actual manufacturing
overhead was $37,000.
Lanen - Chapter 07
62. What is the predetermined manufacturing overhead rate per direct labor hour for the year?
A. $15
B. $20
C. $25
D. $30
$30,000/2,000 = $15 per DLH
AACSB: Analytic
Blooms: Application
Difficulty: Easy
63. What was the amount of manufacturing overhead applied to Job A-101?
A. $16,000
B. $18,000
C. $24,000
D. $44,000
$15 1,200 = $18,000
AACSB: Analytic
Blooms: Application
Difficulty: Easy
64. What is the amount of the under- or overapplied manufacturing overhead?
B. $3,000 overapplied
C. $4,000 underapplied
$37,000 - [$15 (1,200 + 1,000)] = $4,000 underapplied
AACSB: Analytic
Blooms: Application
Difficulty: Medium
The Update Company does not maintain backup documents for its computer files. In June, some of the
balances on June 1 are known:
information:
The production superintendent's job cost sheets indicated that materials of $2,600 were included in the
June 30 Work-in-Process Inventory. Also, 300 direct labor hours had been paid at $6.00 per hour for the
jobs in process on June 30.
Payroll records indicate that 5,200 direct labor hours were recorded for June. It was verified that there
were no variations in pay rates among employees during June.
The predetermined overhead rate was based on an estimated 60,000 direct labor hours for the year and
an estimated $180,000 in manufacturing overhead costs.
Lanen - Chapter 07
65. What is the ending balance in the Work-in-Process Inventory on June 30?
A. $4,800
B. $5,300
C. $9,300
D. $9,800
$180,000/60,000 = $3.00 per DLH; $2,600 + 300($6.00) + 300($3.00) = $5,300
AACSB: Analytic
Blooms: Application
Difficulty: Medium
66. What is the amount of direct materials purchased during June?
A. $38,000
B. $40,000
C. $42,000
D. $43,000
$6,000 + materials purchased - $40,000 = $8,000; Materials purchased = $42,000
AACSB: Analytic
Blooms: Application
Difficulty: Medium
67. What is the Cost of Goods Manufactured for June?
A. $89,000
B. $84,000
C. $94,000
D. $99,000
$11,000 + CoGM - $16,000 = $84,000; CoGM = $89,000
AACSB: Analytic
Blooms: Application
Difficulty: Medium
68. How much manufacturing overhead was applied to the Work-in-Process Inventory during June?
A. $12,000
B. $15,600
C. $18,400
D. $20,500
$180,000/60,000 = $3.00 per DLH; $3.00 5,200 = $15,600
AACSB: Analytic
Blooms: Application
Difficulty: Easy
69. What is the ending balance in the Direct Materials Inventory on June 30?
A. $6,000
B. $10,500
C. $11,000
D. $15,000
$11,000 + CoGM - $16,000 = $84,000; CoGM = $89,000
AACSB: Analytic
Blooms: Application
Difficulty: Hard
The financial records for the Lee Manufacturing Company have been destroyed in a fire. The following
Lanen - Chapter 07
70. What is the amount of the materials purchased?
A. $14,400
B. $16,400
C. $18,000
D. $19,600
$8,000 + purchases - $18,000 = $6,400; purchases = $16,400
AACSB: Analytic
Blooms: Analysis
Difficulty: Medium
71. What is the value of the ending Work-in-Process inventory balance?
A. $-0-
B. $4,200
C. $7,500
D. $8,000
$7,500 + $18,000 + $13,500 + $8,000 - $39,500 = $7,500
AACSB: Analytic
Blooms: Application
Difficulty: Medium
72. What is the value of the beginning Finished Goods Inventory?
A. $-0-
B. $4,200
C. $13,300
D. $21,700
beginning FGI + $39,500 - $57,000 = $4,200; beginning FGI = $21,700
AACSB: Analytic
Blooms: Application
Difficulty: Medium
73. Birk Co. uses a job order costing system. The following debits (credits) appeared in Birk's work-in-
process account for the month of April:
Birk applies overhead to production at a predetermined rate of 80% of direct labor cost. Job No. 5, the
only job still in process on April 30 has been charged with direct labor of $2,000. What was the amount
of direct material charged to Job No.5? (CPA adapted)
A. $3,000
B. $5,200
C. $8,800
D. $24,000
4,000+24,000+16,000+12,800 - 48,000 =8,800; 8,800 - 2,000 - 1,600= $5,200
AACSB: Analytic
Blooms: Application
Difficulty: Medium
74. The following are Mill Co.'s production costs for October:
What amount of costs should be traced to specific products in the production process? (CPA adapted)
A. $194,000
B. $190,000
C. $100,000
D. $90,000
DM (100,000) + DL (90,000) = $190,000
AACSB: Analytic
Blooms: Application
Difficulty: Easy
75. Under Pick Co.'s job order costing system manufacturing overhead is applied to work in process using a
predetermined annual overhead rate. During January, Pick's transactions included the following:
Pick had neither beginning nor ending inventory in Work-in-Process Inventory. What was the cost of
jobs completed in January? (CPA adapted)
A. $302,000
B. $310,000
C. $322,000
D. $330,000
DM (90,000) + OH applied (113,000) + DL (107,000) = $310,000
AACSB: Analytic
Blooms: Application
Difficulty: Medium
76. In a traditional job order costing system, the issue of indirect materials to a production department
increases: (CPA adapted)
A. Stores control.
B. Work-in-Process control.
C. Factory overhead control.
D. Factory overhead applied.
Indirect material is overheadit increase factory overhead control.
AACSB: Analytic
Blooms: Application
Difficulty: Easy
77. Which of the following actions do not cause an impropriety in job costing?
A. Misstating the stage of completion.

B. Choosing to use normal costing rather than actual costing.
C. Charging costs to the wrong job.
D. Choosing an allocation method based on the results rather than choosing the method based on
resource usage.
The choice between normal costing and actual costing is not an ethical issue.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
78. Which of the following approaches allocates overhead by multiplying a predetermined overhead rate
actual activity?
A. Actual costing
B. Normal costing
D. Standard costing
Normal costing still applies overhead based on actual activity; standard costing uses standard activity.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
79. Which of the following approaches allocates overhead by multiplying an actual overhead rate actual
activity?
A. Actual costing
B. Normal costing
D. Standard costing
The actual rate is not known until the end of the period.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
80. Which of the following approaches allocates overhead by multiplying a predetermined rate standard
activity?
A. Actual costing
B. Normal costing
D. Standard costing
Normal costing still applies overhead based on actual activity; standard costing uses standard activity.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory
overhead was $287,920, actual machine-hours were 19,050. How much overhead would be applied to
production?
A. $266,400.
B. $274,320.
C. $279,607.
D. $287,920.
$266,400/18,500 = $14.40/hr 19,050 hr = $274,320
AACSB: Analytic
Blooms: Application
Difficulty: Medium
overhead was $287,920, actual machine-hours were 19,050. How much is the over- or underapplied
overhead?
D. $0
$287,920 - [($266,400/18,500) 19,050] = 13,600 underapplied
AACSB: Analytic
Blooms: Application
Difficulty: Medium
83. Scottso Corporation applies overhead using an actual costing approach. Budgeted factory overhead
was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual
machine-hours were 19,050. How much overhead would be applied to production?
A. $266,400.
B. $274,320.
C. $279,607.
D. $287,920.
Actual costing applies the actual overhead incurred to production.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
84. Scottso Corporation applies overhead using an actual costing approach. Budgeted factory overhead
was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual
machine-hours were 19,050. How much is the over- or underapplied overhead?
D. $0
There is no over- or underapplied overhead using actual costing.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
overhead was $227,830, actual machine-hours were 16,150. How much overhead would be applied to
production?
A. $214,795
B. $227,830
C. $232,750
D. $246,875
$232,750/17,500 = $13.30/hr 16,150 hrs = $214,795
AACSB: Analytic
Blooms: Application
Difficulty: Medium
overhead was $227,830, actual machine-hours were 16,150. How much is the over- or underapplied
overhead?
A. $13,035 overapplied
D. $4,920 underapplied
$227,830 - [($232,750/17,500) 16,150] = 13,035 underapplied
AACSB: Analytic
Blooms: Application
Difficulty: Medium
87. On October 1, the general ledger of Slipshod Company had the following accounts and balances:
The subsidiary ledgers had the following information on October 1:
During October, the following costs were incurred on account:
A summary of the materials requisition slips and the labor time tickets for the month revealed the
following distribution:
Overhead is applied based upon direct labor cost. Jobs B81, B83, and B84 were for 8,000, 6,000 and
4,800 units of product respectively, and were completed during October. Jobs B80, B81, B82, and B83
were sold on account for $150,000.
Required: Prepare T-accounts for a job order cost system, posting the beginning balances and all
transactions for the month. Clearly indicate the ending balances for the accounts and label the 'cost of
goods manufactured' and 'cost of goods sold' amounts.
Feedback: Overhead rate: B81: 8,750/7,000 = 125%

88. The following selected data were taken from the records of the Bixby Box Company. The company
uses a job costing system to account for its manufacturing costs. Bixby's fiscal year runs from January 1
to December 31; manufacturing overhead is closed out only at the end of the fiscal year. The following
information relates to August operations.
(1.) Jobs in process on August 1.
(2.) Jobs completed during August: W12, X13, Y14.

(3.) Material requisitions and labor time tickets indicated the following:
(4.) Jobs sold during August: W12, X13.

(5.) Bixby applies overhead to production based upon labor costs.
(6.) Selected account balances on August 1 were:
(7.) Various overhead incurred (excluding indirect materials and indirect labor) during August, $13,500.
(8.) Materials (direct and indirect) purchased during August, $10,905.
Required:
(a) What is the balance in the Material Inventory account on August 31?
(b) Is the manufacturing overhead account over-or underapplied on August 31? By how much?
(c) Compute the cost of goods manufactured for August.
(d) Compute the cost of goods sold for August.
(e) What is the balance of the Work-in-Process Inventory account on August 31?
(a) $7,880
(b) underapplied by $1,900
(c) $27,835
(d) $16,530
(e) $7,020
Feedback: (a) $5,175 + 10,905 - (610 + 370 + 2,780 + 4,050 + 390) = ending balance = $7,880
(b) overhead in Work-in-Process Inventory, August 1: $9,555 - (800 + 1,000) - (1,200 + 1,620) = $4,935;
overhead rate = $4,935/$2,820 = 175% of Direct Labor Costs
MOH debits: IM $390 + IL 540 + incurred 13,500 = $14,430
MOH credits: Beg Bal 1,400 + applied 11,130 = $12,530
Ending MOH: $14,430 - 12,530 = $1,900 debit balance: underapplied
(d) W12 + X13: $6,800 + $9,730 = $16,530

(e) Job Z15: Material ($4,050) + Labor ($1,080) + Overhead ($1,890) = $7,020
AACSB: Analytic
Blooms: Application
89. Carver Test Systems manufactures automated test systems that perform quality inspections during and
at the completion of the manufacturing process. As most manufacturing processes are unique, Carver's
test equipment is designed to customer specifications, and each system has a selling price in excess of
$300,000. The company uses a job-order cost system based on the full absorption of actual costs and
applies overhead on the basis of machine hours using a predetermined overhead rate. For the fiscal year
ended November 30 budgeted manufacturing overhead was $1,960,000, and the expected activity level
was 98,000 machine hours. Data regarding several jobs at Carver are presented below.
By the end of November all jobs but RX-115 were completed, and all completed jobs had been
delivered to customers with the exception of SL-205.
Required:
(a) Determine the balance in the Finished Goods Inventory on November 30.
(b) Compute the cost of goods manufactured for November.
(c) Compute the Cost of Goods Sold for November.
(d) Determine the balance in Work-In-Process Inventory on November 30.
(a) $192,325
(b) $675,285
(c) $482,960
(d) $68,835
Feedback: Overhead rate = $1,960,000/98,000 hrs = $20/hr

(a) only SL-205 is in inventory: $34,350 + 71,800 + 32,175 + (2,700 $20) = $192,325
(b) XJ-107 + ST-211 + XD-108 + SL-205: $675,285
XJ-107: $118,600 + 4,000 + 8,400 + (150 20) = $134,000
ST-211: $121,450 + 2,500 + 12,160 + (300 20) = $142,110
XD-108: $21,800 + 86,400 + 36,650 + (3,100 20) = $206,850
SL-205: $34,350 + 71,800 + 32,175 + (2,700 $20) = $192,325
(c) $675,285 - 192,325 = $482,960
(d) only RX-115: $18,990 + 21,845 + (1,400 20) = $68,835
AACSB: Analytic
Blooms: Application
Difficulty: Medium
90. A manufacturing company employs job costing to account for its costs. There are three production
departments, and separate departmental overhead application rates are employed because the operations
of the departments are so different. All jobs generally pass through all three production departments.
Data regarding the hourly direct labor rates, overhead application rates, and three jobs on which work
was done during the month appear below. Job 101 and Job 102 were completed during the current
month. (CIA Examination adapted)
Required:
(a) Job 101: $147,075; Job 102: $144,950

(b) Job 103: $198,125
Feedback:
AACSB: Analytic
Blooms: Application
Difficulty: Medium
91. Baby Care Manufacturing Company is a manufacturer of furnishings for infants and children. The
company uses job costing and employs a full absorption accounting method for cost accumulation.
Baby Care's Work-in-Process Inventory on April 30 consisted of the following jobs:
Baby Care applies manufacturing overhead on the basis of direct labor hours. The company's estimated
manufacturing overhead for the period ending May 31 totals $4,500,000; the company estimated it
would use 600,000 direct labor hours during the year.
At the end of April, the balance in Baby Care's Materials Inventory, which includes both materials and
purchased parts, was $668,000. Additions to, and requisitions from, the materials inventory during the
month of May included the following:
During the month of May, Baby Care's factory payroll consisted of the following:
Listed below are the jobs that were completed and the units that were sold during the month of May.
Required:
(a) Compute the value of Baby Care's Work-in-Process Inventory on May 31.
(b) Compute the value of Baby Care's Cost of Goods Manufactured for May.
(a) Job DRS114: $807,750

(b) $2,471,650
Feedback: overhead rate: $4,500,000/600,000 hrs = $7.50/hr

(a) WIP 5/31: Job DRS114: $250,000 beginning bal + $124,000 materials + $87,000 purchased parts +
$200,500 labor + (19,500 $7.50 overhead) = $807,750
(b) COGM: $1,267,400 CBS102 + $510,000 PLP086 + $199,250 STR077 + $495,000 CRG096 =
$2,471,650
CBS102: $900,000 + 51,000 + 104,000 + 122,400 + (12,000 7.50) = $1,267,400
PLP086: $420,000 + 3,000 + 10,800 + 43,200 + (4,400 7.50) = $510,000
STR077: $-0- + 62,000 + 81,000 + 30,000 + (3,500 7.50) = $199,250
CRG096: $-0- + 65,000 + 187,000 + 138,000 + (14,000 7.50) = $495,000
92. Shawano Corporation applies overhead based upon machine-hours. Budgeted factory overhead was
machine-hours were 19,050. Before disposition of over- or underapplied overhead, the cost of goods
sold was $560,000 and ending inventories were as follows:
Required:
(a) $274,320
Feedback: (a) rate = $266,400/18,500 = $14.40/hr; 19,050 hrs $14.40 = $274,320

(b) actual - applied = $287,920 - 274,320 = $13,600 underapplied
AACSB: Analytic
Blooms: Application
Difficulty: Medium
93. Prepare the necessary journal entries from the following information for Beaulieu Company.
d. Overhead incurred (not including materials or overhead): $52,900.
e. Overhead is applied to production based on direct labor cost at the rate of 220 percent.
h. Close the overhead control account to Cost of Goods Sold.
Feedback: (h): Actual OH: $8,505 + 12,500 + 52,900 = 73,905 - Applied 72,820 = underapplied $1,085
AACSB: Analytic
Blooms: Application
Difficulty: Medium
94. Danner Corporation applies overhead based upon machine-hours. Budgeted factory overhead was
machine-hours were 13,150.
Required:
(a) $30 per machine hour

(b) $394,500
(c) $6,580 overapplied
Feedback: (a) rate = $375,000/12,500 hrs = $30/hr

(b) 13,150 $30 = $394,500
(c) $387,920 actual - 394,500 applied = $6,580 overapplied
AACSB: Analytic
Blooms: Application
Difficulty: Medium
95. The following selected data were taken from the books of the Bixby Box Company. The company uses
job costing to account for manufacturing costs. The data relate to June operations.
Beginning work-in-process, June 1, $-0-
Required:
(a) Determine the ending work-in-process balance on June 30.
(b) Determine the cost of goods manufactured for June.
(c) Is factory overhead over- or underapplied for June? What is the monthly value?
(a) $24,850
(b) $64,100
(c) $1,050 underapplied
Feedback: (a) Job 407: $7,000 + 3,200 + 8,000 + (190 $35) = $24,850
(b) Jobs 405 & 406: $28,500 + 35,600 = $64,100
Job 405: $7,000 + 11,000 + (300 $35) = $28,500
Job 406: $3,000 + 6,000 + 14,000 + (360 $35) = $35,600
(c) Actual OH: $2,300 + 3,700 + 19,400 + 5,400 = $30,800; Applied: (300 + 360 + 190) 35 = $29,750;
$30,800 - 29,750 = $1,050 underapplied
AACSB: Analytic
Blooms: Application
Difficulty: Medium
96. Rosebud Manufacturing uses actual costing. The following events took place during the current year:
Required:
(a) Determine the ending Direct Materials Inventory balance.
(b) Determine the ending Work-in-Process Inventory balance.
(c) Determine the ending Finished Goods Inventory balance.
(d) Determine the Cost of Goods Manufactured.
(a) $19,000
(b) $88,410
(c) $24,628.50
(d) $164,190
Feedback: (a) $-0- + 95,000 - (95,000 80%) = $19,000

(b) costs added: (95,000 80%) + $56,000 + (107,000 + 13,600) = $252,600; WIP: $-0- + 252,600 -
(252,600 65%) = $88,410
(c) $-0- + 164,190 - (164,190 85%) = $24,628.50
(d) $252,600 65% = $164,190
AACSB: Analytic
Blooms: Application
Difficulty: Medium
97. The Cedar Company does not maintain backup documents for its computer files. In June, some of the
balances are known:
information:
The production superintendent's job cost sheets indicated that materials of $5,200 were included in the
June 30 Work-in-Process Inventory. Also, 300 direct labor hours had been paid at $12.00 per hour for
the jobs in process on June 30.
Payroll records indicate that 5,200 direct labor hours were recorded for June. It was verified that there
were no variations in pay rates among employees during June.
The predetermined overhead rate was based on an estimated 60,000 direct labor hours for the year and
an estimated $360,000 in manufacturing overhead costs.
Required:
(a) Compute the Cost of Goods Manufactured.
(b) Compute the ending Work-in-process inventory balance.
(c) Compute the ending Direct Materials Inventory balance.
(a) $178,000
(b) $10,600
(c) $22,000
Feedback: Overhead rate = $360,000/60,000 = $6/hr

(a) Beg. FG: $22,000 + COGM - COGS 168,000 = End. FG 32,000; COGM = $178,000
(b) Ending WIP: Materials $5,200 + (300 $12) + (300 $6) = $10,600
(c) WIP: 9,000 + DM used + (5,200 $12) + (5,200 $6) -$178,000 = $10,600: DM used = $86,000;
AP: $12,000 + purchased - 80,000 = $16,000: Purchased = $84,000; DM $24,000 + 84,000 - 86,000 =
$22,000
AACSB: Analytic
Blooms: Application
Difficulty: Medium
98. The financial records for the Lee Manufacturing Company have been destroyed in a flood. The
following information has been obtained from a separate set of books maintained by the cost
accountant. The cost accountant now asks for your assistance in computing the missing amounts.
Required: Compute the following:

(a) direct materials purchased
(b) ending Work-in-process inventory
(c) beginning Finished goods inventory
(a) $16,400
(b) $7,500
(c) $21,700
Feedback: (a) $8,000 + purchased - $18,000 = $6,400; purchases = $16,400

(b) $7,500 + 18,000 + 13,500 + 8,000 - 39,500 = $7,500
(c) BFG + 39,500 - 57,000 = $4,200; beginning FG = $21,700
AACSB: Analytic
Blooms: Application
Difficulty: Medium
99. The Bisson Company had the following transactions and events during its first year of operations.
Required:
Determine the ending balances for:
(a) Materials inventory
(b) Work-in-process inventory
(c) Finished goods inventory
(a) $17,010
(b) $565,150
(c) $462,800
Feedback: overhead rate = $770,000/$350,000 = 220%

(a) $-0- + $567,000 - (567,000 85%) - (567,000 12%) = $17,010
(b) $-0- + (567,000 85%) + 331,000 + (331,000 220%) - 976,000 = $565,150
(c) $-0- + 976,000 - 513,200 = $462,800
AACSB: Analytic
Blooms: Application
Difficulty: Medium
100. The Brisebois Company had the following transactions and events during its first year of operations.
Required:
(2) Prepare the journal entry to prorate the over- or underapplied overhead to the appropriate accounts.
Feedback: (1d) overhead rate: $770,000/$350,000 = 220%

(2): Actual OH: $68,040 + 125,000 + 529,000 = 722,040 - Applied 728,200 = overapplied $6,160
WIP: $-0- + (567,000 85%) + 331,000 + (331,000 220%) - 976,000 = $565,150
FG: $-0- + 976,000 - 513,200 = $462,800
AACSB: Analytic
Blooms: Application
Difficulty: Medium
101. In February, Forester Engineering worked on three contracts: 1,200 hours for Tarvell Company, 1,100
hours for Natron LLC and 3,400 for Lisere Corp. Forester bills clients at the rate of $150 per hour;
labor cost for its engineering staff is $45 per hour. The total number of hours worked in February was
6,000 (any untraced hours are considered overhead), and non-labor overhead costs were $325,000.
Overhead is applied to clients at $55 per labor-hour. In addition, Forester had $243,000 in marketing
and administrative costs. All transactions are on account. All services were billed.
Required:
a. Determine the cost of each of the three jobs.
b. What is the amount of over- or underapplied overhead?
c. How much operating profit did Forester make in February? Assume the over- or underapplied
overhead is not closed out each month.
(a) Tarvell: $120,000; Natron: $110,000; Lisere: $340,000

(b) $25,000 underapplied
(c) $42,000
Feedback:
(b) Indirect labor: 6,000 hrs $45 = $270,000 - 256,500 = $13,500; overhead = $13,500 + 325,000 =
$338,500. Underapplied: $313,500 applied - 338,500 incurred: $25,000 underapplied
AACSB: Analytic
Blooms: Application
Difficulty: Medium
102. Mounder Manufacturing Company employs job costing to account for its costs. There are three
production departments, and separate departmental overhead application rates are employed. All jobs
generally pass through all three production departments. Data regarding the hourly direct labor rates,
overhead application rates, and three jobs on which work was done during the month appear below.
Job 611 and Job 613 were completed during the current month, Job 612 was still in process. (CIA
Examination adapted)
Required:
(a) Job 611: $215,060; Job 613: $323,400

(b) Job 612: $154,120
Feedback:
AACSB: Analytic
Blooms: Application
Difficulty: Medium
103. Misa Company applies overhead based upon labor-hours. Budgeted factory overhead was $910,000 and
budgeted labor-hours were 32,500. Actual factory overhead was $893,675 and actual labor-hours were
31,560.
Required:
(a) $28 per labor hour

(b) $883,680
(c) $9,995 underapplied
Feedback: (a) rate = $910,000/32,500 hrs = $28/hr

(b) 31,560 $28 = $883,680
(c) $893,675 actual - 883,680 applied = $9,995 underapplied
AACSB: Analytic
Blooms: Application
Difficulty: Medium
104. Becker Company applies overhead at a rate of $26 per direct labor hour. Budgeted labor hours were
25,000; actual labor hours exceeded the budget by 1,600 hours. Overhead was overapplied by $3,758.
Required:
(a) Compute the budgeted overhead for the year.
(b) Compute actual overhead for the year.
(a) $650,000
(b)$687,842
Feedback: (a) 25,000 hrs $26/hr = $650,000

(b) applied OH = (25,000 + 1,600) $26 = $691,600; applied - overapplied = actual OH: $691,600 -
3,758 = $687,842
AACSB: Analytic
Blooms: Application
Difficulty: Medium
105. Bailey's Corporation applies overhead based upon machine-hours. Budgeted factory overhead was
machine-hours were 12,660. Before disposition of over- or underapplied overhead, the cost of goods
sold was $725,000 and ending inventories were as follows:
Required:
(a) $316,500
Feedback: (a) rate = $325,000/13,000 = $25/hr; 12,660 hrs $25 = $316,500

(b) actual - applied = $312,330 - 316,500 = $4,170 overapplied
AACSB: Analytic
Blooms: Application
Difficulty: Medium
106. The Perrot Company is a computer repair shop and had the following transactions and events during the
year. Estimated overhead for the year was $175,000; estimated labor for the year was 6,000 hours.
b. Traced materials to repair jobs $110,880; general shop materials used $9,500.
c. Labor traced to repair jobs $165,000, untraced labor was $22,200.
e. Overhead is applied to repair jobs based on labor hours. All workers were paid $30/hr.
f. Ending work-in-process consisted of one repair job with a cost of $1,976. There was no beginning
work-in-process.
g. Repair jobs were billed to the customers for $476,000.
Required:
(2) Prepare the journal entry to write-off the over- or underapplied overhead to the cost of repair jobs.
(3) What would Perrot's operating profit for the year?
Feedback: (1d) overhead rate: $175,000/6,000 hrs = 29.1667/hr

(1f)WIP: $-0- + 110,880 + 165,000 + (5,500 29.1667) - 1,976 = $434,321
(2): Actual OH: $9,500 + 22,200 + 139,600 = 171,300 - Applied 160,417 = underapplied $10,883
(3) $476,000 - (434,321 + 10,883) = $30,796
AACSB: Analytic
Blooms: Application
Difficulty: Medium
107. Why might a company use a predetermined rate for applying overhead rather than just apply actual
overhead?
Students may provide a number of reasons, including: 1) costs can be computed for a job immediately
upon completion, 2) random factors such as large expenses may not enter the cost of a job, 3) seasonal
swings in production will not cause jobs to cost differently at different times of the year.
AACSB: Analytic
Difficulty: Medium
Topic Area: Predetermined Rate
108. Describe the difference between normal costing, actual costing, and standard costing.
Normal costing assigns actual direct costs to a job and applies overhead based on a predetermined
rate times the actual activity. Actual costing assigns actual direct costs to a job and actual overhead as
well. Standard costing assigns a standard amount of direct costs to a job and applies overhead using a
standard rate times standard activity.
AACSB: Analytic
Difficulty: Medium
109. How does job costing for a service organization differ from job costing for a manufacturer?
The only real difference beside different account titles is a service organization has fewer direct
materials than a manufacturer.
AACSB: Analytic
Difficulty: Medium
110. Describe three possible unethical actions that can cause impropriety in job costing.
1) Misstating the stage of completion; 2) charging costs to wrong jobs; 3) misrepresenting the cost of
jobs.
Feedback: Students should expand on each of these three.
AACSB: Analytic
Blooms: Application
Difficulty: Medium
111. Describe two alternative approaches to the handling of over- or underapplied overhead.
1) The over- or underapplied overhead can be written off directly to cost of goods sold; 2) the over- or
underapplied overhead can be prorated between work-in-process, finished goods, and cost of goods
sold.
AACSB: Analytic
Difficulty: Medium
ch7 Summary
Category # of Questions
AACSB: Analytic 111
AICPA: FN-Measurement 111
Blooms: Analysis 4
Blooms: Application 70
Blooms: Comprehension 32
Blooms: Knowledge 5
Difficulty: Easy 36
Difficulty: Hard 9
Difficulty: Medium 66
Lanen - Chapter 07 116
Learning Objective: 1 6
Topic Area: Allocating Over- or Underapplied Overhead 2
Topic Area: Computing the Cost of a Job 46
Topic Area: Defining a Job 6
Topic Area: Ethical Issues and Job Costing 3
Topic Area: Managing Projects 2
Topic Area: Manufacturing Overhead 20
Topic Area: Over- and Underapplied Overhead 6
Topic Area: Predetermined Rate 1
Topic Area: Using Job Costing in Service Organizations 9
Topic Area: Using Normal, Actual, and Standard Costing 14
Topic Area: Writing Off Over- and Underapplied Overhead 2

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ch7

A. Auto repair shop

A. Each job is distinguishable from other jobs.

A. Applied Manufacturing Overhead

A. Cost of Goods Manufactured

A. sold during the period.

A. direct material added in April.

A. greater than the balance in the Applied Manufacturing Overhead account.

A. use fewer direct materials.

A. Overhead was overapplied by $4,000.

A. a debit to Materials Inventory, $15,945.

70. What is the amount of the materials purchased?

A. Misstating the stage of completion.

The subsidiary ledgers had the following information on October 1:

During October, the following costs were incurred on account:

(2.) Jobs completed during August: W12, X13, Y14.

(4.) Jobs sold during August: W12, X13.

Required: Compute the following:

111.Describe two alternative approaches to the handling of over- or underapplied overhead.

19. It is unethical to intentionally charge costs to the wrong job.

Both statements are true.

A. Auto repair shop

In auto repair, each job will require different resources.

23. Which of the following is not a characteristic of job costing?

A. Each job is distinguishable from other jobs.

Job costing is used when there is variety in the units produced.

When a job is complete it leaves work-in-process and goes to finished goods.

A. Applied Manufacturing Overhead

A. Cost of Goods Manufactured

Product leaves finished goods when it is sold.

A. sold during the period.

If there is no work-in-process inventory, there is nothing to apply overhead to.

The completed goods go to finished goods, they come from work-in-process.

A. direct material added in April.

A. greater than the balance in the Applied Manufacturing Overhead account.

(B) is false because overapplied is when actual is less than applied.

Actual overhead rate implies an actual costing system.

A. use fewer direct materials.

Services are more intangible and have less materials.

There are no finished goodsrevenue is recognized when the service is complete.

This is the definition of a project.

A. Overhead was overapplied by $4,000.

Actual $124,000 - Applied $120,000 = $4,000 underapplied.

($100,000 .75)/$5.00 = 15,000 hours; 15,000 $4.00 = $60,000

$77,500 - 74,000 = $3,500 overapplied overhead; [$20,000/(57,500 + 20,000)] $3,500 = $903

$77,500 - 74,000 = $3,500 overapplied overhead; [$57,500/(57,500 + 20,000)] $3,500 = $2,597;

A. a debit to Materials Inventory, $15,945.

$5,250 + 3,700 + 4,525 + 2,470 = $15,945 to Work-in-Process Inventory

[($600,000/200,000) $8,000] + [($400,000/800,000) $12,000] = $30,000; $25,000 + 20,000 +

$41,500 - [($3,000 + 6,000) + $14,000 + ($3.50 3,600)] = $5,900

[($7,000 + 3,200) + $8,000 + ($3.50 1,900)] = $24,850

Manufacturing Overhead Control = $2,300 + 3,700 + 19,400 + 5,400 = $30,800

$200 + 125 + 300 + 250 - 175 = $700 Cost of Goods Manufactured

58. What is the company's Cost of Goods Sold?

[$0 + .80(95,000) + 56,000 + ($107,000 + 13,600)].65 = $164,190; .85($164,190) = $139,561.50

[$0 + .80(95,000) + 56,000 + ($107,000 + 13,600)].35 = $88,410

61. What is the value of the ending Finished Goods Inventory?

[$0 + .80(95,000) + 56,000 + ($107,000 + 13,600)].65 = $164,190; .15($164,190) = $24,628.50

$30,000/2,000 = $15 per DLH

$15 1,200 = $18,000

$37,000 - [$15 (1,200 + 1,000)] = $4,000 underapplied

$180,000/60,000 = $3.00 per DLH; $2,600 + 300($6.00) + 300($3.00) = $5,300

66. What is the amount of direct materials purchased during June?