Cost Management Measuring, Monitoring And Motivating Performance 2nd Edition By Susan K. Wolcott, Leslie G. Eldenburg

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*you will get test bank in PDF in best viewable format after buy*

 

Chapter 1: The Role of Accounting Information in Management Decision Making

 

 

Learning Objective	True / False	Multiple Choice	Matching	Exercises	Short Answer	Problems
Q1:   What is the process of strategic management and decision making?	1-4	1-12 S: 59, 67 W: 78, 83, 84	1		6
Q2: What types of control systems do managers use?	5-8	13 – 14			7
Q3:   What is the role of accounting information in strategic management?	9-13	15-23 S: 60-62 W: 68-70, 80	3		3, 4
Q4:   What information is relevant for decision making?	14-17	24-30 S: 63-65 W: 74, 75, 77, 79, 81, 82	4	1	2	1, 2
Q5 How does business risk affect management decision making?	18-21	31-32
Q6:   How do biases affect management decision making?	22-24	33-40 W: 72, 73	2		1, 5	1
Q7:   How can managers make higher-quality decisions?	25-29	41-53 S: 58 W: 71	2		4, 8
Q8:   What is ethical decision making, and why is it important?	30-32	54-59 S: 66 W: 76	5

S:  Questions from the study guide

Level of Complexity*	True / False	Multiple Choice	Matching	Exercises	Short Answer	Problems
Foundation:  Repeat or paraphrase information; Reason to single correct solution; Perform computations; etc.	All	All	All	All	6	2
Step 1: Identify the problem, relevant information, and uncertainties					1, 2, 5, 6, 7	1, 2
Step 2: Explore interpretations and connections					3, 4	1
Step 3: Prioritize alternatives and implement conclusions
Step 4: Envision and direct strategic innovation

 

*Based on level in Steps for Better Thinking (Exhibit 1.10, textbook p. 16):

Note:  Step 1, 2, 3, and 4 questions in this test bank are intentionally open-ended and subjective, giving students the opportunity to demonstrate skills such as judgment, reasoning, identification of uncertainties, identification or analysis of pros and cons, and so on.  Therefore, student answers may not exactly match those shown in the solutions.

 

 

True / False

1. A vision statement is one way to clarify an organization’s basic purpose and ideology.
2. Most managers follow a standard template and format when writing a vision statement.
3. A vision statement helps employees understand how to deal with various stakeholder groups.
4. Organizational core competencies are the tactics that managers use to take advantage of the vision.
5. Belief systems encourage employees to be inspired by the vision of the company
6. Boundary systems set budget goals to constrain behavior.
7. Diagnostic systems set budget goals to constrain behavior.
8. Interactive systems should be examined only when a problem exists.
9. Accounting information is the only thing managers need to make financial decisions.
10. Accounting information is used to monitor operations by comparing actual results to planned results.
11. Accounting information cannot be used to motivate employee behavior.
12. Cost accounting information is used for both external reporting and internal decision making.
13. Cost accounting information, such as the valuation of ending inventory, is shown on external financial statements.
14. Incremental cash flows are relevant for decision making.
15. Incremental cash flows are the same as unavoidable cash flows.
16. Relevant information for decisions can focus both on learning from the past and anticipating the future.
17. The cost of your old automobile is relevant in the decision to purchase a new automobile.
18. Business risk is the risk that business will be altered or interrupted in some way.
19. Business risk should be monitored regularly
20. Risk management can eliminate business risk
21. Using prior year, historical information can eliminate business risk.
22. Because accounting information is highly objective and quantitative in nature, it is not subject to management bias.
23. Biases reduce decision quality.
24. Biases do not affect external financial reports, because they are based on objective standards.
25. Because we can never completely remove biases and business risk from decision making, higher quality decision processes are often ineffective.
26. Higher quality decisions result from higher quality information, reports, and decision making processes.
27. Few management decisions can be made with absolute certainty.
28. Open-ended problems are not often seen in business.
29. When learning cost accounting, it is sufficient to learn the mechanics of applying cost accounting methods.
30. Ethical behavior is an individual obligation, but not an organizational obligation.
31. Employees will always make ethical decisions if they act in the best interests of shareholders.
32. Ethical behavior is required of every employee within an organization.

 

 

 

Multiple Choice

1. Which of the following influences organizational strategies?
2. Organizational vision
3. Financial statement results
4. Computer software
5. Number of employees
6. Which of the following statements regarding organizational vision is false?
7. Organizational vision means the same as core competencies
8. Organizational vision is one tool for expressing an organization’s main purpose
9. Organizational vision should be communicated to all employees
10. Managers sometimes divide the organizational vision into one or more written statements
11. An organizational vision is sometimes broken down into
12. Mission statement
13. Core values statement

III. Code of conduct

1. I only
2. I and II only
3. I, II, and III
4. II and III only
5. Organizational core competencies can include
6. A mission statement
7. Patents, copyrights and special legal protections
8. A code of conduct
9. An operating plan
10. How are organizational strategies related to core competencies?
11. Competencies are the tactics managers use to take advantage of strategies
12. Competencies and strategies are an integral part of organizational vision
13. Strategies help managers exploit competencies
14. Strategies and competencies are actually two ways of expressing the same idea
15. Organizational strategies
16. Are reconsidered on a daily basis
17. Should never be reconsidered once they are determined
18. Are reconsidered quarterly
19. Are reconsidered periodically in response to changes in the organization or environment
20. Which of the following is an element of an operating plan?
21. Developing an organizational mission
22. Preparing financial statements
23. Defining core values
24. Budgeting employee costs

 

Use the following information for the next 5 questions:

Maude is considering opening her own business, now that she has retired from her regular job.  Her business idea is a reminder and shopping service, in which clients submit lists of birthdays, anniversaries and other important dates.  Maude sends her clients reminders for those dates, and shops for special gifts at the client’s request.  She plans to do all of the work herself rather than hiring and managing additional employees.

 

8. “Providing excellent, reliable customer service at reasonable prices” best describes which of the following for Maude’s business?
9. Core competency
10. Vision
11. Operating plan
12. Actual operations
13. Maude’s core competencies are most likely to include
14. An annual budget
15. The ability to deduct business expenses on her tax return
16. The first year’s actual results
17. Her knowledge of potential gifts and the local shops
18. Maude’s organizational strategy is most likely to include
19. Her knowledge of local stores
20. Operating her business from her home to keep costs low
21. Leasing equipment
22. Mailing flyers to potential clients
23. Maude’s actual operations would probably include
24. Establishing a sales strategy
25. Purchasing advertisements in local media
26. Identifying her core competencies
27. Developing a budget
28. Which of the following statements is true for Maude’s business regarding measuring and monitoring performance?
29. Maude does not need a system to measure and monitor performance because her company is a sole proprietorship
30. Maude needs audited financial statements every year
31. Maude can track cash flows on a monthly basis
32. Maude only needs to reconcile her accounts every few years

 

13. Belief systems are an important part of what framework?
14. Levers of information
15. Levers of control
16. Levers of belief
17. Control systems

 

14. The code of conduct of a firm would likely be considered
15. Belief system
16. Boundary system
17. Diagnostic control system
18. Interactive control system
19. Accounting information
20. Can be used to guide organizational vision
21. Is a core competency for most companies

III. Can be used to motivate performance

1. I only
2. I and II only
3. I, II, and III
4. I and III only
5. Cost accounting information is used for
6. Financial reporting only
7. Management reporting only
8. Both financial and management reporting
9. Neither financial nor management reporting
10. Which of the following is a type of external report produced by an organization’s information system?
11. Cash flow plan
12. Analysis of potential acquisition
13. News release
14. Bonus computations

 

18. Which of the following is least likely to be an external report?
19. Credit report
20. Supplier’s inventory report
21. Tax return
22. Analysis of supplier quality
23. Which of the following is the best example of an internal report that might come from an organization’s information system?
24. Environmental Protection Agency regulatory report
25. Operating budget
26. Income tax returns
27. Medicare cost report
28. Financial statements are
29. External reports produced from an organization’s information system
30. Never used for internal decision making
31. Only true when they are audited
32. Unimportant reports for most organizations
33. Information gathered outside the organization includes
34. Customer preferences
35. Product design specifications
36. Taxable income
37. Number of employees hired
38. Which of the following is not true about information in an organization’s databases?
39. Information may be collected formally or informally
40. Access to database information is often restricted to specific individuals
41. Intellectual capital is usually captured in database information
42. The benefits of generating information should exceed the costs
43. How does the use of sophisticated information systems affect strategic management?
44. Sophisticated information systems always improve strategic management
45. Sophisticated information systems always provide better information
46. Managers may overlook potential uncertainties and bias in their information
47. The cost of sophisticated information systems may exceed their benefit
48. Irrelevant information may be
49. Useful in decision making
50. Internally-generated

III. Accurate

1. I only
2. I and II only
3. II and III only
4. I, II, and III

 

25. Whether a given type of information is relevant or irrelevant depends on
26. Its accuracy
27. Its objectivity
28. Its relation to the decision to be made
29. Whether it is cash-basis or accrual-basis
30. Relevant cash flows are
31. Past cash flows
32. Future cash flows
33. Incremental cash flows
34. Unavoidable cash flows
35. In a decision to lease or borrow money and build office space, which of the following is relevant?
36. The current cost of office space
37. The architect’s fee for drawing the building
38. The number of employees currently working for the company
39. The personal preferences of the decision maker
40. Irrelevant cash flows are
41. Avoidable
42. Unavoidable
43. Objective
44. Subjective
45. Relevant cash flows are
46. Avoidable
47. Incremental
48. Both of the above
49. None of the above
50. Frank is considering transportation modes to a client’s office. He can drive his own car, at an incremental cost of $0.55 per mile, or take a company car.  If he takes his own car, he can be reimbursed $0.45 per mile.  If Frank makes his decision strictly from his personal economic point of view, what is the relevant net cost associated with driving his own car?
51. $0.10
52. $0.45
53. $0.55
54. Some other amount
55. Business Risks
56. Are issues about which managers have doubts
57. Do not impact accounting information, which is highly objective and reliable
58. Are preconceived notions developed without careful thought
59. Are rarely a problem in business decision making
60. Alaska Airlines flies several non-stop flights daily between Los Angeles and Vancouver. Which of the following is a business risk associated with this operation?
61. The exact number of flights flown the previous day
62. The average number of passengers on each flight the previous week
63. The average number of empty seats for flights next month
64. The number of ticket agents scheduled for each shift for the next day
65. Business risk may hinder a manager’s ability to:
66. Adequately define a problem
67. Identify all potential solution options

III. Predict the outcome of various solution options

1. I and III only
2. II and III only
3. I, II, and III
4. II only
5. Pet Snacks Company has 500 pounds of liver-flavored dog biscuits that are not selling well. The selling price of the biscuits could be reduced from $3.00 to $2.50 per pound.  Or, they could be cheese-coated and sold for $4.00 per pound; the additional processing cost would be $0.50 per pound.  Cheese-coated biscuits sell very well.  Which alternative probably has less uncertainty concerning volume of sales?
6. Reduce the price of liver-flavored biscuits
7. Proceed with the cheese coating
8. Both alternatives are equally uncertain
9. Uncertainty does not affect this decision

 

35. Marriott Corporation operates hotels all over the world. Which of the following is the best example of a potential bias associated with its operations?
36. Managers assume that most travelers are interested in conducting business, rather than vacationing
37. Managers learn that guests rarely stay longer than a week
38. Managers find that last year’s profits were below the industry average
39. Managers are concerned because employee turnover increased during the last year
40. Biases can affect
41. Organizational vision
42. Core competencies

III. Operating plans

1. I only
2. II only
3. I and III only
4. I, II, and III
5. Which of the following statement about biases is true?
6. Biases can affect management accounting information, but not financial accounting information
7. Managers cannot work toward eliminating their biases
8. Biases reduce the quality of decisions
9. Biased managers are more likely to explore alternatives before making a decision
10. Biases may be
11. Intentional
12. Unintentional
13. Both intentional and unintentional
14. Beneficial to decision making
15. Biases
16. Inhibit anticipating all future conditions
17. Assist in the identification of relevant information
18. Do not affect the ability to identify irrelevant information
19. Are not a problem in ethical decision making

 

40. Biases
41. Are issues about which managers have doubts.
42. Do not impact accounting information, which is highly objective and reliable
43. Are preconceived notions developed without careful thought
44. Are rarely a problem in business decision making
45. Managers can make higher-quality decisions by relying on all of the following except
46. More complete information
47. Better decision-making processes
48. Irrelevant information
49. Information having less uncertainty
50. Which of the following adjectives describes higher quality information?
51. Complete
52. Costly to develop

III. Relevant

1. I and II only
2. II and III only
3. I and III only
4. I, II, and III
5. Higher quality reports are more
6. Relevant
7. Understandable

III. Available

1. I and II only
2. I and III only
3. II and III only
4. I, II, and III
5. Higher quality decision making processes are less
6. Biased
7. Certain
8. Creative
9. Focused
10. The process of making higher quality business decisions requires each of the following except
11. Distinguishing between relevant and irrelevant information
12. Recognizing and evaluating assumptions
13. Considering organizational values and core competencies
14. Relying on preconceived notions to make decisions more quickly
15. Which of the following statements about open-ended problems is true?
16. Open-ended problems cannot be solved with absolute certainty
17. It is not possible to find the best solution to an open-ended problem
18. Only one possible solution is possible for an open-ended problem
19. The best solution to an open-ended problem ensures the most favorable outcome
20. Why is it necessary to identify whether a problem is open-ended?
21. Open-ended problems require less decision making effort than other types of problems
22. Decision maker biases are not important when addressing open-ended problems
23. More than one potential solution must be explored for open-ended problems
24. Few management decisions are open-ended

 

48. Which of the following is least likely to be an open-ended problem?
49. How to contribute as a team member
50. Choice of career
51. How to study for a course
52. Identification of required courses for a college degree
53. John is creating next year’s budget for PDC Corporation. He estimates that next year’s sales volume will be 5% higher than this year and that the selling price per unit will remain at $75 per unit.  He estimates that cost of goods sold will be $40 per unit, based on a purchase agreement the company has signed with its supplier.  The company has done business with the supplier for many years.  In creating the budget, which of the following tasks is most likely to be open-ended?
54. Calculating budgeted sales volume
55. Determining that sales volume will grow by 5%
56. Calculating budgeted cost of goods sold
57. Determining that cost of goods sold per unit will be $75 per unit
58. Analyzing the strengths and weaknesses of different alternatives includes all of the following except
59. Recognizing and evaluating assumptions
60. Drawing a conclusion about which alternative is best overall
61. Gauging the quality of information
62. Considering different viewpoints

 

Purchase For Continue…. 

 

Chapter 5:  Job Costing

 

 

Learning Questions	True / False	Multiple Choice	Matching	Exercises	Short Answer	Problems
1.      How are costs assigned to customized goods and services?	1-5	9-12, 22, 63-72, 77-84 W: 104, 105, 108, 110-112, 114, 117, 120-121	1, 3	2, 3, 10, 11	1, 11, 12
2.      How is overhead allocated to individual jobs?	6-15	1,- 8, 13-16, 18-21, 23, 34,73,76,85,86 S:  97-99, 101-103 W: 119	1,2,3	1-4,9	2,6.7.8.13	1-3
3.
3,How does job costing information affect managers’ incentives and decisions?	16-20	35-42 W: 113			9, 10, 14, 15	1, 2, 3
4.      How are spoilage, rework and scrap handled in job costing?	21-25	43-46, 48-51, 54, 55, 58, 59 S:  88-93, 95 W: 107, 116	3		3, 4	4, 5, 6
5.      What are the quality and behavioral implications of spoilage?	26-29	47, 52, 53, 56, 57, 60-62 S:  87, 94	3			5, 6

S:  Questions from the study guide

W:  Questions from web quizzes on the student web site

 

Level of Complexity*	True / False	Multiple Choice	Matching	Exercises	Short Answer	Problems
Foundation:  Repeat or paraphrase information; Reason to single correct solution; Perform computations; etc.	All	All	All	All	2, 3, 6	1-6
Step 1: Identify the problem, relevant information, and uncertainties					1, 4, 9-13	2
Step 2: Explore interpretations and connections					7, 8, 14, 15	1, 3, 5, 6
Step 3: Prioritize alternatives and implement conclusions
Step 4: Envision and direct strategic innovation

 

*Based on level in Steps for Better Thinking (Exhibit 1.10, textbook p. 16):

Note:  Step 1, 2, 3, and 4 questions in this test bank are intentionally open-ended and subjective, giving students the opportunity to demonstrate skills such as judgment, reasoning, identification of uncertainties, identification or analysis of pros and cons, and so on.  Therefore, student answers may not exactly match those shown in the solutions.

 

True / False

1. When goods are customized, all costs are easily traced to individual cost objects.
2. Overhead allocation is the process of tracing costs to products or services.
3. Job costing can be used in both manufacturing and service organizations.
4. Direct material and direct labor costs are typically traced to individual jobs in a job costing system.
5. In a job costing system, costs flow out of work in process into finished goods inventory.
6. Overhead is typically allocated to jobs in a job costing system, rather than being traced directly.
7. A “job” refers to a group of individual overhead costs that are accumulated for a particular purpose.
8. The first step in overhead allocation is to identify the cost object.
9. Identifying a cost driver is the first step in allocating overhead in a job costing system.
10. A separate cost allocation base must be chosen for each job in a job costing system.
11. Actual costing and normal costing are two different names for the same overhead allocation system.
12. Both actual costing and normal costing systems use the actual quantity of the allocation base to assign overhead costs to jobs.
13. In actual costing systems, overhead is allocated using the following formula: actual allocation base volume ¸ actual allocation rate.
14. In normal costing systems, overhead is allocated using the following formula: normal allocation base volume ¸ normal allocation rate.
15. One of the primary differences between actual and normal costing systems is their treatment of direct material and direct labor costs.
16. In a job costing system, costs are very accurate because jobs are customized.
17. Information from job costing systems is subject to uncertainties, and implementing a job costing system requires judgment.
18. Because overhead costs are allocated in a job costing system, they can be considered “variable” for the purpose of decision making.
19. Direct costs are subject to less uncertainty than indirect costs in a job costing system, but managers still exercise judgment regarding direct cost tracing.
20. Allocated overhead generally does not accurately measure a job’s overhead resources.
21. Spoilage, rework, and scrap are irrelevant in job costing systems.
22. Spoilage is typically identified as part of the overhead allocation process.
23. Only spoiled goods are reworked.
24. Reworked units can always be sold at the regular market price.
25. Scrap can be sold, discarded, or used in other creative ways.
26. Potential loss of reputation and market share are opportunity costs of spoilage and rework.
27. Although they may be significant in amount, quality costs are often measured imprecisely.
28. Quality initiatives have both quantitative and qualitative benefits.
29. Accounting processes influence manager behavior in many organizations.

 

 

Multiple Choice

 

Use the following information for the next 2 questions.

Direct               Direct                Direct

Materials         Labor Cost        Labor Hours

Job 200              $   500                 $800                    40

Job 201                   350                   200                    10

Job 202                1,000                   600                    30

Franks Fabricating uses job costing and applies overhead using a normal costing system and uses direct labor cost as the allocation base.  This period’s estimated overhead cost is $100,000 and estimated direct labor cost of $50,000 and 2,500 direct labor hours.

1. What is the overhead allocation rate?
2. 200%
3. 50%
4. 30%
5. 60%
6. What is the total manufacturing cost of Job 201?
7. $550
8. $950
9. $850
10. $1,500

 

Use the following information for the next 2 questions.

Direct               Direct                Direct

Materials         Labor Cost        Labor Hours

Job 400                 $200                 $800                    40

Job 401                   250                   200                    10

Job 402                   500                   600                    32

O’Hare Sisters Manufacturing uses job costing and applies overhead using a normal costing system using direct labor hours as the allocation base.  This period’s estimated overhead cost is $400,000, estimated direct labor cost is $500,000 and estimated direct labor hours are 25,000.  This period actual overhead cost was $420,000, actual direct labor cost was $390,000, and actual direct labor hours were 20,000.

3. What is the overhead allocation rate?
4. $21/hour
5. $10/hour
6. $16/hour
7. $18/hour
8. What is the total manufacturing cost of Job 400?
9. $1,200
10. $1,000
11. $1,320
12. $1,640

 

Use the following information for the next 2 questions.

Direct               Direct                Direct

Materials         Labor Cost        Labor Hours

Job 400                 $200                 $800                    40

Job 401                   250                   200                    10

Job 402                   500                   600                    32

Sparkle Company uses job costing and applies overhead using an actual costing system using direct labor hours as the allocation base.  This period’s estimated overhead cost is $400,000, estimated direct labor cost is $500,000 and estimated direct labor hours are 25,000.  This period actual overhead cost was $420,000, actual direct labor cost was $390,000, and actual direct labor hours were 20,000.

5. What is the overhead allocation rate?
6. $21/hour
7. $10/hour
8. $16/hour
9. $18/hour
10. What is the total manufacturing cost of Job 402?
11. $1,100
12. $1,772
13. $1,320
14. $1,640

 

Use the following information for the next 2 questions.

Professional       Other Direct       Professional

Labor Cost             Costs            Labor Hours

Client 57            $2,000                 $800                    20

Client 58              1,000                   200                    10

Client 59              5,000                   600                    50

Allen’s Accounting Services uses job costing and applies overhead using a normal costing system using professional labor hours as the allocation base.  This period’s estimated overhead cost is $400,000, estimated professional labor cost is $800,000 and estimated direct labor hours are 8,000.  This period actual overhead cost was $426,400, actual direct labor cost was $820,000, and actual direct labor hours were 8,200.

7. What is the overhead allocation rate?
8. $60/hour
9. $55/hour
10. $52/hour
11. $50/hour
12. What is the total cost for Client 58?
13. $1,300
14. $1,200
15. $1,720
16. $1,700

 

Use the following information for the next 4 questions.

Kelita’s Kar Kare Kompany had the following cost and inventory data for the month.

Costs incurred for the month:

Direct labor                                $6,900

Indirect labor                                1,500

Direct materials purchased            4,500

Factory utilities                            2,200

Factory depreciation                     3,000

Factory supervision                       1,200

 

Inventories:

Ending           Beginning

Direct materials              $1,500              $1,800

Work-in-process               4,500                4,050

Finished goods                 6,000                5,250

 

9. What were the direct materials available for the month?
10. $4,500
11. $6,000
12. $6,300
13. $7,800
14. What were the direct costs of production incurred during the month?
15. $12,000
16. $11,700
17. $10,200
18. $10,500
19. Assume that the total production costs incurred for the month were $15,000. What was the cost of jobs completed?
20. $14,550
21. $19,050
22. $15,000
23. $15,450
24. Assume that total production costs incurred for the month were $15,000. What was the cost of goods sold?
25. $13,800
26. $15,300
27. $19,800
28. $20,550

 

Use the following information for the next 3 questions.

Asadi Company uses a job costing system and allocates overhead using an estimated overhead allocation rate based on direct labor hours.  Information for 20×5 is as follows:

Estimated              Actual

Manufacturing overhead                    $166,500          $165,000

Direct labor hours                                 50,000              60,000

13. The estimated overhead allocation rate for 20×5 was
14. $2.75
15. $3.30
16. $3.33
17. $2.76
18. The overhead allocated to work-in-process during 20×5 before the year-end adjustment was
19. $199,800
20. $165,000
21. $166,500
22. $198,000
23. The amount of over- or underapplied overhead for 20×5 was
24. $1,500 underapplied
25. $3,000 underapplied
26. $1,500 overapplied
27. $34,800 overapplied

 

16. Following are the budgeted costs for a manufacturing plant producing custom products:

Materials (70% direct and 30% indirect)                         $15,000

Labor (60% direct and 40% indirect)                                12,000

Supervision                                                                      5,000

Depreciation                                                                   10,000

Utilities                                                                            4,860

Total                                                                $46,860

The company uses a normal costing system, and overhead is allocated on the basis of direct labor cost. If actual direct labor cost was $7,500, the overhead allocated was

1. $29,160
2. $20,688
3. $30,375
4. $48,813

 

Use the following information for the next 2 questions.

Allen, Inc. has budgeted $120,000 in variable overhead and $72,000 in fixed overhead for the current month.  8,000 custom units were expected to be produced using 60,000 machine hours.  During the month, Allen actually used 68,096 machine hours and produced 8,960 units. Actual overhead costs were: $132,000 variable and $73,600 fixed.

17. Assume Allen uses an actual costing system. The amount of over- or underapplied overhead for the current month is
18. $9,440 overapplied
19. $12,307 overapplied
20. $0
21. $13,600 overapplied
22. Assume Allen uses a normal costing system. The variable overhead allocated would be
23. $136,192
24. $132,000
25. $134,400
26. $120,000
27. Kelita’s Kar Company projects the following costs:

Direct material                                    $300,000

Direct labor                                           500,000

Indirect labor wages                                50,000

Sales commissions                                  30,000

Production foremen salaries                    75,000

Production equipment leases                 125,000

Production depreciation                          60,000

Property taxes-plant                                25,000

If overhead is allocated on the basis of direct labor hours and 25,000 direct labor hours are budgeted for next year, the estimated overhead allocation rate will be

13. $13.40 per direct labor hours
14. $14.60 per direct labor hours
15. $12.40 per direct labor hours
16. $33.40 per direct labor hours
17. A firm had the following balances at the end of the period

Work in process                                      $   400

Finished goods                                            600

Cost of goods sold                                    1,000

Overapplied overhead                                  400

It was determined that the overapplied overhead should be treated as immaterial.  After any adjustments for overapplied overhead are made, the balance of work in process would be

1. $320
2. $400
3. $480
4. $534
5. Assume there is $2,000 of overapplied fixed overhead, which is to be prorated. Current balances of selected accounts are:

Work in process                        $15,000

Finished goods                            25,000

Cost of goods sold                       60,000

The adjusting journal entry is

1. Overapplied fixed overhead 2,000

Work in process                                                             300

Finished goods                                                              500

Cost of goods sold                                                      1,200

1. Work in process 300

Finished goods                                                  500

Cost of goods sold                                          1,200

Overapplied fixed overhead                                         2,000

1. Fixed overhead control 2,000

Work in process                                                             300

Finished goods                                                              500

Cost of goods sold                                                      1,200

1. Work in process 300

Finished goods                                                  500

Cost of goods sold                                          1,200

Fixed overhead allocated                                             2,000

22. For which of the following products would a job costing system be appropriate?
23. Brewery, where each brand is a produced in a separate batch process
24. Jewelry store that manufactures and sells handcrafted jewelry
25. Cement kiln, where a single identical type of cement product is manufactured
26. Chemical plant, where each polymer is produced in a separate continuous process
27. Assume that variable overhead is overapplied by $200 and fixed overhead is underapplied by $100. If these variances are considered immaterial, the effect on cost of goods sold is
28. $300 increase
29. $100 increase
30. $300 decrease
31. $100 decrease
32. When overhead is underapplied
33. Cost of goods sold is understated
34. Work in process inventory is overstated
35. Gross profit is understated
36. Finished goods inventory is overstated
37. The denominator in an overhead allocation rate for normal costing is
38. Actual overhead costs
39. Estimated activity level
40. Estimated overhead costs
41. Actual activity level

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