Chapter 3 Job Costing

Question 1

Departmental overhead rates are generally preferred to plant-wide overhead rates when:

the activities of the various departments in the plant are not homogeneous.
the activities of the various departments in the plant are homogeneous.
most of the overhead costs are fixed.
all departments in the plant are heavily automated.

Answer 1

the activities of the various departments in the plant are not homogeneous.

Question 2

On the Schedule of Cost of Goods Manufactured, the final Cost of Goods Manufactured figure represents:

the amount of cost charged to Work in Process during the period.
the amount of cost transferred from Finished Goods to Cost of Goods Sold during the period.
the amount of cost placed into production during the period.
the amount of cost of goods completed during the current year whether they were started before or during the current year

Answer 2

the amount of cost of goods completed during the current year whether they were started before or during the current year

Question 3

Overapplied manufacturing overhead means that:

the applied manufacturing overhead cost was less than the actual manufacturing overhead cost.

the applied manufacturing overhead cost was greater than the actual manufacturing overhead cost.

the estimated manufacturing overhead cost was less than the actual manufacturing overhead cost.

the estimated manufacturing overhead cost was less than the applied manufacturing overhead cost.

Answer 3

the applied manufacturing overhead cost was greater than the actual manufacturing overhead cost.

Question 4

Hibshman Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the machine-hours for the upcoming year at 10,000 machine-hours. The estimated variable manufacturing overhead was $6.82 per machine-hour and the estimated total fixed manufacturing overhead was $230,200. The predetermined overhead rate for the recently completed year was closest to:

$29.84 per machine-hour
$23.15 per machine-hour
$23.02 per machine-hour
$6.82 per machine-hour

Answer 4

$29.84 per machine-hour

Estimated total manufacturing overhead = $230,200 + ($6.82 per machine-hour × 10,000 machine-hours) = $298,400
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $298,400 ÷ 10,000 machine-hours = $29.84 per machine-hour

Question 5

Dagger Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $423,870. At the end of the year, actual direct labor-hours for the year were 19,400 hours, manufacturing overhead for the year was underapplied by $5,650, and the actual manufacturing overhead was $418,870. The predetermined overhead rate for the year must have been closest to:

$21.59
$20.76
$21.30
$21.85

Answer 5

$21.30

Underapplied (overapplied) manufacturing overhead = Actual manufacturing overhead - Manufacturing overhead applied
Manufacturing overhead applied = Actual manufacturing overhead - Underapplied manufacturing overhead
= $418,870 - $5,650
= $413,220

Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $413,220 ÷ 19,400 direct labor-hours = $21.30 per direct labor-hour