Question

1. The R&R Company's production costs for August are: direct labor, $13,000; indirect labor, $6,500; direct materials, $15,000; property taxes on production equipment, $800; heat, lights and power, $1,000; and insurance on plant and equipment, $200. R&R Company's factory overhead incurred for August is:
A. $2,000.
B. $6,500.
C. $8,500.
D. $21,500.
E. $36,500.

2. A company rents a building with a total of 100,000 square feet, which are evenly divided between two floors. The space on the first floor is considered twice as valuable as that on the second floor. The total monthly rent for the building is $30,000. How much of the monthly rental expense should be allocated to a department that occupies 10,000 square feet on the first floor?
A. $6,000.
B. $5,000.
C. $3,000.
D. $4,000.
E. $2,000.

3. O.K. Company uses a job order cost accounting system and allocates its overhead on the basis of direct labor costs. O.K. expects to incur $800,000 of overhead during the next period, and expects to use 50,000 labor hours at a cost of $10.00 per hour. What is O.K. Company's overhead application rate?
A. 6.25%.
B. 62.5%.
C. 160%.
D. 1600%.
E. 67%.

4. Austin Company uses a job order cost accounting system. The company's executives estimated that direct labor would be $2,000,000 (200,000 hours at $10/hour) and that factory overhead would be $1,500,000 for the current period. At the end of the period, the records show that there had been 180,000 hours of direct labor and $1,200,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead allocation rate?
A. $6.00 per direct labor hour.
B. $7.50 per direct labor hour.
C. $6.67 per direct labor hour.
D. $8.33 per direct labor hour.
E. $7.08 per direct labor hour.

5. Expenses that are not easily associated with a specific department, and which are incurred for the benefit of more than one department, are:
A. Fixed expenses.
B. Indirect expenses.
C. Direct expenses.
D. Uncontrollable expenses.
E. Variable expenses.

6. Job order production is also known as:
A. Mass production.
B. Process production.
C. Unit production.
D. Customized production.
E. Standard costing.

7. Regardless of the system used in departmental cost analysis:
A. Direct costs are allocated, indirect costs are not.
B. Indirect costs are allocated, direct costs are not.
C. Both direct and indirect costs are allocated.
D. Neither direct nor indirect costs are allocated.
E. Total departmental costs will always be the same.

8. At the current year-end, Hardly Company found that its overhead was underapplied by $2,500, and this amount was not deemed to be a material amount. Based on this information, Hardly should
A. Close the $2,500 to Cost of Goods Sold.
B. Close the $2,500 to Finished Goods Inventory.
C. Do nothing about the $2,500, since it is not material, and it is likely that overhead will be overapplied by the same amount next year.
D. Carry the $2,500 to the income statement as "Other Expense".
E. Carry the $2,500 to the next period.

9. A company has an overhead application rate of 125% of direct labor costs. How much overhead would be allocated to a job if it required total labor costing $20,000?
A. $5,000.
B. $16,000.
C. $25,000.
D. $125,000.
E. $250,000.

10. Which of the following is the best explanation for why it is necessary to calculate equivalent units of production in a process costing environment?
A. In most manufacturing environments, it is not possible to conduct a physical count of units.
B. Companies often use a combination of a process costing and job order costing systems.
C. In most process costing systems, direct materials are added at the beginning of the process while conversion costs are added evenly throughout the manufacturing process.
D. All of the work to make a unit 100% complete and ready to move to the next stage of production or to finished goods inventory may not have been completed in a single time period.
E. In most cases, there is no difference between physical units and equivalent units of production.

11. Hancock Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Hancock estimated total overhead of $396,000; materials of $410,000 and direct labor of $220,000. During the year Hancock incurred $418,000 in materials costs, $413,200 in overhead costs and $224,000 in direct labor costs. Compute the amount of overhead applied to jobs during the year.
A. $396,000.
B. $424,450.
C. $413,190.
D. $413,200.
E. $403,200.

12. A company uses the weighted average method for inventory costing. During a period, Department A finished and transferred 50,000 units to Department B. Also, during the period, 10,000 units were started but brought only to a stage of being 3/5 completed. The number of equivalent units produced by Department A during the period was:
A. 44,000 units.
B. 50,000 units.
C. 54,000 units.
D. 56,000 units.
E. 60,000 units.

13. A retail store has three departments, 1, 2, and 3, and does general advertising that benefits all departments. Advertising expense totaled $50,000 for the year, and departmental sales were as follows. Allocate advertising expense to Department 2 based on departmental sales.
A. $11,000.
B. $14,000.
C. $16,667.
D. $22,500.
E. $50,000.

14. A company uses a process cost accounting system. Its Assembly Department's beginning inventory consisted of 50,000 units, 3/4 complete with respect to direct labor and overhead. The department started and finished 127,500 units this period. The ending inventory consists of 40,000 units that are 1/4 complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $24,000 and overhead costs of $32,000 for the period. Assuming the weighted average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is:
A. $0.14.
B. $0.16.
C. $0.17.
D. $0.30.
E. $0.37.

15. Equivalent units of production are equal to:
A. The number of units that could have been completed if all effort had been applied to units that were started and completed during a period.
B. The number of finished units actually produced during a period.
C. The number of units introduced into the process during a period.
D. The number of units still in process at the end of a period.
E. Physical units that were started and completed during a period.

16. Alton Company has an overhead application rate of 160% and allocates overhead based on direct materials. During the current period, direct labor is $50,000 and direct materials used are $80,000. Determine the amount of overhead Alton Company should record in the current period.
A. $31,250.
B. $50,000.
C. $80,000.
D. $128,000.
E. $208,000.

17. The following is taken from Ames Company's internal records of its factory with two operating departments. The cost driver for indirect labor is direct labor costs, and the cost driver for the remaining items is number of hours of machine use. Compute the total amount of overhead allocated to Dept.1 using activity-based costing.   
A. $18,720.
B. $12,930.
C. $13,400.
D. $19,190.
E. $19,440.

18. Belgrade Lakes Properties is developing a golf course subdivision that includes 225 home lots; 100 lots are golf course lots and will sell for $95,000 each; 125 are street frontage lots and will sell for $65,000. The developer acquired the land for $1,800,000 and spent another $1,400,000 on street and utilities improvement. Compute the amount of joint cost to be allocated to the golf course lots using value basis.
A. $1,724,800.
B. $1,777,920.
C. $2,018,920.
D. $1,422,080.
E. $1,475,200.

19. A company uses a process cost accounting system. Its Sewing Department completed and transferred out 120,000 units during the current period. The ending inventory in the Sewing Department consists of 40,000 units (20% complete with respect to direct materials and 60% complete with respect to direct labor). Overhead is applied on the basis of direct labor.
Determine the equivalent units of production for the Sewing Department for direct materials, direct labor and overhead assuming the weighted average method.
A. 120,000; 120,000; 120,000
B. 120,000; 160,000; 120,000
C. 128,000; 120,000; 120,000
D. 128,000; 144,000; 144,000
E. 128,000; 184,000; 160,000

20. White Company has two service departments and two operating (production) departments. The Payroll Department services all three of the other departments in proportion to the number of employees in each. The Maintenance Department costs are allocated to the two operating departments in proportion to the floor space used by each. Listed below are the operating data for the current period.

The total cost of operating the Milling Department for the current period is:
A. $14,280.
B. $15,912.
C. $76,500.
D. $90,780.
E. $92,412.

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1. The R&R Company's production costs for August are: direct labor, $13,000; indirect labor, $6,500; direct materials, $15,000; property taxes on production equipment, $800; heat, lights and power, $1,000; and insurance on plant and equipment, $200. R&R Company's factory overhead incurred for August is:
A. $2,000.
B. $6,500.
C. $8,500.
D. $21,500.
E. $36,500.

The answer is c – 6500+1000+800+200

2. A company rents a building with a total of 100,000 square feet, which are evenly divided between two floors. The space on the first floor is considered twice as valuable as that on the second floor. The total monthly rent for the building is $30,000. How much of the monthly rental expense should be allocated to a department that occupies 10,000 square feet on the first floor?
A. $6,000.
B. $5,000.
C. $3,000.
D. $4,000.
E. $2,000.

First floor: $20,000 for 50,000 sq ft
Second floor: $10,000 for 50,000 sq ft
We need only 10,000 sq ft on the first floor, which is 20% of the entire floor. 0.2*20,000=$4,000...

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