College Acct 2- Chapter 2

Which of the following is a disadvantage of using a single plantwide overhead rate?

• It simplifies the overhead allocation process.

• It may lead to less accurate product costing.

• It is easier to implement and maintain.

• It ensures consistent overhead application across all departments.

Which of the following is the correct formula to compute the predetermined overhead rate?

• Predetermined overhead rate = Estimated total manufacturing overhead costs ÷ Actual total units in the allocation base.

• Predetermined overhead rate = Estimated total manufacturing overhead costs ÷ Estimated total units in the allocation base

• Predetermined overhead rate = Actual total manufacturing overhead costs ÷ Estimated total units in the allocation base

• Predetermined overhead rate = Estimated total units in the allocation base ÷ Estimated total manufacturing overhead costs

The Silver Corporation uses a predetermined overhead rate to apply manufacturing overhead to jobs. The predetermined overhead rate is based on machine-hours in Dept. A and on labor cost in Dept. B. At the beginning of the year, the Corporation made the following estimates (in screenshot)

What predetermined overhead rates would be used in Dept. A and Dept. B, respectively?

• $3.00 and 67%

• $5.00 and 150%

• $5.00 and 67%

• $45 and 112.5%

Summers Corporation is using a predetermined overhead rate that was based on estimated total fixed manufacturing overhead of $502,000 and 20,000 machine-hours for the period. The company incurred actual total fixed manufacturing overhead of $525,000 and 21,150 total machine-hours during the period. The amount of manufacturing overhead that would have been applied to all jobs during the period is closest to:

• $525,000

• $530,865

• $502,000

• $20,000

Assigning manufacturing overhead to a specific job is complicated by all of the below except:

• Manufacturing overhead is an indirect cost that is either impossible or difficult to trace to a particular job.

• The average cost of actual fixed manufacturing overhead expenses will vary depending on how many units are produced in a period.

• Manufacturing overhead consists of both variable and fixed costs.

• Manufacturing overhead is incurred only to support some jobs.

Which of the following would usually be found on a job cost sheet under a normal cost system?

• Actual Manufacturing Overhead cost

• Actual direct Materials cost

• Both actual MOH & actual direct materials

Job 711 was recently completed. The following data have been recorded on its job cost sheet:

Direct Materials $2,785

Direct labor-hours 20 labor-hours

Direct labor wage rate $18 per labor-hour

Machine-hours 142 machine-hours

The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $12 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 711 would be:

• $4,849

• $3,760

• $3,220

• $3,445

Which of the following statements about using a plantwide overhead rate based on direct labor is correct?

• Using a plantwide overhead rate based on direct labor costs will ensure that direct labor costs will be correctly traced to jobs.

• The labor theory of value ensures that using a plantwide overhead rate based on direct labor will do a reasonably good job of assigning overhead costs to jobs.

• Using a plantwide overhead rate based on direct labor-hours will ensure that direct labor costs are correctly traced to jobs.

• It is often overly simplistic and incorrect to assume that direct labor-hours is a company’s only manufacturing overhead cost driver.

Rothermel Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $500,000, variable manufacturing overhead of $2.50 per direct labor-hour, and 75,000 direct labor-hours. The company has provided the following data concerning Job B456 which was recently completed.

Number of units in the job 50

Total direct labor-hours 100

The amount of overhead applied to Job B456 is closest to:

• $917

• $625

• $250

• $875

Stuart Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data:

Total direct labor-hours 10,000

Total fixed manufacturing overhead cost $33,000

Variable manufacturing OH per direct labor-hour $2.50

Recently, Job K332 was completed with the following characteristics:

Number of units in the job 70

Total direct labor-hours 140

Direct materials $275

Direct labor cost $6,250

The total job cost for Job K332 is closest to:

• $1,267

• $7,337

• $5,775

• $6,132