Managerial Accounting 12th Edition By Garrison - Test Bank

Managerial Accounting 12th Edition By Garrison – Test Bank

$15.00

Pay And Download 

Complete Test Bank With Answers

 

 

Sample Questions Posted Below

 

Chapter 3 Systems Design: Job-Order Costing
True/False Questions
Process costing is used in those situations where many different products or services are produced each period to customer specifications.
Answer: False  Level: Easy  LO: 1
The basic approach in job-order costing is to accumulate costs in a particular operation or department for an entire period (month, quarter, year) and then to divide this total by the number of units produced during the period.
Answer: False  Level: Easy  LO: 1
If a company uses predetermined overhead rates, actual manufacturing overhead costs of a period will be recorded in the Manufacturing Overhead account, but they will not be recorded on the job cost sheets for the period.
Answer: True  Level: Medium  LO: 2
In a job-order cost system, indirect labor is assigned to a job by using the labor time ticket as a source document.
Answer: False  Level: Medium  LO: 2
The formula for computing the predetermined overhead rate is:
Estimated total units in base ˜ Estimated total manufacturing costs
Answer: False  Level: Easy  LO: 3
The fact that one department may be labor intensive while another department is machine intensive may explain in part the existence of multiple predetermined overhead rates in larger companies.
Answer: True  Level: Easy  LO: 3
If a company closes any under- or overapplied overhead to the Cost of Goods Sold account, then Cost of Goods Sold will be credited if manufacturing overhead is overapplied for the period.
Answer: True  Level: Medium  LO: 4,8
Garrison, Managerial Accounting, 12th Edition 71
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The following entry would be used to record the transfer of material from the storeroom to production if 80% of the material was direct material and 20% was indirect material:
Work in Process ………………………..40,000Manufacturing Overhead ……………10,000Raw Material ……………………50,000Answer: True  Level: EasyLO: 4
If a job is not completed at the end of the year, then no manufacturing overhead cost should be applied to that job.
Answer: False  Level: Medium  LO: 5
When raw materials are purchased, they are recorded as an expense. Answer: False Level: Medium LO: 7
In a job-order cost system, depreciation on factory equipment should be charged directly to the Work in Process account.
Answer: False  Level: Medium  LO: 7
The entire difference between the actual manufacturing overhead cost for a period and the applied manufacturing overhead cost is typically closed to the Work In Process account.
Answer: False  Level: Easy  LO: 8
If the actual manufacturing overhead costs for a period exceed the manufacturing overhead costs applied, then overhead would be considered to be overapplied.
Answer: False  Level: Medium  LO: 8
When the predetermined overhead rate is based on the level of activity at capacity, the overhead underapplied may be called the Cost of Unused Capacity and treated as a period expense.
Answer: True  Level: Easy  LO: 9  Appendix: 3A
72 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The absorption cost approach is so named because it provides for the absorption of all manufacturing costs, fixed and variable, into units of product.
Answer: True  Level: Easy  LO: 10
Multiple Choice Questions
Which of the following industries would be most likely to use a process costing system?
Ship builder
Movie studio
Oil refinery
Hospital
Answer: C  Level: Easy  LO: 1
A process cost system is employed in those situations where:
many different products, jobs, or batches of production are being produced each period.
where manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis.
a service is performed such as in a law firm or an accounting firm.
full or absorption cost approach is not employed.
Answer: B  Level: Easy  LO: 1
Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company misclassified a portion of direct labor cost as indirect labor. The effect of this misclassification will be to:
understate the predetermined overhead rate.
overstate the predetermined overhead rate.
have no effect on the predetermined overhead rate.
cannot be determined from the information given.
Answer: B  Level: Medium  LO: 3
Garrison, Managerial Accounting, 12th Edition 73
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Which of the following entries would record correctly the application of overhead cost?
A) Work in Process ……………………………. XXX
Accounts Payable …………………. XXX
B) Manufacturing Overhead ……………….. XXX
Accounts Payable …………………. XXX
C) Manufacturing Overhead ……………….. XXX
Work in Process ……………………. XXX
D) Work in Process ……………………………. XXX
Manufacturing Overhead ……….. XXX
Answer: D  Level: Easy  LO: 4,5
The operations of Kalispell Company resulted in overapplied overhead for the month just completed. Which of the following journal entries can be correct if Kalispell allocates under- or overapplied overhead among accounts?
A)   Cost of Goods Sold ……………………………XXXManufacturing Overhead ……………XXXB)Manufacturing Overhead ……………………XXXCost of Goods Sold ……………………XXXC)Work in Process ………………………………..XXXFinished Goods …………………………………XXXCost of Goods Sold ……………………XXXManufacturing Overhead ……………XXXD)Manufacturing Overhead ……………………XXXWork in Process ………………………..XXXFinished Goods …………………………XXXCost of Goods Sold ……………………XXX
Answer: D  Level: Medium  LO: 4,8
74 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Which of the following entries would record correctly the monthly salaries earned by the top management of a manufacturing company?
A) Manufacturing Overhead ………………………  XXX
Salaries and Wages Payable …………. XXX
B) Salaries Expense ………………………………….  XXX
Salaries and Wages Payable …………. XXX
C) Work in Process …………………………………..  XXX
Salaries and Wages Payable …………. XXX
D) Salaries and Wages Payable …………………..  XXX
Salaries Expense …………………………. XXX
Answer: B  Level: Easy  LO: 4
22.  The journal entry to record applying overhead during the production process is:
A) Manufacturing Overhead ……………………………… XXX
Work In Process ………………………………….. XXX
B) Finished Goods …………………………………………… XXX
Manufacturing Overhead ……………………… XXX
C) Manufacturing Overhead ……………………………… XXX
Finished Goods …………………………………… XXX
D) Work In Process ………………………………………….. XXX
Manufacturing Overhead ……………………… XXX
Answer: D  Level: Easy  LO: 4
When manufacturing overhead is applied to production, it is added to:
the Cost of Goods Sold account.
the Raw Materials account.
the Work in Process account.
the Finished Goods inventory account.
Answer: C  Level: Easy  LO: 5,7
Garrison, Managerial Accounting, 12th Edition 75
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
24.  Which of the following statements is true?
I. Overhead application may be made slowly as a job is worked on.
Overhead application may be made in a single application at the time of completion of the job.
Overhead application should be made to any job not completed at year-end in order to properly value the work in process inventory.
Only statement I is true.
Only statement II is true.
Both statements I and II are true.
Statements I, II, and III are all true.
Answer: D  Level: Easy  LO: 5
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: D  Level: Hard  LO: 6
Under a job-order costing system, the dollar amount transferred from Work in Process to Finished Goods is the sum of the costs charged to all jobs:
started in process during the period.
in process during the period.
completed and sold during the period.
completed during the period.
Answer: D  Level: Medium  LO: 7
76 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
If a company applies overhead to production on the basis of a predetermined rate, a debit balance in the Manufacturing Overhead account at the end of the period means that:
actual overhead cost was greater than the amount charged to production.
actual overhead cost was less than the amount of direct labor cost.
more overhead cost has been charged to production than has been charged to finished goods during the period.
actual overhead cost was less than the amount charged to production.
Answer: A  Level: Medium  LO: 8
Overapplied overhead means that:
the applied overhead cost was less than the actual overhead cost.
the applied overhead cost was greater than the actual overhead cost.
the estimated overhead cost was less than the actual overhead cost.
the estimated overhead cost was less than the applied overhead cost.
Answer: B  Level: Easy  LO: 8
A job order cost system uses a predetermined overhead rate based on estimated activity and estimated manufacturing overhead cost. At the end of the year, underapplied overhead might be explained by which of the following situations?
Actual activityActual manufacturing overhead costsA)Greater than estimatedGreater than estimatedB)Greater than estimatedLess than estimatedC)Less than estimatedGreater than estimatedD)Less than estimatedLess than estimated
Answer: C  Level: Medium  LO: 8  Source: CPA, adapted
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: A  Level: Easy  LO: 10  Source: CMA, adapted
Garrison, Managerial Accounting, 12th Edition 77
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The Work in Process inventory account of a manufacturing company shows a balance of $18,000 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of $6,000 and $3,000 for materials, and charges of $4,000 and $2,000 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of:
50%
200%
300%
20%
Answer: A  Level: Medium  LO: 2,3,5
Blackwood Co. uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. The predetermined overhead rates for the year are 200% for Department A and 50% for Department B. Job 123, started and completed during the year, was charged with the following costs:
Dept. ADept. BDirect materials ………………………..$25,000$5,000Direct labor ………………………………?$30,000Manufacturing overhead …………….$40,000?
The total manufacturing costs associated with Job 123 should be:
$135,000
$180,000
$195,000
$240,000
Source: CPA, adapted
Answer: A  Level: Medium  LO: 2,5
78 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Fisher Company uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. The following information about Fisher Company’s Work in Process inventory account has been provided for the month of May:
May 1 balance …………………………………….$26,000Debits during May:Direct Materials ………………………………..$40,000Direct Labor …………………………………….$50,000Manufacturing Overhead ……………………$37,500
During the month, Fisher Company’s Work in Process inventory account was credited for $120,500, which represented the Cost of Goods Manufactured for the month. Only one job remained in process on May 31; this job had been charged with $9,600 of applied overhead cost. The amount of direct materials cost in the unfinished job would be:
$10,600
$16,700
$12,800
$23,400
Answer: A  Level: Hard  LO: 3,5,6,7
At the beginning of the year, manufacturing overhead for the year was estimated to be $477,590. At the end of the year, actual direct labor-hours for the year were 29,000 hours, the actual manufacturing overhead for the year was $472,590, and manufacturing overhead for the year was overapplied by $110. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:
29,300 direct labor-hours
28,987 direct labor-hours
28,993 direct labor-hours
29,000 direct labor-hours
Answer: A  Level: Hard  LO: 3,5,8
Garrison, Managerial Accounting, 12th Edition 79
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
At the beginning of the year, manufacturing overhead for the year was estimated to be $670,700. At the end of the year, actual direct labor-hours for the year were 36,200 hours, the actual manufacturing overhead for the year was $665,700, and manufacturing overhead for the year was overapplied by $22,100. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:
35,037 direct labor-hours
35,300 direct labor-hours
36,200 direct labor-hours
33,874 direct labor-hours
Answer: B  Level: Hard  LO: 3,5,8
At the beginning of the year, manufacturing overhead for the year was estimated to be $670,530. At the end of the year, actual direct labor-hours for the year were 29,400 hours, the actual manufacturing overhead for the year was $665,530, and manufacturing overhead for the year was underapplied by $27,550. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:
30,900 direct labor-hours
29,400 direct labor-hours
30,670 direct labor-hours
31,939 direct labor-hours
Answer: A  Level: Hard  LO: 3,5,8
Bradbeer Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 17,500 hours. At the end of the year, actual direct labor-hours for the year were 16,000 hours, the actual manufacturing overhead for the year was $233,000, and manufacturing overhead for the year was underapplied by $15,400. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been:
$249,375
$217,600
$228,000
$238,000
Answer: D  Level: Hard  LO: 3,5,8
80 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Braam Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 11,500 hours. At the end of the year, actual direct labor-hours for the year were 9,700 hours, the actual manufacturing overhead for the year was $143,350, and manufacturing overhead for the year was underapplied by $18,220. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been:
$164,023
$125,130
$148,350
$138,350
Answer: C  Level: Hard  LO: 3,5,8
Braaten Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 14,100 hours. At the end of the year, actual direct labor-hours for the year were 13,500 hours, the actual manufacturing overhead for the year was $291,100, and manufacturing overhead for the year was underapplied by $7,600. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been:
$286,100
$296,100
$298,816
$283,500
Answer: B  Level: Hard  LO: 3,5,8
Cribb Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 17,900 hours and the total estimated manufacturing overhead was $341,890. At the end of the year, actual direct labor-hours for the year were 16,700 hours and the actual manufacturing overhead for the year was $336,890. Overhead at the end of the year was:
$22,920 underapplied
$17,920 overapplied
$17,920 underapplied
$22,920 overapplied
Answer: C  Level: Medium  LO: 3,5,8
Garrison, Managerial Accounting, 12th Edition 81
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Crich Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 21,800 hours and the total estimated manufacturing overhead was $497,040. At the end of the year, actual direct labor-hours for the year were 21,500 hours and the actual manufacturing overhead for the year was $492,040. Overhead at the end of the year was:
$6,840 overapplied
$6,840 underapplied
$1,840 underapplied
$1,840 overapplied
Answer: C  Level: Medium  LO: 3,5,8
Crick Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 14,400 hours and the total estimated manufacturing overhead was $355,680. At the end of the year, actual direct labor-hours for the year were 15,200 hours and the actual manufacturing overhead for the year was $350,680. Overhead at the end of the year was:
$24,760 underapplied
$24,760 overapplied
$19,760 underapplied
$19,760 overapplied
Answer: B  Level: Medium  LO: 3,5,8
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: C  Level: Hard  LO: 3,5,8
82 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Daget Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $364,140. At the end of the year, actual direct labor-hours for the year were 24,000 hours, manufacturing overhead for the year was overapplied by $8,060, and the actual manufacturing overhead was $359,140. The predetermined overhead rate for the year must have been closest to:
$15.43
$15.30
$15.17
$14.96
Answer: B  Level: Hard  LO: 3,5,8
Dafoe Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the total estimated manufacturing overhead was $221,100. At the end of the year, actual direct labor-hours for the year were 14,400 hours, manufacturing overhead for the year was overapplied by $21,500, and the actual manufacturing overhead was $216,100. The predetermined overhead rate for the year must have been closest to:
$15.01
$17.73
$15.35
$16.50
Answer: D  Level: Hard  LO: 3,5,8
Juanita Corporation uses a job-order cost system and applies overhead on the basis of direct labor cost. At the end of October, Juanita had one job still in process. The job cost sheet for this job contained the following information:
Direct materials …………………………………….$480Direct labor …………………………………………..$150Manufacturing overhead applied ……………..$600
An additional $ 100 of labor was needed in November to complete this job. For this job, how much should Juanita have transferred to finished goods inventory in November when it was completed?
$1,330
$500
$1,230
$1,730
Answer: D  Level: Medium  LO: 3,5
Garrison, Managerial Accounting, 12th Edition 83
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Wall Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. The company’s estimated costs for the next year are:
Direct materials ……………………………………………..$3,000Direct labor ……………………………………………………$20,000Depreciation on factory equipment …………………..$6,000Rent on factory ………………………………………………$12,000Sales salaries ………………………………………………….$29,000Factory utilities ………………………………………………$15,000Indirect labor …………………………………………………$6,000
It is estimated that 10,000 direct labor hours will be worked during the year. The predetermined overhead rate will be:
$3.90
$5.90
$6.80
$9.10
Answer: A  Level: Medium  LO: 3
48.  The following information relates to Spock Manufacturing Company:
Total estimated manufacturing overhead at beginning of year ..$620,000Total manufacturing overhead applied to production duringthe year …………………………………………………………………………$625,000Total manufacturing overhead incurred during the year …………$618,000
The company closes out the balance in the Manufacturing Overhead to Cost of Goods Sold at the end of the year. In the journal entry to close out the balance, the company would:
debit cost of goods sold for $2,000
credit cost of goods sold for $2,000
credit cost of goods sold for $7,000
debit cost of goods sold for $7,000
Answer: C  Level: Hard  LO: 4,5,8
84 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Rio Manufacturing Company uses a job order cost system. At the beginning of February, Rio only had one job in process, Job #594. The direct costs assigned to this job at that time were $800 of materials and $650 of labor. Job #594 was finished during February incurring additional direct costs of $120 for materials and $370 for labor. Job #595 was started and finished during February. The direct costs assigned to this job were $310 for materials and $190 for labor. Job #596 was started during February but was not finished by the end of the month. The direct costs assigned to this job were $740 for materials and $300 for labor. Rio applies manufacturing overhead to its products at a rate of 200% of direct labor cost. What is Rio’s cost of goods manufactured for February?
$2,440
$3,750
$4,860
$6,500
Answer: C  Level: Hard  LO: 5,6
Serenje Manufacturing Company produces nameplates and uses a job-order cost system. The following amounts relate to nameplate production for the month of June:
Work in process inventory, June 1 ………………………………………………$620Cost of materials directly assigned to production during June ………..$1,800Cost of labor directly assigned to production during June ………………$1,200Cost of nameplates completed during June …………………………………..$4,300
Serenje applies overhead at a predetermined overhead rate of 60% of direct material cost. At the end of June, only one job was in Work in Process inventory. This job had been charged with $150 of direct material cost. What is the direct labor cost assigned to this job?
$100
$160
$225
$530
Answer: B  Level: Hard  LO: 5,7
Garrison, Managerial Accounting, 12th Edition 85
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Dukes Company used a predetermined overhead rate this year of $2 per direct labor hour, based on an estimate of 20,000 direct labor hours to be worked during the year. Actual costs and activity during the year were:
Actual manufacturing overhead cost incurred ……………..$38,000Actual direct labor hours worked ………………………………18,500
The under- or overapplied overhead for the year was:
$1,000 underapplied
$1,000 overapplied
$3,000 underapplied
$3,000 overapplied
Answer: A  Level: Easy  LO: 5,8
Sargent Company applies overhead cost to jobs on the basis of 80 percent of direct labor cost. If Job 210 shows $10,000 of manufacturing overhead cost applied, how much was the direct labor cost on the job?
$12,500
$11,000
$8,000
$10,000
Answer: A  Level: Medium  LO: 5
In the Vasquez Company, any over- or underapplied overhead is closed out to Cost of Goods Sold. Last year, the company incurred $27,000 in actual manufacturing overhead cost, and applied $29,000 of overhead cost to jobs. The beginning and ending balances of Finished Goods were equal, and the Company’s Cost of Goods Manufactured for the year totaled $71,000. Given this information, Cost of Goods Sold, after adjustment for any over- or underapplied overhead, for the year must have been:
$98,000
$73,000
$71,000
$69,000
Answer: D  Level: Hard  LO: 6,8
86 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
In reviewing the accounting records at year-end, Garff Company’s accountant has determined that the following items and amounts were debited to the Manufacturing Overhead account during the year:
Factory supervisorís salary ………………………………………$8,000Sales commissions ………………………………………………….$7,000Vacation pay for the materials storeroom clerk ………….$2,000
Including the items listed above, the debits to the Manufacturing Overhead account totaled $245,000 for the year. Credits to the account totaled $240,000 for the year. Based on this information, if all entries had been made correctly during the year the Manufacturing Overhead account would have been:
overapplied by $4,000
overapplied by $12,000
underapplied by $5,000
overapplied by $2,000
Answer: D  Level: Hard  LO: 7,8
Compute the October cost of direct materials used if raw material purchases for the month were $30,000 and the inventories were as follows:
BeginningEndingDirect materials ………………………..$7,000$4,000Work in Process ………………………..$6,000$7,500Finished goods ………………………….$10,000$12,000
The cost of direct materials used would be:
$31,500
$29,500
$27,000
$33,000
Answer: D  Level: Easy  LO: 7
Garrison, Managerial Accounting, 12th Edition 87
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Hardin Company’s manufacturing overhead account showed a $20,000 underapplied overhead balance on December 31. Other data as of December 31 appear below:
Cost of Goods Sold…………………………………………………………..$800,000Overhead applied during the year included in Cost of GoodsSold …………………………………………………………………………….$200,000Overhead applied during the year in the ending balances of:Work in Process inventory ……………………………………………..$80,000Finished Goods inventory ………………………………………………$120,000
If the company allocates the underapplied overhead among Cost of Goods Sold and the appropriate inventory accounts based on the amount of overhead applied during the year in the accounts, Cost of Goods Sold after allocation will be:
$790,000
$820,000
$810,000
$780,000
Answer: C  Level: Medium  LO: 8
Use the following to answer questions 57-60:
The accounting records of Omar Company contained the following information for last year:
BeginningEndingDirect materials inventory …………………….$9,000$7,000Work in process inventory ……………………$17,000$31,000Finished goods inventory ……………………..$10,000$15,000Manufacturing costs incurredDirect materials used ……………………………$72,000Overhead applied ………………………………..$24,000Direct labor cost (10,000 hours) …………….$80,000Depreciation ……………………………………….$10,000Rent …………………………………………………..$12,000Taxes …………………………………………………$8,000Cost of goods sold ……………………………….$157,000**Selling and administrative costs incurredAdvertising …………………………………………$35,000Rent …………………………………………………..$20,000Clerical ………………………………………………$25,000
*Does not include over- or underapplied overhead.
88 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The amount of direct material purchased during the year was:
$66,000
$70,000
$65,000
$74,000
Answer: B  Level: Medium  LO: 6
The total costs added to Work in Process during the year were:
$206,000
$162,000
$176,000
$182,000
Answer: C  Level: Medium  LO: 6
If Omar Company applies overhead to jobs on the basis of direct labor hours and Job 3 took 120 hours, how much overhead should be applied to that job?
$960
$360
$528
$288
Answer: D  Level: Medium  LO: 3,5
The cost of goods manufactured for the year was:
$190,000
$162,000
$168,000
$135,000
Answer: B  Level: Medium  LO: 6
Use the following to answer questions 61-64:
At the beginning of the current year, Garber Corporation estimated that its manufacturing overhead would be $70,000 and the activity level would be 10,000 machine-hours. The level of activity at capacity is 14,000 machine-hours. The actual manufacturing overhead for the year was $63,300 and the actual level of activity was 10,100 machine-hours.
Garrison, Managerial Accounting, 12th Edition 89
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
If the company bases its predetermined overhead rate on estimated machine-hours, then its predetermined overhead rate would have been:
$6.27
$7.00
$5.00
$6.33
Answer: B  Level: Medium  LO: 3  Appendix: 3A
If the company bases its predetermined overhead rate on estimated machine-hours, then its overhead for the year would have been:
$12,800 overapplied
$12,800 underapplied
$7,400 overapplied
$7,400 underapplied
Answer: C  Level: Medium  LO: 8  Appendix: 3A
If the company bases its predetermined overhead rate on machine-hours at capacity, then its predetermined overhead rate would have been:
$6.33
$6.27
$5.00
$7.00
Answer: C  Level: Medium  LO: 3,9  Appendix: 3A
If the company bases its predetermined overhead rate on machine-hours at capacity, then the cost of unused capacity reported on the income statement would have been:
$700
$7,400
$6,700
$12,800
Answer: D  Level: Medium  LO: 5,9  Appendix: 3A
90 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Use the following to answer questions 65-67:
Acton Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its most recent year of operations.
Estimated manufacturing overhead …………………..$139,080Estimated machine-hours ………………………………..3,800Actual manufacturing overhead ……………………….$137,000Actual machine-hours …………………………………….3,780
The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company’s predetermined overhead rate for the year.
The predetermined overhead rate is closest to:
$36.60
$36.41
$36.24
$36.05
Answer: A  Level: Easy  LO: 3
The applied manufacturing overhead for the year is closest to:
$136,269
$138,348
$136,987
$137,630
Answer: B  Level: Easy  LO: 5
The overhead for the year was:
$732 underapplied
$1,348 underapplied
$732 overapplied
$1,348 overapplied
Answer: D  Level: Easy  LO: 8
Garrison, Managerial Accounting, 12th Edition 91
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Use the following to answer questions 68-70:
Baker Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $210,600 and 6,000 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $209,000 and actual direct labor-hours were 5,980.
The predetermined overhead rate for the year was closest to:
$34.95
$34.83
$34.98
$35.10
Answer: D  Level: Easy  LO: 3
The applied manufacturing overhead for the year was closest to:
$208,283
$209,001
$209,898
$209,180
Answer: C  Level: Easy  LO: 5
The overhead for the year was:
$702 underapplied
$898 underapplied
$702 overapplied
$898 overapplied
Answer: D  Level: Easy  LO: 8
Use the following to answer questions 71-73:
Caber Corporation applies manufacturing overhead on the basis of machine-hours. At the
beginning of the most recent year, the company based its predetermined overhead rate on total
estimated overhead of $60,600. Actual manufacturing overhead for the year amounted to
$59,000 and actual machine-hours were 5,900. The company’s predetermined overhead rate
for the year was $10.10 per machine-hour.
92 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The predetermined overhead rate was based on how many estimated machine-hours?
5,783
6,000
5,900
5,842
Answer: B  Level: Medium  LO: 3
The applied manufacturing overhead for the year was closest to:
$58,017
$59,590
$60,600
$58,597
Answer: B  Level: Easy  LO: 5
The overhead for the year was:
$1,010 underapplied
$590 overapplied
$590 underapplied
$1,010 overapplied
Answer: B  Level: Easy  LO: 8
Garrison, Managerial Accounting, 12th Edition 93
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Use the following to answer questions 74-76:
Dapper Company had only one job in process on May 1. The job had been charged with
$3,400 of direct materials, $4,640 of direct labor, and $9,200 of manufacturing overhead cost. The company assigns overhead cost to jobs using the predetermined overhead rate of $23.00 per direct labor-hour.
During May, the activity was recorded:Raw materials (all direct materials):Beginning balance ……………………………………………….$8,500Purchased during the month ………………………………….$42,000Used in production ………………………………………………$48,500Labor:Direct labor-hours worked during the month …………..2,200Direct labor cost incurred ……………………………………..$25,520Actual manufacturing overhead costs incurred …………..$52,800Inventories:Raw materials, May 30 ………………………………………..?Work in process, May 30 ……………………………………..$32,190
Work in process inventory on May 30 contains $7,540 of direct labor cost. Raw materials consist solely of items that are classified as direct materials.
The balance in the raw materials inventory account on May 30 was:
$33,500
$2,000
$40,000
$6,500
Answer: B  Level: Medium  LO: 6
The cost of goods manufactured for May was:
$109,670
$124,620
$143,300
$126,820
Answer: A  Level: Hard  LO: 6
94 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The entry to dispose of the under- or overapplied overhead cost for the month would include a:
debit of $2,200 to Manufacturing Overhead
debit of $14,950 to Manufacturing Overhead
credit of $14,950 to Manufacturing Overhead
credit of $2,200 to Manufacturing Overhead
Answer: D  Level: Hard  LO: 5,8
Use the following to answer questions 77-80:
The direct labor rate in Brent Company is $9.00 per hour, and manufacturing overhead is applied to products using a predetermined overhead rate of $6.00 per direct labor hour. During May, the company purchased $60,000 in raw materials (all direct materials) and worked 3,200 direct labor hours. The Raw Materials inventory (all direct materials) decreased by $3,000 between the beginning and end of May. The Work in Process inventory on May 1 consisted of one job which had been charged with $4,000 in direct materials and on which
300 hours of direct labor time had been worked. There was no Work in Process inventory on May 31.
The balance in the Work in Process inventory account on May 1 was:
$0
$6,700
$4,500
$8,500
Answer: D  Level: Medium  LO: 4
The debit to Work in Process for the cost of direct materials used during May was:
$63,000
$61,000
$57,000
$67,000
Answer: A  Level: Medium  LO: 4
The debit to Work in Process for direct labor cost during May was:
$21,000
$26,100
$28,800
$31,500
Answer: C  Level: Medium  LO: 4
Garrison, Managerial Accounting, 12th Edition 95
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
If overhead was underapplied by $2,500 during May, the actual overhead cost for the month must have been:
$16,700
$21,700
$18,500
$23,500
Answer: B  Level: Hard  LO: 5,8
Use the following to answer questions 81-84:
Chelm Music Company manufactures violins, violas, cellos, and fiddles and uses a job-order cost system.
What account should Chelm debit when the workers who carve the wood for the instruments are paid?
Direct Labor
Work in Process
Manufacturing Overhead
Salaries and Wages Receivable
Salaries and Wages Expense
Answer: B  Level: Easy  LO: 4
What account should Chelm debit when the production manager is paid?
Direct Labor
Work in Process
Manufacturing Overhead
Salaries and Wages Receivable
Salaries and Wages Expense
Answer: C  Level: Medium  LO: 4
What account should Chelm debit when the president of the company is paid?
Direct Labor
Work in Process
Manufacturing Overhead
Salaries and Wages Receivable
Salaries and Wages Expense
Answer: E  Level: Easy  LO: 4
96 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
What is one of the accounts that Chelm should credit when goods are sold?
Finished Goods
Work in Process
Cost of Goods Sold
Manufacturing Overhead
Cost of Goods Manufactured
Answer: A  Level: Easy  LO: 4
Use the following to answer questions 85-89:
The following partially completed T-accounts summarize transactions for Western Company during the year:
Raw Material

Beg Bal 3,000 8,000
5,000
7,000
Finished Goods

Beg Bal 9,000 20,000
25,000
Work in Process

Beg Bal 6,000 25,000
6,500
9,000
7,000
Wages & Salaries Payable

10,000 2,000 Beg Bal
12,000
Manufacturing Overhead

1,500 7,000
2,000
750
3,000
Cost of Goods Sold

20,000
Garrison, Managerial Accounting, 12th Edition 97
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The Cost of Goods Manufactured is:
$20,000
$34,000
$22,500
$25,000
Answer: D  Level: Medium  LO: 6,7
The direct labor cost was:
$9,000
$12,000
$10,000
$14,000
Answer: A  Level: Hard  LO: 7
The direct materials cost was:
$8,000
$6,500
$9,000
$6,000
Answer: B  Level: Hard  LO: 7
The manufacturing overhead applied was:
$9,000
$3,000
$500
$7,000
Answer: D  Level: Hard  LO: 5,7
The manufacturing overhead was:
$250 overapplied
$750 underapplied
$250 underapplied
$750 overapplied
Answer: C  Level: Medium  LO: 7,8
98 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Use the following to answer questions 90-91:
Kapanga Manufacturing Company uses a job-order costing system and started the month of October with a zero balance in its work in process and finished goods inventory accounts. During October, Kapanga worked on three jobs and incurred the following direct costs on those jobs:
Job B18Job B19Job C11Direct materials ………………………..$12,000$25,000$18,000Direct labor ………………………………$8,000$10,000$5,000
Kapanga applies manufacturing overhead at a rate of 150% of direct labor cost. During October, Kapanga completed Jobs B18 and B19 and sold Job B19.
What is Kapanga’s cost of goods manufactured for October?
$ 50,000
$ 55,000
$ 78,000
$ 82,000
Answer: D  Level: Medium  LO: 5,6
What is Kapanga’s work in process inventory balance at the end of October?
$23,000
$30,500
$32,000
$43,000
Answer: B  Level: Medium  LO: 5,6
Garrison, Managerial Accounting, 12th Edition 99
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Use the following to answer questions 92-95:
Dillon Company applies manufacturing overhead to jobs using a predetermined overhead rate of 75% of direct labor cost. Any under or overapplied overhead cost is closed out to Cost of Goods Sold at the end of the month. During May, the following transactions were recorded by the company:
Raw materials (all direct materials):Purchased during the month ………………………………….$38,000Used in production ………………………………………………$35,000Labor:Direct labor hours worked during the month …………..3,150Direct labor cost incurred ……………………………………..$30,000Manufacturing overhead cost incurred (total) …………….$24,500Inventories:Raw materials (all direct), May 31 …………………………$8,000Work in process, May 1 ……………………………………….$9,000Work in process, May 31 ……………………………………..$12,000*
*Contains $4,400 in direct labor cost.
The balance on May 1 in the Raw Materials inventory account was:
$11,000
$5,000
$7,000
$9,000
Answer: B  Level: Medium  LO: 6
The amount of direct materials cost in the May 31 Work in Process inventory account was:
$7,600
$2,000
$6,300
$4,300
Answer: D  Level: Hard  LO: 6
100 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The entry to dispose of the under or overapplied overhead cost for the month would include:
a debit of $2,000 to the Manufacturing Overhead account
a credit of $2,500 to the Manufacturing Overhead account
a debit of $2,000 to Cost of Goods Sold
a credit of $2,500 to Cost of Goods Sold
Answer: C  Level: Hard  LO: 8
The Cost of Goods Manufactured for May was:
$84,500
$95,000
$75,500
$81,500
Answer: A  Level: Medium  LO: 6
Use the following to answer questions 96-98:
Farber Corporation uses a job-order cost system. The information below is from the financial records of the company for last year:
Total manufacturing costs …………………….$2,500,000Cost of goods manufactured ………………….$2,425,000Predetermined overhead rate …………………80% of direct labor cost
Applied overhead was 30% of total manufacturing costs. The Work in Process inventory at January 1 was 75% of the Work in Process inventory at December 31.
Farber Company’s total direct labor cost was:
$750,000
$600,000
$900,000
$937,500
Answer: D  Level: Hard  LO: 6  Source: CMA, adapted
Garrison, Managerial Accounting, 12th Edition 101
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Total cost of direct material used by Farber Company was:
$750,000
$812,500
$850,000
$1,150,000
Answer: B  Level: Hard  LO: 6  Source: CMA, adapted
The Work in Process inventory at December 31 was:
$300,000
$225,000
$100,000
$75,000
Answer: A  Level: Hard  LO: 6  Source: CMA, adapted
Use the following to answer questions 99-101:
Killian Company began operations on January 1. The predetermined overhead rate was set at $6.00 per direct labor-hour. Debits to Work in Process for the year totaled $550,000. Credits to Work in Process totaled $480,000. Analysis of the Company’s records indicates that direct labor cost totaled $250,000 for the year, which represents 20,000 direct labor-hours.
The direct materials used in production during the year totaled:
$180,000
$240,000
$130,000
$120,000
Answer: A  Level: Hard  LO: 7
If the actual manufacturing overhead cost for the year totaled $145,000, then overhead was:
overapplied by $25,000
overapplied by $10,000
underapplied by $25,000
underapplied by $10,000
Answer: C  Level: Medium  LO: 7,8
102 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The Company’s ending work in process inventory consisted of one job, Job 42. The job had been charged with $28,000 of direct labor cost, which consisted of 2,000 actual labor-hours. The direct materials cost in Job 42 totaled:
$33,000
$42,000
$17,000
$30,000
Answer: D  Level: Hard  LO: 7
Use the following to answer questions 102-103:
Echo Corporation uses a job-order costing system and applies overhead to jobs using a predetermined overhead rate. During the year the company’s Finished Goods inventory account was debited for $360,000 and credited for $338,800. The ending balance in the Finished Goods inventory account was $36,600. At the end of the year, manufacturing overhead was overapplied by $15,900.
The balance in the Finished Goods inventory account at the beginning of the year was:
$15,900
$15,400
$21,200
$36,600
Answer: B  Level: Medium  LO: 7
If the applied manufacturing overhead was $169,300, the actual manufacturing overhead cost for the year was:
$168,800
$153,400
$190,000
$185,200
Answer: B  Level: Medium  LO: 7
Garrison, Managerial Accounting, 12th Edition 103
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Use the following to answer questions 104-108:
The following partially completed T-accounts summarize transactions for Farwest Company during the year:
Raw Materials

Beg Bal 4,700 10,000
6,900
Finished Goods

Beg Bal 1,900 22,900
26,300
Work in Process

Beg Bal 4,600 26,300
7,400
8,000
6,800
Manufacturing Overhead

2,600 6,800
3,000
1,900
Wages & Salaries Payable

12,300 1,400 Beg Bal
11,000
Cost of Goods Sold

22,900
The Cost of Goods Manufactured was:
$22,900
$26,300
$6,400
$49,200
Answer: B  Level: Medium  LO: 7
104 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The direct labor cost was:
$8,000
$12,300
$12,600
$11,000
Answer: A  Level: Hard  LO: 7
The direct materials cost was:
$8,000
$10,000
$7,400
$4,600
Answer: C  Level: Hard  LO: 7
The manufacturing overhead applied was:
$1,900
$6,800
$12,900
$3,000
Answer: B  Level: Medium  LO: 7
The manufacturing overhead was:
$1,900 underapplied
$700 underapplied
$400 overapplied
$3,200 overapplied
Answer: B  Level: Medium  LO: 7
Garrison, Managerial Accounting, 12th Edition 105
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Essay Questions
Aladili Company is a manufacturing firm that uses job-order costing. At the beginning of the year, the company’s inventory balances were as follows:
Raw materials …………………………..$36,000Work in process ………………………..$41,000Finished goods ………………………….$104,000
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 21,000 machine-hours and incur $210,000 in manufacturing overhead cost. The following transactions were recorded for the year:
Raw materials were purchased, $346,000.
Raw materials were requisitioned for use in production, $338,000 ($302,000 direct and $36,000 indirect).
The following employee costs were incurred: direct labor, $360,000; indirect labor, $68,000; and administrative salaries, $111,000.
Selling costs, $153,000.
Factory utility costs, $29,000.
Depreciation for the year was $102,000 of which $93,000 is related to factory operations and $9,000 is related to selling and administrative activities.
Manufacturing overhead was applied to jobs. The actual level of activity for the year was 19,000 machine-hours.
The cost of goods manufactured for the year was $870,000.
Sales for the year totaled $1,221,000 and the costs on the job cost sheets of the goods that were sold totaled $855,000.
The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.
Required:
Prepare the appropriate journal entry for each of the items above (a. through j.). You can assume that all transactions with employees, customers, and suppliers were conducted in cash.
Level: Medium  LO: 3,4,5,8
106 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Answer:a.Raw Materials Inventory ………………………………346,000Cash …………………………………………………..346,000b.Work in Process Inventory ……………………………302,000Manufacturing Overhead ………………………………36,000Raw Materials Inventory ………………………338,000c.Work in Process Inventory ……………………………360,000Manufacturing Overhead ………………………………68,000Administrative Salary Expense ………………………111,000Cash …………………………………………………..539,000d.Selling Expenses ………………………………………….153,000Cash …………………………………………………..153,000e.Manufacturing Overhead ………………………………29,000Cash …………………………………………………..29,000f.Manufacturing Overhead ………………………………93,000Depreciation Expense …………………………………..9,000Accumulated Depreciation ……………………102,000g.Work in Process …………………………………………..190,000Manufacturing Overhead ………………………190,000h.Finished Goods ……………………………………………870,000Work in Process…………………………………..870,000i.Cash …………………………………………………………..1,221,000Sales…………………………………………………..1,221,000Cost of Goods Sold ………………………………………855,000Finished Goods ……………………………………855,000j.Cost of Goods Sold ………………………………………36,000Manufacturing Overhead ………………………36,000
Garrison, Managerial Accounting, 12th Edition 107
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Quark Spy Equipment manufactures espionage equipment. Quark uses a job-order cost system and applies overhead to jobs the basis of direct labor-hours. For the current year, Quark estimated that it would work 100,000 direct labor-hours and incur $20,000,000 of manufacturing overhead cost. The following summarized information relates to January of the current year. The raw materials purchased include both direct and indirect materials.
Raw materials purchased on account …………………………$1,412,000Direct materials requisitioned into production …………….$1,299,500Indirect materials requisitioned into production ………….$98,000Direct labor cost (7,900 hours @ $40 per hour) …………..$316,000Indirect labor cost (10,200 hours @ $16 per hour) ………$163,200Depreciation on the factory building ………………………….$190,500Depreciation on the factory equipment ………………………$890,700Utilities for the factory …………………………………………….$79,600Cost of jobs finished ………………………………………………..$2,494,200Cost of jobs sold ……………………………………………………..$2,380,000Sales (all on account) ………………………………………………$3,570,000
Required:
Prepare journal entries to record Quark’s transactions for the month of January. Do not close out the manufacturing overhead account.
Level: Medium  LO: 3,4,5
108 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Answer:Raw Materials ………………………………………………..1,412,000Accounts Payable …………………………………..1,412,000Work in Process ……………………………………………..1,299,500Manufacturing Overhead …………………………………98,000Raw Materials ……………………………………….1,397,500Work in Process ……………………………………………..316,000Manufacturing Overhead …………………………………163,200Salaries and Wages Payable (or Cash) ………479,200Work in Process ……………………………………………..1,580,000Manufacturing Overhead ………………………..1,580,000($20,000,000/100,000) ◊ 7,900Manufacturing Overhead …………………………………1,160,800Accumulated Depreciation, Building ………..190,500Accumulated Depreciation, Equipment …….890,700Utilities Payable (or Cash) ………………………79,600Finished Goods ………………………………………………2,494,200Work in Process …………………………………….2,494,200Cost of Goods Sold…………………………………………2,380,000Finished Goods ……………………………………..2,380,000Accounts Receivable ………………………………………3,570,000Sales …………………………………………………….3,570,000
Garrison, Managerial Accounting, 12th Edition 109
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Baar Company is a manufacturing firm that uses job-order costing. The company’s inventory balances were as follows at the beginning and end of the year:
Beginning BalanceEnding BalanceRaw materials …………………………..$26,000$20,000Work in process ………………………..$71,000$53,000Finished goods ………………………….$66,000$81,000
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 44,000 machine-hours and incur $176,000 in manufacturing overhead cost. The following transactions were recorded for the year:
Raw materials were purchased, $459,000.
Raw materials were requisitioned for use in production, $465,000 ($431,000 direct and $34,000 indirect).
The following employee costs were incurred: direct labor, $296,000; indirect labor, $63,000; and administrative salaries, $157,000.
Selling costs, $134,000.
Factory utility costs, $14,000.
Depreciation for the year was $119,000 of which $114,000 is related to factory operations and $5,000 is related to selling and administrative activities.
Manufacturing overhead was applied to jobs. The actual level of activity for the year was 47,000 machine-hours.
Sales for the year totaled $1,287,000
Required:
Prepare a schedule of cost of goods manufactured in good form.
Was the overhead under- or overapplied? By how much?
Prepare an income statement for the year in good form. The company closes any under- or overapplied overhead to Cost of Goods Sold.
Level: Medium  LO: 3,5,6,8
110 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Answer:a.  Schedule of cost of goods manufacturedEstimated total manufacturing overhead (a) ……………….$176,000Estimated total machine-hours (b) …………………………….44,000………………………..Predeterminedoverheadrate(a)˜(b)$4.00Actual total machine-hours (a) ………………………………….47,000Predetermined overhead rate (b) ……………………………….$4.00Overhead applied (a) ◊ (b)……………………………………….$188,000Direct materials:Raw materials inventory, beginning ……………………….$26,000Add: purchases of raw materials …………………………….459,000…………………………………Totalrawmaterialsavailable485,000Deduct: raw materials inventory, ending …………………20,000……………………………..Rawmaterialsusedinproduction465,000Less: indirect materials ……………………………………………34,000………………………………………………………Directmaterials431,000Direct labor …………………………………………………………….296,000Manufacturing overhead applied ……………………………….188,000………………………………………..Totalmanufacturingcosts915,000Add: Beginning work in process inventory ………………..71,000986,000Deduct: Ending work in process inventory …………………53,000……………………………………..Costofgoodsmanufactured$933,000
Overhead under- or overapplied
Actual manufacturing overhead cost incurred:
Indirect materials ………………………………………………….$ 34,000Indirect labor ……………………………………………………….63,000Factory utilities ……………………………………………………14,000Factory depreciation ……………………………………………..114,000……………………….Manufacturingoverheadcostincurred225,000Manufacturing overhead applied ……………………………….188,000……………………………………………Underappliedoverhead$ 37,000
Garrison, Managerial Accounting, 12th Edition 111
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
c.  Income StatementBeginning finished goods inventory ………………………….$66,000Cost of goods manufactured ……………………………………..933,000…………………………………………..Goodsavailableforsale999,000Ending finished goods inventory ………………………………81,000…………………………………..Unadjustedcostofgoodssold918,000Add: underapplied overhead …………………………………….37,000……………………………………..Adjustedcostofgoodssold$955,000Sales ……………………………………………………………………..$1,287,000Cost of goods sold (adjusted) ……………………………………955,000………………………………………………………….Grossmargin332,000Less selling and administrative expenses:Administrative salaries …………………………………………….$157,000Selling costs …………………………………………………………..134,000Depreciation …………………………………………………………..5,000296,000………………………………………………Netoperatingincome$36,000
Gonzalez, Inc. manufactures stereo speakers in two factories; one in Vandalia, Illinois and another in Modesto, California. The Vandalia factory uses DL$ for its overhead rate and the Modesto factory uses machine-hours (MHs) for its overhead rate. Information related to both plants for last year is presented below:
Vandalia factoryModesto factoryEstimated manufacturing overhead ………..$1,000,000$1,600,000Estimated amount of allocation base ………(a)______________200,000 MHsPredetermined overhead rate …………………$10 per DL$(d)______________Actual amount of allocation base ……………(b)______________190,000 MHsActual manufacturing overhead ……………..$1,092,500$1,472,500Applied manufacturing overhead ……………$1,010,000(e)_______________Under or overapplied overhead………………(c)______________(f)_______________Required:
Fill in the lettered blanks above. SHOW YOUR CALCULATIONS.
Level: Medium  LO: 3,5,8
112 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Answer:
= $100,000; $1,000,000/$10
= $101,000; $1,010,000/$10
= $82,500 underapplied; $1,092,500 – $1,010,000
= $8 per MH; $1,600,000/200,000
= $1,520,000; 190,000 ◊ $8
= ($47,500) overapplied; $1,472,500 – $1,520,000
Hacken Company has a job-order costing system. The company applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor cost. The information below has been taken from the cost records of Hacken Company for the past year:
Direct materials used in production ……………………………………………..$1,250Total manufacturing costs charged to production during the year(includes direct materials, direct labor, and applied factoryoverhead) ……………………………………………………………………………..$6,050Manufacturing overhead applied …………………………………………………$2,800Selling and administrative expenses…………………………………………….$1,000Inventories:Direct materials, January 1 ………………………………………………………$130Direct materials, December 31 …………………………………………………$80Work in process, January 1 ……………………………………………………..$250Work in process, December 31 ………………………………………………..$400Finished goods, January 1 ……………………………………………………….$300Finished goods, December 31 ………………………………………………….$200
Required:
Compute the cost of direct materials purchased during the year.
Compute the predetermined overhead rate that was used during the past year.
Compute the Cost of Goods Manufactured for the past year.
Compute the Cost of Goods Sold for the past year.
Level: Hard  LO: 3,6
Garrison, Managerial Accounting, 12th Edition 113
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Answer:a.Cost of raw materials used in production ………………………………….$1,250Less decrease in the raw materials inventory during the year($130 – $80 = $50) ……………………………………………………………..50……………………….Costofrawmaterialspurchasedduringtheyear$1,200b.Total manufacturing costs ………………………………………………………$6,050Less: Direct materials used in production …………………………………1,250Less: Manufacturing overhead applied …………………………………….2,800……………………………………………………….Directlaborcostincurred$2,000Predetermined overhead rate = Manufacturing overhead cost ˜ Direct laborcost = $2,800 ˜ $2,000 =140% of direct labor costc.Total manufacturing costs ………………………………………………………$6,050Add: Work in process inventory, January 1 ………………………………2506,300Deduct: Work in process inventory, December 31 …………………….400……………………………………………………Costofgoodsmanufactured$5,900d.Finished goods inventory, January 1 ………………………………………..$ 300Add: Cost of goods manufactured ……………………………………………5,900………………………………………………Costofgoodsavailableforsale6,200Deduct: Finished goods inventory, December 31 ………………………200…………………………………………………………………Costofgoodssold$6,000
114 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The Simkins Company uses a job order costing system. The following activities took place during the month of May:
Raw materials purchased, $40,000.
Raw materials (all direct) used in production, $35,000.
Salaries and wages cost incurred:
Direct labor cost, $60,000.
Indirect labor cost, $30,000.
Sales salaries $25,000.
Factory utility costs incurred, $15,000.
Depreciation on factory equipment, $50,000.
Advertising expense incurred, $80,000.
Manufacturing overhead is applied at the predetermined rate of 150% of direct labor cost.
Cost of Goods Manufactured for the month, $180,000.
Cost of Goods Sold for the month, $150,000.
Required:
Prepare journal entries to record the information given above. Key your entries by the letters a through i.
Level: Medium  LO: 4,5,6
Garrison, Managerial Accounting, 12th Edition 115
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Answer:a.Raw materials inventory ……………………..40,000Accounts payable ………………………….40,000b.Work in process ………………………………….35,000Raw materials inventory ………………..35,000c.Work in process ………………………………….60,000Manufacturing overhead ……………………..30,000Sales salaries expense …………………………25,000Wages and salaries payable ……………115,000d.Manufacturing overhead ……………………..15,000Accounts payable ………………………….15,000e.Manufacturing overhead ……………………..50,000Accumulated depreciation ……………..50,000f.Advertising expense ……………………………80,000Accounts payable ………………………….80,000g.Work in process ………………………………….90,000Manufacturing overhead ………………..90,000$60,000 ◊ 150% = $90,000h.Finished goods …………………………………..180,000Work in process ……………………………180,000i.Cost of goods sold ………………………………150,000Finished goods ……………………………..150,000
116 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The Commonwealth Company uses a job-order cost system and applies manufacturing overhead cost to jobs using a predetermined overhead rate based on the cost of materials used in production. At the beginning of the year, the following estimates were made as a basis for computing the predetermined overhead rate: manufacturing overhead cost, $186,000; direct materials cost, $155,000. The following transactions took place during the year (all purchases and services were acquired on account):
Raw materials purchased, $96,000.
Raw materials requisitioned for use in production (all direct materials), $88,000.
Utility bills incurred in the factory, $17,000.
Costs for salaries and wages incurred as follows: Direct labor, $174,000
Indirect labor, $70,000
Selling and administrative salaries, $124,000
Maintenance costs incurred in the factory, $12,000.
Advertising costs incurred, $98,000.
Depreciation recorded for the year, $75,000 (75% relates to factory assets and the remainder relates to selling and administrative assets).
Rental cost incurred on buildings, $80,000 (80% of the space is occupied by the factory, and 20% is occupied by sales and administration).
Miscellaneous selling and administrative costs incurred, $12,000.
Manufacturing overhead cost was applied to jobs.
Cost of goods manufactured for the year, $480,000.
Sales for the year (all on account) totaled $900,000. These goods cost $550,000 to manufacture
Required:
Prepare journal entries to record the information above. Key your entries to the letters a through l.
Level: Medium  LO: 4,5,6
Garrison, Managerial Accounting, 12th Edition 117
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Answer:a.Raw Materials ……………………………..96,000Accounts Payable ……………………96,000b.Work in Process …………………………..88,000Raw Materials ………………………..88,000c.Manufacturing Overhead ………………17,000Accounts Payable ……………………17,000d.Work in Process …………………………..174,000Manufacturing Overhead ………………70,000Salaries Expense …………………………..124,000Salaries and Wages Payable ……..368,000e.Manufacturing Overhead ………………12,000Accounts Payable ……………………12,000f.Advertising Expense …………………….98,000Accounts Payable ……………………98,000g.Manufacturing Overhead ………………56,250Depreciation Expense ……………………18,750Accumulated Depreciation ……….75,000h.Manufacturing Overhead ………………64,000Rent Expense ……………………………….16,000Accounts Payable ……………………80,000i.Miscellaneous Expense …………………12,000Accounts Payable ……………………12,000j.Work in Process …………………………..105,600Manufacturing Overhead …………105,600((186,000/155,000) ◊ 88,000)k.Finished Goods …………………………….480,000Work in Process ……………………..480,000l.Accounts Receivable …………………….900,000Sales ……………………………………..900,000Cost of Goods Sold ………………………550,000Finished Goods ………………………550,000
118 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
The following cost data relate to the manufacturing activities of the Kanaba Company last year:
Manufacturing overhead costs:Property taxes ………………………………………………..$ 1,500Utilities, factory ……………………………………………..2,500Indirect labor ………………………………………………….5,000Depreciation, factory ………………………………………12,000Insurance, factory ……………………………………………3,000……………………………………………………………..Total$24,000Other costs incurred:Purchases of direct materials ……………………………$16,000Direct labor cost ……………………………………………..$20,000Inventories:Direct materials, January 1 ………………………………$4,000Direct materials, December 31 …………………………$3,500Work in process, January 1 ………………………………$3,000Work in process, December 31 …………………………$3,750
The company uses a predetermined overhead rate to apply manufacturing overhead cost to production. The rate last year was $ 5.00 per machine-hour; a total of 5,000 machine-hours were recorded for the year.
Required:
Compute the amount of under- or overapplied overhead cost for the year.
Prepare a schedule of Cost of Goods Manufactured for the year.
Level: Medium  LO: 5,6,8
Garrison, Managerial Accounting, 12th Edition 119
 HYPERLINK “http://downloadslide.blogspot.com” 
Chapter 3 Systems Design: Job-Order Costing
Answer:a.  Actual total manufacturing overhead cost …………………..$24,000Manufacturing overhead applied: 5,000 ◊ $5.00 = ………25,000………………………..Overappliedmanufacturingoverhead$ (1,000)b.Kanaba CompanyStatement of Cost of Goods ManufacturedFor the year ended December 31Direct materials:Direct materials inventory, January 1 ……………………..$ 4,000Add purchases of direct materials …………………………..16,000……………………………Directmaterialsavailableforuse20,000Deduct direct materials inventory, December 31 ………3,500…………………………..Directmaterialsusedinproduction16,500Direct labor …………………………………………………………….20,000Overhead cost applied to work in progress …………………25,000………………………………………..Totalmanufacturingcosts61,500Add work in process, January 1 ………………………………..3,00064,500Deduct work in process, December 31 ………………………3,750……………………………………..Costofgoodsmanufactured$60,750
Testor Products uses a job-order costing system with a predetermined overhead rate based on machine-hours. The company closes out any under- or overapplied overhead to Cost of Goods Sold.
Required:
If overhead is overapplied, what adjustment does the company make to Cost of Goods Sold? Is Cost of Goods Sold increased or decreased? Why?
Level: Easy LO: 8 Answer:
If overhead is overapplied, too much overhead has been applied to inventories and they are therefore overcosted. Since these excess costs flow through to Cost of Goods Sold when finished goods are sold, it is necessary to reduce Cost of Goods Sold in order to eliminate this overstatement of costs.
120 Garrison, Managerial Accounting, 12th Edition
 HYPERLINK “http://downloadslide.blogspot.com” 

There are no reviews yet.

Add a review

Be the first to review “Managerial Accounting 12th Edition By Garrison – Test Bank”

Your email address will not be published. Required fields are marked *

Category:
Cart Close
Updating…
  • No products in the cart.

Continue shopping