Managerial Accounting Ch17

Cost accounting systems are used ________.

A) to accumulate product cost information

Which one of the following companies is most likely to use job order costing?

B) a law firm

3 Which of the following is true about ERP systems?

B) Because ERP systems track costs more efficiently, the benefit from the cost information outweighs the cost of obtaining the information.

4 Which of the following is a reason why a job order costing system is appropriate for a custom furniture
manufacturer?

A) The cost incurred for each job will differ as per the order specifications.

Which of the following statements is true of costing systems?

An accounting firm would likely use a job order costing system.

Which of the following would use a process costing system rather than a job order costing system?

a paint manufacturer

Which of the following is the correct order of the four steps of tracking product costs?

B) accumulate → assign → allocate → adjust

The entry to record the purchase of direct materials on account would include a ________.

A) debit to the Raw Materials Inventory account

Which of the following accounts would be debited in the journal entry to record the issuance of direct
materials?

B) Work-in-Process Inventory

The journal entry to record direct labor costs actually incurred involves a debit to the ________.

A) Work-in-Process Inventory account

The journal entry to record indirect labor costs incurred involves a debit to the ________.

A) Manufacturing Overhead account

Which of the following will be categorized as a manufacturing overhead cost?

A) depreciation on factory plant and equipment

Which of the following correctly describes the term cost driver?

C) the primary factor that causes a cost to be incurred

The predetermined overhead allocation rate is the rate used to ________.

C) allocate estimated manufacturing overhead costs to jobs

5 The predetermined overhead allocation rate is calculated by dividing ________.

D) the estimated overhead costs by total estimated quantity of the overhead allocation base

Aaron, Inc. estimates direct labor costs and manufacturing overhead costs for the coming year to be
$750,000 and $550,000, respectively. Aaron allocates overhead costs based on machine hours. The
estimated total labor hours and machine hours for the coming year are 18,000 hours and 7,000 hours,
respectively. What is the predetermined overhead allocation rate? (Round your answer to the nearest
cent.)

D) $78.57 per machine hour Explanation: D) Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base Predetermined overhead allocation rate = $550,000 / 7,000 machine hours = $78.57 per machine hour

Sybil, Inc. uses a predetermined overhead allocation rate to allocate manufacturing overhead costs to
jobs. The company recently completed Job 300X. This job used 11 machine hours and 5 direct labor hours.
The predetermined overhead allocation rate is calculated to be $43 per machine hour. What is the amount
of manufacturing overhead allocated to Job 300X using machine hours as the allocation base?

A) $473 Explanation: A) Allocated manufacturing overhead cost = Predetermined overhead allocation rate × Actual quantity of the allocation base used by each job Allocated manufacturing overhead cost = $43 × 11 machine hours = $473

The journal entry to record allocation of manufacturing overhead to a particular job includes a
________.

D) debit to the Work-in-Process Inventory account and credit to the Manufacturing Overhead account Answer: D

The records at Smith and Jones, Inc. show that Job 110 is charged with $10,000 of direct materials and
$13,000 of direct labor. Smith and Jones, Inc. allocate manufacturing overhead at 80% of direct labor cost.
What is the total cost of Job No. 110?

B) $33,400 direct material+direct labor+allocated Man. OH=

20 Underallocated overhead occurs when ________.

A) allocated overhead costs are less than actual overhead costs