Q: A company estimated $$1,053,000 of manufacturing overhead and 58,500 direct labor hours, resulting in a predetermined overhead rate of 18 $$per DL hour. If actual overhead was $$1,005,000 and actual DL hours were 57,000, by how much was overhead over- or underallocated? Use the formula: $$ \text{Allocated MOH} = \text{Actual DL Hours} \times \text{Predetermined MOH Rate} $

$$ 57,000 \times 18 = 1,026,000 $$ allocated; $$1,026,000 - 1,005,000 = 21,000$$ overallocated

Question 1

Which of the following best describes the main difference between job costing and process costing?

Accepted Answer

Job costing is used for unique, custom-ordered products, while process costing is used for mass production of identical units.

Question 2

A company manufactures custom furniture in small batches. Which costing system should it use and why?

Accepted Answer

Job costing, because each batch is unique and costs must be tracked separately.

Question 3

Which document lists all raw materials needed to manufacture a specific job?

Accepted Answer

Bill of materials

Question 4

A company estimates its total manufacturing overhead costs for the year to be $$1,200,000 and expects to use 60,000 direct labor hours. What is the predetermined manufacturing overhead rate per direct labor hour?

Provide your answer using the formula: 
$$ 	ext{Predetermined MOH Rate} = \frac{	ext{Total Estimated MOH Costs}}{	ext{Total Estimated Allocation Base}} $

Accepted Answer

$$ \frac{1,200,000}{60,000} = 20 $$ per direct labor hour

Question 5

If a job used 200 direct labor hours and the predetermined manufacturing overhead rate is $$15 per direct labor hour, how much manufacturing overhead should be allocated to the job?

Use the formula: 
$$ 	ext{MOH Allocated} = 	ext{Predetermined MOH Rate} 	imes 	ext{Actual Allocation Base Used} $

Accepted Answer

$$ 15 	imes 200 = 3,000 $$

Question 6

A company’s actual manufacturing overhead for the year was $$25,000. The overhead allocated to jobs was 24$$,000. Was overhead underallocated or overallocated, and by how much?

Accepted Answer

Underallocated by $1,000

Question 7

If jobs have been undercosted due to underallocation of manufacturing overhead, what adjustment should be made to Cost of Goods Sold?

Accepted Answer

Increase Cost of Goods Sold by the amount of underallocation

Question 8

Which of the following is NOT a direct cost in a job costing system?

Accepted Answer

Manufacturing overhead

Question 9

A law firm uses job costing to bill clients. Which of the following would be considered a direct cost for a client job?

Accepted Answer

Professional labor hours spent on the client’s case

Question 10

A company completed Job 603 with the following costs: Direct Materials $$40,000, Direct Labor 10$$,000, Manufacturing Overhead $$8,000. If 50 units were produced, what is the cost per unit?

Use the formula: 
$$ 	ext{Cost per Unit} = \frac{	ext{Total Job Cost}}{	ext{Number of Units}} $

Accepted Answer

$$ \frac{58,000}{50} = 1,160 $$

Question 11

Which of the following companies would most likely use process costing?

Accepted Answer

A cereal manufacturer

Question 12

Which document is used by production personnel to request materials from the storeroom for a specific job?

Accepted Answer

Materials requisition

Question 13

A company estimated $$1,053,000 of manufacturing overhead and 58,500 direct labor hours, resulting in a predetermined overhead rate of 18 $$per DL hour. If actual overhead was $$1,005,000 and actual DL hours were 57,000, by how much was overhead over- or underallocated?

Use the formula: 
$$ 	ext{Allocated MOH} = 	ext{Actual DL Hours} 	imes 	ext{Predetermined MOH Rate} $

Accepted Answer

$$ 57,000 	imes 18 = 1,026,000 $$ allocated; $$1,026,000 - 1,005,000 = 21,000$$ overallocated

Question 14

Which of the following is a reason management uses job cost records?

Accepted Answer

To assess profitability, reduce future job costs, and prepare bids for custom orders

Question 15

Which of the following is an example of a cost driver for allocating manufacturing overhead?

Accepted Answer

Direct labor hours

Question 16

A company’s actual manufacturing overhead is $$30,000, but 35$$,000 was allocated to jobs. What adjustment should be made to Cost of Goods Sold?

Accepted Answer

Decrease Cost of Goods Sold by $5,000

Question 17

Which of the following is NOT a step in allocating manufacturing overhead to jobs?

Accepted Answer

Allocate overhead based on actual costs incurred

Question 18

Which of the following statements about nonmanufacturing costs is correct?

Accepted Answer

Nonmanufacturing costs are assigned to products only for internal decision making.

Job Costing: Concepts, Procedures, and Applications in Managerial Accounting

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