Q: A company uses a predetermined overhead rate of $30 per direct labor hour. If a job requires 8 direct labor hours, how much overhead will be allocated to the job?

$$Allocated\ Overhead = PDOH\ Rate \times Actual\ Activity = \30$$ \times 8 = \$$240$$

Question 1

Which of the following best describes the primary difference between financial accounting and managerial accounting?

Accepted Answer

Financial accounting provides information to external users, while managerial accounting provides information to internal users.

Question 2

Which of the following costs would be classified as a period cost for a manufacturing company?

Accepted Answer

Depreciation on office equipment

Question 3

A company estimates its total overhead costs for the year to be $500,000 and expects to use 20,000 direct labor hours. What is the predetermined overhead rate (PDOH Rate)?

Provide your answer using the correct formula.

Accepted Answer

$$PDOH\ Rate = \frac{\500$$,000}{20,000} = \$$25\ per\ direct\ labor\ hour$$

Question 4

Which of the following is an example of a direct cost for a custom furniture manufacturer?

Accepted Answer

Wood used to build a specific table

Question 5

A company has the following balances: Beginning Inventory $$5,000, Purchases 45$$,000, Ending Inventory $10,000. What is the cost of materials used in production?

Use the appropriate formula.

Accepted Answer

$$Cost\ of\ Materials\ Used = Beginning\ Inventory + Purchases - Ending\ Inventory = \5$$,000 + \$$45,000 - \10$$,000 = \$$40,000$$

Question 6

Which of the following statements about product costs is correct?

Accepted Answer

Product costs are recorded as inventory on the balance sheet until the product is sold.

Question 7

A company uses a predetermined overhead rate of $30 per direct labor hour. If a job requires 8 direct labor hours, how much overhead will be allocated to the job?

Accepted Answer

$$Allocated\ Overhead = PDOH\ Rate 	imes Actual\ Activity = \30$$ 	imes 8 = \$$240$$

Question 8

Which of the following is NOT a characteristic of managerial accounting reports?

Accepted Answer

They are required to follow GAAP.

Question 9

A company’s cost object is a specific consulting project. Which of the following would be considered an indirect cost for this project?

Accepted Answer

Office rent for the consulting firm

Question 10

Which of the following best describes the flow of product costs through inventory accounts for a manufacturer?

Accepted Answer

Raw Materials Inventory → Work-in-Process Inventory → Finished Goods Inventory → Cost of Goods Sold

Question 11

A company completed the following for a job: Direct Materials $$2,000, Direct Labor 1$$,500, Allocated Overhead $1,200. What is the total cost of the job?

Use the correct formula.

Accepted Answer

$$Total\ Cost = Direct\ Materials + Direct\ Labor + Allocated\ Overhead = \2$$,000 + \$$1,500 + \1$$,200 = \$$4,700$$

Question 12

Which of the following is an example of a company that would most likely use process costing?

Accepted Answer

A paint manufacturer

Question 13

If a company over-allocates overhead to a job, what adjustment must be made at the end of the period?

Accepted Answer

Decrease Cost of Goods Sold by the over-allocated amount

Question 14

Which of the following would NOT be included in the calculation of total manufacturing costs for Work-in-Process Inventory?

Accepted Answer

Selling department salaries

Question 15

A company’s beginning Work-in-Process Inventory is $$8,000. During the year, it adds 37$$,000 in direct materials, $$60,000 in direct labor, and 30$$,000 in allocated overhead. If ending Work-in-Process Inventory is $15,000, what is the cost of goods manufactured?

Use the correct formula.

Accepted Answer

$$Cost\ of\ Goods\ Manufactured = Beginning\ WIP + Direct\ Materials + Direct\ Labor + Allocated\ Overhead - Ending\ WIP = \8$$,000 + \$$37,000 + \60$$,000 + \$$30,000 - \15$$,000 = \$$120,000$$

Question 16

Which of the following is a reason why management uses a predetermined overhead rate instead of actual overhead costs?

Accepted Answer

To allocate overhead costs to cost objects in a timely manner for pricing decisions

Fundamentals of Managerial Accounting: Cost Classification and Flow

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