Case study

Topics: Inventory, Manufacturing, Costs Pages: 25 (3814 words) Published: May 26, 2014

1.Paulson Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for next year:

Paulson estimated that 40,000 direct labor hours and 20,000 machine hours would be worked during the year. The predetermined overhead rate per machine hour will be:
A)$1.60.
B)$2.10.
C)$1.00.
D)$1.05.

Answer: B)$2.10.
Manufacturing OH = Rent + Depreciation + Indirect materials + Insurance = 13,500 + 6,500 + 10,000 + 12,000 = 42,000
Machine hrs= 20,000
Therefore POHR = 42,000 / 20,000 = $2.10

2.Which of the following would probably be the least appropriate allocation base for allocating overhead in a highly automated manufacturer of specialty valves?
A)machine-hours
B)power consumption
C)direct labor-hours
D)machine setups
Answer: C)direct labor-hours

3.Nil Co. uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. For the year ended December 31, Nil's estimated manufacturing overhead was $600,000, based on an estimated volume of 50,000 direct labor hours, at a direct labor rate of $6.00 per hour. Actual manufacturing overhead amounted to $620,000, with actual direct labor cost of $325,000. For the year, manufacturing overhead was:

A)overapplied by $20,000.
B)underapplied by $22,000.
C)overapplied by $30,000.
D)underapplied by $30,000.
Answer: C)overapplied by $30,000.

Direct labor cost = 50,000 x $ 6 = $300,000
manufacturing overhead = $600,000
Rate = $600,000/ $300,000 = $ 2
Actual direct labor cost = $325,000
Therefore applied overhead= 325,000 x 2 =$650,000
Actual manufacturing OH=$620,000
Therefore OH over applied==$650,000 - $620,000 = $30,000

Use the following to answer question 4:

Leija Manufacturing Company uses a job-order costing system and started the month of March with one job in process (Job #359). This job had $500 of cost assigned to it at this time. During March, Leija assigned production costs as follows to the jobs worked on during the month:

During March, Leija completed and sold Job #359. Job #360 was also completed but was not sold by month end. Job #361 was not completed by the end of March.

4.What is Leija's cost of goods manufactured for March?
A)$ 6,500
B)$14,100
C)$14,600
D)$16,500

Answer : C)$14,600
Job # 359 = 500+ 6000=6500
Job # 360 = 8100
6500+8100 = 14600
Cost of goods manufactured : The manufacturing costs associated with the goods that were finished during the period.

5.Which of the following entries or sets of entries would record sales of $200,000 for the month of July of goods costing $119,000?
A)

B)

C)

D)

Answer: D)

6.Pinnini Co. uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. Last year, Pinnini Company incurred $225,000 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was overapplied $14,500 for the year. If the predetermined overhead rate was $5.00 per direct labor hour, how many hours did the company work during the year?

A)45,000 hours
B)47,900 hours
C)42,100 hours
D)44,000 hours

Answer: B)47,900 hours
Total OH applied= $225,000+ $14,500= $239,500
Rate= $5.00 per direct labor hour
Therefore no of hours= $239,500/ $ 5 = 47,900 hours

Use the following to answer question 7:

Munos Publishing Company uses a job-order costing system to collect costs related to the manufacture of specialty publications for corporate training.

7.What journal entry would Munos make to record the completion of Job KN668 at a total cost of $7,600?
A)

B)

C)

D)

Answer: C)

When a job is completed, the total cost is debited to Finished Goods Inventory and credited to Work in Process Inventory.

8.The balance in...
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