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web.groovymark@gmail.com
- December 8, 2024
Question 01
Which of the following should be included as manufacturing overhead cost?
a) The wages of employees who work on production lines
b) The raw materials used in the finishing department
c) The direct materials used to make a product
d) The wages of factory custodians
Answer: d) The wages of factory custodians
Explanation: The wages of factory custodians are considered part of manufacturing overhead because they are indirect labor costs related to production.
Question 02
The glue and nails used in a manufacturing process should be included in which cost category?
a) Administrative costs
b) Manufacturing overhead costs
c) Prepaid supplies
d) Direct materials costs
Answer: b) Manufacturing overhead costs
Explanation: Glue and nails are considered indirect materials and are part of manufacturing overhead costs.
Question 03
. How is the purchase of raw materials on open account recorded?
a) Debit to accounts payable
b) Credit to raw materials inventory
c) Credit to work-in-process inventory
d) Debit to raw materials inventory
Answer: d) Debit to raw materials inventory
Explanation: A purchase of raw materials on account increases raw materials inventory, which is recorded as a debit.
Question 04
Which journal entry is used to record payment of factory rent in cash?
a) Debit to finished goods inventory
b) Debit to cost of goods sold
c) Debit to work-in-process inventory
d) Debit to manufacturing overhead
Answer: d) Debit to manufacturing overhead
Explanation: Payment for factory rent is recorded as manufacturing overhead, which is an indirect cost of production.
Question 05
What is the manufacturing overhead rate that is applied to work-in-process during manufacturing?
a) An estimate based on expected overhead and machine/labor hours
b) The actual costs of manufacturing overhead components
c) An estimate based on actual costs divided by products made
d) The actual costs of manufacturing overhead divided by total products
Answer: a) An estimate based on expected overhead and machine/labor hours
Explanation: Manufacturing overhead is typically applied to work-in-process using a predetermined overhead rate based on expected costs and allocation factors like machine or labor hours.
Question 06
In a job order costing system, what does a debit to work-in-process inventory and a credit to salaries and wages payable represent?
a) Recognizing total labor costs
b) Applying indirect labor costs to work-in-process inventory
c) Assigning direct labor costs to products being manufactured
d) Payment of salaries to factory employees
Answer: c) Assigning direct labor costs to products being manufactured
Explanation: This journal entry reflects assigning direct labor costs to the work-in-process inventory.
Question 07
In a job order costing system, what does a debit to manufacturing overhead and a credit to salaries and wages payable represent?
a) Recording indirect labor costs to manufacturing overhead
b) Paying the salaries of indirect laborers
c) Recording direct labor costs
d) Paying direct laborers
Answer: a) Recording indirect labor costs to manufacturing overhead
Explanation: Indirect labor costs (such as supervisors) are recorded as part of manufacturing overhead.
Question 08
A company budgets manufacturing overhead at $500,000 and direct labor hours at 20,000. What is the predetermined overhead rate?
a) $36 per direct labor hour
b) $20 per direct labor hour
c) $25 per direct labor hour
d) $61 per direct labor hour
Answer: c) $25 per direct labor hour
Explanation: The predetermined overhead rate is calculated as budgeted overhead divided by budgeted direct labor hours ($500,000 / 20,000 = $25).
Question 09
What is the correct order of steps for accounting for manufacturing overhead?
a) Budget overhead, record actual overhead, apply overhead to WIP, eliminate overapplied/underapplied overhead
b) Budget overhead, eliminate overapplied/underapplied overhead, record actual overhead, apply overhead to WIP
c) Apply overhead, budget overhead, record actual overhead, eliminate overapplied/underapplied overhead
d) Record actual overhead, apply overhead, budget overhead, eliminate overapplied/underapplied overhead
Answer: a) Budget overhead, record actual overhead, apply overhead to WIP, eliminate overapplied/underapplied overhead
Explanation: The process begins by budgeting overhead, recording actual overhead, applying overhead, and adjusting for over- or underapplied overhead.
Question 10
How are actual manufacturing overhead costs recorded during the year?
a) Debits to the work-in-process account
b) Debits to the manufacturing overhead account
c) Credits to the manufacturing overhead account
d) Credits to the work-in-process account
Answer: b) Debits to the manufacturing overhead account
Explanation: Actual manufacturing overhead costs are debited to the manufacturing overhead account.
Question 11
What would least likely be assigned to manufacturing overhead?
a) Repairs on factory equipment
b) Rent on the factory warehouse
c) Insurance on the factory where goods are made
d) Materials that are a key component to making manufactured goods
Answer: d) Materials that are a key component to making manufactured goods
Explanation: Key materials used directly in manufacturing goods are considered direct materials, not overhead.
Question 12
Applied manufacturing overhead is directly recorded as a credit to which account?
a) Cost of goods sold
b) Work-in-process inventory
c) Manufacturing overhead
d) Finished goods inventory
Answer: c) Manufacturing overhead
Explanation: When manufacturing overhead is applied, it is credited to the manufacturing overhead account.
Question 13
When manufacturing overhead is underapplied, which entry is included in closing the manufacturing overhead account?
a) Debit to cost of goods sold
b) Debit to finished goods inventory
c) Debit to work-in-process inventory
d) Debit to manufacturing overhead
Answer: a) Debit to cost of goods sold
Explanation: Underapplied overhead means not enough overhead was applied, so it is added to cost of goods sold.
Question 14
At the end of an accounting period, the manufacturing overhead account has debits totaling $25,000 and credits totaling $28,000. What does this mean?
a) Actual manufacturing costs were $28,000
b) Manufacturing overhead is underapplied by $3,000
c) Manufacturing overhead is overapplied by $3,000
d) Applied manufacturing overhead costs were $25,000
Answer: c) Manufacturing overhead is overapplied by $3,000
Explanation: Overapplied overhead occurs when more overhead is applied than actually incurred ($28,000 - $25,000 = $3,000 overapplied).
Question 15
What does a journal entry debiting cost of goods sold and crediting manufacturing overhead represent?
a) Recording underapplied manufacturing overhead
b) Transferring overhead costs to work-in-process
c) Recording overapplied manufacturing overhead
d) Recording actual manufacturing overhead for the period
Answer: a) Recording underapplied manufacturing overhead
Explanation: This entry adjusts for underapplied overhead by increasing cost of goods sold.
Question 16
What is an alternative way to eliminate overapplied or underapplied manufacturing overhead besides recording it to cost of goods sold?
a) Allocate to finished goods inventory only
b) Allocate to work-in-process inventory, finished goods inventory, and cost of goods sold
c) Allocate to work-in-process inventory only
d) Allocate to manufacturing overhead payable
Answer: b) Allocate to work-in-process inventory, finished goods inventory, and cost of goods sold
Explanation: Over- or underapplied overhead can be prorated across inventory and cost of goods sold based on ending balances.
Question 17
An overapplication of manufacturing overhead would be corrected by which journal entry?
a) Debiting cost of goods sold and crediting manufacturing overhead
b) Debiting manufacturing overhead and crediting cost of goods sold
c) Debiting work-in-process inventory and crediting manufacturing overhead
d) Debiting finished goods inventory and crediting manufacturing overhead
Answer: b) Debiting manufacturing overhead and crediting cost of goods sold
Explanation: To correct overapplied overhead, manufacturing overhead is debited (to reduce it) and cost of goods sold is credited.
Question 18
In which case is it appropriate to use job costing?
a) When a company supports more than one product line
b) When the costs of outsourcing exceed the benefits
c) When the activities performed in each process center are different for all units produced
d) When rental costs are allocated among various product lines
Answer: c) When the activities performed in each process center are different for all units produced
Explanation: Job costing is used when production processes and costs vary by job or product.
Question 19
A company has accrued but not paid direct labor wages in cash. What is part of the journal entry to record the amount of direct labor wages earned?
a) Debit finished goods inventory
b) Debit work-in-process inventory
c) Debit manufacturing overhead
d) Credit work-in-process inventory
Answer: b) Debit work-in-process inventory
Explanation: Direct labor costs are debited to work-in-process inventory.
Question 20
What is process costing?
a) A method of product costing in which all costs are accumulated and assigned to selling, general, and administrative expenses
b) A method of product costing in which costs are accumulated and tracked by process and averaged over all products made during the period
c) A method of product costing in which costs are accumulated and tracked by specific jobs or products
d) A method of product costing in which all costs are accumulated and assigned to manufacturing overhead
Answer: b) A method of product costing in which costs are accumulated and tracked by process and averaged over all products made during the period
Explanation: Process costing is used when products are manufactured in continuous processes and costs are averaged over all units produced.
