1.

Moran Company uses a job order cost system and has established a predetermined overhead application rate for the current
year of 150% of direct labor cost, based on budgeted overhead of P900,000 and budgeted direct labor cost of P600,000. Job
no. 1 was charged with direct materials of P36,000 and with overhead of P27,000. What is the total cost of job no. 1?
a. P64,000.
b. . P81,000.
c. P91,000.
d. Cannot be determined without additional information.

2.

Doyle Co. uses a job order cost accounting system. At year-end the Work-in-Process Inventory controlling account showed a
debit balance of P43,125. For the two jobs in process at year-end, one showed P6,000 in direct materials and P4,500 in direct
labor. The job cost sheet for the second job showed P9,000 in direct materials and P6,750 in direct labor. If the company is
using a predetermined overhead application rate based on direct labor cost, the rate is:
a. 50%.
b. 100%.
c. 150%.
d. 200%.

3.

Edwards Auto Body uses a job order cost system. Overhead is applied to jobs on the basis of direct labor hours. During the
current period, Job No. 337 was charged P425 in direct materials, P475 in direct labor, and P190 in overhead. If direct labor
costs an average of P16 per hour, the company's overhead application rate is:
a. P7.27 per direct labor hour.
c. P17.50 per direct labor hour.
b. P6.40 per direct labor hour.
d. P40 per direct labor hour.

4.

Marty's Metal Shop uses a job order cost system. It applies overhead to jobs at a rate of 150% of direct labor costs. Job No.
2617 required P800 in direct labor costs. The job was initially budgeted to require P850 in direct labor costs. Overhead applied
to Job No. 2617 during the period amounted to:
a. P850.
b. P1,200.
c. P1,275.
d. Some other amount.

5.

Capri Boat Corporation uses a job order cost system and applies overhead based on a percentage of direct labor cost. Cost
flows through the Work-in-Process Inventory account during March are given below:

Only Job #007 was still in process at the end of March and this job had been charged with P40,000 in direct materials cost.
6.

Refer to the information above. The amount of direct materials cost charged to completed jobs during March was:
a. P20,000.
b. P50,000.
c. P30,000.
d. Some other amount.

7.

Refer to the information above. The predetermined overhead application rate at Capri Boat is what percentage of direct labor
costs?
a. 38%.
b. 62%.
c. 260%.
d. 580%

8.

Refer to the information above. The amount of overhead costs applied to Job #007 during March were:
a. P90,000.
b. P26,250.
c. P65,000.
d. P60,000.

9.

Refer to the information above. The journal entry which accounts for the P300,000 transferred out of work in process includes
a debit of P300,000 to:
a. Finished Goods.
b. Cost of Goods Sold.
c. Accounts Receivable.
d. Sales.

Canfield Construction applies overhead to its projects at a rate of P65 per direct labor hour. Laborers are paid an average rate of P30
per hour. The Jefferson Apartments project was charged a total of P1,200,000 in direct materials and P450,000 in direct labor costs.
10. Refer to the information above. Overhead applied to the Jefferson Apartments project amounted to:
a. P450,000.
b. P650,000.
c. P975,000.
d. Some other amount.
11. Refer to the information above. The journal entry to transfer the completed Jefferson Apartments project to Canfield's finished
goods inventory would include:
a. A debit to the Finished Goods Inventory account of P975,000.
b. A debit to the Finished Goods Inventory account of P2,625,000.
c. A debit to the Finished Goods Inventory account of P1,650,000.
d. A credit to the Work-in-Process Inventory account of P2,175,000.
12. Refer to the information above. The journal entry made by Canfield to record the sale of the Jefferson Apartments project to
King Development Company for P5,250,000 would include:
a. A debit to Sales of P5,250,000.
c. A credit to Finished Goods Inventory of P975,000.
b. A debit to Cost of Goods Sold of P2,625,000.
d. A debit to Finished Goods Inventory of P975,000.

Riverview Company's budget for the coming year includes P6,000,000 for manufacturing overhead, 50,000 hours of direct labor, and
250,000 hours of machine time.
13. Refer to the above data. If Riverview applies overhead using a predetermined rate based on machine-hours, what amount of
overhead will be assigned to a unit of output which requires 0.5 machine hours and 0.25 labor hours to complete?
a. P12.00.
b. P16.00.
c. P20.00.
d. Some other amount.
14. Refer to the above data. If Riverview applies overhead using a predetermined rate based on labor-hours, what amount of
overhead will be assigned to a unit of output which requires 0.5 machine hours and 0.25 labor hours to complete?
a. P16.00.
b. P30.00.
c. P20.00.
d. Some other amount.

15. The advantage of using a predetermined overhead application rate is that:

a. Units produced are charged with a "normal" amount of manufacturing overhead regardless of whether they are
produced in a high-volume month or a low-volume month.
b. Overhead costs will be limited to the predetermined amount.
c. Entries need not be made to record actual overhead costs incurred.
d. The unit cost of production will be lower than it would be if actual overhead costs were assigned to units produced.
16. A predetermined overhead application rate:
a. Is used in a job order cost system but cannot be used in a process cost system.
b. Can be determined by dividing budgeted direct labor cost by the budgeted factory overhead costs.
c. Is not generally accepted for financial reporting purposes.
d. Tends to avoid wide variations in per-unit overhead costs because of short-run changes in volume.
17. Under-applied overhead at the end of a month:
a. Results when actual overhead costs are less than amounts applied to work in process.
b. Indicates a poorly designed cost accounting system.
c. Is represented by a debit balance remaining in the Manufacturing Overhead account.
d. Is represented by a credit balance remaining in the Manufacturing Overhead account.
18. Which of the following statements is true about activity-based costing?
a. Only one activity should be used for a company.
b. Many different activity bases are used in applying overhead.
c. There can only be one cost driver.
d. Direct materials and direct labor are applied to work-in-process based upon cost drivers.
19. Which of the following is not a commonly used cost accounting system?
a. Manufacturing yield costing.
c. Process costing.
b. Job order costing.
d. Activity-based costing.
20. The type of cost accounting system best suited to a particular company depends on:
a. The nature of the company's manufacturing operations.
c. Government regulations.
b. The requirements set forth by the FASB.
d. The type of cost drivers available.
21. Manufacturing overhead is:
a. A direct cost that can traced to a specific job.
b. An indirect cost that can be traced to a specific job.

c. A direct cost that cannot be traced to a specific job.

d. An indirect cost that cannot be traced to a specific job.

22. In an activity-based costing system, manufacturing overhead costs are divided into separate:
a. Cost drivers.
b. Activity cost pools.
c. Activity bases.
d. Indirect cost centers.
23. Benefits of activity-based costing include all of the following except:
a. More accurate measures of product costs.
b. More accurate evaluations of product profitability.
c. A better understanding of what "drives" manufacturing overhead costs.
d. More subjective product pricing decisions.
24. Manufacturing overhead is:
a. A product cost.

b. An indirect cost.

c. A manufacturing cost.

d. All three of the above.

25. An activity-based costing system would probably not be appropriate if:

a. A company produces more than one product line.
c. A company is highly automated.
b. A company produces only one product.
d. A company has more than one production facility.
26. Overhead costs are assigned to production using an overhead application rate, whereas no such "application rate" is used to
assign the costs of direct materials and direct labor to production. The reason for this difference in procedures is that:
a. Overhead is an indirect cost which cannot be traced easily and directly to specific units of product.
b. Overhead is always larger in dollar amount than either direct materials or direct labor.
c. The amounts of direct material and direct labor applicable to each unit of production cannot be determined as easily as
the amount of overhead.
d. Overhead is always equal to a constant percentage of direct labor costs.
27. An activity base is said to be a "driver" of overhead costs when the activity base:
a. Is independent of the amount of overhead cost incurred.
b. Results in an overhead application rate greater than 100%.
c. Is a causal factor in the amount of overhead cost incurred.
d. Is the largest of the various types of expenditures classified as manufacturing overhead.
28. Which of the following would likely be the most appropriate cost driver to allocate machinery set-up costs to products?
a. Machine hours.
b. Direct labor hours.
c. Number of production runs.
d. Repair work orders.

29. Using machine hours to assign manufacturing overhead to a labor intensive product line is likely to:
a. Over-apply overhead to the product line.
c. Understate direct labor costs.
b. Under-apply overhead to the product line.
d. Overstate direct labor costs.
30. If manufacturing overhead is materially over-applied, it is best to close it to:
a. Work-in-process inventory.
c. Cost of goods sold.
b. Finished goods inventory.
d. All three in an apportioned manner.
31. The Work-in-Process account in a job order accounting system will be debited for:
a. Only direct labor and direct materials.
c. Direct labor, direct materials, and actual overhead.
b. Direct labor, direct materials, and applied overhead.
d. Only direct materials and applied overhead.

32. Debits to the Manufacturing Overhead account record:

a. The actual amounts of overhead costs incurred during a period.
b. The amount of overhead applied to production during a period.
c. The amount of overhead incurred on a specific job.
d. All conversion costs of a period.
33. At the end of the accounting period, applied overhead was larger than actual overhead by a material amount. The over-applied
overhead should be:
a. Treated as an extraordinary gain.
b. Closed into Cost of Goods Sold.
c. Apportioned among Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold.
d. Ignored; actual overhead is determined only for internal control purposes.
34. All of the following are advantages of developing a predetermined overhead application rate except:
a. Short-run fluctuations in volume of output are normalized.
b. In a job order system, unit costs can be determined as soon as jobs are completed.
c. The overhead application rate facilitates assigning overhead costs to the ending inventory of work in process.
d. Actual overhead will always be less than applied overhead.
35. The Collins Company forecasts that total overhead for the current year will be P12,000,000 and that total machine hours will
be 200,000 hours. Year to date, the actual overhead is P8,000,000 and the actual machine hours are 100,000 hours. If the
Collins Company uses a predetermined overhead rate based on machine hours for applying overhead, what is that overhead
rate?
a. P80 per machine hour
b. P120 per machine hour
c. P40 per machine hour
d. P60 per machine hour
36. The Collins Company forecasts that total overhead for the current year will be P12,000,000 and that total machine hours will
be 200,000 hours. Year to date, the actual overhead is P8,000,000 and the actual machine hours are 100,000 hours. If the
Collins Company uses a predetermined overhead rate based on machine hours for applying overhead, as of this point in time
(year to date) the overhead is over/under applied by?
a. P2,000,000 over
b. P2,000,000 under
c. P4,000,000 over
d. P4,000,000 under
37. Selected accounts with some debits and credits omitted are presented as follows:
Work in Process
Aug. 1

Balance

31

Direct materials

31

Direct labor

31

Factory overhead

275,000 Aug. 31 Goods finished

1,230,000

X
350,000
X

Factory Overhead
Aug. 1-31Costs incurred

90,000 Aug. 1
31

Balance

15,000

Applied

(30% of direct
labor cost)

If the balance of Work in Process at August 31 is P200,000, what was the amount debited to Work in Process for direct
materials in August?
a. P700,000
b. P805,000
c. P300,000
d. P605,000
38. Selected accounts with some debits and credits omitted are presented as follows:
Work in Process
Aug. 1

Balance

31

Direct materials

31

Direct labor

31

Factory overhead

275,000 Aug. 31 Goods finished

1,230,000

X
350,000
X
Factory Overhead

Aug. 1-31 Costs incurred

90,000 Aug. 1
31

Balance
Applied

15,000
X

If the balance of Work in Process at August 31 is P200,000, what was the amount debited to Work in Process for factory
overhead in August, assuming a factory overhead rate of 30%?
a. P105,000
b. P120,000
c. P90,000
d. P70,000

39. A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that
factory overhead costs would be P360,000 and direct labor hours would be 45,000. Actual factory overhead costs incurred
were P377,200, and actual direct labor hours were 46,000. What is the amount of overapplied or underapplied manufacturing
overhead at the end of the year?
a. P17,000 overapplied.
b. P17,000 underapplied.
c. P9,200 overapplied.
d. P9,200 underapplied.
40. A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that
factory overhead costs would be P360,000 and direct labor hours would be 45,000. Actual manufacturing overhead costs
incurred were P377,200, and actual direct labor hours were 46,000. What is the predetermined overhead rate per direct labor
hour?
a. P8.00
b. P8.20
c. P8.38
d. P7.83
41. A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that
factory overhead costs would be P360,000 and direct labor hours would be 45,000. Actual manufacturing overhead costs
incurred were P377,200, and actual direct labor hours were 46,000. The entry to apply the factory overhead costs for the year
would include a
a. debit to factory overhead for P360,000.
c. debit to factory overhead for P377,200.
b. credit to factory overhead for P368,000.
d. credit to factory overhead for P360,000.