1

CH-08
Multiple Choice Quiz
1 In order to compute equivalent units of production, which of the following must be reasonably
estimated?
A)
Units completed
B)
The percentage of completion
C)
Direct material cost
D)
Units started and completed
E)
None of the above.
2
Total costs to be accounted for include:
A)
the manufacturing costs added this period only.
B)
costs associated with beginning work in process plus current period costs.
C)
costs associated with beginning work in process plus the manufacturing costs added
this period plus the costs associated with the ending work in process.
D)
the costs associated with ending work in process plus the manufacturing costs
added this period.
E)
None of the above.
3
Zahn Industries uses process costing system. During October, the finishing department had
30,000 units in beginning work in process and 45,000 units in ending work in process. During the
month, 95,000 units were transferred in from the previous department. Materials are added at
the end of the process and conversion costs are added uniformly throughout the process.
Beginning work in process was 20% complete with respect to conversion costs; ending inventory
was 40% complete with respect to conversion costs. If Zahn uses weighted-average costing, the
equivalent units of production for materials and conversion costs are:
A)
80,000 and 95,000.
B)
80,000 and 92,000.
C)
0 and 92,000.
D)
80,000 and 98,000.
E)
None of the above.

4/ Consider the following information:

If the equivalent units of production under weighted-average costing were 40,000 and 50,000 for
materials and conversion costs, respectively, what are the costs per equivalent unit?

2
A)
B)
C)
D)
E)

$1.15; $1.56.
$1.76; $1.94.
$2.30; $2.48.
$3.45; $4.04.
None of the above.

When computing the cost per equivalent unit (EU) using weighted-average costing, the beginning work in
process costs and the manufacturing costs added this period are both included in the numerator and
divided by the current period EU. Total cost per EU for materials = cost of $138,000 EU of 40,000 for
materials = $3.45. Total cost per EU for conversion = cost of $202,000 EU of 50,000 for conversion =
$4.04.

5 The production cost report summarizes:

A)
the costs charged to the department.
B)
how the costs were assigned to the output.
C)
the equivalent units of production by the department.
D)
the flow of units for the department.
E)
All of the above.
6 Rodrick Corporation experienced the following during April:
Materials are added at the beginning of the process and conversion occurs uniformly throughout
the process. If the company uses FIFO costing, what are the equivalent units for direct materials
and conversion?
A)
66,500; 66,500.
B)
66,500; 72,000.
C)
71,500; 69,500.
D)
64,000; 65,000.
E)
None of the above.

3
7/ Rybak Company manufactures paint and uses a process costing system and uses FIFO costing.
During February, the company had 38,000 gallons in beginning inventory and 26,000 gallons in
ending inventory. During the month, the company started 80,000 gallons of paint and completed
92,000 gallons and transferred them to the mixing department. Included in that amount were the
42,000 gallons that were both started and completed. The equivalent units for conversion costs
were 85,800 for February. Materials are added at the beginning of the process and conversion
costs are added evenly throughout the process. Beginning work in process was 30% complete as
to conversion costs and ending work in process was 20% complete as to conversion costs. The
cost data for February follow:

During February, the cost per equivalent unit for materials was $1.875, the cost per equivalent
units for conversion was $4.00, and the total cost per equivalent unit was $5.875. What was the
cost of the gallons that were transferred to the mixing department?
A)
$450,500
B)
$479,350
C)
$489,850
D)
$502,300
E)
None of the above.

8 If computational and recordkeeping costs are about the same under both FIFO and weightedaverage costing, which method, if any, will generally be preferred?
A)
Weighted-average costing
B)
FIFO costing
C)
Both methods offer the same degree of information.
D)
The answer cannot be determined with so little information.
E)
None of the above.
Feedback: Learning Objective 8-6 The FIFO costing method will provide additional
information. So, if the computational and recordkeeping costs are essentially the
same, the FIFO costing method will provide greater decision-making benefits and, as
such, will be preferred over the weighted-average costing method.
9 Process costing is characterized by:
A)
the assumption that that each unit produced is different.
B)
less detailed recordkeeping.
C)
the collection of costs for each unit produced.
D)
higher record-keeping costs.
E)
None of the above.

4
Process costing assumes that each unit produced is relatively uniform. Process costing does not maintain
a record of the cost of each unit produced. Process costing has less detailed recordkeeping; hence, if a
company were choosing between job and process costing, it would generally find lower recordkeeping
costs under process costing. Process costing does not provide as much information as job costing because
it does not record the cost of each unit produced. The choice of a costing system involves a comparison of
the costs and benefits of each system. The production process being utilized is also a major factor in
choosing a cost system.

10 Which of the following statements regard operations costing is not correct?

A)
Any given company must choose between a job order costing system, a
process costing system, or an operation costing system.
B)
Operation costing is a hybrid of job and process costing.
C)
Operation costing is used in manufacturing goods that have some common
characteristics plus some individual characteristics.
D)
Operation costing combines the aspect of job costing that assigns materials
separately to jobs (also called work orders or batches in operation costing) with the aspect of
process costing that assigns conversion costs equally to each operation.
E)
All of the above are correct statements.
When thinking about the appropriate product costing system, it will not necessarily fit into one of these
three categories (that is, job order costing system, a process costing system, or an operation costing
system). Every company has its own unique costing methods that do not precisely fit any textbook
description

1
A five-step process is used to assign costs to products in a process costing system.
I. Assign product cost to batches of work.
II. Compute the equivalent units of production.
III. Identify the product costs for which to account.
IV. Measure the physical flow of resources.
V. Compute the costs per equivalent unit.
The correct order in which these steps should be taken is:

A)

B)

C)

D)

II, IV, I, III, V

IV, II, III, V, I

III, II, V, I, IV

V, IV, II, I, III

None of the above

E)

5
Use the following information to answer questions 2 and 3:
Greenwood Petroleum had 26,000 barrels of crude oil in beginning work-in-process (60%
complete with respect to conversion costs). The company started 67,000 barrels this period and
had 15,000 gallons (40% complete with respect to conversion costs) in ending work-in-process.

2
How many barrels were completed and transferred out of work-in-process this period?

A)

B)

C)

D)

67,000

78,000

82,000

93,000
None of the above

E) Feedback: Beginning inventory + units started this period ending inventory = units
transferred out this period (note: all without respect to percentage of completion).
26,000 + 67,000 15,000 = 78,000. This represents the physical flow of units
3 Feedback: Transferred out units are always 100 percent complete (78,000 x 1.00 = 78,000).
The ending work-in-process was 40 percent complete (EUP = 15,000 x .40 = 6,000). So, the
total work done during the period was 84,000 barrels.
Using a weighted-average cost flow assumption, calculate the equivalent units of production.

A)

B)

78,000

82,000
84,000

C)

D)

92,000

None of the above

E)
4
The costs for which to account include:

A)

B)

C)

D)

the manufacturing costs added this period only.

beginning WIP plus the manufacturing costs added this period.

ending WIP plus beginning WIP plus the manufacturing costs added this period.

ending WIP plus the manufacturing costs added this period.

none of the above.

E)

Use the following information to answer questions 5 and 6:

Materials Costs Conversion Costs
Work-in-process, May 1
$ 46,000
$ 78,000
Current costs (May)
$ 92,000
124,000
Total cost
$138,000
$202,000

5
If the equivalent units of production under weighted average costing were 40,000 and 50,000
for materials and conversion costs, respectively, what are the costs per equivalent unit?

A)

$1.15, $1.56

B)

C)

D)

$1.76, $1.94

$2.30, $2.48

$3.45, $4.04

None of the above

E) Feedback: When computing the cost per EUP under the weighted average assumption,
the beginning WIP costs and the manufacturing costs added this period are both
included in the numerator and divided by the current period EUP. $138,000 40,000
= $3.45; $202,000 50,000 = $4.04.
6
If the equivalent units of production under FIFO costing were 40,000 and 50,000 for materials
and conversion costs, respectively, what are the costs per equivalent unit?

A)

B)

C)

D)

$1.15, $1.56

$1.76, $1.94

$2.30, $2.48

$3.45, $4.04

None of the above

E) Feedback: When computing the cost per EUP under the FIFO assumption, only the
manufacturing costs added this period are included in the numerator; this is divided
by the current period EUP. $92,000 40,000 = $2.30; $124,000 50,000 = $2.48
7
The production cost report summarizes:

A)

B)

C)

D)

the costs charged to the department.

how the costs were assigned to the output.

the equivalent units of production by the department.

physical transfers for the department

all of the above

E)
8 In order to compute equivalent units of production, which of the following must be reasonably
estimated:

A)

B)

C)

D)

Units completed

The percentage of completion

Direct material cost

Units started and completed

None of the above

E)

Use the following information to answer questions 9 and 10:

Apex Corporation experienced the following during April:
Beginning WIP inventory
7,500 units, 40% of labor added this period
Units started this period
64,000 units

9
Ending WIP inventory
5,000 units, 60% of labor added this period
Direct materials are added at the beginning of the process and direct labor is added uniformly
throughout the process.

9
The equivalent units for direct materials and direct labor under a weighted average cost are:

A)

B)

C)

D)

66,500; 66,500

66,500; 72,000

71,500; 69,500

64,000; 74,000

None of the above

E)
1 Feedback: Material is added at the beginning of the process, so the EUP will always be 100
0 percent complete with respect to material. The ending EUP are 60 percent complete with
respect to labor. The units transferred out = 7,500 + 64,000 5,000 = 66,500 units.
The equivalent units for direct materials and direct labor under a FIFO cost are:

A)

B)

C)

66,500; 66,500

66,500; 72,000

71,500; 78,500
64,000; 65,000

D)

10

None of the above

E)

Use the following information to answer questions 11 15

The Superior Company manufactures paint and uses a process costing system. During February,
Superior started 80,000 gallons of paint. During the month the company completed 92,000
gallons and transferred them to the mixing department. Superior had 38,000 gallons in
beginning inventory and 26,000 gallons in ending inventory. Material is added at the beginning of
the process and conversion costs are added evenly throughout the process. Beginning WIP was
30% complete as to conversion costs and ending WIP was 20% complete as to conversion costs.
The company uses a FIFO costing. The cost data for February follow:
Beginning inventory:
Direct materials
$22,200
Conversion costs 44,000
Costs added this period: Direct materials
Conversion costs

$150,000
343,200

1 Feedback: Either completed (92,000) not started this period (38,000) = 54,000 or started
1 (80,000) but not completed this period (26,000) = 54,000.
How many gallons were started and completed this period?

A)

B)

C)

D)

42,000

48,000

54,000

66,000

None of the above

E)
1
2 What were the equivalent units for conversion costs during February?
72,600

11
A)

B)

C)

D)

85,800

88,600

92,900

None of the above

E)
1 Feedback: Unit cost for DM = DM costs added this period FIFO direct material EUP =
3 150,000 80,000 = $1.875. Ending WIP direct material EUP x DM unit cost = DM ending
inventory cost = 26,000 x $1.875 = $48,750
What was the cost of direct materials in ending inventory?

A)

B)

C)

D)

$37,560

$42,600

$45,550

$48,750

None of the above

E)
1 Feedback: Conversion costs added this period conversion cost EUP = conversion cost per
4 unit. $343,200 85,800 = $4 per unit. Ending WIP conversion cost EUP x conversion cost per
unit = conversion cost in ending inventory. 5,200 x $4 = $20,800.
The amount of conversion cost in ending inventory was:

12

A)

B)

C)

D)

$20,800

$31,200

$34,400

$35,100

None of the above

E)
1
5 The cost of goods transferred out was:

A)

B)

C)

D)

$450,500

$479,350

$489,850

$502,300

None of the above

E)
1 Feedback: Transferred-in units are always 100 percent complete. Therefore, the weighted
6 average EUP would be: Units completed in Department 2 (389,000) + EWIP units (33,000) =
422,000

13
Zapper, Inc. manufactures a product that goes through two departments. In May 375,000
units of the product were transferred from Department 1 into Department 2. The beginning
inventory in Department 2 consisted of 47,000 units (25% complete as to conversion) and
ending inventory consisted of 33,000 units (45% complete as to conversion). Zapper uses a
weighted average process cost system. The equivalent units for transferred-in costs in
Department 2 are:

A)

B)

C)

D)

375,000

389,000

408,000

422,000

None of the above

E)

Use the following information to answer questions 17 and 18

Jones, Industries uses process costing system. In October, the finishing department had 30,000
units in beginning work-in-process, 45,000 units in ending inventory and had 95,000 units
transferred in from the previous department. Material is added at the end of the process and
conversion costs are added uniformly throughout the process. Beginning work-in-process was
20% complete with respect to conversion costs; ending inventory was 40% complete with
respect to conversion costs.

1 The transferred in units will always be 100% complete; since DM is added at the end of the
7 process, only those units completed will have any DM costs; and the conversion costs are
added uniformly, so the units in EWIP are multiplied by the percentage of completion
If Jones uses weighted average, the equivalent units of production for transferred-in costs,
direct material and conversion costs are:

A)

95,000; 80,000; 98,000

125,000; 80,000; 92,000

14
B)

C)

D)

125,000; 0; 92,000

125,000; 80,000; 98,000

None of the above

E)
1 Feedback: (17.0K)The transferred in units will always be 100% complete; since DM is added
8 at the end of the process, only those units completed will have any DM costs; and the
conversion costs are added uniformly, so the units in EWIP and BWIP are multiplied by the
percentage of completion
If Jones uses FIFO, the equivalent units of production for transferred-in costs, direct material,
and conversion costs are:

A)

B)

C)

D)

95,000; 80,000; 98,000

125,000; 80,000; 92,000

125,000; 0; 92,000

125,000; 80,000; 98,000

None of the above

E)
1 Feedback: FIFO will provide additional information, so if the costs are essentially the same,
9 FIFO will provide greater decision-making benefits and will be preferred over weighted
If computational and record-keeping costs are about the same under both FIFO and weighted
average, __________ will generally be preferred.

15

A)

B)

C)

D)

Weighted Average

FIFO

They offer the same degree of information

Cannot be determined with so little information

None of the above

E)
2
0 Process costing is characterized by:

A)

B)

C)

D)

High production volume and heterogeneous products.

High production volume and homogeneous products.

Low production volume and heterogeneous products.

Low production volume and homogeneous products.

None of the above

E)

16

1/ Under process-costing systems, how are costs accumulated?

A)
By product
B)
By job
C)
By department
D)
By time period
E)
None of the above
Feedback:
In job-order costing, costs are accumulated by job order and recorded in an job-order record. In
process costing, costs are accumulated by department. LO 1
2/ When Production Department A transfers units to Production Department B for further
processing the journal entry will include which of the following?
A)
A debit to Work in Process, Production Department A
B)
A credit to Transferred-Out Costs, Production Department A
C)
A debit to Finished Goods InventoryProduction Department A
D)
A credit to Work-in-Process InventoryProduction Department A
E)
None of the above

3/ Willow Company accumulates costs for its product using process costing. Direct material is
added at the beginning of the production process, and conversion activity occurs uniformly
throughout the process.

Calculate the weighted-average equivalent units of activity for conversion costs:

A)
90,000 units
B)
100,000 units
C)
78,000 units
D)
96,000 units
E)
None of the above
Feedback: Units completed and transferred out were 90,000 (= 20,000 + 80,000 - 10,000).
Weighted-average equivalent units for conversion costs are 96,000 (= 90,000 + (10,000 x 0.60)).
LO 4
4/ Marble Company accumulates costs for its product using process costing. Direct material is
added at the beginning of the production process, and conversion activity occurs uniformly
throughout the process.

17

It was determined that as of the end of October, the equivalent units of conversion activity were
(space needed) two thousand units fewer than the equivalent units of direct materials.
Determine the percentage of completion of the 10,000 units in ending WIP as to conversion
costs.
A)
100% complete
B)
80% complete
C)
70% complete
D)
60% complete
E)
None of the above
Feedback:
Direct materials are added at the beginning of the production process; as such the equivalent
units of direct materials totaled 110,000 units (100,000 units transferred out and 10,000 units in
ending work in process). The equivalent units for conversion activity are two thousand fewer, or
108,000. The 100,000 units transferred out are complete with respect to conversion cost leaving
8,000 partially completed units in ending inventory, representing 80% completion (8,000
equivalent/10,000 total).

5/ Which accounts are affected when finished goods are sold?

A)
Cost of Goods Sold and Work-in-Process Inventory
B)
Cost of Goods Sold and Finished Goods Inventory
C)
Finished Goods Inventory and Work-in-Process Inventory
D)
Manufacturing Overhead and Work-in-Process Inventory
E)
None of the above
Feedback: When finished goods are sold, the Cost of Goods Sold account is debited and the
Finished-Goods Inventory account is credited for the cost of the finished goods. An additional
entry (not illustrated in this chapter) debiting Cash or Accounts Receivable and crediting Sales is
made for the sales price of the finished goods.
6/ The beginning work-in-process inventory consists of 1,500 units that are 30% complete with
respect to conversion costs, and 100% complete with respect to direct material costs. Ten
thousand units were started during the period. There are 2,000 units in process at the end of the
accounting period, which are 20% complete with respect to conversion costs, and 100%
complete with respect to direct material costs. Using the weighted-average method of process
costing, calculate the equivalent units of conversion.
A)
13,500
B)
9,900
C)
10,450

18
D)
12,450
E)
11,500
Feedback:
Equivalent units are equal to the units completed and transferred out (1,500 + 10,000 2,000)
plus the ending work in process multiplied by its percentage of completion (2,000 x 0.20).
Equivalent units of conversion are 9,900 (= (1,500 + 10,000 2,000) + (2,000 x 0.20)).
7/ The beginning work-in-process inventory consists of 1,500 units that are 30% complete with
respect to conversion costs and 100% complete with respect to direct material costs. Ten
thousand units were started during the period. There are 2,000 units in process at the end of the
accounting period, which are 20% complete with respect to conversion costs, and 100%
complete with respect to direct material costs. Under the weighted-average method of process
costing, what are the equivalent units of direct materials?
A)
13,500
B)
12,000
C)
10,450
D)
11,500
E)
9,900
Feedback: Equivalent units are equal to the units completed and transferred out (1,500 + 10,000
2,000) plus the ending work in process multiplied by its percentage of completion (2,000 x
1.00). Equivalent units of direct materials are 11,500 (= (1,500 + 10,000 2,000) + (2,000 x
1.00)).
8/ What is the key document in a typical process-costing system called?
A)
Job-cost Record or Job-cost Sheet
B)
Schedule of Cost of Goods Manufactured
C)
Departmental Production Report
D)
Income Statement
E)
Balance Sheet
Feedback:
The key document in a typical process-costing system is the departmental production report in
which units transferred in and out of the department and costs transferred in and out of the
department are reconciled.
9/ When using the weighted-average method of process costing, how are the beginning work-inprocess units and costs treated?
A)
As units and costs of the current period
B)
As units and costs of the subsequent period
C)
As units and costs of a previous period
D)
Ignored in the calculation of the cost per equivalent unit
E)
None of the above
Feedback: A key feature of the weighted-average method is the number of equivalent units of
activity is calculated without making a distinction as to whether the activity occurred in the
current accounting period or the preceding accounting period.
10/

19

What are the unit values of A and B, respectively?

A)
165,000 and 15,000, respectively
B)
120,000 and 105,000, respectively
C)
165,000 and 20,000, respectively
D)
150,000 and 165,000, respectively
E)
180,000 and 165,000, respectively
Feedback:
The total units to account for must be equal to the total units accounted for, which is this case
are 165,000. The units completed and transferred were 150,000 (= 165,000 15,000).
11/

What is the
A)
B)
C)
D)
E)

12/

total cost of Portsmouth's work in process inventory on 8/31?

$503,950
$462,360
$42,282
$36,200
None of the above

20

Continue with the Portsmouth Storage Company fact pattern. Assume that completed units are
transferred from the Cutting department to the Finishing department. Which of the following
would be included in the entry to transfer the completed units out of the Cutting department and
in to the Finishing department?
A)
Work in Process-Cutting (debit) $462,360
B)
Work in Process-Finishing (debit) $555,750
C)
Finished Goods (debit) $503,950
D)
Cost of Goods Sold (debit) $503,950
E)
None of the above

13/

What is the value of the units transferred out, if there are 5,000 units in ending work-in-process
inventory that are 100% complete as to direct materials and 60% complete as to conversion
costs?
A)
$402,000

21
B)
$420,000
C)
$380,000
D)
$358,000
E)
$240,000
Feedback: Direct material cost, per equivalent unit is $2 (= $140,000/70,000). Conversion cost
per equivalent unit is $4 (= $240,000/60,000) Cost of ending work in process is $22,000 (=
(5,000 x $2) + (5,000 x 0.60 x $4) ) Cost of goods completed and transferred out is $358,000 (=
($80,000 + $300,000) $22,000).
14/ Under an operation costing system, when direct labor is recorded at the end of the pay
period the journal entry will include a debit to which account?
A)
Manufacturing Overhead
B)
Direct Labor
C)
Work in Process
D)
Applied Conversion Costs
E)
Finished Goods Inventory
Feedback: Direct labor and manufacturing overhead are accumulated in the Applied Conversion
Costs account. At the end of the period these conversion costs are allocated to the separate
production departments on a predetermined rate, which is based on an activity or cost driver.
15/

Actual conversion costs and actual production are the same as the budgeted conversion costs
and budgeted production. The firm produced 20,000 Professional baseball bats and 30,000
Amateur baseball bats. The cost driver for each of the three types of conversion activity is the
number of units produced. Use an operation costing approach and determine the per-unit cost for
each Professional and Amateur bat, respectively.
A)
$6.74 and $1.74, respectively
B)
$4.54 and $4.54, respectively
C)
$4.54 and $3.74, respectively
D)
$7.54 and $4.54, respectively
E)
$5.74 and $3.74, respectively
Feedback: The application rate for each conversion cost, respectively, is $0.60 for lathing, $0.90
for sanding, and $0.24 for lacquer and sanding. The cost of each Professional baseball bat is
$5.74 (= $4.00 + $0.60 + $0.90 + $0.24). The cost of each Amateur baseball bat is $3.74 (=
$2.00 + $0.60 + $0.90 + $0.24). Total cost of both grades of baseball bats is $227,000 (= ($5.74
x 20,000) + ($3.74 x 30,000) = ($114,800 + $112,200) = $227,000).
CH-07

22
1/ A control account:

A)

B)

C)

D)

is a temporary account.

is supported by a set of subsidiary ledger accounts.

summarizes revenue and expense accounts.

is closed at the end of the period to cost of goods sold.

None of the above.

E)
Feedback: Learning Objective 7-1 A control account is an account in the
general ledger that summarizes a set of subsidiary ledger accounts.
2
INCORREC
T

Gaynor Company started March with $35,000 in direct materials inventory.

During the month, direct materials in the amount of $145,000 were purchased
and $22,000 was in the ending direct materials inventory at the end of March.
What was the amount of direct material used in production in March?

A)

B)

C)

D)

$158,000

$167,000

$180,000

$193,000

None of the above.

E)

23
Feedback: Learning Objective 7-2 Amount used = beginning inventory of
$35,000 + purchases of $145,000 ending inventory of $22,000 =
$158,000.
3
INCORREC
T

Montage Company uses direct labor cost to apply overhead to work-in-process.

If the estimated overhead for the current year is $468,000 and the company
expects to use 90,000 hours of direct labor. The average labor rate is $10.40
per hour. What is the predetermined rate that will be used to apply overhead?

A)

B)

C)

D)

50%

52%

120%

200%

None of the above.

E)
Feedback: Learning Objective 7-3 Predetermined overhead rate =
Estimated overhead estimated allocation base. The predetermined rate
= estimated overhead of $468,000 estimated direct labor cost of
$936,000 (or 90,000 direct labor hours x $10.40 per hour) = 0.50 or 50%.
4
INCORREC
T

During the current year, Esterhazy, Inc. estimated manufacturing overhead for
the year to be $896,000. The company uses direct labor hours to apply
manufacturing overhead to work-in-process. The budgeted direct labor hours
for the current year totaled 80,000 hours and the actual hours worked were
82,000. The actual overhead incurred during the year was $924,000. What is
the amount of overapplied or underapplied overhead?

A)

$28,000 overapplied
$28,000 underapplied

24
B)

C)

D)

$5,600 overapplied

$5,600 underapplied

None of the above.

E)
Feedback: Learning Objective 7-3 Overapplied (or underapplied)
overhead = amount applied to work-in-process (not given) actual
overhead. The amount applied to work-in-process = predetermined rate
(not given) x actual direct labor hours. The predetermined overhead rate
= estimated overhead estimated allocation base. Predetermined rate =
estimated overhead of $896,000 estimated direct labor hours of 80,000
= $11.20 per direct labor hour. The amount applied to work-in-process =
predetermined rate of $11.20 per direct labor hour x actual direct labor
hours of 82,000 = $918,400. Overapplied (or underapplied) overhead =
amount applied to work-in-process of $918,400 actual overhead of
$924,000 = $5,600 underapplied.
5
UNANSWE
RED

Feedback: Learning Objective 7-3 The journal entry to close overhead to cost
of goods sold will always include a debit to the Applied Overhead account and a
credit to the Overhead Control account. If overhead is overapplied, that means
that the amount applied is greater than (or over) the actual amount and a
credit will be required to balance the entry. The credit will be to the Cost of
Goods Sold account.
Creedence Company uses a Manufacturing Overhead Control account and a
Manufacturing Overhead Applied account. If overhead is overapplied during the
period, the journal entry to write it off to cost of goods sold will include:

A)

B)

C)

a credit to Applied Manufacturing Overhead.

a debit to Cost of Goods Sold.

a debit to Manufacturing Overhead Control.

25

D)

a credit to Cost of Goods Sold.

None of the above.

E)

6
CORRECT

Wiedlin Inc. worked on three jobs (jobs 102, 103, and 104) in March. The
amount of overhead applied to the jobs during March was $42,000 to job 102,
$37,000 to job 103, and $21,000 to job 104. At the end of March, the company
had overapplied overhead of $12,000. If the company uses the value in the
individual inventory accounts to allocate overapplied or underapplied overhead,
what amount of overapplied overhead would then be charged to Job 103?

A)

B)

C)

D)

$2,520

$4,440

$5,040

$6,220

None of the above.

E)
Feedback: Learning Objective 7-3 First, determine the percentage of
each job's applied overhead to the total overhead applied and, then,
multiply that percentage times the total overapplied or underapplied
overhead. Overhead applied to job 102 of $42,000 + overhead applied to
job 103 of $37,000 + overhead applied to job 104 of $21,000 = $100,000
(total overhead applied to all jobs). The percentage of overhead applied
to job 103 = overhead applied to job 102 of $37,000 total overhead
applied to all jobs of $100,000 = 0.37 or 37%. The amount of overapplied
overhead applied to job 103 = overapplied overhead of $12,000 x
percentage of overhead applied to job 103 of 0.37 = $4,440.

26
7
INCORREC
T

What type of cost is composed of actual direct material and labor cost plus
overhead applied using a predetermined rate and an actual allocation base?

A)

B)

C)

D)

Actual

Normal

Standard

Real

None of the above.

E)
Feedback: Learning Objective 7-3 A normal cost is determined by actual
direct material and labor cost plus overhead applied using a
predetermined rate and an actual allocation base.
8
INCORREC
T

Which of the following statements describe a primary difference in job costing

between service companies and manufacturing companies?

A)

B)

C)

D)

Service companies generally use fewer direct materials.

Service companies' overhead accounts have slightly different names.

Service companies' finished goods are charged to Cost of Services Billed.

All of the above.

None of the above.

27
E)
Feedback: Learning Objective 7-4 The three primary differences between
service companies and manufacturing companies include: (1) service
companies use less direct materials; (2) for overhead names, service
companies use Service Overhead, Service Overhead Applied, etc.; and (3)
finished goods are charged to Cost of Services rather than to Cost of
Goods Sold.
9
INCORREC
T

Which of the following statements regarding ethical issues and job costing is
not correct?
The contracted price in a "cost-plus fixed fee" contract equals the cost of
A) the product or service minus an amount that represents the vendor's profit.

Job supervisors who report the stage of completion of their jobs can be
B) tempted to overstate it.

Choosing to allocate overhead costs using the cost allocation method that
C) provides the most favorable result could be unethical.

Job supervisors sometimes instruct employees to charge costs to the wrong

D) jobs to avoid the appearance of cost overruns on jobs.

None of the above.

E)
Feedback:
Learning Objective 7-5 The contracted price in a "cost-plus fixed fee"
contract equals the cost of the product or service plus a fixed fee
representing the profit to the vendor.

10
CORRECT

Which of the following terms is used to describe a complex task that often
takes months or years to complete and requires the work of many different
departments, divisions, or subcontractors?

A)

Jobs
Tasks

28
B)

C)

D)

Projects

Ventures

None of the above.

E)
Feedback: Learning Objective 7-6 Complex jobs (for example, bridges,
shopping centers, complex lawsuits) that often take months or years to
complete and require the work of many different departments, divisions,
or subcontractors are called projects.