Question

16) Davie, Inc. used estimated direct labor hours of 200,000 and estimated manufacturing overhead costs of $1,150,000 in establishing its predetermined overhead allocation rate for the year. Actual results showed the following: Actual manufacturing overhead Allocated manufacturing overhead $700,000 $325.000 What was the number of direct labor hours worked during the year? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.) A) 172,234 hours B) 240,084 hours 282,857 hours D) 146,087 hours 1 17) When goods are transferred from the Work-in-Process Inventory account to the Finished Goods Inventory account, A) total equity and total assets increase by the same amount B) total liabilities increase and total equity decreases by the same amount total assets and total liabilities increase by the same amount D) total assets of the company remain constant 18) Underallocated overhead occurs when A) allocated overhead costs are less than actual overhead costs B) estimated overhead costs are greater than budgeted overhead costs actual overhead costs are less than allocated overhead costs D) estimated overhead costs are greater than actual overhead costs 19) Both job order costing and process costing A) treat all period costs as product costs B) have the same type of product costs maintain a single Work-in-Process Inventory account D) follow last-in, first-out method for inventory valuation 20) Which of the following best describes the term equivalent units? A) substitute of units that are partially completed B) different types of units that have same selling price o partially completed units of output that will be sold as is D) partially completed units expressed in terms of fully completed units 21) The beginning inventory costs and the product costs of the current period are combined to determine the average cost of equivalent units of production under the A) equivalent units method B) first-in, first-out method weighted average method D) conversion costs method 22) In process costing factory rent and utilities are debited to the A) Manufacturing Overhead account B) Cost of Goods Sold account Finished Goods Inventory account D) Work-in-Process Inventory account

Answer 1

16. Pre-determined Overhead rate => 1150,000 $/240000 hrs =4.79 $. Allocated O/H => 825000 $. So actual hours => 825000/4.79 = 172,234 $. Hence Option A is correct.

17. Since the transfer is between WIP inventory to Finished Goods inventory, presuming such goods aren't sold yet, there will be movement of value from one asset item to another. hence overall asset position remains the same. Hence, Option D is correct.

18. Under-allocated overheads occur when applied or allocated overheads are less than actual overheads. Hence Option A is correct. All other options are incorrect.

19. Both job order costing and process costing have the same type of product costs. Hence Option B is correct. Other options are incorrect because:The valuation need not be LIFO. Process costing includes multiple WIP a/c and need not always treats period costs as product costs

20. Equivalent units are partially completed units are expressed in terms of fully completed units. Hence Option D is correct.

21. Beginnng Inventory costs plus production costs of current period divide by the number of units gives us the weighted average cost of product. Hence Option C is correct.

22. Factory rent and utilities being factory overhead will be debited to manufacturing overhead in product costing. Hence option A is correct.