Exam 11: Product Costing in Service and Manufacturing Entities

McDonnell Industries estimated manufacturing overhead for the year at $290,000. Manufacturing overhead for the year was underapplied by $12,000. The company applied $235,000 to work in process. The amount of actual overhead would have been:

Which of the following statements is false?

Service companies generally do not have Work in Process and Finished Goods inventory accounts.

Which of the following correctly computes cost of goods manufactured?

Virginia Company paid $7,500 cash for various manufacturing overhead costs. As a result of this transaction:

Winken, Blinken, and Nod is a law firm specializing in real estate litigation. In addition to the three partners, the firm employs nine associates who work directly with clients. The average budgeted compensation for the twelve professionals is $240,000. Each lawyer is budgeted at 1,500 billable hours per year. All professional labor costs are included in a single direct cost pool and are traced to jobs on a per-hour basis. All non-professional labor costs are included in a single overhead cost pool and are allocated to jobs using professional labor hours as the allocation base. Budgeted overhead costs total $1,800,000. The firm is considering bidding on some work with a local university. The job is expected to require 100 hours of professional labor.Required: 1) Compute the budgeted direct cost rate per hour of professional labor.2) Compute the budgeted (that is, predetermined) overhead cost rate per hour of professional labor.3) Compute the budgeted cost for the university job.

Lexington Company's predetermined overhead rate is $4.00 per direct labor hour. Which of the following equations correctly computes the amount of overhead cost that should be applied to work in process assuming a job required 100 hours but was estimated to require 90 hours?

Selected T-accounts from the books of Street Manufacturing Company are provided below: Required: 1) Assuming overhead was allocated on the basis of direct labor cost, compute the predetermined overhead rate.2) Compute the amount by which overhead was over- or underapplied. (Be sure to indicate whether over- or underapplied.)3) Compute the cost of goods sold assuming that the company writes off any over- or underapplied overhead directly against cost of goods sold.4) Compute net income for the period.5) Compute the total amount of inventory that will be reported on the end-of-year balance sheet, including the balances from all of the company's inventory accounts.

Bates Company recognized $16,000 of estimated manufacturing overhead costs at the end of the month. As a result of this transaction the:

Debits in the Work in Process account consist of actual direct material costs, actual direct labor costs, and estimated manufacturing overhead costs.

By the end of the year, Shirley Company's manufacturing overhead account had a $1,500 credit balance. This means that overhead was underapplied during the year.

Which of the following costs would not increase the Work in Process Inventory account?

Selected accounts from Harper Company are provided below: Required: In the space provided, briefly describe each indicated transaction. Transaction (a) has been completed as an example. Transaction Description of Transaction (a) Common stock issued for cash (b) (c) (d) (e) (f) (g) (h) (i) (j)

A credit to the Finished Goods Inventory account represents the: