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Overhead Costs for Manufacturing

Use the following to answer questions 1-2:

Mayfield Corporation estimates its manufacturing overhead costs to be $80,000 and its direct labor costs to be $160,000 for 2005. The actual manufacturing labor costs were $40,000 for job 1, $60,000 for job 2 and $80,000 for job 3 during 2005. Manufacturing overhead is applied to jobs on the basis of direct labor costs using a predetermined overhead rate. The actual manufacturing overhead cost for the year was $114,000.

1. The amount of overhead assigned to Job 3 during 2005 was:

A) $ 80,000

B) $160,000

C) $ 40,000

D) $ 35,555

2. The amount of the manufacturing overhead variance during 2005 was:

A) $24,000 Underapplied

B) $66,000 Overapplied

C) $66,000 Underapplied

D) $24,000 Overapplied

3. Which of the following statements about activity based costing is not true?

A) Activity based costing differs from traditional costing systems in that products are not cross subsidized.

B) In activity based costing, cost drivers are usually what cause costs to be incurred.

C) Activity based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.

D) Activity based costing is useful for allocating marketing and distribution costs.

Use the following to answer questions 4-5:

The following information is available for last year:

Sales Revenue
Variable Cost
Contribution Margin

Product X
$125,000
$105,000
$20,000

Product Y
62,500
38,750
23,750

4. If the salesperson's commission is 3 percent of sales, which product would he prefer to sell?

A) Product X

B) Product Y

C) Either Product X or Y

D) Neither Product X nor Y

5. If the salesperson's commission is 10 percent of contribution margin, which product would he prefer to sell?

A) Product X

B) Product Y

C) Either Product X or Y

D) Neither Product X nor Y

6. Companies using just-in-time (JIT) inventory systems will generally have:

A) Higher inventory turnover and higher total sales than traditional companies.

B) Higher inventory turnover and higher total sales than traditional companies.

C) Lower inventory turnover and higher sales per employee than traditional companies.

D) Higher inventory turnover and higher sales per employee than traditional companies.

Use the following to answer questions 7-8:

Elger Company has a process-costing system using the Weighted-Average cost flow method. All materials are introduced at the beginning of the process in Department 1. The following information is available for the month of December.

Units

Work-in-Process, December 1 (30% complete as to conversion cost)
1,000

Started in December
8,000

Transferred to Department 2 during December
7,500

Work-in-Process, December 31 (20% complete as to conversion cost)
1,500

7. The number of equivalent units of production for materials for the month of December is:

A) 8,000

B) 7,500

C) 9,000

D) 7,800

8. The number of equivalent units of production for conversion costs for the month of December is:

A) 8,000

B) 7,500

C) 9,000

D) 7,800

9. In joint-process costing and analysis, which of the following costs is relevant when deciding the point at which a product should be sold to maximize profits?

A) The cost of the machinery used to produce the three products

B) The salaries of production personnel making the product

C) The cost of the materials required for the joint products

D) The selling price if the products are processed further

10. In joint-process costing and analysis, which of the following costs would not be relevant when deciding the point at which a product should be sold to maximize profits?

A) The cost of the machinery used to produce the three products

B) The selling price at the split off point

C) The additional processing costs

D) The selling price if the product is processed further

Solution Summary

The solution analyzes overhead costs for manufacturing.

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