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Accounting multiple choice questions

1. Neil Company uses a job order cost system and has established a predetermined overhead application rate for the current year of 150%, based on budgeted overhead of $900,000 and budgeted direct labor cost of $600,000. Job no. 1 was charged with direct materials of $20,000 and with overhead of $18,000. The total cost of job no. 1:

a. Is $38,000.
b. Is $50,000.
c. Is $65,000.
d. Cannot be determined without additional information.

2. ABD Co. uses a job order cost accounting system. At year-end the Work in Process Inventory controlling account showed a debit balance of $65,000. For the two jobs in process at year-end, one showed $8,000 in direct materials and $6,000 in direct labor. The job cost sheet for the second job showed $12,000 in direct materials and $9,000 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. During August, Department Z started and completed 78,000 units and also finished 12,000 units that were 75% completed on July 31. On August 31, Department Z's ending inventory consisted of 15,000 units that were 40% completed. All manufacturing costs are incurred at a uniform rate throughout Department Z's production process. The number of equivalent full units of production for Department Z during August is:

a. 87,000.
b. 78,000.
c. 93,000.
d. 96,000.

Solution Preview

1. Neil Company uses a job order cost system and has established a predetermined overhead application rate for the current year of 150%, based on budgeted overhead of $900,000 and budgeted direct labor cost of $600,000. Job no. 1 was charged with direct materials of $20,000 and with overhead of $18,000. The total cost of job no. 1:

a. Is $38,000.
b. Is $50,000.
c. Is $65,000.
d. Cannot be determined without additional information.

Answer: b. Is $50,000.
Direct materials= $20,000
Overhead rate= 150%
Overhead= $18,000
Therefore direct labor= $12,000 =18000/150%
Therefore total cost= $50,000 ...

Solution Summary

Answers Accounting multiple choice questions dealing with job order cost system, predetermined overhead application rate, equivalent units

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