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Job Order Cost System, Factory Overhead and Direct Labor

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Multiple choice:

1. Department X of a manufacturing company works on only one product. The 8000 units in process on December 1 were 60% complete. An additional 80,000 units were places in production during December. At December 31, the 20,000 units in process were 80% complete. The equivalent Units of production during December amounted to:
a. 79,200 b. 80,800 c. 99,200 d. 100,800

2. A job order cost system would be most appropriate in the manufacture of:
a. Paints b. custom-made furniture c. breakfast cereal d. standard grade of wood

3. Under a job order cost system, costs are accumulated for each:
a. Department in the production cycle
b. Batch of production known as a job or lot
c. Individual unit produced
d. Job supervisor

4. Which of the following is a characteristic of factory overhead in a job order cost system.
a. Is indirectly traceable to specific jobs or units
b. It includes the cost of all labor relating to factory operations
c. It is assigned to units produced by means of an overhead application
d. It includes the cost of raw materials used and indirect labor

5. Factory overhead expressed as a percentage of direct labor:
a. Cannot be estimated at the beginning of the accounting period
b. Ranges from 40% to 50% for most business
c. Tends to be very high in labor intensive businesses
d. Is determined by dividing budgeted overhead by budgeted direct labor

6. At the end of the accounting period, applied overhead was larger than actual overhead by an immaterial amount. The overapplied overhead should be:
a. Treated as an extraordinary gain
b. Closed into Cost of Goods sold
c. Apportioned among Goods in Process Inventory, Finished Goods Inventory and Cost of Goods Sold.
d. Ignored; actual overhead is determined only for internal control purposes.

7. Amortizing a premium on bonds payable:
a. Increases interest expense
b. Increases periodic cash payment to bondholders
c. Decreases interest expense
d. Decreases periodic cash payments to bondholders

8. Marshall Company bought $20,000 (maturity value)of 9% bonds at a price of 94. The brokerage commission was $45 and accrued interest amounted to $400. Marshall Company should debit investment in bonds:
a. $18,000 b. $18,845 c. $19,200 d. $19,245

9. Bonds Payable has a balance of $750,000 and Premium on Bonds Payable has a balance of $12,800. If the issuing corporation redeems the bonds at 104, what is the amount of gain or loss on redemption?
a. $17,200 loss b. $17,200 gain c. $30,000 loss d. $30,000 gain e. none of these

10. The statement of cash flows prepared by the indirect method, the cash flows from operating activities section would include:
a. Receipts from the sale of investments
b. Amortization of premium on bonds payable
c. Payments for cash dividends
d. Receipts from the issuance of capital stock

11. Accounts receivable arising from trade transactions amounted to $35,000 and $40,000 at the beginning and end of the year respectively. Income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is:
a. $120,000 b. $125,000 c. $155,000 d. $115,000

12. The articles of partnership for AB Partnership provide for a salary allowance of $3000 per month for partner A and that the balance of net income be divided equally. If A made no additional investment during the year but withdrew $2500 per month, and net income for the year was $60,000, by what amount did A's capital increase during the year?
a. $18,000 b. $30,000 c. $36,000 d. $48,000 d. none of these

13. Treasury stock represents:
a. Shares of ownership in the United State Treasury Department
b. A current asset
c. Authorized shares which have never been issued
d. Previously outstanding shares which have been repurchased by the issuing company

14. A and B are partners who share income in the ration of 1:2 and have capital balance of $90,000 and $60,000 respectively. With the consent of B, X buys one half of A's interest for $48,000. For what amount will X's capital account be credited to record admission to the partnership?
a. $40,000 b. $45,000 c. $50,000 d. $75,000 e. none of these
15. X and Y are partners who share income in the ration of 2:0. At the time they decide to terminate the partnership their capital balances are $105,000 and $140,000 respectively. After all non cash assets are sold and all liabilities are paid, there is a cash balance of $290,000. What amount of gain on realization should be allocated to X?
a. $15,000 b. $22,500 c. $30,000 d. $45,000 e. none of these

16. On January 1, X Corp. purchases 20% of the common stock of Y Company for $150,000, which corresponds to the underlying book value. Y company has issued only common stock. During the year Y Company earns net income of $100,000 and pays dividends of $40,000. X corp uses the equity method to account for this investment. The investment should appear in X Corp's balance sheet at the end of the year at the amount of:
a. $170,000 b. $162,000 c. $150,000 d. $142,000

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Solution Summary

The solution explains some multiple choice questions relating to job order cost system, factory overhead, direct labor and more