Multiple Choice Questions

1. Each of the following statements regarding a plantwide overhead rate is true, except:

a. The use of a plantwide rate is easy.

b. A plantwide rate provides less accurate cost information than does a departmental rate.

c. A plantwide rate is less time consuming to prepare than is a departmental rate.

d. A plantwide rate is more costly to prepare than is a departmental rate.

2. At the law firm of Kimberly Kanakes and Associates LLP, overhead is assigned to clients based on direct labor hours. At the beginning of the current year, estimated overhead costs were $156,000 and estimated direct labor hours were 20,800. Actual overhead costs for the year amounted to $166,400, and the firm’s attorneys worked 20,904 hours on various client issues. How much overhead cost should be assigned to a client whose file indicates that attorneys worked 120 hours on various client issues?

a. $895.20

b. $900.00

c. $955.20

d. $960.00

3. Refer to question (9). How much is overhead overapplied or underapplied?

a. $9,620 overapplied

b. $9,620 underapplied

c. $780 overapplied

d. $780 underapplied

4. Pack, Inc. applies manufacturing overhead on the basis of machine hours. The following estimates were used for the current year:

Estimated machine hours ..........200,000

Estimated manufacturing overhead .......$1,000,000

Actual machine hours were 202,000 and actual manufacturing overhead was $1,005,000.

What was Pack’s over- or underapplied overhead for the year?

a. $5,000 under

b. $5,000 over

c. $10,000 under

d. $10,000 over

e. $2,000 over

5. In its initial year of operation, Computer World manufactured 1,000 computer screens and had a batch of 200 more computer screens that were 50 percent complete at year end. Production costs for the year totaled $220,000. How many equivalent units were completed during the year?

a. 100

b. 1,000

c. 1,100

d. 1,200

6. Mark Goodwin Ltd. has a beginning work in process inventory of 25,000 units, 40 percent complete. During the period, 100,000 units were transferred in from a preceding process. The ending work in process inventory was 20,000 units, 80 percent complete. What are the equivalent units for the conversion costs, assuming that the company uses the weighted average method?

a. 106,000

b. 115,000

c. 121,000

d. 131,000

7. Under which of the following conditions will the first-in, first-out method produce the same cost of goods manufactured as the weighted average method?

a. There is no ending work in process inventory.

b. There is no beginning work in process inventory.

c. The beginning and ending work in process inventories are equal.

d. The beginning and ending work in process inventories are both 50 percent complete.

8. The costs included in the cost per equivalent unit using the weighted average method are:

a. Current costs and those from beginning work in process inventory

b. Current costs and those from ending work in process inventory

c. Current costs only

d. Costs from beginning and ending work in process inventories