Page 751 - Accounting Principles (A Business Perspective)

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What are the differences between the cost of goods sold sections in a manufacturer's and a merchandiser's
income statements?
a. A merchandiser uses Merchandise Inventory and Direct Labor, whereas a manufacturer uses Finished Goods

Inventory and Cost of Goods Manufactured.
b. A merchandiser uses Merchandise Inventory and Cost of Goods Available for Sale, whereas a manufacturer
uses Finished Goods Inventory and Cost of Goods Available for Sale.
c. A merchandiser uses Work in Process Inventory and Cost of Goods Sold, whereas a manufacturer uses
Finished Goods Inventory and Cost of Goods Sold.
d. None of the above.
A job cost system is used:

a. When there are dissimilar products.
b. By manufacturers and service companies.
c. When goods are produced to meet a customer's particular needs.
d. All of the above.
Which of the following best describes the advantages of using a predetermined overhead rate?.
a. Overhead costs are applied evenly throughout the year rather than fluctuating from month to month.
b. Predetermined rates require managers to wait until long after the accounting period to get an estimate of
product costs.
c. Total unit costs of production are known sooner than using actual overhead rates, and overhead costs are

evenly distributed throughout the year.
d. Both (a) and (c) above.
The expected level of activity in a production center is 30,000 machine-hours. Estimated overhead costs are
indirect materials and indirect labor, USD 360,000; other overhead, USD 90,000. Which of the following is the
predetermined overhead rate per machine-hour?
a. USD 3.
b. USD 12.

c. USD 15.
d. USD 20.
You are given the following data relating to a company:
Estimated manufacturing overhead per USD 24,000
year
Expected level of activity per year 40,000 machine-hours
Predetermined overhead rate USD 0.60 per machine-hour
Actual overhead costs incurred during USD 22,500
year
Actual machine-hours 35,000
Which of the following are the correct journal entries for the preceding data?
a. Manufacturing overhead 22,500
Various accounts 22,500
Work in process inventory 21,000
Manufacturing overhead 21,000
b. Manufacturing overhead 22,500
Various accounts 22,500
Work in process inventory 15,428
Manufacturing overhead 15,428

Accounting Principles: A Business Perspective 752 A Global Text