AT&T e-28%) 10:19 AM asuonline.alasu.edu 16) Which of the following statements i
ID: 2334591 • Letter: A
Question
AT&T e-28%) 10:19 AM asuonline.alasu.edu 16) Which of the following statements is true regaeding prodact and period costs 6 A) Delivary espense is a product cost and indirect materials is a period cost B) Sales commissions and indirect labor are both period costs C) Office salaries expense and factory maintenance are both product costs D) Office rent is a peoduct cost and supervisons' salaries exponse is a period cost E) Factory renn is a product cost and advertising expense is a period cost 17) At the current year-end, Simply Company found that its overhead was underapplied by 17) $2,500, and this amount was not considered material. Based on this information Simply should A) Close the $2.500 to Cost of Goods Sold B) Camy the $2,500 so the income statement as "Other Expense" C) Carry the $2,500 to the next period D) Do mothing about the $2,500, since i is not material, and it is likely that overhead will be overapplied by the same amount nest year. E) Close the $2,500 o Finished Goods Invenloey 13) Omega Contractors manefactures each house to customer specifications le most likcly s) A) A periodic inventery sysiem. C) Job order costing D) Activity-basod costing 19) Clemmens Company applies overhead based on direct labor cost. Estimaned overhead 19 and direct laboe costs foe the year were 5112,500 and $125,000, respectively. Daning the ycar, actual overhcad was $107.400 and acteal direct labor cost was $150,000. The entry to close the over- or underapplied overhead at year-end, assuming an immaterial amount, would include A) A credn to Finished Goods Inventory for $600 B, A debit to Costofdioods Sold for S600 C) A credit to Cost of Goods Sold for 5600 D) A credit to Factory Overhead for 5600 E) A debit so Work in Process Inventory for S600. 20) Minstrel Manufacturing uses a job order costing system. During one month Minstrel 20) purchased 5198,000 of raw matcrials on crodit; issued materials to production of $195,000 of which $30,000 were indinect. Minstrel incurred a factory payrell of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead fate of 150% ef direct Ibor cost. The journal entry lo teoced e application of factory overhead to production is: A) Debit Facsoey Payroll S1S0,000, credit Week in Process Inventory S150,000 B) Debit Woek in Process Inventory $225,000; crodit Factory Overhead $225,000 C) Debit Factory Overhead $165,000 credit Work in Process Inventory $165,000. D) Debit Work in Process Inventory $165,000, crodit Factory Payroll $165,000 E) Debit Work in Process Inventiory $165,000, crodit Factory Overhcad S165,000 21) The Week in Precess Inventory account of a manofacturing company that usesan overbcad rate based on direct labor cost has a $3,500 debin balance after all posting is completed. The cest sheet of the one job sti in process shows direct material cost of $1,400 and diroct labor cost of $800. Therefore, the amount of the applied overhead is A) $2.200. B) $2.400 C$1,800 E) $1,000 22) A job cost sheet shows 1 rmation about each of the following items escept; A) The costs incurred by the marketing department in selling the job B) The ovethead costs assigned to the jobExplanation / Answer
16) Answer: Option E) Factory rent is a product cost and advertising expense is a period cost.
Factory rent which is a manufacturing overhead is a product cost while advertising expense is a period cost and hence, option E) is correct.
Delivery expense is a period cost and indirect materials is a product cost, hence option A) is incorrect. Sales commissions is a period cost and indirect labor is a product cost, hence option B) is incorrect. Office salaries expense is a period cost while factory maintenance is a product cost, hence option C) is incorrect. Office rent is a period cost while supervisors’ salaries expense is a product cost, hence option D) is incorrect.
17) Answer: Option A) Close the $2,500 to Cost of Goods Sold.
Under-applied overheads if not material are typically closed to the cost of goods sold account. In case it is material, the same are pro-rated to the cost of goods sold, work in process inventory, and finished goods inventory.
18) Answer: Option C) Job order costing
Job order costing is used when every product manufactured is different from the others or when the products manufactured are not homogenous. Since Omega Contractors manufactures each house to customer specifications, each house manufactured would be different due to which Omega Contractors is most likely to use job order costing.
19) Answer: Option C) A credit to Cost of Goods Sold for $600.
Predetermined overhead rate = Estimated overhead/Estimated direct labor cost = $112500/$125000 = 90%.
Overhead applied during the year = 90% x $120000 = $108000
Actual overhead incurred during the year = $107400
Overhead over-applied = $108000 - $107400 = $600
Over-applied overhead being immaterial, will be closed to the cost of goods sold by debiting overheads account and crediting the cost of goods sold account by $600. Hence, option C) is correct.
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