1. Consider the following statements about applying overhead to jobs in a job-or
ID: 2336917 • Letter: 1
Question
1. Consider the following statements about applying overhead to jobs in a job-order costing system.
Overhead can be applied when the job is completed.
Overhead can be applied slowly or periodically as a job is being worked on.
Overhead should be applied to any job not yet completed at year-end in order to value the work-in-process inventory.
Which of these statements is correct?
1) I only
2) II only
3) I and II only
4) I, II, and III
2. For external reporting purposes, manufacturing overhead applied is a recorded as a debit to which account in a job-order costing system?
1) Raw Materials inventory
2) Finished Goods inventory
3) Work in Process inventory
4) Cost of Goods Sold
3. Graca Tools shows the following entries in a T-account:
Manufacturing Overhead
(2)
9,000
(12)
167,000
(3)
15,000
(4)
80,000
(5)
30,000
(6)
25,000
159,000
167,000
Bal.
8,000
What does the ending balance of $8,000 represent?
1) Overapplied overhead
2) Underapplied overhead
3) Manufacturing overhead that will be carried over to the next period
4) An accounting error
Manufacturing Overhead
(2)
9,000
(12)
167,000
(3)
15,000
(4)
80,000
(5)
30,000
(6)
25,000
159,000
167,000
Bal.
8,000
Explanation / Answer
(1)About application of manufacturing overheads:
Overhead can be applied when the job is completed.
Overhead can be applied slowly or periodically as a job is being worked on.
Overhead should be applied to any job not yet completed at year-end in order to value the work-in-process inventory.
All of given statements are correct.
So Option 4 is correct answer.
(2)
For external reporting purposes, manufacturing overhead applied is a recorded as a debit to "Work In Process Inventory" account in a job-order costing system.
So Option 3 is correct answer.
(3)
Actual incurred overhead is $159,000
But Applied overhead is $167,000
So difference of $8,000 represents Over Application of Overhead.
So Option 1 is correct answer.
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