1/ Adams Manufacturing allocates overhead to production on the basis of direct l

Question

1/ Adams Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Adams estimated total overhead of $334,500; materials of $413,000 and direct labor of $223,000. During the year Adams incurred $421,000 in materials costs, $419,000 in overhead costs and $227,000 in direct labor costs. Compute the overhead application rate.

Multiple Choice

185%.

81%.

67%.

184%.

150%.

2/ The Work in Process Inventory account for DG Manufacturing follows. Compute the cost of jobs completed and transferred to Finished Goods Inventory.

The cost of units transferred to finished goods is:

Multiple Choice

$111,300.

$100,600.

$98,800.

$89,900.

$95,200.

3/ Cosi Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Cosi expects to incur $760,000 of overhead during the next period, and expects to use 46,000 labor hours at a cost of $10.00 per hour. What is Cosi Company's overhead application rate?

Multiple Choice

6.05%.

60.5%.

165%.

1652%.

65%.

Work in Process Inventory Beginning WIP 5,400 Direct materials 48,000 Direct labor 30,500 Applied Overhead 16,700 Total Manufacturing Costs 100,600 To Finished Goods ? Ending WIP 10,700

Explanation / Answer

1. Overhead application rate = Estimated overhead*100/estimated labour cost

= 334500*100/223000

Overhead application rate = 150% of labour cost

so answer is e) 150%

2. Cost of units transferred to finished goods = Total manufacturing cost-ending wip

= 100600-10700

Cost of units transferred to finished goods = 89900

so answer is d) $89900

3. Overhead application rate = Estimated overhead*100/estimated labour cost

= 760000*100/460000

Overhead application rate = 165.2%

so answer is d) 165.2%

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