1. Assigning manufacturing overhead to a specific job involves some difficulties. All of the following are examples of such a difficultyexcept:

   Manufacturing overhead is a direct cost and can be easily traced to products or a particular job.

   Manufacturing overhead consists of many different types of costs ranging from lubricants used in machines to the depreciation of factory equipment.

   The average cost per unit of manufacturing overhead varies from one period to the next due to the fixed costs in manufacturing overhead that remain relatively constant from one period to the next even though the units produced fluctuate.

   Manufacturing overhead is an indirect cost, and is either impossible or difficult to trace to a particular product or job.

3 points

QUESTION 2

1. Why is a predetermined overhead rate calculated and used to apply manufacturing overhead to a job, instead of using the actual cost of manufacturing overhead?

   Seasonal factors should be included in the cost of products so products that cost more in summer as opposed to winter are priced at higher amounts.

   There is no way to calculate the actual overhead costs.

   Managers would rather not accumulate the actual overhead costs, so estimations are made throughout the year.

   Actual overhead costs may not be known until the end of the year.

3 points

QUESTION 3

1. Which of the following statements is true?

   Direct labor hours are the allocation base that all manufacturing firms should use in the predetermined overhead rate.

   Ideally, the allocation base in the predetermined overhead rate should drive the overhead cost.

   Most manufacturing companies in the United States have quit using direct labor hours as the primary or secondary allocation base for manufacturing overhead.

   In the past decade direct labor has increased relative to overhead as a component of product costs.

3 points

QUESTION 4

1. Which of the following statements related to the four step process used to compute the predetermined overhead rate is true?

   The second step is to estimate the total fixed manufacturing overhead cost for the coming period and the variable manufacturing overhead cost per unit of the allocation base.

   The third step is to analyze all the mixed costs in the firm.

   The fourth step is to compute the predetermined overhead rate by dividing actualtotal manufacturing overhead cost by actual total amount of the allocation base.

   The first step is to compute the actual amount of the allocation base that will be used for next period's production.

3 points

QUESTION 5

1. All of the following statements are trueexcept:

   The schedule of cost of goods manufactured contains three elements of product costs-direct materials, direct labor and manufacturing overhead.

   The schedule of cost of goods manufactured summarizes the portions of costs that remain in ending Work in Process inventory and that are transferred out of Work in Process to Finished Goods.

   The schedule of cost of goods sold shows the detail of the work in process inventory account.

   The schedule of cost of goods sold summarizes the portions of costs that remain in ending Finished Goods inventory and that are transferred out of finished goods to Cost of Goods Sold.