1. Test Company produces a product that passes through two departments: Department 1 and Department 2. Test Company determines product cost using a normal cost system. The company applies overhead using a plant-wide rate based on machine hours. The company prepared the following estimates at the beginning of the year.

   	Department 1	Department 2	Total
   Prime cost	$375,000	$700,000	$1,075,000
   Overhead cost	$420,000	$240,000	$660,000
   Direct labor hours	16,000	50,000	66,000
   Machine hours	100,000	20,000	120,000

   During the year, Test Company reported the following actual results.

   	Department 1	Department 2	Total
   Prime cost	$475,000	$850,000	$1,325,000
   Overhead cost	$450,000	$300,000	$750,000
   Direct labor hours	20,000	60,000	80,000
   Machine hours	125,000	25,000	150,000

   Calculate the predetermined overhead rate Test Company uses to apply overhead.

   		$10.00 per direct labor hour
   		$5.00 per machine hour
   		$5.50 per machine hour
   		$16.20 per machine hour

5 points

QUESTION 2

1. THE FOLLOWING INFORMATION IS USED FOR QUESTIONS 1 4.

   Test Company produces a product that passes through two departments: Department 1 and Department 2. Test Company determines product cost using a normal cost system. The company applies overhead using a plant-wide rate based on machine hours. The company prepared the following estimates at the beginning of the year.

   	Department 1	Department 2	Total
   Prime cost	$375,000	$700,000	$1,075,000
   Overhead cost	$420,000	$240,000	$660,000
   Direct labor hours	16,000	50,000	66,000
   Machine hours	100,000	20,000	120,000

   During the year, Test Company reported the following actual results.

   	Department 1	Department 2	Total
   Prime cost	$475,000	$850,000	$1,325,000
   Overhead cost	$450,000	$300,000	$750,000
   Direct labor hours	20,000	60,000	80,000
   Machine hours	125,000	25,000	150,000

   Calculate the overhead applied to production for the year.

   		$825,000
   		$660,000
   		$800,000
   		$600,000

5 points

QUESTION 3

1. THE FOLLOWING INFORMATION IS USED FOR QUESTIONS 1 4.

   Test Company produces a product that passes through two departments: Department 1 and Department 2. Test Company determines product cost using a normal cost system. The company applies overhead using a plant-wide rate based on machine hours. The company prepared the following estimates at the beginning of the year.

   	Department 1	Department 2	Total
   Prime cost	$375,000	$700,000	$1,075,000
   Overhead cost	$420,000	$240,000	$660,000
   Direct labor hours	16,000	50,000	66,000
   Machine hours	100,000	20,000	120,000

   During the year, Test Company reported the following actual results.

   	Department 1	Department 2	Total
   Prime cost	$475,000	$850,000	$1,325,000
   Overhead cost	$450,000	$300,000	$750,000
   Direct labor hours	20,000	60,000	80,000
   Machine hours	125,000	25,000	150,000

   Calculate the overhead variance for the year.

   		$75,000 underapplied
   		$75,000 overapplied
   		$90,000 overapplied
   		$165,000 underapplied

5 points

QUESTION 4

1. THE FOLLOWING INFORMATION IS USED FOR QUESTIONS 1 4.

   Test Company produces a product that passes through two departments: Department 1 and Department 2. Test Company determines product cost using a normal cost system. The company applies overhead using a plant-wide rate based on machine hours. The company prepared the following estimates at the beginning of the year.

   	Department 1	Department 2	Total
   Prime cost	$375,000	$700,000	$1,075,000
   Overhead cost	$420,000	$240,000	$660,000
   Direct labor hours	16,000	50,000	66,000
   Machine hours	100,000	20,000	120,000

   During the year, Test Company reported the following actual results.

   	Department 1	Department 2	Total
   Prime cost	$475,000	$850,000	$1,325,000
   Overhead cost	$450,000	$300,000	$750,000
   Direct labor hours	20,000	60,000	80,000
   Machine hours	125,000	25,000	150,000

   Calculate the total normal product cost for the year.

2. 		$2,075,000
   		$1,900,000
   		$1,735,000
   		$2,150,000