Question

1. Which of the following statements is true of a normal costing system?

In a normal costing system, only the costs incurred for direct materials are used to determine unit cost.

In a normal costing system, only actual costs of direct materials, direct labor, and overhead are used to determine unit cost.

In a normal costing system, unit costs are determined by adding estimated direct materials, estimated direct labor, and actual overhead.

In a normal costing system, unit costs are determined by adding actual direct materials, actual direct labor, and estimated overhead.

d

2. Which of the following is a difference between the actual cost system and the normal cost system?

The actual cost system determines unit cost by adding actual costs of direct materials and actual direct labor, whereas the normal cost system determines unit cost by adding actual direct materials, actual direct labor, and estimated overhead.

The actual cost system determines unit cost by adding actual direct materials, actual direct labor, and actual overhead, whereas the normal cost system determines unit cost by adding actual direct materials, actual direct labor, and estimated overhead.

The actual cost system determines unit cost by adding actual costs of direct materials and actual direct labor, whereas the normal cost system determines unit cost by adding actual direct labor and estimated overhead.

The actual cost system determines unit cost by approximating the year’s actual total cost at the beginning of the year, whereas the normal cost system determines unit cost by approximating the year’s actual total cost based on the total cost of the prior year.

3. Using the normal costing method, how can the overhead costs be estimated or calculated?

Overhead costs can be calculated by approximating the year’s actual overhead at the end of the year and then using the actual rate to obtain the needed unit cost information.

Overhead costs are estimated by approximating the year’s estimated overhead at the beginning of the year and then using the actual rates from the most recent year to obtain the needed unit cost information.

Overhead costs can be estimated by approximating the year’s actual overhead at the beginning of the year and then using a predetermined rate throughout the year to obtain the needed unit cost information.

Overhead costs can be calculated by approximating the year’s actual overhead at the end of the first six months of the year and then using the actual rate of this period to obtain the needed unit cost information.

1. Nile Machinery Inc. estimated an annual overhead cost of $200,000 for the year 20X1. It also estimated an annual activity level of 4,000 units for the year. The actual overhead cost was $240,000. Calculate the predetermined overhead rate per unit for Nile Machinery for the year 20X1.

$60 per unit

$10 per unit

$50 per unit

$100 per unit

2. For the year 20X1, Argon Systems Inc.’s predetermined overhead rate was 40% of direct labor costs. By the end of the year, the total costs for direct labor was $100,000. The actual overhead for the year 20X1 was $38,000. Calculate the overhead variance for the year 20X1.

Underapplied variance of $2,000

Overapplied variance of $2,000

Underapplied variance of $4,000

Overapplied variance of $4,000

3. Which of the following is the mathematical expression to calculate the predetermined overhead rate for a department?

Predetermined Departmental Overhead Rate = Actual Department Overhead ÷ Estimated Departmental Activity Level

Predetermined Departmental Overhead Rate = Estimated Department Overhead ÷ Actual Departmental Activity Level

Predetermined Departmental Overhead Rate = Estimated Department Overhead ÷ Estimated Departmental Activity Level

Predetermined Departmental Overhead Rate = Actual Department Overhead ÷ Actual Departmental Activity Level

4. Regal Manufacturing Corp., manufacturers of custom-made motor engines, has an estimated overhead of $109,500 and estimated direct labor hours of 21,900 at the beginning of the current year. It applies overhead based on direct labor hours. Actual direct labor hours for the current year are 22,500. Calculate the overhead applied to production for the year.

$106,580

$112,500

$3,000

$5,920

1. Which of the following documents lists the total cost for a single job?

Sales order

Job-order cost sheet

Bill of materials

Goods receipt note

2. Which of the following is true of a material requisition form?

It includes the data like type, quantity, and unit price of the direct materials issued to a job.

It lists the total material cost for a single job.

It is filled out by each employee every day to identify total material cost and abnormal wastage of material.

It is prepared using the information of material cost entered in the job-order cost sheet.

3. Vector Paperwork's Inc. produces high-quality paper and other stationery items. It uses the job-order costing system in its manufacturing process. In the factory, 100 employees work in the production process, 20 as supervisors, 30 in the sales department, and 5 in the accounting department. For which of the following employees must time ticket be filled out for at the end of each job?

Employees in the accounting department

Employees in the sales department

Supervisors

Employees in the production process

Answer 1

1. Which of the following statements is true of a normal costing system?

Ans. In a normal costing system, unit costs are determined by adding actual direct materials, actual direct labor, and estimated overhead.

2. Which of the following is a difference between the actual cost system and the normal cost system?

Ans. The actual cost system determines unit cost by adding actual direct materials, actual direct labor, and actual overhead, whereas the normal cost system determines unit cost by adding actual direct materials, actual direct labor, and estimated overhead.

3. Using the normal costing method, how can the overhead costs be estimated or calculated?

Ans. Overhead costs are estimated by approximating the year’s estimated overhead at the beginning of the year and then using the actual rates from the most recent year to obtain the needed unit cost information.

4.  The predetermined overhead rate per unit for Nile Machinery for the year 20X1 will be $50 per unit i.e.$ 200000 estimated overhead divided by 4000 units.

5. overhead variance for the year 20X1 for Argon Systems Inc would be difference between Pre determined overheadf cost less Actual Overhead Cost , which will be as below :

Overhead Variance = Predetermined Cost less Actual Cost

= ($100000 * 40%) less ($38000)

= $40000 - $38000

Overhead Variance = $2000 (Favourable)

6. the mathematical expression to calculate the predetermined overhead rate for a department

Ans. Predetermined Departmental Overhead Rate = Estimated Department Overhead ÷ Estimated Departmental Activity Level

7. the overhead applied to production for the year.for Regal Manufacturing Corporation

Pre determined overhead rate per labour hour = Estimated Overhead divided by Estimated Labour Hour

=

= $5 per hour

Hence , the overhead applied to production for the year = Actual Hours * Predetermined Overhead Rate

= 22500 * 5

the overhead applied to production for the year = $112500

8. Which of the following documents lists the total cost for a single job?

Ans. Job-order cost sheet

9. Which of the following is true of a material requisition form?

Ans. It includes the data like type, quantity, and unit price of the direct materials issued to a job.