Multiple Choice Questions and Answers on Cost Accounting

The assignment content discusses various accounting concepts and calculations, including calculating cost of each unit, manufacturing overhead cost, and indirect cost rate per hour. It also addresses ways to dispose off under allocated or over allocated overhead costs at the end of a fiscal year, namely allocating to work in process, cost of goods sold, and finished goods account, allocating to cost of goods sold account, or reallocating based on adjusted overhead allocation rates.

Answer 1: B
Answer 2: A
Answer 3: B
Answer 4: A
Answer 5: C
Answer 6: C
Direct material = $2950
Direct labor = $2000
Manufacturing Overhead = Direct labor hours x $35
= [2000/20] x $35
= 100 x $35 = $3500
Cost of each unit:
= Direct material + Direct labor + Manufacturing overhead
= $2950 + $2000 + $3500
= $8450
Answer 7: B
Manufacturing overhead cost = Budgeted indirect cost rate x Direct mfg. labor hours
= $60 x 500
= $30000
Answer 8: D
Annual manufacturing overhead cost allocation rate for machine department:
= Estimated manufacturing overhead costs ÷ estimated machine hours
= $420000 ÷ 80000
= $5.25 per hour

Answer 9: a:
Total direct cost = Budgeted compensation per employee x No. of employees
= $50000 x 10
=$500000
Total professional labor hours = Billable hours per clients x No. of clients
= 400 x 20
=8000 hours
Direct labor cost rate per hour = Total direct cost ÷ Total professional labor hours
= $500000 ÷ 8000
= $62.50
Answer 9: b:
Budgeted indirect cost =$200000
Total professional labor hours = 8000
Indirect cost rate per hour = Budgeted indirect cost ÷ Total professional labor hours
= $200000 ÷ 8000
=$25
Answer 10:
The three possible ways to dispose off under allocated or over allocated overhead costs at the
end of fiscal year are:
 Allocating the under allocated or over allocated overhead costs to the work in process, cost
of goods sold and finished goods account. This method is theoretically correct as it is more
accurate than other methods and it is rational to account for the under or over allocated
overhead cost to the goods when they are produced.
 Allocating the total amount of under allocated or over allocated overhead costs to the cost
of goods sold account. This method is theoretically incorrect method but it is practical in
nature as it is less time consuming and it can be applied when the under or over allocated
overhead costs are not material in nature.
 Reallocating the overhead costs on the basis of adjusted overhead allocation rate based on
the actual overhead costs. This method is theoretically correct but more time consuming as
it requires re-calculation of the allocation rates.