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Garrison 13e Practice Exam – Chapter 3

Print these pages. Answer each of the following questions, explaining your answers or showing your work, as appropriate, and then compare your solutions to those provided at the end of the practice exam.

1. Closet Depot, Inc. had the following estimated costs for next year:

Sales commissions
$600,000
Direct labor
440,000
Salary of production supervisor
280,000
Rent on factory equipment
128,000
Direct materials
120,000
Advertising expense 88,000
Indirect materials
40,000

The company estimates that 64,000 direct labor hours will be worked and 80,000 machine hours will be incurred during the year.

If overhead is applied on the basis of direct labor hours, what will be the overhead rate per hour?

2. Energetica Company’s predetermined overhead rate is based on direct labor hours. At the beginning of the current year, the company estimated that its manufacturing overhead would total $440,000 during the year. During the year, the company incurred $400,000 in actual manufacturing overhead costs. The Manufacturing Overhead account showed that overhead was underapplied by $16,000 during the year. If the predetermined overhead rate was $40.00 per direct labor hour, how many hours were worked during the year?
3. Lotus Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated manufacturing overhead would be $400,000 and direct labor hours would be 40,000. The actual figures for the year were $430,000 for manufacturing overhead and 42,000 direct labor hours. Is manufacturing overhead underapplied or overapplied for the year? By how much?

4. Rollerston Company's job-order costing system, manufacturing overhead is applied to Work in Process inventory using a predetermined overhead rate. Wagner had no beginning or ending inventories in the current month. During

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