Chapter 3: Product Costing Answers to Review Questions

R3.1. The following equation applies to raw materials, work-in-process and finished goods inventories

Beginning Balance + Transfers In - Transfers Out = Ending Balance

Correct answer is D: all of the above.

R3.2. Correct answer is D. The predetermined rate is used to apply overhead costs to work-in-process units.

R3.3. Correct answer is D. The costs to be accounted for consist of: Costs in the beginning inventory and costs added during the period

R3.4 Correct answer is C: The detailed materials, labor, and overhead costs are needed when determining the cost per equivalent units.

R3.5 The job-order costing system assign costs directly to the product or job by adding the direct materials and direct labor costs to the work-in-process (WIP) inventory.

When the manufacturing process is continuous, it is difficult to establish how much of each material is used and exactly how much labor time is consumed to produce each unit of a product. Thus, under process costing, costs are accounted for by the production process or production department instead of by the product or the job.

R3.6 The predetermined rate is calculated as shown below and is used to apply overhead costs to work-in-process:

Predetermined Overhead Rate = Budgeted(Estimated)OverheadCost Budgetted(Estimated)LevelofActivity(basis)

R3.7 Correct answer is B. When products or services are different from each other, joborder costing should be used.

R3.8. Correct answer is D. Direct materials, direct labor and manufacturing costs are recorded on the job cost sheet.

R3.9. Correct answer is B. Work in process debited & Materials credited for the issuance of direct materials to production.

R3.10 The relationship between machine-hours and applied overhead is a constant of $5 per machine-hour, which indicates a strong, projected cause-and-effect relationship between the two.