Predetermined Overhead Rate Is Based on Direct Labor Costs

1. Which of the following statements is (are) true?

A) Companies that produce many different products or services would use job-order costing systems.

B) Job-order costing systems cannot be used by service firms.

C) Costs are traced to departments and then allocated to units of product when job-order costing is used.

D) All of the above.

2. Harrington Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on machine hours in the Machining Department and direct labor cost in the Assembly Department. At the beginning of the year, the company made the following estimates:

What predetermined overhead rates would be used in the Machining and Assembly Departments, respectively?

A) 110% and $15

B) $5.00 and 50%

C) $8.00 and 50%

D) $5.00 and 200%

3. Tribute Company has the following estimated costs for next year:

The company estimates that 16,000 direct labor and 106,000 machine hours will be worked during the year. If overhead is applied on the basis of direct labor hours, the predetermined overhead rate per direct labor hour will be:

A) $7.00.

B) $13.88.

C) $15.26.

D) $17.12.

4. Hiassen Company's predetermined overhead rate is based on direct labor costs. The company's Work in Process inventory account has a balance of $2,400, which relates to the one job that was in process at the end of an accounting period. The related job cost sheet includes total charges of $400 for direct materials and $1,000 for direct labor. The company's predetermined overhead rate, as a percentage of direct labor costs, must be:

A) 100%.

B) 50%.

C) 40%.

D) 17%.

5. Dearborn Company's predetermined overhead rate is based on direct labor hours (DLHs). At the beginning of the current year, the company estimated that its manufacturing overhead would total $220,000 during the year. During the year, the company incurred $200,000 in actual manufacturing overhead costs. The...