Question

General administrative expenses are normally treated as inventoriable cost and allocated as an expense in the balance sheet.

True or False

The predetermined overhead rate for manufacturing overhead was $8 per direct labour hour. The estimated labour rate was $10 per hour. If the estimated direct labour costs was $150,000, what was the estimated total manufacturing overhead.

a.15,000 b.120,000 c.75,000 d.18750 e.93,750

At the end of the year, Rainbow had an amount of $1,000 over-applied overhead. What would be the most common treatment of the overapplied overhead?

a.Debit cost of goods sold account by $1000 in the income statement

b.Increase amount of assets by $1,000 in the balance sheet

c.Prorate the $1,0000 between work in process inventory, finished goods invcentory, and cost of goods manufactured accounts

d.Increase revenue amount by $1,000 in the income statement

e.Credit cost of goods sold account by $1,000 in the income statement

Answer 1

Ans 1 : False

General Administrative Expense is a period cost.

Ans 2 : $ 120,000

Labour Hours = $ 150,000 / $ 10

Labour Hours = 15,000

Pre determined overhead rate = $8

Applied Overheads = 15,000 x $8

Applied Overheads = $ 120,000

Ans 3 : Credit Cost of Goods sold Account by $ 1,000 in the income statement

To reduce Cost of Goods sold as overheads were to be adjusted.

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