1-Bright Orange, Inc., uses direct labor hours to allocate overhead costs. If Bright Orange estimates $50,000 of overhead and 60,000 hours of direct labor this period, the overhead applied when 5,000 direct labor hours are used should be a. $3,900.22 b. $5211.33 c. $4,987.24 d. $5,257.36 2-Wharton, Inc. produces two products, M-24 and L-Z15. M-24 is a high-volume item totaling 25,000 units annually, while L-Z15 is a low-volume item totaling 8,000 units per year. M-24 requires 1.5 hours of direct labor per unit, while each unit of L-Z15 requires 3 hours. Therefore, total annual direct labor hours are 64,500 (37,500 + 24,000). Expected annual manufacturing overhead costs are $2,100,000. Wharton uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of L-Z15 would be assigned overhead of, a) $85.00 b) $97.68 c) $115.00 d) $120.50 3-Which of the following items is reported as a deferred tax liability? a) Tax refund expected next year b) Prepaid tax amounts c) Current year's tax payable d) Temporary difference when book income exceeds taxable income 4-What is the underlying principle of substance over form? a) Economic substance dictates accounting treatment over legal form b) Legal requirements override accounting treatment c) Both legal and economic aspects must be equal d) Form always determines substance
1-Bright Orange, Inc., uses direct labor hours to allocate overhead costs. If Bright Orange estimates $50,000 of overhead and 60,000 hours of direct labor this period, the overhead applied when 5,000 direct labor hours are used should be a. $3,900.22 b. $5211.33 c. $4,987.24 d. $5,257.36 2-Wharton, Inc. produces two products, M-24 and L-Z15. M-24 is a high-volume item totaling 25,000 units annually, while L-Z15 is a low-volume item totaling 8,000 units per year. M-24 requires 1.5 hours of direct labor per unit, while each unit of L-Z15 requires 3 hours. Therefore, total annual direct labor hours are 64,500 (37,500 + 24,000). Expected annual manufacturing overhead costs are $2,100,000. Wharton uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of L-Z15 would be assigned overhead of, a) $85.00 b) $97.68 c) $115.00 d) $120.50 3-Which of the following items is reported as a deferred tax liability? a) Tax refund expected next year b) Prepaid tax amounts c) Current year's tax payable d) Temporary difference when book income exceeds taxable income 4-What is the underlying principle of substance over form? a) Economic substance dictates accounting treatment over legal form b) Legal requirements override accounting treatment c) Both legal and economic aspects must be equal d) Form always determines substance
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 1EA: Steeler Towel Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor...
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Transcribed Image Text:1-Bright Orange, Inc., uses direct labor hours
to allocate overhead costs. If Bright Orange
estimates $50,000 of overhead and 60,000
hours of direct labor this period, the overhead
applied when 5,000 direct labor hours are
used should be
a. $3,900.22
b. $5211.33
c. $4,987.24
d. $5,257.36
2-Wharton, Inc. produces two products, M-24 and L-Z15.
M-24 is a high-volume item totaling 25,000 units annually,
while L-Z15 is a low-volume item totaling 8,000 units per
year. M-24 requires 1.5 hours of direct labor per unit, while
each unit of L-Z15 requires 3 hours. Therefore, total annual
direct labor hours are 64,500 (37,500 + 24,000).
Expected annual manufacturing overhead costs are
$2,100,000. Wharton uses a traditional costing system
and assigns overhead based on direct labor hours. Each
unit of L-Z15 would be assigned overhead of,
a) $85.00
b) $97.68
c) $115.00
d) $120.50
3-Which of the following items is reported as a deferred
tax liability?
a) Tax refund expected next year
b) Prepaid tax amounts
c) Current year's tax payable
d) Temporary difference when book income exceeds
taxable income
4-What is the underlying principle of substance over form?
a) Economic substance dictates accounting treatment over
legal form
b) Legal requirements override accounting treatment
c) Both legal and economic aspects must be equal
d) Form always determines substance
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