accounting 2 - smart book 2

The adjustment for underapplied overhead:

- Increases cost of goods sold and decreases net income

In the formula Y = a + bX, X represents the estimated:

Total amount of the allocation base.

An allocation base should be:

- A cost driver

Why do companies use a predetermined overhead rate rather than an actual overhead rate?

An actual overhead rate is not known until the end of the period.

Overhead application is the process of:

Assigning manufacturing overhead costs to jobs.

The type and quantity of each type of direct material needed to complete a unit of product is listed on the

Bill of materials

Costs assigned to units of products in absorption costing include ____ manufacturing costs.

Both variable and fixed

Predetermined overhead rate =

Estimated manufacturing overhead/Estimated direct labor cost

An allocation base is a(n):

Is a measure such as direct labor-hours (DLH) or machine-hours (MH) that is used to assign overhead costs to products and services. - Measure of activity used to assign overhead costs to products and services

Materials requisition form

The type and quantity of materials to be drawn from the storeroom and identifies the job that will be charged for the cost of materials.

Jones Company uses a job-order costing system with a predetermined overhead rate of 120% of direct labor cost. The job cost sheet for Job #420 showed that Jones Company spend $4,000 on direct materials and $5,000 on direct labor on the job. What is the total cost of Job #420?

- $15000 Direct Materials + Direct Labor + Predetermined overhead x Direct Labor Cost = $4,000 x $5,000 + 1.20 x $5,000

Job XYZ has a total manufacturing cost of $600. If the mark-up percentage is 40%, the job will sell for $:

- $840 Total manufacturing cost + (Total manufacturing cost x Mark-up percentage) = W $600 + ($600 x 40%) = $840

Estimated manufacturing overhead: $450,000 Estimated direct labor hours: 150,000 Actual manufacturing overhead: $405,000 Actual direct labor hours: 180,000 Based on this information, the amount of overhead allocated to a job that used 300 direct labor hours is $:

- $900 Estimated manufacturing overhead/Estimated direct labor hours = $W per direct labor hour Then, W x Direct labor hours $450,000/150,000 = $3.00 per direct labor hour x 300 = $900

A factor that causes overhead costs is called a:

- A cost driver

Cost-plus pricing occurs when:

- A markup percentage is added to the cost of a job

the total cost of a job includes:

- Direct labor cost - Direct materials cost - Applied manufacturing overhead

A job sheet contains:

- Manufacturing overhead costs charged to the job - Labor costs charged to the job - materials costs charged to the job Records the direct materials, direct labor, and manufacturing overhead cost charged to a job

Direct materials costs are recorded on the job cost sheet when the:

- Materials are issued to the job

To keep track of labor time and costs, many firms have replaced:

- Paper time tickets with computerized systems

Which of the following would be considered direct materials in a service firm that uses job-order costing?

- Paperwork at a law firm

Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing?

- The salary of the manager at a hair salon

Which of the following would not be considered a job in a service firm that uses job-order costing?

- The tax department in an accounting firm *This is a department; a job would be an individual client

The document used to record the time workers spend on each job and task is called a:

- Time Ticket A document that is used to record the amount of time an employee spends on various activities

The unit product cost is the same as the:

- Total job cost divided by number of units - Average product cost per unit

True or False: Job-order costing can only be used in manufacturing firms.

False *Also used extensively in service industries

Which of the following is not a manufacturing cost category?

Selling & administrative costs

Murphy Manufacturing estimated total overhead for 2017 to be $100,000 and uses direct labor-hours as the allocation base. They estimated that 5,000 hours would be used. Actual overhead for 2017 was $120,000 and actual direct labor-hours were 7,500. How much overhead was applied to a job completed during 2017 that used 200 direct labor-hours?

$4,000

Which kind of costing do most companies use in their management reports?

- Absorption

A normal costing system applies overhead by job by multiplying a(n) ____ ____ rate by the ____ amount of the allocation base incurred by the job.

- predetermined overhead rate - actual

Jones Company uses a job-order costing system with a predetermined overhead rate of 120% of direct labor cost. The job cost sheet for job #420 listed $4,000 in direct materials cost and $5,000 in direct labor cost to manufacture 7,500 units. The unit cost of Job #420 is:

Answer: $2.00 Total cost of Job #420= Direct Materials + Direct Labor + Overhead (predetermined overhead rate x direct labor cost) = $4000 + $5000 + 1.20 x $5000 = $15000 Unit Product Cost = $15000 / 7500 Units = $2.00

In the formula Y = a + bX, a represents the estimated:

The estimated total fixed manufacturing overhead cost

Average manufacturing overhead costs per unit usually varies from one period to the next because:

- Fixed manufacturing overhead remains constant in total even when production changes

To calculate a predetermined overhead rate, divide estimated manufacturing overhead by:

Estimated allocation base

The most widely used allocation bases in manufacturing are:

- Direct labor-hours - Direct labor cost - Machine-hours - and (where a company has only a single product) units of product.

The process used to assign overhead costs to products is called overhead ______.

- Allocation Overhead allocation uses an overhead rate to assign overhead costs.

Manufacturing overhead:

- Consists of many different types of costs - is an indirect cost - contains fixed costs

Companies that make many different products each period use ______ - _____ costing.

Job - Order

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n) ____ ____.

subsidiary ledger

The difference between direct labor and indirect labor is that direct labor:

- can be easily traced to jobs, while indirect labor cannot. **Direct labor consists of labor charges that are easily traced to a particular job. Indirect labor Includes tasks such as maintenance, supervision, and cleanup. These labor changes cannot be easily traced to specific jobs and are treated as part of manufacturing overhead.

Total manufacturing overhead costs tend to:

- Remain fairly constant

Underapplied or overapplied overhead is the:

- Difference between overhead applied to work in process and actual overhead

When all overhead is assigned using direct-labor hours, the company has chosen to use a(n) ______ predetermined overhead rate.

- Plantwide

The formula for applying overhead to a specific job is:

- Predetermined overhead rate x Amount of allocation base incurred by job

Y = a + bX

Y = The estimated total manufacturing overhead cost a= The estimated total fixed manufacturing overhead cost b= The estimated variable manufacturing overhead cost per unit of the allocation base X= The estimated total amount of the allocation base

Murphy Manufacturing estimated total manufacturing overhead for 2017 to be $100,000 and uses direct labor-hours as the allocation base. They estimated that 5,000 hours would be used. Actual overhead for 2017 was $120,000 and actual direct labor- hours were 7,500. How much overhead was applied to a job completed during 2017 that used 200 direct labor-hours?

$4000

A job-order costing system may inaccurately assign costs to jobs due to:

**Focus on indirect manufacturing costs, Manufacturing overhead costs. - An inappropriate allocation base

Which of the following would not be a good allocation base for manufacturing overhead?

- Accounting hours Accounting hours are not related to manufacturing. **An allocation base is a measure such as Direct Labor-Hours or Machine-Hours

When a company creates overhead rates based on the actions it performs, it is employing an approach called _____ - _____.

- Activity - based costing

The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost and:

- Applied manufacturing overhead cost

The predetermined overhead rate is calculated:

- Before the period begins

To calculate the unit product cost using the job cost sheet:

- Divide the total job cost by the number of units produced

A bill of materials contains the

- Type of each direct material needed to complete a unit of product - Quantity of each direct material needed to complete a unit of product.

Companies assign costs to products and services to:

- Value ending inventory - Establish selling prices - Understand product profitability

Which of the following is an essential quality of an overhead allocation base?

It must be common to all the company's products and services.

The type and quantity of materials to be drawn from the storeroom and the job that will be charged for the materials is specified on the

Materials requisition form

Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is:

More complex, but more accurate.