Accounting week 2

Murphy manufacturing estimated total manufacturing a 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 for 2017 was applied to a job completed during 2017 that used 200 direct labor-hours?

$4,000 - (The predetermined overhead rate = $100,000/5,000 direct labor-hours = 20 per direct labor-hour. The overhead applied to the job = $20 per direct labor-hours x 200 direct labor-hours = $4,000.)

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 spent $4,000 on direct materials and $5,000 on direct labor on the job. What is the total cost of Job #420?

15,000 Cost of job number 420 = direct materials + direct labor + predetermined overhead rate x direct labor cost. ( $4000 + $5000 + 120% x 5000 =$15,000)

An essential quality of an overhead allocation base is that it must:

Be common to all companies products and service

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

Bill of Materials

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

Bill of materials

Costs assigned to units of product in absorption costing include___ manufacturing costs

Both variable and fixed

Companies that make many different products each period use —— —— costing:

Job order

A SERVICE firm that would most likely use job order costing is a

Law firm

Materials requisition forms are used for:

Making journal entries in accounting records and controlling the flow of materials into production

Labor charges that cannot be easily traced to a job or considered :

Manufacturing overhead and indirect labor

A job cost sheet contains:

Materials costs charged to the job, manufacturing overhead costs charged to the job, and labor costs charged to the job.

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

Materials requisition form

The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find

Overhead applied to the job

A normal costing system applies overhead by job my multiplying a ___________ ____________ rate by the _________ amount of the allocation base incurred by the job.

Predetermined overhead, actual

A bill of materials contains the

Quantity of each direct materials needed to complete a Unit a product and the type of each direct materials needed to complete a unit of product

Why is the unit product cost different from the cost that would be incurred if another (additional) unit were produced

The cost to produce another unit is the incremental or marginal cost

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

Total amount of the allocation base

True or false : One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors

True

Widely used allocation bases in manufacturing include

Units of production Direct labor hours Machine hours Direct labor cost

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

Variable manufacturing overhead cost per unit

Categories of manufacturing costs include

direct materials, direct labor, manufacturing overhead

To calculate the unit product cost using the job cost sheet

divide the total job cost by the number of units produced

What is the most common approach to produci costing throughout the world?

Absorption costing

The formula for applying overhead to a specific job is:

Can you determine overhead rate x amount of allocation-based incurred by job

Job-order costing would most likely be used in a(n)

Construction company

Manufacturing overhead:

Contains fixed costs Is an indirect cost Consist of many different types of costs

The process used to assign overhead costs to products is called overhead:

allocation

Labor costs that are easily traced to a job are called _____ labor costs

direct

Manufacturing overhead costs:

- Consist of many different items - Are indirect costs

The total cost of a job includes

-Direct Materials Cost -Direct Labor Cost -Applied Manufacturing Overhead

The United States requires absorption costing for

Tax reports and External Financial Reports

A normal cost system assigns overhead to jobs using:

predetermined overhead rate

Cost behavior:

The first to hell cost will change as activity levels changes and categorizes costs as fixed, mixed and variable

An hour-by-hour summary of an employee's activities throughout the day is found on the

Time ticket

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

Time ticket

The average manufacturing overhead cost per unit tends to

vary from one period to the next

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

paper time tickets with computerized systems

All manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under

Absorption costing

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

Accounting hours

A measure such as direct labor hours or machine hours used to assign overhead cost to products and services is called a cost driver or a(n)

Allocation base

Why do companies 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 cost to jobs

Barcodes can be used to:

Automatically record and post direct labor costs to jobs

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

False

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

Fix manufacturing overhead remains constant in total even when production changes

The document that records the materials, labor and manufacturing overhead costs charged to a is the

Job cost sheet

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

applied manufacturing overhead cost