ch 2
job cost sheet
$18 of indirect labor cost related to performing maintenance. This cost is treated as part of manufacturing overhead and does not get posted on a _____________________.
job cost sheet
After a production order has been issued, the Accounting Department's job-order costing software system automatically generates a ______________________
allocation base
Allocation is accomplished by selecting an __________________________ that is common to all of the company's products and services.
fulfill planning, controlling, and decision-making determine the value of ending inventories and cost of goods sold for external reporting
Companies usually assign costs to their products and services for two main reasons.
overhead costs
Given these circumstances, allocation is used to assign _________________________________ to products
job-order costing system
If a company's __________________________________ does not accurately assign manufacturing costs to jobs, it will adversely influence the types of planning and decision-making scenarios just described.
seasonal factors
If an actual rate is computed monthly or quarterly, __________________________ in overhead costs or in the allocation base can produce fluctuations in the overhead rate.
job cost information
Managers use _____________________________ to establish plans and make decisions.
indirect cost
Manufacturing overhead is an ____________________. This means that it is either impossible or difficult to trace these costs to a particular product or job
predetermined overhead rate
Manufacturing overhead is commonly assigned to products using a ______________________________________
fixed
Many companies have large amounts of _____________ manufacturing overhead.
product costs
Many managers believe that such fluctuations in ____________________ serve no useful purpose. To avoid such fluctuations, actual overhead rates could be computed on an annual or less-frequent basis
computerized systems
Most companies rely on __________________________ to maintain employee time tickets
caused
Note that the amount of overhead applied to a particular job is not the actual amount of overhead ____________________ by the job.
Estimated total manufacturing overhead cost / Estimated total amount of the allocation base
Predetermined overhead rate =
incremental cost
The ________________________- of an additional unit is something less than the average unit cost because much of the actual overhead costs would not change if another unit were produced.
increases, decreases
The adjustment for underapplied overhead _________________cost of goods sold and ____________________ net operating income,
predetermined departmental overhead rates
The appeal of using _____________________________________________________ is that they presumably provide a more accurate accounting of the costs caused by jobs, which in turn, should enhance management planning and decision making.
unit product cost
This average cost per unit is also referred to as the _____________________________.
overhead cost
To improve job cost accuracy, the allocation base in the predetermined overhead rate should drive the _________________________
constant
Total manufacturing overhead costs tend to remain relatively _______________________ from one period to the next even though the number of units that they produce can fluctuate widely. Consequently, the average cost per unit will vary from one period to the next
cost-plus pricing
Under this approach, known as ________________, the managers establish a markup percentage that they believe will generate enough revenue to cover all of a job's manufacturing costs and a portion of the company's non-manufacturing costs, while generating some residual profit.
underapplied overhead
When a company applies less overhead to production than it actually incurs, it creates what is known as __________________________________.
activity-based costing
When a company creates overhead rates based on the activities that it performs, it is employing an approach called _________________________________
subsidiary ledger
When all of a company's job cost sheets are viewed collectively they form what is known as a _______________________________________-.
production order
When an agreement has been reached with the customer concerning the quantities, prices, and shipment date for the order, a _________________ is issued
multiple predetermined overhead rates
When companies can identify more than one overhead cost driver they can improve job cost accuracy by using __________________________________________________________.
overapplied overhead
When it applies more overhead to production than it actually incurs, it results in _______________________________
allocation base
While job-order costing systems can accurately trace direct materials and direct labor costs to jobs, they often fail to accurately allocate the manufacturing overhead costs used during the production process to their respective jobs. The root cause of the problem often relates to the choice of an ____________________________.
use overhead resources.
While the distortion caused by using "number of people seated at the table" as the allocation base seems obvious, job-order costing systems often make the same error—they use allocation bases that do not reflect how jobs actually ____________________________________
estimated total fixed manufacturing overhead cost
Y=a+bX A =
estimated variable manufacturing overhead cost per unit of the allocation base
Y=a+bX B =
estimated total amount of the allocation base
Y=a+bX X =
estimated total manufacturing overhead cost
Y=a+bX Y =
Direct labor
________________________ consists of labor charges that are easily traced to a particular job.
Job-order costing
___________________________ is also used extensively in service industries
Manufacturing overhead
________________________________ consists of many different types of costs ranging from the grease used in machines to the annual salary of the production manager, also some are variable or fixed
manufacturing overhead
__________________________________ also needs to be recorded on the job cost sheet.
bill of materials
a document that lists the quantity of each type of direct material needed to complete a unit of product
materials requisition form
a document that specifies the type and quantity of materials to be drawn from the storeroom and identifies the job that will be charged for the cost of the materials
cost driver
a factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs
absorption costing
all manufacturing costs, both fixed and variable, are assigned to units of product—units are said to fully absorb manufacturing costs.
period costs
all nonmanufacturing costs are treated as __________________________ and they are not assigned to units of product
plantwide overhead rate
allocate all manufacturing overhead costs to jobs based on their usage of direct-labor hours
normal cost system
applies overhead costs to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the jobs
predetermined overhead rate
computed by dividing the total estimated manufacturing overhead cost for the period by the estimated total amount of the allocation base
job-order costing system
costs are traced and allocated to jobs and then the costs of the job are divided by the number of units in the job to arrive at an average cost per unit
ending inventories
costs attached to products that have not been sold are included in __________________ on the balance sheet
cost of goods sold
costs attached to units that have been sold are included in ____________________________ on the income statement
Predetermined overhead rate * Amount of the allocation base incurred by the job
formula for determining the amount of overhead cost to apply to a particular job is
time ticket
hour-by-hour summary of the employee's activities throughout the day
allocation base
is a measure such as direct labor-hours (DLH) or machine-hours (MH) that is used to assign overhead costs to products and services
direct-labor hours
it is often overly simplistic and incorrect to assume that _______________________ is a company's only manufacturing overhead cost driver
external parties
job-order costing systems are also often used to create a balance sheet and income statement for ______________________________
absorption costing
many companies use some form of ________________________ for product costing purposes
normal costing
overhead assigned to the job is simply a share of the total overhead that was estimated at the beginning of the year. This approach to overhead application is known as _________________________
overhead application
process of assigning overhead cost to jobs is called ____________________________________-
job cost sheet
records the materials, labor, and manufacturing overhead costs charged to that job
predetermined overhead
the ____________________________________ rate is computed before the period begins
decreases, increases
the adjustment for overapplied overhead ________________________ cost of goods sold and ____________________ net operating income.
Cost Summary, total cost, unit product cost
the job cost sheet is complete except for two final steps. totals for direct materials, direct labor, and manufacturing overhead transferred to _____________________ section of the job cost sheet and added together to obtain the ________________ for the job Then the total product cost is divided by the number of units to obtain the ___________________________
average cost
this unit product cost is an ______________________ and should not be interpreted as the cost that would actually be incurred if another unit were produced
Job-order costing
used in situations where many different products, each with individual and unique features, are produced each period
materials requisition form
used to control the flow of materials into production and also for making journal entries in the accounting records
