A306 SB Ch 3

Based on this information, the predetermined overhead rate per direct labor dollar is ______.

$2.00

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:

$2.00.

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $_____.

2

Which of the following is only true in a multiple predetermined overhead rate system?

Each production department may have its own predetermined overhead rate.

Which of the following is not a manufacturing cost category?

Selling & administrative costs

One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors.

True

When a company assumes direct-labor hours is the only manufacturing overhead cost driver, they are likely to use a plantwide overhead rate.

True

A cost driver is

a factor that causes overhead costs to occur

A factor that causes overhead costs is called a _____.

cost driver

Categories of manufacturing costs include:

direct labor. direct materials. manufacturing overhead.

To calculate the unit product cost using the job cost sheet _____ by the number of units produced.

divide the total job cost

The formula for a predetermined overhead rate is _____.

estimated total manufacturing overhead cost ÷ estimated total allocation base

Labor charges that cannot be easily traced to a job are considered _____.

manufacturing overhead indirect labor

Manufacturing overhead consists of _____.

many different kinds of indirect costs

An allocation base is a(n) _____.

measure of activity used to assign overhead costs to products and services

Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is _____ accurate

more complex and more

The formula for applying overhead to a specific job is _____.

predetermined overhead rate × amount of allocation base incurred by job

A multiple predetermined overhead rate system is more accurate than a plantwide overhead rate system because it

reflects differences in how overhead costs are incurred within departments

The average manufacturing overhead cost per unit tends to _____.

vary from one period to the next

Murphy Manufacturing estimated total manufacturing overhead for the year to be $100,000 and that 5,000 direct-labor hours would be used. Actual overhead was $120,000 and actual direct labor-hours were 7,500. The overhead applied to a job completed during the year that used 200 direct labor-hours was _____.

$4,000

Cost-plus pricing occurs when

a markup percentage is added to the cost of a job

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

840

Based on this information, the amount of overhead allocated to a job that used 300 direct labor hours is $_____.

900

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.

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

The unit product cost is an average, not an incremental cost.

Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwide predetermined overhead rate based on direct labor-hours, rather than using departmental rates?

Yes

An allocation base should be:

a cost driver

Cost-plus pricing occurs when _____.

a markup percentage is added to the cost of a job

The appeal of using predetermined departmental overhead rates is they presumably provide _____.

a more accurate accounting of costs enhanced information for decision making

Overhead application is the process of _____.

assigning manufacturing overhead cost to jobs

The predetermined overhead rate is calculated _____.

before the period begins

The difference between direct labor and indirect labor is that direct labor ____.

can be easily traced to jobs, while indirect labor cannot

Manufacturing overhead costs _____.

consist of many different items are indirect costs

When a company uses a departmental approach rather than a plantwide approach to applying overhead, the selling price of the product will always be

different

Factory labor charges that can be easily traced to a job are treated as _____.

direct labor

The total cost of a job includes:

direct labor cost. direct materials cost. predetermined manufacturing overhead.

Widely used allocation bases in manufacturing include:

direct labor cost. units of product. machine hours. direct labor hours.

To calculate a predetermined overhead rate, divide estimated total manufacturing overhead by the _____.

estimated total allocation base

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

fixed manufacturing overhead remains constant in total even when production changes

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

overhead applied to the job

A single predetermined overhead rate is called a(n) _____ overhead rate.

plantwide

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

predetermined manufacturing overhead cost.

Total manufacturing overhead costs tend to _____.

remain fairly constant

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 hours workers spend on each job and task is called a _____.

time ticket

The unit product cost is the same as the _____.

total job cost divided by number of units average product cost per unit

Allocation bases that do not drive overhead costs

will not accurately measure the cost of overhead used

Allocation bases that do not drive overhead costs _____.

will not accurately measure the cost of overhead used