ACC112 - Chapter 2 Smartbook
The appeal of using predetermined departmental overhead rates is they presumably provide
- a more accurate accounting of costs - enhanced information for decision making
Typical cost drivers include:
- computer time - flight-hours - machine-hours
Manufacturing overhead costs
- consist of many different items - are indirect costs
Manufacturing overhead:
-is an indirect cost. -is directly traceable to units produced. -consists of many different types of costs.
A cost driver is
A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs.
Which of the following would not be a good allocation base for manufacturing overhead? A.) Machine hours B.) Accounting hours C.) Units of product D.) Direct labor hours
Accounting hours bc they are not related to manufacturing
Which of the following would not be a good allocation base for manufacturing overhead?
Accounting hours bc they are not related to manufacturing overhead
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 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
True or False: One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors.
True
Cost-plus pricing occurs when
a markup percentage is added to the cost of a job
All manufacturing costs are assigned to units of product and all non-manufacturing costs are treated as period cost under............costing
absorption
When a company creates overhead rates based on the actions it performs, it is employing an approach called
activity-based costing
A measure such as direct labor-hours or machine hours used to assign overhead costs to products and services is called a cost driver or a(n)
allocation base
Companies use a predetermined overhead rate rather than an actual overhead rate because
an actual rate is not known until the end of the period
The process used to assign overhead costs to products is called overhead
application
Overhead application is the process of
assigning manufacturing overhead cost to jobs
An essential quality of an overhead allocation base is that it must
be common to all the company's products and services
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
Job-order costing would most likely be used in a(n)
construction company
An allocation base should be:
cost driver
The adjustment for overapplied overhead Blank______ net income.
decreases cost of goods sold and increases
The adjustment for overapplied overhead ___ net income.
decreases cost of goods sold and increases
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
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
A predetermined overhead rate is calculated by dividing the ______ total manufacturing overhead by the ______ total allocation base. Multiple choice question.
estimated; estimated
In a system that uses multiple predetermined overhead rates, overhead is applied
in each department as jobs proceed through the department
The adjustment for underapplied overhead
increases COGS and decreases net operating income
Factory labor charges that cannot be easily traced to a job are treated as
manufacturing overhead
Manufacturing overhead consists of
many different kinds of indirect costs
Direct materials costs are recorded on the job cost sheet when the
materials are issued to the job
Direct materials costs are recorded on the job cost sheet when the....
materials are issued to the job
When compared to a departmental approach, using activity-based costing results in ______ overhead rates.
more
Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is ______ accurate.
more complex and more
The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find
overhead applied to the job
The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost, and:
predetermined manufacturing overhead cost.
The formula for applying overhead to a specific job is: ______ amount of allocation base incurred by job.
predetermined overhead rate ×
When all of a company's job cost sheets are viewed collectively, they form what is known as a(n)
subsidiary ledger
Allocation bases that do not drive overhead costs
will not accurately measure the cost of overhead used
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
To calculate the unit product cost using the job cost sheet _____ by the number of units produced.
divide the total job cost
A job cost sheet contains ______ the job.
-labor costs charged to -manufacturing overhead charged to -materials costs charged to
Costs assigned to units of product under absorption costing include:
- variable manufacturing. - fixed manufacturing.
Widely used allocation bases in manufacturing include
- direct labor hours - units of product - direct labor cost - machine hours
An allocation base is a(n)...
measure of activity used to assign overhead costs to products and services
Which of the following would be considered direct materials in a service firm that uses job-order costing?
paperwork at a law firm
The total cost of a job includes:
-direct materials cost. -direct labor cost. -predetermined manufacturing overhead.
