ACC202
The ABC system for applying overhead works just like a job-order costing
True
Activity based costing
A technique that attempts to assign overhead costs more accurately to products known as
Cost of goods manufactured is the
sum of all jobs transferred from work in process to finished goods
generally, when simplifying an activity based costing system, activities and costs should only be combined if
they fall within the same level in the cost hierarchy
Cost of goods manufactured is
the cost of jobs completed during the period
In a normal costing system, the manufacturing overhead account is debited for
the cost of indirect materials and the actual overhead costs
the activity rate is computed by dividing the ___ by the __
total cost in the activity cost pool; activity level in the activity cost pool
The journal entry to record the issuance of direct materials into production debits
work in process
manufacturing overhead is applied with a debit to
work in process
Manufacturing overhead includes
Factory utilities, factory maintenance wages, and factory rent
Period costs flow from finished goods to cost of goods sold
False
Traditional cost tend to undercuts standard products and overcast specialty products
False
Himber, Inc. just completed a job that cost 14000 in direct materials, 1200 in direct labor, and 8000 in applied manufacturing overhead. The journal entry to record completion of the job would debit
Finished goods 34000 and credit work in process 34000
A company incurred 10000 in direct labor costs and 8000 in indirect labor costs. The journal entry to record this transaction debits
Work in process 10000 and manufacturing overhead 8000 and credits salaries and wages payable 18000
Departmental overhead rates may not correctly assign overhead costs in situations where a company has
a variety of products
The journal entry to record the purchase fo materials credits
accounts payable
a bucket in which costs are accumulated that relate to a single activity measure in the ABC system is an
activity cost pool
The formula to apply overhead to products is:
activity rate * activity
total cost of each activity divided by the total activity is the computation of
activity rates
A journal entry debiting salaries expense and crediting salaries and wages payable could record
administrative salaries
an activity measure is an ____ base in an activity-based costing system
allocation
customer orders are considered to be an ___ level activity
batch
Miltion corporation sold goods costing 50000 for 75000. journal entries should be made could include entries
cogs for 50000 and a/r for 75000
Finished goods
consists of completed, unsold goods
the amount transferred from work in process to finished goods is
cost of goods manufactured
The __ side of the manufacturing overhead account is always used to record manufacturing overhead applied to production
credit
The __ side is always used o record the actual manufacturing costs inured
debit
A journal entry that debits manufacturing overhead and credits accounts payable could not record the incurrence of
direct labor costs
If factory wide overhead costs do not move in the same direction as the plantwide activity base product costs will be
distorted
which of the following is not an ABC level of activity
employee-level
To calculate direct materials on the schedule of cost of goods manufactured, add purchases to beginning raw materials inventory and subtract
ending raw materials inventory and indirect materials used
When only a portion of the units involved in a job are sold, the
not product cost is used to calculate the amount transferred from finished goods to cost of goods sold
When labor costs are incurred, ___ are added to the work in process account
only direct labor costs
The difference between overhead applied to work in process and actual overhead is
over applied or undersupplied overhead
A significant limitation of the ABC model is that the product costs computed will most likely be
overstated for purposes of decision making
when a job is completed, its costs are transferred into
finished goods
An ABC system,
-The cost of designing and implementing the system may outweigh the benefits of the system -The cost in each activity cost pool may not be strictly proportional to its activity measure
using direct-labor hours or another volume based cost driver to assign overhead
-may result in selling products at a loss -may result in overcharging customers for products -ignores other significant causes of overhead
departmental overhead rates
-may use different allocation bases in different departments -may not assign overhead correctly with a company that has a range of products
Benefits of Activity Based Costing
-more accurate product costs -helping target areas for process improvement -helping managers understand the nature of overhead costs
Activity-based costing is most likely to be beneficial when
-products differ in batch size and the activities hey require -overhead costs are high and increasing and no one knows why
Facility-level activities
-setting up a computer network -preparing annual reports -heating a manufacturing plant
Activity-based voting improves the accuracy of product costs by
-using a variety of activity measures to assign overhead costs to products -using cost pools that are more homogeneous than departmental cost pools -increasing the number of cost pools used to accumulate overhead cost
Which of the following would not be charged to the manufacturing overhead account?
Nonmanufacturing costs
when is ABC useful to a company?
when their costs have changed since the existing cost system was developed
designing and advertising a product are ___ level activities
product
the journal entry to record the purchase of materials debits
raw materials
Any purchased materials that will go into the finished product are the first recorded in the
raw materials account
A journal entry that debits advertising expense and credits cash would record the incurrence of a
selling cost
Not a benefit of activity-based voting to managers
Managers have numerous cost pools that are identified for each major activity
any event that causes consumption of overhead resources is
an activity
a predetermined overhead rate in an activity-based costing system is called
an activity rate
An activity-based costing an activity measure is
an allocation base
The journal entry to record general selling and administrative costs debits
an expense account and credit cash or a liability
a journal entry that debits work in process and credits manufacturing overhead is recording the
application of manufacturing overhead costs
Units of product that are only part;;y complete are contained in the
work in process inventory
The transfer costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next
True
traditional costing _____ high-volume products and ___ low-volume products
overcosts; undercosts
under activity-based costing, the manufacturing overhead costs are allocated to products via ___ stage process
two