Accounting CH 2

Estimated manufacturing overhead $500,000 Estimated direct labor cost $250,000 Actual manufacturing overhead $720,000 Actual direct labor cost $300,000 Based on this information, the predetermined overhead rate per direct labor dollar is ______.

$2.00 Reason: $500,000 ÷ $250,000 = $2.00 per direct labor dollar

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 Reason: Total cost of Job #420 = Direct materials + direct labor + overhead (predetermined overhead rate × direct labor cost) = $4,000 + $5,000 + 1.20 × $5,000 = $15,000 Unit product cost = $15,000 ÷ 7,500 units = $2.00 per unit.

Company Dept. A Dept B. Predetermined overhead rate per direct labor hour $2.10 $2.40 $1.80 Direct labor hours hours worked on Job ABC 30 17 13 Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is:

$64.20 Reason: $2.40 × 17 + $1.80 × 13 = $64.20

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

Estimated manufacturing overhead $450,000 Estimated direct labor hours 150,000 Actual manufacturing overhead $405,000 Actual direct labor hours 180,000 Based on this information, the predetermined overhead rate per direct labor hour is $

3.00 or 3

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 Reason: The predetermined overhead rate = $100,000 ÷ 5,000 direct labor-hours = $20 per direct labor-hour × 200 direct labor-hours = $4,000.

Company Dept. A Dept B. Predetermined overhead rate per direct labor hour $2.10 $2.40 $1.80 Direct labor hours hours worked on Job ABC 40 18 22 Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is $

82.80

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

840

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.

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. Reason: The predetermined overhead rate does not change with each unit produced.

When a company creates overhead rates based on the actions it performs, it is employing an approach called - costing.

activity-based

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

allocation, application

Overhead application is the process of ______.

assigning manufacturing overhead cost to jobs

The predetermined overhead rate is calculated ______.

before the period begins

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

bill of materials

A factor that causes overhead costs is called a ______.

cost driver

The adjustment for overapplied overhead ______ net income.

decreases cost of goods sold and increases

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

enhanced information for decision making a more accurate accounting of costs

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

estimated total allocation base

The formula for a predetermined overhead rate is ______.

estimated total manufacturing overhead cost ÷ estimated total allocation base

A predetermined overhead rate is calculated by dividing the ______ total manufacturing overhead by the ______ total allocation base.

estimated; estimated

The adjustment for underapplied overhead ______ net income.

increases cost of goods sold and decreases

Typical cost drivers include ______.

machine-hours flight-hours computer time

An allocation base is a(n) ______.

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

When compared to a departmental approach, using activity-based costing results in ______ overhead rates.

more

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n)

subsidiary ledger

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n) ______.

subsidiary ledger

The unit product cost is the same as the ______.

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

The unit product cost is the same as the ______.

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

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