Acct Ch. 2 Module 2

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 $

$2.00 Predetermined Overhead Rate=Total Machine Hours/Total Overhead Costs​ Given: Total Overhead Costs = $500,000 Total Machine Hours = 250,000

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 amount of overhead allocated to a job that used 300 direct labor hours is $

900

Manufacturing overhead __________

Contains both fixed and variable costs Is an indirect cost Consists of many different types of costs

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

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

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

The formula for applying overhead to a specific job is

predetermined overhead rate × amount of allocation base incurred by job

The unit product cost is the same as the_______.

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

Absorbtion Costing

A costing method that includes all manufacturing costs —direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs.

All manufacturing costs are assigned to units of product and all non-manufacturing costs are treated as period costs under________ costing

Absorption costing

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

True. One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors. By using a predetermined rate, companies can apply overhead consistently throughout the year, avoiding fluctuations that might occur due to seasonal variations in overhead costs.

material requisition form is used for

controlling the flow of materials into production making journal entries in accounting records

Assigning manufacturing overhead to product is complicated because __________.

it consists of many types of costs it is an indirect cost Many companies have large amounts of fixed overhead

The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find__________

overhead applied to the job

The formula for applying overhead to a specific job is: ________ X The amount of allocation base incurred by job.

predetermined overhead rate

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 _______ $3,200 $4,800 $100,000 $4,000

1st.) Predetermined Overhead Rate=5,000/100,000​= 20 per direct labor-hour Apply the Predetermined Overhead Rate to the Job: 2nd.) Overhead Applied = Predetermined Overhead Rate × Actual Direct Labor - Hours Used for the Job Given: Actual Direct Labor - Hours Used for the Job = 200 Overhead Applied = 20 × 200= 4,000

Bill of Materials

A document that shows the quantity of each type of direct material required to make a product.

material requisition form

A document that specifies the type and quantity of materials to be drawn from the storeroom and that identifies the job that will be charged for the cost of those materials.

Activity Based Costing

A method of allocating overhead based on each product's use of activities in making the product. Assigns costs to products or services based on the specific activities required to produce them. Instead of using one broad overhead rate, ABC looks at the actual resources each activity uses, giving a more accurate picture of costs.

The unit product cost is the same as the _______. and _______

Average product cost per unit Total job cost divided by number of units

All hours on computerized time tickets are automatically posted directly to job cost sheets. True False

False

A job cost sheet contains Blank______ the job. Materials costs charged to Labor costs charged to Manufacturing overhead charged to The selling price of Selling costs charged to

Materials costs charged to Labor costs charged to Manufacturing overhead charged to

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

More

Explain The adjustment for underapplied overhead

When overhead is underapplied, it means the company didn't allocate enough overhead to jobs. To adjust, the difference is added to Cost of Goods Sold (COGS), increasing expenses and lowering profit to match the actual overhead costs.

Allocation bases that do not drive overhead costs Blank______. Cannot be used to calculate overhead Will not accurately measure costs used by jobs Will always cause job costs to be overstated Are difficult to keep track of

Will not accurately measure costs used by jobs If the allocation base (like machine hours or labor hours) isn't closely related to the actual overhead costs, the costs assigned to a job will be inaccurate.

Job Order Costing

a costing system used in situations where many different products, jobs, or services are produced each period

Time ticket

a document that is used to record the amount of time an employee spends on various activities

A cost driver is

a factor that causes overhead costs to occur

job cost sheet

a form that records the materials, labor, and manufacturing overhead costs charged to a job

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

overhead applied to the job

A bill of materials contains the Blank______. Multiple select question. quantity of each direct material needed to complete a unit of product type of materials to be drawn from the storeroom type of each direct material needed to complete a unit of product quantity of materials to be drawn from the storeroom

quantity of each direct material needed to complete a unit of product type of each direct material needed to complete a unit of product