Acct2020 Ch 2

A bill of materials contains the ______.

1. type of each direct material needed to complete a unit of product 2. quantity of each direct material needed to complete a unit of product

Which of the following would be considered direct materials in a service firm that uses job-order costing?

Paperwork at a law firm

Which of the following is not a manufacturing cost category?

Selling & administrative costs

Murphy Manufacturing estimated total manufacturing overhead for 2017 to be $100,000 and uses direct labor-hours as the allocation base. They estimated that 5,000 hours would be used. Actual overhead for 2017 was $120,000 and actual direct labor-hours were 7,500. How much overhead was applied to a job completed during 2017 that used 200 direct labor-hours?

The predetermined overhead rate = $100,000 ÷ 5,000 direct labor-hours = $20 per direct labor-hour. The overhead applied to the job = $20 per direct labor-hours ×200 direct labor-hours = $4,000.

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

What absorption cost system(s) uses a volume-related allocation base for all of the manufacturing costs?

Traditional

Using a departmental approach to overhead application results in ______ as using a plantwide rate.

a different selling price

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 nonmanufacturing costs are treated as period cost under BLANK costing.

absorption

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

activity based

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) BLANK BLANK

allocation base

In activity-based absorption costing, the consumption of overhead resources is caused by ______,

an activity

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

applied manufacturing overhead cost

Activity-based absorption costing ______.

assigns overhead based on events that consume overhead resources

An essential quality of an overhead allocation base is that it must ______.

be common to all the company's products and services

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

bill of materials

Costs assigned to units of product in absorption costing include ______ manufacturing costs.

both fixed and variable

Job-order costing would most likely be used in a(n) ______.

construction company

A factor that causes overhead costs is called a ______.

cost diver

The adjustment for overapplied overhead ______.

decreases cost of goods sold and increases net income

Labor costs that are easily traced to a job are called BLANK labor costs

direct

True or false: Activity-based absorption costing only assigns variable manufacturing overhead costs to products.

false

The adjustment for underapplied overhead ______.

increases cost of goods sold and decreases net income

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

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

subsidiary ledger

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

true

Traditional absorption costing systems allocate all manufacturing costs using a(n) ______ related allocation base.

volume

In a system that uses multiple predetermined overhead rates, overhead is applied ______.

in each department as jobs proceed through the department

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

overhead applied to the job

Typical cost drivers include ______.

1. machine hours 2. bed occupied 3. computer time 4. flight hours

When predetermined overhead rates are based on budgeted activity ______.

1 .unit product costs fluctuate depending upon budgeted activity 2. products are charged for resources they don't use

Which of the following statements are true?

1. Too much fixed overhead may be applied to products when the predetermined overhead rate is based on estimated activity. 2. Total estimated overhead at capacity is generally larger than total estimated overhead at the expected level of activity.

Manufacturing overhead costs ______.

1. are indirect costs 2. consist of many different items

Categories of manufacturing costs include ______.

1. direct labor 2. direct materials 3. manufacturing overhead

Widely used allocation bases in manufacturing include ______.

1. direct labor cost 2. machine hours 3. units of product 4. direct labor hours

The total cost of a job includes ______.

1. direct materials cost 2. applied manufacturing 3.overhead direct labor cost

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

1. enhanced information for decision making 2. a more accurate accounting of costs

A job cost sheet contains ______.

1. labor costs charged to the job 2. manufacturing overhead costs charged to the job 3. materials costs charged to the job

Which of the following would not be a good allocation base for manufacturing overhead?

Accounting hours

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.

Companies that use job-order costing make ______.

many different products

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.

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