ACCT2521 Learnsmart Ch 2

Company | Dept. A | Dept B. Estimated manufacturing overhead $500,000 | $338,000 | $162,000 Estimated direct labor cost $250,000 | $130,000 | $120,000 Actual manufacturing overhead $720,000 | $400,000 | $320,000 Actual direct labor cost $300,000 | $160,000 | $140,000 Based on this information, the predetermined overhead rate per direct labor dollar for Dept. B is $__________

$1.35 Predetermined overhead rate = (Estimated total manufacturing overhead cost) / (Estimated total amount of the allocation base) $162,000 / $120,000 = 1.35

Name | 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 2.40 * 18 = 43.20 1.80 * 22 = 39.60 43.20 + 39.60 = 82.80

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

B. Accounting hours

The adjustment for overapplied overhead ______ net income. A. decreases both cost of goods sold and B. increases both cost of goods sold and C. decreases cost of goods sold and increases D. increases cost of goods sold and decreases

C. decreases cost of goods sold and increases

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 or activity base or driver

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

application, allocation, allocating, allocated, assignment, or assigning

The approach used when overhead is applied to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the jobs is called ___________ costing.

normal

A normal cost system assigns overhead to jobs using ______. A. a predetermined overhead rate B. an actual overhead rate C. budgeted production standards

A. a predetermined overhead rate

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 ______. A. $2.88 B. $2.00 C. $2.40 D. $1.67

B. $2.00 Predetermined overhead rate = (Estimated total manufacturing overhead cost) / (Estimated total amount of the allocation base) 500,000 / 250,000 = 2 per direct labor dollar

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 or $3.00 Predetermined overhead rate = (Estimated total manufacturing overhead cost) / (Estimated total amount of the allocation base) $450,000 / $150,000 = 3 per direct labor hour

Which of the following is only true in a multiple predetermined overhead rate system? A. Each production department may have its own predetermined overhead rate. B. Overhead is applied multiple times throughout the period. C. Multiple types of overhead are included to calculate the predetermined overhead rate.

A. Each production department may have its own predetermined overhead rate.

The predetermined overhead rate is calculated ______. A. before the period begins B. as soon as actual overhead is known C. after the period is over D. as the period progresses

A. before the period begins

In the formula Y = a + bX, a represents the estimated ______. A. total amount of the allocation base B. total fixed manufacturing overhead cost C. variable manufacturing cost per unit D. total manufacturing overhead cost

B. total fixed manufacturing overhead cost

Manufacturing overhead ______. a. consists of many different types of costs b. is an indirect cost c. is directly traceable to units produced d. contains fixed costs

a. consists of many different types of costs b. is an indirect cost d. contains fixed costs

All manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under _______ costing.

absorption or full

Why is the unit product cost different from the cost that would be incurred if another (additional) unit were produced? A. The unit product cost is an average, not an incremental cost. B. The cost that would be incurred if another unit were produced cannot be calculated. C. There would be no additional cost to produce another unit. D. The predetermined overhead rate changes with each unit produced.

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

Overhead application is the process of ______. A. assigning manufacturing overhead cost to jobs B. calculating the total cost of a job C. adjusting accounts for the difference between applied and actual overhead D. calculating a predetermined overhead rate

A. assigning manufacturing overhead cost to jobs

To calculate the unit product cost using the job cost sheet ______ by the number of units produced. A. divide the total job cost B. multiply the total job cost C. add direct labor to manufacturing overhead and divide D. add direct labor to direct materials and divide

A. divide the total job cost

True or false: When a company uses cost-plus pricing, they consider both the costs of production and the desired profit.

False

The total cost of a job includes ______. a. direct labor cost b. nonmanufacturing cost c. direct materials cost d. applied manufacturing overhead e. actual manufacturing overhead

a. direct labor cost c. direct materials cost d. applied manufacturing overhead

Widely used allocation bases in manufacturing include ______. a. product revenue b. direct labor-hours c. units of product d. machine-hours e. nonmanufacturing costs f. direct labor cost

b. direct labor-hours c. units of product d. machine-hours f. direct labor cost

The adjustment for underapplied overhead ______ net income. A. increases both cost of goods sold and B. decreases cost of goods sold and increases C. decreases both cost of goods sold and D. increases cost of goods sold and decreases

D. increases cost of goods sold and decreases

Manufacturing overhead consists of ______. A. many different kinds of direct costs B. a single kind of direct cost C. a single kind of indirect cost D. many different kinds of indirect costs

D. many different kinds of indirect costs

The appeal of using predetermined departmental overhead rates is they presumably provide ______. a. enhanced information for decision making b. higher profitability for the company c. a more accurate accounting of costs

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

Average manufacturing overhead cost per unit usually varies from one period to the next because ______. A. fixed manufacturing overhead remains constant in total even when production changes B. the makeup of manufacturing overhead changes from period to period C. variable overhead costs per unit vary when production changes

A. fixed manufacturing overhead remains constant in total even when production changes

An allocation base is a(n) ______. A. measure of activity used to assign overhead costs to products and services B. measure used to assign all manufacturing costs to products and services C. activity that causes overhead costs to change

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

Overhead application is the process of ______. A. calculating a predetermined overhead rate B. assigning manufacturing overhead cost to jobs C. calculating the total cost of a job D. adjusting accounts for the difference between applied and actual overhead

B. assigning manufacturing overhead cost to jobs

Costs assigned to units of product under absorption costing include ______. a. fixed manufacturing b. variable nonmanufacturing c. fixed nonmanufacturing d. variable manufacturing

a. fixed manufacturing d. variable manufacturing

When a predetermined markup is applied to a base to determine the target selling price, the company is using ________-__________ pricing.

cost plus

The formula for applying overhead to a specific job is ______. A. predetermined overhead rate × amount of allocation base incurred by job B. estimated manufacturing overhead × amount of allocation base incurred by job C. estimated manufacturing overhead ÷ amount of allocation base incurred by job D. estimated manufacturing overhead ÷ estimated allocation base

A. 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 ______. A. reflects differences in how overhead costs are incurred within departments B. reflects how different departments use direct materials C. is easier to apply than a plantwide system D. reflects how different departments use direct labor

A. reflects differences in how overhead costs are incurred within departments

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 ______. A. $1.20 B. $2.00 C. $1.33

B. $2.00 Overhead = (predetermined overhead rate * direct labor cost) Direct materials + Direct labor + Overhead = Total cost for the job. Total product cost / number of units = unit product cost. 120% of $5,000 = 1.20 * $5,000 = $6,000 $4,000 + $5,000 + $6,000 = $15,000 $15,000 / 7,500 units = $2.00 per unit

The unit product cost is the same as the ______. a. total job cost divided by number of units b. cost that would be incurred if another unit were produced c. incremental unit cost d. average product cost per unit

a. total job cost divided by number of units d. average product cost 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 ______. A. $54.00 B. $72.00 C. $64.20 D. $63.00

C. $64.20 2.40 * 17 = 40.80 1.80 * 13 = 23.40 40.80 + 23.40 = 64.20

The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost and ______. A. applied manufacturing overhead cost and applied nonmanufacturing cost B. actual manufacturing overhead cost C. applied manufacturing overhead cost D. actual manufacturing overhead cost, and applied nonmanufacturing cost

C. applied manufacturing overhead cost

When a company uses a departmental approach rather than a plantwide approach to applying overhead, the selling price of the product will always be ______. A. higher B. the same C. different D. lower

C. different

To calculate a predetermined overhead rate, divide estimated total manufacturing overhead by the ______. A. estimated total direct labor hours B. actual total manufacturing overhead C. estimated total allocation base D. estimated units of production

C. estimated total allocation base

The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find ______. A. the predetermined overhead rate for the job B. the total cost of the job C. overhead applied to the job D. actual overhead

C. overhead applied to the job

In the formula Y = a + bX, X represents the estimated ______. A. variable manufacturing cost per unit B. total manufacturing overhead cost C. total amount of the allocation base D. total fixed manufacturing overhead cost

C. total amount of the allocation base

The average manufacturing overhead cost per unit tends to ______. A. be more than direct materials cost per unit B. remain fairly constant C. vary from one period to the next D. contain direct materials costs

C. vary from one period to the next

Name | Company | Dept. A | Dept B. Estimated manufacturing overhead $500,000 | $338,000 | $162,000 Estimated direct labor cost $250,000 | $130,000 | 120,000 Actual manufacturing overhead $720,000 | $400,000 | $320,000 Actual direct labor cost $300,000 | $160,000 | $140,000 Based on this information, the predetermined overhead rate per direct labor dollar for Dept. A is ______. A. $2.00 B. $2.50 C. $2.40 D. $2.60

D. $2.60 Predetermined overhead rate = (Estimated total manufacturing overhead cost) / (Estimated total amount of the allocation base) $338,000 / $130,000 = $2.60

Manufacturing overhead costs ______. a. consist of many different items b. do not impact the average cost per unit c. tend to vary significantly, in total, from one period to the next d. are indirect costs

a. consist of many different items d. are indirect costs