CH 2 AC 204

Need POHR because

1. Actual OH for the period cost is not known until the end of the period. 2. Actual OH costs can fluctuate seasonally, thus misleading decision makers.

Predetermined Overhead Rate formula

= estimated total manufacturing overhead cost for the coming period / estimated total units in allocation base for the coming period

Absorption Costing

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

normal costing

A costing system in which overhead costs are applied to a job by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job.

Widely used allocation bases in manufacturing are:

DL cost units of product machine hours direct labor hours

A factor that causes OH cost is called a

cost driver

to calculate the unit product cost using the job cost sheet ____.

divide the total job cost by the number of units produced.

The appeal of using predetermined departmental OH rates is they presumably provide __________.

enhanced information for decision making, a more accurate accounting of costs

Average manufacturing overhead cost per unit usually varies from one period to the next because _____________.

fixed manufacturing overhead remains constant in total even when production changes

Cost assigned to units of product under absorption costing include ______________.

fixed manufacturing, variable manufacturing

All manufacturing cost are assigned to units or product and all non-manufacturing costs are treated as period costs under __________ costing.

full

adjustment for underapplied overhead

increase cost of goods sold and decrease net operating income

Manufacturing Overhead including ________ _________- and _________ ___________, are allocated to all jobs rather than directly traced to each job.

indirect materials & indirect labor

A single predetermined OH rate is called a(n) ________ OH rate

plantwide

overapplied overhead

A credit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process exceeds the amount of overhead cost actually incurred during a period.

overhead application

The process of charging manufacturing overhead cost to job cost sheets and to the Work in Process account.

job cost sheet

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

Cost driver

A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs.

Which of the following would not be a good allocation base for manufacturing overhead - accounting hrs - units of prod - DL hours - Machine hours

accounting hours

the formula for applying overhead to a specific job is _____

predetermined overhead rate x amount of allocation base incurred by job

underapplied overhead

A debit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost actually incurred exceeds the amount of overhead cost applied to Work in Process during a period.

allocation base

A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects.

T or F : when a company uses cost-plus pricing, they consider both the costs of production and the desired profit

False

Which of the following is not a manufacturing cost category? - MOH - Selling & Admin Cost - DL -DM

Selling & Administrative cost

When a company creates OH rates based on the actions it performs, it is employing an approach called _______ ______ costing.

activity based

manufacturing overhead costs _____________.

are indirect costs and consist of many different items

Overhead application is the process of

assigning manufacturing overhead cost to jobs

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

assignment

the unit product cost is the same as

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

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

bill of materials

Job Order Costing

charge direct material and direct labor cost to each job as work is performed where many different products, jobs, or services are produced each period.

Typical cost drivers include

computer time, machine- hours, flight- hours

Materials requisition forms are used for __________.

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

an allocation base should be

cost driver

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

cost plus

adjustment for overapplied overhead

decrease cost of goods sold and increase net operating income

Using a departmental approach to OH application results in _____ as using a plantwide rate

different selling price

The type and quantity of materials to be drawn from the storeroom and the job that will charged for the materials is specified on the the _______.

materials requisition form

A normal costing system applies OH by job by multiplying a(n) _________ ________ rate by the ________ amount of the allocation base incurred by the job

predetermined, OH, Total

total manufacturing overhead costs tend to:

remain fairly constant

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

subsidiary ledger

In the forumla Y = a +bX, a represents the estimated

total fixed manufacturing overhead cost

Predetermined Overhead Rate (POHR)

used to apply overhead to jobs is determined before the period begins

in the formula Y = a + bX, b represents the estimated ____

variable manufacturing overhead cost per unit

The Average manufacturing OH cost per unit tends to ______.

vary from one period to the next