ch 2

job cost sheet

$18 of indirect labor cost related to performing maintenance. This cost is treated as part of manufacturing overhead and does not get posted on a _____________________.

job cost sheet

After a production order has been issued, the Accounting Department's job-order costing software system automatically generates a ______________________

allocation base

Allocation is accomplished by selecting an __________________________ that is common to all of the company's products and services.

fulfill planning, controlling, and decision-making determine the value of ending inventories and cost of goods sold for external reporting

Companies usually assign costs to their products and services for two main reasons.

overhead costs

Given these circumstances, allocation is used to assign _________________________________ to products

job-order costing system

If a company's __________________________________ does not accurately assign manufacturing costs to jobs, it will adversely influence the types of planning and decision-making scenarios just described.

seasonal factors

If an actual rate is computed monthly or quarterly, __________________________ in overhead costs or in the allocation base can produce fluctuations in the overhead rate.

job cost information

Managers use _____________________________ to establish plans and make decisions.

indirect cost

Manufacturing overhead is an ____________________. This means that it is either impossible or difficult to trace these costs to a particular product or job

predetermined overhead rate

Manufacturing overhead is commonly assigned to products using a ______________________________________

fixed

Many companies have large amounts of _____________ manufacturing overhead.

product costs

Many managers believe that such fluctuations in ____________________ serve no useful purpose. To avoid such fluctuations, actual overhead rates could be computed on an annual or less-frequent basis

computerized systems

Most companies rely on __________________________ to maintain employee time tickets

caused

Note that the amount of overhead applied to a particular job is not the actual amount of overhead ____________________ by the job.

Estimated total manufacturing overhead cost / Estimated total amount of the allocation base

Predetermined overhead rate =

incremental cost

The ________________________- of an additional unit is something less than the average unit cost because much of the actual overhead costs would not change if another unit were produced.

increases, decreases

The adjustment for underapplied overhead _________________cost of goods sold and ____________________ net operating income,

predetermined departmental overhead rates

The appeal of using _____________________________________________________ is that they presumably provide a more accurate accounting of the costs caused by jobs, which in turn, should enhance management planning and decision making.

unit product cost

This average cost per unit is also referred to as the _____________________________.

overhead cost

To improve job cost accuracy, the allocation base in the predetermined overhead rate should drive the _________________________

constant

Total manufacturing overhead costs tend to remain relatively _______________________ from one period to the next even though the number of units that they produce can fluctuate widely. Consequently, the average cost per unit will vary from one period to the next

cost-plus pricing

Under this approach, known as ________________, the managers establish a markup percentage that they believe will generate enough revenue to cover all of a job's manufacturing costs and a portion of the company's non-manufacturing costs, while generating some residual profit.

underapplied overhead

When a company applies less overhead to production than it actually incurs, it creates what is known as __________________________________.

activity-based costing

When a company creates overhead rates based on the activities that it performs, it is employing an approach called _________________________________

subsidiary ledger

When all of a company's job cost sheets are viewed collectively they form what is known as a _______________________________________-.

production order

When an agreement has been reached with the customer concerning the quantities, prices, and shipment date for the order, a _________________ is issued

multiple predetermined overhead rates

When companies can identify more than one overhead cost driver they can improve job cost accuracy by using __________________________________________________________.

overapplied overhead

When it applies more overhead to production than it actually incurs, it results in _______________________________

allocation base

While job-order costing systems can accurately trace direct materials and direct labor costs to jobs, they often fail to accurately allocate the manufacturing overhead costs used during the production process to their respective jobs. The root cause of the problem often relates to the choice of an ____________________________.

use overhead resources.

While the distortion caused by using "number of people seated at the table" as the allocation base seems obvious, job-order costing systems often make the same error—they use allocation bases that do not reflect how jobs actually ____________________________________

estimated total fixed manufacturing overhead cost

Y=a+bX A =

estimated variable manufacturing overhead cost per unit of the allocation base

Y=a+bX B =

estimated total amount of the allocation base

Y=a+bX X =

estimated total manufacturing overhead cost

Y=a+bX Y =

Direct labor

________________________ consists of labor charges that are easily traced to a particular job.

Job-order costing

___________________________ is also used extensively in service industries

Manufacturing overhead

________________________________ consists of many different types of costs ranging from the grease used in machines to the annual salary of the production manager, also some are variable or fixed

manufacturing overhead

__________________________________ also needs to be recorded on the job cost sheet.

bill of materials

a document that lists the quantity of each type of direct material needed to complete a unit of product

materials requisition form

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

cost driver

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

absorption costing

all manufacturing costs, both fixed and variable, are assigned to units of product—units are said to fully absorb manufacturing costs.

period costs

all nonmanufacturing costs are treated as __________________________ and they are not assigned to units of product

plantwide overhead rate

allocate all manufacturing overhead costs to jobs based on their usage of direct-labor hours

normal cost system

applies overhead costs to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the jobs

predetermined overhead rate

computed by dividing the total estimated manufacturing overhead cost for the period by the estimated total amount of the allocation base

job-order costing system

costs are traced and allocated to jobs and then the costs of the job are divided by the number of units in the job to arrive at an average cost per unit

ending inventories

costs attached to products that have not been sold are included in __________________ on the balance sheet

cost of goods sold

costs attached to units that have been sold are included in ____________________________ on the income statement

Predetermined overhead rate * Amount of the allocation base incurred by the job

formula for determining the amount of overhead cost to apply to a particular job is

time ticket

hour-by-hour summary of the employee's activities throughout the day

allocation base

is a measure such as direct labor-hours (DLH) or machine-hours (MH) that is used to assign overhead costs to products and services

direct-labor hours

it is often overly simplistic and incorrect to assume that _______________________ is a company's only manufacturing overhead cost driver

external parties

job-order costing systems are also often used to create a balance sheet and income statement for ______________________________

absorption costing

many companies use some form of ________________________ for product costing purposes

normal costing

overhead assigned to the job is simply a share of the total overhead that was estimated at the beginning of the year. This approach to overhead application is known as _________________________

overhead application

process of assigning overhead cost to jobs is called ____________________________________-

job cost sheet

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

predetermined overhead

the ____________________________________ rate is computed before the period begins

decreases, increases

the adjustment for overapplied overhead ________________________ cost of goods sold and ____________________ net operating income.

Cost Summary, total cost, unit product cost

the job cost sheet is complete except for two final steps. totals for direct materials, direct labor, and manufacturing overhead transferred to _____________________ section of the job cost sheet and added together to obtain the ________________ for the job Then the total product cost is divided by the number of units to obtain the ___________________________

average cost

this unit product cost is an ______________________ and should not be interpreted as the cost that would actually be incurred if another unit were produced

Job-order costing

used in situations where many different products, each with individual and unique features, are produced each period

materials requisition form

used to control the flow of materials into production and also for making journal entries in the accounting records