Chapter 2 Accounting
What is the process of assigning overhead cost to specific jobs?
Overhead application
The adjustment for overapplied overhead ________.
Decreases cost of goods sold and increases net operating income.
The formula for a predetermined overhead rate is:
Estimated manufacturing overhead cost divided by estimated allocation base
T/F the amount of overhead applied to a particular job is the actual amount of overhead caused by the job
False
T/F, Job-order costing can only be used in manufacturing firms
False
What records the materials, labor, and manufacturing overhead costs charged to that job?
Job cost sheet
What is A costing system used in situations where many different products, jobs, or services are produced each period?
Job-order costing
What equals Estimated total manufacturing overhead cost / (divided by) Estimated total amount of the allocation base
Predetermined overhead rate
How do you calculate Overhead applied to a particular job?
Predetermined overhead x Amount of the allocation base incurred by the job
In this equation, what does Y equal, Y=a+bX ?
The estimated total manufacturing overhead cost
T/F The average cost per unit is also referred to as the unit product cost.
True
T/F The predetermined overhead rate is computed before the period begins.
True
True or False, All nonmanufacturing costs are treated as period costs and they are not assigned to units of product.
True
What is a costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs?
absorption costing
When a company creates overhead rates based on the activities that it performs, it is employing an approach called:
activity-based costing
What is a a measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects?
allocation base
A job-order costing system may inaccurately assign costs to jobs due to:
an inappropriate allocation base
To avoid such fluctuations, actual overhead rates could be computed on an _______ or less-frequent basis.
annual
The predetermined overhead rate is calculated:
before the period begins
The direct materials required to manufacture each unit of product are listed on a ________.
bill of materials
The type and quantity of each type of direct material needed to complete a unit of product is listed on the
bill of materials
What is a document that lists the quantity of each type of direct material needed to complete a unit of product?
bill of materials
A normal cost system applies overhead to jobs ________.
by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job
What is a factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs
cost driver
The adjustment for overapplied overhead _________ cost of goods sold and _________ net operating income
decreases, increases
The most widely used allocation bases in manufacturing are ______ _____-_____, _____ _____ ____, _______-_____, , and (where a company has only a single product) _____ __ _______.
direct labor-hours, direct labor cost, machine-hours, units of product
Companies generally classify manufacturing costs into three broad categories:
direct materials, direct labor, and manufacturing overhead
To improve job cost accuracy, the allocation base in the predetermined overhead rate should _____ the overhead cost.
drive
The adjustment for underapplied overhead _________ cost of goods sold and _________ net operating income
increases, decreases
What kind of cost is manufacturing overhead?
indirect
The document that records the materials, labor, and manufacturing overhead costs charged the job is the:
job cost sheet
Labor charges that cannot be easily traced to specific jobs are treated as part of....
manufacturing overhead
Direct materials costs are recorded on the job cost sheet when the:
materials are issued to the job
The type and quantity of materials to be drawn from the storeroom and the job that will be charged for the materials is specified on the
materials requisition form
What form is used to control the flow of materials into production and also for making journal entries in the accounting records?
materials requisition form
What is 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?
materials requisition form
Companies can improve job cost accuracy by using ________.
multiple predetermined overhead rates
What is a single predetermined overhead rate?
plantwide overhead rate
Manufacturing overhead is commonly assigned to products using a......
predetermined overhead rate
What is a rate used to charge manufacturing overhead cost to jobs that is established in advance for each period. It is computed by dividing the estimated total manufacturing overhead cost for the period by the estimated total amount of the allocation base for the period?
predetermined overhead rate
When an agreement has been reached with the customer concerning the quantities, prices, and shipment date for the order, a __________ ______ is issued.
production order
When all of a company's job cost sheets are viewed collectively they form what is known as a ________.
subsidiary ledger
What is a document that is used to record the amount of time an employee spends on various activities?
time ticket
In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated ________.
total fixed manufacturing overhead cost
What is the term used when a company applies less overhead to production than it actually incurs?
underapplied overhead
A business estimated total manufacturing overhead for 2017 would be 100k and uses direct labor-hours as the allocation based. They estimated that 5,00 hours would be used. Actual overhead was 120k 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?
4,000