Chapter 2: Job Order Costing & Unit Product Costs

Cost driver is

a factor that causes overhead costs to occur

Cost-plus pricing occurs when

a markup percentage is added to the cost of a job

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

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

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

absorption

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

accounting hours

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

activity based

A job-order costing system may inaccurately assign costs to jobs due to

an inappropriate allocation base

Overhead application is the process of

assigning manufacturing overhead cost to jobs

The unit product cost is the same as the

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

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

be common to all the company's products and services

Predetermined overhead rate is calculated

before the period begins

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 variable and fixed

When a predetermined markup is applied to a base to determine the target selling price, the company is using ___ pricing

cost plus

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

cost plus

The adjustment for overapplied overhead ___ net income

decreases cost of goods sold and increases

When a company uses a departmental approach rather than a plantwide approach to applying overhead, the selling price of the product will always be

different

Widely used allocation bases in manufacturing include

direct labor hours, direct labor cost, machine hours, units of product

Categories of manufacturing costs include

direct materials, direct labor, manufacturing overhead

Which of the following is only true in a multiple predetermined overhead rate system?

each production department may have its own predetermined overhead rate

The formula for a predetermined overhead rate is

estimated total manufacturing overhead cost/estimated total of the allocation base

The United States requires absorption costing for ___ reports

external

T/F: Job order costing can only be used in manufacturing firms

false

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

false

T/F: all hours on computerized time tickets are automatically posted directly to job cost sheets

false

T/F: job order costing can only be used in manufacturing firms

false

T/F: the root cause of inaccurately assigning costs to jobs is generally due to poor tracking of direct labor costs

false

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

The adjustment for underapplied overhead ___ net income

increases cost of goods sold and decreases

Assigning manufacturing overhead to product is complicated because

indirect cost, consists of many types of costs

Manufacturing overhead is

indirect, contains both fixed and VC, consists of many types of costs

Companies that make many different products each period use ___ costing

job order

A service firm that would most likely use job-order costing is a

law practice

Material requisition forms are used for

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

Companies that use job-order costing make

many different products

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

An allocation base is an

measure to assign overhead costs to products and services

When compared to a departmental approach, using activity-based costing results in ___ overhead rates

more

Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is ___ accurate.

more complex; more

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

normal

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

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

overhead applied to the job

A single predetermined overhead rate is called an ___ overhead rate

plantwide

A factor that causes overhead costs is called a

predetermined overhead rate

A normal cost system assigns overhead to jobs using

predetermined overhead rate

The formula for applying overhead to a specific job is: ___ amount of allocation base incurred by job

predetermined overhead rate x

Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing?

salary of hair salon manager

Which of the following is not a manufacturing cost category?

selling and administrative costs

Why is the unit product cost different from the cost that would be incurred if another (additional) unit were produced?

the unit product cost is an average, not an incremental cost

Overhead application is used to apply overhead costs to jobs

throughout the accounting period

The document that provides an hour by hour summary of the employee's activities throughout the day is called a

time ticket

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

total fixed manufacturing overhead cost

To find the predetermined overhead rate per hour, you should

total overhead cost/machine hours

A bill of materials contains the ___

type of each direct material needed to complete a unit of product, quantity of each direct material needed to complete a unit of product

The most common approach to product costing throughout the world is ___ costing

variable

In the formula Y=a+bX, b represents

variable manufacturing overhead cost per unit

The average manufacturing overhead cost per unit tends to

varies from one period to the next

Allocation bases that do not drive overhead costs

will not accurately measure the cost of overhead used