Chapter 2 LearnSmart

Job XYZ has a total manufacturing cost of $600. If the mark-up percentage is 40%, the job will sell for $_____

$840

Manufacturing overhead costs _____.

-are indirect costs -consist of many different items

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

Accounting hours

Labor costs that are easily traced to a job are called _____ labor costs.

Direct

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

False

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

The salary of the manager at a hair salon.

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.

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:

Total cost of Job #420 = Direct materials + direct labor + overhead (predetermined overhead rate × direct labor cost) = $4,000 + $5,000 + 1.20 × $5,000 = $15,000 Unit product cost = $15,000 ÷ 7,500 units = $2.00 per unit.

One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors.

True

A 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

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

absorption

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

be common to all the company's products and services

The 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

The difference between direct labor and indirect labor is that direct labor ______.

can be easily traced to jobs, while indirect labor cannot

A factor that causes overhead costs is called a ______.

cost driver

An allocation base should be:

cost driver

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

The adjustment for underapplied overhead ______.

increases cost of goods sold and decreases net operating income

The document that records the materials, labor, and manufacturing overhead costs charged to a job is the ______.

job cost sheet

Companies that make many different products each period use _____-_____ costing.

job-order

Manufacturing overhead consists of ______.

many different kinds of indirect costs

Direct materials costs are recorded on the job cost sheet when the ______.

materials are issued to the job

An allocation base is a(n) ______.

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

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

more

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

overhead applied to the job

The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost, and:

predetermined manufacturing overhead cost.

Total manufacturing overhead costs tend to ______.

remain fairly constant

The document used to record the hours workers spend on each job and task is called a Blank______.

time ticket

Allocation bases that do not drive overhead costs ______.

will not accurately measure the cost of overhead used

The unit product cost is the same as the ______.

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

Costs assigned to units of product under absorption costing include:

-variable manufacturing. -fixed manufacturing.

Murphy Manufacturing estimated total manufacturing overhead for the year to be $100,000 and that 5,000 direct-labor hours would be used. Actual overhead was $120,000 and actual direct labor-hours were 7,500. The overhead applied to a job completed during the year that used 200 direct labor-hours was ______.

4000

Murphy Manufacturing estimated total manufacturing overhead for the year to be $100,000 and that 5,000 direct-labor hours would be used. Actual overhead was $120,000 and actual direct labor-hours were 7,500. The overhead applied to a job completed during the year that used 200 direct labor-hours was

The predetermined overhead rate = $100,000 ÷ 5,000 direct labor-hours = $20 per direct labor-hour × 200 direct labor-hours = $4,000.

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

more complex and more

When all overhead is assigned using direct-labor hours, the company has chosen to use a(n)_____ overhead rate, which is a single predetermined overhead rate

plantwide

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

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

Widely used allocation bases in manufacturing include ______.

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

Typical cost drivers include ______.

-machine-hours -flight-hours -computer time

A job cost sheet contains ______ the job.

-materials costs charged to -manufacturing overhead charged to -labor costs charged to

The total cost of a job includes:

-predetermined manufacturing overhead. -direct labor cost. -direct materials cost.

A bill of materials contains the ______.

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

Companies use a predetermined overhead rate rather than an actual overhead rate because _____.

an actual rate is not known until the end of the period

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

predetermined overhead rate ×

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 base

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

The tax department in an accounting firm

Manufacturing overhead:

-consists of many different types of costs. -contains fixed costs. -is an indirect cost.

Which of the following would be considered direct materials in a service firm that uses job-order costing?

Paperwork at a law firm

When a company creates overhead rates based on the actions it performs, it is employing an approach called_____-_____ costing.

activity based

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

allocation

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

cost-plus

Companies that use job-order costing make ______.

many different products

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $_____

2 ($500,000/250,000)

A multiple predetermined overhead rate system is more accurate than a plantwide overhead rate system because it ______.

reflects differences in how overhead costs are incurred within departments

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

subsidiary ledger

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

subsidiary ledger

An hour-by-hour summary of an employee's activities throughout the day is found on the _____ _____

time-ticket

The average manufacturing overhead cost per unit tends to ______ when the number of units produced fluctuate.

vary from one period to the next

Overhead application is the process of ______.

assigning manufacturing overhead cost to jobs

To calculate the unit product cost using the job cost sheet ______ by the number of units produced.

divide the total job cost

To calculate a predetermined overhead rate, divide estimated total manufacturing overhead by the ______.

estimated total allocation base