chapter 2 LearnSmart acct 2302

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

Accounting hours

Total manufacturing overhead costs tend to:

remain fairly constant

Widely used allocation bases in manufacturing include

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

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

variable manufacturing overhead cost per unit

Smith, Inc. uses a job-order costing system with the predetermined overhead rate of $12 per machine-hour. The job cost sheet for Job #42A listed $12,000 in direct labor cost, $18,000 in direct materials cost, 1,200 direct labor-hours and 1,100 machine-hours. The total cost of Job #42A is

43,200

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

applied manufacturing overhead cost

Overhead application is the process of

assigning manufacturing overhead cost to jobs

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

be common to all the company's products and services

Manufacturing overhead costs

consist of many different items, are indirect costs

The adjustment for underapplied overhead

increases cost of goods sold and decreases net income

Factory labor charges that cannot be easily traced to a job are treated as

manufacturing overhead

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

overhead applied to the job

The formula for applying overhead to a specific job is

predetermined overhead rate × amount of allocation base incurred by job

A normal costing system applies overhead by job by multiplying a(n) Blank 1 Blank 2 Unavailable rate by the Blank 3

predetermined, overhead, actual

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

time ticket

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

total amount of the allocation base

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

total fixed manufacturing overhead cost

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

False

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

Paperwork at a law firm

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

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

cost-plus

An allocation base is a(n)

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

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 showed that Jones Company spent $4,000 on direct materials and $5,000 on direct labor on the job. What is the total cost of Job #420?

15,000: Cost of Job #420 = Direct materials + Direct labor + Predetermined overhead rate × Direct labor cost = $4,000 + $5,000 + 120% × $5,000 = $15,000

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

The cost to produce another unit is the incremental or marginal cost.

Using a departmental approach to overhead application results in ______ as using a plantwide rate.

a different selling price

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

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

The adjustment for overapplied overhead

decreases cost of goods sold and increases net income

The total cost of a job includes

direct materials cost, direct labor cost, applied manufacturing overhead

To calculate the unit product cost using the job cost sheet

divide the total job cost by the number of units produced

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

Manufacturing overhead consists of

many different kinds of indirect costs

To keep track of labor time and costs, many firms have replaced

paper time tickets with computerized systems

The average manufacturing overhead cost per unit tends to

vary from one period to the next

Answer Mode Multiple Choice QuestionYour Answer correct 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 ______.

2.00 Reason: 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.

Murphy Manufacturing estimated total manufacturing overhead for 2017 to be $100,000 and uses direct labor-hours as the allocation base. They estimated that 5,000 hours would be used. Actual overhead for 2017 was $120,000 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 :Reason: The predetermined overhead rate = $100,000 ÷ 5,000 direct labor-hours = $20 per direct labor-hour. The overhead applied to the job = $20 per direct labor-hours ×200 direct labor-hours = $4,000.

The unit product cost is the same as the

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

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

true

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

Why do companies use a predetermined overhead rate rather than an actual overhead rate?

An actual overhead rate is not known until the end of the period.

A normal cost system assigns overhead to jobs using

a predetermined overhead rate

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

allocation