Chapter 3 Job Costing

Sunk cost

A cost incurred in the past that is not relevant to any current decision is classified as a

Cost of goods sold

Product costs that have become expenses can be found in:

total fixed manufacturing overhead cost

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 ________.

Contribution margin

Sales less variable production, variable selling, and variable administrative expenses.

allocation base

An activity measure is a(n) ________

Mixed cost

Factory overhead is typically a(n):

Indirect labor and fixed manufacturing overhead

A factory supervisors wages are classified as

multiple predetermined overhead rates

Companies can improve job cost accuracy by using ________.

product-level activities

Design and engineering changes are examples of ________

$595,200 = $390,000 + (3.00x68,400)

Mansfield, Inc., has two production departments, Assembly and Packaging. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The predetermined overhead rate in the Assembly Department is based on machine hours (MHs) and it is based on direct labor-hours (DLHs) in the Packaging Department. At the beginning of the year, the company made the following estimates: Assembly Packaging Direct labor-hours 5,200 62,000 Machine-hours 68,400 11,900 Total fixed manufacturing overhead cost $390,000 $419,000 Variable manufacturing overhead per DLH $3.75 Variable manufacturing overhead per MH$3.00 What is the estimated total manufacturing overhead in the Assembly Department?

$4,000 200,000/10,000= 20 20x200 = $4000

Spartan Corporation estimates that it will incur $200,000 of total manufacturing overhead cost at an estimated activity level of 10,000 direct labor-hours. What is the amount of manufacturing overhead that would be applied to a job that required 200 direct labor-hours?

decreases cost of goods sold and increases net operating income.

The adjustment for overapplied overhead ________.

bill of materials

The direct materials required to manufacture each unit of product are listed on a ________.

$69,100

The following costs were incurred in May: direct materials $45,300 direct labor $23,800 manufacturing overhead $17,500 selling expenses $16,800 administrative expenses $30,200 Prime costs during the month total:

$10.00 per machine hour

The management of Blue Ocean Company estimates that 50,000 machine-hours will be required to support the production planned for the year. It also estimates $300,000 of total fixed manufacturing overhead cost for the coming year and $4 of variable manufacturing overhead cost per machine-hour. What is the predetermined overhead rate?

Multiple activity rates

What is (are) used in activity-based absorption costing to assign overhead costs to products?

by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job

A normal cost system applies overhead to jobs ________.

Underapplied

What is the term used when a company applies less overhead to production than it actually incurs?

subsidiary ledger

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

Discretionary fixed costs can often be reduced to zero for short periods of time without seriously impairing the long run goals of the company.

Which of the following statements is true when referring to fixed costs?

$124 = 4,000 + 1,200 + 10*100 6200/50 = 124

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours to produce 50 audio controllers, what is this job's unit product cost (per audio controller)?

$6,200 4,000 + 1,200 + 10*100

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours, what is the total cost assigned to this job?

Vary in total in direct proportion to changes in the activity level.

Within the relevant range, variable costs can be expected to:

$10.51 per DLH Estimated total manufacturing overhead = $419,000 + ($3.75 per DLH × 62,000 DLHs) = $651,500 Predetermined overhead rate = $651,500 ÷ 62,000 DLHs = $10.51 per DLH

Mansfield, Inc., has two production departments, Assembly and Packaging. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The predetermined overhead rate in the Assembly Department is based on machine hours (MHs) and it is based on direct labor-hours (DLHs) in the Packaging Department. At the beginning of the year, the company made the following estimates: Assembly Packaging Direct labor-hours 5,200 62,000 Machine-hours 68,400 11,900 Total fixed manufacturing overhead cost $390,000 $419,000 Variable manufacturing overhead per DLH $3.75 Variable manufacturing overhead per MH$3.00 What is the predetermined overhead rate for the Packaging Department?

$223.00 Activity rate for the setting up machines (setup) activity cost pool= $551,702 ÷ 2,474 setups = $223.00 per setup

Simmons, Inc.'s traditional costing system uses a plantwide predetermined overhead rate based on direct labor-hours (DLHs). The company's estimated total manufacturing overhead is $1,632,986 and estimated total direct labor-hours for the year is 30,220. Data about its only two products, A and B, as well as data pertaining to its proposed activity-based absorption costing system appears below. Product A Product B Direct materials per unit $31.80 $63.30 Direct labor per unit $10.00 $27.00 Direct labor-hours per unit 0.20 1.00 Annual production (units) 45,600 21,100 Activities and Activity Measures Estimated Overhead Cost Supporting direct labor (DLHs) $695,060 Setting up machines (setups) 551,702 Parts administration (part types) 386,224 Total$1,632,986 Expected Activity Product A Product B Total DLHs 9,120 21,100 30,220 Setups 1,450 1,024 2,474 Part types 677 279 956 When manufacturing overhead is applied to each unit of product B, what is the activity rate that will be used for the setting up machines (setup) activity cost pool?