COST ACCY CH 4 QUESTIONS
Identify the reason(s) why most organizations use an annual period rather than a weekly or monthly period to compute budgeted indirect-cost rates.
The denominator reason-the longer the time period, the less the effect of variations in output levels on the allocation of fixed costs. The numerator reason-the longer time period, the less influence of seasonal patterns.
Determine whether this statement is true or false. "In a normal-costing system, the amounts in the Manufacturing Overhead Control account will always equal the amounts in the Manufacturing Overhead Allocated account."
False
Distinguish between actual costing and normal costing.
Actual costing and normal costing differ in their use of actual or budgeted indirect-cost rates.
How does a job-costing system differ from a process-costing system?
A job-costing system assigns costs to distinct units; a process-costing system assigns costs to masses of similar units.
Why might an advertising agency use job costing for an advertising campaign by PepsiCo, whereas a bank might use process costing to determine the cost of checking account deposits?
Job costing enables all the specific aspects of each job to be identified, whereas process costing can be used to compute the cost of numerous identical or similar services.
Identify the seven steps in job costing.
Step 1. Identify the job that is the chosen cost object. Step 2. Identify the direct costs of the job. Step 3. Select the cost-allocation bases to use for allocating indirect costs to the job. Step 4. Identify the indirect costs associated with each cost-allocation base. Step 5. Compute the rate per unit of each cost-allocation base used to allocate indirect costs to the job. Step 6. Compute the indirect costs allocated to the job. Step 7. Compute the total cost of the job by adding all direct and indirect costs assigned to the job.
What is the advantage of using computerized source documents to prepare job-cost records?
accuracy of the records- incorrect recording of amounts, incorrect job numbers, materials being "borrowed" for another job
Identify three different debit entries to the Work-in-Process Control T-account under normal costing.
direct materials used, direct manufacturing labor billed to a job, manufacturing overhead allocated to a job
Electronic Data Interchange (EDI) is helpful to managers because
it ensures that a purchase order is transmitted quickly and accurately to suppliers with minimum paperwork and costs.
A company might use budgeted costs rather than actual costs to compute direct-labor rates because
it may be difficult to trace direct labor costs to jobs as they are completed.
Identify three major source documents used in job-costing systems.
job cost record (sheet), materials requisition record, and labor time record
Select examples of two cost objects in companies using job costing.
products or jobs and responsibility centers or departments
Identify the appropriate way(s) to dispose of under- or overallocated overhead costs.
(1) Proration to work in process, finished goods and cost of good sold, (2) Year-end write-off to cost of goods sold, (3) Restatement of all overhead entries using actual indirect costs rates rather than budgeted indirect cost rates.
Identify the ways in which a house construction company may use job-cost information.
(a) to determine the profitability of individual jobs, (b) to assist in bidding on future jobs, and (c) to evaluate professionals who are in charge of managing individual jobs
