Managerial Accounting Chapter 2

Categories of manufacturing costs include:

direct materials, direct labor, manufacturing overhead

Predeterminded over rate per direct labor hour is

estimated manufacturing overhead/esitmated direct labor hours

A predetermined overhead rate it calculated by dividing the _____ total manufacturing overhead by the __________ total amount of the allocation base

estimated, estimated

The difference between overhead applied to work in process and actual overhead is

overapplied or underapplied overhead

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

overhead allocation

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

paperwork at a law firm

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

paper time tickets with computerized systems

Smith Inc uses a job order costing system 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 $

Total cost of Job #42A = Direct materials + direct labor + predetermined overhead rate X actual machine-hours = $18,000 + $12,000 + ($12 per machine-hour X 1,100 machine-hours) = $43,200

The total cost of a job includes

- Applies manufacturing overhead - direct materials cost - direct labor cost

Typical cost drivers include

- flight hours - computer time - machine hours

All manufacturing costs are assigned to units of product and all non manufacturing costs are treated as period costs under ________ costing

Absorption

The predetermined overhead rate per direct labor dollars for a particular department

Can by calculated by dividing Estimated manu overhead by estimated direct labor cost

A factor that causes overhead costs is called a

Cost Driver - measure such as direct labor hours or machine hours used to assign overhead costs to product

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

Direct Labor Cost

The formula for a predetermined overhead rate is:

Estimated manufacturing overhead cost divided by estimated allocation base

Overhead allocated to a job that used 300 direct labor hours is

Estimated manufacturing overhead/estimated direct labor hours = direct labor hours ($) X direct labor hours used = #

True or False: Job order costing can only be used in manufactering firms

False (Also used extensively in service industries.)

Companies that make many different types of products each period use

Job order costing

Direct Materials costs are recorded on the job cost sheet when the

Materials are issued to the job

The overhead applied to Job ABC using multiple predetermined overhead rate is $

Multiply departmenta A & B's predeterminded overhead rate per direct labor hours X's the direct labor hours worked on job ABC. Then add them up together

When all overhead is assigned using direct labor hours, the company has chosen to use a ________ predetermined overhead rate

Plantwide rate - a single predetermined overhead rate is called

The formula for applying overhead to a specific job is

Predetermined overhead rate X Amount of allocation base incurred by job

Which of the following is not a manufacturing cost category

Selling and administrative costs

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 5000 in direct labor cost to manufacture 7500 units. The unit cost of job #420 is

Total cost of Job #420 = Direct Materials + Direct Labor + Predetermined overhead rate x Direct labor cost = $4,000 + $5,000 + 120% x $5,000 = $15,000 Unit product cost = $15,000/$7,500 = $2.00 per unit

In the formula Y = A + BX, X represents the estimated

X= Total amount of the allocation base Y = The estimated total manufacturing overhead cost A = The estimated total fixed manufacturing over head cost B = The estimated variable manufacturing overhead cost per unit of the allocation base

Cost plus pricing occurs when

a markup percentage is added to the cost of a job

A normal cost system assigns overhead to jobs using:

a predeterminded overhead rate

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

accounting hours are not related to manufacturing

Manufacturing Overhead

all manufacturing costs except direct materials and direct labor - Consists of many different types of costs - is an indirect cost - contains fixed costs

The job order costing system may inaccurately assign cost to jobs due to

an inappropriate allocation base

The predeterminded overhead rate is calculated

before the period begins

Allocation bases that do not driver overhead costs:

can cause product costs to be distorted

The adjustment for overapplied overhead:

decreases cost of goods sold and increases net income

The united States requires absorption costing for _________ financial reports

external financial reports

Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is

more complex, but more accurate

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

subsidiary ledger

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

the tax department in an accounting firm - this is a department - a job would be an individual client

An hour by hour summary of an employees activities through the day is found on the

time ticket

The average manufacturing overhead cost per unit tends to

vary from one period to the next

Widely used allocation bases in manufacturing are

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

A job cost sheet contains

- manufacturing overhead costs charged to the job - materials cost charged to the job - labor costs charged to the job

Materials requisition forms are used for

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

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 direct labor cost in a service firm that uses job - order costing

The salary of the manager at a hair salon

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

Activity Based

A measure such as direct labor hours or machine hours used to assign overhead costs to produce services is called a cost or a

Activity base - also commonly called an allocating base

Job order costing would most likely be used in an

- construction company - Soda bottling company would be more likely to use process costing - companies that make different products each period use

A bill of materials contains the

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

The unit product cost is the same as the

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

Cost assigned to units of production under absorption costing include

- variable manufacturing - fixed manufacturing

Companies assign costs to products and services to:

-understand product profitability -establish selling prices -value ending inventory