smartbook chapter 3

Estimated manufacturing overhead $500,000 Estimated direct labor cost $250,000 Actual manufacturing overhead $720,000 Actual direct labor cost $300,000 Based on this information, the predetermined overhead rate per direct labor dollar is

$2.00; $500,000 ÷ $250,000 = $2.00 per direct labor dollar

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; 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.

Company Dept. A Dept B. Estimated manufacturing overhead $500,000 $338,000 $162,000 Estimated direct labor cost $250,000 $130,000 $120,000 Actual manufacturing overhead $720,000 $400,000 $320,000 Actual direct labor cost $300,000 $160,000 $140,000 Based on this information, the predetermined overhead rate per direct labor dollar for Dept. A is

$2.60; $338,000 ÷ $130,000 = $2.60

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

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

what is only true in a multiple predetermined overhead rate system?

Each production department may have its own predetermined overhead rate

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

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

predetermined overhead rate formula

estimated total manufacturing overhead cost ÷ estimated total allocation base

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

Labor charges that can't be easily traced to a job are considered

manufacturing overhead, indirect labor

manufacturing overhead consists of

many different kinds of indirect costs

allocation base

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

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

more complex and more accurate

A single predetermined overhead rate is called a

plantwide overhead rate

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

predetermined manufacturing overhead cost

the total cost of a job includes

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

Co. Dept. A Dept B. Predetermined OH rate per direct labor hour $2.10 $2.40 $1.80 Direct labor hours worked on Job ABC 40 18 22 Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is

$82.80

formula for applying overhead to a specific job

predetermined overhead rate × amount of allocation base incurred by job

total manufacturing costs tend to

remain fairly constant (causes the avg cost to change with changes in production levels)

materials requisition form

specifies the type and quantity of materials to be drawn from the storeroom and identifies the job that will be charged for the cost of the materials

Co. Dept. A Dept B. Predetermined OH rate per direct labor hour $2.10 $2.40 $1.80 Direct labor hours worked on Job ABC 30 17 13 Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is

$64.20; $2.40 × 17 + $1.80 × 13 = $64.20

manufacturing overhead costs

are indirect costs and consist of many different items

overhead application is the process of

assigning manufacturing overhead cost to jobs

The unit product cost is the same as the

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

The predetermined overhead rate is calculated

before the period begins

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

Factory labor charges that can be easily traced to a job are treated as

direct labor

widely used allocation bases in manufacturing includes

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

manufacturing cost categories

direct materials, direct labor, manufacturing overhead

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

divide the total job cost

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

total manufacturing overhead costs tend to

remain relatively constant due to the presence of fixed costs; units produced fluctuate which causes the average cost per unit to vary

production order

specifies the quantity, price, and shipment dates for an order

Company Dept. A Dept B. Estimated manufacturing overhead $500,000 $338,000 $162,000 Estimated direct labor cost $250,000 $130,000 $120,000 Actual manufacturing overhead $720,000 $400,000 $320,000 Actual direct labor cost $300,000 $160,000 $140,000 Based on this information, the predetermined overhead rate per direct labor dollar for Dept. B is

$1.35

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

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

$840

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

An allocation base should be

a cost driver

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

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

factory labor is a

manufacturing cost

Allocation bases that do not drive overhead costs

will not accurately measure the cost of overhead used

Estimated manufacturing overhead $450,000 Estimated direct labor hours 150,000 Actual manufacturing overhead $405,000 Actual direct labor hours 180,000 Based on this information, the amount of overhead allocated to a job that used 300 direct labor hours is

900

difference between direct and indirect labor is

direct labor can be easily traced to jobs, indirect labor can't

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

time sheet

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

true

When a company assumes direct-labor hours is the only manufacturing overhead cost driver, they are likely to use a plantwide overhead rate

true