A306 SB 3

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 $500000/250000

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 X direct labor cost) = $4,000 + $5,000 + 1.20 X $5,000 = $15,000

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

$4000 Predetermined overhead was $100000/5000=$20* 200 direct labor hours = $4000

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

$840 ($600 + ($600x40%) = $840)

The total cost of a job includes:

-direct materials cost -predetermined manufacturing overhead -direct labor cost

Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is

64.20 17*2.4+13*1.8=$64.20

Cost-plus pricing (markup 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 charges that can be easily traced to a job are treated as ______.

Direct labor

The formula for a predetermined overhead rate is

Estimated total manufacturing overhead cost / estimated total allocation base

Manufacturing Overhead

Is an indirect cost Contains fixed costs Consists of many different types of costs

Total Manufacturing Costs tend to

Remain fairly constant

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.

When a company assumes direct labor hours is the only manufacturing overhead cost driver, they are likely to use a plant wide overhead rate. T or F

True

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

True!

Average manufacturing overhead cost per unit usually

Varies from one period to the next

Allocation based that do not drive overhead costs

Will not accurately measure the cost of overhead used

A cost driver is

a factor that causes overhead costs to occur

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

a more accurate accounting of costs enhanced information for decision making

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

An allocation base should be:

cost driver

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

Widely used allocation bases in manufacturing are:

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

Categories of manufacturing costs include:

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

Labor charges that cannot be easily traced to a job are considered:

manufacturing overhead indirect labor

An allocation base is

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, but more accurate

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

overhead applied to the job

A single predetermined overhead rate is called a ________ overhead rate.

plantwide

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

predetermined manufacturing overhead 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 fairly constant

The document used to record the hours workers spend on each job and task is called a

time ticket