ACCT 202 - (Chapter II: Connect Reading)

The formula for a predetermined overhead rate is:

Estimated manufacturing overhead cost divided by estimated allocation base

Allocation bases that do not drive overhead costs:

cause product costs to be distorted

To calculate the unit product cost using the job cost sheet:

divide the total job cost by the number of units produced

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

overhead applied to the job

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

time ticket

A job-order costing system may inaccurately assign costs to jobs due to:

an inappropriate allocation base

When all overhead is assigned using direct-labor hours, the company has chosen to use a(n) _________________ overhead rate.

plantwide

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n) _______________ _______________.

subsidiary ledger

True or False: One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors.

True

A normal cost system assigns overhead to jobs using:

a predetermined overhead rate

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

applied manufacturing overhead cost

Murphy manufacturing estimated total manufacturing a overhead for 2017 to be $100,000 and uses direct labor-hours as the allocation base. They estimated that 5,000 hours would be used. Actual overhead for 2017 was $120,000 and actual direct labor-hours were 7,500. How much overhead for 2017 was applied to a job completed during 2017 that used 200 direct labor-hours?

$4,000 - (The predetermined overhead rate = $100,000/5,000 direct labor-hours = 20 per direct labor-hour. The overhead applied to the job = $20 per direct labor-hours x 200 direct labor-hours = $4,000.)

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

$82.8

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)

Manufacturing Overhead:

-is an indirect cost -contains fixed costs -consists of many different types of costs

The unit product cost is the same as the:

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

Companies assign costs to products and services to:

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

What is the MOST common approach to product costing throughout the world.

Absorption costing

An allocation base should be:

a cost driver

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

activity-based

Overhead application is the process of:

assigning manufacturing overhead cost to jobs

The predetermined overhead rate is calculated:

before the period begins

The type and quantity of each type of direct material needed to complete a unit of product is listed on the...

bill of materials

Costs assigned to units of product in absorption costing include ______________ manufacturing costs.

both variable and fixed

Labor costs that are easily traced to a job are called __________________ labor costs.

direct

In a system that uses multiple predetermined overhead rates, overhead is applied:

in each department as jobs proceed through the department

The adjustment for underapplied overhead:

increases cost of goods sold and decreases net income

The document that records the materials, labor, and manufacturing overhead costs charged to a job is the:

job cost sheet

Companies that make many different products each period use ________-__________ costing.

job-order

The type and quantity of materials to be drawn from the storeroom and the job that will be charged for the materials is specified on the...

materials requisition form

The allocation base is a(n):

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

The difference b/n overhead applied to work in process and actual overhead is:

overapplied or underapplied overhead

Total manufacturing overhead costs tend to:

remain fairly constant

In the formula Y=a+bX, b represents the estimated:

variable manufacturing overhead cost per unit

Which of the following would NOT be a good allocation base for manufacturing overhead? -Machine hours -Accounting hours -Units of product -Direct labor hours

Accounting hours (are not related to manufacturing).

Which of the following are NOT one of the categories into which manufacturing costs are generally classified? -Selling & administrative expenses -Direct Labor -Direct Materials -Manufacturing overhead

-Selling & administrative expenses

Typical cost drivers include:

-computer time -flight-hours -machine-hours

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 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 _____________. (Enter your answer as a whole number.)

$43,200

The United States requires absorption costing for:

'-external financial reports -tax reports

True or False: Job-order costing can ONLY be used in manufacturing firms.

False (Also used extensively in service industries.)

The adjustment for overapplied overhead:

decreases cost of goods sold and increases net income

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 predetermined overhead rate per direct labor hour is $___________.

$3 ($450,000/150,000 direct labor-hours = 3 per direct labor-hour.)

Direct materials costs are recorded on the job cost sheet when the:

materials are issued to the job