Acct 2102 Test 1 learnsmarts

CH 2. Job-Order Costing

Calculating Unit Product Costs (cont.)

CH. 3 Job-Order Costing

Cost Flows and External Reporting

when preparing financial statements in a job-order costing system, finished goods first flow to the ________ _______ and then to the ________ ________.

balance sheet, income statement

customer orders are considered to be a(n) _____-level activity

batch

setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of _____-level activities

batch (relates to groups of units, regardless of how many units are in the group)

what type of activities are performed each time a group of units is processed, regardless of how many units are in the group?

batch-level

ABC can be used in

both service and manufacturing companies

Allocation bases that do not drive overhead costs

can cause product costs to be distorted

finished goods

consists of completed products not sold to customers yet

finished goods _____.

consists of completed, unsold goods

work in process

consists of units of product that are started but only partially complete and require further work before sale

administrative costs

cost associated with general management of an organization rather than with manufacturing or selling

what accounts are debited when goods are sold on account?

cost of goods sold and accounts receivable

selling costs

costs incurred to secure customer orders and get finished product

when overhead is underapplied, a _____ must be made to the manufacturing overhead account to close it out

credit

the ____ side of the manufacturing overhead account is always used to record manufacturing overhead applied to the production and the _____ side is always used to record the actual manufacturing overhead costs incurred

credit, debit

actual manufacturing overhead was $50,000, while overhead applied to jobs was $45,000. The entry to dispose of underapplied or overapplied overhead

credits manufacturing overhead $5,000 (underapplied overhead results in a $5,000 debit balance in the overhead account. To dispose of it, manufacturing overhead should be credited for $5,000).

the adjustment for overapplied O/H _____.

decreases cost of goods sold and increases net income

a journal entry that debits depreciation expense and credits accumulated depreciation records ______.

depreciation on office equipment

the journal entry that debits work in process and manufacturing overhead and credits salaries and wages payable is recording

direct and indirect labor costs

conversion cost

direct labor and manufacturing overhead

in the 1800's

direct labor and overhead was believed to be highly correlated, cost systems emphasized simplicity

a journal entry that debits manufacturing overhead and credits accounts payable would NOT be used to record _____.

direct labor costs (the incurrence of direct labor costs should be recorded by debiting work in process account)

in recent years, as a percentage of total cost

direct labor has been decreasing and overhead has been increasing

reasons that companies are moving away from a plantwide overhead rate like direct labor

direct labor is no longer directly correlated to overhead for many products, a variety of products are made by companies, many tasks are now down with automated equipment

Categories of manufacturing costs include ____

direct labor, direct materials, manufacturing overhead

prime cost

direct material and direct labor

in a normal costing system, work in process is debited for

direct materials and manufacturing overhead applied

not a common method used to assign overhead to products

direct tracing of overhead

if factory wide overhead costs do not move in the same direction as the plantwide activity base, products cost will be

distorted

which of the following is only true in a multiple POHR system?

each production department may have its own POHR

to calculate a POHR, divide estimated manufacturing overhead by the

estimated allocation base

predetermined overhead rate

estimated overhead/estimated activity base

Job-order costing can only be used in manufacturing firms

false

traditional cost systems tend to undercost standard products and overcost specialty products

false

when jobs are sold their costs are transferred period costs flow from finished goods to cost of goods sold

false

when a job is completed, which account is debited?

finished goods

when goods are sold on account, what accounts are credited?

finished goods and sales

average manufacturing o/h cost per unit usually varies from one period to the next because

fixed manufacturing overhead remains constant in total even when production changes

a journal entry debiting COGS and crediting finished goods is made when

goods are sold

which is generally not part of the design of an ABC system

identifying and including all activities that cause overhead costs (there are hundreds or thousands of activities that drive overhead costs, and it would be too expensive to identify every one of them)

using direct-labor hours or another volume based cost driver to assign overhead

ignores other significant causes of overhead, may result in selling products at a loss, ma result in overcharging customers for products

in a system that uses multiple POHR's, overhead is applied

in each department as jobs proceed through the department

product costs

include all costs involved in acquiring or making a product

raw materials

include any materials that haven't entered into manufacturing process yet

cost of goods manufactured ____.

includes the manufacturing costs of goods finished during the period

selling and administrative costs first appear on the _____.

income statement

labor costs charged to manufacturing overhead represent

indirect labor costs

materials requisition forms are used for

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

which is not a benefit of activity-based costing to managers?

managers have numerous cost pools that are identified for each major activity (this is a benefit of ABC costing, but not a benefit directly to a manager).

selling price

manufacturing cost + mark up

which account is credited when manufacturing overhead is applied?

manufacturing overhead

the journal entry to record $1,000 in expired prepaid insurance on factory equipment is debit

manufacturing overhead $1,000 and credit prepaid insurance $1,000

the journal entry to record $20,000 in depreciation on factory equipment is debit

manufacturing overhead $20,000 and credit accumulated depreciation $20,000

if a company incurs $2,000 of factory rent, $1,000 of factory utilities, and $5,000 of miscellaneous factory costs, the journal entry to record these transactions would be to debit

manufacturing overhead $8,000 and credit accounts payable $8,000

the journal entry to record accrued property taxes for a factory building debits

manufacturing overhead and credits property taxes payable

the periods ends

manufacturing overhead is closed

overhead is applied to work in process

manufacturing overhead is credited

actual overhead is incurred

manufacturing overhead is debited

companies that use job-order costing make

many different products

DM costs are recorded on the job cost sheet when the

materials are issued to the job

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 cost of implementing and maintaining an ABC system

may outweigh the benefits received

departmental overhead rates

may use different allocation bases in different departments, may not assign overhead correctly with a company has a range of products

Compared to a plantwide o/h rate system, a multiple POHR system is

more complex, but more accurate

applied manufacturing overhead will most likely _____ actual manufacturing overhead

not equal

activities that occur regardless of which customers are served, which products are produced or how many batches are run or units made are facility-level or _____-______ activities

organization-sustaining

the difference between O/H applied to work in process and actual overhead is ___.

overapplied or underapplied overhead

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

overapplied or underapplied overhead

usually, traditional costing _____ high volume products and ____ low-volume products

overcosts, undercosts

the first stage of allocating overhead costs to products

overhead costs are assigned to activity cost pools

the basis of benchmarking is comparing

performance within the same industry

maintaining a product manager and staff is a(n) _____ activity

product-level

activity-based costing is most likely to be beneficial when

products differ substantially in batch size and the activities they require, overhead costs are high and increasing and no one knows why

which are true

products do not all use resources in the same way, traditional costing systems can distort product costs

unit level activities are

proportional to the number of units produced

a journal entry that debits raw materials and credits accounts payable is recording the

purchase of materials

a bill of materials contains the

quantity of each direct material needed to complete a unit of a product, type of each direct material needed to complete a unit of product

any purchased materials that will go into the finished product are first recorded in the _____ _____ inventory account

raw materials

the journal entry to record issuing materials to be used in production credits ____.

raw materials

activity-based management is focused on

reducing defects, eliminating waste

total manufacturing o/h costs tend to

remain fairly constant

implementing activity based costing

requires substantial resources, should be done by a cross-functional team, requires taking employees away from other tasks

contribution margin

sales minus variable cost

when making decisions

some selling and administrative expenses should be assigned to the products

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

subsidiary ledger

costs of goods manufactured is _____.

sum of all jobs transferred from work in process to finished goods

which of the following issues needs to be considered when implementing an ABC system?

the cost in each activity cost pool may not be strictly proportional to its activity measure, the cost of designing and implementing the system may outweigh the benefits of the system

the value of work in process is equal to

the cost of all unfinished jobs

Which of the following not be considered a job in 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 employee's activities throughout the day is found on the _____ ____

time ticket

activity rate is computed by dividing the _______ by the _______

total cost in the activity cost pool; activity level in the activity cost pool

ABC relies on a number of critical assumptions which could distort information for making decisions

true

manufacturing overhead costs consist of all manufacturing costs other than direct materials and direct labor

true

the transfer of costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next

true

the costs in the activity cost pools are allocated to products using activity rates and activity measures. This is part of stage ____ in allocating overhead costs to products

two

under activity-based costing, the manufacturing overhead costs are allocated to products via a _____-stage process

two

a debit balance in manufacturing overhead means overhead was

underapplied

when only a portion of the units involved in a job are sold, the

unit product cost is used to calculate the amount transferred from the finished goods to cost of goods sold

what level of activity is performed each time an item of a product is produced?

unit-level

companies assign costs to products and services to

value ending inventory, understand product profitability, establish selling prices

costs partially completed units are accounted for in

work in process

manufacturing overhead is applied with a debit to

work in process

a company incurred $10,000 in direct labor costs and $8,000 in indirect labor costs. The journal entry to record this transaction debits

work in process $10,000 and manufacturing overhead $8,000 and credits salaries and wages payable $18,000

which account(s) are debited in the journal entry to record manufacturing labor costs?

work in process and manufacturing overhead

the journal entry to record to more accurate allocation of overapplied or underapplied overhead includes entries to

work in process, cost of goods sold, finished goods, manufacturing overhead

which is true

ABC may be useful to a company whose costs have changed substantially since the existing cost system was developed

departmental overhead rates may not correctly assign overhead costs in situations where a company has

a variety of products

the journal entry to record the purchase of materials credits ____.

accounts payable

in ABC, any event that causes consumption of overhead resources is a(n)

activity

when a company created O/H rates based on the actions it performs, it is employing an approach called ____-_____ costing.

activity - based

focusing on activities to eliminate waste, decrease processing time, and reduce defects in the basis of _____ _____ management

activity based

a "bucket" in which costs are accumulated that relate to a single activity measure in the ABC system is a(n)

activity cost pool

the formula to apply overhead to products is

activity rate x activity

the manufacturing overhead account is debited when _______.

actual overhead costs are incurred

in a normal costing system, the manufacturing overhead account is debited for

actual overhead costs, the cost of indirect materials

an activity measure is a(n) _______ base in an activity-based costing system

allocation

a predetermined overhead rate in an activity-based costing system is called

an activity rate

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

an innapropriate allocation base

which of the following appears on job cost sheets and in the work in process account?

applied manufacturing overhead

Manufacturing O/H Costs

are indirect costs, consist of many different items, contains fixed costs

actual manufacturing overhead costs are recorded in the manufacturing overhead account

as they are incurred

raw materials inventory is an

asset

bar codes can be used to

automatically record and post DL costs to jobs

a job consisted of 1,000 units at a total cost of $200,000. The cost transferred to cost of goods sold for the sales of 600 units is

$120,000 ($200,000/1,000 x 600)

based on this information, the overhead applied to job ABC using multiple POHR is

$2.40 x 18/$1.80 x 22=$82.80

based on this information, the POHR per DLH for Dept. A is, based on this information, the POHR per DLH for Dept. B is

$338,000/$130,000=$2.60, $162,000/$120,000=$1.35

Based on this information, the predetermined overhead rate per direct labor hour is $_____

$450,000/150,000= $3.00 per DLH

plaster company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine set-ups. The activity rate is

$500/set-up ($400,000/800)

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

$840 (600 x .40 = $240 + 600 = $840)

overhead applied to a particular job

POHR x amount of allocation base incurred by job

an allocation base should be

a cost driver