ACTY 2110
Applied Manufacturing Overhead
rate x actual hours
Suppose Bluefield uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line if Product A consumes 22,100 machine hours and Product B consumes 37,700
take total overhead / total # of machine hours = x A: X * 22100 B: X* 33700
A proactive approach managers use to determine what costs should be is called ______.
target costing
Indirect costs can be assigned to products or services using ______.
the activity rate method the activity proportion method
why would a company choose to use process costing rather than job order costing to compute product cost?
the company manufactures a product using a series of continuous processes that result in units that are virtually identical from one to the next
compute activity rate
total activity / total cost driver
Cost of Goods Manufactured
total current manufacturing costs + beg. work in process - ending work in process
direct materials + direct labor + manufacturing overhead
total manufacturing costs
use activity proportion to determine amount of overhead assigned to a product
total overhead cost x (# of hours / est. cost driver) =
An approach that aims to improve products by reducing and eliminating errors, streamlining activities, and continuously making production processes better is called _________________ management.
total quality
A management system that focuses on continually improving production processes is called ______.
total quality management
When computing unit costs, the direct materials and direct labor costs are the same, regardless of whether ABC or a volume-based costing system is used.
true
Traditional (non-ABC) cost system assign indirect (overhead) costs on the basis of
unit - or volume - cost drivers
If the number of units produced increases, then
unit fixed costs will decrease
what activity level is machining
unit level
firing pots in a kiln
unit, batch level ; batches fired is the cost driver ; value added
pouring plaster
unit, batch level ; unit cost driver ; value added
factory property taxes
management overhead ; fixed cost
Factory supervisor salary
manufacturing overhead ; fixed cost
To calculate manufacturing overhead cost per unit using ABC, divide the total ______.
manufacturing overhead cost by the number of units produced
The source document used to specify the quantity and unit costs of raw materials issued into production is called
materials requisition form
Which of the following is most likely to be a Manufacturing company? burger king holister supercuts maytag
maytag
Which of the following is not a customer-level activity at the doctors office?
negotiating a new contract with an insurance company
which of the following is a volume-based allocation measure?
number of units produced number of direct labor hours number of machine hours
Actual Manufacturing Overhead costs are recorded
on the left (debit) side of the Manufacturing Overhead account
applied manufacturing overhead costs are recorded
on the left (debit) side of the work in process inventory account and on the right (credit) side of the manufacturing overhead account
A company's activity rate for the general factory is $2.00 per machine hour. Product A used 3,000 machine hours and 1,000 labor hours. General factory overhead assigned to Product A is ______.
$6,000Rationale:$2 × 3,000 = $6,000
Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product.
$73,160 to Model XLT and $44,840 to Model TXTRationale:620/1000 = 62% to Model XLT and 380/1000 = 38% to TXT
Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 27,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned _______________% of the total setup cost.
30 (8,250/27,500)
Which of the function of management involves monitoring actual results to see whether the objectives set in the planning stage are being met and if necessary, taking corrective action to adjust the objectives or implementation of the plan ?
controlling
direct labor + manufacturing overhead
conversion cost
The formula to compute activity proportion is ______.
cost driver for product ÷ cost driver for all products
A group of similar activities that have been combined together is an activity ______.
cost pool
Activity-based costing systems typically include ______ cost drivers.
both volume- and non-volume-based
Accrued factory labor costs of $84,600, which included $18,600 of indirect labor. The workers have not yet been paid.
debit work in process inventory 66000 debit manufacturing overhead 18600 credit salaries/wages payable 84600
recorded depreciation for office equipment of 15000
depreciation expense 15000 accumulated depreciation 15000
Hiring workers for the manufacturing facility
implementing
Implementing a bonus system to reward employees for meeting sales and production goals.
implementing
overseeing the production and shipment of The Campus Court
implementing
Activity-based management focuses on ______.
improving operations increasing efficiency
both traditional and ABC cost systems focus on assigning
indirect costs
A just-in-time (JIT) system ______.
is a demand-pull system is used to help reduce costs
Which of the following source documents serves as a subsidiary ledger fo the Work In Process Inventory account?
job cost sheet
A system that pulls materials and products through the manufacturing system based on customer demand is called ______.
just-in-time
Suppose you are trying to decide whether to sell your accounting book at the end of the semester or keep it as a reference book for future courses. if you decide to keep the book, the money you will have received from selling it is an
opportunity cost
Indirect costs are also referred to ____________ as costs.
overhead
The activity proportion method uses _______________ to assign overhead costs to products.
percentages
sales commission
period ; variable
Depreciation on salespersons' cars
period cost ; fixed
Company advertising
period; fixed
Identifying five college campuses to serve as test markets.
planning
Preparing one-, three-, and five-year budgets that detail the necessary resources and costs that will be incurred to meet the projected sales forecasts.
planning
setting the goal of $1 millions in annual sales by the year 2018.
planning
suppose you have decided that you would like to purchase a new home in five years. to do this, you will need a down payment of approximately 20,000, which means you need to save 350 a month for the next five years. this is an example of
planning / organizing
use problem above using the rate above, what is the full manufacturing cost per unit of the deluxe product?
pre-determined overhead rate x labor hours = 50 x 2 = 100 add direct labor direct labor and applied overhead = 225
Suppose Bluefield Corp. uses a traditional costing system with number of labor hours as the cost driver. Determine the amount of overhead assigned to each product line if Product A requires 70 percent of the labor hours and Product B requires 30 percent. total overhead = 112500
product a = .7 x 112500 product b = .3 x 112500
what activity level is design
product level
The duration of a product from its infancy through its eventual decline is represented by the ________________.
product life cycle
In order to make good product introduction decisions in today's digital age, managers need to be able to accurately estimate ______.
life cycle costs
Which of the following is NOT a volume-based cost driver?
machine setups An ABC batch-level cost driver
screws
product; MOH ; variable
Factory rent
product; MOH; fixed
furniture assembler wages
product; direct labor ; variable cost
Deciding to spend more advertising dollars in regions where sales were slower than expected.
controlling
Deciding which new markets to expand into based on the first year's sales results.
controlling
Manufacturing Overhead
direct labor x rate
presidents salary
period ; fixed
The formula to apply overhead to products is ______.
activity rate times activity
Which of the following statements are true?
Managing and reducing costs is the true benefit of ABC. Implementing an ABC system is not a trivial task.
Improving operations and reducing costs is the focus of __________-_________ management.
activity-based
A technique that attempts to assign overhead costs to products based on the actions they require is called _____________ - _____________ _____________
activity-based costing
The manufacturing overhead account has a 10,000 debit balance that is closed directly to Cost of Goods Sold. Which statement is true?
actual manufacturing overhead was more than applied manufacturing overhead the entry to eliminate the balance in Manufacturing overhead will increase the cost of goods sold
Actual Manufacturing Overhead
all indirect cost except general and administrative salaries and selling expenses
A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. The activity rates are ______.
$200,000/25,000 = $8 per customer call and $300,000/20,000 = $15 per development hour.
find direct labor with out knowing Manufacturing overhead applied
1. conversion cost = total current Manufacturing cost - direct materials 2. conversion cost / 1 + (rate/100) = direct labor
sold jobs costing 102000 for 127500 on account
1. debit accounts receivable 127500 credit sales revenue 127500 2. debit cost of goods sold 102000 credit finished goods inventory 102000
What is Garcias manufacturing overhead? factory rent 5000 direct labor 8000 indirect materials 1000 direct materials 3500 sales commissions 2500 factory managers salary 4000 advertising 1500
10,000 factory rent 5000 indirect materials 1000 factory managers salary 4000
Applied manufacturing overhead 100,000 actual manufacturing overhead 90,000 unadjusted cost of goods sold 800,000 if Delphi closes the balance of its manufacturing overhead account directly to the cost of goods sold, how much is adjusted cost of goods sold?
100,000 - 90,000 = 10,000 (amount adjusting for) since applied overhead is more than actual manufacturing overhead we must subtract 10,000 from the Cost of goods sold 800,000 - 10,000 - 790,000
What is Garcias primecost? factory rent 5000 direct labor 8000 indirect materials 1000 direct materials 3500 sales commissions 2500 factory managers salary 4000 advertising 1500
11500 direct labor 8000 direct materials 3500
Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour.
19.53 625,000/(8000x4)
What is Garcias total manufacturing cost? factory rent 5000 direct labor 8000 indirect materials 1000 direct materials 3500 sales commissions 2500 factory managers salary 4000 advertising 1500
21,500 factory rent 5000 direct labor 8000 indirect materials 1000 direct materials 3500 factory managers salary 4000
Comstock company uses a predetermined overhead rate based on the machine hours to apply manufacturing overhead to jobs. estimated and actual total manufacturing overhead costs and machine hours are: total estimated overhead cost 100,000 total actual overhead cost 110,250 estimated machine hours 20,000 actual machine hours 21,000
5.00 100,000 / 20,000
underapplied overhead
Actual Overhead - Applied Overhead
Which of the following statements is true?
An existing ABC system can report sustainability-related information
Which of the following statements are true?
Appraisal costs are also known as inspection costs. Appraisal costs identify defective products before they get to the customer.
Which of the following statements are true?
Before implementing ABC, a company should weigh the benefits against the costs. The support of upper management is required for successful ABC implementation.
direct materials when given raw materials
Beg. Raw Materials inventory + Raw Materials purchased - indirect materials - ending raw materials
Which of the following are facility-level activities?
Paying factory insurance Human resource hiring fairs
creating molds
Unit,Product and batch level ; molds used cost driver ; value added
A method that attempts to assign overhead costs based on what is required to produce products is ______ costing.
activity based
Indirect costs ______.
are not easily traced to products or services
Non-volume-based cost drivers ______.
are used in ABC systems allow more indirect costs to be allocated to products
The final step in activity-based costing is ______.
assigning indirect costs to products or services
number of setups is an example of
batch level
what activity level is setup
batch level
Direct materials economy = $50 direct materials deluxe = $100 direct labor economy = $25 direct labor deluxe = $25 manufacturing overhead economy = ? manufacturing overhead deluxe = ? manufacturing cost per unit economy = ? manufacturing cost per unit deluxe = ? The company current applies 1 million in manufacturing overhead to the two products on the basis of direct labor hours. both products require 2 hours of direct labor what rate is currently used to apply manufacturing overhead to the two products?
direct labor hours for economy product = 8000 x 2 = 16000 Direct labor hours for deluxe product = 2000 x 2 = 4000 total labor hours = 20000 predetermined overhead rate= 1,000,000 / 20,000 hours = 50 per direct labor hour
Manufacturing Overhead was applied at the rate of 150% of direct labor cost
direct labor x 1.5
applied overhead when given raw materials
direct labor x overhead rate
furniture lumber
direct materials ; variable cost
which of the following cost(s) is (are) recorded directly into Work In Progress Inventory account?
direct materials and direct labor
beg. work in process inventory
end work in process inventory - total current manufacturing cost + COG manufactured
Predetermined Overhead Rate per hour
estimated total manufacturing overhead cost / estimated total cost driver(direct labor hours)
Predetermined Overhead Rate
estimated total manufacturing overhead cost/estimated number of machine hours
Storing inventory is
facility level ; sq. footage cost driver ; non-value added
The primary difference between financial accounting and managerial accounting is that
financial accounting is used by external parties while managerial accounting is used by internal parties
Which of the following would not be treated as a product cost under GAAP?
sales commissions
A bakery creates a new type of cake for sale. Under activity-based costing, this is an example of a ______-level activity.
service
Under activity-based costing, a degree program at a university is considered a(n) ______________-level activity.
service
refer to the question above, how much is over or underapplied overhead?
take the rate (5.00) and multiply it by the actual machine hours then subtract from the actual manufacturing overhead. 5 x 21,000 = 105000 105,000 - 110,250 = - 5250 (- means underapplied)
The concept _____________ ____________ of the begins with the customer and works backward to ensure that activities deliver what matters to customers.
value chain
The linked set of activities required to design, produce, and deliver products and provide aftermarket service to customers is called the .
value chain
Direct labor hours and machine hours are both examples of -_____________ based cost drivers.
volume
direct materials + direct labor =
prime costs
Implementing an ABC system ______.
provides information for cost management
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 $ _________
2 500,000/250000
Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours?
35000/5000=Per direct labor hour2. PDLH*40 = 280
A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned $____________ in total overhead
400 x 3 1200
Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $ ______________ per setup.
400,000 / 800 = 500
Which of the following statements are true?
Quality training is an example of a prevention cost. Most experts believe that incurring prevention costs is the most effective way to manage quality costs.
Costs incurred to identify defective products before they get to the customer are called costs
appraisal
ending finished goods inventory
beg finished goods inventory + COGM - COGS
Cost of Goods Sold
beg. finished goods inventory + Cost of goods manufactured - ending finished goods inventory - overapplied Manufacturing overhead
The best reason to implement an ABC system is to obtain more accurate information about the cost of products and services.
false
Cost of goods sold
cost of goods manufactures+beg. finished inventory - ending finished inventory
A group of similar activities that have been combined together is called an activity_________ ____________ .
cost pool
Record the entry to transfer the over- or underapplied balance to cost of goods sold
debit cost of goods sold credit Manufacturing overhead
completed jobs costing 150000
debit finished goods inventory 150000 credit work in process inventory 150000
Incurred actual manufacturing overhead costs (on account) of 122000
debit manufacturing overhead 122000 credit manufacturing overhead 122000
record purchased raw materials on account for 58500
debit raw materials (58500) credit accounts payable (58500)
record requisitioned raw materials of 35200 to the factory, which included 9900 of indirect materials
debit work in process inventory 25300 debit manufacturing overhead 9900 credit raw materials inventory 35200
Activities that occur regardless of how many products are produced or how many batches are run or units made are___________ - __________ activities.
facility level
Activities that occur regardless of how many products are produced or how many batches are run or units made are ___________-________ activities.
facility wide
ABC is designed to provide managers with detailed information about the cost of activities and is therefore not useful in providing sustainability-related information.
false
Factory insurance
manufacturing overhead ; fixed cost
factory utilities
manufacturing overhead ; variable cost; product
factory equipment depreciation
manufacturing overhead and Fixed cost
To keep quality problems from happening, companies incur ______________ costs.
prevention
A predetermined overhead rate in an activity-based costing system is called ______.
the activity rate
The activity rate is computed by dividing the ______ by the ______.
total activity cost; total cost driver