CH 2- Job order costing: calculating unit product costs

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

$840

Manufacturing Overhead

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

The total cost of a job includes:

- applied manufacturing overhead - direct labor cost - direct materials cost

Typical cost drivers include:

- computer time - flight-hours - machine-hours

materials requisition forms are used for

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

A job cost sheet contains:

- manufacturing overhead costs charged to the job - materials cost charged to the job - labor costs charged to the job

A bill of materials contains the

- quantity of each direct material needed to complete a unit of production - type of each direct material needed to complete unit of production

Categories of manufacturing costs include:

-direct materials -direct labor -manufacturing overhead

Why do companies use a predetermined overhead rate rather than an actual overhead rate?

An actual overhead rate is not known until the end of the period

Based on this information, the amount of overhead allocated to a job that used 300 direct labor hours is $____.

Estimated manufacturing overhead/ Estimated direct labor hours = amount ($) per direct labor hour $450,000/150,000=$3 per direct labor hour amount per direct labor hour X direct labor hrs= amount of overhead allocated ($) $3x 300hr =$900= OVERHEAD ALLOCATED TO JOB

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

Overhead applied to the job

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. The unit cost of job #420 is

Total cost of Job #420 = Direct Materials + Direct Labor + Predetermined overhead rate x Direct labor cost => $4,000 + $5,000 + (1.2 x $5,000) = $15,000

Smith Inc uses a job order costing system 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 $____.

Total cost of Job #42A = Direct materials + direct labor + predetermined overhead rate X actual machine-hours $18,000+ $12,000+ ($12 x 1100)= $43,200= TOT COST OF JOB

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

X= Total amount of the allocation base Y = The estimated total manufacturing overhead cost A = The estimated total fixed manufacturing over head cost B = The estimated variable manufacturing overhead cost per unit of the allocation base

A normal cost system assigns overhead to jobs using:

a predeterminded overhead rate

All manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under _____ costing.

absorption

Which of the following would NOT be a good allocation base for manufacturing overhead?

accounting hours

The process used to assign overhead costs to products is called overhead ______.

allocation

A measure such as direct lab or-hours or machine hours used to assign overhead costs to products and services is called a cost driver or a(n) ______ _______.

allocation base

The difference between direct labor and indirect labor is that direct labor:

can be easily traced to jobs, while indirect labor cannot

Allocation bases that so not drive overhead costs

can 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

A predetermined overhead rate is calculated by dividing the _____ total manufacturing overhead by the ______ total amount of the allocation base.

estimated; estimated

Companies that make many different products each period use ______-_____ costing.

job-order

Which of the following would be considered direct materials in a service firm that uses job order costing?

paperwork at a law firm

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

plantwide

Why is the unit product cost different from the cost that would be incurred if another unit were produced?

the cost to produce another unit is the incremental or marginal cost

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

time ticket

Murphy manufacturing estimated total manufacturing 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 7500. How much overhead was applied to a job completed during 2017 that used 200 direct labor-hours?

predetermined overhead rate= estimated total manufacturing overhead/estimated direct labor hours => $100,000/5,000=$20 per direct labor-hour overhead applied to the job= predetermined overhead X direct labor hours => $20x200= OVERHEAD APPLIED TO JOB = $4,000