Ch 2 SB ACCT 252
Estimated manufacturing overhead: (Company $500,000), (Dept. A: $338,000), (Dept B: $162,000) Estimated direct labor cost: (Company: $250,000), (Dept A: $130,000), (Dept B: $120,000) Actual manufacturing overhead: (Company $720,000), (Dept. A: $400,000), (Dept B: $320,000) Actual direct labor cost: (Company $300,000), (Dept. A: $160,000), (Dept B: $140,000) Based on this information, the predetermined overhead rate per direct labor dollar for Dept. B is $___________
$1.35 Reason:$162,000 ÷ $120,000=$1.35
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 showed that Jones Company spent $4,000 on direct materials and $5,000 on direct labor on the job. What is the total cost of Job #420?
$15,000 Reason: Direct Materials + Direct Labor + Predetermined overhead x Direct Labor Cost = $4,000 + $5,000 + 120% × $5,000 = $15,000
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
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 Reason: Total cost of Job #420 = Direct materials + direct labor + overhead [predetermined overhead rate × direct labor cost] = $4,000 + $5,000 + [1.20 × $5,000] = ($15,000 Total cost of Job) Total cost of Job ÷ Number of Units (ex 7,500) Unit product cost = $15,000 ÷ 7,500 units = $2.00 per unit.
Predetermined OH rate per direct labor hour: (Co.$2.10), (Dept A. $2.40), (Dept B. $1.80) Direct labor hours worked on Job ABC: (Co. : 30), (Dept A: 17), (Dept B: 13)
$64.20 Reason: ($2.40 × 17) + ($1.80 × 13) = $64.20
materials requisition form
A document that specifies the type and quantity of materials to be drawn from the storeroom and that identifies the job that will be charged for the cost of those materials.
Which of the following would not be a good allocation base for manufacturing overhead?
Accounting hours Reason: Accounting hours are not related to manufacturing.
production order form
After the production order has been issued, the accounting department may prepare a job cost sheet.
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 $
Estimated manufacturing overhead $450,000 ÷ Estimated direct labor hours 150,000 = $3.00
True or False: Job-order costing can only be used in manufacturing firms?
False
True or False: The root cause of inaccurately assigning costs to jobs is generally due to poor tracking of direct labor costs.
False
Which of the following would be considered direct materials in a service firm that uses job-order costing?
Paperwork at a law firm
Total manufacturing overhead costs tend to?
Remain fairly constant Reason: Total manufacturing overhead costs tend to remain relatively constant from one period to the next.
Smith, Inc. uses a job-order costing system with a 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 per machine-hour) x (1,100 machine-hours)] = $43,200
time ticket
a document that is used to record the amount of time an employee spends on various activities
A cost driver is_____?
a factor that causes overhead costs to occur
A normal cost system assigns overhead to jobs using ?
a predetermined overhead rate Reason: A normal cost system is a system in which overhead costs are applied to a job by multiplying the (predetermined overhead rate) x by the (actual amount of allocation base incurred by the job).
All manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under
absorption
The most common approach to product costing throughout the world is ______ costing.
absorption
When a company creates overhead rates based on the actions it performs, it is employing an approach called____________
activity-based costing
The process used to assign overhead costs to products is called overhead________?
allocation
A job-order costing system may inaccurately assign costs to jobs due to_______?
an inappropriate allocation base
Manufacturing overhead costs _____?
are indirect costs consist of many different items
Manufacturing Overhead
consists of many different types of costs. contains fixed costs. is an indirect cost.
When a predetermined markup is applied to a base to determine the target selling price, the company is using _____,_________, pricing
cost plus
Labor costs that are easily traced to a job are called _________?
direct labor costs
The appeal of using predetermined departmental overhead rates is they presumably provide _______?
enhanced information for decision making a more accurate accounting of costs
To calculate a predetermined overhead rate, divide estimated total manufacturing overhead by the
estimated total allocation base.
true or false : When a company uses cost-plus pricing, they consider both the costs of production and the desired profit.
false
Average manufacturing overhead cost per unit usually varies from one period to the next because?
fixed manufacturing overhead remains constant in total even when production changes
Manufacturing overhead?
is an indirect cost. contains fixed costs. consists of many different types of costs.
The document that records the materials, labor, and manufacturing overhead costs charged to a job is the?
job cost sheet
A SERVICE firm that would most likely use job-order costing is a _____?
law practice
Widely used allocation bases in manufacturing include?
machine hours units of product direct labor hours direct labor cost
Materials requisition forms are used for?
making journal entries in accounting records. controlling the flow of materials into production.
Companies that use job-order costing make_______?
many different products
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
An allocation base is an?
measure of activity used to assign overhead costs to products and services
When compared to a departmental approach, using activity-based costing results in ______ overhead rates.
more
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
An hour-by-hour summary of an employee's activities throughout the day is found on the?
time ticket
In the formula (Y = a + bX). "a"represents the estimated?
total fixed manufacturing overhead cost
A bill of materials contains the
type of each direct material needed to complete a unit of product. quantity of each direct material needed to complete a unit of product. Reason: it's on the materials requisition form.
Estimated manufacturing overhead $500,000 Estimated direct labor cost $250,000 Actual manufacturing overhead $720,000 Actual direct labor cost $300,000 Based on this information, the predetermined overhead rate per direct labor dollar is?
$2.00 Reason: $500,000 Estimated manufacturing overhead ÷ $250,000 Estimated direct labor cost = $2.00 per direct labor dollar
Bar codes can be used to:
automatically record and post direct labor costs 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 essential quality of an overhead allocation base is that it must?
be common to all the company's products and services
The type and quantity of each type of direct material needed to complete a unit of product is listed on the _________
bill of materials
The approach used when overhead is applied to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the jobs is called______costing.?
normal
The approach used when overhead is applied to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the jobs is called?
normal costing.
The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find?
overhead applied to the job
To keep track of labor time and costs, many firms have replaced?
paper time tickets with computerized systems
A single predetermined overhead rate that is used throughout a plant is called a(n) __________overhead rate?
plantwide
When all overhead is assigned using direct-labor hours, the company has chosen to use a(n)____________overhead rate, which is a single predetermined overhead rate.
plantwide
A single predetermined overhead rate that is used throughout a plant is called?
plantwide overhead rate.
The total cost of a job includes:__________?
predetermined manufacturing overhead. direct labor cost. direct materials cost.
Predetermined OH rate per direct labor hour: (Co.$2.10), (Dept A. $2.40), (Dept B. $1.80) Direct labor hours worked on Job ABC: (Co.: 40 hrs ), (Dept A: 18 hrs), (Dept B: 22hrs) Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is $
$82.80 ($2.40 x 18hrs) + ($1.80 x 22 hrs) = $82.80
Costs assigned to units of product in absorption costing include ______ manufacturing costs
both variable and fixed Reason: In absorption costing, fixed manufacturing costs are also assigned to units of product.
The difference between direct labor and indirect labor is that direct labor______?
can be easily traced to jobs. while indirect labor cannot
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
The total cost of a job includes:
direct materials cost. direct labor cost. predetermined manufacturing overhead.
The appeal of using predetermined departmental overhead rates is they presumably provide?
enhanced information for decision making a more accurate accounting of costs
The formula for a predetermined overhead rate is ?
estimated total manufacturing overhead cost ÷ estimated total allocation base
The United States requires absorption costing for ______ financial reports
external
In a system that uses multiple predetermined overhead rates, overhead is applied_______?
in each department as jobs proceed through the department
The total cost of a job includes:
predetermined manufacturing overhead. direct materials cost. direct labor cost.
Estimated manufacturing overhead: (Company $500,000), (Dept. A: $338,000), (Dept B: $162,000) Estimated direct labor cost: (Company: $250,000), (Dept A: $130,000), (Dept B: $120,000) Actual manufacturing overhead: (Company $720,000), (Dept. A: $400,000), (Dept B: $320,000) Actual direct labor cost: (Company $300,000), (Dept. A: $160,000), (Dept B: $140,000) Based on this information, the predetermined overhead rate per direct labor dollar for Dept. A is______?
$2.60 Reason: $338,000 ÷ $130,000 = $2.60
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_____________?
$4, 000 Reason: The predetermined overhead rate = $100,000 ÷ 5,000 direct labor-hours = $20 per direct labor-hour × 200 direct labor-hours = $4,000.
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 ____?
$4,000 Reason: The predetermined overhead rate = $100,000 ÷ 5,000 direct labor-hours = $20 $20 per direct labor-hour × 200 direct labor-hours = $4,000.
Job XYZ has a total manufacturing cost of $600. If the mark-up percentage is 40%, the job will sell for $________?
$840 Reason: $600 + ($600x40%) = $840
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 amount of overhead allocated to a job that used 300 direct labor hours is $______?
$900 Reason: Estimated manufacturing overhead ÷ Estimated direct labor hours = ($W per direct labor hour). Then, ($W) x (Direct labor hours). $450,000 ÷ 150,000 = ($3.00 per direct labor hour) $3x 300 = $900
The formula for applying overhead to a specific job is: ________ amount of allocation base incurred by job
(predetermined overhead rate) ×
Bill of Materials
A bill of materials shows the quantity of each type of direct material required to make a product.
production order
The accounting department prepares a job cost sheet after the production order has been issued.
Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing?
The salary of the manager at a hair salon.
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.
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.
An allocation base should be: ?
a cost driver.
Cost-plus pricing occurs when_______?
a markup percentage is added to the cost of a job
Overhead application is the process of ?
assigning manufacturing overhead cost to jobs
A factor that causes overhead costs is called a______?
cost driver
To calculate the unit product cost using the job cost sheet ________ by the number of units produced.
divide the total job cost
Companies that make many different products each period use _______, ___________, costing?
job, order
Manufacturing overhead consists of ?
many different kinds of indirect costs
Manufacturing overhead consists of_______?
many different kinds of indirect costs
Direct materials costs are recorded on the job cost sheet when the_____?
materials are issued to the job
The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost, and:
predetermined manufacturing overhead cost.
The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost, and___________?
predetermined manufacturing overhead cost.
The document used to record the hours workers spend on each job and task is called an?
time ticket
In the formula (Y = a + bX). a represents the estimated?
total fixed manufacturing overhead cost
In the formula (Y = a + bX). "b" represents the estimated________?
variable manufacturing overhead cost per unit
Allocation bases that do not drive overhead costs?
will not accurately measure the cost of overhead used
