Chapter 2 & 3 Accounting 2

The total cost of a job includes

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

Luthan Company uses a plantwide predetermined overhead rate of $22.10 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $265,200 of total manufacturing overhead cost for an estimated activity level of 12,000 direct labor-hours. The company incurred actual total manufacturing overhead cost of $270,000 and 11,500 total direct labor-hours during the period.

11,500 * 22.10 = 254,150

Newhard Company assigns overhead cost to jobs on the basis of 116% of direct labor cost. The job cost sheet for Job 313 includes $19,602 in direct materials cost and $10,300 in direct labor cost. A total of 1,550 units were produced in Job 313. a. What is the total manufacturing cost assigned to Job 313? b. What is the unit product cost for Job 313?

19,602 + 10,300 + 10,300 * 1.16 = 41,850 41,850/ 1,550 = 27

For the month of October, Janus Corporation used $30,000 worth of direct materials in production and incurred direct labor costs of $60,000. Actual manufacturing overhead costs were $40,000, whereas $45,000 was the manufacturing overhead applied to work in process. What is the amount of total manufacturing costs that would appear in the Schedule of Cost of Goods Manufactured for October?

30,000 + 45,000 + 60,000 = 135,000

Which of the following occurs when manufacturing overhead is applied to Work in Process?

Credit to Manufacturing Overhead

Which of the following best describes the journal entry to record the use of direct and indirect labor in production?

Debit Work in Process, debit Manufacturing Overhead, and credit Salaries and Wages Payable

Which of the following best describes the journal entry to record the withdrawal of raw materials from the storeroom for use as direct and indirect materials in production?

Debit Work in Process, debit Manufacturing Overhead, and credit raw materials

Which of the following occurs when finished jobs are shipped to customers?

Debit to Cost of Goods Sold

Which of the following statements about manufacturing overhead costs is not correct?

Depreciation on factory equipment is recorded with a debit to Depreciation Expense.

Which of the following is only true in multiple predetermined overhead rate system

Each production department may have its own predetermined overhead rate

The formula for a predetermined overhead rate is

Estimated manufacturing overhead cost divided by estimated allocation base

Time ticket

a document that is used to record the amount of time an employee spends on various activities

allocation base

a measure such as direct labor hours or machine hours that is used to assign overhead costs to products and services

Work in process consist of

actual direct labor cost applied manufacturing overhead actual direct materials cost

Absorption Costing

all manufacturing costs, both fixed and variable, are assigned to units of product-units are said to fully absorb manufacturing costs

manufacturing overhead costs

are indirect costs and consist of many different items

raw materials is an

asset account

Bar codes can be used to

automatically record and post direct labor costs to jobs

The direct materials required to manufacture each unit of product are listed on a ________.

bill of materials

A normal cost system applies overhead to jobs ________.

by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job

A journal entry that debits finished goods and credits work in progress records the

completion of a job

Which of the following occurs when a job has been completed and transferred to the finished goods warehouse?

credit to work in progress

The adjustment for overapplied overhead ________.

decreases cost of goods sold and increases net operating income.

A journal entry that debits manufacturing overhead and credits accounts payable would not be used to record

direct labor costs

Typical cost drivers include

machine-hours, flight-hours, computer time

material requisition forms are used for

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

Manufacturing overhead consists of all

manufacturing costs other than direct labor and direct materials; The cost of goods sold summarizes costs that remain in Finished goods Inventory and that have been transferred to Costs of goods Sold

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

manufacturing overhead applied direct materials

Examples of product costs

manufacturing overhead costs raw materials direct labor

The period ends

manufacturing overhead is closed

overhead is applied to work in progress

manufacturing overhead is credited

actual overhead is incurred

manufacturing overhead is debited

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

materials are issued on the job

compared to a plant wide overhead rate system, a multiple predetermined overhead rate system is

more complex and more accurate

Companies can improve job cost accuracy by using ________.

multiple predetermined overhead rates

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

What is the term used when a company applies less overhead to production than it actually incurs?

under applied

The average manufacturing overhead cost per unit tends to

vary from one period to the next

When a job is completed , the job costs are transferred out of

work in progress

manufacturing overhead is applied with a debt to

work in progress

to calculate a predetermined overhead rate, divide estimated manufacturing overhead by the

estimated allocation base

The adjustment for under applied overhead

increases cost of goods sold and decreases net income

companies that make many different products each period use

job order costing

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.

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200 respectively. If Job X23 used 100 direct labor-hours, what is the total cost assigned to this job? Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200 respectively. If Job X23 used 100 direct labor-hours to produce 50 audio controllers, what is this job's unit product cost (per audio controller)?

6,200 100 * 10 = 1,000 4,000 + 1,200 + 1,000 = 6,200 124 6,200/50 = 124

The $2,000 charged to Manufacturing Overhead in entry (2) represents indirect materials. The _____ side of the Manufacturing Overhead account is always used to record the actual manufacturing overhead costs, such as indirect materials, that are incurred during the period. The ______ side of this account, as you will see in transaction (7), is always used to record the manufacturing overhead applied to work in process.

debit : credit

overhead application

process used to assign overhead costs to products

A job cost sheet contains

labor cost, material cost, and manufacturing overhead

The journal entry to record labor costs credits

salaries and wages payable

Widely used allocation bases in manufacturing are:

direct labor hours, units of products, direct labor cost, and machine hours

Zimmer, Inc. started the month of January with beginning finished goods inventory of $20,000. The cost of goods manufactured during the month was $120,000 and the ending finished goods inventory was $50,000. What is the unadjusted cost of goods sold for January?

20,000+120,000= 140,000 140,000-50,000 = 90,000

When companies incur selling and administrative costs, those costs ________.

do not flow through inventories on the balance sheet

Companies assign costs to products and services to

establish selling prices value ending inventory understand product profitability

A Journal entry that debits manufacturing overhead and credits accounts payable could be made to record

rent expense on factory equipment factory utilities expense

Which of the following costs are charged directly to the income statement

selling costs administrative costs

When all of a company's job cost sheets are viewed collectively they form what is known as a ________.

subsidiary ledger

The cost of goods manufactured is the

sum of all amounts transferred from work in progress to finished goods during a period

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

Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 41,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $506,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Harris's actual manufacturing overhead cost for the year was $705,146 and its actual total direct labor was 41,500 hours. Compute the company's plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

41,000 * 3 = 123,000 + 506,000 = 629,000 629,000/41,000= $15.34

To calculate the unit product cost using the job cost sheet

divide the total job cost by the number of units produced

The unit product cost in the same as

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