Chapter 2 SmartBook Assignment

Allocation bases that do not drive overhead costs ______. A) will not accurately measure the cost of overhead used B) cannot be used to calculate overhead using a predetermined rate C) are difficult to keep track of

A) will not accurately measure the cost of overhead used

Manufacturing overhead consists of ______. A) a single kind of direct cost B) a single kind of indirect cost C) many different kinds of indirect costs D) many different kinds of direct costs

C) many different kinds of indirect costs

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n) ______. A) job cost ledger B) financial statement backup C) subsidiary ledger D) book of original entry

C) subsidiary ledger

Select all that apply. The unit product cost is the same as the ______. A) average product cost per unit B) cost that would be incurred if another unit were produced C) incremental unit cost D) total job cost divided by number of units

A) average product cost per unit D) total job cost divided by number of units

To calculate the unit product cost using the job cost sheet ______ by the number of units produced. A) divide the total job cost B) multiply the total job cost C) add direct labor to direct materials and divide D) add direct labor to manufacturing overhead and divide

A) divide the total job cost

A predetermined overhead rate is calculated by dividing the ______ total manufacturing overhead by the ______ total allocation base. A) estimated; estimated B) actual; estimated C) actual; actual D) estimated; actual

A) estimated; estimated

When a company creates overhead rates based on the actions it performs, it is employing an approach called ________-________ costing.

activity-based

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

allocation base

In activity-based absorption costing, the consumption of overhead resources is caused by ______ A) direct labor B) an activity C) manufacturing overhead D) direct materials

B) an activity

Overhead application is the process of ______. A) calculating the total cost of a job B) assigning manufacturing overhead cost to jobs C) adjusting accounts for the difference between applied and actual overhead D) calculating a predetermined overhead rate

B) assigning manufacturing overhead cost to jobs

An essential quality of an overhead allocation base is that it must ______. A) be calculated using a predetermined overhead rate B) be common to all the company's products and services C) vary with all overhead costs D) be a cost associated with producing the firm's goods

B) be common to all the company's products and services

The adjustment for underapplied overhead ______ net income. A) decreases both cost of goods sold and B) increases cost of goods sold and decreases C) decreases cost of goods sold and increases D) increases both cost of goods sold and

B) increases cost of goods sold and decreases

Select all that apply. Manufacturing overhead ______. A) is directly traceable to units produced B) is an indirect cost C) contains fixed costs D) consists of many different types of costs

B) is an indirect cost C) contains fixed costs D) consists of many different types of costs

The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find ______. A) the predetermined overhead rate for the job B) overhead applied to the job C) the total cost of the job D) actual overhead

B) overhead applied to the job

To keep track of labor time and costs, many firms have replaced ______. A) computerized systems with bar code systems B) paper time tickets with computerized systems C) computerized systems with paper time tickets D) bar code systems with computerized systems

B) paper time tickets with computerized systems

The activity-based approach tends to ______. A) shift costs from low-volume to high-volume products B) shift costs from high-volume to low-volume products C) have no impact on product costs

B) shift costs from high-volume to low-volume products

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? A) $10,000 B) $9,000 C) $15,000 D) $11,000

C) $15,000 $4,000 + $5,000 + (120% × $5,000) = $15,000

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 $_____.

$3. $450,000 ÷ 150,000 DLH = $3 per DLH

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 $162,000 ÷ $120,000 = $1.35

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

$840. $600 + (600 × 40%) = $840

The United States requires absorption costing for ______ financial reports. A) external B) internal C) both internal and external D) neither internal nor external

A) external

The document that records the materials, labor, and manufacturing overhead costs charged to a job is the ______. A) job cost sheet B) production order C) materials requisition form D) time ticket

A) job cost sheet

Select all that apply. A job cost sheet contains ______. A) labor costs charged to the job B) materials costs charged to the job C) selling costs charged to the job D) manufacturing overhead costs charged to the job E) the selling price of the job

A) labor costs charged to the job B) materials costs charged to the job D) manufacturing overhead costs charged to the job

Select all that apply. Categories of manufacturing costs include ______. A) manufacturing overhead B) direct materials C) administrative expenses D) direct labor E) selling expenses

A) manufacturing overhead B) direct materials D) direct labor

Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is ______ accurate. A) more complex and more B) more complex and less C) simpler and more D) simpler and less

A) more complex and more

An allocation base should be ______. A) machine hours B) a cost driver C) a cost object D) direct labor hours

B) a cost driver

Murphy Manufacturing estimated total manufacturing overhead for 2021 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 2021 was $120,000 and actual direct labor-hours were 7,500. The overhead applied to a job completed during 2021 that used 200 direct labor-hours was ______. A) $3,200 B) $4,800 C) $4,000 D) $100,000

C) $4,000 POHR = $100,000 ÷ 5,000 direct labor-hours = $20 per direct labor-hour. The overhead applied to the job = $20 per direct labor-hours × 200 direct labor-hours = $4,000.

True or False: One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors.

True

When a predetermined markup is applied to a base to determine the target selling price, the company is using ________-________ pricing.

cost-plus

Companies that use job-order costing make ______. A) very few products in large numbers B) many different products

B) many different products

When compared to a traditional approach, activity-based absorption costing uses ______ cost pools. A) the same number of B) more C) less

B) more

Cost-plus pricing occurs when ______. A) non-manufacturing costs are added to manufacturing costs B) the cost of the job is multiplied by 2 C) a markup percentage is added to the cost of a job

C) a markup percentage is added to the cost of a job

Bar codes can be used to ______. A) reduce the amount of direct labor time spent on a job B) automatically record and post indirect labor costs to jobs C) trace indirect costs to jobs D) automatically record and post direct labor costs to jobs

D) automatically record and post direct labor costs to jobs

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 ÷ 250,000 MH = $2 per machine hour

The most common approach to product costing throughout the world is ______ costing. A) variable B) absorption

B) absorption

A SERVICE firm that would most likely use job-order costing is a ______. A) clothing shop B) law practice C) car manufacturer

B) law practice

When compared to a departmental approach, using activity-based costing results in ______ overhead rates. A) less B) more C) the same number of

B) more

True or False: Job-order costing can only be used in manufacturing firms.

False

The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost and ______. A) actual manufacturing overhead cost B) applied manufacturing overhead cost C) actual manufacturing overhead cost, and applied non-manufacturing cost D) applied manufacturing overhead cost and applied non-manufacturing cost

B) applied manufacturing overhead cost

True or False: Activity-based absorption costing only assigns variable manufacturing overhead costs to products.

False

True or False: The root cause of inaccurately assigning costs to jobs is generally due to poor tracking of direct labor costs.

False

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

time ticket

Which of the following is not a manufacturing cost category? A) Selling & administrative costs B) Direct labor C) Direct materials D) Manufacturing overhead

A) Selling & administrative costs

An activity ________ pool is a "bucket" in which costs are accumulated that relate to a single activity measure.

cost

The activity-based approach tends to shift costs from ________ volume products to _________ volume products.

high ; low

Predetermined overhead rate per direct labor hour: Company = $2.10, Dept A = $2.40, Dept B = $1.80 Direct labor hours hours worked on Job ABC: Company = 40, Dept A = 18, Dept B = 22 Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is $ _____.

$82.80 ($2.40 × 18) + ($1.80 × 22) = $82.80

An activity cost pool accumulates costs for ______ activity measure(s). A) exactly one B) multiple C) one or more

A) exactly one

Select all that apply. The total cost of a job includes ______. A) non-manufacturing cost B) direct materials cost C) applied manufacturing overhead D) actual manufacturing overhead E) direct labor cost

B) direct materials cost C) applied manufacturing overhead E) direct labor cost

Companies that make many different products each period use _________- ________ costing.

job-order

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

subsidiary ledger

Select all that apply. Materials requisition forms are used for ______. A) summarizing the cost of a job B) making journal entries in accounting records C) specifying the cost of materials to be ordered D) controlling the flow of materials into production

B) making journal entries in accounting records D) controlling the flow of materials into production

An allocation base is a(n) ______. A) activity that causes overhead costs to change B) measure of activity used to assign overhead costs to products and services C) measure used to assign all manufacturing costs to products and services

B) measure of activity used to assign overhead costs to products and services

When a company uses a departmental approach rather than a plantwide approach to applying overhead, the selling price of the product will always be ______. A) higher B) the same C) different D) lower

C) different

The formula for a predetermined overhead rate is ______. A) estimated total allocation base ÷ estimated total manufacturing overhead cost B) actual total allocation base ÷ actual total manufacturing overhead cost C) estimated total manufacturing overhead cost ÷ estimated total allocation base D) actual total manufacturing overhead cost ÷ actual total allocation base

C) estimated total manufacturing overhead cost ÷ estimated total allocation base

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 ______. A) bill of materials B) materials requisition form C) time ticket D) production order form

B) materials requisition form

Activity-based absorption costing ______. A) arbitrarily assigns some overhead costs to products B) assigns overhead based on departmental application rates C) assigns overhead based on events that consume overhead resources

C) assigns overhead based on events that consume overhead resources

A multiple predetermined overhead rate system is more accurate than a plantwide overhead rate system because it ______. A) reflects how different departments use direct materials B) reflects how different departments use direct labor C) is easier to apply than a plantwide system D) reflects differences in how overhead costs are incurred within departments

D) reflects differences in how overhead costs are incurred within departments

In the formula Y = a + bX, X represents the estimated ______. A) variable manufacturing cost per unit B) total fixed manufacturing overhead cost C) total manufacturing overhead cost D) total amount of the allocation base

D) total amount of the allocation base

Which of the following would not be a good allocation base for manufacturing overhead? A) Machine hours B) Accounting hours C) Units of product D) Direct labor hours

B) Accounting hours

Predetermined overhead rate per direct labor hour: Company = $2.10, Dept A = $2.40, Dept B = $1.80 Direct labor hours hours worked on Job ABC: Company = 30, Dept A = 17, Dept B = 13 Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is ______. A) $63.00 B) $72.00 C) $54.00 D) $64.20

D) $64.20 ($2.40 × 17) + ($1.80 × 13) = $64.20

All manufacturing costs are assigned to units of product and all non-manufacturing costs are treated as period cost under ________ costing.

absorption or full

The adjustment for overapplied overhead ______ net income. A) decreases both cost of goods sold and B) increases both cost of goods sold and C) decreases cost of goods sold and increases D) increases cost of goods sold and decreases

C) decreases cost of goods sold and increases

A cost driver is ______. A) something you want to know the cost of B) a measure that is used to assign overhead costs to products and services C) the amount of overhead assigned to a job D) a factor that causes overhead costs to occur

D) a factor that causes overhead costs to occur

Smith, Inc. uses a job-order costing 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 $______.

$43,200. (1,100 machine hours × $12 per machine hour) + $12,000 + $18,000 = $43,200

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. $450,000 ÷ 150,000 DLH = $3 per DLH $3 per DLH × 300 DLH = $900

Why is the unit product cost different from the cost that would be incurred if another (additional) unit were produced? A) The unit product cost is an average, not an incremental cost. B) The cost that would be incurred if another unit were produced cannot be calculated. C) The predetermined overhead rate changes with each unit produced. D) There would be no additional cost to produce another unit.

A) The unit product cost is an average, not an incremental cost.

Select all that apply. The appeal of using predetermined departmental overhead rates is they presumably provide ______. A) a more accurate accounting of costs B) higher profitability for the company C) enhanced information for decision making

A) a more accurate accounting of costs C) enhanced information for decision making

A job-order costing system may inaccurately assign costs to jobs due to ______. A) an inappropriate allocation base B) inaccurate allocation of direct materials C) inaccurate allocation of direct labor

A) an inappropriate allocation base

True or False: When a company uses cost-plus pricing, they consider both the costs of production and the desired profit.

False

Labor costs that are easily traced to a job are called _________ labor costs.

direct or touch

A single predetermined overhead rate is called a(n) _________ overhead rate.

plantwide

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

plantwide

Select all that apply. Typical cost drivers include ______. A) machine-hours B) computer time C) flight-hours D) utilities cost E) machine depreciation

A) machine-hours B) computer time C) flight-hours

Factory labor charges that cannot be easily traced to a job are treated as ________. A) manufacturing overhead B) direct labor C) non-manufacturing costs

A) manufacturing overhead

In ABC, any event that causes consumption of overhead resources is a(n) _________.

activity

A normal costing system applies overhead by job by multiplying a(n) ________ _________ rate by the _________ amount of the allocation base incurred by the job.

predetermined overhead ; actual

Select all that apply. Widely used allocation bases in manufacturing include ______. A) direct labor hours B) direct labor cost C) nonmanufacturing costs D) units of product E) product revenue F) machine hours

A) direct labor hours B) direct labor cost D) units of product F) machine hours

The formula for applying overhead to a specific job is ______. A) predetermined overhead rate × amount of allocation base incurred by job B) estimated manufacturing overhead × amount of allocation base incurred by job C) estimated manufacturing overhead ÷ amount of allocation base incurred by job D) estimated manufacturing overhead ÷ estimated allocation base

A) predetermined overhead rate × amount of allocation base incurred by job

Select all that apply. A bill of materials contains the ______. A) type of each direct material needed to complete a unit of product B) type of materials to be drawn from the storeroom C) quantity of each direct material needed to complete a unit of product D) quantity of materials to be drawn from the storeroom

A) type of each direct material needed to complete a unit of product C) quantity of each direct material needed to complete a unit of product

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 ______. A) $2.50 B) $2.60 C) $2.40 D) $2.00

B) $2.60 $338,000 ÷ $130,000 = $2.60

Which of the following would be considered direct materials in a service firm that uses job-order costing? A) Scissors at a hair salon B) Paperwork at a law firm C) Beds in a hospital D) Tools in an auto repair shop

B) Paperwork at a law firm

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 ______. A) $1.20 B) $1.33 C) $2.00

C) $2.00 Direct materials + direct labor + overhead (predetermined overhead rate × direct labor cost) = $4,000 + $5,000 + (1.20 × $5,000) = $15,000 Unit product cost = $15,000 ÷ 7,500 units = $2.00 per unit.

Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing? A) The salary of an attorney at a law firm B) The wages of technicians at an auto repair shop C) The salary of the manager at a hair salon D) The salary of a surgeon at a hospital

C) The salary of the manager at a hair salon

A normal cost system assigns overhead to jobs using ______. A) budgeted production standards B) an actual overhead rate C) a predetermined overhead rate

C) a predetermined overhead rate

The type and quantity of each type of direct material needed to complete a unit of product is listed on the ______. A) materials requisition form B) time ticket C) bill of materials D) production order

C) bill of materials

Costs assigned to units of product in absorption costing include ______ manufacturing costs. A) only variable B) only fixed C) both variable and fixed D) neither variable nor fixed

C) both variable and fixed

Average manufacturing overhead cost per unit usually varies from one period to the next because ______. A) the makeup of manufacturing overhead changes from period to period B) variable overhead costs per unit vary when production changes C) fixed manufacturing overhead remains constant in total even when production changes

C) fixed manufacturing overhead remains constant in total even when production changes

The document used to record the hours workers spend on each job and task is called a ______. A) materials requisition form B) production order C) time ticket

C) time ticket

In the formula Y = a + bX, a represents the estimated ______. A) variable manufacturing cost per unit B) total manufacturing overhead cost C) total fixed manufacturing overhead cost D) total amount of the allocation base

C) total fixed manufacturing overhead cost

Why do companies use a predetermined overhead rate rather than an actual overhead rate? A) A predetermined overhead rate is easier to use. B) An actual overhead rate can never be calculated. C) A predetermined overhead rate is more accurate. D) An actual overhead rate is not known until the end of the period.

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

What absorption cost system(s) uses a volume-related allocation base for all of the manufacturing costs? A) Both traditional and activity-based B) Activity-based C) Neither traditional nor activity-based D) Traditional

D) Traditional

Total manufacturing overhead costs tend to: A) be easily traceable to jobs B) be impossible to assign to jobs C) vary greatly with production D) remain fairly constant

D) remain fairly constant

Traditional absorption costing systems allocate all manufacturing costs using a(n) ______ related allocation base. A) activity B) materials C) overhead D) volume

D) volume

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

application or allocation