Managerial Accounting Chapter 2

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

$840 ( 600 * 1.40 = 840 )

Manufacturing overhead:

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

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 (predetermined overhead rate = estimated manufacturing overhead / estimated direct labor hours) (450000/150000=3)

Job cost sheet contains

Materials costs charged to the job, manufacturing overhead costs charged to the job, and labor costs charged to the job.

Which of the following is not a manufacturing cost category?

Selling & administrative costs

what is the most common approach to product costing throughout the world

absorption costing

Costs assigned to units of production under absorption costing include _____ manufacturing

fixed and variable

Companies that make many different products each period use ___ ___ costing

job order

a service firm that would most likely use job-order costing is a i. car manufacturer ii. clothing shop iii. law practice

law practice

Labor charges that cannot be easily traced to a job are considered:

manufacturing overhead and indirect labor

Total manufacturing overhead costs tend to

remain fairly constant

companies assign costs to products and services to

value ending inventory understand product profitability establish selling prices

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 unites. The unit cost of Job #420 is:

$2.00 Total cost of job $15,000 / 7,500 units

Murphy manufacturing estimated total manufacturing a 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 7,500. How much overhead for 2017 was applied to a job completed during 2017 that used 200 direct labor-hours?

$4,000 - (The predetermined overhead rate = $100,000/5,000 direct labor-hours = 20 per direct labor-hour. The overhead applied to the job = $20 per direct labor-hours x 200 direct labor-hours = $4,000.)

Predetermined overhead rate per direct labor hour: Company - $2.10 Dept. A - $2.40 Dept. B - $1.80 Direct labor 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 us $______________.

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

Widely used allocation bases in manufacturing are:

- Direct Labor Cost- Machine Hours- Direct Labor Hours- Units of Product

materials requisition forms are used for

- Making journal entries in accounting records - Controlling the flow of materials into production

The unit product cost is the same as the

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

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 _____________. (Enter your answer as a whole number.)

43200 (total cost of job 42a = direct materials + direct labor + predetermined overhead rate * actual machine-hours = 18000 + 12000 + (12 per machine hour * 1100 machine hours = $43200)

A measure such as direct labor hours, or machine hours that is used to assign overhead costs to products and services is called a cost driver or a(n) _______

allocation base

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

a job-order costing system may inaccurately assign costs to jobs due to

an inappropriate allocation base

The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost and

applied manufacturing overhead cost

Overhead application is the process of:

assigning manufacturing overhead cost to jobs

the predetermined overhead rate is calculated

before the period begins

The type and quantity of each type of direct material needed to complete a unit of product is listed on the...

bill of materials

A factor that causes overhead costs is called a

cost driver

Labor costs that are easily traced to a job are called _ labor costs

direct

Categories of manufacturing costs include:

direct materials, direct labor, manufacturing overhead

In a system that uses multiple predetermined overhead rates, overhead is applied:

in each department as jobs proceed through the department

The adjustment for underapplied overhead:

increases COGS and decreases net operating income

direct materials costs are recorded on the job cost sheet when the

materials are issued to the job

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

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

overhead applied to the job

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

plantwide

a single predetermined overhead rate is called a ____ overhead rate

plantwide

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

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

subsidiary ledger

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

time ticket

An allocation base should be

a cost driver

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

activity-based

underapplied or overapplied overhead is the

difference between overhead applied to work in process and actual overhead

The formula for a predetermined overhead rate is

estimated manufacturing overhead cost / estimated allocation base

the united states requires absorption costing for _ financial reports

external

to keep track of labor time and costs, many firms have replaced

paper time tickets with computerized systems

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

paperwork at a law firm

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

variable manufacturing overhead cost per unit