acct chap 2
Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is: Predetermined overhead rate per direct labor hour $2.10 $2.40 $1.80 Direct labor hours hours worked on Job ABC 30 17 13
$2.40 × 17 + $1.80 × 13 = $64.20
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
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 $
43200
Based on this information, the predetermined overhead rate per direct labor dollar is Estimated manufacturing overhead $500,000 Estimated direct labor cost $250,000 Actual manufacturing overhead $720,000 Actual direct labor cost $300,000
500k/250k=2
A journal entry that debits Finished goods and credits Work in process records the ______.
A journal entry that debits Finished goods and credits Work in process records the ______.
The most common approach to product costing throughout the world is Blank______ costing
Absortion
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.
The process used to assign overhead costs to products is called overhead
Application
When preparing financial statements in a job-order costing system, finished goods flow first to the (2 words) to (2 words)
Balance sheet to income statement
Raw materials inventory was $27,000 at the beginning of the year and $25,000 at the end of the year. During the year, $100,000 in raw materials were purchased, including $28,000 of indirect materials that were put into manufacturing overhead during the period. Calculate the cost of direct materials used during the period.
Cost of direct materials used in production = Beginning Inventory + Purchases - Indirect Materials - Ending Inventory ($27,000 + $100,000 - $28,000 - $25,000 = $74,000)
Manufacturing overhead applied to production is always recorded on the (blank) side of the manufacturing overhead account and the (blank) side is always used to record the actual manufacturing costs incurred.
Credit/debit
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
Which of the following costs are found on the balance sheet of a manufacturer? Direct Labor Raw Materials Selling and Admin Manufacturing Overhead
Direct Labor Raw Materials Manufacturing Overhead
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?
Direct materials + Direct labor + Predetermined overhead rate × Direct labor cost = $4,000 + $5,000 + 120% × $5,000 = $15,000
How to calculate predetermined overhead rate
Estimated overhead/estimated labor hour= however much per labor hour
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
The predetermined overhead rate = $100,000 ÷ 5,000 direct labor-hours = $20 per direct labor-hour × 200 direct labor-hours = $4,000.
Which of the following would not be considered a job in a service firm that uses job-order costing? A patient in a hospital A repair job at an auto repair shop The tax department in an accounting firm A client at a law firm
The tax department in an accounting firm
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.
A company incurred $10,000 in direct labor costs and $8,000 in indirect labor costs. The journal entry to record this transaction debits ______.
Work in process $10,000 and Manufacturing overhead $8,000 and credits Salaries and wages payable $18,000
The journal entry to record $10,000 in manufacturing overhead applied to Job #40 debits ______.
Work in process $10,000 and credits Manufacturing overhead $10,000
When a company creates overhead rates based on the actions it performs, it is employing an approach called (2 words) costing
activity based
Work in Process consists of ______.
actual direct labor cost/ applied manufacturing overhead/ actual direct materials cost
A journal entry debiting Salaries expense and crediting Salaries and wages payable could record:
administrative salaries.
The journal entry to record selling and administrative salaries debits ______.
an expense account and credits Cash or a liability
A job-order costing system may inaccurately assign costs to jobs due to
an inappropriate allocation base
A journal entry that debits Work in process and credits Manufacturing overhead is recording the ______.
application of manufacturing overhead costs
Raw materials is an (blank) account
asset or inventory
Overhead application is the process of
assigning manufacturing overhead cost to jobs
Bar codes can be used to:
automatically record and post direct labor costs to jobs.
The unit product cost is the same as the Blank______.
average product cost per unit/ total job cost divided by number of units
To calculate the unit product cost using the job cost sheet Blank______ by the number of units produced.
divide the total job cost
To calculate a predetermined overhead rate, divide estimated total manufacturing overhead by the Blank______.
estimated total allocation base
The United States requires absorption costing for Blank______ financial reports.
external
Actual overhead costs appear in the Work in Process account but not on the job cost sheet. T or f
f
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
Average manufacturing overhead cost per unit usually varies from one period to the next because Blank______.
fixed manufacturing overhead remains constant in total even when production changes
In a system that uses multiple predetermined overhead rates, overhead is applied ______.
in each department as jobs proceed through the department
When compared to a departmental approach, using activity-based costing results in (blank) overhead rates
more
Selling and administrative costs incurred are treated as ______.
period expenses
When all overhead is assigned using direct-labor hours, the company has chosen to use a(n) (blank) overhead rate, which is a single predetermined overhead rate.
plantwide
A journal entry that debits Raw Materials and credits Accounts Payable is recording the ______.
purchase of materials
A bill of materials contains the Blank______.
quantity of each direct material needed to complete a unit of product/ type of each direct material needed to complete a unit of product
The journal entry to record issuing materials to be used in production credits ______.
raw materials
Costs assigned to units of product under absorption costing include:
variable manufacturing. fixed manufacturing.
Allocation bases that do not drive overhead costs
will not accurately measure the cost of overhead used
Manufacturing overhead is applied with a debit to ______.
work in process
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:
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 is only true in a multiple predetermined overhead rate system? Each production department may have its own predetermined overhead rate. Overhead is applied multiple times throughout the period. Reason: This is true in a plantwide rate system as well. Multiple types of overhead are included to calculate the predetermined overhead rate.
Each production department may have its own predetermined overhead rate.
A predetermined overhead rate is calculated by dividing the ______ total manufacturing overhead by the ______ total allocation base.
Estimated/ Estimated
The root cause of inaccurately assigning costs to jobs is generally due to poor tracking of direct labor costs. T or F
F
When a company uses cost-plus pricing, they consider both the costs of production and the desired profit. T or F
F
Completed units that have not yet been sold are found in (2 blank)
FInished goods
Selling and administrative costs first appear on the ______.
Income statement
Which of the following is a clearing account?
Manufacturing overhead
George Corporation recognized $1,000 of accrued property taxes on its manufacturing facility. The journal entry to record this debits ______.
Manufacturing overhead $1,000 and credits Property taxes payable $1,000
If a company incurs $2,000 of factory rent, $1,000 of factory utilities, and $5,000 of miscellaneous factory costs, the journal entry to record these transactions would be to debit ______.
Manufacturing overhead $8,000 and credit Accounts payable $8,000
The journal entry to record accrued property taxes for a factory building debits ______.
Manufacturing overhead and credits Property taxes payable
Which of the following would be considered direct materials in a service firm that uses job-order costing? Tools in an auto repair shop Paperwork at a law firm Scissors at a hair salon Beds in a hospital
Paperwork at a lawfirm
Any purchased materials that will go into the finished product are first recorded in the (2 blank) inventory account
Raw materials
The journal entry to record labor costs credits ______.
Salaries and wages payable
Which of the following costs are charged directly to the income statement?
Selling costs Administrative costs
One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors. T OR F
T
The journal entry to record a completed job debits ______.
The journal entry to record a completed job debits ______.
Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing? The wages of technicians at an auto repair shop The salary of a surgeon at a hospital The salary of the manager at a hair salon The salary of an attorney at a law firm
The wages of technicians at an auto repair shop The salary of a surgeon at a hospital The salary of the manager at a hair salon Reason: This would be considered overhead. The salary of an attorney at a law firm
Which of the following statements are true? When materials are purchased they are recorded in the Raw materials inventory account. Raw materials inventory only includes the cost of direct materials. Raw materials inventory represents the cost of materials not yet used in production. Direct labor costs flow through the Raw materials inventory account.
When materials are purchased they are recorded in the Raw materials inventory account. Raw materials inventory represents the cost of materials not yet used in production.
The journal entry to record issuing both direct and indirect materials into production debits ______.
Work in process and Manufacturing overhead
An allocation base should be:
a cost driver.
A cost driver is
a factor that causes overhead costs to occur
Cost-plus pricing occurs when
a markup percentage is added to the cost of a job
The appeal of using predetermined departmental overhead rates is they presumably provide
a more accurate accounting of costs enhanced information for decision making
A normal cost system assigns overhead to jobs using
a predetermined overhead rate
All manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under Blank costing.
absortion
The journal entry to record the purchase of materials credits ______.
accounts payable
Which of the following would not be a good allocation base for manufacturing overhead? Units of product MaCHINE hours direct labor hrs acct hrs
acct hrs
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 Blank______.
bill of materials
Materials requisition forms are used for ______.
controlling the flow of materials into production/ making journal entries in accounting records
A factor that causes overhead costs is called a
cost driver
When a predetermined markup is applied to a base to determine the target selling price, the company is using (blank) (Blank) pricing.
cost plus pricing
The journal entry that debits Work in Process and Manufacturing overhead and credits Salaries and Wages Payable is recording ______.
direct and indirect labor costs
Cost of goods manufactured ______.
includes the manufacturing costs of goods finished during the period
Labor charges that cannot be easily traced to a job are considered Blank______.
indirect labor/ manufacturing overhead
A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the:
issuance of materials.
Widely used allocation bases in manufacturing include:
machine hours. direct labor cost. direct labor hours. units of product.
Typical cost drivers include ______.
machine-hours computer time flight-hours
Materials requisition forms are used for ______.
making journal entries in accounting records/ controlling the flow of materials into production
Manufacturing overhead consists of all ______.
manufacturing costs other than direct labor and direct materials
A job cost sheet contains Blank______.
manufacturing overhead costs charged to the job/ materials costs charged to the job/ labor costs charged to the job
Companies that use job-order costing make
many different products
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 Blank______.
materials requisition form
An allocation base is a(n)
measure of activity used to assign overhead costs to products and services
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 formula for applying overhead to a specific job is
predetermined overhead rate × amount of allocation base incurred by job
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
Total manufacturing overhead costs tend to
remain fairly constant
Total manufacturing overhead costs tend to Blank______.
remain fairly constant
The cost of goods manufactured for a period is the ______.
sum of all amounts transferred between the Work in process account and the Finished goods account during that period
True or false: The transfer of costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next.
t
The value of work in process is equal to ______.
the cost of all unfinished jobs
Manufacturing overhead costs include ______.
the factory supervisor's salary/ factory insurance
An hour-by-hour summary of an employee's activities throughout the day is found on the
time ticket
