Ch. 2 Job Costing

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to allocate MOH. steps

1) POHR with estimates 2) multiply 3) allocate MOH based on actual level

In absorption costing, nonmanufacturing costs are assigned to units of product.

False

MOH allocated formula

POHR * Actual allocation base

POHR (predetermined overhead rate)

Total estimated MOH/Total estimated allocation base

Total estimated MOH

Y=a+bX

distortion

automatically introduced whenever we estimate the portion fo total MOH that should be located to one unit of product or service

Single Plantwide POHR

one is calculated at beginning of the year for the entire firm using total estimated MOH as the numerator and total estimated allocation base as the denominator. used all year long. simples but least refined method

Abosroption costing

required by GAAP. must include all manufacturing and only manufacturing costs in cost of good sold

In a job-order costing system that is based on machine-hours, which of the following formulas is correct?

Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours

normal costing

estimated MOH costs at beginning of period based on expected costs reported in the budget -update estimates at end of period -reconcile actual and expected costs -relevant during period -less reliable

If a job is not completed at year end, then no manufacturing overhead cost would be applied to that job when a predetermined overhead rate is used.

false

The amount of overhead applied to a particular job equals the actual amount of overhead caused by the job.

false

The formula for computing the predetermined overhead rate is: Predetermined overhead rate = Estimated total amount of the allocation base ÷ Estimated total manufacturing overhead cost

false

Multiple (departmental) Pohr

one is calculated at the beginning of the year for each department using total estimated MOH as the numerator and total estimated allocation base as the denominator. allow us to choose different allocation bases for each department

Total estimated allocation base

total est imaged level of activity for next period

Most countries require some form of absorption costing for external reports.

true

The appeal of using multiple departmental overhead rates is that they presumably provide a more accurate accounting of the costs caused by jobs.

true

The costs attached to products that have not been sold are included in ending inventory on the balance sheet.

true

The fact that one department may be labor intensive while another department is ma

true

actual costing

wait to pool & allocate until end of period when actual costs are known -reliable -not relevant until end of period


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