Chapter 2 - Concept Videos

The management of Blue Ocean Company estimates that 50,000 machine-hours will be required to support the production planned for the year. It also estimates $300,000 of total fixed manufacturing overhead cost for the coming year and $4 of variable manufacturing overhead cost per machine-hour. What is the predetermined overhead rate?

$10.00 per machine hour Y = a + bX Y = 300,000 + 50,000($4) Y = $500,000 Predetermined overhead rate = 500,000 / 50,000 = 10

Mansfield, Incorporated, has two production departments, Assembly and Packaging. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The predetermined overhead rate in the Assembly Department is based on machine hours (MHs) and it is based on direct labor-hours (DLHs) in the Packaging Department. At the beginning of the year, the company made the following estimates: What is the predetermined overhead rate for the Packaging Department?

$10.51 419,000 + (3.75 * 62,000) = 651,500 651,500 / 62,000 = $10.51

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hours. 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?

$124 $10 (50 units) + $4,000 + $1,200 = $6,200 $6,200 / 50

Spartan Corporation estimates that it will incur $200,000 of total manufacturing overhead cost at an estimated activity level of 10,000 direct labor-hours. What is the amount of manufacturing overhead that would be applied to a job that required 200 direct labor-hours.

$4,000 Overhead applied to a particular job = Predetermined overhead rate * Amount of the allocation base incurred by the job = (200,000/10,000) * 200

Mansfield, Incorporated, has two production departments, Assembly and Packaging. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The predetermined overhead rate in the Assembly Department is based on machine hours (MHs) and it is based on direct labor-hours (DLHs) in the Packaging Department. At the beginning of the year, the company made the following estimates: What is the estimated total manufacturing overhead in the assembly departments?

$595,200 390,000 + (3 * 68,400)

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hours. 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?

$6,200 $10 (50 units) + $4,000 + $1,200

Which of the following statements is true? -The activity-based approach typically uses fewer cost pools than the traditional approach. -The activity-based approach includes some activities that do not relate to the volume of units produced. -The activity-based approach excludes direct labor costs from its product cost calculations. -Each activity includes a separate cost pool for each product that the company manufactures.

-The activity-based approach includes some activities that do not relate to the volume of units produced.

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

The adjustment for overapplied overhead _____

Decreases cost of goods sold and increases net operating income

The predetermined overhead rate equals

Estimated total manufacturing overhead ÷ Estimated total units in the allocation base

Companies can improve job cost accuracy by using

Multiple predetermined overhead rates

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

Subsidiary ledger

In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated ___

Total fixed manufacturing overhead cost

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

Underapplied

Which of the following statements is true? -When using multiple predetermined overhead rates, each cost pool uses the equation Y = a + bX to estimate the total amount of the allocation base. -When using multiple predetermined overhead rates, only cost pools that use machine-hours as the allocation base use the equation Y = a + bX to estimate total overhead costs. -When using multiple predetermined overhead rates, only cost pools that use machine-hours as the allocation base use the equation Y = a + bX to estimate total overhead costs. -When using multiple predetermined overhead rates, each cost pool uses the equation Y = a + bX to estimate total overhead costs.

When using multiple predetermined overhead rates, each cost pool uses the equation Y = a + bX to estimate total overhead costs.

An activity measure is:

an allocation base that is used as the denominator for an activity cost pool.

When using multiple predetermined overhead rates:

each cost pool's numerator may include fixed and variable manufacturing overhead.

The job-order costing method described in this chapter relies on:

normal costing.

The manufacturing overhead applied to each jobs equals:

the predetermined overhead rate × the actual amount of the allocation used by the job.