Chapter 2. Job-Order Costing

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

True

Select all that apply: Manufacturing overhead ______.

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

Select all that apply: The total cost of a job includes ______.

-direct materials cost -direct labor cost -applied manufacturing overhead

Select all that apply: A bill of materials contains the ______.

-type of each direct material needed to complete a unit of product -quantity of each direct material needed to complete a unit of product

Costs assigned to units of product in absorption costing include ______ manufacturing costs.

both variable and fixed

Murphy Manufacturing estimated total manufacturing 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 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.)

Estimated manufacturing overhead $450,000estimated direct labor hours 150,000actual manufacturing overhead $405,000actual 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 = 3.00 per direct labor hour X 300 = 900

Select all that apply: The appeal of using predetermined departmental overhead rates is they presumably provide ______.

-enhanced information for decision making -a more accurate accounting of costs

Select all that apply: A job cost sheet contains ______.

-materials costs charged to the job -manufacturing overhead costs charged to the job -labor costs charged to the job

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.

Direct materials costs are recorded on the job cost sheet when the ______.

Direct materials costs are recorded on the job cost sheet when the ______.

In a system that uses multiple predetermined overhead rates, overhead is applied ______.`

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

Which of the following is not a manufacturing cost category?

Selling & administrative costs

Using a departmental approach to overhead application results in ______ as using a plantwide rate.

a different selling price

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

absorption

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

activity based

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

bill of materials

Job-order costing would most likely be used in a(n) ______.

construction company

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

direct

Factory labor charges that cannot be easily traced to a job are treated as ______.

manufacturing overhead

Select all that apply: Categories of manufacturing costs include ______.

manufacturing overhead, direct materials, direct labor

Companies that use job-order costing make ______.

many different products

When compared to a departmental approach, using activity-based costing results in ______ overhead rates.

more

The formula for applying overhead to a specific job is ______.

predetermined overhead rate × amount of allocation base incurred by job

Select all that apply: Manufacturing overhead costs ______.

-are indirect costs -consist of many different items

Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is ______.

more complex, more accurate

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

overhead applied to the job