Chapter 2: Job-Order Costing: Calculating Unit Product Costs CONNECT

Estimated manufacturing overhead $500,000 Estimated direct labor cost $250,000 Actual manufacturing overhead $720,000 Actual direct labor cost $300,000 Based on this information, the predetermined overhead rate per direct labor dollar is:

$2.00

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 amount of overhead allocated to a job that used 300 direct labor hours is $ _________.

$900

The appeal of using predetermined departmental overhead rates is they presumably provide ______.

A more accurate accounting of costs Enhanced information for decision making

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

Absorption

Which of the following would not be a good allocation base for manufacturing overhead?

Accounting hours

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

Activity-based

Overhead application is the process of ______.

Assigning manufacturing overhead cost to jobs

An essential quality of an overhead allocation base is that it must ______.

Be common to all the company's products and services

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

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

Both variable and fixed

An allocation base is a(n) ______.

Common measure used to assign overhead costs to products and services

Manufacturing overhead ______.

Consists of many different types of costs Is an indirect cost Contains both fixed and variable costs

True or False: All hours on computerized time tickets are automatically posted directly to job cost sheets.

False

Assigning manufacturing overhead to product is complicated because ______.

It consists of many types of costs It is an indirect cost

The document that records the materials, labor, and manufacturing overhead costs charged to a job is the ______.

Job cost sheet

Companies that make many different products each period use _______-_______ costing.

Job-order

A job cost sheet contains ______ the job.

Manufacturing overhead charged to Labor costs charged to Materials costs charged to

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

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

More complex and more

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

Overhead applied to the job

The formula for applying overhead to a specific job is: ______ amount of allocation base incurred by job.

Predetermined overhead rate ×

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

Which of the following is not a manufacturing cost category?

Selling & administrative costs

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.

Overhead application is used to apply overhead costs to jobs ______.

Throughout the accounting period

The document that provides an hour-by-hour summary of the employee's activities throughout the day is called a ______.

Time ticket

The unit product cost is the same as the ______.

Total job cost divided by number of units Average product cost per unit

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

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

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 ______.

$4,000

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

Widely used allocation bases in manufacturing include ______.

Direct labor cost Units of product Machine hours Direct labor hours

Categories of manufacturing costs include ______.

Direct materials Manufacturing overhead Direct labor

The formula for a predetermined overhead rate is:

Estimated total manufacturing overhead cost ÷ estimated total allocation base