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

Select all that apply Manufacturing overhead ______. is directly traceable to units produced contains fixed costs is an indirect cost consists of many different types of costs

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

Select all that apply Materials requisition forms are used for ______. specifying the cost of materials to be ordered controlling the flow of materials into production summarizing the cost of a job making journal entries in accounting records

controlling the flow of materials into production making journal entries in accounting records

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

To calculate a predetermined overhead rate, divide estimated total manufacturing overhead by the ______.

estimated total allocation base

The predetermined overhead rate is calculated ______.

before the period begins

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

job cost sheet

To keep track of labor time and costs, many firms have replaced ______.

paper time tickets with computerized systems

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

Which of the following would be considered direct materials in a service firm that uses job-order costing? Tools in an auto repair shop Reason: These are assets. Beds in a hospital Reason: These are assets. Scissors at a hair salon Reason: These are assets. Paperwork at a law firm

Paperwork at a law 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.

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

True

Job XYZ has a total manufacturing cost of $600. If the mark-up percentage is 40%, the job will sell for $_______.

840

Bar codes can be used to ______.

automatically record and post direct labor costs to jobs

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?

$15,000 Reason: Cost of Job #420 = Direct materials + Direct labor + Predetermined overhead rate × Direct labor cost = $4,000 + $5,000 + 120% × $5,000 = $15,000

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 __________.

allocation, application, allocating, allocated, assignment, or assigning

A job-order costing system may inaccurately assign costs to jobs due to ______.

an inappropriate allocation base

The adjustment for underapplied overhead ______ net income.

increases cost of goods sold and decreases

In the formula Y = a + bX, a represents the estimated ______.

total fixed manufacturing overhead cost

Allocation bases that do not drive overhead costs ______.

will not accurately measure the cost of overhead used

Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing?

The salary of the manager at a hair salon

A measure such as direct labor-hours or machine hours used to assign overhead costs to products and services is called a cost driver or a(n)

allocation base

A factor that causes overhead costs is called a ______.

cost driver

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

manufacturing overhead

Select all that apply A job cost sheet contains ______. selling costs charged to the job the selling price of the job manufacturing overhead costs charged to the job materials costs charged to the job labor costs charged to the job

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

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

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 ______.

predetermined overhead rate × amount of allocation base incurred by job

A normal costing system applies overhead by job by multiplying a(n) _________ ________ rate by the ___________ amount of the allocation base incurred by the job.

predetermined overhead; actual

The document used to record the hours workers spend on each job and task is called a ______.

time ticket

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 predetermined overhead rate per direct labor hour is $

3

A single predetermined overhead rate is called a(n) __________ overhead rate.

plantwide

Cost-plus pricing occurs when ______.

a markup percentage is added to the cost of a job

Select all that apply The appeal of using predetermined departmental overhead rates is they presumably provide ______. a more accurate accounting of costs higher profitability for the company enhanced information for decision making

a more accurate accounting of costs enhanced information for decision making

Select all that apply The total cost of a job includes ______. nonmanufacturing cost applied manufacturing overhead direct materials cost direct labor cost actual manufacturing overhead

applied manufacturing overhead direct materials cost direct labor cost

The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost and ______.

applied manufacturing overhead cost

The adjustment for overapplied overhead ______ net income.

decreases cost of goods sold and increases

To calculate the unit product cost using the job cost sheet ______ by the number of units produced.

divide the total job cost

The United States requires absorption costing for ______ financial reports.

external

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

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

in each department as jobs proceed through the department

Select all that apply Labor charges that cannot be easily traced to a job are considered ______. indirect labor direct labor manufacturing overhead

indirect labor manufacturing overhead

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

job order

Companies that use job-order costing make ______.

many different products

When all overhead is assigned using direct-labor hours, the company has chosen to use a(n) ___________ predetermined overhead rate.

plantwide, single, or plant wide

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n) ______.

subsidiary ledger

An hour-by-hour summary of an employee's activities throughout the day is found on the __________ __________.

time ticket

In the formula Y = a + bX, X represents the estimated ______.

total amount of the allocation base

Murphy Manufacturing estimated total manufacturing overhead for 2021 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 2021 was $120,000 and actual direct labor-hours were 7,500. The overhead applied to a job completed during 2021 that used 200 direct labor-hours was ______.

$4,000 Reason: 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 ×200 direct labor-hours = $4,000.

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

True or false: When a company uses cost-plus pricing, they consider both the costs of production and the desired profit.

False Reason: Cost-plus pricing applies a predetermined markup to a cost base to determine selling price. Desired profit is not considered.

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

absorption OR full

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

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

materials are issued to the job

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n) ________ __________.

sudsidiary ledger

Select all that apply Manufacturing overhead costs ______. tend to vary significantly, in total, from one period to the next do not impact the average cost per unit are indirect costs consist of many different items

are indirect costs consist of many different items

Overhead application is the process of ______.

assigning manufacturing overhead cost to jobs

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

Accounting hours

True or false: The root cause of inaccurately assigning costs to jobs is generally due to poor tracking of direct labor costs.

False

Select all that apply The unit product cost is the same as the ______. cost that would be incurred if another unit were produced total job cost divided by number of units incremental unit cost average product cost per unit

total job cost divided by number of units average product cost per unit

Select all that apply Widely used allocation bases in manufacturing include ______. product revenue machine hours units of product direct labor hours direct labor cost nonmanufacturing costs

machine hours units of product direct labor hours direct labor cost

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 type of materials to be drawn from the storeroom quantity of materials to be drawn from the storeroom

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

A normal cost system assigns overhead to jobs using ______.

a predetermined overhead rate Reason: A normal cost system is a system in which overhead costs are applied to a job by multiplying predetermined overhead rate by the actual amount of allocation base incurred by the job.

Which of the following is only true in a multiple predetermined overhead rate system?

Each production department may have its own predetermined overhead rate.

Total manufacturing overhead costs tend to:

remain fairly constant

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 ______.

$2.00 Reason: Total cost of Job #420 = 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.

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

True or false: Job-order costing can only be used in manufacturing firms.

False

Which of the following would not be considered a job in a service firm that uses job-order costing?

The tax department in an accounting firm

The most common approach to product costing throughout the world is ______ costing.

absorption

An allocation base should be ______.

a cost driver

A SERVICE firm that would most likely use job-order costing is a ______.

law practice

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 ______.

materials requisition form

An allocation base is a(n) ______.

measure of activity used to assign overhead costs to products and services