Chapter 2 LearnSmart

Categories of manufacturing costs include:

- direct materials -direct labor -manufacturing overhead

the total cost of a job includes

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

Manufacturing overhead costs:

-are indirect costs - consists of many different items

Typical cost drivers include:

-machine-hours -flight-hours -computer time

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 United States requires absorption costing for:

External financial reports

Job-order costing can only be used in manufacturing firms

False

what is an essential quality of an overhead allocation base?

It must be common to all the company's products and services

Costs assigned to units of product under absorption costing include:

Manufacturing costs (fixed and variable)

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:

Plantwide predetermined overhead rate

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 (this is a department, a job would be an individual client)

Cost-plus pricing occurs when:

a markup percentage is added to the cost of the job

a job-order costing system may inaccurately assign costs to jobs due to:

an inappropriate allocation base

The predetermined overhead rate calculated:

before the period begins

The predetermined overhead rate is calculated:

before the period begins

An allocation base should be:

cost driver

The adjustment for overapplied overhead

decreases cost of goods sold and increases net operating income.

to calculate the unit product cost using the job cost sheet:

divide the total job cost by the number of units produced

The process used to assign overhead costs to products is called

overhead allocation

multiple predetermined overhead rate system is more accurate than a plant wide overhead rate system because it:

reflects differences in how overhead costs are incurred within departments

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

time ticket

The unit product cost is the same as the:

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

A job sheet contains

-materials -labor -manufacturing overhead costs

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

activity based costing

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

bill of materials

labor costs that are easily traced to a job are called __ labor costs

direct

Average manufacturing overhead cost per unit varies from one period to the next because

fixed manufacturing overhead remains constant in total even when production changes

Direct materials costs are recorded on the job cost sheet when the:

materials are issued to the job

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

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

Formula for applying overhead to a specific job

predetermined overhead rate * amount of allocation base incurred by job

a normal costing system applies overhead by job multiplying___ rate by the __ amount of the allocation base incurred by the job

predetermined overhead, actual

when all of a company's job cost sheets are viewed collectively, they form what is known as a

subsidiary ledger

Widely used allocation bases in manufacturing are:

- direct labor cost - direct labor hours -machine hours -units of products

Companies assign costs to products and services to:

-establish selling prices -value ending inventory -understand product profitability

T/F One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors

True

Bar codes can used to:

automatically record and post direct labor costs to jobs

underapplied or overapplied overhead is the:

differences between overhead applied to work in process and actual overhead

Predetermined overhead rate calculation:

estimated manufacturing overhead/estimated allocation base

the predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find:

overhead applied to the job