ACC 208 Exam 2

Features of Job Costing

- how to price a custom order - direct and indirect costing- indirect called overhead cost - custom made designs can't be put the same price; each one is unique, and different features

common fixed cost examples

- salary of the CEO company - cost of heating or A/C in a grocery store is a common fixed cost of the stores various departments

The predetermined overhead rate is calculated Blank______. Multiple choice question. 1. before the period begins 2. as the period progresses 3. as soon as actual overhead is known 4. after the period is over

1. Before the period begins

Factory labor charges that can be easily traced to a job are treated as Blank______. Multiple choice question. 1. direct labor 2. manufacturing overhead 3. nonmanufacturing costs 4. indirect labor

1. Direct Labor Reason: Factory labor is a manufacturing cost.

examples of traceable fixed costs

1. The salary of the Fritos product manager at Pepsi is a traceable fixed cost of the Fritos business segment of Pepsi 2. The maintenance cost for the building in which Boeing 747's are assembled is a traceable fixed cost of the 74 business segment of Boeing 3. The liability insurance at Disnes World is a traceable fixed cost of the Disney World business segment of the Walt Disney Corp.

An allocation base is a(n) Blank______. Multiple choice question. 1. activity that causes overhead costs to change 2. measure of activity used to assign overhead costs to products and services 3. measure used to assign all manufacturing costs to products and services

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

The average manufacturing overhead cost per unit tends to Blank______. 1. remain fairly constant 2. vary from one period to the next

2. vary from one period to the next

common fixed cost

A fixed cost that supports more than one business segment, but is not traceable in whole or in part to any one of the business segments.

Job Costing

A system for assigning costs to products or services that differ in the amount of materials, labor, and overhead required. Typically used by manufacturers that produce unique, or custom-ordered products in small batches; also used by professional service firms.

Which of the following can make a product line look less profitable than it really is? Allocated common fixed costs Common variable costs

Allocated common fixed expenses

Direct cost are traced not allocated True or False

True

If a segment was eliminated there would be no change to a true common fixed cost True or False

True

traceable fixed cost

a fixed cost incurred because of the existence of a particular business segment and that would be eliminated if the segment were eliminated; the fixed cost would disappear

allocation base

a measure such as direct labor hours or machine hours that is used to assign overhead costs to products and services

plantwide overhead rate

a single predetermined overhead rate that is used throughout a plant

Manufacturing Overhead

all manufacturing costs except direct materials and direct labor

on a segmented income statement common fixed costs

are deducted from the segment margin to arrive at the net operating income.

traceable fixed cost on a segmented income statement

common fixed costs are deducted from the segment margin to arrive at the net operating income. They are not allocated to a specific cost since they are common cost.

A business segment should only be dropped if a company can avoid more in fixed costs than it gives up in

contribution margin

Calculate predetermined overhead rate

estimated total manufacturing overhead cost/estimated total amount of the allocation base

cost driver

factors such s machine hours, beds occupied, computer time, or flight hours that causes overhead cost

material requisition

indicates cost of direct material to charge to jobs and cost of indirect material to charge to overhead

cost allocation

process of identifying and assigning costs to activities, people, projects, or any other cost objective. Works to measure financial performance and improve decision-making.

When making a decision, only relevant items are included in the analysis of the alternatives when using ______. 1. neither the differential nor total cost approach 2. both the differential and total cost approaches 3. the differential cost approach only 4. the total cost approach only

the differential cost approach only

When making a decision, irrelevant items are included in the analysis of both alternatives when using ______. 1. both the differential and total cost approaches 2. the differential cost approach only 3. the total cost approach only 4. neither the differential nor total cost approach

the total cost approach only

Widely used allocation bases in manufacturing include

units of product machine hours direct labor cost direct labor hours

job cost sheet

used to trace direct materials and direct labor costs to a job

overhead application

when it comes to a particular job predetermined overhead rate x amount of the allocation base incurred by the job