accounting 2: ch 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 ______.
$4,000 100,000 / 5,000 = 20 20 x 200 = 4000
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
$900 450,000/150,000 = 3 3 x 300 = 900
When predetermined overhead rates are based on budgeted activity
- products are charged for resources they don't use - unit product costs fluctuate depending upon budgeted level of activity
Factory labor charges that cannot be easily traced to a job are treated as:
MOH
Which of the following is not a manufacturing cost category
Selling & administrative costs
Which of the following is not a manufacturing cost category?
Selling & administrative costs
Cost-plus pricing occurs when
a markup percentage is added to the cost of a job
When a company creates overhead rates based on the actions it performs, it is employing an approach called ________ ___________ costing
activity based
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 __________ __________
activity driver
Companies use a predetermined overhead rate rather than an actual overhead rate because ______.
an actual rate is not known until the end of the period
Activity-based absorption costing
assigns overhead based on events that consume overhead resources
An essential quality of an overhead allocation base is that it must
be common to all the company's products and service
Costs assigned to units of product in absorption costing include ______ manufacturing costs
both variable and fixed
Job-order costing would most likely be used in a(n)
construction company
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
Categories of manufacturing costs include
direct materials, direct labor, manufacturing overhead
Activity-based absorption costing only assigns variable manufacturing overhead costs to products.
false
t/f: Activity-based absorption costing only assigns variable manufacturing overhead costs to products.
false
t/f: In practice, most companies base their predetermined overhead rates on the allocation base at capacity.
false
t/f: When predetermined overhead rates are based on capacity, unit product costs fluctuate depending on activity.
false - when based on activity not capacity
The document that records the materials, labor, and manufacturing overhead costs charged to a job is the
job cost sheet
Widely used allocation bases in manufacturing include ______.
machine hours units of product direct labor cost direct labor hours
Manufacturing overhead consists of
many different kinds of indirect costs
An allocation base is a(n)
measure of activity used to assign overhead costs to products and services
Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is
more complex and more accurate
Which of the following would be considered direct materials in a service firm that uses job-order costing?
paperwork at a law firm
The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost, and:
predetermined manufacturing overhead cost.
The formula for applying overhead to a specific job is: ______ amount of allocation base incurred by job.
predetermined overhead rate ×
A bill of materials contains the ______.
quantity and type of each direct material needed to complete a unit of product
A cost driver is
the amount of overhead assigned to a job
What absorption cost system(s) uses a volume-related allocation base for all of the manufacturing costs?
traditional
t/f: The absorption approach to overhead charges products for resources they don't use.
true
t/f: Too much fixed overhead may be applied to products when the predetermined overhead rate is based on estimated activity.
true
t/f: When overhead is based on estimated activity, units produced must shoulder the cost of unused capacity.
true
