accounting 202 chapter 2 learnsmart

companies assign costs to products and services to

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

widely used allocation bases in manufacturing are:

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

categories of manufacturing costs include

-manufacturing overhead -direct materials -direct labor

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 predetermined overhead rate is calculated:

before the period begins

a factor that causes overhead costs is called a

cost driver

Why is the unit product cosp uced? a. There would be no additional cost to produce another unit b. The cost that would be incurred if another unit were produced cannot be calculated c. The predetermined overhead rate changes with each unit produced d. The cost to produce another unit is the incremental or marginal cost

d

to calculate a predetermined overhead rate, divide estimated manufacturing overhead by

estimated allocation base

the US requires absorption costing for _____ financial reports

external

which is an essential quality of an overhead allocation base

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

A document that records the materials, labor and manufacturing overhead cots charged with the job

job cost sheet

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

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

overhead applied to the job

which of the following would be considered direct materials in a service firm that uses job-order costing

paperwork at a law firm

when all overhead is assigned using direct labor hours, the company has chosen to use ____ predetermined overhead rate

plantwide

which of the following would NOT be considered a direct labor cost in a service firm that used job-order costing?

the salary of the manager at a hair salon (this would be considered overhead)

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, the a represents the estimated:

total fixed manufacturing overhead cost

manufacturing overhead costs:

-consist of many different items -are indirect costs

materials requisition forms are used for

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

Widely used allocation bases in manufacturing are:

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

the total cost of a job includes

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

Labor charges that cannot be easily traced to a job are considered:

-manufacturing overhead -indirect labor

a job cost sheet contains

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

an allocation base should be

a cost driver

all manufacturing costs are assigned to units of product and all non manufacturing costs are treated as period cost under ____ costing

absorption

what is the most common approach to product costing throughout the world

absorption costing

which would NOT be a good allocation base for manufacturing overhead

accounting hours (accounting hours are not related to manufacturing)

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

activity-based costing

the process used to assign overhead costs to products is called overhead

allocation

a measure such as direct-labor hours used o assign overhead costs to products and services is called a cost driver or

allocation base

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

an inappropriate allocation base

the adjustment for underapplied overhead

increases cost of goods sold (COGS) and decreases net operating income

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 ________ _________

job-order costing

a service firm that would most likely use job-order costing is a

law practice

the manufacturing overhead account contains

many different kinds of indirect costs

companies that use job-order costing make

many different products

direct materials costs are recorded on the job cost sheet when the

materials are issued to the job

the formula for applying overhead to a specific job is

predetermined overhead are x amount of allocation base incurred by a job

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

subsidiary ledger

which of the following would not be considered a job in a service form that uses job order costing

the tax department in an accounting firm (this is a department; a job would be an individual client)

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

$840

the total cost of a job includes

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

costs assigned to units of product user absorption costing include:

-fixed manufacturing -variable manufacturing

manufacturing overhead

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

a normal costing system applies overhead by job by multiplying a ____ _____ rate by the ___ _____ of the allocation base incurred by the job

-predetermined overhead -actual amount

a bill of materials contains the

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

the unit product cost is the same as the

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

a normal cost system assigns overhead to jobs using

a predetermined overhead rate

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

divide the total job cost by the # of units produced

a predetermined overhead rate is calculated by dividing the ____ total manufacturing overhead by the _____ total amount of the allocation base

estimated/estimated

compared to a plant wide overhead rate system, a multiple predetermined overhead are system is

more complex, but more accurate

to keep track of labor time and costs, many firms have replaced

paper time tickets with computerized systems

a 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

t/f one reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors

true

t/f underapplied or oversupplied overhead occurs because overhead is applied to jobs using a predetermined rate based on estimates of costs and activity levels

true

the average manufacturing overhead cost per unit tends to

vary from one period to the next