Accounting week 2
Murphy manufacturing estimated total manufacturing a overhead for 2017 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 2017 was $120,000 and actual direct labor-hours were 7,500. How much overhead for 2017 was applied to a job completed during 2017 that used 200 direct labor-hours?
$4,000 - (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 x 200 direct labor-hours = $4,000.)
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 Cost of job number 420 = direct materials + direct labor + predetermined overhead rate x direct labor cost. ( $4000 + $5000 + 120% x 5000 =$15,000)
An essential quality of an overhead allocation base is that it must:
Be common to all companies products and service
The type and quantity of each type of direct material needed to complete a unit of product is listed on the
Bill of Materials
The type and quantity of each type of direct material needed to complete a unit of product listed on the
Bill of materials
Costs assigned to units of product in absorption costing include___ manufacturing costs
Both variable and fixed
Companies that make many different products each period use —— —— costing:
Job order
A SERVICE firm that would most likely use job order costing is a
Law firm
Materials requisition forms are used for:
Making journal entries in accounting records and controlling the flow of materials into production
Labor charges that cannot be easily traced to a job or considered :
Manufacturing overhead and indirect labor
A job cost sheet contains:
Materials costs charged to the job, manufacturing overhead costs charged to the job, and labor costs charged 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 specified on the
Materials requisition form
The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find
Overhead applied to the job
A normal costing system applies overhead by job my multiplying a ___________ ____________ rate by the _________ amount of the allocation base incurred by the job.
Predetermined overhead, actual
A bill of materials contains the
Quantity of each direct materials needed to complete a Unit a product and the type of each direct materials needed to complete a unit of product
Why is the unit product cost different from the cost that would be incurred if another (additional) unit were produced
The cost to produce another unit is the incremental or marginal cost
In the formula Y = a + bX X represents the estimated
Total amount of the allocation base
True or false : One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors
True
Widely used allocation bases in manufacturing include
Units of production Direct labor hours Machine hours Direct labor cost
In the formula Y = a + bX , b represents the estimated
Variable manufacturing overhead cost per unit
Categories of manufacturing costs include
direct materials, direct labor, manufacturing overhead
To calculate the unit product cost using the job cost sheet
divide the total job cost by the number of units produced
What is the most common approach to produci costing throughout the world?
Absorption costing
The formula for applying overhead to a specific job is:
Can you determine overhead rate x amount of allocation-based incurred by job
Job-order costing would most likely be used in a(n)
Construction company
Manufacturing overhead:
Contains fixed costs Is an indirect cost Consist of many different types of costs
The process used to assign overhead costs to products is called overhead:
allocation
Labor costs that are easily traced to a job are called _____ labor costs
direct
Manufacturing overhead costs:
- Consist of many different items - Are indirect costs
The total cost of a job includes
-Direct Materials Cost -Direct Labor Cost -Applied Manufacturing Overhead
The United States requires absorption costing for
Tax reports and External Financial Reports
A normal cost system assigns overhead to jobs using:
predetermined overhead rate
Cost behavior:
The first to hell cost will change as activity levels changes and categorizes costs as fixed, mixed and variable
An hour-by-hour summary of an employee's activities throughout the day is found on the
Time ticket
The document used to record the time workers spend on each job and task is called a
Time ticket
The average manufacturing overhead cost per unit tends to
vary from one period to the next
To keep track of labor time and costs, many firms have replaced
paper time tickets with computerized systems
All manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under
Absorption costing
Which of the following would not be a good allocation base for manufacturing overhead?
Accounting hours
A measure such as direct labor hours or machine hours used to assign overhead cost to products and services is called a cost driver or a(n)
Allocation base
Why do companies predetermined overhead rate rather than an actual overhead rate?
An actual overhead rate is not known until the end of the period
Overhead application is the process of:
Assigning manufacturing overhead cost to jobs
Barcodes can be used to:
Automatically record and post direct labor costs to jobs
True or false: Job-order costing can only be used in manufacturing firms
False
Average manufacturing overhead cost per unit usually varies from one period to the next because
Fix manufacturing overhead remains constant in total even when production changes
The document that records the materials, labor and manufacturing overhead costs charged to a is the
Job cost sheet
The total cost of a job is calculated by adding the total of direct labor cost direct materials cost and
applied manufacturing overhead cost