Cost Accounting CH 2

Given a predetermined overhead rate of $1.60 per direct labor hour, a capacity of 50,000 hours and 42,000 actual hours, the cost of unused capacity is

$12,800 (8000*1.6)

Based on this information, the predetermined overhead rate per direct labor hour is $

$3.00 (EST. MOH/ EST. DLH)

Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is ______.

$64.20 ($2.4*17 + $1.8*13)

Based on this information, the amount of overhead allocated to a job that used 300 direct labor hours is $

$900 (get predetermined rate and multiply it by 300 direct labor hours)

The unit product cost is the same as the ______.

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

Based on this information, the predetermined overhead rate per direct labor dollar for Dept. B is $

1.35

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

840

Which of the following would not be a good allocation base for manufacturing overhead?

Accounting hours

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

Activity based

Which of the following is only true in a multiple predetermined overhead rate system?

Each production department may have its own predetermined overhead rate.

Activity-based absorption costing only assigns variable manufacturing overhead costs to products.

False

The root cause of inaccurately assigning costs to jobs is generally due to poor tracking of direct labor costs.

False

Why is the unit product cost different from the cost that would be incurred if another (additional) unit were produced?

The unit product cost is an average, not an incremental cost.

The appeal of using predetermined departmental overhead rates is they presumably provide Blank______.

a more accurate accounting of costs enhanced information for decision making

A normal cost system assigns overhead to jobs using Blank______.

a predetermined overhead rate

An event that causes consumption of overhead resources is called a(n)

activity

In activity-based absorption costing, the consumption of overhead resources is caused by Blank______,

an activity

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

A job-order costing system may inaccurately assign costs to jobs due to Blank______.

an inappropriate allocation base

The adjustment for overapplied overhead Blank______ net income.

decreases cost of goods sold and increases

When a company uses a departmental approach rather than a plantwide approach to applying overhead, the selling price of the product will always be Blank______.

different

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

fixed manufacturing overhead remains constant in total even when production changes

The activity-based approach tends to shift costs from _____volume products to ______ volume products

high, low

In a system that uses multiple predetermined overhead rates, overhead is applied ______.

in each department as jobs proceed through the department

Manufacturing overhead consists of Blank______.

many different kinds of indirect costs

An allocation base is a(n) Blank______.

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

When all overhead is assigned using direct-labor hours, the company has chosen to use a(n) ____ predetermined overhead rate.

plantwide

A single predetermined overhead rate is called a(n)

plantwide overhead

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 ×

In the formula Y = a + bX, X represents the estimated Blank______.

total amount of the allocation base

Traditional absorption costing systems allocate all manufacturing costs using a(n) ______ related allocation base.

volume

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 (120% of 5000 is 6000=predetermined overhead rate; $5000+$4000+$6000= $15,000)

Based on this information, the predetermined overhead rate per direct labor dollar for Dept. A is Blank______.

$2.60

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 Blank______.

$4,000 (predetermined overhead rate * actual direct labor hours) $100,000/5000= 20; 20*200= $4,000

Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing?

The salary of the manager at a hair salon.

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

What absorption cost system(s) uses a volume-related allocation base for all of the manufacturing costs?

Traditional

In the formula Y = a + bX, b represents the estimated Blank______.

variable manufacturing overhead cost per unit

When a company uses cost-plus pricing, they consider both the costs of production and the desired profit.

False

Smith, Inc. uses a job-order costing system with the predetermined overhead rate of $12 per machine-hour. The job cost sheet for Job #42A listed $12,000 in direct labor cost, $18,000 in direct materials cost, 1,200 direct labor-hours and 1,100 machine-hours. The total cost of Job #42A is $

Total cost of Job $42A = Direct materials + Direct labor + Predetermined overhead rate x Actual machine-hours = $18,000 + $12,000 + ($12 per machine-hour x 1,100 machine-hours) = $43,200

One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors.

True

The absorption approach to overhead charges products for resources they don't use.

True

A cost driver is ______

a factor that causes overhead costs to occur

Cost-plus pricing occurs when Blank______.

a markup percentage is added to the cost of a job

The adjustment for underapplied overhead Blank______ net income.

increases cost of goods sold and decreases

When predetermined overhead rates are based on budgeted activity ______.

unit product costs fluctuate depending upon budgeted level of activity products are charged for resources they don't use

An allocation base should be:

a cost driver.

A factor that causes overhead costs is called a Blank______.

cost driver

An activity cost pool accumulates costs for Blank______ activity measure(s).

exactly one

The total cost of a job includes:

predetermined manufacturing overhead. direct labor cost. direct materials cost.

The activity-based approach tends to Blank______.

shift costs from high-volume to low-volume products

Overhead application is the process of Blank______.

assigning manufacturing overhead cost to jobs

When predetermined overhead rates are based on capacity, critics suggest the cost of unused capacity should ______.

be disclosed separately on the income statement

When compared to a departmental approach, using activity-based costing results in Blank______ overhead rates.

more

The approach used when overhead is applied to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the jobs is called

normal costing

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

overhead application

The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find Blank______.

overhead applied to the job

Allocation bases that do not drive overhead costs Blank______.

will not accurately measure the cost of overhead used

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 listed $4,000 in direct materials cost and $5,000 in direct labor cost to manufacture 7,500 units. The unit cost of Job #420 is ______.

$2.00

The predetermined overhead rate is calculated Blank______.

before the period begins

A "bucket" in which costs are accumulated that relate to a single activity measure is called an activity

cost pool

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $

2 (add up hours and divide by $500k, round up to 2)

Which of the following statements are true?

When overhead is based on estimated activity, units produced must shoulder the cost of unused capacity. Too much fixed overhead may be applied to products when the predetermined overhead rate is based on estimated activity.

Activity-based absorption costing Blank______.

assigns overhead based on events that consume overhead resources

To calculate the unit product cost using the job cost sheet Blank______ by the number of units produced.

divide total job cost

To calculate a predetermined overhead rate, divide estimated total manufacturing overhead by the Blank______.

estimated total allocation base

When companies have large amounts of fixed manufacturing overhead, total manufacturing overhead costs tend to ______.

remain fairly constant from one period to the next