Managerial Accounting: Chapter 17

Riverview Company's budget for the coming year includes $6,000,000 for manufacturing overhead, 50,000 hours of direct labor, and 250,000 hours of machine time. If Riverview applies overhead using a predetermined rate based on machine-hours, what amount of overhead will be assigned to a unit of output which requires 0.5 machine hours and 0.25 labor hours to complete?

$12.00 $6,000,000 ÷ 250,000 = $24 × 0.5 = $12

Moran Company uses a job order cost system and has established a predetermined overhead application rate for the current year of 150% of direct labor cost, based on budgeted overhead of $900,000 and budgeted direct labor cost of $600,000. Job No. 1 was charged with direct materials of $36,000 and with overhead of $27,000. What is the total cost of Job No. 1?

$81,000 ($27,000 ÷ 150%) + $36,000 + $27,000 = $81,000

In an activity-based costing system, manufacturing overhead costs are divided into separate:

Activity cost pools.

At the end of the accounting period, applied overhead was larger than actual overhead by a material amount. The over-applied overhead should be:

Apportioned among Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold.

An effective cost accounting system should match processes that consume resources with the associated ________ in order to maintain competitive advantage.

Costs.

A job order cost system would be appropriate in the manufacturing of:

Custom-made furniture.

A job cost sheet will include:

Direct labor applied to production.

Which of the following would likely be the most appropriate cost driver to allocate machinery set-up costs to products?

Number of production runs

The advantage of using a predetermined overhead application rate is that:

Units produced are charged with a "normal" amount of manufacturing overhead regardless of whether they are produced in a high-volume month or a low-volume month.