Managerial Accounting Chapter 2 Exam Review

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

-a more accurate accounting of costs, -enhanced information for decision making

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

Each production department may have its own predetermined overhead rate

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.

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

Paperwork at a law firm

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

allocation

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 a(n)

allocation base

An essential quality of an overhead allocation base is that it must ______.

be common to all the company's products and services

Costs assigned to units of product under absorption costing include: -fixed manufacturing -variable nonmanufacturing -fixed nonmanufacturing -variable manufacturing

fixed manufacturing variable manufacturing

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

in each department as jobs proceed through the department

The adjustment for underapplied overhead ______ net income.

increases cost of goods sold and decreases

Manufacturing overhead:

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

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 () () costing

job-order

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

manufacturing overheadindirect labor

An allocation base is a(n) ______.

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

Typical cost drivers include:

- computer time - flight-hours - machine-hours

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 total cost of a job includes:

-Direct Materials Cost -Direct Labor Cost -Applied Manufacturing Overhead

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

Which of the following is not a manufacturing cost category? Selling & administrative costs Direct materials Manufacturing overhead Direct Labor

Selling and administrative costs

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

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

True

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

activity based

The type and quantity of each type of direct material needed to complete a unit of product is listed on the ______.

bill of materials

Costs assigned to units of product in absorption costing include ______ manufacturing costs.

both variable and fixed manufacturing

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

divide the total job cost

Manufacturing overhead consists of ______.

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 jobs

The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost, and:

predetermined manufacturing overhead cost.

Allocation bases that do not drive overhead costs ______.

will not accurately measure the cost of overhead used

Cost-plus pricing occurs when ______.

a markup percentage is added to the cost of a job

Manufacturing overhead costs ______.

consists of many different items are indirect cost

A factor that causes overhead costs is called a ______.

cost driver

An allocation base should be:

cost driver

The adjustment for overapplied overhead ______ net income.

decreases cost of goods sold and increases

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

more

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

overhead applied to the job

The formula for applying overhead to a specific job is ______.

predetermined overhead rate × amount of allocation base incurred by job

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 - (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.)

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

$600 + ($600 * 40%) $600 + $240 $840

Which of the following would not be a good allocation base for manufacturing overhead? -Accounting Hours -Machine Hours -Units of Product -Direct Labor Hours

Accounting hours

Why do companies use a 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

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

Labor costs that are easily traced to a job are called () labor costs

direct

Categories of manufacturing costs include:

direct materials, direct labor, manufacturing overhead

Widely used allocation bases in manufacturing include:

units of product machine hours direct labor cost direct labor hours