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

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

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

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.)

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

Categories of manufacturing costs include:

direct materials, direct labor, manufacturing overhead

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 formula for applying overhead to a specific job is ______.

predetermined overhead rate × amount of allocation base incurred by job

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

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

Widely used allocation bases in manufacturing include:

units of product machine hours direct labor cost direct labor hours