Quiz 2

A cost driver is a factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes direct costs.

false

A job cost sheet is used to record how much a customer pays for the job once the job is completed.

false

An employee time ticket is used to record points that are earned by employees based on the hours they worked that can be used to pay for coffee, food in the cafeteria, and even in some cases for vacation travel.

false

Generally speaking, when going through the process of computing a predetermined overhead rate, the estimated total manufacturing overhead cost is determined before estimating the amount of the allocation base.

false

If a job is not completed at year end, then no manufacturing overhead cost would be applied to that job when a predetermined overhead rate is used.

false

If the allocation base in the predetermined overhead rate does not drive overhead costs, it will nevertheless provide reasonably accurate unit product costs because of the averaging process.

false

If the overhead rate is computed annually based on the actual costs and activity for the year, the manufacturing overhead assigned to any particular job can be computed as soon as the job is completed.

false

In a job-order costing system, costs are traced to individual units of product. The sum total of such traced costs is called the unit product cost.

false

In absorption costing, nonmanufacturing costs are assigned to units of product.

false

Job cost sheets contain entries for actual direct material, actual direct labor, and actual manufacturing overhead cost incurred in completing a job.

false

The amount of overhead applied to a particular job equals the actual amount of overhead caused by the job.

false

The formula for computing the predetermined overhead rate is: Predetermined overhead rate = Estimated total amount of the allocation base ÷ Estimated total manufacturing overhead cost

false

A bill of materials is a document that lists the type and quantity of each type of direct material needed to complete a unit of product.

true

Actual overhead costs are not assigned to jobs in a job costing system.

true

An employee time ticket is an hour-by-hour summary of the employee's activities throughout the day.

true

Job-order costing systems often use allocation bases that do not reflect how jobs actually use overhead resources.

true

Most countries require some form of absorption costing for external reports.

true

The appeal of using multiple departmental overhead rates is that they presumably provide a more accurate accounting of the costs caused by jobs.

true

The costs attached to products that have not been sold are included in ending inventory on the balance sheet.

true

The fact that one department may be labor intensive while another department is machine intensive explains in part why multiple predetermined overhead rates are often used in larger companies.

true

Which of the following would usually be found on a job cost sheet under a normal cost system?

B) Yes No

Which of the following statements is not correct concerning multiple overhead rate systems?

In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.

Which of the following statements about using a plantwide overhead rate based on direct labor is correct?

It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.

Assigning manufacturing overhead to a specific job is complicated by all of the below except:

Manufacturing overhead is incurred only to support some jobs.

In a job-order costing system that is based on machine-hours, which of the following formulas is correct?

Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours

Which of the following is the correct formula to compute the predetermined overhead rate?

Predetermined overhead rate = Estimated total manufacturing overhead costs ÷ Estimated total units in the allocation base

A company will improve job cost accuracy by using multiple overhead rates even if it cannot identify more than one overhead cost driver.

false