ACC chap 1 & 2
True or false: One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors.
true
Direct labor is also called ____ labor.
touch
Job-order costing would most likely be used in a(n) -soda bottling factory -oil refinery -construction company -dairy farm that produces raw milk
construction company
Product costs are also called ______ costs
inventoriable/manufacturing
A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n) _______ _______
opportunity cost
Costs assigned to units of product under absorption costing include ______. (multiple) -fixed nonmanufacturing -fixed manufacturing -variable nonmanufacturing -variable manufacturing
-fixed manufacturing -variable manufacturing
A bill of materials contains the ______. (multiple) -type of each direct material needed to complete a unit of product -quantity of each direct material needed to complete a unit of product -type of materials to be drawn from the storeroom -quantity of materials to be drawn from the storeroom
-type of each direct material needed to complete a unit of product -quantity of each direct material needed to complete a unit of product
Fill in the blanks to complete the sentence. Company Dept. A Dept B. Predetermined overhead rate per direct labor hour $2.10 $2.40 $1.80 Direct labor hours hours worked on Job ABC 40 18 22 Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is $
82.80
True or false: The finished product of one company can become raw materials for another company.
True
Sales revenue minus variable expenses equals ____ ______
contribution margin
A factor that causes overhead costs is called a ______. -cost driver -manufacturing cost -cost object -predetermined overhead rate
cost driver
Companies that make many different products each period use ____ _____ costing.
job order
Direct materials and direct labor are both ______ costs.
manufacturing
Manufacturing overhead consists of ______. -a single kind of direct cost -a single kind of indirect cost -many different kinds of direct costs -many different kinds of indirect costs
many different kinds of indirect costs
Companies that use job-order costing make ______. -many different products -a very few products in large numbers
many different products
A cost that contains both variable and fixed cost elements is a(n) ______ cost. -semifixed -sunk -mixed -opportunity
mixed
The materials that go into the final product are called ____ materials.
raw
Estimated manufacturing overhead $500,000 Estimated direct labor cost $250,000 Actual manufacturing overhead $720,000 Actual direct labor cost $300,000 Based on this information, the predetermined overhead rate per direct labor dollar is ______. -$2.40 -$2.00 -$2.88 -$1.67
$2.00 ($500,000 ÷ $250,000 = $2.00 per direct labor dollar)
Murphy Manufacturing estimated total manufacturing overhead for 2021 to be $100,000 and uses direct labor-hours as the allocation base. They estimated that 5,000 hours would be used. Actual overhead for 2021 was $120,000 and actual direct labor-hours were 7,500. The overhead applied to a job completed during 2021 that used 200 direct labor-hours was ______.
$4000 (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 ×200 direct labor-hours = $4,000)
Based on the following information, calculate net income for Dana's Dress Shop using the traditional format. Sales $360,000 Gross Margin $140,000 Contribution Margin $110,000 Total Selling & Administrative Exp. $60,000
$80000 (gross margin of $140000-total selling and admin exp of $60000)
Product costs ______. (multiple) -"attach" to units of products as they are purchased for resale or produced -are always expensed in the same period in which the related products are produced -are also called inventoriable costs -include all costs involved in making and selling a product
-"attach" to units of products as they are purchased for resale or produced -are also called inventoriable costs
An allocation base should be ____ -a cost object -a cost driver -direct labor hours -machine hours
-a cost driver
Cost behavior ______. (multiple) -is a detailed analysis technique used to determine whether costs are fixed or variable -refers to how a cost will change as activity level changes -categorizes costs as fixed, mixed and variable -is the relative proportion of each type of cost in an organization
-refers to how a cost will change as activity level changes -categorizes costs as fixed, mixed and variable
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 (total overhead cost $500000/total machine hours 250000)
Estimated manufacturing overhead $450,000 Estimated direct labor hours 150,000 Actual manufacturing overhead $405,000 Actual direct labor hours 180,000 Based on this information, the predetermined overhead rate per direct labor hour is $
3 (Estimated manufacturing overhead $450,000/Estimated direct labor hours 150,000)
Estimated manufacturing overhead $450,000 Estimated direct labor hours 150,000 Actual manufacturing overhead $405,000 Actual direct labor hours 180,000 Based on this information, the amount of overhead allocated to a job that used 300 direct labor hours is $
900 (predetermined overhead rate 3 * 300 direct labor)
Which of the following would not be a good allocation base for manufacturing overhead? -Accounting hours -Units of product -Direct labor hours -Machine hours
Accounting hours
Which of the following is only true in a multiple predetermined overhead rate system? -Overhead is applied multiple times throughout the period. -Each production department may have its own predetermined overhead rate -Multiple types of overhead are included to calculate the predetermined overhead rate
Each production department may have its own predetermined overhead rate
True or false: All of a company's depreciation, property taxes and insurance premiums are considered manufacturing overhead.
False
All manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under ____ costing.
absorption/full
When a company creates overhead rates based on the actions it performs, it is employing an approach called ______ _____ costing
activity based
How individual costs react to changes in activity level is referred to as ______ cost.
behavior
The type and quantity of each type of direct material needed to complete a unit of product is listed on the _____ -bill of materials -time ticket -production order -materials requisition form
bill of materials
The difference between direct labor and indirect labor is that direct labor ______. -is a manufacturing cost and indirect labor is a period cost -can be easily traced to jobs, while indirect labor cannot -is a manufacturing overhead cost, while indirect labor is not -is a variable cost, while indirect labor is a fixed cost
can be easily traced to jobs, while indirect labor cannot
Any item for which cost data is desired is called a(n) ____ ______
cost object
Differential costs, opportunity costs and sunk costs are all cost classifications used in ______. -account analysis -decision making -predicting cost behavior -financial statements
decision making
Costs that can be easily and conveniently traced to a specific product are called ______ costs.
direct
Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are _____ materials
direct
A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost. -direct material -direct labor -manufacturing overhead -indirect material
direct material
A cost that can be easily and conveniently traced to a specific cost object is a(n) _____ cost of that cost object, whereas costs that cannot be easily and conveniently traced to that specific cost object are _____ costs.
direct, indirect
Labor costs that are easily traced to a job are called ____ labor costs.
direct/touch
Administrative costs include ______. -shipping costs and sales commissions -executive compensation and public relations costs -factory maintenance workers' wages and factory supervisors' salaries -sales commissions and factory supervisors' salaries
executive compensation and public relations costs
True or false: Labor costs that can be specifically traced to a product are indirect labor costs.
false
The adjustment for underapplied overhead ______ net income. -increases cost of goods sold and decreases -decreases both cost of goods sold and -increases both cost of goods sold and -decreases cost of goods sold and increases
increases cost of goods sold and decreases
Salaries of factory supervisors and factory maintenance personnel are examples of ______ labor costs. -direct -indirect -administrative
indirect
Which of the following is not a COST CLASSIFICATION associated with decision making? -differential costs -sunk costs -opportunity costs -indirect costs
indirect costs
Factory materials, such as cleaning supplies, that are not components of finished products are classified as ______. -direct materials -manufacturing overhead -administrative costs -period costs
manufacturing overhead
Indirect materials and indirect labor are classified as ______. -period costs -nonspecific labor -nonspecific materials -manufacturing overhead
manufacturing overhead
The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as the _____ principle
matching
An allocation base is a(n) ______. -activity that causes overhead costs to change -measure of activity used to assign overhead costs to products and services -measure used to assign all manufacturing costs to products and services
measure of activity used to assign overhead costs to products and services
The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find _____ -overhead applied to the job -actual overhead -the predetermined overhead rate for the job -the total cost of the job
overhead applied to the job
Inventoriable costs is another term for _____ costs.
product/manufacturing
On a traditional income statement, cost of goods sold reports the ____ costs attached to merchandise sold during the period, while selling and administrative expenses report all ____ costs that have been expensed as incurred
product/manufacturing, period
The assumption that cost behavior is strictly linear is reasonably valid within the _____ ______of activity
relevant range
When all of a company's job cost sheets are viewed collectively, they form what is known as a(n) ______. -financial statement backup -book of original entry -subsidiary ledger -job cost ledger
subsidiary ledger
Within the relevant range, a cost that changes in direct proportion to changes in the activity level is a ______ cost. -fixed -variable -mixed
variable
Selling and administrative costs are ______ costs. -always indirect -always direct -direct or indirect
-direct or indirect
Typical cost drivers include ______. (multiple) -flight-hours -machine depreciation -computer time -utilities cost -machine-hours
-flight-hours -computer time -machine-hoursfThe
Nonmanufacturing costs include ______. (multiple) -insurance on plant equipment -sales commissions -assembly-line workers -company president's salary
-sales commissions -company president's salary
A cost driver is ______. -a measure that is used to assign overhead costs to products and services -the amount of overhead assigned to a job -something you want to know the cost of -a factor that causes overhead costs to occur
a factor that causes overhead costs to occur
Cost-plus pricing occurs when ____ -the cost of the job is multiplied by 2 -a markup percentage is added to the cost of a job -non-manufacturing costs are added to manufacturing costs
a markup percentage is added to the cost of a job
The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost and ______. -actual manufacturing overhead cost, and applied nonmanufacturing cost -applied manufacturing overhead cost -actual manufacturing overhead cost -applied manufacturing overhead cost and applied nonmanufacturing cost
applied manufacturing overhead cost
An essential quality of an overhead allocation base is that it must _____ -be a cost associated with producing the firm's goods -be calculated using a predetermined overhead rate -be common to all the company's products and services -vary with all overhead costs
be common to all the company's products and services
The predetermined overhead rate is calculated ______. -after the period is over -before the period begins -as soon as actual overhead is known -as the period progresses
before the period begins
Costs assigned to units of product in absorption costing include ______ manufacturing costs. -neither variable nor fixed -only variable -both variable and fixed -only fixed
both variable and fixed
The adjustment for overapplied overhead ______ net income. -increases both cost of goods sold and -decreases cost of goods sold and increases -decreases both cost of goods sold and -increases cost of goods sold and decreases
decreases cost of goods sold and increases
A cost that contains both variable and fixed costs elements is called a(n) _____ cost.
mixed
When compared to a departmental approach, using activity-based costing results in ______ overhead rates -the same number of -more -less
more
Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is ______ accurate. -more complex and more -simpler and less -simpler and more -more complex and less
more complex and more
A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, ______. -$300 is reported as an expense and $900 is reported as a liability -$1200 is reported as a liability -$300 is reported as a expense and $900 is reported as an asset -$1200 is reported as an expense -$1200 is reported as an asset
-$300 is reported as a expense and $900 is reported as an asset
Which of the following are most likely fixed costs? (multiple) -administratiive slaries -electricity to operate factory machines -factory insurance -factory rent
-administratiive slaries -factory insurance -factory rent
Differential cost is ______. (multiple) -never relevant to a product decision -the same as opportunity cost -also known as incremental cost -the difference in cost between two alternatives
-also known as incremental cost -the difference in cost between two alternatives
Manufacturing overhead costs ______. -tend to vary significantly, in total, from one period to the next -do not impact the average cost per unit -are indirect costs -consist of many different items
-are indirect costs -consist of many different items
Indirect labor costs include ______. (multiple) -assembly-line supervisor salary -administrative assistant salary -factory security guard wages -assembly-line worker wages
-assembly-line supervisor salary -factory security guard wages
Manufacturing costs include ______. (multiple) -manufacturing overhead -administrative costs -direct labor -direct materials -selling costs
-manufacturing overhead -direct labor -direct materials
Which of the following is not a manufacturing cost category? -Direct materials -Direct labor -Selling & administrative costs -Manufacturing overhead
Selling & 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 a surgeon at a hospital -The salary of the manager at a hair salon -The wages of technicians at an auto repair shop -The salary of an attorney at a law firm
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? -A repair job at an auto repair shop -A patient in a hospital -A client at a law firm -The tax department in an accounting firm
The tax department in an accounting firm
When a company uses a departmental approach rather than a plantwide approach to applying overhead, the selling price of the product will always be ______. -the same -higher -lower -different
different
In an automobile manufacturing plant, the assembly-line workers are classified as _____ ______ cost.
direct labor
Labor costs that can be easily and conveniently traced to specific products are ______ costs. -indirect labor -direct labor -manufacturing overhead -selling
direct labor
Manufacturing costs can be divided into three categories:
direct labor, direct materials, manufacturing overhead
To calculate a predetermined overhead rate, divide estimated total manufacturing overhead by the _____ -actual total manufacturing overhead -estimated units of production -estimated total allocation base -estimated total direct labor hours
estimated total allocation base
The difference in costs between two alternatives is called a(n) ______ cost. -opportunity -incremental -common -sunk
incremental
The difference in revenues between two alternatives is called _____ -net profit -marginal revenue -incremental cost -incremental revenue
incremental revenue
Differential costs are also known as _____ costs.
incremental/relevant/decremental
A manufacturing cost that cannot be easily traced to a specific cost object is a(n) ______ cost.
indirect
Direct materials costs are recorded on the job cost sheet when the ______. -job is complete -job is sold to a customer -materials are issued to the job -requisition form is submitted to the storeroom clerk
materials are issued to the job
Indirect materials include ______. -laptop computer keyboards -factory manager's salary -factory rent and insurance -nails, glue, and thread
nails, glue, and thread
The formula for applying overhead to a specific job is _____ -predetermined overhead rate × amount of allocation base incurred by job -estimated manufacturing overhead ÷ estimated allocation base -estimated manufacturing overhead × amount of allocation base incurred by job -estimated manufacturing overhead ÷ amount of allocation base incurred by job
predetermined overhead rate × amount of allocation base incurred by job
A multiple predetermined overhead rate system is more accurate than a plantwide overhead rate system because it ______. -reflects differences in how overhead costs are incurred within departments -reflects how different departments use direct labor -reflects how different departments use direct materials -is easier to apply than a plantwide system
reflects differences in how overhead costs are incurred within departments
Period costs are always expensed on the income statement in the period in which ______. -they are incurred -the cash for the expense changes hands -the related goods are sold
they are incurred
An income statement focusing on product and period costs has been prepared using a(n) _____ format, while a(n) ____ format income statement makes a distinction between fixed and variable costs.
traditional/GAAP, contribution
Within the relevant range of activity ______. (multiple) -variable costs do not change in total, only per unit -costs and activity can be approximated by a straight line -fixed costs remain constant in total
-costs and activity can be approximated by a straight line -fixed costs remain constant in total
Manufacturing overhead ______. (multiple) -is an indirect cost -is directly traceable to units produced -consists of many different types of costs -contains fixed costs
-is an indirect cost -consists of many different types of costs -contains fixed costs
Widely used allocation bases in manufacturing include ______. (multiple) -machine hours -units of product -nonmanufacturing costs -direct labor cost -direct labor hours -product revenue
-machine hours -units of product -direct labor cost -direct labor hours
A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of ______. (multiple) -direct materials -manufacturing overhead -indirect materials -administrative costs
-manufacturing overhead -indirect materials
Which of the following would be considered direct materials in a service firm that uses job-order costing? -Beds in a hospital -Scissors at a hair salon -Tools in an auto repair shop -Paperwork at a law firm
Paperwork at a law firm
The formula for a predetermined overhead rate is _____ -estimated total manufacturing overhead cost ÷ estimated total allocation base -actual total allocation base ÷ actual total manufacturing overhead cost -actual total manufacturing overhead cost ÷ actual total allocation base -estimated total allocation base ÷ estimated total manufacturing overhead cost
estimated total manufacturing overhead cost ÷ estimated total allocation base
A predetermined overhead rate is calculated by dividing the ______ total manufacturing overhead by the ______ total allocation base. -actual; actual -actual; estimated -estimated; actual -estimated; estimated
estimated; estimated
Manufacturing overhead costs include ______. -indirect materials, factory supervisors' salaries, and factory depreciation -direct materials, sales commissions, and factory assembly workers' wages -administrative taxes and insurance, sales commissions, and factory assembly workers' wages -direct materials, administrative taxes and insurance, and sales commissions
indirect materials, factory supervisors' salaries, and factory depreciation
Manufacturing overhead cost does not include which of the following: -fixed costs -indirect costs -many different types of cost -is directly traceable to units produced
is directly traceable to units produced
Cost objects include ______. (multiple) -anything for which revenue data is desired -customers -organizational subunits -anything for which cost data is desired
-customers -organizational subunits -anything for which cost data is desired
Categories of manufacturing costs include ______. (multiple) -direct labor -direct materials -manufacturing overhead -administrative expenses -selling expenses
-direct labor -direct materials -manufacturing overhead
The document that records the materials, labor, and manufacturing overhead costs charged to a job is the ______. -materials requisition form -production order -time ticket -job cost sheet
job cost sheet
Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ______. -manufacturing overhead -direct materials -indirect labor -period costs
manufacturing overhead
Factory labor charges that cannot be easily traced to a job are treated as ______. -manufacturing overhead -nonmanufacturing costs -direct labor
manufacturing overhead
Direct materials, direct labor, and manufacturing overhead are all ______ costs.
product
The total cost of a job includes ______. -actual manufacturing overhead -direct labor cost -direct materials cost -applied manufacturing overhead -nonmanufacturing cost
-direct labor cost -direct materials cost -applied manufacturing overhead
The appeal of using predetermined departmental overhead rates is they presumably provide ______. (multiple) -higher profitability for the company -enhanced information for decision making -a more accurate accounting of costs
-enhanced information for decision making -a more accurate accounting of costs
Company Dept. A Dept B. Predetermined overhead rate per direct labor hour $2.10 $2.40 $1.80 Direct labor hours hours worked on Job ABC 30 17 13 Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is ______. -$63.00 -$64.20 -$72.00 -$54.00
$64.20 ($2.40 × 17 + $1.80 × 13 = $64.20)
Which of the following are differences between the traditional and contribution format to income statements? (multiple) -The traditional income statement is for internal use, while the contribution format income statement is for external use -Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior -Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier
-Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior -Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier
Selling costs include ______. (multiple) -advertising -sales salaries -sales commissions -administrative salaries
-advertising -sales salaries -sales commissions
Why do companies use a predetermined overhead rate rather than an actual overhead rate? -An actual overhead rate can never be calculated. -An actual overhead rate is not known until the end of the period. -A predetermined overhead rate is more accurate. -A predetermined overhead rate is easier to use.
An actual overhead rate is not known until the end of the period
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/activity, base/driver
Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) ______ cost of the customer placing the order.
direct
Cost of goods sold for a merchandising company, direct materials and commissions are all examples of _____ costs.
variable
Allocation bases that do not drive overhead costs ______. -cannot be used to calculate overhead using a predetermined rate -will not accurately measure the cost of overhead used -are difficult to keep track of
will not accurately measure the cost of overhead used
A job cost sheet contains ______. (multiple) -manufacturing overhead costs charged to the job -materials costs charged to the job -selling costs charged to the job -the selling price of the job -labor costs charged to the job
-manufacturing overhead costs charged to the job -materials costs charged to the job -labor costs charged to the job
Which of the following statements are true? (multiple) -The wages of assembly-line workers are period costs -period costs are expensed in the same period in which they are incurred -period costs are included as part of the cost of goods -sales commissions are period costs
-period costs are expensed in the same period in which they are incurred -sales commissions are period costs
Which of the following statements are true? (multiple) -period costs are expensed when incurred -period costs do not flow through the inventory accounts -inventoriable costs are expensed in the period in which they are incurred -all costs in a merchandising company are period costs
-period costs are expensed when incurred -period costs do not flow through the inventory accounts
Contribution margin is ______. -sales revenue minus variable costs -all revenues minus all costs -sales revenue minus fixed costs -sales revenue minus cost of goods sold
-sales revenue minus variable costs
Opportunity costs ______. (multiple) -are uncommon in decision making -should be considered in decision making -are part of traditional accounting records -are benefits that are given up when selecting one alternative over another
-should be considered in decision making -are benefits that are given up when selecting one alternative over another