ACC112 - Chapter 2 Smartbook

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

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

Typical cost drivers include:

- computer time - flight-hours - machine-hours

Manufacturing overhead costs

- consist of many different items - are indirect costs

Manufacturing overhead:

-is an indirect cost. -is directly traceable to units produced. -consists of many different types of costs.

A cost driver is

A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs.

Which of the following would not be a good allocation base for manufacturing overhead? A.) Machine hours B.) Accounting hours C.) Units of product D.) Direct labor hours

Accounting hours bc they are not related to manufacturing

Which of the following would not be a good allocation base for manufacturing overhead?

Accounting hours bc they are not related to manufacturing overhead

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

Each production department may have its own predetermined overhead rate.

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

Cost-plus pricing occurs when

a markup percentage is added to the cost of a job

All manufacturing costs are assigned to units of product and all non-manufacturing costs are treated as period cost under............costing

absorption

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

activity-based costing

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

Companies use a predetermined overhead rate rather than an actual overhead rate because

an actual rate is not known until the end of the period

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

application

Overhead application is the process of

assigning manufacturing overhead cost to jobs

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

be common to all the company's products and services

The predetermined overhead rate is calculated...

before the period begins

The difference between direct labor and indirect labor is that direct labor...

can be easily traced to jobs, while indirect labor cannot

Job-order costing would most likely be used in a(n)

construction company

An allocation base should be:

cost driver

The adjustment for overapplied overhead Blank______ net income.

decreases cost of goods sold and increases

The adjustment for overapplied overhead ___ net income.

decreases cost of goods sold and increases

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

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

A predetermined overhead rate is calculated by dividing the ______ total manufacturing overhead by the ______ total allocation base. Multiple choice question.

estimated; estimated

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

increases COGS and decreases net operating income

Factory labor charges that cannot be easily traced to a job are treated as

manufacturing overhead

Manufacturing overhead consists of

many different kinds of indirect costs

Direct materials costs are recorded on the job cost sheet when the

materials are issued to the job

Direct materials costs are recorded on the job cost sheet when the....

materials are issued to the job

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

more

Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is ______ accurate.

more complex and more

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

overhead applied to the job

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

predetermined manufacturing overhead cost.

The formula for applying overhead to a specific job is: ______ amount of allocation base incurred by job.

predetermined overhead rate ×

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n)

subsidiary ledger

Allocation bases that do not drive overhead costs

will not accurately measure the cost of overhead used

A bill of materials contains the

- type of each direct material needed to complete a unit of product - quantity of each direct material needed to complete a unit of product

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

divide the total job cost

A job cost sheet contains ______ the job.

-labor costs charged to -manufacturing overhead charged to -materials costs charged to

Costs assigned to units of product under absorption costing include:

- variable manufacturing. - fixed manufacturing.

Widely used allocation bases in manufacturing include

- direct labor hours - units of product - direct labor cost - machine hours

An allocation base is a(n)...

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

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

paperwork at a law firm

The total cost of a job includes:

-direct materials cost. -direct labor cost. -predetermined manufacturing overhead.


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