accounting 202 chapter 2 learnsmart
companies assign costs to products and services to
-establish selling prices -understand product profitability -value ending inventory
widely used allocation bases in manufacturing are:
-machine hours -direct labor cost -units of production -direct labor hours
categories of manufacturing costs include
-manufacturing overhead -direct materials -direct labor
the total cost of a job is calculated by adding the total of direct labor cost, direct materials cost and
applied manufacturing overhead cost
the predetermined overhead rate is calculated:
before the period begins
a factor that causes overhead costs is called a
cost driver
Why is the unit product cosp uced? a. There would be no additional cost to produce another unit b. The cost that would be incurred if another unit were produced cannot be calculated c. The predetermined overhead rate changes with each unit produced d. The cost to produce another unit is the incremental or marginal cost
d
to calculate a predetermined overhead rate, divide estimated manufacturing overhead by
estimated allocation base
the US requires absorption costing for _____ financial reports
external
which is an essential quality of an overhead allocation base
it must be common to all the company's products and services
A document that records the materials, labor and manufacturing overhead cots charged with the job
job cost sheet
the type and quantity of materials to be drawn from the storeroom and the job that will be charged for the materials is specified on the
materials requisition form
the predetermined overhead rate is multiplied by the actual allocation base incorrect by a a job to find:
overhead applied 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
when all overhead is assigned using direct labor hours, the company has chosen to use ____ predetermined overhead rate
plantwide
which of the following would NOT be considered a direct labor cost in a service firm that used job-order costing?
the salary of the manager at a hair salon (this would be considered overhead)
an hour-by-hour summary of an employee's activities throughout the day is found on the _____ _______
time ticket
in the formula Y = a + bX, the a represents the estimated:
total fixed manufacturing overhead cost
manufacturing overhead costs:
-consist of many different items -are indirect costs
materials requisition forms are used for
-controlling the flow of materials into production -making journal entries in accounting records
Widely used allocation bases in manufacturing are:
-direct labor hours -direct labor cost -units of product -machine hours
the total cost of a job includes
-direct materials cost -direct labor cost -applied manufacturing overhead
Labor charges that cannot be easily traced to a job are considered:
-manufacturing overhead -indirect labor
a job cost sheet contains
-manufacturing overhead costs charged to the job -labor costs charged to the job -materials costs charged to the job
an allocation base should be
a cost driver
all manufacturing costs are assigned to units of product and all non manufacturing costs are treated as period cost under ____ costing
absorption
what is the most common approach to product costing throughout the world
absorption costing
which would NOT be a good allocation base for manufacturing overhead
accounting hours (accounting hours are not related to manufacturing)
when a company creates overhead rates based on the actions it performs, it is employing an approach called
activity-based costing
the process used to assign overhead costs to products is called overhead
allocation
a measure such as direct-labor hours used o assign overhead costs to products and services is called a cost driver or
allocation base
a job-order costing system may inaccurately assign costs to jobs due to
an inappropriate allocation base
the adjustment for underapplied overhead
increases cost of goods sold (COGS) and decreases net operating income
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 ________ _________
job-order costing
a service firm that would most likely use job-order costing is a
law practice
the manufacturing overhead account contains
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 job
the formula for applying overhead to a specific job is
predetermined overhead are x amount of allocation base incurred by a job
when all of a company's job cost sheets are viewed collectively, they form what is known as a
subsidiary ledger
which of the following would not be considered a job in a service form that uses job order costing
the tax department in an accounting firm (this is a department; a job would be an individual client)
job XYZ has a total manufacturing cost of $600. if the mark-up percentage is 40%, the job will sell for
$840
the total cost of a job includes
-direct labor cost -applied manufacturing overhead -direct materials cost
costs assigned to units of product user absorption costing include:
-fixed manufacturing -variable manufacturing
manufacturing overhead
-is an indirect cost -consists of many different types of costs -contains fixed costs
a normal costing system applies overhead by job by multiplying a ____ _____ rate by the ___ _____ of the allocation base incurred by the job
-predetermined overhead -actual amount
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 unit product cost is the same as the
-total job cost divided by number of units -average production cost per unit
a normal cost system assigns overhead to jobs using
a predetermined overhead rate
to calculate the unit product cost using the job cost sheet:
divide the total job cost by the # of units produced
a predetermined overhead rate is calculated by dividing the ____ total manufacturing overhead by the _____ total amount of the allocation base
estimated/estimated
compared to a plant wide overhead rate system, a multiple predetermined overhead are system is
more complex, but more accurate
to keep track of labor time and costs, many firms have replaced
paper time tickets with computerized systems
a multiple predetermined overhead rate system is more accurate than a plant wide overhead rate system because it
reflects differences in how overhead costs are incurred within departments
t/f one reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors
true
t/f underapplied or oversupplied overhead occurs because overhead is applied to jobs using a predetermined rate based on estimates of costs and activity levels
true
the average manufacturing overhead cost per unit tends to
vary from one period to the next