Accounting Ch2

The adjustment for overapplied overhead ________.

decreases cost of goods sold and increases net operating income.

Companies can improve job cost accuracy by using ________.

multiple predetermined overhead rates

When all of a company's job cost sheets are viewed collectively they form what is known as a ________.

subsidiary ledger

What is the term used when a company applies less overhead to production than it actually incurs?

Underapplied

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

Manufacturing overhead is incurred only to support some jobs.

Spartan Corporation estimates that it will incur $200,000 of total manufacturing overhead cost at an estimated activity level of 10,000 direct labor-hours. What is the amount of manufacturing overhead that would be applied to a job that required 200 direct labor-hours?

Predetermined overhead rate = $200,000 ÷ 10,000 DLHs = $20 per DLH For 200 DLHs, the manufacturing overhead that would be applied is = $20 per DLH × 200 DLHs = $4,000

The direct materials required to manufacture each unit of product are listed on a ________.

bill of materials The direct materials required to manufacture each unit of product are listed on a bill of materials. A materials requisition form identifies the materials drawn from the storeroom that must then be charged to each job. Each employee who works on the job uses a time ticket to record the time spent. A job cost sheet is used to keep track of the materials, labor, and manufacturing overhead costs charged to each job.

A normal cost system applies overhead to jobs ________.

by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job

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

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

True

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200 respectively. If Job X23 used 100 direct labor-hours to produce 50 audio controllers, what is this job's unit product cost (per audio controller)?

Unit product cost = Total product cost ÷ Number of units Unit product cost = $6,200 ÷ 50 Units = $124

Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours 40,000 Total fixed manufacturing overhead cost $ 96,000 Variable manufacturing overhead per direct labor-hour $ 3.00 Recently, Job P951 was completed with the following characteristics: Number of units in the job 20 Total direct labor-hours 100 Direct materials $ 755 Direct labor cost $ 4,000 The amount of overhead applied to Job P951 is closest to: (Round your intermediate calculations to 2 decimal places.)

Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $96,000 + ($3.00 per direct labor-hour × 40,000 direct labor-hours) = $96,000 + $120,000 = $216,000 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $216,000 ÷ 40,000 direct labor-hours = $5.40 per direct labor-hour Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $5.40 per direct labor-hour × 100 direct labor-hours = $540

Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours 40,000 Total fixed manufacturing overhead cost $ 96,000 Variable manufacturing overhead per direct labor-hour $ 3.00 Recently, Job P951 was completed with the following characteristics: Number of units in the job 20 Total direct labor-hours 100 Direct materials $ 755 Direct labor cost $ 4,000 The total job cost for Job P951 is closest to: (Round your intermediate calculations to 2 decimal places.)

Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $96,000 + ($3.00 per direct labor-hour × 40,000 direct labor-hours) = $96,000 + $120,000 = $216,000 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $216,000 ÷ 40,000 direct labor-hours = $5.40 per direct labor-hour Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $5.40 per direct labor-hour × 100 direct labor-hours = $540 Direct materials $ 755 Direct labor 4,000 Manufacturing overhead applied 540 Total cost of Job P951 $ 5,295

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. T/F

False

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

False

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200 respectively. If Job X23 used 100 direct labor-hours, what is the total cost assigned to this job?

Total cost associated with the job = Direct material + Direct labor + Manufacturing overhead applied Total cost associated with the job = $4,000 + $1,200 + ($10 × 100 DLHs) = $6,200

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

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

In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated ________.

total fixed manufacturing overhead cost The cost formula used to estimate the total manufacturing overhead cost for a given period is: Y = a + bX where, Y = the estimated total manufacturing overhead cost, a = the estimated total fixed manufacturing cost, b = the estimated variable manufacturing overhead cost per unit of the allocation base, and X = the estimated total amount of the allocation base.

Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours 40,000 Total fixed manufacturing overhead cost $ 96,000 Variable manufacturing overhead per direct labor-hour $ 3.00 Recently, Job P951 was completed with the following characteristics: Number of units in the job 20 Total direct labor-hours 100 Direct materials $ 755 Direct labor cost $ 4,000 The predetermined overhead rate is closest to:

Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $96,000 + ($3.00 per direct labor-hour × 40,000 direct labor-hours) = $96,000 + $120,000 = $216,000 Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $216,000 ÷ 40,000 direct labor-hours = $5.40 per direct labor-hour