Acct 2102 Test 1 learnsmarts
CH 2. Job-Order Costing
Calculating Unit Product Costs (cont.)
CH. 3 Job-Order Costing
Cost Flows and External Reporting
when preparing financial statements in a job-order costing system, finished goods first flow to the ________ _______ and then to the ________ ________.
balance sheet, income statement
customer orders are considered to be a(n) _____-level activity
batch
setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of _____-level activities
batch (relates to groups of units, regardless of how many units are in the group)
what type of activities are performed each time a group of units is processed, regardless of how many units are in the group?
batch-level
ABC can be used in
both service and manufacturing companies
Allocation bases that do not drive overhead costs
can cause product costs to be distorted
finished goods
consists of completed products not sold to customers yet
finished goods _____.
consists of completed, unsold goods
work in process
consists of units of product that are started but only partially complete and require further work before sale
administrative costs
cost associated with general management of an organization rather than with manufacturing or selling
what accounts are debited when goods are sold on account?
cost of goods sold and accounts receivable
selling costs
costs incurred to secure customer orders and get finished product
when overhead is underapplied, a _____ must be made to the manufacturing overhead account to close it out
credit
the ____ side of the manufacturing overhead account is always used to record manufacturing overhead applied to the production and the _____ side is always used to record the actual manufacturing overhead costs incurred
credit, debit
actual manufacturing overhead was $50,000, while overhead applied to jobs was $45,000. The entry to dispose of underapplied or overapplied overhead
credits manufacturing overhead $5,000 (underapplied overhead results in a $5,000 debit balance in the overhead account. To dispose of it, manufacturing overhead should be credited for $5,000).
the adjustment for overapplied O/H _____.
decreases cost of goods sold and increases net income
a journal entry that debits depreciation expense and credits accumulated depreciation records ______.
depreciation on office equipment
the journal entry that debits work in process and manufacturing overhead and credits salaries and wages payable is recording
direct and indirect labor costs
conversion cost
direct labor and manufacturing overhead
in the 1800's
direct labor and overhead was believed to be highly correlated, cost systems emphasized simplicity
a journal entry that debits manufacturing overhead and credits accounts payable would NOT be used to record _____.
direct labor costs (the incurrence of direct labor costs should be recorded by debiting work in process account)
in recent years, as a percentage of total cost
direct labor has been decreasing and overhead has been increasing
reasons that companies are moving away from a plantwide overhead rate like direct labor
direct labor is no longer directly correlated to overhead for many products, a variety of products are made by companies, many tasks are now down with automated equipment
Categories of manufacturing costs include ____
direct labor, direct materials, manufacturing overhead
prime cost
direct material and direct labor
in a normal costing system, work in process is debited for
direct materials and manufacturing overhead applied
not a common method used to assign overhead to products
direct tracing of overhead
if factory wide overhead costs do not move in the same direction as the plantwide activity base, products cost will be
distorted
which of the following is only true in a multiple POHR system?
each production department may have its own POHR
to calculate a POHR, divide estimated manufacturing overhead by the
estimated allocation base
predetermined overhead rate
estimated overhead/estimated activity base
Job-order costing can only be used in manufacturing firms
false
traditional cost systems tend to undercost standard products and overcost specialty products
false
when jobs are sold their costs are transferred period costs flow from finished goods to cost of goods sold
false
when a job is completed, which account is debited?
finished goods
when goods are sold on account, what accounts are credited?
finished goods and sales
average manufacturing o/h cost per unit usually varies from one period to the next because
fixed manufacturing overhead remains constant in total even when production changes
a journal entry debiting COGS and crediting finished goods is made when
goods are sold
which is generally not part of the design of an ABC system
identifying and including all activities that cause overhead costs (there are hundreds or thousands of activities that drive overhead costs, and it would be too expensive to identify every one of them)
using direct-labor hours or another volume based cost driver to assign overhead
ignores other significant causes of overhead, may result in selling products at a loss, ma result in overcharging customers for products
in a system that uses multiple POHR's, overhead is applied
in each department as jobs proceed through the department
product costs
include all costs involved in acquiring or making a product
raw materials
include any materials that haven't entered into manufacturing process yet
cost of goods manufactured ____.
includes the manufacturing costs of goods finished during the period
selling and administrative costs first appear on the _____.
income statement
labor costs charged to manufacturing overhead represent
indirect labor costs
materials requisition forms are used for
making journal entries into accounting records, controlling the flow of materials into production
which is not a benefit of activity-based costing to managers?
managers have numerous cost pools that are identified for each major activity (this is a benefit of ABC costing, but not a benefit directly to a manager).
selling price
manufacturing cost + mark up
which account is credited when manufacturing overhead is applied?
manufacturing overhead
the journal entry to record $1,000 in expired prepaid insurance on factory equipment is debit
manufacturing overhead $1,000 and credit prepaid insurance $1,000
the journal entry to record $20,000 in depreciation on factory equipment is debit
manufacturing overhead $20,000 and credit accumulated depreciation $20,000
if a company incurs $2,000 of factory rent, $1,000 of factory utilities, and $5,000 of miscellaneous factory costs, the journal entry to record these transactions would be to debit
manufacturing overhead $8,000 and credit accounts payable $8,000
the journal entry to record accrued property taxes for a factory building debits
manufacturing overhead and credits property taxes payable
the periods ends
manufacturing overhead is closed
overhead is applied to work in process
manufacturing overhead is credited
actual overhead is incurred
manufacturing overhead is debited
companies that use job-order costing make
many different products
DM costs are recorded on the job cost sheet when the
materials are issued to the job
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 cost of implementing and maintaining an ABC system
may outweigh the benefits received
departmental overhead rates
may use different allocation bases in different departments, may not assign overhead correctly with a company has a range of products
Compared to a plantwide o/h rate system, a multiple POHR system is
more complex, but more accurate
applied manufacturing overhead will most likely _____ actual manufacturing overhead
not equal
activities that occur regardless of which customers are served, which products are produced or how many batches are run or units made are facility-level or _____-______ activities
organization-sustaining
the difference between O/H applied to work in process and actual overhead is ___.
overapplied or underapplied overhead
the difference between overhead applied to work in process and actual overhead is
overapplied or underapplied overhead
usually, traditional costing _____ high volume products and ____ low-volume products
overcosts, undercosts
the first stage of allocating overhead costs to products
overhead costs are assigned to activity cost pools
the basis of benchmarking is comparing
performance within the same industry
maintaining a product manager and staff is a(n) _____ activity
product-level
activity-based costing is most likely to be beneficial when
products differ substantially in batch size and the activities they require, overhead costs are high and increasing and no one knows why
which are true
products do not all use resources in the same way, traditional costing systems can distort product costs
unit level activities are
proportional to the number of units produced
a journal entry that debits raw materials and credits accounts payable is recording the
purchase of materials
a bill of materials contains the
quantity of each direct material needed to complete a unit of a product, type of each direct material needed to complete a unit of product
any purchased materials that will go into the finished product are first recorded in the _____ _____ inventory account
raw materials
the journal entry to record issuing materials to be used in production credits ____.
raw materials
activity-based management is focused on
reducing defects, eliminating waste
total manufacturing o/h costs tend to
remain fairly constant
implementing activity based costing
requires substantial resources, should be done by a cross-functional team, requires taking employees away from other tasks
contribution margin
sales minus variable cost
when making decisions
some selling and administrative expenses should be assigned to the products
When all of a company's job cost sheets are viewed collectively, they form what is known as a(n)
subsidiary ledger
costs of goods manufactured is _____.
sum of all jobs transferred from work in process to finished goods
which of the following issues needs to be considered when implementing an ABC system?
the cost in each activity cost pool may not be strictly proportional to its activity measure, the cost of designing and implementing the system may outweigh the benefits of the system
the value of work in process is equal to
the cost of all unfinished jobs
Which of the following not be considered a job in a service firm that uses job-order costing?
the tax department in an accounting firm (this is a DEPARTMENT; a job would be an individual client)
An hour-by-hour summary of an employee's activities throughout the day is found on the _____ ____
time ticket
activity rate is computed by dividing the _______ by the _______
total cost in the activity cost pool; activity level in the activity cost pool
ABC relies on a number of critical assumptions which could distort information for making decisions
true
manufacturing overhead costs consist of all manufacturing costs other than direct materials and direct labor
true
the transfer of costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next
true
the costs in the activity cost pools are allocated to products using activity rates and activity measures. This is part of stage ____ in allocating overhead costs to products
two
under activity-based costing, the manufacturing overhead costs are allocated to products via a _____-stage process
two
a debit balance in manufacturing overhead means overhead was
underapplied
when only a portion of the units involved in a job are sold, the
unit product cost is used to calculate the amount transferred from the finished goods to cost of goods sold
what level of activity is performed each time an item of a product is produced?
unit-level
companies assign costs to products and services to
value ending inventory, understand product profitability, establish selling prices
costs partially completed units are accounted for in
work in process
manufacturing overhead is applied with a debit to
work in process
a company incurred $10,000 in direct labor costs and $8,000 in indirect labor costs. The journal entry to record this transaction debits
work in process $10,000 and manufacturing overhead $8,000 and credits salaries and wages payable $18,000
which account(s) are debited in the journal entry to record manufacturing labor costs?
work in process and manufacturing overhead
the journal entry to record to more accurate allocation of overapplied or underapplied overhead includes entries to
work in process, cost of goods sold, finished goods, manufacturing overhead
which is true
ABC may be useful to a company whose costs have changed substantially since the existing cost system was developed
departmental overhead rates may not correctly assign overhead costs in situations where a company has
a variety of products
the journal entry to record the purchase of materials credits ____.
accounts payable
in ABC, any event that causes consumption of overhead resources is a(n)
activity
when a company created O/H rates based on the actions it performs, it is employing an approach called ____-_____ costing.
activity - based
focusing on activities to eliminate waste, decrease processing time, and reduce defects in the basis of _____ _____ management
activity based
a "bucket" in which costs are accumulated that relate to a single activity measure in the ABC system is a(n)
activity cost pool
the formula to apply overhead to products is
activity rate x activity
the manufacturing overhead account is debited when _______.
actual overhead costs are incurred
in a normal costing system, the manufacturing overhead account is debited for
actual overhead costs, the cost of indirect materials
an activity measure is a(n) _______ base in an activity-based costing system
allocation
a predetermined overhead rate in an activity-based costing system is called
an activity rate
a job-order costing system may inaccurately assign costs to jobs due to
an innapropriate allocation base
which of the following appears on job cost sheets and in the work in process account?
applied manufacturing overhead
Manufacturing O/H Costs
are indirect costs, consist of many different items, contains fixed costs
actual manufacturing overhead costs are recorded in the manufacturing overhead account
as they are incurred
raw materials inventory is an
asset
bar codes can be used to
automatically record and post DL costs to jobs
a job consisted of 1,000 units at a total cost of $200,000. The cost transferred to cost of goods sold for the sales of 600 units is
$120,000 ($200,000/1,000 x 600)
based on this information, the overhead applied to job ABC using multiple POHR is
$2.40 x 18/$1.80 x 22=$82.80
based on this information, the POHR per DLH for Dept. A is, based on this information, the POHR per DLH for Dept. B is
$338,000/$130,000=$2.60, $162,000/$120,000=$1.35
Based on this information, the predetermined overhead rate per direct labor hour is $_____
$450,000/150,000= $3.00 per DLH
plaster company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine set-ups. The activity rate is
$500/set-up ($400,000/800)
Job XYZ has a total manufacturing cost of $600. If the mark-up percentage is 40%, the job will sell for
$840 (600 x .40 = $240 + 600 = $840)
overhead applied to a particular job
POHR x amount of allocation base incurred by job
an allocation base should be
a cost driver
