ACCT:2200 Midterm 3

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

false

In a job order costing system, the direct materials is assigned to the job based on the materials requisition slip.

true

Indirect costs have to be allocated to the cost objects. The best way to allocate an indirect cost is to identify a cost driver that exhibits a strong correlation to the cost. Then that cost can be divided up between the cost objects based on the usage of the cost driver by the cost object. True False

true

Actual overhead costs are not assigned to jobs in a job costing system.

true -We use the predetermined overhead rate to allocate overhead to jobs. This rate uses the estimated manufacturing overhead in its calculation.

Which of the following companies are most likely to use job order costing? Select all that apply. -A company that produces gallons of paint, such as Sherwin Williams. -A CPA firm that completes tax returns for various clients, such as RSM. -A company that mass produces ice cream, such as Ben & Jerry's. -An architecture firm that designs buildings., such as Shive- Hattery.

-A CPA firm that completes tax returns for various clients, such as RSM. -An architecture firm that designs buildings., such as Shive- Hattery.

We use estimates in computing a predetermined overhead rate when determining how to allocate overhead. Because of this, there are differences between the what we applied to cost objects versus what the total overhead costs actually are for the period. This results in manufacturing overhead being over or under-applied. When manufacturing overhead is under-applied: (Select all that apply) 1.the amount of overhead assigned to the cost objects for the period is less than the actual manufacturing overhead that is incurred. 2.the amount of overhead assigned to the cost objects for the period is more than the actual manufacturing overhead that is incurred. 3.Cost of goods sold will be increased to adjust for this difference. 4.Cost of goods sold will be decreased to adjust for this difference.

1 & 3

What items caused the need for multiple overhead rates and cost drivers? Select all that apply. 1.The number of product variations. 2.The increase in direct labor costs. 3.The increase in automation. 4.The increase in indirect costs as a percentage of total costs.

1,3,4

What is an advantage of ABC? Select all that apply. 1.The costs associated with implementing the system. 2.Its compliance with GAAP. 3.A better understanding of what is causing the costs of your cost object which can lead to strategies to reduce costs. 4.More accurate costing of your cost objects.

3&4

Which of the following is a volume based allocation measure that is often used in traditional costing or in assigning unit level costs in an ABC system? Number of units produced. Number of direct labor hours. Number of machine hours. All of the above.

All of the above.

Number of setups is an example of: Unit level activity. Batch level activity. Product-level activity. Organizational sustaining activity.

Batch level activity.

Another name for an activity cost pool is an activity measure. True False

False

Both traditional and ABC cost systems focus on the assignment of: Direct costs Indirect costs Manufacturing costs Nonmanufacturing costs

Indirect costs Explanation Remember in ABC, we add in the assignment of nonmanufacturing costs as well....we don't do this in traditional product costing where we just look at assigning manufacturing costs to the cost object. Again the focus of both is how we get assign(allocate) those indirect costs to the cost object.

What is true about the pizza example when comparing the traditional(one rate) method for allocating overhead to the multiple rate method for allocating overhead? Maria was charged too much when using the traditional method. Steve was charged too much when using the traditional method. Both Maria and Steve were charged to much when using the traditional method. Both Maria and Steve were charged too little when using the traditional method.

Maria was charged too much when using the traditional method.

In a job-order costing system that is based on machine-hours, what is the formula?

Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours

Assume you are out with friends for dinner. The waitress comes back with a total bill for your table. Which costs would be considered direct costs if each person is the cost object? The costs of the appetizers that were shared by the table. The cost of the individual dinners each person ordered. The cost of the pitcher of soda that was order for the table.

The cost of the individual dinners each person ordered.

An activity measure is another name for a cost driver in an ABC system. True False

True