ACG Chapter 3
When manufacturing overhead is applied to each unit of product B, what is the activity rate that will be used for the setting up machines (setup) activity cost pool?
activity rate for the setting up machines (setup) activity cost pool = activity measure/number of activities= per unit activity rate
An activity measure is a(n)______
allocation base
the adjustment for underapplied overhead is
increase cost of goods sold and decrease net 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 product each period use
job order costing
factory labor charges that cannot be easily traced to a job are treated as ______
manufacturing overhead
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 type and quantity of materials to be drawn from the storeroom and the job that will be charged for materials is specified on the
materials requisition form
compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is
more complex but more accurate
What is (are) used in activity based absorption costing to assign overhead costs to products?
multiple activity rates
companies can improve job cost accuracy by using _____
multiple predetermined overhead rates
Wilson products uses a plant wide 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 uses 100 direct labor hours to produce 50 audio controllers, what is this jobs unit product cost (per audio controller)?
$124 Total cost associated with the job = $4,000 + $1,200 + ($10 x 100 DLH) = $6,200 Unit product cost = total cost associated with the job / number of units $6,200/50 units= $124
est MOH $500,000 est DL cost $250,000 actual MOH $720,000 actual DL cost $300,000 Based on this info, the predetermined overhead rate per direct labor dollar is
$2.00 ($500,000/$250,000)
Smith, Inc. uses a job-order costing system with the predetermined overhead rate of $12 per machine-hour. The job cost sheet for Job #42A listed $12,000 in direct labor cost, $18,000 in direct materials cost, 1,200 direct labor-hours and 1,100 machine hours. The total cost of job #42A is $______________.
$43,200 (12 x 1,100) + 12,000 + 18,000
est. MOH $450,000 est. DL hours 150,000 actual MOH $405,000 actual DL hours 180,000 Based on this info, the amount of overhead allocated to a job that used 300 DL hours is $
$900 (450,000/150,000= 3 3 x 300= 900)
the unit product cost is the same as the
-average product cost per unit -total job cost divided by number of units
materials requisition form are used for
-controlling the flow of materials into production -making journal entries in accounting records
A job cost sheet contains
-manufacturing overhead costs charged to the job -labor costs charged to the job -materials costs to the job
the formula for a predetermined overhead rate is
Estimated manufacturing overhead cost divided by estimated allocation base
which of the following would not be a good allocation base for manufacturing overhead
accounting hours
A job order costing system may inaccurately assign costs to jobs due to
an inappropriate allocation base
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
the predetermined overhead rate is calculated
before the period begins
The direct materials required to manufacture each unit of product are listed on a
bill of materials
The type and quantity of each type of direct material needed to complete a unit of product is listed on the
bill of materials
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
A factor that causes overhead costs is called a
cost driver
The adjustment for overapplied overhead _____
decrease cost of goods sold and increase net operating income
Underapplied or overapplied overhead is the ____
difference between overhead applied to work in process and actual overhead
the difference between overhead applied to work in process and actual overhead is
overapplied or overapplied overhead
the predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find
overhead applied to the job
to keep track of labor time and costs, many firms have replaced
paper time tickets with computerized systems
When all overhead is assigned using direct labor hours, the company has chosen to use a ___ predetermined overhead rate
plantwide
Design and engineering changes are examples of ____
product level activities
A multiple predetermined overhead rate system is more accurate than a plantwide overhead rate system because
reflects differences in how overhead costs are incurred within departments
A multiplied predetermined overhead rate system is more accurate than a plantwide overhead rate system because it
reflects differences in how overhead costs are incurred within departments
Which of the following is not a manufacturing cost category?
selling and admin costs
When all of a company's job cost sheets are viewed collectively they form what is known as ____
subsidiary ledger
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
an hour by hour summary of an employees activities throughout the day is found on the ___ ____
time ticket
one reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors
true
underapplied or overapplied overhead occurs because overhead is applied to jobs using a predetermined rate based on estimates of costs and activity levels
true
What is the term used when a company applies less overhead to production than it actually incurs?
underapplied
estimated fixed MOH $534,000 estimated activity level 30,000 machine hours actual fixed MOH $487,000 actual activity level 27,400 The predetermined overhead rate per machine hour would be closest to
$17.80 Estimated Fixed MOH of $534,000/ estimated activity level of 30,000= 17.80 predetermined overhead rate
Wilson products uses a plant wide 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 the job?
$6,200 total cost associated with the job = DM +DL+ MOH $4,000 + $1,200 + ($10 x 100 DLH) = $6,200
Braverman company has two manufacturing departments- Finishing and fabrication. The predetermined overhead rates in finishing and fabrication are $18 per direct labor hour and 110% of direct material cost respectively. The company's direct labor wage rate is $16 per hour. Finishing: DM= $410 DL=$128 Fabrication: DM=$60 DL=$48 What is the total manufacturing cost assigned to job 700?
DM (410+60)= 470 DL (128+48)= 176 Finishing OH (18 per DLH x 8DLH)=144 ***Total direct labor hours= direct labor cost of 128/ Direct labor wage rate per hour 16= 8DLH**** Fabrication OH (110% x 60)= 66 Total manufacturing cost = 470+176+144+66= $856
DM $6,000 DL $20,000 rent of factory $15,000 sales salaries $25,000 depreciation equip $8,000 indirect labor $12,000 production super salary $15,000 Jameson estimated that 20,000 direct labor hours will be worked during the year. The predetermined overhead rate per hour will be
Predetermined overhead rate= MOH cost/ allocation base First find MOH- rent of $15,000 + depreciation of equip $8,000 + indirect labor $12,000 + super salary of $15,000= $50,000 then $50,000/20,000 direct labor hours= $2.50 per direct labor hour
-Total manufacturing cost - $120,000 per year -allocation base: machine time per custom photo book - 15 seconds per customer photo book - capacity- 800,000 custom photo books per year -budgeted output for next year- 500,000 custom photo books per year based on the data provided, what is the predetermined overhead rate based on capacity?
$.01 per second 15 seconds x 800,000 custom photo books per year= 1,200,000 $120,000/ 1,200,000= $.01 per second
-Total manufacturing cost - $120,000 per year -allocation base: machine time per custom photo book - 15 seconds per customer photo book - capacity- 800,000 custom photo books per year -budgeted output for next year- 500,000 custom photo books per year Based on the data provided, what is the predetermined overhead rate based on budgeted output?
$.016 estimated total amount of the allocation base=machine time per custom photo book x budgeted output 15 seconds x 500,000 custom photo books per year = 7,500,000 seconds predetermined overhead rate based on budgeted output= estimated total manufacturing overhead cost/ estimated total amount of the allocation base $120,000/ 7,500,000 seconds= $.016
Jones company uses a job costing system with a predetermined overhead rate of 120% of direct labor cost. The job cost sheet for Job #420 listed $4,000 in direct materials cost and $5,000 in direct labor cost to manufacture 7,500 units. The unit cost of job #420 is
$2.00 Total cost of job #420= DM +DL +OH (predetermined OH rate x DL cost) = $4,000 + $5,000 + (1.2 x 5,000) = $15,000 $15,000/7,500 units= $2.00 per unit
Est MOH: company- $500,000 Dept. A- $338,000 Dept. B- $162,000 Est. DL cost: Company- $250,000 Dept. A-$130,000 Dept. B- $120,000 Actual MOH: company- $720,000 Dept. A- $400,000 Dept. B=$320,000 Actual DL cost: company-$300,000 Dept. A-$160,000 Dept. B-$140,000 Based on this info, the predetermined overhead rate per direct labor dollar for Dept. A is
$2.60 ($338,000/$130,000)
The management of Blue Ocean Company estimates that 50,000 machine hours will be required to support the production planned for the year. It also estimates $300,000 of total fixed manufacturing overhead cost for the coming year and $4 of variable manufacturing overhead cost per machine hour. What is the predetermined overhead rate?
estimated total overhead cost= $300,000 + ($4 per MH x 50,000 MHs)= $500,000 Predetermined overhead rate= estimated total overhead cost of $500,000/50,000 MHs= $10 per MH
A normal costing system applies overhead by job by multiplying a _______ __________ by the _______ amount of the allocation base incurred by the job
predetermined overhead total
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 average manufacturing overhead cost per unit tends to
vary from one period to the next
Hahn Company uses a job-order costing system. Its plantwide predetermined overhead rate uses direct labor-hours as the allocation base. The company pays its direct laborers $15 per hour. During the year, the company started and completed only two jobs—Job Alpha, which used 54,500 direct labor-hours, and Job Omega. The job cost sheets for the these two jobs are shown below: Job Alpha: DM= ? DL= ? MOH=? total job cost= $1,533,500 Job Omega: DM= 235,000 DL= 345,000 MOH= 184,000 total job cost= $764,000 Calculate job cost sheet for Job Alpha
Direct materials is a plug in figure since the total job cost is given and DL and MOH applied can be calculated DL (54,500 DLHs x $15 per DLH) = $817,500 MOH ($8 per DLH x 54,500 DLH)= $436,000 **$8 was plantwide overhead rate calculated in previous problem DM= total cost of $1,533,000- DL of $817,500 - MOH of $436,000= $280,000
Companies assign costs to product and services to
-understand product profitability -establish selling prices -value ending inventory
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
Estimated total MH: Forming 9,000 Assembly 1,000 Total 10,000 Estimated total fixed MOH cost: Forming $52,200 Assembly $2,400 Total $54,600 Estimated Variable MOH cost per MH: Forming $2.00 Assembly $2.10 Job B: forming machine hours 6,100 Assembly machine hours 400 Job H: Forming machine hours 2,900 Assembly machine hours 600 Assume that the company uses a plant wide predetermined manufacturing overhead rate based on machine hours. The amount of manufacturing overhead applied to Job B is closest to
$48,555 First step is to calculate estimated total overhead cost in the two departments: Forming- Fixed MOH of $52,200+ Variable MOH of ($2 x 9,000 MHs) 18,000= $70,200 total OH Assembly: Fixed OH of $2,400 + Variable OH of (2.10 per MH x 1,000 MHs) 2,100= $4,500 total OH second step is to combine MOH cost in both departments to equal total of $74,700 to get plantwide predetermined overhead rate: est. total MOH $74,700/ est. total MH of 10,000= $7.47 per MH then overhead applied to Job B: Overhead applied to particular job= predetermined OH rate x machine hours incurred by the job = $7.47 per MH x (6,100 MH's + 400 MHs) = $48,555
Predetermined overhead rate per direct labor hour- $2.10 $2.40 $1.80 Direct labor hours worked on Job ABC Based on this info, the overhead applied to job ABC using multiple predetermine overhead rates is
$64.20 ($2.40 x 17 + $1.80 x 13= $64.20)
Spartan corp 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 x 200 DLHs= $4,000
Braverman company has two manufacturing departments- Finishing and fabrication. The predetermined overhead rates in finishing and fabrication are $18 per direct labor hour and 110% of direct material cost respectively. The company's direct labor wage rate is $16 per hour. Finishing: DM= $410 DL=$128 Fabrication: DM=$60 DL=$48 If job 700 consists of 15 units, what is the unit product cost for this job?
Total manufacturing cost ** computed in another problem** $856/ 15 units= $57.07
an allocation base should be
a cost driver
a cost driver is
a factor that causes overhead costs to occur
Cost plus pricing occurs when
a markup percentage is added to the cost of the job
an allocation base is
a measure of activity used to assign overhead costs to products and services
A normal cost system assigns overhead to jobs using
a predetermined overhead rate
All manufacturing costs are assigned to units of product and all nonmanufacturing 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 ____ _____ costing
activity based
labor costs that are easily traced to a job are called ____ labor costs
direct
Widely used allocation bases in manufacturing are
direct labor cost units of product machine hours direct labor hours
categories of manufacturing costs include _____ _____, _______ labor, manufacturing ________
direct material direct overhead
to calculate the unit product cost using the job cost sheet
divide the total job cost by the number of units produced
predetermined overhead rate formula
estimated total manufacturing overhead/ estimated total amount of allocation
predetermined overhead rate formula
estimated total overhead cost/ total allocation cost
A predetermined overhead rate is calculated by dividing the ____ total manufacturing overhead by the ____ total amount of the allocation base
estimated; estimated
the US requires absorption costing for ___ financial reports
external
job order costing can only be used in manufacturing firms
false
Average manufacturing overhead cost per unit usually varies from one period to the next because
fixed manufacturing overhead remains constant in total even when production changes
In a system that uses multiple predetermined overhead rates, overhead is applied
in each department as jobs proceed through the department
Hahn Company uses a job-order costing system. Its plantwide predetermined overhead rate uses direct labor-hours as the allocation base. The company pays its direct laborers $15 per hour. During the year, the company started and completed only two jobs—Job Alpha, which used 54,500 direct labor-hours, and Job Omega. The job cost sheets for the these two jobs are shown below: Job Alpha: DM= ? DL= ? MOH=? total job cost= $1,533,500 Job Omega: DM= 235,000 DL= 345,000 MOH= 184,000 total job cost= $764,000 Calculate the predetermined overhead rate
step 1: total direct labor hours required for job Omega: DL-345,000/DL wage rate $15= 23,000 total direct labor hours worked step 2: derive plant wide predetermined overhead rate: MOH applied to Job omega $184,000/ Direct labor hours worked on job omega 23,000= $8 per DLH which is plantwide predetermined overhead rate
