Ch. 2 Job Costing
to allocate MOH. steps
1) POHR with estimates 2) multiply 3) allocate MOH based on actual level
In absorption costing, nonmanufacturing costs are assigned to units of product.
False
MOH allocated formula
POHR * Actual allocation base
POHR (predetermined overhead rate)
Total estimated MOH/Total estimated allocation base
Total estimated MOH
Y=a+bX
distortion
automatically introduced whenever we estimate the portion fo total MOH that should be located to one unit of product or service
Single Plantwide POHR
one is calculated at beginning of the year for the entire firm using total estimated MOH as the numerator and total estimated allocation base as the denominator. used all year long. simples but least refined method
Abosroption costing
required by GAAP. must include all manufacturing and only manufacturing costs in cost of good sold
In a job-order costing system that is based on machine-hours, which of the following formulas is correct?
Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours
normal costing
estimated MOH costs at beginning of period based on expected costs reported in the budget -update estimates at end of period -reconcile actual and expected costs -relevant during period -less reliable
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 amount of overhead applied to a particular job equals the actual amount of overhead caused by the job.
false
The formula for computing the predetermined overhead rate is: Predetermined overhead rate = Estimated total amount of the allocation base ÷ Estimated total manufacturing overhead cost
false
Multiple (departmental) Pohr
one is calculated at the beginning of the year for each department using total estimated MOH as the numerator and total estimated allocation base as the denominator. allow us to choose different allocation bases for each department
Total estimated allocation base
total est imaged level of activity for next period
Most countries require some form of absorption costing for external reports.
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
The costs attached to products that have not been sold are included in ending inventory on the balance sheet.
true
The fact that one department may be labor intensive while another department is ma
true
actual costing
wait to pool & allocate until end of period when actual costs are known -reliable -not relevant until end of period
