Chapter 15

Swifty Manufacturing thinks that the best activity base for its manufacturing overhead is machine hours. The estimate of annual overhead costs is $600000. The company used 1000 hours of processing for Job A15 during the period and incurred actual overhead costs of $610000. The budgeted machine hours for the year totaled 20000. What amount of manufacturing overhead should be applied to Job A15?

$30000. Correct! Overhead costs cannot be assigned to specific jobs on the basis of actual costs incurred. Instead, companies assign manufacturing overhead to work in process and specific jobs on an estimated basis through the use of a predetermined overhead rate ($30) = estimated annual overhead costs ($600000) ÷ expected annual operating activity (20,000 machine hours). Amount assigned to jobs = actual activity base used (1,000 machine hours) x predetermined overhead rate ($30) = $30000 ("Manufacturing Overhead Costs").

During June, Concord, Inc. produced a job consisting of 124 widgets with a job cost of $2728. Which of the following is one effect that occurs when the company sells half of the products for $1828?

Cost of Goods Sold increases. Correct! Cost of Goods Sold increases, Finished Goods Inventory decreases, Sales increases, and Accounts Receivable (or Cash) increases.

A process cost system is used when a company manufactures a large volume of unique products.

False

The predetermined overhead rate is based on the relationship between actual annual overhead costs and expected annual operating activity.

False

Under a job order cost system, costs are assigned to each job or to each batch of goods.

True

When a job is completed in a job order cost accounting system, the cost of the job is transferred to finished goods inventory. manufacturing overhead. work in process inventory. cost of goods sold.

finished goods inventory.

A company is more likely to use a job costing system if it manufactures products with unique characteristics. it uses a periodic inventory system. it manufactures a large volume of similar products. its production is continuous.

it manufactures products with unique characteristics.

Companies assign manufacturing overhead to work in process on an estimated basis through the use of a(n) predetermined overhead rate. assigned overhead rate. previous year's overhead rate. actual overhead rate.

predetermined overhead rate.