Chapter 2 & 3 Accounting 2
The total cost of a job includes
- applied manufacturing overhead - direct labor cost - direct materials cost
Luthan Company uses a plantwide predetermined overhead rate of $22.10 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $265,200 of total manufacturing overhead cost for an estimated activity level of 12,000 direct labor-hours. The company incurred actual total manufacturing overhead cost of $270,000 and 11,500 total direct labor-hours during the period.
11,500 * 22.10 = 254,150
Newhard Company assigns overhead cost to jobs on the basis of 116% of direct labor cost. The job cost sheet for Job 313 includes $19,602 in direct materials cost and $10,300 in direct labor cost. A total of 1,550 units were produced in Job 313. a. What is the total manufacturing cost assigned to Job 313? b. What is the unit product cost for Job 313?
19,602 + 10,300 + 10,300 * 1.16 = 41,850 41,850/ 1,550 = 27
For the month of October, Janus Corporation used $30,000 worth of direct materials in production and incurred direct labor costs of $60,000. Actual manufacturing overhead costs were $40,000, whereas $45,000 was the manufacturing overhead applied to work in process. What is the amount of total manufacturing costs that would appear in the Schedule of Cost of Goods Manufactured for October?
30,000 + 45,000 + 60,000 = 135,000
Which of the following occurs when manufacturing overhead is applied to Work in Process?
Credit to Manufacturing Overhead
Which of the following best describes the journal entry to record the use of direct and indirect labor in production?
Debit Work in Process, debit Manufacturing Overhead, and credit Salaries and Wages Payable
Which of the following best describes the journal entry to record the withdrawal of raw materials from the storeroom for use as direct and indirect materials in production?
Debit Work in Process, debit Manufacturing Overhead, and credit raw materials
Which of the following occurs when finished jobs are shipped to customers?
Debit to Cost of Goods Sold
Which of the following statements about manufacturing overhead costs is not correct?
Depreciation on factory equipment is recorded with a debit to Depreciation Expense.
Which of the following is only true in multiple predetermined overhead rate system
Each production department may have its own predetermined overhead rate
The formula for a predetermined overhead rate is
Estimated manufacturing overhead cost divided by estimated allocation base
Time ticket
a document that is used to record the amount of time an employee spends on various activities
allocation base
a measure such as direct labor hours or machine hours that is used to assign overhead costs to products and services
Work in process consist of
actual direct labor cost applied manufacturing overhead actual direct materials cost
Absorption Costing
all manufacturing costs, both fixed and variable, are assigned to units of product-units are said to fully absorb manufacturing costs
manufacturing overhead costs
are indirect costs and consist of many different items
raw materials is an
asset account
Bar codes can be used to
automatically record and post direct labor costs to jobs
The direct materials required to manufacture each unit of product are listed on a ________.
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 journal entry that debits finished goods and credits work in progress records the
completion of a job
Which of the following occurs when a job has been completed and transferred to the finished goods warehouse?
credit to work in progress
The adjustment for overapplied overhead ________.
decreases cost of goods sold and increases net operating income.
A journal entry that debits manufacturing overhead and credits accounts payable would not be used to record
direct labor costs
Typical cost drivers include
machine-hours, flight-hours, computer time
material requisition forms are used for
making journal entries in accounting records and controlling the flow of materials into production
Manufacturing overhead consists of all
manufacturing costs other than direct labor and direct materials; The cost of goods sold summarizes costs that remain in Finished goods Inventory and that have been transferred to Costs of goods Sold
In a normal costing system, work in process is debited for
manufacturing overhead applied direct materials
Examples of product costs
manufacturing overhead costs raw materials direct labor
The period ends
manufacturing overhead is closed
overhead is applied to work in progress
manufacturing overhead is credited
actual overhead is incurred
manufacturing overhead is debited
Direct materials cost are recorded on the job cost sheet when the
materials are issued on the job
compared to a plant wide overhead rate system, a multiple predetermined overhead rate system is
more complex and more accurate
Companies can improve job cost accuracy by using ________.
multiple predetermined overhead rates
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
What is the term used when a company applies less overhead to production than it actually incurs?
under applied
The average manufacturing overhead cost per unit tends to
vary from one period to the next
When a job is completed , the job costs are transferred out of
work in progress
manufacturing overhead is applied with a debt to
work in progress
to calculate a predetermined overhead rate, divide estimated manufacturing overhead by the
estimated allocation base
The adjustment for under applied overhead
increases cost of goods sold and decreases net income
companies that make many different products each period use
job order costing
materials requisition form
A document that specifies the type and quantity of materials to be drawn from the storeroom and that identifies the job that will be charged for the cost of those materials.
Wilson Products uses a plantwide 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 this job? Wilson Products uses a plantwide 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 to produce 50 audio controllers, what is this job's unit product cost (per audio controller)?
6,200 100 * 10 = 1,000 4,000 + 1,200 + 1,000 = 6,200 124 6,200/50 = 124
The $2,000 charged to Manufacturing Overhead in entry (2) represents indirect materials. The _____ side of the Manufacturing Overhead account is always used to record the actual manufacturing overhead costs, such as indirect materials, that are incurred during the period. The ______ side of this account, as you will see in transaction (7), is always used to record the manufacturing overhead applied to work in process.
debit : credit
overhead application
process used to assign overhead costs to products
A job cost sheet contains
labor cost, material cost, and manufacturing overhead
The journal entry to record labor costs credits
salaries and wages payable
Widely used allocation bases in manufacturing are:
direct labor hours, units of products, direct labor cost, and machine hours
Zimmer, Inc. started the month of January with beginning finished goods inventory of $20,000. The cost of goods manufactured during the month was $120,000 and the ending finished goods inventory was $50,000. What is the unadjusted cost of goods sold for January?
20,000+120,000= 140,000 140,000-50,000 = 90,000
When companies incur selling and administrative costs, those costs ________.
do not flow through inventories on the balance sheet
Companies assign costs to products and services to
establish selling prices value ending inventory understand product profitability
A Journal entry that debits manufacturing overhead and credits accounts payable could be made to record
rent expense on factory equipment factory utilities expense
Which of the following costs are charged directly to the income statement
selling costs administrative costs
When all of a company's job cost sheets are viewed collectively they form what is known as a ________.
subsidiary ledger
The cost of goods manufactured is the
sum of all amounts transferred from work in progress to finished goods during a period
Why is the unit product cost different from the cost that would be incurred if another unit were produced?
the cost to produce another unit is the incremental or marginal cost
Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 41,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $506,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Harris's actual manufacturing overhead cost for the year was $705,146 and its actual total direct labor was 41,500 hours. Compute the company's plantwide predetermined overhead rate for the year. (Round your answer to 2 decimal places.)
41,000 * 3 = 123,000 + 506,000 = 629,000 629,000/41,000= $15.34
To calculate the unit product cost using the job cost sheet
divide the total job cost by the number of units produced
The unit product cost in the same as
the total job cost divided by number of units average product cost per unit