Chapter 2 SmartBook - ACCT 2302

Widely used allocation bases in manufacturing include ______.

direct labor hours direct labor cost machine hours units of product

To calculate the unit product cost using the job cost sheet ______ by the number of units produced.

divide the total job cost

The formula for a predetermined overhead rate is Blank______.

estimated total manufacturing overhead cost ÷ estimated total allocation base

A predetermined overhead rate is calculated by dividing the ______ total manufacturing overhead by the ______ total allocation base.

estimated; estimated

The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find ______.

overhead applied to the job

A multiple 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

Total manufacturing overhead costs tend to ______.

remain fairly constant

Allocation bases that do not drive overhead costs ______.

will not accurately measure the cost of overhead used

Company Dept. A Dept B. Estimated manufacturing overhead $500,000 $338,000 $162,000 Estimated direct labor cost $250,000 $130,000 $120,000 Actual manufacturing overhead $720,000 $400,000 $320,000 Actual direct labor cost $300,000 $160,000 $140,000 Based on this information, the predetermined overhead rate per direct labor dollar for Dept. B is $ _____.

1.35

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $ _____.

2 or two

Estimated manufacturing overhead $450,000 Estimated direct labor hours 150,000 Actual manufacturing overhead $405,000 Actual direct labor hours 180,000 Based on this information, the predetermined overhead rate per direct labor hour is $_____.

3.00 or 3

Company Dept. A Dept B. Predetermined overhead rate per direct labor hour $2.10 $2.40 $1.80 Direct labor hours hours worked on Job ABC 40 18 22 Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is $ _____.

82.80

Job XYZ has a total manufacturing cost of $600. If the mark-up percentage is 40%, the job will sell for $ _____.

840

Estimated manufacturing overhead $450,000 Estimated direct labor hours 150,000 Actual manufacturing overhead $405,000 Actual direct labor hours 180,000 Based on this information, the amount of overhead allocated to a job that used 300 direct labor hours is $_____.

900

When all overhead is assigned using direct-labor hours, the company has chosen to use a(n) _____ overhead rate, which is a single predetermined overhead rate.

Plantwide or plant wide

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n) _____ _____.

Subsidiary ledger

Which of the following would not be considered a job in a service firm that uses job-order costing?

The tax department in an accounting firm

Why is the unit product cost different from the cost that would be incurred if another (additional) unit were produced?

The unit product cost is an average, not an incremental cost.

An allocation base should be:

a cost driver.

The appeal of using predetermined departmental overhead rates is they presumably provide ______.

a more accurate accounting of costs enhanced information for decision making

A measure such as direct labor-hours or machine hours used to assign overhead costs to products and services is called a cost driver or a(n) _____ _____.

allocation or activity base or driver

Companies use a predetermined overhead rate rather than an actual overhead rate because ______.

an actual rate is not known until the end of the period

Manufacturing overhead costs ______.

are indirect costs consist of many different items

Overhead application is the process of ______.

assigning manufacturing overhead cost to jobs

The unit product cost is the same as the ______.

average product cost per unit total job cost divided by number of units

The predetermined overhead rate is calculated ______.

before the period begins

The type and quantity of each type of direct material needed to complete a unit of product is listed on the ______.

bill of materials

The difference between direct labor and indirect labor is that direct labor ______.

can be easily traced to jobs, while indirect labor cannot

Job-order costing would most likely be used in a(n) ______.

construction company

Manufacturing overhead:

contains fixed costs. is an indirect cost. consists of many different types of costs.

When a predetermined markup is applied to a base to determine the target selling price, the company is using _____ - _____ pricing.

cost plus

The adjustment for overapplied overhead ______ net income.

decreases cost of goods sold and increases

When a company uses a departmental approach rather than a plantwide approach to applying overhead, the selling price of the product will always be ______.

different

When a company uses cost-plus pricing, they consider both the costs of production and the desired profit.

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

The adjustment for underapplied overhead ______.

increases cost of goods sold and decreases net operating income

The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost, and:

predetermined manufacturing overhead cost.

The total cost of a job includes:

predetermined manufacturing overhead. direct materials cost. direct labor cost.

The formula for applying overhead to a specific job is: ______ amount of allocation base incurred by job.

predetermined overhead rate ×

A bill of materials contains the ______.

quantity of each direct material needed to complete a unit of product type of each direct material needed to complete a unit of product

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n) ______.

subsidiary ledger

An hour-by-hour summary of an employee's activities throughout the day is found on the _____ _____.

time ticket, sheet, or card

The document used to record the hours workers spend on each job and task is called a ______.

time ticket

One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors.

true

Costs assigned to units of product under absorption costing include:

variable manufacturing. fixed manufacturing.

A single predetermined overhead rate that is used throughout a plant is called a(n) _____ overhead rate.

plantwide

Estimated manufacturing overhead $500,000 Estimated direct labor cost $250,000 Actual manufacturing overhead $720,000 Actual direct labor cost $300,000 Based on this information, the predetermined overhead rate per direct labor dollar is ______.

$2.00

Jones Company uses a job-order 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

Co. Dept. A Dept B. Predetermined OH rate per direct labor hour $2.10 $2.40 $1.80 Direct labor hours worked on Job ABC 30 17 13 Based on this information, the overhead applied to Job ABC using multiple predetermined overhead rates is ______.

$64.20

Which of the following would not be a good allocation base for manufacturing overhead?

Accounting hours

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 products each period use _____ - _____ costing.

job order

Typical cost drivers include ______.

machine-hours flight-hours computer time

Factory labor charges that cannot be easily traced to a job are treated as ______.

manufacturing overhead

Manufacturing overhead consists of _____.

many different kinds of indirect costs

Direct materials costs are recorded on the job cost sheet when the ______.

materials are issued to the job

An allocation base is a(n) ______.

measure of activity used to assign overhead costs to products and services

When compared to a departmental approach, using activity-based costing results in ______ overhead rates.

more

Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is ______ accurate.

more complex and more

Company Dept. A Dept B. Estimated manufacturing overhead $500,000 $338,000 $162,000 Estimated direct labor cost $250,000 $130,000 $120,000 Actual manufacturing overhead $720,000 $400,000 $320,000 Actual direct labor cost $300,000 $160,000 $140,000 Based on this information, the predetermined overhead rate per direct labor dollar for Dept. A is ______.

$2.60

Murphy Manufacturing estimated total manufacturing overhead for the year to be $100,000 and that 5,000 direct-labor hours would be used. Actual overhead was $120,000 and actual direct labor-hours were 7,500. The overhead applied to a job completed during the year that used 200 direct labor-hours was ______.

$4,000

The process used to assign overhead costs to products is called overhead _____.

allocation

A factor that causes overhead costs is called a ______.

cost driver

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.

Cost-plus pricing occurs when ______.

a markup percentage is added to the cost of a job

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