Chapter 3
All manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under ____________ costing.
Absorption
The process used to assign overhead costs to products is called overhead ____________.
Application
Manufacturing overhead costs:
Consist of many different items, are indirect costs
Categories of manufacturing costs include ____________ ____________, ____________ labor, manufacturing ____________.
Direct materials; direct; overhead
A predetermined overhead rate is calculated by dividing the ____________ total manufacturing overhead by the ____________ total amount of the allocation base.
Estimated; estimated
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
Which of the following is an essential quality of an overhead allocation base?
It must be common to all the companies products and services
In the formula Y= a+bX, a represents the estimated:
Total fixed manufacturing overhead cost
Costs assigned to units of product in absorption costing include ____________ manufacturing costs.
Both variable and fixed
A measure such as direct labor hours for machine hours used to assign overhead costs to products and services is called a cost driver or a(n) ____________ ____________.
Allocation base
Overhead application is the process of:
Assigning manufacturing overhead costs to jobs
Manufacturing overhead:
Consist of many different types of costs, contains fixed costs, is an indirect cost
In the formula Y= a+bX, X represents the estimated:
Total amount of the allocation base
The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find:
Overhead applied to the job
The formula for applying overhead to a specific job is:
Predetermined overhead rate X amount of allocation base incurred by job
Widely used allocation bases in manufacturing are:
Units of product, machine hours, direct labor cost, direct labor hours
In the formula Y= a+bX, b represents the estimated:
Variable manufacturing overhead cost per unit
Which of the following would not be a good allocation base for manufacturing overhead? Units of product Machine hours Accounting hours Direct labor hours
Accounting hours
Costs assigned to unit of product under absorption costing include:
Fixed manufacturing, variable manufacturing
An allocation base is a(n):
Measure of activity used to assign overhead costs to products and services
The average manufacturing overhead cost per unit tends to:
Vary from one period to the next
Categories of manufacturing costs include ____________.
direct materials, direct labor, manufacturing overhead
To calculate the unit product cost using the job cost sheet:
divide the total job cost by the number of units produced
Murphy manufacturing estimated total manufacturing overhead for 2017 to be $100,000 and uses direct labor hours as the allocation base. They estimated that 5000 hours would be used. Actual overhead for 2017 was $120,000 and actual direct labor hours were 7500. How much overhead was applied to a job completed during 2017 that used 200 direct labor hours?
$4000: the predetermined overhead rate = $100,000/$5000 direct labor-hours = $20 per direct labor hour. The overhead applied to the job = $20 per direct labor hours X 200 direct labor hours = $4000
To calculate a predetermined overhead rate, divide estimated manufacturing overhead by:
estimated allocation base
The predetermined overhead rate is calculated:
Before the period begins
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 $4000 in direct materials cost and $5000 in direct labor cost to manufacture 7500 units. The unit cost of job #420 is:
$2.00: direct materials + direct labor + overhead predetermined overhead rate x direct labor cost) = 4,000+5,000+1.2x5,000=15,000 unit product cost=15,000/7,500 units = $2.00 per unit