Managerial Accounting CH2

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 $100,00/5,000= $20 $20 x 200 _ $4,000

Companies that make many different products each period use ___ ___ costing.

(seperate entries) job, order

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

600 + (600 x40%) 600 + 240 840

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

Accounting hours

Why do companies use a predetermined overhead rate rather than an actual overhead rate?

An actual overhead rate is not known until the end of the period.

Manufacturing overhead consists of:

Many different kinds of indirect costs

Which of the following is NOT a manufacturing cost cartegory?

Selling & administrative costs

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

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 Think of a job un a service as an individual client

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

True

Cost-plus pricing occurs when ______.

a markup percentage is added to the cost of a job

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

a more accurate accounting of costs, enhanced information for decision making

An essential quality of an overhead allocation base is that is must:

be common to all the company's products and services

The type and quantity of each type of direct material needed to complete a unit of product is lsited on the:

bill of materials

Manufacturing Overhead Costs

consist of many different items, are indirect costs

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

construction company

A factor that causes overhead costs is called a ______.

cost driver

The adjustment for overappleid overhead __ net income.

decreases cost of goods sold and increases

The adjustment for overapplied overhead __ net income

decreases costs of goods sold and increases

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

different

Widely used alloation bases in manufacturing include:

direct labor cost, direct labor hours, machine hours, units of product

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 adjusgtment for unerapplied overhead __ net income

increased cost of goods sold and decreased

(Select all that may apply) Manufacturing overhead:

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

The document that records the materials, labor, and manufacturing overhead costs charged to a job is the ______.

job cost sheet

Typical cost drivers include:

machine-hours, computer time, flight-hours

Labor charges that cannot be easily traced to a job are considered

manufacturing overhead, indirect labor

A job cost sheet contains:

materials costs charged to the job, manufacturing overhead costs charged to the job, and labor costs charged to the job.

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

The process used to assign overhead costs to products is called:

overhead application

The predetermined overhead rate is multipled by the actual allocation base incurred by a job to find:

overhead applied to the job

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

predetermined manufacturing overhead cost

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

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

time ticket

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

time, ticket (blank 2 options_ ticket, sheet, or card)

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

True

The formula for applying overhead to a specific job is

predetermined overhead rate x amount of allocation base incurred by job

Which of the following is only true in a multiple predetermined overhead rate system?

Each production department may have its own predetermined overhead rate.

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 $

450,000/150,000 = 3.00 300*3.00 = 900

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:

Direct materials + direct labor + overhead (predetermined OR x direct labor cost) 4,000 + 5,000 + 1.2 x 5,000 = 15,000 Unit product cost = 15,000/7,500 = 2.00

When a company creates overhead rates based on the actions it performs, it is employing an approach called __ __ costing.

activity, based

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

allocation, base (or enter: activity, driver)

Overhead application is the process of:

assigning manufacturing overhead cost to jobs

The total cost of a job includes:

direct materials, direct labor, and predetermined manufacturing overhead

Categories of manufacturing costs include:

direct materials, direct labor, manufacturing overhead

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

divide the total job cost

Costs assigned to units of prduct under absorption costing include:

manufacturing costs (both fixed and variable)

Factory labor charges that CANNOT be easily traced to a job are treated as:

manufacturing overhead

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

The average manufacturing overhead cost per unit tends to:

vary from one perid to the next

Costs assigned to units of product in absorption costing include ______ manufacturing costs.

both variable and fixed