Managerial Accounting Ch2

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

Oil refinery

• construction company
• dairy farm that produces raw milk
• soda bottling factory

Which of the following is not a manufacturing cost category?

• Direct materials
• selling & administrative costs
• Direct labor
• Manufacturing overhead

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

time ticket

• bill of materials
• materials requisition form
• production order

Bill of materials

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

• materials are issued to the job
• requisition form is submitted to the storeroom clerk
• job is sold to a customer
• job is complete

Labor costs that are easily traced to a job are called ________ labor costs.

Companies that make many different products each period use _________ - __________

costing.

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

Categories of manufacturing costs include (Select all that apply):

• direct materials.
• direct labor.
• selling expenses.
• manufacturing overhead.
• administrative expenses.

Manufacturing overhead costs ______ (select all that apply).

tend to vary significantly, in total, from one period to the next

• consist of many different items
• are indirect costs
• do not impact the average cost per unit

A bill of materials contains the ______ (select all that apply).

type of materials to be drawn from the storeroom

• quantity of each direct material needed to complete a unit of product
• quantity of materials to be drawn from the storeroom
• type of each direct material needed to complete a unit 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
• variable overhead costs per unit vary when production changes
• the makeup of manufacturing overhead changes from period to period

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

job cost sheet

• time ticket
• production order
• materials requisition form

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) _______ _______.

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

can be easily traced to jobs, while indirect labor cannot

• is a manufacturing overhead cost, while indirect labor is not
• is a variable cost, while indirect labor is a fixed cost
• is a manufacturing cost and indirect labor is a period cost

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

Units of product

• Machine hours
• Accounting hours
• Direct labor hours

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

• time ticket
• materials requisition form
• production order

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

Manufacturing overhead consists of ______.

many different kinds of direct costs

• a single kind of direct cost
• many different kinds of indirect costs
• a single kind of indirect cost

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

actual overhead

• overhead applied to the job
• the total cost of the job
• the predetermined overhead rate for the job

Total manufacturing overhead costs tend to ______.

be easily traceable to jobs

• remain fairly constant
• be impossible to assign to jobs
• vary greatly with production

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 ______.

$100,000

• $3,200
• $4,000
• $4,800

An essential quality of an overhead allocation base is that it must ______.

be calculated using a predetermined overhead rate

• be a cost associated with producing the firm's goods
• vary with all overhead costs
• be common to all the company's products and services

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

A predetermined overhead rate is more accurate.

• An actual overhead rate is not known until the end of the period.
• A predetermined overhead rate is easier to use.
• An actual overhead rate can never be calculated.

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

Widely used allocation bases in manufacturing include (select all that apply):

direct labor cost.

• machine hours.
• product revenue.
• nonmanufacturing costs.
• direct labor hours.
• units of product.

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

predetermined manufacturing overhead cost.

• actual manufacturing overhead cost, and applied nonmanufacturing cost.
• actual manufacturing overhead cost.
• predetermined manufacturing overhead cost and nonmanufacturing cost.

Overhead application is the process of ______.

calculating a predetermined overhead rate

• assigning manufacturing overhead cost to jobs
• calculating the total cost of a job
• adjusting accounts for the difference between applied and actual overhead

add direct labor to manufacturing overhead and divide

• multiply the total job cost
• divide the total job cost
• add direct labor to direct materials and divide

The formula for applying overhead to a specific job is ______estimated manufacturing overhead ÷ amount of allocation base incurred by job

• estimated manufacturing overhead ÷ estimated allocation base
• estimated manufacturing overhead × amount of allocation base incurred by job
• predetermined overhead rate × amount of allocation base incurred by job

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

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 $_________.

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

A factor that causes overhead costs is called a ______.

manufacturing cost

• predetermined overhead rate
• cost object
• cost driver

The total cost of a job includes (select all that apply):

direct materials cost.

• direct labor cost.
• nonmanufacturing cost.
• predetermined manufacturing overhead.
• actual manufacturing overhead.

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:

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

Overhead is applied multiple times throughout the period.

• Multiple types of overhead are included to calculate the predetermined overhead rate.
• Each production department may have its own predetermined overhead rate.

Cost-plus pricing occurs when ______.

non-manufacturing costs are added to manufacturing costs

• a markup percentage is added to the cost of a job
• the cost of the job is multiplied by 2

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

_________-_________

pricing.

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
• $100,000
• $3,200
• $4,800

The appeal of using predetermined departmental overhead rates is they presumably provide ______. (Select all that apply)

enhanced information for decision making

• a more accurate accounting of costs
• higher profitability for the company

Typical cost drivers include ______ (Select all that apply).

flight-hours

• machine-hours
• utilities cost
• machine depreciation
• computer time

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

actual manufacturing overhead cost, and applied nonmanufacturing cost.

• predetermined manufacturing overhead cost.
• predetermined manufacturing overhead cost and nonmanufacturing cost.
• actual manufacturing overhead cost.

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

more

• the same number of
• less

In a system that uses multiple predetermined overhead rates, overhead is applied ______.

at the end of each period

• in each department as jobs proceed through the department
• before production begins
• at the end of the total production process

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

The adjustment for underapplied overhead ______ net income.

decreases both cost of goods sold and

• decreases cost of goods sold and increases
• increases both cost of goods sold and
• increases cost of goods sold and decreases

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

the same

• different
• lower
• higher

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

A cost driver is ______.

a measure that is used to assign overhead costs to products and services

• the amount of overhead assigned to a job
• something you want to know the cost of
• a factor that causes overhead costs to occur

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

___________- ___________

costing.

A multiple predetermined overhead rate system is more accurate than a plantwide overhead rate system because it ______.

is easier to apply than a plantwide system

• reflects how different departments use direct labor
• reflects how different departments use direct materials
• reflects differences in how overhead costs are incurred within departments

decreases both cost of goods sold and

• increases cost of goods sold and decreases
• increases both cost of goods sold and
• decreases cost of goods sold and increases

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

financial statement backup

• job cost ledger
• book of original entry
• subsidiary ledger