Managerial Accounting Ch2

Discipline: Accounting

Type of Paper: Question-Answer

Academic Level: Undergrad. (yrs 3-4)

Paper Format: APA

Pages: 1 Words: 275

Question

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

Oil refinery

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

Construction company

Which of the following is not a manufacturing cost category?

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

Selling & administrative costs


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

materials are issued to the job

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

direct or touch

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

costing.

Blank 1: job

Blank 2: order

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

Blank 1: time

Blank 2: ticket, sheet, or card

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


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

direct materials.

direct labor.

manufacturing overhead.

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

consist of many different items

are indirect costs


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

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

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

fixed manufacturing overhead remains constant in total even when production changes

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

Job cost sheet

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) _______ _______.

Blank 1: allocation or activity

Blank 2: base or driver

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

can be easily traced to jobs, while indirect labor cannot

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

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

  • time ticket
  • materials requisition form
  • production order

Time ticket


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

Blank 1: allocation, application, allocating, allocated, assignment, assigning, applied, or assigned


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

many different kinds of indirect costs

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

overhead applied to 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

remain fairly constant

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

$4,000

Reason: The predetermined overhead rate = $100,000 ÷ 5,000 direct labor-hours = $20 per direct labor-hour × 200 direct labor-hours = $4,000.

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

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.

direct labor cost.

machine hours.

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.

predetermined manufacturing overhead 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

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

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

divide the total job cost

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

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 $________.

Blank 1: 840

Reason: $600 x .40 = $240

$240 + $600 = $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

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

True


A factor that causes overhead costs is called a ______.

manufacturing cost

  • predetermined overhead rate
  • cost object
  • cost driver

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.

direct materials cost.

direct labor cost.

predetermined 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:

$2.00

Reason: Total cost of Job #420 = Direct materials + direct labor + overhead (predetermined overhead rate × direct labor cost) = $4,000 + $5,000 + 1.20 × $5,000 = $15,000

Unit product cost = $15,000 ÷ 7,500 units = $2.00 per unit.


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.

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

a markup percentage is added to the cost of a job

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

_________-_________

pricing.

Blank 1: cost

Blank 2: plus

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

$4,000

Reason: The predetermined overhead rate = $100,000 ÷ 5,000 direct labor-hours = $20 per direct labor-hour × 200 direct labor-hours = $4,000.


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

enhanced information for decision making

a more accurate accounting of costs


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

flight-hours

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

flight-hours

machine-hours

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.

predetermined manufacturing overhead cost.


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

more

  • the same number of
  • less

more

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

in each department as jobs proceed through the department


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

False

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

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

different

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

Blank 1: subsidiary

Blank 2: ledger

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

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.

Blank 1: activity

Blank 2: based


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

reflects differences in how overhead costs are incurred within departments

The adjustment for overapplied overhead ______ net income.

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

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

subsidiary ledger