Accounting

Question 1

Job order Costing

Answer 1

Helps with planning, controlling, and decision-making

Helps value ending inventories and COGS for external purposes

The cost attached to products not sold are included in the ending inventory Balance Sheet

The cost attached to products sold are included in the COGS Income Statement

Question 2

Job order Costing
is used when

Answer 2

Used when there are many different products, jobs, and services produced each period

Products are manufactured to order

The unique nature of each order requires tracing or allocating costs, and maintaining cost records for each job

Question 3

After the production order is issued

Answer 3

automatically generate a job cost sheet

Assigning and tracing costs to products and services

Direct cost is assigned - Indirect cost is allocated

Question 4

External Perspective

Answer 4

amount of overhead applied to all jobs during a period will differ from the actual amount

Question 5

underapplied overhead

Answer 5

company applies less overhead to production than it actually incurs

increases the cost of goods sold and decreases net operating income

Question 6

overapplied overhead

Answer 6

applies more overhead to production than it actually incurs

decreases cost of goods sold and increases net operating income.

Question 7

Finished Goods flow where

Answer 7

Flow first to the balance sheet then to the income statement

Question 8

External Financial Reporting

Answer 8

Heavily influence companies to assign costs to products and services

Question 9

Absorption Costing

Answer 9

Also known as “full costing,” is a managerial accounting method for capturing all costs associated with manufacturing a particular product.

Question 10

Nonmanufacturing cost

Answer 10

Period cost & not assigned to products

Question 11

Bill of Materials

Answer 11

Lists the quantity of each type of direct material needed to complete a unit

Question 12

Materials Requisition Form

Answer 12

Controls the flow of materials into production

Type and quantity of materials drawn from the storeroom

Question 13

Time tickets

Answer 13

Under direct labor. Hourly summary of employee activity

Question 14

Predetermined Overhead Rates

Answer 14

A mix of variable and direct overhead cost

Usually have high overhead costs. So, total overhead tends to be constant each period while the average cost per unit varies.

Is used because it is impossible to trace overhead costs to jobs

Manufacturing overhead consists of different items

If the actual rate is computed monthly or quarterly, factors in overhead cost or in allocation base can produce fluctuations in the overhead rate

used to apply the estimated cost of manufacturing overhead to cost objects for a specific reporting period

Multiple predetermined rate is more accurate

To give the ability to estimate job costs during the period

Question 15

Predetermine Overhead rates is established when?

Answer 15

Before the period

Question 16

Why is predetermined overhead rate needed?

Answer 16

Actual OH is not known till the end of the period, inhibiting the ability to estimate job cost

Actual OH can fluctuate, misleading decision makers

Question 17

Allocation Base

Answer 17

A Measure like direct labor hours or machine hours. Used to assign overhead costs to them

Question 18

Allocation base should drive

Answer 18

To improve job cost accuracy: Allocation based on predetermined overhead rate should DRIVE overhead cost

Cost driver

Question 19

plantwide overhead rate

Answer 19

a single predetermined overhead rate

Question 20

Overhead Application

Answer 20

Overhead application is used to apply overhead costs to jobs throughout the accounting period

Question 21

Manufacturing overhead

Answer 21

Computed after the period

Question 22

Normal Cost System

Answer 22

adds actual direct material, actual direct labor, and applied manufacturing overhead costs to the work-in-process inventory

Question 23

Job Cost Sheet

Answer 23

Records direct materials, labor, manu overhead charged to a job

Question 24

Cost Plus Pricing

Answer 24

A pricing method.

Predetermined markup is applied to the cost base to determine the target selling price

Question 25

Activity Based Approach

Answer 25

Using departmental overhead rates is one approach to creating a job-order costing system with multiple predetermined overhead rates. Another approach is to create overhead rates related to the activities performed within departments. Results in more overhead rates

Question 26

Activity Based Costing

Answer 26

an alternative approach to developing multiple predetermined overhead rates more accurately measure

Question 26

Cost Driver

Answer 26

a factor that causes overhead costs Machine hours, beds occupied, computer time, flight hours, etc,

Question 26

Traditional Absorption Costing Problem

Answer 26

Traditional absorption costing tends to focus on volume-related drivers, such as labour hours

Question 27

Activity-based Absorption Costing

Answer 27

Assign all manufacturing overhead costs to products based on the activities performed to make those products.

Question 27

Activity Measure

Answer 27

denominator for an activity cost pool An allocation base

Question 27

Activity Cost Pool

Answer 27

a “bucket” that accumulates costs related to a single activity Accumulates cost for for EXACTLY ONE activity measure

Question 27

Activity Rate

Answer 27

assign costs from an activity cost pool to products

Question 27

Activity-based Absorption different from traditional absorption costing

Answer 27

uses more cost pools includes some activities and activity measures that do not relate to the volume of units produced. The traditional approach relies exclusively on allocation bases that are driven by the volume of production include product-level activities Costs at the product level depend on the number of batches process

Question 27

Batch Level Activity

Answer 27

Setting up equipment, placing purchase orders, and arranging shipments to customers

Question 28

Product Level Activity

Answer 28

Activities such as design or engineering changes for an item being produced Costs incurred that are not related to number of batches run or unit produced, such as making design changes

Question 28

If actual and applied Manu Overhead aren’t equal, year-end adjustment is

Answer 28

Required

Question 29

Capacity-Based Overhead Rates

Answer 29

limitations of traditional absorption costing can be overcome by using the “estimated total amount of the allocation base at capacity” as the denominator of the predetermined overhead rate capacity-based approach would treat this cost as a period expense

Question 30

Schedule of COGM

Answer 30

Contains direct materials, labor, and manu overhead Summarize portions of remaining in ending WIP and transfer out to finished goods

Question 31

Actual overhead costs may not be proportional to the actual amount of the allocation base used because

Answer 31

overhead spending may not be under control many actual overhead costs are fixed

Question 32

Widely used allocation bases in manufacturing include:

Answer 32

units of product direct labor hours direct labor cost machine hours

Question 33

The journal entry to record the more accurate allocation of overapplied or underapplied overhead includes entries to

Answer 33

Finished goods Cost of goods sold Manufacturing overhead Work in process

Question 34

Actual manufacturing overhead is ________ to the Manufacturing overhead account

Answer 34

debited

Question 35

Applied overhead is _____ to the Manufacturing overhead account

Answer 35

Credited

Question 36

A ________ in Manufacturing overhead means overhead is _____

Answer 36

Credit, Overapplied

Question 37

The Manufacturing Overhead account is _______ when actual overhead costs are incurred

Answer 37

debited

Question 38

The Manufacturing Overhead account is ______ when actual overhead is applied to Work in Process

Answer 38

credited

Question 39

A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record

Answer 39

rent expense on factory equipment factory utilities expense

Question 40

A journal entry that debits Manufacturing overhead and credits Accounts payable would not be used to record

Answer 40

The incurrence of direct labor costs should be recorded by debiting Work in process accounts.

Question 41

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

Answer 41

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

Question 42

The unit product cost is the same as the

Answer 42

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

Question 43

Which of the following are used to calculate the Cost of goods available for sale on the schedule of cost of goods sold?

Answer 43

Cost of goods manufactured Beginning finished goods inventory

Question 44

Closing underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold is

Answer 44

more accurate than closing the entire balance to the Cost of goods sold more complex than closing the entire balance to the Cost of Goods Sold calculated by multiplying applicable percentages by the over or under-applied overhead

Question 45

Key Assumptions:

Answer 45

Always use only one predetermined overhead rate Under and Over manu overhead always closed to COGS Record transactions in Microsoft Excel using positive numbers to increase balance sheet accounts

Question 46

Disposition of overapplied and underapplied overhead (remaining balance in manu overhead can be disposed by)

Answer 46

Closed to COGS Closed proportionally to WIP, FG, COGS (more accurate but more complex)

Question 47

Schedule of COGS

Answer 47

Contains direct materials, labor, and manu overhead Summarize portions of remaining in ending Finished Goods and transfer out to COGS

Question 48

Accounting for Nonmanufacturing

Answer 48

Not assigned to individual jobs Expensed in the period incurred

Question 49

Schedules of COGM and COGS calculate

Answer 49

Raw materials and direct labor cost in production and Manu Overhead applied to production Manu cost associated with finished goods during the period

Question 50

Raw materials placed in production are called direct materials

Answer 50

When materials are purchased they are recorded in the Raw materials inventory account. Raw materials inventory represents the cost of materials not yet used in production.

Question 51

Process Cost Accounting System

Answer 51

appropriate for similar products that are continuously mass-produced.