Chapter 10- Job and order costing

Question 1

POHR =

(predetermined overhead rates)

Answer 1

Budgeted total manufacturing overhead costs for the coming year / budgeted total units in the allocation base for the coming period

Question 2

Overhead applied =

Answer 2

POHR x actual activity

Question 3

Use of a predetermined overhead rate:

Answer 3

• makes it possible to estimate total job costs sooner
• actual overhead rate period is not known until the end of the period

Question 4

Use of a predetermined overhead rate:

Answer 4

• makes it possible to estimate total job costs sooner
• actual overhead rate period is not known until the end of the period

Question 5

Overhead variance

Answer 5

The difference between actualoverhead for the period and appliedoverhead for the period

It can be:
- under applied: actual > applied
- over applied: actual < applied

Question 6

Absorption costing/full costing

Answer 6

All costs are included

Includes direct material, direct labour and both variable and fixed manufacturing overhead in the costs of products.

Question 7

Variable costing

Answer 7

Applies direct material and direct labour costs but only variable manufacturing overhead to products. Fixed manufacturing costs are not taken into account

Question 8

Throughput costing (TC)

Answer 8

Only take into account the cash costs

• costs where you have an outflow of costs, not depreciation etc.

TC avoids incentive to overproduce because the cost per unit depends only on out-of-pocket costs (e.g., costs of materials), not how many units are made.