Chapter 2

Question 1

Manufacturing Environments: Job-order

Answer 1

• Many different jobs
• Each job is made to customer specifications
• Each job has different production requirements
• Costs are traced to each specific job on a job cost sheet
• Unit costs are computed by job on the job cost sheet

Question 2

Manufacturing Environments: Process

Answer 2

• A single product is produced on a continuing basis or for a long period of time
• All units are identical
• Costs are accumulated by department on a department production report
• Unit costs are computed by department

Question 3

Job Order Costing

Answer 3

• Charge direct material and direct labor costs to each job as work is performed
• Manufacturing OH are allocated to all jobs rather than directly traced to each job

Question 4

Allocating Manufacturing OH

Answer 4

1. Compute predetermined OH rate
   = est. total manufacturing costs/est. total amount of allocation base
2. Apply OH cost to jobs
   = predetermined OH rate * actual activity for job
3. Compute the cost of the job

Question 5

Allocation base options: Plantwide rates

Answer 5

One volume based cost-driver (allocation base) used for the whole company

Question 6

Allocation base options: Departmental rates

Answer 6

Allocation base selected for each department

Question 7

Allocation base: Capacity based rates

Answer 7

Rates are computed using capacity rather than the estimated activity