Chapter 2: Job-Order Costing

Question 1

Companies that use job-order costing make _____

Answer 1

many different products

Question 2

A bill of materials contains the _____

Answer 2

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

Question 3

Direct materials costs are recorded on the job cost sheet when the _____

Answer 3

materials are issued to the job

Question 4

Manufacturing overhead consists of _____

Answer 4

many different kinds of indirect costs

Question 5

An allocation base is a(n) _____

Answer 5

measure of activity used to assign overhead costs to products and services

Question 6

Companies that make many different products each period use _____-_____ costing

Answer 6

job-order

Question 7

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

Answer 7

bill of materials

Question 8

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

Answer 8

job cost sheet

Question 9

Manufacturing overhead _____

Answer 9

• contains fixed costs
• consists of many different types of costs
• is an indirect cost

Question 10

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

Answer 10

be common to all the company’s products and services

Question 11

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

Answer 11

construction company

Question 12

A job cost sheet contains _____ the job

Answer 12

• labor costs charged to
• manufacturing overhead charged to
• materials costs charged to

Question 13

Manufacturing overhead costs _____

Answer 13

• are indirect costs
• consist of many different items

Question 14

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) _____ _____

Answer 14

allocation base

Question 15

Would accounting hours be a good allocation base for manufacturing overhead?

Answer 15

No

Question 16

SPL Enterprises allocates overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $_____

Answer 16

2

Question 17

Estimating the total amount of the allocation base (the denominator) required for next period’s estimated level of production is the _____ step in computing the predetermined overhead rate

Answer 17

first

Question 18

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

Answer 18

overhead applied to the job

Question 19

Widely used allocation bases in manufacturing include _____

Answer 19

• machine hours
• units of product
• direct labor cost
• direct labor hours

Question 20

The formula for a predetermined overhead rate is:

Answer 20

estimated total manufacturing overhead cost ÷ estimated total allocation base

Question 21

Estimating the total fixed manufacturing overhead cost for the coming period and the variable manufacturing overhead cost per unit of the allocation base is the _____ step in computing the predetermined overhead rate

Answer 21

second

Question 22

The formula for applying overhead to a specific job is: _____ amount of allocation base incurred by job

Answer 22

predetermined overhead rate ×

Question 23

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

Answer 23

True

Question 24

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 _____

Answer 24

$4,000

Question 25

The total cost of a job includes:

Answer 25

- predetermined manufacturing overhead. - direct labor cost. - direct materials cost.

Question 26

Companies use a predetermined overhead rate rather than an actual overhead rate because _____

Answer 26

an actual rate is not known until the end of the period

Question 27

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

Answer 27

$840

Question 28

A cost driver is _____

Answer 28

a factor that causes overhead costs to occur

Question 29

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

Answer 29

predetermined manufacturing overhead cost.

Question 30

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

Answer 30

reflects differences in how overhead costs are incurred within departments

Question 31

Cost-plus pricing occurs when _____

Answer 31

a markup percentage is added to the cost of a job

Question 32

Typical cost drivers include _____

Answer 32

- computer time - flight-hours - machine-hours

Question 33

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

Answer 33

in each department as jobs proceed through the department

Question 34

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

Answer 34

more

Question 35

A company’s job cost sheets provide a(n) _____ that summarizes the specific jobs that comprise the amounts reported in Work in Process and Finished Goods on the balance sheet as well as Cost of Goods Sold on the income statement

Answer 35

subsidiary ledger

Question 36

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

Answer 36

activity-based

Question 37

The adjustment for underapplied overhead _____

Answer 37

increases cost of goods sold and decreases net operating income