Chapter 3

Question 1

A sales order is prepared as a basis for issuing a what?

Answer 1

Production order

Question 2

A production order initiates work on a job, whereby costs are charged through, what?

Answer 2

Materials requisition, Direct Labor Time Ticket, Predetermined Overhead Rates

Question 3

The various costs of production are accumulated on a form known as what?

Answer 3

Job Cost Sheet

Question 4

Job cost sheet forms the basis of what?

Answer 4

for valuing ending inventories and COGS

Question 5

In a job-order costing system, the cost of a job consists of what?

Answer 5

1. actual direct material costs traced to a job 2. Actual direct labor costs traced to the job 3. Manufacturing overhead applied to the job using a predetermined overhead rate. Actual overhead costs are not assigned to jobs

Question 6

A predetermined rate is used for what?

Answer 6

to assign overheated cost to products and services

Question 7

A predetermined overhead rate is based on what and established when?

Answer 7

based on estimated data and established before the period begins

Question 8

Why does a predetermined overhead rate estimate data?

Answer 8

to get cost data immediately also because overhead rates vary substantially from month to month

Question 9

Predetermined overhead rate=

Answer 9

Estimated total manufacturing overhead cost / estimated total amount of the allocation base

Question 10

if DLH is allocation base, give eqn for estimated total manufacturing overhead

Answer 10

Fixed manufacturing OH cost + [(variable OH per unit cost) x DLH ]

Question 11

Definition for applying overhead

Answer 11

process of assigning overhead to jobs

Question 12

Overhead applied to a job eqn

Answer 12

predetermined overheated rate x DLH required for that job

Question 13

journal entry…raw mat purchased

Answer 13

DR Raw Materials CR A/P

Question 14

journal entry…raw mat issued for production and some used for DM and other for IM

Answer 14

DR WIP and OH…CR Raw Mat

Question 15

Journal entry…DL, indirect labor, selling and administrative wages and salaries incurred but not yet paid

Answer 15

DR WIP, OH, Wage and Salary Expense CR Salaries and Wages Payable

Question 16

Utility cost incurred in factory

Answer 16

DR OH CR A/P

Question 17

What are problems with traditional predetermined rate eqn

Answer 17

products appear to cost more when activity has decline; may lead to pressure to increase selling prices when activity declines; products are charged for resources they don’t use

Question 18

alternative approach predetermined overhead rate eqn

Answer 18

estimated total manufacturing overhead cost / total amount of the allocation base at capacity

Question 19

What are the effects of having alternative approach for predetermined overhead rate?

Answer 19

Underapplied overhead resulting from unused capacity is treated as a period expense and is called Cost of Unused Capacity on income statement; denominator is more stable than in traditional approach so the costs of products will not appear to increase as activity lvl falls and products are only charged for the resources they use

Question 20

What type of costing is job order costing?

Answer 20

absorption costing

Question 21

definition of absorption costing

Answer 21

all manufacturing costs both fixed and variable are asigned to units of product