Chapter 4 book (4.5, 4.6, 4.7)

Question 1

under normal costing, is the amount of manufacturing overhead costs allocated to individual jobs based on the budgeted rate, $40 per direct manufacturing labor hours in this case, multiplied by the actual quantity of the allocated base used for each job

Answer 1

manufacturing overhead allocated
or
manufacturing overhead applied

Question 2

the subsidiary ledger for materials, is used to continuously record the quantity of materials received, issued to jobs, and the inventory balances for each type of material

Answer 2

materials record

Question 3

the allocated amount of indirect costs in an accounting period is less than the actual overhead amount incurred for the period

Answer 3

underallocated indirect costs
or
underapplied (overapplied) indirect costs

Question 4

occur when the allocated amount of indirect costs in an accounting period is greater than the actual overhead amount incurred for the period

Answer 4

overallocated indirect costs
or
underabsorbed (overabsorbed) indirect costs

Question 5

3 main approaches to accounting for underallocating or overallocating manufacturing overhead costs

Answer 5

1. adjusted allocation rate approach
2. proration approach
3. write off to cost of goods sold approach

Question 6

restates all overhead entries in the general ledger and subsidiary ledgers using actual overhead cost rates rather than budgeted overhead cost rates

Answer 6

adjusted allocation rate approach

Question 7

spreads under- or overallocated overhead among ending work-in-process- inventory, finished goods inventory, and cost of goods sold

Answer 7

proration

Question 8

underallocated (overallocated) indirect costs how do you find it

Answer 8

actual indirect costs incurred - indirect costs allocated

Question 9

records the actual costs in all the individual overhead categories (such as indirect materials, indirect manufacturing labor, supervision, engineering, utilities, and plant depreciation)

Answer 9

manufacturing overhead control

Question 10

records the manufacturing overhead allocated to individual jobs on the basis of the budgeted indirect cost rate multiplied by actual direct manufactuing labor hours

Answer 10

manufactuing overhead allocated

Question 11

• if the purpose of the adjustement is to: state the balance sheet and income statements based ona ctual rather than budgeted manufacturing overhead rates
• and the total amount of underallocation or overallocation is: big, relative to total operating income and inventory levels are high
  which approach do you use?

Answer 11

proration
bc it is th most accurate method of allocating actual manufacturing overhead costs to the general ledger accounts

Question 12

• If the purpose of the adjustment is to: state the balance sheet and income statements based on actual rather than budgeted manufacturing overhead rates
• and the total amount of underallocation or overallocation is: small, relative to total operating income, or inventory levels are low
  which method do managers prefer to use?

Answer 12

write off to cost of goods sold
bc it is a good approximation of the more accurate proration method

Question 13

• If the purpose of the adjustment is to: provide an accurate record of actual individual job costs in order to conduct a profitability analysis, learn how to better manage the costs of jobs, and bid on future jobs
• and the total amount of underallocation or overallocation is: big, relative to total operating income
  which method do managers prefer to use?

Answer 13

adjsuted allocation rate method
bc it makes adjustements in individual job records in addition to the general ledger accounts