Chapter 5 Flashcards
Job-order costing and process costing are widely used for what?
to track costs
What type of costing is used where the organization offers many different products or services, such as in furniture manufacturers, hospitals, and legal firms?
Job-order costing
What type of costing is used where units of product are homogeneous (many units of a single product), such as in flour milling or cement production?
Process costing
What two things are used to assign direct materials and direct labour costs to jobs in a job-order costing system?
Materials requisition forms and labour time tickets
How and when is the predetermined overhead rate established?
when
- before the period begins
how
- by dividing the estimated total manufacturing overhead cost for the period by the estimated total allocation base for the period
How is overhead applied to jobs?
by multiplying the predetermined overhead rate by the actual amount of the allocation base used by the job
TRUE/FALSE:
the actual overhead costs incurred during a period may be more or less than the amount of overhead cost applied to production
TRUE - referred to as under-applied or over-applied overhead
What are the three ways to deal with under- or over-applied overhead for a period?
- closed out to COGS
- allocated among WIP, FG, and COGS
- carried forward to the EOY
TRUE/FALSE
The predetermined overhead rate is always equal to the actual overhead rate
FALSE - it’s an estimate
When overhead is under-applied, what happens to overhead costs and what must be done to expenses?
-MOC has been understated
-expenses must be adjusted upwards
When overhead is over-applied, what happens to overhead costs and what must be done to expenses and/or inventories?
-MOC has been overstated
-expenses/inventories must be adjusted downwards
In job-order costing, what needs to be charged to each job as work is performed? (2)
direct materials and direct labour
What is a materials requisition form? (3)
- Specifies the type and quantity of
materials to be drawn from the
storeroom and - Identifies the job to which the costs of the materials are to be charged.
- The form controls the flow of materials
into production and also makes entries
in the accounting records.
What is a job cost sheet?
a form prepared for each separate job that records the materials, labour, and overhead costs charged to the job
What gets posted to a job cost sheet?
direct labour costs, applied overhead cost (estimated), direct materials
What are types of allocation bases?
direct labour hours, direct labour dollars, machine hours
Can the average unit cost be used to calculate the costs that would be incurred if an additional were produced?
No, fixed overhead would not change if
another unit were produced, so the
incremental cost of another unit may
be somewhat less than the average
unit cost
Actual overhead costs are debited or credited to the MOH account?
debited
Overhead applied to WIP using the POHR is debited or credited to the MOH account?
credited
When an amount is leftover in the debit side of the MOH account, was the POHR over-applied or under-applied?
under-applied
TRUE/FALSE
Actual overhead appears on the job cost sheet and in the WIP account
FALSE - only the applied OH cost, based on the POHR appears on the job cost sheet and in the WIP account
Is sales a Dr or Cr account?
credit
If a company applied $95,000 in MOH to WIP while incurring actual MOH of only $90,000, then the overhead would be over or under applied and by how much?
over-applied by $5,000
