Midterm 2 Study

Question 1

What is a product cost

Answer 1

Direct materials, direct labour and manufacturing overhead

Question 2

What is period cost

Answer 2

Non-manufacturing costs, costs that support company operations

Question 3

When is Job order costing used

Answer 3

End products are customizable

Question 4

Job order costing flow of operations

Answer 4

1.receives a job order from customer
2. job order cost sheet
3. Materials requistion form
4. Production order is issued

Question 5

When manufacturing overhead is under applied which is debited and credited

Answer 5

Debit- COGS, WIP, finished goods
Credit- manufacturing overhead

Question 6

When manufacturing overhead is over applied what do you debit and credit

Answer 6

Debit manufacturing overhead
Credit COGS

Question 7

Journal direct materials added to job

Answer 7

Debit WIP
Credit raw materials inventory

Question 8

Journal indirect materials

Answer 8

Debit manufacturing overhead
Credit raw materials inventory

Question 9

Journal direct labour added

Answer 9

Debit WIP
Credit salaries and wages payable

Question 10

Journal manufacturing overhead added

Answer 10

Debit WIP
Credit manufacturing overhead

Question 11

Journal admin expenses on the Job

Answer 11

Debit admin expense
Credit acc payable

Question 12

Journal finished job

Answer 12

Debit finished goods inventory
Credit WIP

Question 13

Journal product shipped to customer

Answer 13

Debit acc rec, COGS
Credit sales, finished goods inventory

Question 14

How do you get predetermined overhead rate(POHR)

Answer 14

Estimated total manufacturing overhead
Divided by
Estimated units in allocation base (usually direct labour hours)

Question 15

How do you get estimated total manufacturing overhead costs

Answer 15

All expected indirect costs (indirect labour, indirect materials and factory utilities)

Question 16

What happens when manufacturing costs are over-applied

Answer 16

Product costs will be inflated,
job profits and operating income will be understated

Question 17

What happens when manufacturing costs are under-applied

Answer 17

Products costs will be understated, job profits and operating income will be overstated

Question 18

Manufacturing overhead applied to job

Answer 18

Direct labour hours x cost per direct labour hour

Question 19

Advantage of ABC

Answer 19

More accurate product costing/pricing and profitability analysis, better product mix decisions

Question 20

ABC vs Traditional job order costing

Answer 20

Traditional, single cost allocation, simple, costs less, isn’t as accurate, limited pricing and cost management
ABC, multiple cost allocations, complex, costs more, more accurate, better pricing and cost management