Week 6 (Job order costing)

Question 1

used to apply overhead to products is determined at the beginning of each year
what is this ?

Answer 1

predetermined overhead rate (PDR)

Question 2

1. direct labor hours
2. machine hours
3. direct labor cost
4. or any other activity that causes overhead costs to occur
   what can these be ?

Answer 2

estimated activity level

Question 3

represents the amount of overhead cost assigned to products
what is this ?

Answer 3

applied overhead

Question 4

in the applied overhead equation what is PDR based on ?

Answer 4

estimates, and determined at the beginning of year

Question 5

in the applied overhead equation, the actual activity is what ?

Answer 5

actual amount of the activity level such as direct labor hours, direct labor cost, or machine hours incurred during the year

Question 6

using a predetermined overhead rate makes it possible to ?

Answer 6

estimate total cost of the product (or service) sooner

Question 7

______ for the period is not known until the end of the period ?

Answer 7

actual overhead

Question 8

changing the cost of goods manufactured and the conversion costs equations allow managers to estimate the full cost of products in a timely manner but what is this one problem with assigning overhead costs to products using a PDR ?

Answer 8

The PDR is based on estimates. thus the amount of applied overhead will not equal the actual overhead costs incurred

Question 9

the differences between the overhead cost applied to products and actual overhead costs incurred
what is this ?

Answer 9

under applied or over applied overhead
or known as overhead variance

Question 10

exists when the amount of overhead applied to products using the predetermined rate is less than the total amount of overhead actually incurred
what is this ?

Answer 10

under applied overhead

Question 11

exists when the amount of overhead applied to products using the predetermined rate is greater than the total amount of overhead actually incurred
what is this ?

Answer 11

over applied overhead

Question 12

the overhead variance is closed directly into what ?

Answer 12

cost of goods sold

Question 13

if overhead is under applied, what do you do with COGS ?

Answer 13

increase
debit: cost of goods sold
credit: overhead

Question 14

if overhead is over applied, what do you do with COGS ?

Answer 14

decrease
debit: overhead
credit: cost of goods sold

Question 15

represents the system used by a company to accumulate product cost information
what is this ?

Answer 15

cost accounting system

Question 16

what are the 2 traditional types of cost accounting systems ?

Answer 16

1. job order costing
2. process costing

Question 17

• a company produces many units of a single product
• one unit of product is indistinguishable from other units of product
• the identical nature of each unit of product enables assigning the same average cost per unit
  what cost accounting system is this ?

Answer 17

process costing

Question 18

• many different products are produced each period
• products are manufactured to order
• the unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job
  what cost accounting system is this ?

Answer 18

job order costing

Question 19

• print shops
• anything custom made
• construction companies
• landscapes
  what are these examples of ?

Answer 19

job order costing company bc these are companies who produce separately identifiable products (referred to as jobs)

Question 20

how does accounting for direct materials work when direct materials are purchased for work ?

Answer 20

debit: direct material inventory
credit: cash/accounts payable

Question 21

how does accounting for direct materials when direct materials are used in production work ?

Answer 21

debit: work in process inventory
credit: direct materials inventory

Question 22

how does accounting for direct labor when direct labor cost is incurred work ?

Answer 22

debit: work in process inventory
credit: cash/salaries payable

Question 23

how does accounting for overhead to record actual overhead costs work ?

Answer 23

debit: overhead
credit: cash/accounts payable
supplies
accumulated depreciation

Question 24

how does accounting for overhead to record overhead applied to jobs work ?

Answer 24

debit: work in process inventory
credit: overhead