Ch 4

Question 0

Direct costs of a cost object, define? Example?

Answer 0

Costs related to particular cost object that can be traced
In economically feasible way

Ex. Cost of parts used for iMac

Question 1

Cost object, define, example?

Answer 1

Anything for which measurement of cost is desired

Ex. iMac cost, cost of repairing and iMac

Question 2

Indirect costs of cost object, define? Example?

Answer 2

Costs related to particular cost object that can’t be directly
Traced to cost object in economically feasible way

Ex. Cost of supervisors that oversee multiple products,
Rent paid for facility that makes many different products

Question 3

Cost assignment

Answer 3

General term for assigning costs both indirect and direct

To a cost object

Question 4

Cost tracing

Answer 4

Specific term used for assigning direct costs to cost object

Question 5

Cost allocation

Answer 5

Refers to assigning indirect costs to cost object

Question 6

Cost pool, define, broad example, narrow example?

Answer 6

Grouping of individual indirect cost items
Organized in conjunction with cost allocation bases

Ex. Broad like manufacturing plant costs, narrow like costs of operating metal cutting machines

Question 7

Cost allocation base? Example

Answer 7

Systematic way to link an indirect cost or group of
Indirect costs to cost object (different products)

Ex. Cost per machine hour

Question 8

Cost-application base

Answer 8

Cost object is a job, product or customer

Question 9

Job costing system

Answer 9

In this system, the cost object is a unit or multiple units
Of a distinct product called a job

Each job uses different amount of resources to produce
A distinct product

Question 10

Process-costing system

Answer 10

In system, cost object is masses of identical or similar units
Of product or service

Question 11

What is the ideal cost allocation base?, why?

Answer 11

The cost driver of indirect costs
B/c cause and effect relationship btw/ cost allocation base
And indirect costs

Question 12

5 steps of job costing evaluation and implementation?

Answer 12

1 identify problems and uncertainties
2 obtain info
3 make predictions about the future
4 make decisions by choosing among alternatives
5 implement decision, evaluate performance and learn

Question 13

Actual costing

Answer 13

Costing system that traces direct costs to a cost object
By using actual direct costs rates times actual quantities
Of direct-cost inputs

Allocates indirect costs based on actual indirect cost rates
times actual quantities of cost allocation bases

Calculate actual cost of jobs

Question 14

2 reasons for using longer periods, such as a year, to calculate indirect cost rates?

Answer 14

Numerator reason (indirect-cost pool)

The denominator reason (quantity of allocation base)

Question 15

Numerator reason (indirect costing pool), example?

Answer 15

The shorter the period, the greater influence of
Seasonal patterns on the amount of costs

Ex. Costs of heating charged to production in winter

Question 16

Denominator reason (quantity of cost-allocation base), example?

Answer 16

avoid spreading Monthly fixed allocation costs over fluctuating levels Of monthly output
and fluctuating quantities of cost Allocation base

Ex. Tax accountants that see a high volume around tax season

Question 17

Budgeted indirect cost rate, equation?

Answer 17

Budgeted indirect cost rate =
budgeted annual indirect costs/
budgeted annual quantity of cost-allocation base

Question 18

Normal costing is a costing system that? 2 things.

Answer 18

1) Traces direct costs to cost object by using
actual direct cost rates x actual quantities of direct cost inputs

2) allocates indirect costs based on
budgeted indirect-cost rates x
actual quantities of cost-allocation bases

Question 19

In Job costing, what are the 7 steps to assign costs to an individual job?

Answer 19

1) identify job that has been chosen as cost object
2) identify direct costs of job
3) select cost allocation bases for allocating
indirect costs to job
4) identify indirect costs associated with each
cost-allocation base
5) compute rate/unit of each cost allocation base used to
Allocate indirect costs to job
6)compute indirect costs allocated to job
7) compute total cost of job by adding all direct and
indirect costs assigned to job

Question 20

Source document

Answer 20

Original record that supports journal entries in

accounting system

Question 21

Job cost record AKA Job cost sheet

Answer 21

Records and accumulates all costs assigned to specific job

Starting when work begins

Question 22

Materials-requisition record

Answer 22

Basic source document contains info about cost of direct materials and cost of specific job in specific department

Question 23

Labor-time sheet

Answer 23

Source document for direct manufacturing labor

Contains info on amount of labor time used for
Specific job, in specific department

Question 24

Budgeted manufacturing overhead rate, equation, what is it used to calculate?

Answer 24

Budgeted manufacturing overhead rate = budgeted manufacturing overhead costs/ Budgeted total quantity of cost-allocation base Used to calculate allocation rate for single Manufacturing overhead cost pool, in step 5 of job costing

Question 25

Difference of costing a job btw/ normal costing and actual costing?

Answer 25

Normal costing uses budgeted indirect cost rates In contrast, actual costing uses actual indirect cost rates Calculated annually at end of year

Question 26

Actual manufacturing overhead rate, equation? What is it calculated for?

Answer 26

Actual manufacturing overhead rate = Actual annual manufacturing overhead costs/ Actual annual quantity of cost allocation base Calculated for single manufacturing overhead cost pool

Question 27

Actual indirect cost rate, equation, when is it calculated?

Answer 27

Actual indirect cost rate = total Indirect costs in pool (determined in step 4)/ total quantity of cost allocation base (determined in step 3) Calculated in step 5

Question 28

Manufacturing overhead costs allocated to job, equation, when is it calculated?

Answer 28

Manufacturing overhead costs allocated to job = (Actual manufacturing overhead rate) x (actual quantity of direct manufacturing labor hours)

Question 29

Are manufacturing costs of job available earlier in the actual costing system or normal costing system?

Answer 29

Normal costing system

Question 30

Work in process control

Answer 30

In general ledger contains total of al separate job-cost | Records pertaining to unfinished jobs

Question 31

"control" in general ledger accounts?

Answer 31

Titles with control have underlying subsidiary ledgers

Question 32

Under normal costing, define manufacturing overhead allocated AKA Manufacturing overhead applied?

Answer 32

Manufacturing overhead allocated (applied) = (Amount of manufacturing overhead costs allocated to individual jobs based on budgeted rate) X (actual quantity used of allocation base)

Question 33

Labor records by employee

Answer 33

Used to trace direct manufacturing labor to individual jobs

Question 34

Manufacturing department overhead records by month, 6 main categories?

Answer 34

Subsidiary ledger of manufacturing overhead control Includes indirect materials, indirect manufacturing labor, Supervision, engineering, plant insurance and utilities, Plant depreciation

Question 35

Under allocated indirect costs AKA under applied indirect costs

Answer 35

Occur when allocated indirect costs in an accounting | period is less than actual incurred amount

Question 36

Over allocated indirect costs

Answer 36

Occur when allocated amount of indirect costs in an | Accounting period is greater than actual amount

Question 37

Manufacturing overhead control and manufacturing overhead allocated?

Answer 37

Control-Records actual cost of manufacturing overhead Allocated-manufacturing overhead budgeted rate Multiplied by actual direct manufacturing labor hours

Question 38

3 main approaches for accounting for under allocated manufacturing overhead?

Answer 38

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

Question 39

Adjusted allocation rate approach

Answer 39

Restates all overhead entries in general ledger and subsidiary ledgers using actual cost rates rather Than budgeted cost rates

Question 40

Proration

Answer 40

Spreads under (or over) allocated overhead among Ending work-in-process inventory, finished goods inventory And cost of goods sold

Question 41

Write off cost of goods sold approach?

Answer 41

Total under- or over allocated manufacturing overhead | is included in this year's cost of goods sold

Question 42

Journal entry for write off cost of goods sold approach journal entry for $135,000 under allocated manufacturing overhead with manufacturing overhead allocated of $1,080,000?

Answer 42

Cost of goods sold. 135,000 Manufacturing overhead allocated. 1,080,000 Manufacturing overhead control. 1,215,000

Question 43

Budgeted direct labor cost rate equation?

Answer 43

Budgeted direct labor cost rate = | Budgeted total direct labor cost/budgeted total direct labor hours

Question 44

Budgeted indirect cost rate, equation?

Answer 44

Budgeted indirect cost rate = Budgeted total costs in indirect cost pool/ Budgeted total quantity of cost allocation base (direct labor cost)