Chapter 2 - Calculating Unit Product Costs Flashcards

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1
Q

What is a costing method that includes all manufacturing costs in unit product costs?

A

Absorption costing

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2
Q

What is used in situations where many different products are produced each period?

A

Job-order costing

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3
Q

What is a document that lists the quantity of each type of direct material needed to complete a unit of product?

A

A bill of materials

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4
Q

What is a document that specifies the type and quantity of materials to be drawn from the storeroom and identifies the job that will be charged for the cost of the materials?

A

The materials requisition form

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5
Q

What records the actual materials, actual labor, and estimated manufacturing overhead costs charged to a job?

A

A job cost sheet

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6
Q

Labor charges that cannot be easily traced to specific jobs are treated as part of what?

A

Manufacturing overhead

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7
Q

What includes tasks such as maintenance, supervision, and cleanup?

A

Indirect labor

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8
Q

What is an hour-by-hour summary of the employee’s activities throughout the day?

A

A time ticket

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9
Q

Where does the employee time ticket info go on a job cost sheet?

A

Direct labor

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10
Q

True or False:

Companies with large amounts of fixed manufacturing overhead costs tend to have their costs remain relatively constant from one period to the next

A

True

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11
Q

What is the formula to find the predetermined overhead rate?

A

(FMOC / hours) + VMO

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12
Q

Fill in the Blank:

The allocation base is a __________ that causes overhead

A

Cost Driver

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13
Q

PearCo estimates that it will require 160,000 direct labor-hours to meet the coming period’s estimated production level. In addition, the company estimates total fixed manufacturing overhead at $200,000, and variable manufacturing overhead costs of $2.75 per direct labor hour.

What is the estimated total manufacturing overhead cost?

A
Y = $200,000 + ($2.75 per direct labor-hour × 160,000 direct labor-hours)
Y = $200,000 + $440,000
Y = $640,000
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14
Q

PearCo estimates that it will require 160,000 direct labor-hours to meet the coming period’s estimated production level. In addition, the company estimates total fixed manufacturing overhead at $200,000, and variable manufacturing overhead costs of $2.75 per direct labor hour. (TMOC = $640,000)

What is the predetermined overhead rate?

A
PDOR = 640,000/160,000
PDOR = $4 per direct labor hours
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15
Q

What is a factor that causes overhead costs?

A

The cost driver

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16
Q

What is a single predetermined overhead rate that is used throughout a plant?

A

A plantwide overhead rate

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17
Q

Fill in the Blank:

A cost system with _____________________ uses more than one overhead rate to apply overhead costs to jobs

A

Multiple predetermined overhead rates

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18
Q

Fill in the Blank:

________________ manufacturing costs to jobs adversely influences planning and decisions made by managers.

A

Inaccurately assigning

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19
Q

What often fails to accurately allocate the manufacturing overhead costs used during the production process to their respective jobs?

A

Job-order costing systems

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20
Q

Fill in the Blank: Direct/Indirect

Job-order costing systems can accurately trace _____ materials and ______ labor costs to jobs

A
  1. Direct

2. Direct

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21
Q

What do job-order costing systems often use that do not reflect how jobs actually use overhead resources?

A

Allocation bases

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22
Q

Fill in the Blank:

The allocation base in the predetermined overhead rate must _____ the overhead cost to improve job cost accuracy

A

Drive

23
Q

What approach is a company employing when they create overhead rates based on the activities that it performs?

A

Activity-based costing

24
Q

What is the result when a company applies less overhead to production than it actually incurs?

A

Underapplied overhead

25
Q

What is the result when a company applies more overhead to production than it actually incurs?

A

Overapplied overhead

26
Q

What do many companies use to allocate all manufacturing overhead costs to jobs based on their usage of direct-labor hours?

A

The predetermined overhead rate

27
Q

Fill in the Blank:

A single predetermined plantwide overhead rate is often ____________

A

Overly-simplistic

28
Q

True or False:

A single predetermined plantwide overhead rate is correct to assume that direct-labor hours is a company’s only manufacturing overhead cost driver

A

False

29
Q

How can you improve job cost accuracy when more than one overhead cost driver can be identified?

A

By using multiple predetermined overhead rates

30
Q

What are the 4 steps to calculate the multiple predetermined overhead rate?

A
  1. Calculate the PDOR
  2. Calculate OH applied
  3. Calculate the total job costs
  4. Calculate the selling price
31
Q

True or False:

Using a departmental approach to overhead application results in a different selling price for a job than the selling price derived using a Plantwide overhead rate

A

True

32
Q

What is an alternative approach to developing multiple predetermined overhead rates?

A

Activity-based costing

33
Q

What do managers use to more accurately measure the demands that jobs, products, customers, and other cost objects make on overhead resources?

A

Activity-based costing systems

34
Q

Does the amount of overhead applied to all jobs during a period differ from the actual amount of overhead costs incurred during the period?

A

Yes

35
Q

Does the cost of goods sold have to be adjusted to reflect underapplied or overapplied overhead?

A

Yes

36
Q

Fill in the Blank: Increase/Decrease

The adjustment for underapplied overhead _________ cost of goods sold

A

Increases

37
Q

Fill in the Blank: Increase/Decrease

The adjustment for overapplied overhead _________ cost of goods sold

A

Decreases

38
Q

What do all of a company’s job cost sheets collectively form?

A

A subsidiary ledger

39
Q

Fill in the Blank:

Job-order costing is also used in _______ industries

A

Service industries

40
Q

What is the cost allocation base (C.A.B)?

A

The direct labor hours that you incur

41
Q

Is debit the left or the right column?

A

The left column

42
Q

What is the formula to find a job’s direct labor?

A

Total direct labor hours incurred x wage rate

43
Q

What is the formula to find the overhead applied?

A

DLHW x PDOR

44
Q

What is the formula to find the total job cost?

A

DM + DL + Overhead applied

45
Q

What is the formula to find the selling price?

A

(TJC x markup) + TJC

46
Q

What is the formula to find the selling price per unit?

A

SP / # of units

47
Q

What is the formula to find the unit product cost?

A

TJC / # of units included

48
Q

What is the formula to find the overhead cost applied during the year?

A

PDOR x actual DL

49
Q
Job WR53 at NW Fab, Inc. required $200 of direct materials and 10 direct labor hours at $15 per hour. Estimated total overhead for the year was $760,000 and estimated direct labor hours were 20,000. What would be recorded as the cost of job WR53?
A. $ 200
B. $ 350
C. $ 380
D. $ 730
A

D. $ 730

POHR = 760,000/20,000 hours = 38
DM = 200
DL = 15 x 10 = 150
OA = 38 x 10 = 380
TC = 200 + 150 + 380
TC = $730
50
Q

What happens to variable cost per unit as the activity level increases/decreases?

A

It remains constant

51
Q

What happens to total variable cost as the activity level increases/decreases?

A

It increases or decreases depending on the proportion of change to the activity level

52
Q

What happens to fixed cost per unit as the activity level increases/decreases?

A

It decreases as the activity level rises and increases as the activity level falls

53
Q

What happens to total fixed cost as the activity level increases/decreases?

A

It isn’t affected