Job order costing: Overhead Allocation and Absorption

Question 1

What is a cost object?

Answer 1

products, product lines, jobs

Question 2

job costing?

Answer 2

many different products are produced

Question 3

operational costing?

Answer 3

large batches of similar products are produced. cost is per batch

Question 4

process costing?

Answer 4

masses of similar products are produced. cost is per unit

Question 5

plantwide overhead rate

Answer 5

step 1: find the cost driver said in question
step 2: add all indirect costs (total overhead costs)
step 3: find the overhead absorption rate by doing total indirect cost/cost driver in question

Question 6

how to allocate manufacturing overheads to each job

Answer 6

plantwide overhead rate x cost drivers added up

Question 7

full production cost

Answer 7

total direct costs + allocated overhead to job

Question 8

how to allocate overhead costs

Answer 8

allocate cost drivers (if has all cost drivers find the range)
(if range) x each cost driver used e.g. assembly
add all up

Question 9

To find the range

Answer 9

if its all three cost drivers
cost/add of cost driver(s)

Question 10

operating centre

Answer 10

assembly and fitting

Question 11

service centre

Answer 11

personnel

Question 12

how to reallocate the cost of service cost to the two operating centres using number of employees

Answer 12

service centre total cost/two operating centres ‘employees’

then do two operating centres employees individually x answer

Question 13

predetermined overhead rates given two operating centres

Answer 13

add up the centres total cost and reallocated total

for each= answer/cost driver

Question 14

how to work out amount over or under applied

Answer 14

predetermined overhead rate x cost driver in question

If bigger than MOC then its over applied
If its smaller than MOC then its under applied

Question 15

predetermined overhead rate

Answer 15

total estimated overhead/estimated activity in question for each department

Question 16

job sheet

Answer 16

direct materials
direct labour
total direct costs=
assembly= POHR x cost driver
fitting= POHR x cost driver
total indirect costs= add assembly and fitting
full production cost= total direct + total indirect