Listed below are seven technical accounting terms introduced oremphasized in this chapter.
Job Order costing
Overhead application rate
Overapplied overhead
Activity-based costing
Cost driver
Cost of finished goods manufactured
Job cost sheet
Each of the following statements may (or may not) describe thsestechinial terms. For each statment, indicate the term described, oramswer "None" if the statement does not correctly describe any ofthe terms.
a. An activity base that can b etraced directly to unitsproduced and can be used as a denominator in computing an overheadapplication rate.
b. The total of all direct lavor, direct materials andmanufacturing overhead transferred from work in process to finishedgoods.
c. A means of assigning indirect product costs to work inprocess during the period.
d. A debit balance remaining in the Manufacturing Overheadaccount at teh end of the period.
e. The type of cost accounting system likely to be used by aconstruction company.
f. The type of cost accounting method likely to be used foroverhead costs.
Listed below are seven technical accounting terms introduced oremphasized in this chapter.
Job Order costing
Overhead application rate
Overapplied overhead
Activity-based costing
Cost driver
Cost of finished goods manufactured
Job cost sheet
Each of the following statements may (or may not) describe thsestechinial terms. For each statment, indicate the term described, oramswer "None" if the statement does not correctly describe any ofthe terms.
a. An activity base that can b etraced directly to unitsproduced and can be used as a denominator in computing an overheadapplication rate.
b. The total of all direct lavor, direct materials andmanufacturing overhead transferred from work in process to finishedgoods.
c. A means of assigning indirect product costs to work inprocess during the period.
d. A debit balance remaining in the Manufacturing Overheadaccount at teh end of the period.
e. The type of cost accounting system likely to be used by aconstruction company.
f. The type of cost accounting method likely to be used foroverhead costs.
Related questions
AirComp Corporation produces component parts for the aircraftindustry. In prior years, they maintained a job-costing systemconsisting of direct materials and direct labor cost andmanufacturing overhead. Manufacturing overhead was allocated toproduction jobs using a single-indirect cost allocation rate, whichwas $115 per direct labor hour.
For 20x1, the Company decided to change the method of allocatingmanufacturing overhead to production jobs from the single-indirectcost allocation approach to the activity-based costing (âABCâ)indirect cost allocation approach. For purposes of developing theABC allocation rates, AirCompâs cost accounting team prepared thefollowing analysis:
Activity | Cost Driver | Allocation Rate |
Material handling | Parts handled | $0.40 |
Lathe work | No. of lathe turns | $0.20 |
Milling | Machine hours | $20.00 |
Grinding | No. of parts ground | $0.80 |
Testing | No. of units tested | $15.00 |
For 20x1, AirCompâs cost accountant team prepared the followinganalysis of the direct costs and indirect cost activities for Job100 and Job 200, the only production jobs in process for theperiod:
Job 100 | Job 200 | |
Direct materials cost | $9,700 | $59,900 |
Direct labor cost | $750 | $11,250 |
No. of direct manufacturing labor hours | 25 | 375 |
No. of parts ground | 500 | 2,000 |
No. of lathe turns | 20,000 | 60,000 |
Machine hours | 150 | 1,050 |
No. of units produced during period (all are tested) | 10 | 200 |
Required
1.For each job, determine total per unit cost using direct laborhours to allocate manufacturing overhead to each job.
2.For each job, determine total per unit cost using anactivity-based costing approach to allocate manufacturing overheadcost to job.
3.Compare the per unit cost figures for each job computed instep a. and step b., above. Why do the new ABC approach differ fromthe single-indirect cost allocation systems differ in the amount ofthe per unit indirect cost allocated to each job (i.e. what was theimplications of the cost allocation method change on the amount ofper unit cost allocated to each job and what factors caused theobserved changes).
4.How might AirComp Corporation use the information from ABCallocation approach to better manage its business, i.e. what arethe advantages of using an activity-based costing approach?
1.) On January 31, Village Bank had 500,000 shares of $3 parvalue common stock outstanding. On that date, the company declareda 10% stock dividend when the market price of the stock was $62 pershare. The immediate effect of this dividend upon Village Bankwas:
A.)A reduction in cash of $3,794,500. | |||||||||||||||||||||||||||||||||||||||||
B.) A reduction in retained earnings of $3,100,000. | |||||||||||||||||||||||||||||||||||||||||
C.) A reduction in retained earnings of $150,000. | |||||||||||||||||||||||||||||||||||||||||
| D.) A liability to the stockholders of $150,000. 2.) Mayfair Corporation has outstanding 70,000 shares of $1 parvalue common stock as well as 20,000 shares of 7%, $100 par valuecumulative preferred stock. At the beginning of the year, thebalance in retained earnings was $800,000, and one year's dividendswere in arrears. Net income for the current year is $580,000.Compute the balance in retained earnings at the end of the year ifMayfair Corporation pays a dividend of $3 per share on its commonstock this year.
3.) During the years 2009 through 2011, Powers, Inc., reportedthe following amounts of net income (dollars in thousands):
4.) Hines Cannery issued capital stock in 2009 for $700,000.During 2009 the company paid dividends of $250,000. What is theeffect of these events in Hines' statement of cash flows for2009?
6.) Which of the following is a characteristic of manufacturingoverhead in a job order cost system?
|
7.) A job order cost system traces direct materials cost to aparticular job by means of:
A.) | Materials requisitions. |
B.) | A production budget. |
C.) | The Materials Inventory controlling account. |
D.) | A debit to the job cost sheet for the job. |
8.) Which of the following costing systems would always use jobcost sheets?
A.) | Job order costing. |
B.) | Process costing. |
C.) | Activity-based costing. |
D.) | All three systems. |
9.) Edwards Auto Body uses a job order cost system. Overhead isapplied to jobs on the basis of direct labor hours. During thecurrent period, Job No. 337 was charged $425 in direct materials,$475 in direct labor, and $190 in overhead. If direct labor costsan average of $16 per hour, the company's overhead application rateis:
A.) | $7.27 per direct labor hour. |
B.) | $6.40 per direct labor hour. |
C.) | $17.50 per direct labor hour. |
D.) | $40 per direct labor hour. |
10.) Marty's Metal Shop uses a job order cost system. It appliesoverhead to jobs at a rate of 175% of direct labor costs. Job No.2617 required $800 in direct labor costs. The job was initiallybudgeted to require $850 in direct labor costs. Overhead applied toJob No. 2617 during the period amounted to:
A.) | $850. |
B.) | $1,400. |
C.) | $1,275. |
D.) | Some other amount. |
11.) In a job cost system, the Work-in-Process Inventorycontrolling account may be reconciled to the total of the:
A.) | Employee time cards. |
B.) | Materials requisitions. |
C.) | Work-in-Process Inventory records for each department orprocess. |
D.) | Job cost sheets. |
12.) For the month of December, its first month of operations,the Radcliffe Corporation completed and transferred 800 units ofproduct costing $80,000 to produce to Finished Goods Inventory. IfRadcliffe sold 650 units during the same month, how much was costof goods sold for the same period?
A.) | $80,000. |
B.) | $8,000. |
C.) | $6,500. |
D.) | $65,000. |
13.) The computation of equivalent full units is generally notnecessary when:
A.) | Beginning work-in-process inventories are significantly largerthan ending work-in-process inventories. |
B.) | Beginning and ending work-in-process inventories differ onlyslightly. |
C.) | The number of units in ending work-in-process exceeds the numberof units completed and transferred to finished goods during theperiod. |
D.) | Per-unit costs become distorted as a result of not computingequivalent full units of production. |
14.) During July, the equivalent full units of direct materialsadded to the product worked on by Department A amounted to a totalof 90,000 applied as follows: beginning inventory, 20,000 units;units started and completed in July, 60,000 units; and endinginventory, 10,000 units. Assuming that the cost of direct materialsrequisitioned by the department in July was $135,000; the amount ofthe materials cost to be assigned to the ending inventory wouldbe:
A.) | $16,875. |
B.) | $54,000. |
C.) | $15,000. |
D.) | $18,000. |
