question

FACTORY OVERHEAD APPLIED TO JOBS

answer

WIP -> FO

question

JOBS COMPLTETED

answer

Finished Goods ->WIP

question

COST OF GOODS SOLD

answer

CGS ->Finished Goods

question

Under-applied to CGS

answer

CGS Factory Overhead

question

Over-applied to CGS

answer

Factory Overhead CGS

question

TERMS -----------

answer

...

question

Activity Base

answer

A measure of activity that is related to changes in cost. Used in analyzing and classifying cost behavior. Activity bases are also used in the denominator in calculating the predetermined factory overhead rate to assign factory overhead costs to cost objects.

question

Activity-based costing

answer

A cost allocation method that identifies activities causing the incurrence of costs and allocates these costs to products (or other cost objects), based on activity drivers (bases).

question

Cost accounting systems

answer

Systems that measure, record, and report product costs.

question

Cost allocation

answer

The process of assigning indirect cost to a cost object, such as a job.

question

Finished Goods Ledger

answer

The subsidiary ledger that contains the individual accounts for each kind of commodity or service produced.

question

Job Cost Sheet

answer

An account in the work in progress subsidiary ledger in which the costs charged to a particular job order are recorded.

question

Job Order Cost System

answer

A type of cost accounting system that provides for a separate record of the cost of each particular quantity of product that passes through the factory.

question

Materials ledger

answer

The subsidiary ledger containing the individual accounts for each type of material.

question

Materials requisition

answer

The form or electronic transmission used by a manufacturing department to authorize materials issuance from the storeroom.

question

Overapplied factory overhead

answer

The amount of factory overhead applied in excess of the actual factory overhead costs incurred for production during a period.

question

Predetermined factory overhead rate

answer

The rate used to apply factory overhead costs to the goods manufactured. The rate is determined by dividing the budgeted overhead cost by the estimated usage at the beginning of the fiscal period.

question

Process Cost System

answer

A type of cost system that accumulates costs for each of the various departments within a manufacturing facility.

question

Receiving Report

answer

The form or electronic transmission used by the receiving personnel to indicate that materials have been received and inspected.

question

Time tickets

answer

The form on which the amount of time spent by each employee and the labor cost incurred for each individual job, or for factory overhead, are recorded.

question

DISCUSSION QUESTIONS ------------------------------------- 1a. Name two principal types of cost accounting systems.

answer

Job order cost system and process cost system

question

1b. Which system provides for a separate record of each particular quantity of product that passes through the factory?

answer

The job order cost system provides a separate record of each quantity of product that passes through the factory.

question

1c. Which system accumulates the costs for each department or process within the factory?

answer

Process cost systems accumulate costs for each department or process within a factory.

question

2. What kind of firm would use a job order cost system?

answer

Job order costing is used by firms that sell custom goods and services to customers. The job order system is frequently associated with firms that will produce a product or service specifically to a customer order

question

3. Which account is used in the job order cost system to accumulate direct materials, direct labor, and factory overhead applied to production costs for individual jobs?

answer

Work in progress

question

4. What document is the source for (A) debiting the accounts in the materials ledger and (B) crediting the accounts in the materials ledger?

answer

(A)Purchase invoice or receiving report (B)Materials Requisition

question

5. What is a job cost sheet?

answer

A job cost sheet is the subsidiary ledger to the work in process control account. The cost of materials, labor, and overhead are listed on each separate job cost sheet for each job. A summary of all the job cost sheets during an accounting period is the basis for journal entries to the control accounts.

question

6. What is the difference between a clock card and time ticket?

answer

The clock card is a means of recording the hours spent by employees in the factory. The time ticket is a means of recording the time the employee spends on a specific job.

question

7. Discuss how the predetermined factory overhead rates can be used in job order cost accounting to assist management in pricing jobs.

answer

The predetermined overhead rate is computed using estimated amounts at the beginning of the period. This is because managers need timely information on the product costs of each job. If a company waited until all overhead costs were known at the end of the period, the allocated factory overhead would be accurate, but not timely. Only through timely reporting can managers adjust manufacturing methods or product pricing.

question

8a. How is a predetermined factory overhead rate calculated?

answer

The predetermined factory overhead rate is determined by dividing the estimated total factory overhead costs for the forthcoming year by an estimated activity base, one that reflects the consumption or use of factory overhead costs.

question

8b. Name three common bases used in calculating the rate.

answer

Direct labor cost, direct labor hours, and machine hours.

question

9A. What is (1) over applied factory overhead and (2) under applied factory overhead?

answer

(1) If the amount of factory overhead applied is greater than the actual factory overhead incurred, factory overhead is over-applied. (2) If the amount of actual factory overhead is greater than the amount applied, factory overhead incurred is under-applied.

question

9B. If the factory overhead account has a debit balance, was factory overhead under applied or over applied?

answer

Underapplied

question

9C. If the factory overhead account has a credit balance at the end of the first month of the fiscal year, where will the amount of this balance be reported on the interim balance sheet?

answer

Deferred Credit

question

10. Describe how a job order cost system can be used for professional service businesses.

answer

Job order cost accumulation would be most appropriate for professional service firms that provide extended, project-type services for clients. Examples would be architectural, consulting, advertising, or legal services. Job cost sheets would accumulate all direct costs of servicing the client. Such costs would include labor, materials, travel, and subcontracted services. In addition, overhead would be applied using a predetermined overhead rate. The costs accumulated by the job cost sheet would be treated as work in process (a current asset) until the service is completed. Once completed, the cost would be transferred to the cost of services on the income statement.

question

OBJECTIVES ------------------ OBJ 1 A cost accounting system accumulates

answer

product costs.

question

Two primary cost accounting systems are-

answer

job order and the process cost systems.

question

Job order cost systems accumulate costs for

answer

each quantity of product that passes through the factory.

question

Two primary cost accounting systems are

answer

job order and process cost systems.

question

Job order cost systems accumulate costs for

answer

each quantity of product or "job" that passes through the factory.

question

Process cost systems accumulate costs for

answer

each department or process within the factory.

question

JOB COST System These are assigned to individual jobs based on quantity used.

answer

Direct materials and direct labor

question

OBJ 2 Direct materials, direct labor, and factory overhead are accumulated on the job cost sheet, which is the subsidiary cost ledger for each job.

answer

...

question

Direct Materials and Direct Labor are assigned to individual jobs, based on quantity used.

answer

...

question

Factory overhead costs are assigned to each job based on-

answer

an activity base that reflects the use of factory overhead costs.

question

OBJ 3 Job order cost systems can be used to

answer

evaluate cost performance.

question

Units can be compared over time to determine

answer

if product costs are staying within expected ranges

question

OBJ 4 Job order cost accounting systems can be used by service businesses to-

answer

plan and control operations.

question

Because the product is a service-

answer

the focus is on direct labor and overhead costs.

question

The costs of providing a service are-

answer

accumulated in a work in process account and transferred to a cost of services account upon completion.

question

OTHER EX FROM CH#: Period Costs are recorded as expenses of the current period as either selling or administrative expenses.

answer

selling or administrative

question

Assembling Example

answer

Employees assemble and finish the guitars

question

Cutting Example

answer

Employees cut the body and neck of the guitar out of wood

question

The 3 inventory ledger accounts

answer

Materials Inventory, Work in Progress, Finished Goods Inventory

question

JOURNAL ENTRIES --------------------------

answer

...

question

Issuance of Materials "record the purchase"

answer

Materials AP

question

Purchase of Materials "Materials purchased on account, $634,000."

answer

Materials Accounts Payable

question

Record the requisition from the materials storeroom.

answer

Work in Process Materials

question

Direct labor costs Flow of Labor Costs into Production

answer

Work in Progress Wages Payable

question

Record the Requisition from Storeroom

answer

Work in Progress Materials

question

Entry for Issuing Materials "2 Materials requisitioned, $646,200, of which $74,500 was for general factory use."

answer

Work in Process Factory Overhead Materials

question

Entry for Factory Labor Costs "31 Factory labor used, $660,200, of which $91,200 was indirect."

answer

Work in Process Factory Overhead Wages Payable

question

Journalize Factory Overhead incurred

answer

Factory Overhead Materials (Indirect Materials) Wages Payable (Indirect Labor) Utilities Payable (Utilities Cost) Accumulated Depreciation-Factory (Factory Depreciation)

question

PREDETERMINED FACTORY OVERHEAD RATE

answer

Direct Labor ______________ Example: "Avg Shop Direct Labor Rate" is Activity Base

question

Avg Shop Direct Labor Rate, GIVEN

answer

xx

question

Activity Base x Amount of HRS for each job

answer

...

question

Prepare the journal entry on Apr.30 to apply factory overhead to both jobs "Applying factory overhead"

answer

Work in Progress Factory Overhead

question

Entries for direct labor and factory overhead Required: A. Journalize the April 30 entry to record the factory labor costs. B. Journalize a second entry on April 30 to apply factory overhead to production for April. "applying factory overhead"

answer

Work in Process Factory Overhead Wages Payable Work in Process Factory Overhead

question

FACTORY OVERHEAD RATES, ENTRIES, AND ACCOUNT BALANCE "Factory overhead costs applied to jobs"

answer

1. Work in Process Factory Overhead 2.Work in Process Factory Overhead

question

Predetermined Factory Overhead Rate (book)

answer

Estimated Total Factory Overhead Costs _______________ Estimated Activity Base

question

xx Predetermined Factory Overhead Rate

answer

Direct Labor ______________ Avg Shop Direct Labor Rate = Activity Base

question

xx Predetermined Shop Overhead Rate

answer

Total Shop Overhead _________________ Activity Base

question

2 FORMULAS Predetermined Shop Overhead Rate or Predetermined Overhead Rate

answer

...

question

FOH RATE x ACTUAL MACHINE HRS gives you # for -> applying factory overhead

answer

Work in Process Factory Overhead

question

($117,600 - $119,000)

answer

-1,400 = 1,400 (Credit) Overapplied

question

Jobs completed, $1,002,000.

answer

Finished Goods -->Work in Process

question

Balance of Factory Overhead Accounts Underapplied vs Overapplied

answer

Actual Factory Overhead -

question

Cost of goods sold, $890,000.

answer

Cost of Goods Sold --> Finished Goods

question

To Close 6,000 FOH V Debit

answer

Debit Cost of Goods Sold Credit Factory Overhead

question

To Close 6,000 FOH V Credit

answer

Debit Factory Overhead Credit Cost of Goods Sold

question

($102,350 - $100,620)

answer

$1,730 (Debit) (Underapplied)

question

Spring Street Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows: Engine parts $875,000 Shop direct labor 660,000 Shop and repair equipment depreciation 44,500 Shop supervisor salaries 138,000 Shop property taxes 27,500 Shop supplies 10,000 Advertising expense 22,100 Administrative office salaries 73,500 Administrative office depreciation expense 8,600 Total costs and expenses $1,859,200

answer

Shop and repair equipment depreciation 44,500 Shop supervisor salaries 138,000 Shop property taxes 27,500 Shop supplies 10,000 ^Only included in Factory Overhead

question

The average shop direct labor rate is $30 per hour.

answer

The estimated activity base is determined by dividing the shop direct labor cost by the direct labor rate, as follows: $660,000 $30 per hour= 22,000 hours The predetermined shop overhead rate is: $220,000 22,000 hours = $10.00 per direct labor hour

question

BOOK ----------------------------------------

answer

...

question

OTHER -----------------------------------------

answer

...

question

QUIZ QUESTIONS CENGAGE -----------------------------------------

answer

...

question

A cost accounting system that accumulates costs for each manufacturing department or process is called a

answer

process cost system.

question

A process cost system will be used by all of the following manufacturing companies except

answer

a custom sailboat factory.

question

Which of the following products/services would most likely be accounted for using a job order cost system?

answer

a job audit

question

Which of the following is the flow of manufacturing costs?

answer

materials, work in process, finished goods, cost of goods sol

question

Neon Lighting is comparing actual and applied overhead amounts at the end of the year and finds the factory overhead account has a credit balance. What does this mean?

answer

Applied costs are higher than actual costs.

question

Icy Mocha Company estimates its factory overhead costs to be $35,000 and machine hours to be 5,000 for the year. If the actual hours worked on Jobs 333 and Jobs 334 total 4,980 and actual factory overhead costs are $34,700, what is the amount of either over- or under applied factory overhead?

answer

over applied $160

question

In a job order costing system, ____________ make up the work in process ledger.

answer

job cost sheets

question

A job order cost system can be used by a hospital to

answer

charge patients with services provided.

question

The manager of a company is analyzing direct labor and has found that expenses are higher than expected. Which of the following could be the reason?

answer

All of these choices are correct. (A) higher hourly rates are being paid inefficient use of time new employees unfamiliar with the process

question

A baking company has determined that direct material costs are increasing. All of the following are reasons why this may be true except the fruits used in baking are out of season. the oven is malfunctioning. cakes are being sold at a special rate during the month. a new baker has been hired who is not familiar with the ingredients.

answer

cakes are being sold at a special rate during the month.

question

A hotel will use a job order cost system for which of the following expenses?

answer

Room service

question

The job order cost system for a service business includes all of the following except

answer

Materials Inventory

question

In service companies, _________ is supported by a cost ledger with a job cost sheet for each client.

answer

Work in Process

question

ACCOUNTING COACH ----------------------------------------

answer

...

Test 3 Accounting CH 17 – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards