124 terms

COST ACCOUNTING EXAM 2 ch4

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How to get the indirect cost rate
Indirect cost pool / activity driver
Job Costing
Cost object is a job
A job is a distinct product or service
Customized
Wedding announcements, aircraft, or advertising
Process Costing
Cost object is a large number of identical units
Average or per-unit costs
Coke, oil refining, Intel Pentium chips
Actual Costing
Actual cost for direct and indirect costs
Could be end of year before costs are known
Seasonality issues
Normal Costing
Actual cost for direct items
Indirect costs based on budget
- Budgeted indirect rate * actual quantity (of allocation base)
Actual costing formulas
direct costs = actual direct cost rates * actual quantities of direct cost inputs
Indirect costs = actual indirect cost rates * actual quantities of cost allocation bases
Normal costing formulas
Direct costs = actual direct cost rates * actual quantities of direct cost products
Indirect costs = Budgeted indirect cost rates * actual quantities of cost allocation bases
7 steps to Job Costing
1. Identify the job that is the chosen cost object
2. Identify the direct costs of the job
3. Select the cost-allocation base to use for allocating indirect costs to the job
4. Match indirect costs to their respective cost-allocation base
5. calculate overhead allocation rate
6.Allocate overhead costs to the job: budgeted allocation rate * actual base activity for the job
7. Compute total job costs by adding all direct and indirect costs together
Overhead allocation rate
Budgeted manufacturing Overhead Rate = Budgeted manufacturing overhead costs / Budgeted total quantity of cost-allocation base
Allocation base amount
budgeted allocation rate * actual base activity for the job
What goes into WIP
Direct materials, direct labor, allocated overhead (not actual overhead)
Job costing information is used
for internal financial reporting
Product costing information will include
for cost management
A ______ is a grouping of individual indirect cost items
Cost pool
Each indirect-cost pool of a manufacturing firm ________
utilizes a separate cost-allocation rate
Direct costs ________
are costs related to a particular cost object that can be traced to that cost object in a cost-effective manner
In a costing system, ________.
a cost-allocation base can be either financial or nonfinancial
Assigning direct costs to a cost object is called ________.
cost tracing
________ is the process of distributing indirect costs to products.
Cost allocation
A ________ links an indirect cost to a cost object.
cost-allocation base
Which of the following includes both traced direct costs and allocated indirect costs?
cost assignments
The cost allocation base ________.
is a systematic way to link an indirect cost or group of indirect costs to cost objects
Process costing is ________.
used by businesses to price identical products
Process costing ________.
allocates all product costs, including materials, and labor
Job costing is ________.
used by businesses to price unique products for different jobs
Job costing ________.
records the flow of costs for each product or service
Job-costing is likely to be used by________.
advertising agencies
Which of the following differentiates job costing from process costing?
Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches.
Which of the following companies will use a process costing system?
an oil refining company
Which of the following are reasons for using longer periods, such as a year, to calculate indirect cost rates?
shorter the period, the greater is the influence of seasonal patterns on the amount of costs
The actual indirect-cost rate is calculated by ________.
dividing actual total indirect costs by the actual total quantity of the cost-allocation base
Actual costing is a costing system that traces direct costs to a cost object by ________.
using the actual direct cost rates times the actual quantities of the direct-cost inputs
An example of a numerator reason for calculating annual indirect-cost rates includes ________.
the number of units produced
An example of a denominator reason for calculating annual indirect-cost rates includes ________.
higher levels of output demanded during the fall months
A job that shows low profitability may be the result of ________.
inefficient direct manufacturing labor
For a given job the direct costs associated with the job are ________.
raw materials
Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs:

A. Identify indirect costs
B. Compute the total cost of the job
C. Select cost-allocation bases
D. Compute the indirect cost rate
CADB
The basic source document for direct manufacturing labor is the ________.
labor-time record
Problems with costing occur when ________.
incorrect job numbers are recorded on source documents
The budgeted indirect-cost rate for each cost pool is computed as ________.
budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base
If indirect-cost rates are calculated monthly, distortions might occur because of ________.
property tax payments made in July and December
Bernard Company's budgeted manufacturing overhead is $3,300,000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 60,000. What is the manufacturing overhead rate?
=$55.00
$3,300,000/60,000 hours = $55.00
Vision Enterprises manufactures digital video equipment. For each unit, $3,000 of direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $25 per direct manufacturing labor hour. Calculate the profit earned on 50 units if each unit sells for $9,000.
=$75,000
$3,000 + $2,000 + (($2,000/20) × $25) = $7,500
Profit earned on 50 units = ($9,000 − $7,500) × 50 units = $75,000
In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job.
manufacturing overhead costs
A job-cost sheet details the ________.
direct labor costs incurred
A job-cost record uses information from ________.
a labor-time card to record an employee's wage rate and hours spent on a particular job
Costs that are subject to short-run fluctuations for given jobs are ________.
actual costs
An increase in direct labor cost per unit ________.
increases the variable cost
Fixed costs remain constant at $400,000 per month. During high-output months variable costs are $320,000, and during low-output months variable costs are $80,000. What are the respective high and low indirect-cost rates if budgeted professional labor-hours are 16,000 for high-output months and 4,000 for low-output months?
=$45.00 per hour; $120.00 per hour
HIGH MONTH: ($400,000 / 16,000 = $25.00) + ($320,000 / 16,000 = 20.00)= $45.00
LOW MONTH: ($400,000 / 4,000 = $100.00) + ($80,000 / 4,000 = 20.00) = $120.00
Managers and accountants collect most of the cost information that goes into their systems through ________.
source documents
For 2014, Bakers Manufacturing uses machine-hours as the only overhead cost-allocation base. The direct cost rate is $3.00 per unit. The selling price of the product is $20.00. The estimated manufacturing overhead costs are $240,000 and estimated 40,000 machine hours. The actual manufacturing overhead costs are $300,000 and actual machine hours are 50,000.
Using job costing, the 2014 actual indirect-cost rate is
=$6.00 per machine-hour

$300,000 / 50,000 mh = $6.00
For 2014, Bakers Manufacturing uses machine-hours as the only overhead cost-allocation base. The direct cost rate is $3.00 per unit. The selling price of the product is $20.00. The estimated manufacturing overhead costs are $240,000 and estimated 40,000 machine hours. The actual manufacturing overhead costs are $300,000 and actual machine hours are 50,000.
What is the profit margin earned if each unit requires two machine-hours?
=33.33%
$20 − $3.00 − ($6.00 × 2) = $5; $5/$15 = 33.33%
Tiscara Company manufactures insulation and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $15 per direct labor-hour. The following data are obtained from the accounting records for June 2014:

Direct materials $440,000
Direct labor (3,500 hours @ $11/hour) 38,500
Indirect labor 15,000
Plant facility rent 50,000
Depreciation on plant machinery and equipment 35,000
Sales commissions 10,000
Administrative expenses 25,000

The actual amount of manufacturing overhead costs incurred in June 2014 totals ________.
=$100,000
$15,000 + $50,000 + $35,000 = $100,000
Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 2014:

Budget Actual
Indirect costs $270,000 $300,000
Annualsalaryeachattorney $100,000 $110,000
Annualsalaryofeachparaprofessional $29,000 $30,000
Totalprofessional laborhrs 50,000 dlh 60,000 dlh
What are the actual direct-cost rate and the actual indirect-cost rate, respectively, per professional labor-hour?
=$27.00; $5.00
[($110,000 × 12) + ($30,000 × 10)] / 60,000 = $27.00 actual direct rate
$300,000 / 60,000 = $5.00 actual indirect rate
How much should the client be billed in an actual costing system if 200 professional labor-hours are used?
=$6,400
[($110,000 × 12) + ($30,000 × 10)] / 60,000 × 200 = $5,400
+ $300,000 / 60,000 × 200 = $1,000
= $6,400
The budgeted indirect-cost rate is calculated ________.
at the beginning of the year
The difference between actual costing and normal costing is ________.
normal costing uses budgeted indirect-costs
Which of the following statements about normal costing is true?
Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate.
When using a normal costing system, manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base.
budgeted; actual
Which of the following statements about actual costing is true?
Actual costing uses actual indirect-cost rates calculated annually.
For 2014, Thomas Manufacturing uses machine-hours as the only overhead cost-allocation base. The estimated manufacturing overhead costs are $300,000 and estimated machine hours are 50,000. The actual manufacturing overhead costs are $420,000 and actual machine hours are 70,000.
Using job costing, the 2014 budgeted manufacturing overhead rate is ________.
=$6.00 per machine-hour
$300,000 / 50,000 mh = $6 per machine-hour
What is the difference between the budgeted and the actual manufacturing overhead using job costing?
=$1.00
Actual manufacturing overhead is $420,000/70,000 = $7.00 per machine hour. $7-$6=$1
Sky High Company has two departments, X and Y. The following estimates are for the coming year:

X Y
Direct manufacturing labor-hours 20,000 40,000
Machine-hours 40,000 20,000
Manufacturing overhead $200,000 $400,000
A single indirect-cost rate based on direct manufacturing labor-hours for the entire plant is ________.
=$10 per direct labor-hour
$600,000 / 60,000 dlh = $10
Sky High Company has two departments, X and Y. The following estimates are for the coming year:

X Y
Direct manufacturing labor-hours 20,000 40,000
Machine-hours 40,000 20,000
Manufacturing overhead $200,000 $400,000
The budgeted indirect-cost driver rate for Y based on the number of machine-hours is in excess of X by ________.
=$15 per machine-hour
X = $200,000 / 40,000 mh = $5
Y = $400,000/ 20,000 mh = $20; Excess = $20 − $5 = $15
Kamrock applies manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy Mouse product. Estimates for this order include: Direct materials of $50,000; 600 direct manufacturing labor-hours at $20 per hour; and a 20% markup rate on total manufacturing costs. Manufacturing overhead cost estimates for this special order total ________.
=$36,000
$60 × 600 dlh = $36,000
Comfort Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Winton High School band jacket job.

Company Winton High School Job
Direct materials $40,000 $2,000
Direct labor $10,000 $400
Manuf oh costs $45,000
Machine-hours 100,000 mh 900 mh
For Comfort Manufacturing, what is the annual manufacturing overhead cost-allocation rate?
=$0.45
$45,000/100,000 mh = $0.45 per mh
Comfort Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Winton High School band jacket job.

Company Winton High School Job
Direct materials $40,000 $2,000
Direct labor $10,000 $400
Manuf oh costs $45,000
Machine-hours 100,000 mh 900 mh
What amount of manufacturing overhead costs will be allocated to this job?
=$405
900 mh × $45,000 / 100,000 mh = $405
Comfort Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Winton High School band jacket job.

Company Winton High School Job
Direct materials $40,000 $2,000
Direct labor $10,000 $400
Manuf oh costs $45,000
Machine-hours 100,000 mh 900 mh
What are the total manufacturing costs of this job?
=$2,805
DM $2,000 + DML $400 + MOH $405 = $2,805
Comfort Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Winton High School band jacket job.

Company Winton High School Job
Direct materials $40,000 $2,000
Direct labor $10,000 $400
Manuf oh costs $45,000
Machine-hours 100,000 mh 900 mh
What is the bid price for the Winton High School job if the company uses a 40% markup of total manufacturing costs?
=$3,927
(DM $2,000 + DML $400 + MOH $405) × 1.40 = $3,927
Mark Papers employs 15 full-time employees and 10 trainees. Direct and indirect costs are applied on a professional labor-hour basis that includes both employee and trainee hours. Following is information for 2014:

Budget Actual
Indirect costs $200,000 $300,000
Annual salary of each emp $100,000 $110,000
Annual salary of each trainee $ 25,000 $ 30,000
Total professional labor-hrs 50,000dlh 60,000dlh
What are the budgeted direct-cost rate and the budgeted indirect-cost rate, respectively, per professional labor-hr?
=$35.00; $4.00
[($100,00015)+($2500010)]/50,000 = $35
$200,000 / 50,000 = $4.00
Mark Papers employs 15 full-time employees and 10 trainees. Direct and indirect costs are applied on a professional labor-hour basis that includes both employee and trainee hours. Following is information for 2014:

Budget Actual
Indirect costs $200,000 $300,000
Annual salary of each emp $100,000 $110,000
Annual salary of each trainee $ 25,000 $ 30,000
Total professional labor-hrs 50,000dlh 60,000dlh
How much would a normal client be billed in a normal costing system when 1,000 professional labor-hours are used?
=$39,000
[(100,00015)+(25,00010)] / 50,000 * 1,0000=35,000
+ 200,000/50,000*1,000=$39,000
Mark Papers employs 15 full-time employees and 10 trainees. Direct and indirect costs are applied on a professional labor-hour basis that includes both employee and trainee hours. Following is information for 2014:
Budget Actual
Indirect costs $200,000 $300,000
Annual salary of each emp $100,000 $110,000
Annual salary of each trainee $ 25,000 $ 30,000
Total professional labor-hrs 50,000dlh 60,000dlh
When a normal costing system is used, clients using proportionately more full-time employees than trainees will ________
be underbilled for actual resources used
In a normal costing system, the Manufacturing Overhead Control account ________.
is debited with actual overhead costs
The Materials Control account is increased when ________.
direct materials are purchased
Which of the following is true of the Work-in-Process Control account?
Its balance is the sum of amounts from all in-process individual job-cost records.
Which of the following general ledger accounts will have a subsidiary ledger account?
Work-in-Process Control account
Which of the following increases (are debited to) the Work-in-Process Control account?
direct manufacturing labor costs
When direct materials are requisitioned the ________ account is increased.
Work-in-Process Control
Payment of the factory rent increases the ________.
Manufacturing Overhead Control account
Which of the following is true of plant utility costs?
It increases the Manufacturing Overhead Control account.
Actual (rather than allocated) manufacturing overhead costs are first recorded in the ________.
Manufacturing Overhead Control account
The ending balance in the Work-in-Process Control account represents the costs of all jobs that ________.
have not been completed
For externally reported inventory costs, the Work-in-Process Control account is increased (debited) by ________.
allocated plant utility costs
Which account is debited if materials costing $100,000 are sold?
Cost of Goods Sold account
Which account is credited if direct materials of $20,000 and indirect materials of $3,000 are sent to the manufacturing plant floor?
Materials Control for $23,000
Which of the following items is debited to the Work-in-Process account?
allocated manufacturing overhead
Which account would be credited if the following labor wages were incurred in a furniture manufacturing company?

Assembly workers $20,000
Janitors $10,000
Wages Payable Control, 30,000
Manufacturing overhead costs incurred for the month are:

Utilities $30,000
Depreciation on equipment $25,000
Repairs $20,000
Which account is debited assuming utilities and repairs were on account?
Manufacturing Overhead Control, 75,000
Which of the following statements regarding manufacturing overhead allocation is true?
It includes all manufacturing costs that cannot be directly traced to a product or service.
When a job is complete ________.
Finished Goods Control is debited
During an accounting period, job costs are computed on an ongoing basis by the use of ________.
budgeted indirect-cost rates
The advantage of using normal costing instead of actual costing is ________.
indirect costs are assigned to a job on a timely basis
Pearl Corp. applies manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of a necklace. Estimates for this order include: Direct materials of $50,000; 400 direct manufacturing labor-hours at $20 per hour; and a 30% markup rate on total manufacturing costs.
Estimate total product costs for this special order equal _____.
=$82,000
DM $50,000+DML ($40020)+MOH (40060)=$82,000
Pearl Corp. applies manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of a necklace. Estimates for this order include: Direct materials of $50,000; 400 direct manufacturing labor-hours at $20 per hour; and a 30% markup rate on total manufacturing costs.
The bid price for this special order is _____.
=$106,600
DU $50,000 + DML (40020) +MOH (40060) *130% = $106,600
Filex Company manufactures pipes and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $18 per direct labor-hour. The following data are obtained from the accounting records for June 2014:

Direct materials $140,000
Direct labor (4,000 hours @ $10/hour) 40,000
Indirect labor 13,000
Plant facility rent 30,000
Depreciation plant machinery&equipment 22,500
Sales commissions 24,000
Administrative expenses 28,000
The amount of manufacturing overhead allocated to all jobs during June 2014 totals _______.
=$72,000
4,000*18 per dlh =$72,000
Filex Company manufactures pipes and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $18 per direct labor-hour. The following data are obtained from the accounting records for June 2014:

Direct materials $140,000
Direct labor (4,000 hours @ $10/hour) 40,000
Indirect labor 13,000
Plant facility rent 30,000
Depreciation plant machinery&equipment 22,500
Sales commissions 24,000
Administrative expenses 28,000
For June 2014, manufacturing overhead is _______.
=overallocated by $6500
allocated 72,000 <- (4,000*18) when actual overhead is 65,600
Bauer Manufacturing uses departmental cost driver rates to allocate manufacturing overhead costs to products. Manufacturing overhead costs are allocated on the basis of machine-hours in the Machining Department and on the basis of direct labor-hours in the Assembly Department. At the beginning of 20X3, the following estimates were provided for the coming year:

Machining Assembly
Direct labor-hours 30,000 60,000
Machine-hours 80,000 20,000
Direct labor cost $500,000 $900,000
Manufacturing oh costs $420,000 $240,000

The accounting records of the company show the following data for Job #316:

Machining Assembly
Direct labor-hours 120 70
Machine-hours 60 5
Direct material cost $300 $200
Direct labor cost $100 $400
For Bauer Manufacturing, what is the annual manufacturing overhead cost-allocation rate for the Machining Department?
=$5.25
$420,000/80,000 mh = $5.25 per mh
Bauer Manufacturing uses departmental cost driver rates to allocate manufacturing overhead costs to products. Manufacturing overhead costs are allocated on the basis of machine-hours in the Machining Department and on the basis of direct labor-hours in the Assembly Department. At the beginning of 20X3, the following estimates were provided for the coming year:

Machining Assembly
Direct labor-hours 30,000 60,000
Machine-hours 80,000 20,000
Direct labor cost $500,000 $900,000
Manufacturing oh costs $420,000 $240,000

The accounting records of the company show the following data for Job #316:

Machining Assembly
Direct labor-hours 120 70
Machine-hours 60 5
Direct material cost $300 $200
Direct labor cost $100 $400
what amount of manufacturing overhead costs will be allocated to jon #316?
=$595
[(420,00080,000) + (240,00060,000) * 70] = $595
Bauer Manufacturing uses departmental cost driver rates to allocate manufacturing overhead costs to products. Manufacturing overhead costs are allocated on the basis of machine-hours in the Machining Department and on the basis of direct labor-hours in the Assembly Department. At the beginning of 20X3, the following estimates were provided for the coming year:

Machining Assembly
Direct labor-hours 30,000 60,000
Machine-hours 80,000 20,000
Direct labor cost $500,000 $900,000
Manufacturing oh costs $420,000 $240,000

The accounting records of the company show the following data for Job #316:

Machining Assembly
Direct labor-hours 120 70
Machine-hours 60 5
Direct material cost $300 $200
Direct labor cost $100 $400
what are the total manufacturing costs of job #316?
=$1595
DM $500 + DML $500 +MOH $595 = $1595
Wayland Manufacturing uses a normal cost system and had the following data available for 2010:

Direct materials purchased on account $ 148,000
Direct materials requisitioned 82,000
Direct labor cost incurred 130,000

Factory overhead incurred 146,000
Cost of goods completed 292,000
Cost of goods sold 256,000

Beginning direct materials inventory 26,000
Beginning WIP inventory 64,000
Beginning finished goods inventory 58,000
Oh application rate, as a % of dL costs 125%
The journal entry to record materials placed into production would include a _______.
Credit to DM inventory for $82,000
Wayland Manufacturing uses a normal cost system and had the following data available for 2010:

Direct materials purchased on account $ 148,000
Direct materials requisitioned 82,000
Direct labor cost incurred 130,000

Factory overhead incurred 146,000
Cost of goods completed 292,000
Cost of goods sold 256,000

Beginning direct materials inventory 26,000
Beginning WIP inventory 64,000
Beginning finished goods inventory 58,000
Oh application rate, as a % of dL costs 125%
the ending balance for direct materials inventory is ___.
=$92,000
$26,000+$148,000-$82,000 = $92,000
Wayland Manufacturing uses a normal cost system and had the following data available for 2010:

Direct materials purchased on account $ 148,000
Direct materials requisitioned 82,000
Direct labor cost incurred 130,000

Factory overhead incurred 146,000
Cost of goods completed 292,000
Cost of goods sold 256,000

Beginning direct materials inventory 26,000
Beginning WIP inventory 64,000
Beginning finished goods inventory 58,000
Oh application rate, as a % of dL costs 125%
the ending balance of WIP inventory is ________.
=$146,500
64,000+82,000+130,000+1.25(130,000)-292,000 = $146,500
Wayland Manufacturing uses a normal cost system and had the following data available for 2010:

Direct materials purchased on account $ 148,000
Direct materials requisitioned 82,000
Direct labor cost incurred 130,000

Factory overhead incurred 146,000
Cost of goods completed 292,000
Cost of goods sold 256,000

Beginning direct materials inventory 26,000
Beginning WIP inventory 64,000
Beginning finished goods inventory 58,000
Oh application rate, as a % of dL costs 125%
the ending balance of finished goods inventory is_____.
=$94,000
58,000+292,000-256,000= 94,000
Beta Corporation uses a job cost system and has two production departments, A and B. Budgeted manufacturing costs for the year are:

Department A Department B
Direct materials $800,000 $200,000
Direct manufact labor $200,000 $900,000
Manufact overhead $500,000 $450,000

The actual material and labor costs charged to Job #432 were as follows:

Total
Direct materials: $25,000
Direct labor:
Department A $10,000
Department B $12,000
=$22,000

Beta applies manufacturing overhead costs to jobs on the basis of direct manufacturing labor cost using departmental rates determined at the beginning of the year.
Proportion of manufacturing overhead with respect to the total cost of the job is _____.
=39.74%
DM $25,000 + DML $22,000 + MOH $31,000 [($10,000 × $500,000 / $200,000)] + [$12,000 × $450,000/$900,000] = $78,000
$31,000/$78,000 = 39.74%
The spreading of underallocated or overallocated overhead among ending work-in-process, finished goods, and cost of goods sold is called ________.
the proration approach
The method that restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budgeted cost rates is called ________.
the adjusted allocation rate approach
When the allocated amount of indirect costs are less than the actual amount, indirect costs have been ________.
underallocated
One reason indirect costs may be overapplied is because ________.
budgeted indirect costs exceed actual indirect costs
The ________ adjusts individual job-cost records to account for underallocated or overallocated overhead.
adjusted allocation-rate
The adjusted allocation approach yields the benefits of ________
timeliness and convenience of normal costing
The approach often used when dealing with small amounts of underallocated or overallocated overhead is the ________.
write-off to cost of goods sold approach
The ________ approach carries the underallocated or overallocated amounts to overhead accounts in the following year.
None of these answers are correct.
A company would use multiple cost-allocation bases ________.
if managers believed the benefits exceeded the additional costs of that costing system
Filippucci Company used a budgeted indirect-cost rate for its manufacturing operations, the amount allocated ($200,000) is different from the actual amount incurred ($225,000).

Ending balances in the relevant accounts are:
Work-in-Process $ 10,000
Finished Goods 20,000
Cost of Goods Sold 170,000
Under the writeoff approach, the difference between Manufacturing Overhead Control and Manufacturing Overhead Allocated is adjusted in the ________.
Cost of Goods Sold account
Which account is credited to write off the difference between allocated and actual overhead using the proration approach?
Manufacturing Overhead Control
Legal Advisory Inc., employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 2014:

Budget Actual
Indirect costs $270,000 $300,000
Annual salary each attorn $100,000 $110,000
Annual salary each paraprof $ 29,000 $ 30,000
Total professional labor-hrs 50,000 dlh 60,000dlh

When using a normal costing system, year-end accounting records will show that indirect costs are ________.
overallocated
In the service sector ________.
a budgeted direct-labor cost rate may be used to apply direct labor to jobs
In the service sector, to achieve timely reporting on the profitability of an engagement, a company will use ________.
budgeted rates for some direct costs and indirect cost
Luke employs 20 professional cleaners. Budgeted costs total $1,800,000 of which $1,550,000 is direct costs. Budgeted indirect costs are $750,000 and actual indirect costs were $795,800. Budgeted professional labor-hours are 1,000,000 and actual hours were 1,218,000. What is the budgeted direct cost-allocation rate?
=$1.55 per hour
$1,550,000 / 1,000,000 = $1.55
The budgeted direct-labor cost rate includes ________.
budgeted total direct-labor costs in the numerator
The law firm of Smith & Jones has a staff of 30 lawyers and administrative staff. Budgeted total costs of the firm total $4,000,000 of which $2,500,000 is direct-labor costs. Assuming that the remaining costs are indirect and direct-labor cost is the allocation base, calculate the budgeted indirect cost rate.
=60% of direct-labor cost
1,500,000/2,500,000
A local accounting firm employs 20 full-time professionals. The budgeted annual compensation per employee is $40,500. The average chargeable time is 500 hours per client annually. All professional labor costs are included in a single direct-cost category and are allocated to jobs on a per-hour basis.
What is the budgeted direct labor cost rate per hour?
Other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirect costs for the year are $787,500, and the firm expects to have 90 clients during the coming year.
What is the budgeted direct labor cost rate per hour?
=$18.00 per hour
Total DL cost= $40,500 * 20 = $810,000
Total hours = 500*90 = 45,000 hrs
DL cost rate per hr = 810,000/45,000 = 18.00
A local accounting firm employs 20 full-time professionals. The budgeted annual compensation per employee is $40,500. The average chargeable time is 500 hours per client annually. All professional labor costs are included in a single direct-cost category and are allocated to jobs on a per-hour basis.
What is the budgeted direct labor cost rate per hour?
Other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirect costs for the year are $787,500, and the firm expects to have 90 clients during the coming year.
What is the budgeted indirect-cost rate per hour?
=$17.50
Indirect-cost rate per hr = $787,500 /500 *90 =17.50
A local accounting firm employs 20 full-time professionals. The budgeted annual compensation per employee is $40,500. The average chargeable time is 500 hours per client annually. All professional labor costs are included in a single direct-cost category and are allocated to jobs on a per-hour basis.
What is the budgeted direct labor cost rate per hour?
Other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirect costs for the year are $787,500, and the firm expects to have 90 clients during the coming year.
If ten clients are lost and the workforce stays at 20 employees, then the direct labor cost rate per hr.
=$20.25 per hour
Total direct cost = $40,500 × 30 = $810,000
Total hours = 200 × 80 = 40,000 hours
Direct cost rate per hour = $810,000 / 40,000 = $20.25 per hour
The direct labor cost rate per hour increased from $18.00 per hour to $20.25 per hour
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