D101 Cost and Managerial Accounting - Set 3 - Part 1

Correct Answer: Costs are accumulated by individual jobs or orders

In job order costing, costs are tracked for each job individually because each job may differ in materials, labor, and overhead.

Correct Answer: Direct materials used in production

Direct materials are separately classified and not part of overhead. Manufacturing overhead includes indirect costs like factory rent, equipment depreciation, and supervisor salaries.

Correct Answer: Process costing

Process costing is used when a company produces large quantities of homogeneous products, where the costs are averaged over all units produced.

Correct Answer: When applied overhead exceeds actual overhead

Overapplied overhead occurs when the overhead allocated to production (applied overhead) is higher than the actual overhead incurred during the period.

Correct Answer: Estimating the total overhead costs for the upcoming period

To calculate the predetermined overhead rate, the company first estimates the total overhead costs for the upcoming period based on expected production levels.

Correct Answer: A soft drink bottling company

Process costing is ideal for companies that produce homogeneous products like soft drinks, where production costs are accumulated for continuous processes.

Correct Answer: Administrative expenses

Period costs are not directly tied to the production of goods and are expensed in the period they are incurred. Administrative expenses are classified as period costs.

Correct Answer: Costs are transferred from work-in-process to finished goods inventory

Once a job is completed, its costs are transferred to finished goods inventory, where they remain until the goods are sold.

Correct Answer: It allows for tracking individual job costs

Job order costing allows companies to track the costs of individual jobs or orders, making it easier to assess the profitability of each job.

Correct Answer: Direct materials

Conversion costs include direct labor and manufacturing overhead, which are the costs incurred to convert raw materials into finished goods.

Correct Answer: The overhead assigned to jobs based on the predetermined overhead rate

Applied overhead is the amount of overhead that is allocated to jobs using the predetermined overhead rate, typically based on a measure like labor hours or machine hours.

Correct Answer: Job order costing assigns costs to individual jobs, while process costing averages costs

Job order costing is used for custom jobs where costs are tracked individually, while process costing averages costs over large quantities of identical products.

Correct Answer: As a debit to the manufacturing overhead account

Actual overhead costs incurred during the production process are recorded as a debit to the manufacturing overhead account.

Correct Answer: A factor that causes changes in manufacturing overhead costs

A cost driver is an activity or factor that triggers the incurrence of overhead costs, such as machine hours or labor hours.

Correct Answer: It allocates overhead costs more accurately to products

Activity-based costing (ABC) allocates overhead costs based on multiple cost drivers, providing a more accurate reflection of the resources consumed by different products.

Correct Answer: Estimated overhead / estimated activity base

The predetermined overhead rate is calculated by dividing estimated total overhead costs by the estimated activity base (e.g., labor hours or machine hours).

Correct Answer: To record all costs associated with a specific job

A job cost sheet is used to track the direct materials, direct labor, and applied overhead for each specific job.

Correct Answer: To assign indirect costs to jobs based on a cost driver

Overhead costs are allocated to jobs in job order costing to assign indirect costs (like rent and utilities) to the products being made, based on the activity that drives those costs.

Correct Answer: Actual overhead is the overhead incurred, while applied overhead is the overhead assigned using a predetermined rate

Actual overhead refers to the actual costs incurred, while applied overhead is the estimate of those costs allocated to jobs based on a predetermined rate.

Correct Answer: Manufacturing overhead

Indirect materials, such as supplies used in production but not directly traceable to a specific product, are charged to manufacturing overhead.