Cost Accounting: Overhead Rate and Unit Cost Fluctuations Quiz

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What is the purpose of a control account?

To record direct materials used in assembling jobs

To identify and secure components required for a job

To invoice the client once the order is accepted

To summarize a set of subsidiary ledger accounts (correct)

Which inventory account records supplies and materials not directly charged to jobs?

Material Inventory account

Direct materials inventory (correct)

Finished goods inventory

Work-in-process inventory

In a job shop's production process, what is the first step after assigning a job number?

Assemble components by employees using tools

Move items to finished goods inventory

Inspect items for completion and quality

Identify and secure components required for the job (correct)

What type of costs should follow the physical flows of resources in the cost accounting system?

Direct materials, direct labor, and manufacturing overhead Signup and view all the answers

Which account is NOT one of the three inventory accounts for a manufacturing firm?

Raw materials inventory Signup and view all the answers

When does the job in a job shop production process become considered sold?

After invoicing the client once the order is accepted Signup and view all the answers

What is the main difference between a job and a job shop?

A job is a cost object while a job shop is where jobs are produced. Signup and view all the answers

Why are separate documents kept for recording the costs of individual jobs?

To estimate costs on similar work in the future. Signup and view all the answers

What purpose does the job cost sheet serve in a cost accounting system?

It records and tracks costs incurred for a specific job. Signup and view all the answers

Why is it common in job shops that the product or service price is related to the recorded cost of the job?

To ensure pricing reflects actual production costs. Signup and view all the answers

In what way does a job differ from a project?

Jobs are unique while projects are standardized. Signup and view all the answers

What does a subsidiary ledger account do in a cost accounting system?

Details financial transactions for specific customers, vendors, or jobs. Signup and view all the answers

What is the difference called when the actual overhead costs incurred are in excess of the applied overhead costs?

Underapplied overhead Signup and view all the answers

Which account is credited when overhead is applied to jobs based on the predetermined overhead rate?

Applied manufacturing overhead Signup and view all the answers

What approach involves writing off over- or underapplied overhead to the cost of goods sold account?

Prorating approach Signup and view all the answers

What happens to the balances in the Manufacturing overhead control and Applied manufacturing overhead accounts?

They have no remaining balances. Signup and view all the answers

In which case is the difference called overapplied overhead?

When applied costs exceed actual costs. Signup and view all the answers

What does underapplied overhead refer to?

Actual costs exceed applied costs. Signup and view all the answers

Why does the unit cost fluctuate from month to month for essentially the same product?

Due to changing overhead cost Signup and view all the answers

What problem arises if the company waits till the end of the year to calculate an overhead rate?

Inability of salespeople to price products appropriately Signup and view all the answers

What does the company decide to do eventually to solve the pricing problem for their products?

Estimate yearly manufacturing overhead costs and calculate a predetermined rate Signup and view all the answers

How are manufacturing overhead costs assigned to jobs in the described procedure?

By applying a predetermined overhead rate Signup and view all the answers

What does the year-end single overhead rate do to the unit cost fluctuations?

Smoothes out fluctuations Signup and view all the answers

What is the formula to calculate the predetermined overhead rate?

Estimated overhead / Estimated allocation base Signup and view all the answers

What is the hourly rate paid for direct labor at Jacob Welding, Inc.?

$15 Signup and view all the answers

How are manufacturing overhead costs applied to jobs at Jacob Welding?

Based on direct labor hours Signup and view all the answers

What is the total manufacturing overhead cost incurred in May at Jacob Welding?

$4,650 Signup and view all the answers

How many of the jobs completed in May were delivered to customers?

Two (Jobs 304 and 307) Signup and view all the answers