Questions and Answers
What distinguishes actual manufacturing overhead from applied overhead?
How does overapplied manufacturing overhead affect Cost of Goods Sold at the end of the period?
What is the treatment of underapplied manufacturing overhead in relation to Cost of Goods Sold?
How do you determine the Predetermined Overhead Rate (POHR) in manufacturing?
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What distinguishes actual manufacturing overhead from applied manufacturing overhead?
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In what scenario is Job-Order Costing primarily used?
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What is the purpose of the Predetermined Overhead Rate in a job-order costing system?
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Which of the following statements about Job-Order Costing is correct?
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Study Notes
Job-Order Costing
- A costing system that assigns costs to specific jobs or batches, ideal for custom manufacturing.
- Tracks direct materials, direct labor, and manufacturing overhead separately for each job.
Predetermined Overhead Rate (POHR)
- Calculated by dividing estimated total manufacturing overhead costs by the estimated total allocation base (like labor or machine hours).
- Used to apply manufacturing overhead to jobs throughout the accounting period.
Actual vs. Applied Overhead
- Actual manufacturing overhead includes all costs incurred during a period.
- Applied manufacturing overhead refers to overhead costs assigned to jobs using the POHR, serving estimating purposes.
Closing Over or Underapplied Manufacturing Overhead
- Overapplied overhead, where more was applied than incurred, is subtracted from Cost of Goods Sold (COGS).
- Underapplied overhead indicates that less was applied than incurred, requiring the shortfall to be added to COGS for correction.
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Description
Dive into the essentials of job-order costing, a method that tracks costs for specific jobs in custom manufacturing. Learn about the predetermined overhead rate, the differences between actual and applied overhead, and how to close over or underapplied manufacturing overhead. This quiz will test your understanding of the critical concepts and calculations involved.