Managerial Accounting MGMT 801 Flashcards

Predetermined Overhead Rate

• Calculated by dividing budgeted overhead cost by the budgeted amount of the cost driver or activity base.
• Not determined using actual overhead costs.

Release of Materials to Production

• Authorized by a materials requisition document.
• Other documents like purchase orders and invoices do not serve this purpose.

Job-Order Costs

• Essential for determining the specific cost of a project.
• Helpful for controlling indirect costs and estimating overhead, but primarily focused on individual project costing.

Manufactures Using Job-Order Costing

• Custom-furniture manufacturers are the primary users of job-order costing due to bespoke production practices.
• Other categories like chemical manufacturers and gasoline refiners typically utilize process costing.

Custom-Home Builders

• Likely to utilize job-order costing to manage project-specific expenses accurately.

Assignment of Direct Labor Cost

• Based on the actual time spent on each job, multiplied by the wage rate.
• Not distributed equally among all jobs in process.

Manufacturing Overhead

• Comprises indirect production costs including indirect materials, indirect labor, and factory depreciation.
• Attached to individual products but not easily traced to specific jobs.

Correct Calculation Method for Predetermined Overhead Rate

• The accurate formula is budgeted overhead cost divided by the budgeted amount of the cost driver.

Overhead Rate in Fine Wood Arts Manufacturing

• Set at $20 per machine hour, based on budgeted machine hours for the current accounting period.

Estimates in Overhead Rate Calculation

• Results in either underapplied or overapplied overhead, which is adjusted through Cost of Goods Sold if the amount is immaterial.
• Accuracy of estimates is not guaranteed; they often vary from actual costs.