Managerial Accounting MGMT 801 Flashcards

Questions and Answers

How is a predetermined overhead rate calculated?

Divide the budgeted amount of cost driver or activity base by the actual overhead cost

Divide actual overhead cost by the budgeted amount of cost driver or activity base

Divide actual overhead cost by the actual amount of cost driver or activity base

Divide budgeted overhead cost by the budgeted amount of cost driver or activity base (correct)

Divide budgeted overhead cost by the actual amount of cost driver or activity base

Which of the following documents authorizes the release of material to production for a job?

Materials requisition (correct)

Invoice

Punch card

Purchase order

Statement

Job-order costs are most useful for:

Controlling indirect costs of future production

Determining the cost of a specific project (correct)

Determining costs by averaging the costs of all production

Determining inventory valuation using LIFO

Estimating the overhead costs included in transfer prices

Which of the following manufacturers would most likely use job-order costing?

Custom-furniture manufacturers Signup and view all the answers

A custom-home builder would likely utilize:

Job-order costing Signup and view all the answers

The assignment of direct labor cost to individual jobs is based on:

The actual time spent on each job multiplied by the wage rate Signup and view all the answers

Manufacturing overhead:

Is a pool of indirect production costs that must somehow be attached to each unit manufactured Signup and view all the answers

Which of the following is the correct method to calculate a predetermined overhead rate?

Budgeted overhead cost ÷ budgeted amount of cost driver Signup and view all the answers

Fine Wood Arts Manufacturing uses a predetermined overhead rate of $20 per machine hour. Which of the following were used to calculate the rate?

A denominator of budgeted machine hours for the current accounting period Signup and view all the answers

The estimates used to calculate the predetermined overhead rate will virtually always:

Result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount Signup and view all the answers

Study Notes

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.

Description

Test your knowledge with these flashcards on Managerial Accounting concepts, specifically focusing on predetermined overhead rates. Understand the calculations and applications in a managerial context to enhance your learning experience.