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Questions and Answers
How is a predetermined overhead rate calculated?
How is a predetermined overhead rate calculated?
Which of the following documents authorizes the release of material to production for a job?
Which of the following documents authorizes the release of material to production for a job?
Job-order costs are most useful for:
Job-order costs are most useful for:
Which of the following manufacturers would most likely use job-order costing?
Which of the following manufacturers would most likely use job-order costing?
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A custom-home builder would likely utilize:
A custom-home builder would likely utilize:
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The assignment of direct labor cost to individual jobs is based on:
The assignment of direct labor cost to individual jobs is based on:
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Manufacturing overhead:
Manufacturing overhead:
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Which of the following is the correct method to calculate a predetermined overhead rate?
Which of the following is the correct method to calculate a predetermined overhead rate?
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Fine Wood Arts Manufacturing uses a predetermined overhead rate of $20 per machine hour. Which of the following were used to calculate the rate?
Fine Wood Arts Manufacturing uses a predetermined overhead rate of $20 per machine hour. Which of the following were used to calculate the rate?
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The estimates used to calculate the predetermined overhead rate will virtually always:
The estimates used to calculate the predetermined overhead rate will virtually always:
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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.
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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.
