MA 3 difficile aperto

Underapplied overhead occurs when less overhead is applied to production than actually incurred, leading to an understatement of cost of goods sold and an overstatement of net operating income. Overapplied overhead occurs when more overhead is applied to production than actually incurred, leading to an overstatement of cost of goods sold and an understatement of net operating income.

The predetermined overhead rate is computed at the beginning of each period and is used to apply overhead to jobs based on the predetermined allocation rate multiplied by the allocation base (actual). It accounts for the lack of synchronization between accruing manufacturing overhead and job production.

Variable costing differs from absorption costing by using only variable costs to compute the cost of the product, while absorption costing includes both fixed and variable components.

<p>Job-order costing is used in manufacturing as well as service industries like law firms, accounting firms, and medical treatment. It is applied by tracing costs for a job, involving directly traceable costs like labor and material, and indirectly traceable manufacturing overhead.</p> Signup and view all the answers

<p>The chapter uses actual costing rather than the normal costing approach. It assumes the actual number of units produced as the allocation base, constant variable manufacturing costs per unit, and total fixed manufacturing overhead cost per period.</p> Signup and view all the answers

<p>Overhead is applied to jobs based on the predetermined allocation rate multiplied by the allocation base (actual). Differences between applied and actual overhead costs can overstate or understate the cost of the product.</p> Signup and view all the answers

<p>Absorption costing includes fixed manufacturing overhead in the cost of inventory, while variable costing treats fixed manufacturing overhead as a period cost and only includes variable manufacturing costs in the cost of inventory. This difference makes it difficult to perform break-even and cost-volume-profit analysis using absorption costing, as it distorts the behavior of fixed costs.</p> Signup and view all the answers

<p>The segment margin is a key gauge of the long-run profitability of a segment. It is calculated by subtracting traceable fixed costs from contribution margin.</p> Signup and view all the answers

<p>Traceable fixed costs arise due to the existence of a particular segment and would disappear if the segment itself disappeared. Common fixed costs arise from the overall operation of the company and would not disappear if any particular segment were eliminated.</p> Signup and view all the answers

<p>Allocating common costs to segments distorts decision-making because it may lead to incorrect evaluations of segment profitability and may not reflect the actual costs incurred by each segment.</p> Signup and view all the answers

<p>The purpose of segment reporting at Webber, Inc. is to use the contribution format, listing fixed and variable costs separately, and not allocate common costs to divisions. This differs from traditional cost allocation methods, as it provides a more accurate representation of segment profitability.</p> Signup and view all the answers

<p>ABC differs from traditional cost accounting by using numerous overhead cost pools and a more complex allocation scheme. It assigns nonmanufacturing and manufacturing costs to products on a cause-and-effect basis and can exclude certain costs from product costs.</p> Signup and view all the answers

<p>Activity-based costing (ABC) is a costing method that assigns overhead costs to products based on the activities they require. It differs from traditional cost systems, which often rely on direct labor hours and machine hours to allocate overhead costs. ABC uses different activity cost pools, each with its unique measure of activity, to more accurately allocate costs to products based on the specific activities they require.</p> Signup and view all the answers

<p>A successful ABC implementation requires strong top management support, linking ABC to how people are evaluated and rewarded, and creating cross-functional teams. Without leadership from top management, employees may not be motivated to embrace the changes. If employees continue to be evaluated and rewarded using traditional cost data, they may abandon ABC. Cross-functional teams are essential for designing an effective ABC system.</p> Signup and view all the answers

<p>The five steps for implementing ABC are: (1) Define activities, activity cost pools, and activity measures; (2) Assign costs to cost pools using a first-stage allocation; (3) Calculate activity rates; (4) Assign costs to cost objects using the activity rates; (5) Prepare management reports.</p> Signup and view all the answers

<p>Two common types of activity measures used in an activity-based costing system are transaction drivers (simple count of the number of times an activity occurs) and duration drivers (a measure of the amount of time needed for an activity).</p> Signup and view all the answers

<p>ABC allocates costs to products based on the specific activities they require, using different activity cost pools and measures. Traditional cost systems often rely on direct labor hours and machine hours to allocate overhead costs, which may not accurately reflect the activities required by different products.</p> Signup and view all the answers

<p>In the given example of an automobile battery company, the cost pools and activity measures assigned are: Customer Orders - assigned all costs of resources that are consumed by taking and processing customer orders; Design Changes - assigned all costs of resources consumed by customer requested design changes; Order Size - assigned all costs of resources consumed as a consequence of the number of units produced; Customer Relations - assigned all costs associated with maintaining relations with customers; Other - assigned all organization-sustaining costs and unused capacity costs.</p> Signup and view all the answers

<p>The selling price of Job 407 assuming a 75% markup can be calculated using the formula: Selling price = Cost + (Cost * Markup percentage). If the cost of Job 407 is $x, then the selling price would be $x + (x * 75%).</p> Signup and view all the answers

<p>The appeal of using predetermined departmental overhead rates is that they presumably provide a more accurate accounting of the costs caused by jobs, which in turn, should enhance management planning and decision making.</p> Signup and view all the answers

<p>Activity-based costing is an alternative approach to developing multiple predetermined overhead rates. It involves creating overhead rates based on the activities that a company performs. This approach is employed to more accurately measure the demands that jobs, products, customers, and other cost objects make on overhead resources.</p> Signup and view all the answers

<p>Job cost sheets are used to create a balance sheet and income statement for external parties in job-order costing systems. All of a company’s job cost sheets collectively form a subsidiary ledger.</p> Signup and view all the answers

<p>Using a departmental approach to overhead application results in a different selling price for Job 407 than would have been derived using a plantwide overhead rate based on either direct labor-hours or machine-hours.</p> Signup and view all the answers

<p>The learning objective related to job cost sheets is to use them to calculate ending inventories and cost of goods sold.</p> Signup and view all the answers

<p>Variable costing only includes variable costs in product costs, while absorption costing includes both variable and fixed costs in product costs.</p> Signup and view all the answers

<p>The treatment of fixed manufacturing overhead impacts the cost of goods sold and inventory valuation by including fixed manufacturing overhead in unit product cost under absorption costing, but not under variable costing.</p> Signup and view all the answers

<p>Income statements using variable and absorption costing are prepared to compute net operating income, considering sales and production units. The key consideration is the treatment of fixed manufacturing overhead in the cost of goods sold and inventory valuation.</p> Signup and view all the answers

<p>The relationship between production and sales affects net operating income differently in variable and absorption costing. Variable costing is directly influenced by changes in unit sales, while absorption costing is also affected by changes in production units, increasing net operating income even if unsold units are produced.</p> Signup and view all the answers

<p>Variable costing simplifies cost-volume-profit (CVP) analysis by categorizing costs as variable and fixed and highlighting the contribution margin.</p> Signup and view all the answers

<p>Absorption costing can lead to positive operating income when the number of units sold is less than the breakeven point due to fixed manufacturing overhead residing in inventory, impacting net operating income.</p> Signup and view all the answers