Formulas
When the Direct Materials, Direct Labor, and Applied Manufacturing overhead are added, you will find...
What is Total Manufacturing Cost
Which account is increased when a job is completed?
What is 'Finished goods inventory'
An activity that increases the cost of a product, but not its perceived value to the customer.
What is a 'Non-value added' activity
If Nike estimates its total manufacturing overhead costs for the year to be $300,000 and expects to incur 15,000 direct labor hours during the same period, what is the predetermined overhead rate for the year?
What is $20 per direct labor hour
This is how we determine Gross Profit
What is 'Revenue - Cost of Goods Sold'
Which cost system would be used for a Vogue's manufacturing of magazines?
What is 'Job order costing'
The overhead cost attributed to a distinct activity
What is an 'Activity cost pool'
If a company expects to incur $50,000 in overhead costs for its "Machine Setup" activity and anticipates performing 200 setups during the year and have 450 direct labor hours, what is the activity-based overhead rate for the "Machine Setup" activity?
What is $250 of overhead per setup
How would you determine the amount of over/under applied overhead?
What adjustment should be made when there is overapplied overhead?
There should be a decrease in the COGS account.
Which best describes the flow of overhead costs in an activity-based costing system?
Overhead costs -> activity cost pools -> cost drivers -> products
Toyota estimated its total manufacturing overhead costs for the year to be $200,000 and allocated overhead based on direct labor hours. At the end of the year, they found that actual overhead costs were $220,000, while the applied overhead based on direct labor hours was $210,000. Calculate the over/under applied overhead for the year, and determine whether it was overapplied or underapplied.
$10,000 underapplied overhead
What do you get when you multiply the POH rate by Actual operating activity?
What is the 'Applied Overhead' amount
Which document can also be considered the subsidiary ledger of the Work in Process Inventory account?
What are 'Job order cost sheets'
An engineer designs a new AI-operated airplane. What activity level would this fall under?
What is a 'Product-Level' activity
A construction company recently completed a job and generated $50,000 in revenue from the sale of their services. The direct costs associated with this job, including materials ($10,000), labor ($15,000), and other job-specific expenses ($5,000). Calculate the gross profit generated from this job sale.
What is $20,000 of gross profit
What is the difference between calculating Pre-determined overhead rate and the activity based overhead rate?
POH = Estimated Overhead costs / Estimated Operating activity
AB Overhead = Estimated Overhead PER ACTIVITY/ Estimated use of COST DRIVER
What are the control accounts in a job order cost system?
Raw Materials Inventory, Work in Process Inventory, and Finished Goods Inventory
What are the 4 steps of activity based costing?
1. identify and classify activities/ allocate overhead into cost pools
2. identify cost drivers
3. compute AB overhead rate
4. assign overhead costs to products
A sports equipment manufacturing company uses activity-based costing (ABC) to allocate overhead costs. For their baseballs, the company estimates $15,000 of overhead costs and $1000 of machine hours. During the production of baseballs for the Royals, they allocate 200 machine hours to it. Calculate the applied overhead for the Royal's Baseballs using the activity-based overhead rate.
AB overhead = $15 per machine hour
Applied overhead = $3,000 applied overhead