Exam 16: Cost Concepts and Cost Allocation

A predetermined overhead rate times the amount of activity basis equals the overhead cost assigned to the product.

The costs of labor for maintenance and inspections are examples of direct labor.

Standard costing is based on actual direct materials and direct labor plus estimated overhead.

Lopar Company uses a predetermined overhead rate based on direct labor dollars.Lopar Company estimated that its 2010 overhead would total $938,000 and that 2010 direct labor costs would be $670,000.During 2010,actual overhead costs were $960,000,and actual direct labor costs were $700,000.By how much was Lopar's overhead over- or underapplied?

Product costs could be reported as assets.

Yamishi Production had the following inventories for the first quarter of 20xx: Beginning Ending Materials \ 606,600 \ 522,100 Work in process 312,100 280,800 Finished goods 416,100 540,200 Purchases of materials during the quarter were $427,800.Total direct labor costs were incurred in the amount of $1,482,000.Actual overhead costs were incurred as follows: operating supplies used,$17,100; janitorial and maintenance,$87,300; employee benefits,$26,400; utilities,$162,000; depreciation of factory,$43,200; property taxes,$24,000; factory insurance,$29,000.Net sales for the quarter were $3,562,200.Selling and administrative expenses were $508,000.Income taxes should be computed at 40 percent. Prepare a statement of cost of goods manufactured for the first quarter of 20xx.

Total manufacturing costs include all direct materials used as well as all direct labor costs and overhead costs incurred for a period.

Total manufacturing costs increase which of the following accounts?

Total manufacturing costs increase the balance of the Work in Process Inventory account.

At the beginning of 2010,Zuir Company's accounting department calculated the following estimates for the coming year's production: Estimated overhead \ 441,600 Direct labor hours 9,200 During the year,Zuir Company experienced $440,000 in actual overhead costs and actually worked 9,100 direct labor hours.Zuir applies overhead to production using a predetermined overhead rate based on direct labor hours. a. Calculate the predetermined overhead rate Zuir uses to apply overhead. (Show your computations.) b. By what amount was overhead over- or underapplied for 2010? (Show your computations.) c. Assuming the amount of over- or underapplied overhead is not significant, will the Cost of Goods Sold account be increased or decreased to correct the application of overhead?

The four most common activity bases used for overhead cost allocation purposes are direct labor dollars,units of output,water pressure,and machine hours.

Salaries of supervisory production personnel should be classified as direct labor costs.

The expressions total manufacturing costs and total cost of goods manufactured are not synonymous.

The amount computed for cost of goods manufactured should be the same as the amount transferred from the materials inventory,direct labor,and overhead accounts into the Work in Process Inventory account.

Cost allocation requires pooling of overhead costs and the selection of a cost driver.

Applied overhead is equal to the overhead rate times the actual cost driver level.

Some period costs can be found in inventory accounts on the balance sheet.

A predetermined overhead rate allows managers to make more timely product pricing decisions.

The three costs in every product are

The overhead rate is equal to the total estimated overhead costs divided by the actual cost driver level.