Chapter 5 : Manufacturing Overhead

A major purpose of cost accounting is to..

• classify all costs as operating or non-operating

• measure, record, and report period costs.

• provide information to stockholders for investment decisions.

• measure, record, and report product costs.

Which of the following is true about cost accounting?

• It involves the determination of company profits.

• It involves measuring product costs.

• It requires GAAP to be applied.

• It requires cost minimizing principles.

Cost accounting or 'costing' is primarily concerned with accumulating information about product costs

• TRUE

• FALSE

In normal costing; total product cost taking into account are the actual cost of direct materials used, the actual cost of direct labour incurred and the cost of manufacturing overhead applied.

• TRUE

• FALSE

Why normal costing is better than actual costing (more than 1 answer)

• In actual costing, all costs are actual costs including the overhead cost that will likely vary from month to month because it relies on actual production and situations that often face uncertainties

• In actual costing, all costs are actual costs including the overhead cost where the information about it will only can be known at the end of the month or at the end of the accounting year.

• In normal costing, the predetermined overhead rate that used to assign manufacturing overhead cost to products is more constant and realistic.

• In normal costing, production cost can be determined before the production begins so it is more suitable for product pricing

• Actual costing is used for reporting purposes only

In actual costing; total product cost taking into account are the actual cost of direct materials used, the actual cost of direct labour and the actual cost of manufacturing overhead incurred.

• TRUE

• FALSE

predetermined overhead rate (based on direct labour cost) = ....

• (budgeted manufacturing cost/budgeted production) x 100%

• (budgeted manufacturing overhead cost/budgeted direct labour hours) x 100%

• (budgeted manufacturing overhead cost/budgeted direct labour cost) x 100%

• (budgeted manufacturing cost/budgeted direct labour cost) x 100%

Which elements need to be journalized? (more than 1 answer)

• predetermined overhead rate

• actual manufacturing overhead cost

• budgeted manufacturing overhead cost

• applied manufacturing overhead cost

• standard manufacturing overhead cost per unit

predetermined overhead rate (based on direct labour hours) x actual direct labour hours = ....

• actual manufacturing cost

• budgeted manufacturing overhead cost

• actual direct labour cost

• applied manufacturing overhead cost

Which is not true about predetermined overhead rate?

• It is the rate used to apply manufacturing overhead to work-in-process inventory

• It is calculated before the production begins.

• It is calculated based on either direct labour cost, direct material cost, direct labour hours, machine hours or production units.

• It always fluctuates from time to time.