6. The use of a predetermined overhead rate in a job-order cost system makes it
ID: 2477139 • Letter: 6
Question
6.
The use of a predetermined overhead rate in a job-order cost system makes it possible to compute the total cost of a job before production is begun.
True
False
7.
The cost of a completed job in a job-order costing system typically consists of the actual direct materials cost of the job, the actual direct labor cost of the job, and the manufacturing overhead cost applied to the job.
True
False
8.
The cost categories that appear on a job cost sheet include selling expense, manufacturing expense, and administrative expense.
True
False
9.
Indirect materials are charged to specific jobs.
True
False
10.
In computing its predetermined overhead rate, Brady Company included its factory insurance cost twice. This error will result in:
the ending balance of Finished Goods to be understated.
the credits to the Manufacturing Overhead account to be understated.
the Cost of Goods Manufactured to be overstated.
the Net Operating Income to be overstated.
Explanation / Answer
Answer: 6
False
The use of a predetermined overhead rate in a job-order cost system does not make it possible to compute the total cost of a job before production is begun. Predetermined overhead rate is applied according to some activity base, for example: machine hours, direct labor etc. The actual level of this activity which is used as a basis for predetermined overhead rate can be estimated only when the production is started and completed.
For example:
The predetermined overhead rate is $10 per machine hours and 500 machine hours are used in production. Machine hours is the only activity in production.
The, total cost of the job would be $10*500 = $5000
Answer:7
True.
Answer:8
False.
The cost categories that appear on a job cost sheet include direct material cost, direct labor cost and manufacturing costs.
Answer:9
False
This is not mandatory that indirect materials are charged to specific jobs, they can be related to any job.
Answer:10
In computing its predetermined overhead rate, Brady Company included its factory insurance cost twice. This error will result in the cost of goods manufactured to be overstated.Because factory insurance cost is a part of cost of goods manufactured.
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