Page 752 - Accounting Principles (A Business Perspective)

18. Managerial accounting concepts/job costing

c. Manufacturing overhead 24,000
Various accounts 24,000
Work in process inventory 15,428
Manufacturing overhead 15,428

d. Various accounts 22,500
Manufacturing overhead 22,500
Manufacturing overhead 15,428
Work in process inventory 15,428
Now turn to “Answers to self-test” at the end of the chapter to check your answers.

Questions
➢ What are the major differences between managerial and financial accounting?
➢ Identify the three elements of cost incurred in manufacturing a product and indicate the
distinguishing characteristics of each.

➢ Why might a company claim that the total cost of employing a person is USD 15.30 per hour when
the employee's wage rate is USD 10.50 per hour? How should this difference be classified and why?

➢ Why are certain costs referred to as period costs? What are the major types of period costs incurred
by a manufacturer?
➢ Explain why the income statement of a manufacturing company differs from the income statement of
a merchandising company.
➢ What is the general content of a statement of cost of goods manufactured? What is its relationship to
the income statement?

➢ What is the relationship between cost flows in the accounts and the flow of physical products through
a factory?
➢ Define a job cost system and give an example of a situation in which it can be used.
➢ What are the major reasons for using predetermined manufacturing overhead rates?
➢ What is the formula for computing a predetermined overhead rate? If the expected level of activity in
a production center is 50,000 machine-hours and the estimated overhead costs are USD 750,000,
what is the predetermined overhead rate? Show the calculation.

➢ What is underapplied and overapplied overhead? What type of balance does each have in the
Overhead account?

➢ Direct materials were issued to the following jobs: Material A was issued to Job No. 101, USD 2,000;
Job No. 102, USD 1,000; and Job No. 103, USD 5,000. Material B was issued to Job No. 101, USD
5,000; Job No. 102, USD 2,000; and Job No. 103, USD 3,000. A total of USD 3,000 in indirect
materials was issued to all jobs.
➢ Record the direct and indirect materials issued in journal entry form.

➢ Real world question Assume Domino's Pizza is considering offering a new product—a 6-inch
(15.24 cm) pizza. Why would it matter if Domino's Pizza knows how much it costs to produce and

deliver this 6-inch (15.24 cm) pizza?
➢ Real world question Why is it becoming more important that the managers of hospitals
understand their product costs?

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