Acct Chap 3

Answers to Study Questions for Chapter 3

|1. |By definition, manufacturing overhead consists of costs that cannot be practically traced to jobs. Therefore, if these costs are to be |

| |assigned to jobs, they must be allocated rather than traced. |

|2. |The job cost sheet is used to record all costs that are assigned to a particular job. These costs include direct materials costs traced to |

| |the job, direct labor costs traced to the job, and manufacturing overhead costs applied to the job. When a job is completed, the job cost |

| |sheet is used to compute the unit product cost. The job cost sheet is also a control document for: (1) determining how many units have been |

| |sold and determining the cost of these units; and (2) determining how many units are still in inventory at the end of a period and |

| |determining the cost of these units on the balance sheet. |

|3. |A predetermined overhead rate is used to apply overhead to jobs. It is computed before a period begins by dividing the period’s estimated |

| |total manufacturing overhead by the period’s estimated total amount in the allocation base. Thereafter, overhead is applied to jobs by |

| |multiplying the predetermined overhead rate by the actual amount of the allocation base that is incurred for each job. The most common |

| |allocation base is direct labor-hours. |

|4. |If actual manufacturing overhead cost is applied to jobs, then the company must wait until the end of the accounting period to apply |

| |overhead and to cost jobs. If the company computes the actual overhead rates more frequently to get around this problem, the...