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Chapter 4
Job-Order Costing
Solutions to Questions
4-1 By definition, manufacturing overhead
allocated rather than traced.
4-2 The job cost sheet is used to record all
manufacturing overhead costs applied to the job.
When a job is completed, the job cost sheet is
apply overhead to jobs. It is computed before a
period begins by dividing the period’s estimated
multiplying the predetermined overhead rate by
the actual amount of the allocation base that is
incurred for each job. The most common
agreement has been reached with a customer on
quantities, prices, and shipment dates for goods.
The sales order forms the basis for the production
summarize the various production costs incurred
to complete the job. These costs are entered on
4-5 Some production costs such as a factory
manager’s salary cannot be traced to a particular
production costs such as indirect materials cannot
4-6 If actual manufacturing overhead costs
are applied to jobs, then the company must wait
to get around this problem. However, overhead
cost tends to be incurred somewhat uniformly
rates in periods with low activity and low
overhead rates in periods with high activity. For
4-7 The measure of activity used as the
allocation base should drive the overhead cost;
to products and jobs and product costs will be
distorted.
they may not be sold at prices sufficient to cover
all costs. It is a myth that assigning costs to
4-9 Generally, the amount of overhead
applied will not be the same as the amount of
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Solutions Manual, Chapter 4 137
actual overhead cost exceeds the amount of
overhead cost applied to jobs during the period.
Underapplied or overapplied overhead is disposed
of by either closing out the amount to Cost of
account. The adjustment for underapplied
overhead increases Cost of Goods Sold (and
4-11 Manufacturing overhead may be
underapplied for a number of reasons including:
period may have been too low; and (3) the actual
amount of the allocation base may have been less
enough overhead was assigned to jobs during the
period and therefore cost of goods sold was
4-13 A plantwide overhead rate is a single
rates to more appropriately allocate overhead
costs among products. Multiple overhead rates
in the department that is more machine-intensive
would rely on an allocation base like machine-
hours whereas the overhead rate in the
4-14 When automated equipment replaces
direct labor, overhead increases and direct labor
