Deck 14: Job Costing

Question 1

The first choice to zero out the overhead control account is to correct the rate for the entire year, using actual overhead costs and actual activity volumes at the end of the year.

Answer 1

True

Question 2

In process shops, it is not possible to trace costs to individual units.

Answer 2

True

Question 3

Because of their widespread use, we call systems like job costing normal costing systems.

Answer 3

True

Question 4

Cost of goods manufactured is the inflow into the work in process inventory account and cost of goods sold is the outflow from this account.

Question 5

If over- under-applied overhead amount is small, it is justifiable to write it off to cost of goods sold.

Question 6

A firm would classify payments to employees such as the plant manager as part of its direct labor costs.

Question 7

A firm's actual overhead cost and actual activity volume are likely to remain relatively constant from month to month, thus fluctuations in overhead rates remain relatively constant.

Question 8

The use of predetermined overhead rates results in under- or over-applied overhead because these rates differ from the actual overhead rate.

Question 9

Any unallocated balance in the overhead control account represents over-applied overhead.

Question 10

Instead of waiting until the end of the accounting period to compute actual overhead rates, most firms use predetermined rates for applying overhead to jobs.

Question 11

In a job shop material, but not labor and overhead, can be traced to individual jobs.

Question 12

Typical inputs in manufacturing include materials, labor and equipment.

Question 13

Most firms deal with overhead cost by waiting until the end of the accounting period to compute actual overhead rates.

Question 14

The predetermined overhead rate is calculated by dividing expected activity level by expected overhead costs for the period.

Question 15

Most production systems exhibit some characteristic of job shops or some characteristics of process shops, but not both.

Question 16

The production environments in most firms exhibit characteristics of both job and process shops.

Question 17

The allocation of manufacturing overhead to individual jobs using the predetermined rate is termed applied overhead.

Question 18

In a job shop, because each job is unique, the firm has to track costs separately for individual jobs.

Question 19

Job shops and process shops are basically the same in the extent to which we can trace costs to individual units and jobs.

Question 20

If a firm charges under-applied overhead to costs of goods sold, the under-applied overhead will decrease the cost of goods sold account.

Question 21

During December, Morgan Manufacturing purchased $65,000 of raw materials. Morgan's inventories were as follows: What is the amount of raw materials used in production during December?

A) $65,000
B) $2,000
C) $67,000
D) $64,000
E) None of the above.

Question 22

Which of the following entities would not use process costing? a. Kellogg Company.
B) Remodeling contractors.
C) Steel mills.
D) PepsiCo.
E) All of the above would use process costing.

Question 23

If a company using job-order costing overestimates its manufacturing overhead costs the affect will be to: a. Overstate net operating income.
B) Understate the ending finished goods inventory account balance.
C) Overstate cost of goods sold.
D) Overstate cost of goods manufactured.

Question 24

During December, Morgan Manufacturing transferred $64,000 to ending inventory. Morgan's inventories were as follows: What was the amount of cost of goods sold for December?

A) $62,000
B) $67,000
C) $65.000
D) $2,000
E) None of the above.

Question 25

What method is not acceptable for closing the balance in the manufacturing overhead control accounts? a. Post any over or underapplied overhead directly to cost of goods sold
B) Correct the rates for the entire year, once actual overhead costs are known
C) Prorate the under or overapplied overhead amount between the inventory accounts
D) Show overapplied costs as revenue and underapplied costs as an expense directly on the income statement

Question 26

The Whitestone Company uses a job-order costing system. The predetermined overhead rate for fixed manufacturing overhead is based on direct labor hours. The company has provided the following estimates: The company will use a predetermined fixed manufacturing overhead rate of: a. $2.50 per direct labor hour
B) $12.00 per direct labor hour
C) $7.00 per direct labor dollar
D) $6.00 per direct labor dollar

Question 27

The Watering Hole Company uses job-order costing and a predetermined overhead rate of 120% of direct labor dollars. The following information is available for the month of October: Total debits to the work-in-process account in October totaled: a. $11,600
B) $5,700
C) $3,300
D) $9,200

Question 28

In a job costing system, when a firm issues materials to the shop floor, it removes the cost from:

A) Finished goods inventory.
B) Work-in-process inventory.
C) Raw materials inventory.
D) Cost of goods manufactured.
E) None of the above.

Question 29

Which of the following represents the flow of costs in a job costing system?

A) WIP, FG, CGS.
B) WIP, FG, CGM.
C) FG, WIP, CGS.
D) FG, WIP, CGM.
E) None of the above.

Question 30

In process costing it is not possible to trace costs to individual units. All that is required is to determine the cost of an average unit. Process costing systems accomplish this task by:

A) Allocating all costs based on a pre-determined rate.
B) Accumulating all costs by department or process.
C) Accumulating all costs on a job cost report.
D) Waiting until all products are completed and calculating the actual cost at that time.
E) None of the above.

Question 31

Which of the following entities would not use job costing systems?

A) Law firms.
B) Manufacturer of electronic equipment used in aircraft.
C) Remodeling contractors.
D) PepsiCo.
E) All of the above would use job costing.

Question 32

The most logical business which would use job order costing would be:

A) An oil refinery
B) A paper company
C) A custom-home builder
D) A car dealership

Question 33

Which of the following statements is not true?

A) Job costing systems are appropriate for make-to-order custom products.
B) Job costing systems are appropriate for make-to-stock batches.
C) Process costing systems are appropriate for non-stop production.
D) Process costing systems are appropriate for make-to-stock small batches.
E) All of the above are true.

Question 34

The Gladstone Company has a balance of $3,300 in its work-in-process (WIP) account at the end of the year. Job costs sheets indicate that this consists of costs incurred from two jobs still in process. Job A has incurred costs of $400 for direct materials and $800 for direct labor whereas Job B has incurred costs of $200 for direct materials and $400 for direct labor. If the company applied overhead based on a percentage of direct labor dollars, the company must be using a predetermined rate of : a. 45.45%
B) 80%
C) 125%
D) 275%

Question 35

In a job-order costing system, direct labor costs are shown as an increase to what account? a. Finished goods inventory.
B) Work-in-process inventory.
C) Cost of goods manufactured.
D) Raw materials inventory.

Question 36

During December, Morgan Manufacturing transferred $67,000 of raw materials into production. Morgan's inventories were as follows: What is the amount of work-in-process inventory transferred to finished goods during December?

A) $3,000
B) $67,000
C) $62,000
D) $64,000
E) None of the above.

Question 37

In a job-order costing system, when manufacturing overhead is applied to a job what account is debited: a. Cost of goods sold
B) Work-in-process
C) Finished goods
D) Manufacturing overhead control

Question 38

Which of the following is the correct formula for cost of goods sold?

A) Opening WIP inventory + cost of goods manufactured + ending WIP inventory.
B) Opening WIP inventory - cost of goods manufactured = ending WIP inventory.
C) Opening finished goods inventory - cost of goods manufactured + Ending finished goods inventory.
D) Opening finished goods inventory + cost of goods manufactured - Ending finished goods inventory.
E) None of the above.

Question 39

Combs Manufacturing Company uses predetermined overhead rates based on direct labor. The Company budgeted to spend $750,000 on labor during the period. Combs estimates annual variable overhead to be $225,000 and annual fixed overhead to be $900,000. What are Comb's overhead variable and fixed rates? a. $0.30 variable/$1.20 fixed.
B) $1.80 variable/$0.83 fixed.
C) $1.50 variable/$1.50 fixed.
D) $0.67 variable/$0.67 fixed.
E) None of the above.

Question 40

The Peterson Company uses a predetermined overhead rate of 120% of direct labor costs to apply manufacturing overhead. Estimated costs for the upcoming year are: If actual direct labor costs for the year were $19,000, manufacturing overhead will have been: a. Underapplied by $8,200
B) Underapplied by $3,800
C) Underapplied by $2,000
D) Underapplied by $2,200

Question 41

The amount of overhead applied to a job increases which of the following inventory accounts? a. Overhead control account.
B) Work-in-process inventory account.
C) Overhead application account.
D) Finished goods inventory account.
E) None of the above.

Question 42

Under-applied overhead indicates: a. An amount applied to jobs is smaller than the amount actually spent on overhead.
B) An amount applied to jobs is larger than the amount actually spent on overhead.
C) The predetermined overhead rate was calculated incorrectly.
D) The budget needs to be revised.
E) None of the above.

Question 43

The Chesney Company uses job-order costing and a predetermined overhead rate based on direct labor dollars. For 2009 the company incurred $489,000 of actual manufacturing overhead costs. Their manufacturing overhead control account at the end of the year indicated that they had under-applied manufacturing overhead costs by $19,000. If the predetermined overhead rate was 80% of direct labor dollars, then direct labor costs for the year totaled: a. $587,500
B) $635,000
C) $611,250
D) $581,560

Question 44

Which of the following methods for zeroing out the over-applied or under-applied overhead is the easiest method, but the least accurate? a. Correct rates at year end.
B) Write-off to the miscellaneous expense account.
C) Prorate the under-applied or over-applied amount among the inventory accounts.
D) Write-off to cost of goods sold.
E) None of the above.

Question 45

Assume that a company closes any remaining balances in the manufacturing overhead control account to cost of goods sold account. If the company has overapplied its manufacturing overhead the company would record which of the following entries: a. DR cost of goods sold
CR manufacturing overhead control
B) DR work-in-process
CR cost of goods sold
C) DR manufacturing overhead control
CR cost of goods sold
D) DR cost of goods sold
CR cost of goods manufactured

Question 46

GAAP permits which of the following methods for zeroing out the overhead control account? a. Correct the rates at year end.
B) Charge the under-applied or over-applied overhead to cost of goods sold.
C) Prorate the under-applied or over-applied overhead among the inventory accounts and cost of goods sold.
D) B and C only.
E) A, B and
C)

Question 47

Under- over-applied overhead is computed as: a. Actual overhead expense for the period less budgeted overhead for the period.
B) Actual overhead expense less cost of goods manufactured.
C) Actual overhead expense for the period less applied overhead for the period.
D) Actual overhead expense multiplied by contribution margin ratio.
E) None of the above.

Question 48

The Keith Company uses job-order costing and a predetermined overhead rate based on direct material dollars. The following information is available for the month of August: Manufacturing overhead is charged to jobs at 90% of the direct materials cost. Jobs #22 and #31 were completed during the period and transferred to finished goods. Job #16 was completed and delivered to customers during the month. Cost of goods sold for August was: a. $810
B) $250
C) $340
D) $900

Question 49

In which of the following accounts do firms accumulate indirect manufacturing costs? a. General and administrative expense accounts.
B) Work-in-process inventory accounts.
C) Overhead control accounts.
D) Over- or under-applied overhead accounts.
E) None of the above.

Question 50

Water Sports, Inc. uses a predetermined overhead rate based on direct labor costs. For the current year, the company estimated overhead to be $300,000, based on budgeted production of 20,000 direct labor hours at $6 per hour. Actual overhead for the period was $290,000, with actual direct labor costs of $110,000. What was the over- applied or under-applied overhead for the period? a. $25,000 over-applied.
B) $25,000 under-applied.
C) $15,000 over-applied.
D) $15,000 under-applied.
E) None of the above.

Question 51

The RacingStripe Company began the period with a balance of $13,000 in its work-in-process (WIP) account. During the period the company incurred $16,000 in direct labor costs, requisitioned $10,000 in direct materials, and applied $17,000 in manufacturing overhead. Actual overhead costs for the period were $18,500. If the balance in the WIP account at the end of the period was $22,000 then cost of goods manufactured for the period was: a. $34,000
B) $21,000
C) $35,500
D) $56,000

Question 52

Systems like job costing (systems that use predetermined overhead rates to apply overhead) are referred to as: a. Standard costing systems.
B) Actual costing systems.
C) Normal costing systems.
D) Discretionary costing systems.
E) None of the above.

Question 53

The Fendandez Company provided the following information at the end of 2009: The balance in the finished goods inventory account at January 1^st must have been: a. $92,000
B) $45,000
C) $57,000
D) $44,000

Question 54

The amount of overhead applied to a job decreases which of the following accounts? a. Work-in-process inventory account.
B) Overhead application account.
C) Finished goods inventory account.
D) Overhead control account.
E) None of the above.

Question 55

The Prestige Company, which utilizes job-order costing, uses a predetermined overhead rate based on machine hours to apply both variable and fixed manufacturing overhead to jobs. Estimates for the month of April are as follows: The balance in the manufacturing overhead control account at the end of April will indicate the overhead was: a. Underapplied by $1,400
B) Overapplied by $1,400
C) Overapplied by $2,000
D) Overapplied by $2,000