Deck 14: Job-Costing and Process-Costing Systems

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Entries on the left of the "T" account are always increases.

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Actual overhead rates are used to apply factory overhead to products.

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Companies that use job-order costing normally have uniform production steps.

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The centerpiece of a job-costing system is the balanced scorecard.

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Some companies use hybrid costing, which blends the ideas from both job costing and process costing.

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Job costing only applies to specific jobs with a single physical unit.

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Product costs appear as cost of goods sold in income statements and as finished?goods inventory values in balance sheets.

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Each job has its own job-cost record in a job-costing system.

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The entry to record applied overhead would include a debit to Work-in-Process Inventory.

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Two extremes of product costing are job?order costing and normal costing.

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Construction and printing industries normally use job-order costing.

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Time cards record the materials used in particular jobs.

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The entry to record the completion of units in process would include a debit to Finished Goods Inventory.

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Hybrid-costing systems are blends of ideas from both job costing and process costing.

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The entry to record the sale of goods would include a debit to Cost of Goods Sold.

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In job-order costing, the denominator is small when arriving at a unit cost.

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Chemical and oil companies normally use process costing.

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Process costing averages costs over large numbers of nearly identical products.

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The entry to record factory overhead incurred would include a credit to Factory Department Overhead Control.

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The entry to record the requisition of direct materials would include a debit to Materials Inventory.

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Job-order costing can be used only in manufacturing environments.

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Measures in equivalent units are found only in manufacturing situations.

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Process-costing systems apply costs to like products that are usually mass-produced in continuous fashion through a series of production processes.

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Process costing accumulates costs for a period and divides them by quantities produced during the period to get average costs.

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Examples of potential factory overhead activity centers include receiving, testing, and packaging.

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All product costing uses averaging to determine total costs of production.

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Firms that use activity-based costing shift costs classified from overhead to direct costs.

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The degree of completion for conversion costs depends on what proportion of the total effort needed to complete one unit or one batch has been devoted to units still in process.

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Equivalent units are determined by multiplying physical units by the percentage of noncompletion.

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A company does not use estimates to determine equivalent units.

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Managers need to know product costs to make ongoing decisions such as which products to emphasize or deemphasize and the pricing of products.

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Unlike job-order costing, process costing requires only one work-in-process account.

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Equivalent units are computed to assign cost to partially completed units.

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Budgeted overhead application rate = total actual factory overhead / total budgeted amount of the cost driver.

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Conversion costs include all manufacturing costs other than direct materials.

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In nonprofit organizations, the product is usually called a program or a class of service.

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Regardless of the nature of a company's production system, there will always be resources that are shared among different products.

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Sometimes companies ignore work in process and assign all production costs to units completed and transferred out.

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Except for WIP, all of the journal entries for process costing are the same as job costing.

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The chemical and glass industries normally use job costing.

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The weighted-average method is the most popular inventory system.

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_____ is a product cost.

A)Direct material cost
B)Selling cost
C)Distribution cost
D)Administrative cost

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Organizations using JIT production systems always have no inventories.

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Identify which of the following statements regarding job-order costing is true.

A)Job-order costing deals with great masses of like units.
B)Job-order costing is an averaging process.
C)In job-order costing, the measure of production is small, whereas in process costing the measure of production is large.
D)Job-order costing is not one of the two common systems of product costing.

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The last step in calculating the cost of goods sold report is to apply costs to units completed and to units in the ending work in process.

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Identify which of the following industries is most likely to use a job-order costing system.

A)chemicals
B)plastics
C)printing
D)meat packing

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Some backflush systems eliminate the finished-goods inventory accounts.

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Transferred-in costs include only direct materials.

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When there is beginning work-in-process inventory, the weighted-average method of process costing must be used.

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Backflush costing has only two categories of costs: materials and conversion costs.

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Identify which of the following industries is most likely not to use a job?order costing system.

A)construction
B)lumber
C)aircraft
D)printing

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Under weighted-average process costing, the unit costs used for applying costs to products are affected by the total costs incurred to date, regardless of whether those costs were incurred during or before the current period.

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Backflush systems assume that conversion-costs account balances should be approximately zero at all times.

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Backflush costing applies costs to products only when production is complete.

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The_____ system is better suited for a single physical unit or a few like units.

A)process-costing
B)period-costing
C)product-costing
D)job?order-costing

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Backflush costing is most useful for companies with low inventory levels and short production cycles.

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Transferred-in costs are combined with the direct materials added in a particular department.

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The first step in calculating the cost of goods transferred and cost of goods remaining in ending work-in-process inventory is to calculate unit cost.

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In a job-cost system, all costs for a particular product service or batch of product are recorded on the:

A)materials requisition form
B)job-cost record
C)labor time ticket
D)budgeted overhead rate

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Backflush costing has no WIP account

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Sandy Company uses a job-order-cost system and had the following data available: $\begin{array} { l r } \text { Beginning direct-materials inventory } & \$ 26,000 \\\text { Beginning WIP inventory } & 64,000 \\\text { Beginning finished-goods inventory } & 58,000 \\\text { Direct materials purchased on account } & 148,000 \\\text { Direct materials requisitioned } & 82,000 \\\text { Direct-labor cost incurred } & 130,000 \\\text { Factory overhead incurred } & 146,000 \\\text { Cost of goods completed } & 292,000 \\\text { Cost of goods sold } & 260,000 \\\text { Overhead applicati on rate } & 125 \% \\\quad \text { as a percent of direct-labor cost) } &\end{array}$ The journal entry to record the sale of all jobs would include a _____.

A)debit to Finished-Goods Inventory for $292,000
B)credit to WIP Inventory for $260,000
C)credit to Finished-Goods Inventory for $260,000
D)credit to Cost of Goods Sold for $292,000

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A _____ would be part of the entry to record the requisition of direct materials.

A)credit to WIP Inventory
B)credit to Direct-Materials Inventory
C)credit to Accounts Payable
D)debit to Finished-Goods Inventory

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A _____ would be part of the entry to record the sale of goods.

A)credit to Finished-Goods Inventory
B)credit to Cost of Goods Sold
C)debit to WIP Inventory
D)debit to Sales

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For external reporting purposes, the costs incurred in the production and distribution phases of the value chain are _____.

A)product costs
B)period costs
C)period cost and product cost, respectively
D)product cost and period cost, respectively

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Bev Company uses a job-order-cost system and had the following data available: $\begin{array} { l r } \text { Beginning direct-materials inventory } & \$ 26,000 \\\text { Beginning WIP inventory } & 64,000 \\\text { Beginning finished-goods inventory } & 58,000 \\\text { Direct materials purchased on account } & 148,000 \\\text { Direct materials requisitioned } & 82,000 \\\text { Direct-labor cost incurred } & 130,000 \\\text { Factory overhead incurred } & 146,000 \\\text { Cost of goods completed } & 292,000 \\\text { Cost of goods sold } & 256,000 \\\text { Overhead applicati on rate } & 125 \% \\\quad \text { as a percent of direct-labor cost) } &\end{array}$ The journal entry to record the purchase of direct materials would include a _____.

A)debit to WIP Inventory for $82,000
B)debit to Direct-Materials Inventory for $148,000
C)credit to Direct-Materials Inventory for $148,000
D)credit to WIP Inventory for $82,000

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A _____ would be part of the entry to record application of factory costs.

A)debit to WIP Inventory
B)credit to Cost of Goods Sold
C)debit to Factory Department Overhead Control
D)debit to Factory Overhead Applied

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_____ is a job-cost source document.

A)A job-cost record
B)An inventory summary record
C)A budgeted overhead rate
D)A labor time ticket

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A debit to Cost of Goods Sold is used to record _____.

A)a requisition of direct materials
B)cost of goods completed
C)a sale of merchandise
D)purchase of direct materials

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A _____ would be part of the entry to record the cost of goods completed.

A)debit to Cost of Goods Sold
B)credit to Finished-Goods Inventory
C)debit to Factory Department Overhead Control
D)credit to WIP Inventory

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Helen Company uses a job-order-cost system and had the following data available: $\begin{array} { l r } \text { Beginning direct-materials inventory } & \$ 26,000 \\\text { Beginning WIP inventory } & 64,000 \\\text { Beginning finished-goods inventory } & 58,000 \\\text { Direct materials purchased on account } & 148,000 \\\text { Direct materials requisitioned } & 82,000 \\\text { Direct-labor cost incurred } & 130,000 \\\text { Factory overhead incurred } & 146,000 \\\text { Cost of goods completed } & 292,000 \\\text { Cost of goods sold } & 256,000 \\\text { Overhead applicati on rate } & 125 \% \\\quad \text { as a percent of direct-labor cost) } &\end{array}$ The journal entry to record the cost of goods completed would include a _____.

A)debit to WIP Inventory for $256,000
B)credit to Finished-Goods Inventory for $292,000
C)credit to Cost of Goods Sold for $256,000
D)credit to WIP Inventory for $292,000

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The _____ is supported by a file of completed job?cost records.

A)The Cost of Goods Sold account
B)The Direct-Materials Inventory account
C)The WIP Inventory account
D)The Finished-Goods Inventory account

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Ralph Company uses a job-order-cost system and had the following data available: $\begin{array} { l r } \text { Beginning direct-materials inventory } & \$ 26,000 \\\text { Beginning WIP inventory } & 64,000 \\\text { Beginning finished-goods inventory } & 58,000 \\\text { Direct materials purchased on account } & 148,000 \\\text { Direct materials requisitioned } & 90,000 \\\text { Direct-labor cost incurred } & 130,000 \\\text { Factory overhead incurred } & 146,000 \\\text { Cost of goods completed } & 292,000 \\\text { Cost of goods sold } & 256,000 \\\text { Overhead applicati on rate } & 125 \% \\\quad \text { as a percent of direct-labor cost) } &\end{array}$ The ending inventory of direct materials is _____.

A)$84,000
B)$174,000
C)$90,000
D)$108,000

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A debit to Direct-Materials Inventory is used to record _____.

A)a requisition of direct materials
B)cost of goods completed
C)a sale of merchandise
D)purchase of direct materials

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Jack Company uses a job-order-cost system and had the following data available: $\begin{array} { l r } \text { Beginning direct-materials inventory } & \$ 26,000 \\\text { Beginning WIP inventory } & 64,000 \\\text { Beginning finished-goods inventory } & 58,000 \\\text { Direct materials purchased on account } & 148,000 \\\text { Direct materials requisitioned } & 82,000 \\\text { Direct-labor cost incurred } & 130,000 \\\text { Factory overhead incurred } & 146,000 \\\text { Cost of goods completed } & 292,000 \\\text { Cost of goods sold } & 256,000 \\\text { Overhead application rate } & 130 \% \\\quad \text { as a percent of direct-labor cost) } &\end{array}$ The journal entry to record the factory overhead costs incurred would include a _____.

A)debit to Factory Department Overhead Control for $146,000
B)credit to Factory Department Overhead Control for $169,000
C)debit to WIP Inventory for $146,000
D)credit to WIP Inventory for $169,000

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Choosing direct-labor cost rather than direct-labor hours as a cost driver for overhead implies that _____.

A)higher paid employees use proportionally more support cost
B)higher paid employees use proportionally less support cost
C)direct labor cost data is easier to obtain
D)direct labor hour data is easier to obtain

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A debit to WIP Inventory is used to record _____.

A)a requisition of direct materials
B)cost of goods completed
C)a sale of merchandise
D)purchase of direct materials

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The _____ account is supported by a file of job?cost records for partially completed jobs.

A)WIP Inventory
B)Direct-Materials Inventory
C)Finished-Goods Inventory
D)Cost of Goods Sold

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A debit to Finished-Goods Inventory is used to record _____.

A)requisition of direct materials
B)cost of goods completed
C)a sale of merchandise
D)purchase of direct materials

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A credit to _____ would be part of the entry to record the incurrence of direct labor costs.

A)Accrued Payroll
B)WIP Inventory
C)Finished-Goods Inventory
D)Cost of Goods Sold

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Hybrid-costing systems use a combination of _____.

A)job-order costing and process costing ideas
B)value-added and nonvalue-added costs
C)direct and indirect costs
D)fixed and variable costs

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Deck 14: Job-Costing and Process-Costing Systems

Entries on the left of the "T" account are always increases.

False

Actual overhead rates are used to apply factory overhead to products.

False

Companies that use job-order costing normally have uniform production steps.

False

The centerpiece of a job-costing system is the balanced scorecard.

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