Deck 26: Manufacturing Accounting: The Job Order Cost System

Question 1

The costs incurred to manufacture a product can be classified into three primary elements of manufacturing costs: materials, labor, and factory overhead.

Answer 1

True

Question 2

Those materials used in the manufacturing process that do not become a major part of the finished product are called indirect materials.

Answer 2

True

Question 3

Those materials used in the manufacturing process that do not become a major part of the finished product are called direct materials.

Answer 3

False

Question 4

The main difference in the financial statements of a manufacturing business and a merchandiser is the cost of goods sold section of the income statement and the inventories on the balance sheet.

Question 5

The costs of those employees who devote their time to converting the materials into finished goods are usually referred to as direct labor.

Question 6

Indirect wages includes the wages of employees who spend their time supervising or working in a general nature.

Question 7

Direct labor includes the wages of employees who are directly involved in converting materials into finished goods.

Question 8

Factory overhead normally consists of direct materials and indirect labor.

Question 9

Items acquired that either become a part of the finished product or are used in the process of manufacturing the finished product are known as materials.

Question 10

Products that are only partially completed at the end of the accounting period are known as finished goods.

Question 11

Direct materials are often referred to as factory supplies.

Question 12

The wages and salaries paid to the factory supervisor and janitors are charged to direct labor.

Question 13

The most significant difference between a manufacturer's income statement and a merchandiser's income statement is the use of "cost of goods manufactured" in the place of "purchases."

Question 14

Factory overhead consists of indirect materials, direct labor, and other factory expenses.

Question 15

Manufacturing companies must maintain multiple inventory accounts.

Question 16

Using a predetermined overhead rate, an appropriate amount of factory overhead should be added to a job cost sheet.

Question 17

Products that have been completed and are ready for sale at the end of the accounting period are known as costs of goods sold.

Question 18

Indirect labor costs are those costs to transform raw materials into a finished product.

Question 19

Indirect materials and indirect labor go through factory overhead into work in process.

Question 20

Product cost information is useful in setting selling prices and in determining the profitability of each product.

Question 21

A manufacturing business acquires materials in one form and converts or processes them into a different form for final sale.

Question 22

Materials inventory consists of all products on which work has been started but is not yet finished at the end of the accounting period.

Question 23

There are two basic types of cost accounting systems: manufacturing costing and merchandising costing.

Question 24

One inventory account is needed in a manufacturing business.

Question 25

Process cost accounting is useful for costing homogeneous products such as base models of automobiles.

Question 26

The many types of factory overhead costs make it desirable to use a factory overhead subsidiary ledger.

Question 27

A manufacturer makes the items it sells, rather than purchasing them in final form.

Question 28

The cost of goods sold section of the manufacturer's income statement is commonly supplemented by a schedule of cost of goods manufactured.

Question 29

Material inventory includes both direct and indirect materials.

Question 30

The earnings of workers whose services are considered to be direct labor must be charged to the proper factory overhead accounts.

Question 31

A subsidiary ledger, called a materials requisition, is used to show the quantity, the cost of materials received and issued, and the resulting balances.

Question 32

A cost accounting system is a system for accumulating detailed information about the cost of producing a product.

Question 33

Overapplied overhead is normally transferred to work in process inventory.

Question 34

The key difference between a manufacturing and a merchandising business involves inventory.

Question 35

A merchandising business acquires and holds inventory in only one form-finished and ready for sale.

Question 36

The earnings of workers whose services are considered to be indirect labor must be charged directly to the jobs on which they worked.

Question 37

If the product is made to a customer's orders or specifications or if products are made in separately identifiable "lots" or "batches," a process cost system is appropriate.

Question 38

The wages paid to those who devote their time to supervision or to work of a general nature in the manufacturing process are included in the indirect costs of the factory operation.

Question 39

The use of a periodic inventory system generally is desirable in accounting for manufacturing inventories.

Question 40

Property taxes on the factory buildings should be charged to factory overhead.

Question 41

It is estimated that during the coming year, factory overhead costs will be $675,000 and direct labor costs will be $750,000. The predetermined overhead rate as a percentage of direct labor costs for that year would be

A) 0.9%.
B) 1.11%.
C) 90%.
D) 111%.

Question 42

Under a perpetual inventory system, the sale of a manufactured product requires an entry

A) debiting Cost of Goods Sold and crediting Finished Goods.
B) debiting Cost of Goods Sold and crediting Work in Process.
C) debiting Finished Goods and crediting Work in Process.
D) debiting Finished Goods and crediting Cost of Goods Sold.

Question 43

Products that have been started but are only partially complete at the end of the accounting period are known as

A) materials.
B) work in process.
C) finished goods.
D) cost of goods sold.

Question 44

Materials used in the manufacturing process that do not become a significant part of the finished products are called

A) indirect materials.
B) operating expenses.
C) direct materials.
D) administrative expenses.

Question 45

A system for accumulating detailed information about the cost of producing a product is known as a

A) product costing system.
B) cost accounting system.
C) financial accounting system.
D) managerial accounting system.

Question 46

Materials that enter into and become a significant part of the finished product are called

A) indirect materials.
B) operating expenses.
C) direct materials.
D) administrative expenses.

Question 47

Materials and direct labor flow into which of the following accounts?

A) finished goods
B) work in process
C) cost of goods sold
D) operating expenses

Question 48

Items acquired that either become a part of the finished product or are used in the process of manufacturing the finished product are known as

A) materials.
B) work in process.
C) finished goods.
D) cost of goods sold.

Question 49

Wages paid to those employees who devote their time to supervision or to work of a general nature are referred to as

A) indirect materials.
B) indirect labor.
C) direct materials.
D) direct labor.

Question 50

A schedule of cost of goods manufactured shows all of the following EXCEPT

A) indirect materials.
B) beginning work in process.
C) goods available for sale.
D) ending work in process.

Question 51

If a product is made to customers' orders or specifications or if products are made in separately identifiable "lots" or "batches," the appropriate cost accounting system is a

A) job order system.
B) process system.
C) perpetual system.
D) periodic system.

Question 52

Wages paid to those employees who devote their time to converting the materials into finished goods are called

A) indirect materials.
B) indirect labor.
C) direct materials.
D) direct labor.

Question 53

The inventory accounts used in a manufacturing business are

A) merchandise, materials, and work in process.
B) materials, work in process, and finished goods.
C) merchandise, materials, and finished goods.
D) merchandise, work in process, and finished goods.

Question 54

Products that have been completed and are ready for sale at the end of the accounting period are known as

A) materials.
B) work in process.
C) finished goods.
D) cost of goods sold.

Question 55

In a process cost system, costs attach to products and are passed from one process to another.

Question 56

Production cost information is needed to assist with all of the following EXCEPT

A) setting selling prices.
B) controlling production costs.
C) determining overhead.
D) determining the net income or loss.

Question 57

Depreciation of factory buildings and equipment is an example of

A) direct labor.
B) direct materials.
C) factory overhead.
D) operating expenses.

Question 58

A cost accounting system uses which of the following inventory systems?

A) periodic system
B) perpetual system
C) both a periodic and perpetual system
D) a hands-on system

Question 59

The vacation pay of factory workers may be charged to

A) indirect labor.
B) direct labor.
C) factory overhead.
D) administrative expenses.

Question 60

The purchase of direct and indirect materials on account during the month requires an entry

A) debiting Work in Process and crediting Materials.
B) debiting Materials and crediting Accounts Payable.
C) debiting Accounts Payable and crediting Materials.
D) debiting Materials and crediting Work in Process.

Question 61

McMann Company makes lawn care equipment. It applies overhead at the rate of 125% of direct labor costs. During the year, direct labor costs were $140,000. The actual overhead was $177,000. Make the appropriate general journal entry dated December 31, 20--, to adjust the factory overhead account balance (under- or overapplied) for the year.

Question 62

The following information is supplied for Lexington Corporation. Prepare a schedule of cost of goods manufactured for the year ended December 31, 20--.

Question 63

Match the terms with the definitions.a.Work in Process
b.process cost system
c.overapplied overhead
d.direct materials
e.materials requisition
f.factory overhead subsidiary ledger
g.Finished Goods Inventory
h.materials ledger
i.job order cost system
j.indirect materials
k.job cost sheet
The account that contains the costs of products that have been completed and are ready for sale.

Question 64

Step-in-Time Manufacturing had the following transactions for its job order costing operation: ​
Required:
Prepare general journal entries to record these transactions.

Question 65

The following information pertains to Skylark Manufacturing Corporation for the year ended December 31, 20--. Required:
Complete the statement of cost of goods manufactured.

Question 66

O'Connell Corporation had the following transactions for its job order costing operation.
Apr. 4
Purchased materials on account, $17,000.
7
Direct materials requisitioned to production, Job No. 106, $15,800.
12
Direct labor, Job No. 106, $15,200.
16
Indirect materials (factory overhead) requisitioned to production, $3,300.
22
Indirect labor (factory overhead), $2,400.
28
Other indirect costs (factory overhead, credit Accounts Payable), $2,700.
​
Required:
Prepare general journal entries to record these transactions.

Question 67

The entry to record other factory overhead costs incurred during the month would include

A) a debit to Factory Overhead.
B) a credit to Factory Overhead.
C) a debit to Work in Process.
D) a credit to Work in Process.

Question 68

Which of the following information would NOT be included on the job cost sheet?

A) cost of direct materials
B) cost of direct labor
C) cost of factory overhead applied
D) cost of indirect labor

Question 69

The following information is supplied for Chang Manufacturing Company. ​
Required:
Prepare a schedule of cost of goods manufactured for the year ended December 31, 20--.

Question 70

The entry to record indirect labor costs incurred during the month would include a debit to

A) Wages Payable.
B) Factory Overhead.
C) Work in Process.
D) Materials.

Question 71

Match the terms with the definitions.a.Work in Process
b.process cost system
c.overapplied overhead
d.direct materials
e.materials requisition
f.factory overhead subsidiary ledger
g.Finished Goods Inventory
h.materials ledger
i.job order cost system
j.indirect materials
k.job cost sheet
The system that accumulates manufacturing costs by process, such as cutting, painting, or finishing; and assigns each unit of product passing through the process a share of the costs.

Question 72

To apply factory overhead to work in process, an entry is made

A) debiting Factory Overhead and crediting Work in Process.
B) debiting Work in Process and crediting Factory Overhead.
C) debiting Cost of Goods Sold and crediting Work in Process.
D) debiting Factory Overhead and crediting Cost of Goods Sold.

Question 73

To recognize indirect and direct factory labor cost for the month, an entry is made

A) debiting Payroll Expense, debiting Work in Process, and crediting Factory Overhead.
B) debiting Work in Process, debiting Factory Overhead, and crediting Payroll Expense.
C) debiting Work in Process, debiting Factory Overhead, and crediting Wages Payable.
D) debiting Factory Overhead, debiting Payroll Expense, and crediting Accounts Payable.

Question 74

Which of the following products would most likely be accounted for using a process cost system?

A) custom-ordered trophies
B) luxury cruise ships
C) modeling clay
D) leather furniture

Question 75

The following information pertains to Ortega Corporation for the year ended December 31, 20--. Required:
Prepare a statement of cost of goods manufactured.

Question 76

Match the terms with the definitions.a.Work in Process
b.process cost system
c.overapplied overhead
d.direct materials
e.materials requisition
f.factory overhead subsidiary ledger
g.Finished Goods Inventory
h.materials ledger
i.job order cost system
j.indirect materials
k.job cost sheet
The ledger in which details of the different types of factory overhead costs are accumulated.

Question 77

Match the terms with the definitions.a.Work in Process
b.process cost system
c.overapplied overhead
d.direct materials
e.materials requisition
f.factory overhead subsidiary ledger
g.Finished Goods Inventory
h.materials ledger
i.job order cost system
j.indirect materials
k.job cost sheet
A document for recording the direct materials, direct labor, and factory overhead costs incurred on a specific job.

Question 78

When direct and indirect materials are issued into production from storage, an entry is made

A) debiting Work in Process, debiting Factory Overhead, and crediting Materials.
B) debiting Work in Process and crediting Materials.
C) debiting Materials, crediting Work in Process, and crediting Factory Overhead.
D) debiting Factory Overhead, crediting Work in Process, and crediting Materials.

Question 79

Rozlyn Corporation makes children's toys. It applies overhead at the rate of 110% of direct labor costs. During the year, the labor costs were $130,000. The actual overhead was $142,000. Make the appropriate general journal entry dated December 31, 20--, to adjust the factory overhead account balance (under- or overapplied) for the year.

Question 80

The entry to recognize the completion and transfer of a job so that it can be placed in stock would include

A) debiting Finished Goods and crediting Cost of Goods Sold.
B) debiting Finished Goods and crediting Work in Process.
C) debiting Work in Process and crediting Cost of Goods Sold.
D) debiting Work in Process and crediting Finished Goods.