Deck 14: Job-Costing Systems

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

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

Answer 2

False

Question 3

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

Answer 3

False

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

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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 10

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

Question 11

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

Question 12

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

Question 13

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

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

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

Question 17

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 18

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

Question 19

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

Question 20

Typical inputs in manufacturing include materials, labor and equipment.

Question 21

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 22

During December, Morgan Manufacturing transferred $64,000 to ending inventory.Morgan's inventories were as follows: $$\begin{array} { l c c } & \text { Balance December 1 } & \text { Balance December 31 } \\\hline \text { Raw material } & \$ 15,000 & \$ 13,000 \\\text { Work-in-process } & \$ 23,000 & \$ 26,000 \\\text { Finished goods } & \$ 35,000 & \$ 37,000\end{array}$$ 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 23

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 24

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 25

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 26

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 27

During December, Morgan Manufacturing transferred $67,000 of raw materials into production.Morgan's inventories were as follows: $$\begin{array} { l c c } & \text { Balance December 1 } & \text { Balance December 31 } \\\hline \text { Raw material } & \$ 15,000 & \$ 13,000 \\\text { Work-in-process } & \$ 23,000 & \$ 26,000 \\\text { Finished goods } & \$ 35,000 & \$ 37,000\end{array}$$ 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 28

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 29

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 30

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 31

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 32

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 33

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 34

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 35

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 36

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 37

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 38

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 39

During December, Morgan Manufacturing purchased $65,000 of raw materials.Morgan's inventories were as follows: $$\begin{array} { l c c } & \text { Balance December 1 } & \text { Balance December 31 } \\\hline \text { Raw material } & \$ 15,000 & \$ 13,000 \\\text { Work-in-process } & \$ 23,000 & \$ 26,000 \\\text { Finished goods } & \$ 35,000 & \$ 37,000\end{array}$$ 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 40

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.