Deck 4: Product Costs and Job Order Costing

Question 1

The costs of selling goods and administrative costs are reported on the income statement as expenses when inventory is sold.

Answer 1

False
The cost of selling goods and administrative costs are reported on the income statement as expenses when they are incurred,

Question 2

Period costs are associated with manufacturing overhead incurred during production.

Answer 2

False
Period costs are associated with the selling of products and the administration of the business,

Question 3

Job order costing systems are not used exclusively by manufacturers; many service organizations use job order costing.

Answer 3

True

Question 4

The Work in Process Inventory account contains the costs of all products that have been started but are not yet complete.

Question 5

The costs of acquiring inventory are reported on the balance sheet as an asset labeled "inventory" and are expensed only when products are sold.

Question 6

The fabric used to manufacture a tote bag is an example of indirect material.

Question 7

Product costs are the costs related to inventory and period costs are the costs related to the selling and administrative functions.

Question 8

The cost of goods manufactured includes the cost of everything that is finished during the period, whether or not it was started during the period.

Question 9

Total manufacturing cost is also referred to as cost of goods manufactured.

Question 10

For labor to be considered direct, the worker must actually have his or her hands on the product or on the machine as the product is being made.

Question 11

The production costs of completed products are recorded in the Finished Goods Inventory account.

Question 12

The job order sheets are the subsidiary ledger that supports the Finished Goods Inventory account on the balance sheet.

Question 13

Product costs are any costs that a company incurs to acquire raw materials and convert them to finished goods ready for sale.

Question 14

In a job order costing system, products are manufactured in batches and costs are accumulated in the departments where the work is done.

Question 15

When a direct labor worker performs indirect labor activities, the worker will charge the time to a particular activity, not to a particular job.

Question 16

When inventory is sold to customers, its cost is removed from Work in Process Inventory and transferred to Cost of Goods Sold.

Question 17

The Schedule of Cost of Goods Manufactured is nothing more than a restatement of the Work in Process Inventory account.

Question 18

If a cost is incurred to support the administrative functions and is not classified as direct labor or direct material, it is part of overhead.

Question 19

Dividing overhead among various jobs is called overhead manipulation.

Question 20

If a cost is related to running the manufacturing facility but does not qualify as direct materials or direct labor, it is classified as overhead.

Question 21

Fabric used in the manufacture of baseball jerseys is an example of

Question 22

Oil to keep a factory machinery lubricated is an example of

Question 23

The supply of coffee beans at Starbucks is an example of

Question 24

After the entry is made to record the overhead applied, if the balance in the overhead account is a credit, more overhead was actually incurred than was recorded in the Work in Process account during the period.

Question 25

Which of the following is an example of direct labor for Toyota Motor Company?

A)Assembly line worker
B)Fork-lift driver
C)Line foreman
D)Company president

Question 26

Which of the following is an example of direct labor for Dole Food Company?

A)Truck driver who transports fruit to customers
B)Truck driver who transports laborers to the field
C)Plant supervisor
D)Canning machine operator

Question 27

Overapplied overhead means that not enough overhead cost was charged to products during the production process.

Question 28

Which of the following items would least likely be classified as part of direct materials for Dole Food Company?

A)Pineapple
B)Sugar
C)Stainless steel pots
D)Glass jars

Question 29

The journal entry to charge overhead cost to Work in Process Inventory is to debit Work in Process Inventory and credit Manufacturing Overhead Control.

Question 30

Applied overhead is calculated by dividing the actual activity level of application base by the predetermined overhead rate.

Question 31

Wages of sewing machine operators making baseball jerseys is an example of

Question 32

To adjust for underapplied overhead, the journal entry includes a debit to Cost of Goods Sold and a credit to Manufacturing Overhead Control.

Question 33

The predetermined overhead rate is calculated by dividing budgeted total manufacturing overhead by budgeted activity level of the application base.

Question 34

A zero balance in the manufacturing overhead account prior to adjusting the Manufacturing Overhead account indicates that actual overhead and applied overhead cost are equal, so that all inventory is reflected at actual cost.

Question 35

If the amount of underapplied or overapplied manufacturing overhead is small, most companies will make the entry to close the Manufacturing Overhead account by charging the entire amount to Work in Process.

Question 36

After the entry is made to record the overhead applied, if the balance in the overhead account is a debit, more overhead was actually incurred than was debited to the Work in Process account during the period.

Question 37

Which of the following would most likely be classified as a direct material for a furniture manufacturer?

A)Wood
B)Glue
C)Screws
D)Wood cleaner

Question 38

Aluminum used in the manufacturing of bicycles is an example of

Question 39

An application base is the amount of overhead to be allocated to various jobs.

Question 40

Which of the following items would least likely be classified as part of direct materials for an automobile manufacturer?

A)Steel
B)Paint
C)Tires
D)Screws

Question 41

Direct materials are sometimes referred to as

A)overhead.
B)raw materials.
C)period costs.
D)administrative expenses.

Question 42

Which of the following is not an indirect material?

A)Supplies used in supporting the production process which may not be part of the final product
B)Direct material that is not a significant part of the product
C)Material used that is inexpensive, making it not cost effective to trace its cost back to the product
D)Office supplies used by the human resources department

Question 43

Period costs are associated with

A)the ordering materials for production.
B)producing products.
C)the administration of the business.
D)general factory overhead.

Question 44

A cost that a company incurs that is not a product cost is referred to as

A)contribution cost.
B)nonmanufacturing cost.
C)manufacturing overhead.
D)burden.

Question 45

Which of the following is not another term companies use to refer to manufacturing overhead?

A)Factory overhead
B)Manufacturing administration
C)Factory burden
D)Manufacturing burden

Question 46

Janitorial supplies used in a factory's restrooms is an example of

Question 47

The salary of the president of the company is an example of

Question 48

The wages of the security guards who protect the factory building are an example of

Question 49

A category of costs that includes all the costs associated with the general management of the company is referred to as

A)indirect costs.
B)general and administrative costs.
C)selling costs.
D)product costs.

Question 50

At what point are manufacturing costs expensed?

A)When the finished goods are sold
B)When the costs are transferred out of Work in Process
C)When the production process begins
D)At the end of the accounting period

Question 51

Which of the following expenses are reported on the income statement when they are incurred?

A)Product costs
B)Period costs
C)Indirect material
D)Direct material

Question 52

Which one of the following types of costs is not related to inventory?

A)Direct material
B)Indirect labor
C)Product costs
D)Period costs

Question 53

Costs a company incurs that are not product costs are referred to as

A)period costs.
B)contribution costs.
C)accrued costs.
D)incurred costs.

Question 54

The three components of product costs are:

A)Direct material, indirect material, and labor.
B)Material, direct labor, and indirect labor.
C)Direct material, direct labor, and overhead.
D)Indirect material, indirect labor, and overhead.

Question 55

Which of the following is not classified as a variable product cost?

A)Direct materials
B)Insurance
C)Sales commissions
D)Indirect materials

Question 56

Finished Goods Inventory consists of which of the following costs?

A)Direct material, direct labor, and nonmanufacturing overhead
B)Direct labor and manufacturing overhead costs
C)Manufacturing overhead and direct material
D)Direct material, direct labor, and manufacturing overhead.

Question 57

Which of the following is not associated with period costs?

A)Selling of a product
B)Incurring overhead
C)The passage of time
D)Administration of the business

Question 58

Direct labor costs include all of the following except

A)wages of workers who transform direct materials into the finished product.
B)salaries of supervisors who oversee the production process.
C)wages of workers who run the machines as the product is being made.
D)benefits paid to the workers who transform direct materials into finished products.

Question 59

Period costs are expensed when they are

A)incurred.
B)paid.
C)entered into production.
D)sold.

Question 60

Which of the following is not classified as a fixed product cost?

A)Machine depreciation
B)Electricity to run machinery
C)Factory rent
D)Production manager's salary

Question 61

Which of the following is not classified as a period cost?

A)The cost of toner for the sales department laser printer
B)The salary for the president of the company
C)The cost of utilities for the factory building
D)the cost of the annual company holiday party.

Question 62

Which of the following items is not classified as direct labor for Family Ice Cream Parlor?

A)Salary of workers making banana splits
B)Salary of workers adding toppings to sundaes
C)Salary of store manager
D)Wages of employees processing ice cream

Question 63

Raw Materials Inventory decreases when

A)materials are purchased.
B)materials are used.
C)materials are transferred to Finished Goods Inventory.
D)goods are sold.

Question 64

Work in Process Inventory increases when

A)raw materials are purchased.
B)raw materials are used.
C)products are finished.
D)products are sold.

Question 65

When indirect materials are used, which of the following accounts increases?

A)Raw Materials Inventory
B)Work in Process Inventory
C)Finished Goods Inventory
D)Manufacturing Overhead

Question 66

Which of the following is not classified as a variable period cost?

A)Sales commissions
B)Packaging for delivery
C)Depreciation on delivery trucks
D)Utilities cost per kilowatt hour above the base amount allowed

Question 67

Raw Materials Inventory increases when

A)materials are purchased.
B)materials are used.
C)materials are transferred to Work in Process Inventory.
D)goods are sold.

Question 68

The Work in Process Inventory account contains the costs of all products that have been

A)started but not yet completed.
B)completed.
C)completed and sold.
D)sold.

Question 69

Work in Process Inventory decreases when

A)raw materials are purchased.
B)raw materials are used.
C)products are finished.
D)products are sold.

Question 70

Which of the following is not classified as manufacturing overhead?

A)The cost of depreciation on office equipment
B)The cost of wages paid to the forklift operator in the factory
C)The cost of wages for the plant manager
D)The production foreman's salary

Question 71

When products are completed, which of the following accounts is increased?

A)Raw Materials Inventory
B)Work in Process Inventory
C)Finished Goods Inventory
D)Cost of Goods Sold

Question 72

Which of the following accounts is not reported on the Balance Sheet?

A)Cost of Goods Sold
B)Raw Materials
C)Work in Process
D)Finished Goods

Question 73

Which of the following items is not classified as direct materials for Family Home-Made Ice Cream Parlor?

A)The cost of empty ice cream cones
B)The cost of milk used in the manufacturing of ice cream
C)The cost of hairnets worn by production line workers
D)The cost of strawberries used in the manufacturing of ice cream

Question 74

When a company purchases materials for use in the production process, the cost of those materials is recorded in which of the following accounts?

A)Finished Goods Inventory
B)Work in Process Inventory
C)Raw Materials Inventory
D)Supplies Expense

Question 75

Which of the following items is not classified as indirect labor for a furniture manufacturing company?

A)The production foreman's salary
B)Wages paid to the workers on the assembly line
C)The wages of the forklift driver who delivers raw materials to the production floor
D)The wages of the factory janitorial staff

Question 76

When a product is sold to a customer, which of the following inventory accounts is increased or decreased?

A)Work in Process Inventory is decreased and Finished Goods Inventory is increased
B)Finished Goods Inventory is increased and Cost of Goods Sold is decreased
C)Finished Goods Inventory is decreased and Cost of Goods Sold is increased
D)Raw Materials Inventory is decreased and Cost of Goods Sold is increased.

Question 77

Which of the following items is not classified as indirect materials for a furniture manufacturing company?

A)Sanded and finished wood used to make bed frames
B)Decorative brads used on the arms of chairs
C)Glue used to strengthen joints on drawers
D)Paint used to touch up the final product

Question 78

The Finished Goods inventory account contains the costs of all products that have been

A)started but not yet complete.
B)completed but not sold.
C)completed and sold.
D)sold.

Question 79

When products are completed, which of the following accounts is decreased?

A)Raw Materials Inventory
B)Work in Process Inventory
C)Finished Goods Inventory
D)Cost of Goods Sold

Question 80

Which of the following is not classified as a fixed period cost?

A)Packaging for delivery
B)Depreciation on delivery trucks
C)Marketing Vice President's salary
D)Insurance on the administration building