Deck 3: Cost Accumulation for Job-Shop and Batch Production Operations

Question 1

Job costing or job-order costing treats each individual job as the unit of output and assigns, or allocates costs to each job as resources are used.

Answer 1

True

Question 2

In order to qualify for job-order costing, each job must consist of a single, unique product consisting of only one unit produced of relatively high value.

Answer 2

False

Question 3

Process Costing treats each individual job as the unit of output and assigns, or allocates costs to each job as resources are used.

Answer 3

False

Question 4

Process costing treats all units processed during a time period as the output to be costed and does not separate and record costs for each unit produced.

Question 5

As output becomes more unique and separately identifiable, operation costing becomes more appropriate.

Question 6

In job costing, each unit produced is of relatively low value.

Question 7

Process costing does not separate and record costs for each unit produced.

Question 8

In process costing, the units of output are relatively homogeneous and indistinguishable from one another.

Question 9

Operation costing is appropriate when companies produce large batches of similar products and wish to trace the direct labor component of each unit.

Question 10

The basic cost flow equation in job order costing is: Beginning balance + resource transfers out - resource transfers in = ending balance.

Question 11

The Work-in- Process inventory account represents the cost of all active jobs that have not yet been completed.

Question 12

The Finished Goods account collects the total cost of all jobs completed and sold during the accounting period.

Question 13

When a company uses job-order costing, information regarding the costs of a specific job will be found in the company's general ledger.

Question 14

The primary cost document for a job is called a job-cost record or job-cost sheet.

Question 15

The cost of goods sold account records the cost of finished jobs that have been sold during the period.

Question 16

Transfers out of the Work-in-Process account represent increases to the Cost of Goods Sold account.

Question 17

The accounting journal entry to record the transfer of raw material needed for a production job consists of a debit to Work-in-Process inventory and a credit to Raw-Material inventory.

Question 18

The accounting journal entry to record factory supervisors' salaries consists of a debit to Work-in-Process inventory and a credit to Wages Payable.

Question 19

A debit to Finished- Goods-Inventory will normally be offset by a credit to cost of goods sold.

Question 20

A credit to the Work-in-Process account will normally be accompanied by a debit to the Finished Goods account.

Question 21

A credit to the Manufacturing Overhead account represents the assignment of overhead into Work-in-Process using a predetermined overhead rate.

Question 22

When a job is sold, Finished Goods will be credited for the selling price of the job.

Question 23

The overhead variance is the difference between the actual overhead spending and the applied overhead.

Question 24

Predetermined overhead rates are used because they are more accurate than using actual costs.

Question 25

The predetermined overhead rate is computed by dividing the budgeted manufacturing overhead cost for the month by the budgeted direct-labor hours for the month.

Question 26

The left side of the Manufacturing Overhead account applies overhead costs using the predetermined rate, while the right side accumulates actual overhead costs.

Question 27

When the amount of the overhead variance is immaterial, it is normally written off immediately as part of cost of goods sold.

Question 28

When the amount of the overhead variance is material, it is normally prorated to the Materials and Finished goods accounts.

Question 29

The difference between actual and applied overhead will eventually be expensed, regardless of whether it is written off immediately or prorated.

Question 30

Both normal costing and standard costing use actual inputs to assign direct costs to units produced.

Question 31

Standard costing uses a predetermined rate for both direct and indirect costs to assign manufacturing costs to products.

Question 32

The major difference between normal costing and standard costing is that normal costing only accounts for manufacturing costs in determining per unit cost while standard costing uses both manufacturing costs and general and administrative expenses.

Question 33

The job-order costing process is basically the same in both service and manufacturing firms.

Question 34

Traditional systems tend to focus on only the production component of the value chain.

Question 35

A Gantt chart shows the timing, sequencing and overlapping of major project activities.

Question 36

An unethical contractor will be more likely to understate the actual percentage of completion on a job than to overstate it.

Question 37

Which of the following companies would most likely use a job-order costing system?

A) A textbook manufacturer
B) A lumber company
C) A paint manufacturer
D) A sweater manufacturer

Question 38

Which of the following companies would most likely use a process costing system?

A) A law firm
B) A tax return preparer
C) A paint manufacturer
D) A shipbuilder

Question 39

Which of the following companies would most likely use operation costing?

A) A piano manufacturer
B) A potato chip company
C) An oil company
D) A pocketbook manufacturer

Question 40

Given the following: Transfers In $30,000; Transfers Out: $36,000; Ending Inventory: $6,000. What was the beginning balance?

A) $12,000
B) $ 0
C) $10,000
D) $18,000

Question 41

Given the following: Beginning Balance, $12,000; Transfers Out, $25,000; Ending Balance, 9,000. What was the amount of Transfers In?

A) $ 3,000
B) $22,000
C) $28,000
D) $ 9,000

Question 42

If the amount of Transfers Out exceeds the amount of Transfers In of an account during the period:

A) The inventory balance will increase
B) The inventory balance will decrease
C) The inventory balance will remain the same
D) Additional information is needed to determine the answer

Question 43

Use the following to answer questions:
Use the following information for Swansea Manufacturing Company for the next three questions:


-The cost of goods sold for the period was:

A) $6,000
B) $56,000
C) $44,000
D) $50,000

Question 44

Use the following to answer questions:
Use the following information for Swansea Manufacturing Company for the next three questions:


-The ending Balance in Work-in-Process was:

A) $ 6,000
B) $ 60,000
C) $ 36,000
D) $ 24,000

Question 45

Use the following to answer questions:
Use the following information for Swansea Manufacturing Company for the next three questions:


-The cost of goods manufactured for the period was:

A) $30,000
B) $44,000
C) $36,000
D) $80,000

Question 46

Use the following to answer questions:

Key: BB = Beginning Balance EB = Ending Balance


-The missing amount for letter a is:

A) $2,625
B) $1,125
C) $750
D) $5,650

Question 47

Use the following to answer questions:

Key: BB = Beginning Balance EB = Ending Balance


-The missing amount for letter b is:

A) $4,500
B) $5,250
C) $6,075
D) $1,875

Question 48

Use the following to answer questions:

Key: BB = Beginning Balance EB = Ending Balance


-The missing amount for letter c is:

A) $20,500
B) $14,650
C) $ 5,250
D) $ 4,500

Question 49

Use the following to answer questions:

Key: BB = Beginning Balance EB = Ending Balance


-The missing amount for letter d is:

A) $14,650
B) $5,250
C) $4,250
D) $20,500

Question 50

Use the following to answer questions:

Key: BB = Beginning Balance EB = Ending Balance


-The missing amount for letter e is:

A) $6,075
B) $5,250
C) $20,500
D) $4,500

Question 51

Use the following to answer questions:

Key: BB = Beginning Balance EB = Ending Balance


-The missing amount for letter f is:

A) $6,075
B) $5,250
C) $20,500
D) $5,650

Question 52

Use the following to answer questions:

Key: BB = Beginning Balance EB = Ending Balance


-The amount that would appear in the Manufacturing Overhead account to represent overhead applied is:

A) $4,250 debit
B) $4,250 credit
C) $6,075 debit
D) $6,075 credit

Question 53

In a job-order costing system, the journal entry to record depreciation on factory equipment would be recorded by a:

A) Debit to Depreciation Expense, credit to Accumulated Depreciation
B) Debit to Manufacturing Overhead, credit to Depreciation Expense
C) Debit to manufacturing Overhead, credit to Work-in-Process
D) Debit to Manufacturing Overhead, credit to Accumulated Depreciation

Question 54

In a job-order costing system, the entry to requisition $1,000 of factory supplies from Raw- Materials inventory would be recorded with a:

A) Debit to Work- in process- inventory and credit to Raw-Materials Inventory
B) Debit to Manufacturing Overhead and credit to Cash
C) Debit to Manufacturing Overhead and credit to Raw- Materials inventory
D) Debit to raw materials inventory and credit to Work- in-Process

Question 55

In a job-order costing system, the entry to record the completion of jobs would be recorded with a:

A) Debit to Finished Goods Inventory and a credit to Cost of goods sold
B) Debit to Finished Goods Inventory and credit to Work-in-Process Inventory
C) Debit to Work-in-Process Inventory and credit to Finished Goods Inventory
D) Debit to Cost of Goods Sold inventory and credit to Finished Goods Inventory

Question 56

The entry to record the payroll for the month of June, 2007 should include:
Chelsea Tool Corporation, a machine-tool manufacturing company, incurred the following wage costs on employees during June, 2007:

A) Item A
B) Item B
C) Item C
D) Item D

Question 57

Use the following to answer questions:
Mansfield Corporation estimates its manufacturing overhead costs to be $160,000 and its direct labor costs to be $320,000 for 2007. The actual manufacturing labor costs were $80,000 for job 1, $120,000 for job 2 and $160,000 for job 3 during 2007. Manufacturing overhead is applied to jobs on the basis of direct labor costs using a predetermined overhead rate. The actual manufacturing overhead cost for the year was $172,000.

-The amount of overhead assigned to Job 3 during 2007 was:

A) $ 80,000
B) $ 320,000
C) $ 160,000
D) $ 71,110

Question 58

Use the following to answer questions:
Mansfield Corporation estimates its manufacturing overhead costs to be $160,000 and its direct labor costs to be $320,000 for 2007. The actual manufacturing labor costs were $80,000 for job 1, $120,000 for job 2 and $160,000 for job 3 during 2007. Manufacturing overhead is applied to jobs on the basis of direct labor costs using a predetermined overhead rate. The actual manufacturing overhead cost for the year was $172,000.

-The amount of the manufacturing overhead variance during 2007 was:

A) $ 8,000 Overapplied
B) $12,000 Overapplied
C) 12,000 Underapplied
D) $ 8,000 Underapplied

Question 59

Framingham Company, which uses labor hours to apply overhead to manufacturing, may have increased amounts of underapplied manufacturing overhead at month-end if:

A) Suppliers of direct materials have an across-the-board price increase
B) The company terminates two production supervisors
C) The union representing direct labor negotiates a 4% pay increase, effective retroactively to the beginning of the year
D) An unexpected blizzard closed the factory for three days

Question 60

Readville Company inadvertently assigns a $50,000 advertising expense to Manufacturing Overhead. Readville Company has more inventory at the end of the year than at the beginning of the year. The result of this error will be to:

A) Understate inventory and profit for the year
B) Have no effect on inventory and profit for the year
C) Overstate inventory and profit for the year
D) Overstate inventory but have no effect on profit for the year

Question 61

The general journal entry to record the issuance of materials represented by the following materials requisitions for the month includes:

A) A credit to Manufacturing Overhead, $2,900
B) A debit to Raw-Materials Inventory, $62,904
C) A debit to Work-in-Process inventory, $65,804
D) A credit to Work-in-Process inventory, $ 62,904

Question 62

The Work- in- Process Inventory account of Charles River Corporation has a balance of $4,800 at the end of an accounting period. The job cost sheets of two incomplete jobs show charges of $800 and $400 for materials used and charges of $600 and $1,000 for direct labor used. From this information, it appears that Charles River is using a predetermined rate, as a percentage of direct labor costs of:

A) 80%
B) 125%
C) 41.7 %
D) 240%

Question 63

Manufacturing Overhead applied was $60,000, while actual overhead incurred was $62,000. Which of the following is always true of this situation?

A) Overhead was overapplied by $2,000
B) Overhead was underapplied by $2,000
C) Direct labor activity was overestimated
D) This difference must be reported as a loss for the period

Question 64

Use the following to answer questions:
Before prorating overhead, the current period overhead component of Cost of Goods Sold for Wilmington Company was $230,000, while the current period overhead component of the ending inventory was $80,000. Manufacturing overhead of $310,000 was applied during the period, whereas $296,000 was actually incurred. Wilmington has no Work-in-Process inventory at the end of the period.

-If the manufacturing overhead-variance is prorated between inventory and cost of goods sold, how much will be allocated to the ending inventory? (round to the nearest whole dollar)

A) $14,000
B) $ 0
C) $3,613
D) $2,868

Question 65

Use the following to answer questions:
Before prorating overhead, the current period overhead component of Cost of Goods Sold for Wilmington Company was $230,000, while the current period overhead component of the ending inventory was $80,000. Manufacturing overhead of $310,000 was applied during the period, whereas $296,000 was actually incurred. Wilmington has no Work-in-Process inventory at the end of the period.

-By how much will Wilmington Company's operating income differ if the manufacturing-overhead variance is closed to Cost of Goods Sold instead of prorated between inventory and cost of goods sold?

A) $14,000 higher
B) $3,613 lower
C) $3,613 higher
D) $11,188 lower

Question 66

A Gantt chart:

A) Shows which jobs are over budget and which jobs are under budget during the period
B) Is a pie chart showing total cost for each area of activity
C) Shows the timing, sequencing and overlapping of major project activities
D) Charts each activity in a separate chart so that management can concentrate on activities in sequential order

Question 67

Stoughton applies overhead to production at a predetermined rate of 80% based on direct labor cost. Job 80, the only job still in process at the end of July, has been charged with direct labor of $20,000. The amount of direct materials charged to job 80 was:
Stoughton Furniture uses a job-order cost system. The following debits (credits) appeared in the Work-in-Process inventory account for July 2007:

A) $60,000
B) $44,000
C) $16,000
D) $ 8,000

Question 68

What is the cost of goods sold for 2007?
The following information pertains to Natick Wood Shop:

A) $544,000
B) $496,000
C) $546,000
D) $539,000

Question 69

Hudson Company incurred $50,000 of depreciation expense on factory equipment and $20,000 for a copy machine located in the sales manager's office. The journal entry to record this should be:

A) Debit Depreciation expense $70,000 and credit accumulated depreciation $70,000
B) Debit depreciation expense $20,000; debit manufacturing overhead $50,000 and credit accumulated depreciation $70,000
C) Debit manufacturing overhead $70,000, credit depreciation expense $20,000 and credit overhead allocated $50,000
D) Debit Manufacturing Overhead $70,000 and credit accumulated depreciation $70,000

Question 70

Oak Bluff Company incorrectly assigns a $50,000 overhead item to selling expense. Borden has more inventory at the end of the year than at the beginning of the year. The result of this error will be to:

A) Understate inventory and profit for the year
B) Have no effect on inventory and profit for the year
C) Overstate inventory and profit for the year
D) Understate inventory but have no effect on profit for the year

Question 71

The journal entry to record the above should be:
Belmont Corporation incurred the following labor costs during the month of July, 2007:

A) Debit Manufacturing Overhead $460,000 and credit Salaries and Wages Payable $460,000
B) Debit Salary expense $460,000 and credit salaries and wages payable $460,000
C) Debit Work-in-Process $200,000, debit salary expense $100,000, debit Manufacturing Overhead . $160,000 and credit Salaries and Wages Payable $460,000
D) Debit Salaries and Wages Payable $460,000, credit Work-in-Process $200,000, credit Salary Expense $260,000

Question 72

Chatam Company wrote a check to cover the rent for May. The total of the check was $20,000; the controller estimates that 80% of the square footage of the company was taken up by the factory and 20% by the accounting and administrative offices. The journal entry to record this check should be:

A) Debit Rent Expense $20,000 and credit Cash $20,000
B) Debit Rent Expense $4,000, debit Manufacturing Overhead $16,000 and credit Cash $20,000
C) Debit Manufacturing Overhead $20,000 and credit Rent Expense $20,000
D) Debit Rent Expense $4,000, debit Manufacturing Overhead $16,000 and credit Accumulated Depreciation
E) $20,000

Question 73

The journal entry to record cost of goods sold would include a:

A) Debit to Finished Goods Inventory
B) Credit to Work-in -Process Inventory
C) Credit to Cost of Goods Sold
D) Credit to Finished Goods Inventory

Question 74

If actual manufacturing overhead is greater than applied manufacturing overhead, most companies will:

A) Increase Work-in-process, Finished Goods Inventory, and Cost of Goods Sold
B) Decrease Cost of Goods Sold
C) Increase Finished Goods Inventory
D) Increase Cost of Goods Sold

Question 75

Fill in the missing items for the following inventories

Question 76

Fill in the missing items for the following inventories

Question 77

(1) Denotes materials purchased
Assume that the following T accounts represent data from the Bertelson Corporation's accounting records.
Required:
(a) Find the missing amounts represented by the letters a, b, c, d and e.
(b) Determine the company's predetermined overhead rate, based on labor cost.
(c) Compute the Manufacturing Overhead variance.
BB = Beginning Balance; EB = Ending Balance TO = Transferred Out

Question 78

McGorry applies overhead to production at a predetermined rate of 75%, based on direct labor cost. Job 1000, the only job still in process at the end of June, has been charged with direct labor of $30,000. McGory's Manufacturing Overhead account showed a credit balance of $10,000 at the end of February 2007.
Required:
(a) Calculate the amount of direct materials charged to Job 1000.
(b) Compute the actual overhead for February 2007.
(c) Assume that McGory closes its Manufacturing Overhead account each month. McGory does not prorate the manufacturing overhead variance. Prepare the entry to close the overhead account at the end of February, 2007.
McGorry Furniture Company uses a job-order cost system. The following debits (credits) appeared in the Work-in-Process account for February 2007:

Question 79

Butte Boat Company, experienced the following events during 2007: Purchased $1,800,000 of lumber and other materials for building boats. Incurred $200,000 for advertising.
Paid $60,000 to have lumber transported to its factory. Had sales revenue of $6,000,000 during the year. Incurred $400,000 of general and administrative expenses.
Took a periodic inventory at year-end and determined that material costing $ 400,000 was on hand. The inventory at the beginning of the year was $200,000.
All costs incurred were added to the appropriate accounts. All sales were on credit. Required:
Give the amounts for the following items in Butte Boat Company's Raw-Material inventory account:
a) Transfers in (TI).
b) Beginning balance (BB).
c) Transfers out (TO).
d) Ending balance (EB).

Question 80

Job 100 incurred 700 machine hours in Department 1 and 75 in department 2 and 200 manufacturing labor hours in department 1 and 250 in department 2. The company uses a budgeted departmental overhead rate for applying overhead to production. Job 100 consisted of 3,000 lamps.
Required:
Calculate the total cost and per unit cost of Job 100.
Osterville Manufacturing produces lamps for large department stores. For 2007, the two production departments had budgeted allocation bases of 100,000 machine hours in Dept 1 and 50,000 direct manufacturing labor hours in Department 2. The budgeted manufacturing overheads for 2007 were $1,200,000 for Dept. 1 and $1,000,000 for Dept. 2. For Job 100, the actual costs incurred in the two departments were as follows: