Deck 19: Job Order Costing

Question 1

Cost accounting information is helpful to management for pricing decisions but has no effect on controlling costs.

Answer 1

False

Question 2

There are two basic types of cost accounting systems: job order costing and periodic costing.

Answer 2

False

Question 3

A company's file of job cost sheets for jobs that are not yet completed equals the balance in the Work in Process Inventory account.

Answer 3

True

Question 4

The collection of cost sheets for unfinished jobs makes up a subsidiary ledger controlled by the Work in Process Inventory account in the general ledger.

Question 5

A company's file of job cost sheets for jobs that are completed but not yet sold equals the balance in the Work in Process Inventory account.

Question 6

Job cost sheets are used to track all of the costs assigned to a job, including direct materials, direct labor, overhead, and all selling and administrative costs.

Question 7

A company's file of job cost sheets for jobs that are not yet completed equals the balance in the Finished Goods Inventory account.

Question 8

A company that uses a cost accounting system normally has only two inventory accounts: Finished Goods Inventory and Work in Process Inventory.

Question 9

A job cost sheet is useful for developing financial accounting numbers but does not contain information that is useful for managing the production process.

Question 10

A company that produces a large number of standardized units would normally use a job order costing system.

Question 11

There are two basic types of cost accounting systems: job order costing and process costing.

Question 12

Job order production systems would be appropriate for companies that produce custom homes, specialized equipment, and special computer systems.

Question 13

A job order costing system would be appropriate for a manufacturer of automobile tires.

Question 14

The direct materials section of a job cost sheet shows the materials costs assigned to a specific job, but the direct labor section only shows the total hours of labor allocated to the job.

Question 15

Job order production systems would be appropriate for companies that produce training films for a specific customer or custom-made furniture to be used in a new five-star resort hotel.

Question 16

Job order production systems would be appropriate for companies that produce compact disks or disposable cameras.

Question 17

A company's file of job cost sheets for jobs that are completed but not yet sold equals the balance in the Finished Goods Inventory account.

Question 18

When a job involves producing more than one unit of a custom product, it is often called a job lot.

Question 19

A company that produces products individually designed to meet the needs of a specific customer, would normally use a job order costing system.

Question 20

Cost accounting systems accumulate manufacturing costs and then assign them to products and services.

Question 21

A receiving report serves as the source document for recording materials received in both a materials ledger card and in the general ledger.

Question 22

Job order costing is applicable to manufacturing firms only and not service firms.

Question 23

A time ticket is a source document that an employee uses to report how much indirect labor was performed for a job and is used to determine the amount of direct labor to charge to the job.

Question 24

The journal entry to record the purchase of materials includes a debit to Work in Process Inventory.

Question 25

The journal entry to record the usage of Indirect Materials includes a debit to Work in Process Inventory.

Question 26

Materials requisitions and time tickets are cost accounting source documents.

Question 27

A materials requisition is a source document used by materials managers of a manufacturing company to order raw materials from suppliers; it serves the same purpose as a purchase order in a merchandising company.

Question 28

A time ticket is a source document used by an employee to record the number of hours worked on a particular job during the work day.

Question 29

In nearly all job order cost systems, materials ledger cards are perpetual records that are updated each time materials are purchased or issued for use in production.

Question 30

The file of job cost sheets for completed but undelivered jobs equals the balance in the Work in Process Inventory account.

Question 31

Only product costs are recorded on job cost sheets.

Question 32

When a job is finished, its job cost sheet is completed and moved from the file of jobs in process to the file of finished jobs that are yet to be delivered to customers.

Question 33

A materials requisition is a source document used by production managers to request materials for production and also used to assign materials costs to specific jobs or to overhead.

Question 34

Job cost sheets include both product and period costs.

Question 35

When materials are used as indirect materials, their cost is debited to the Factory Overhead account.

Question 36

Service firms, unlike manufacturing firms, should only use actual costs when determining a selling price for their services.

Question 37

The journal entry to record the usage of Direct Materials includes a debit to Work in Process Inventory.

Question 38

A time ticket is a source document that an employee uses to report how much direct labor was performed for a job and is used to determine the amount of direct labor to charge to the job.

Question 39

Both direct and indirect labor costs are recorded on the individual job cost sheets.

Question 40

The cost of all direct materials issued to production is debited to Work in Process Inventory.

Question 41

Factory overhead is often collected and summarized in a subsidiary factory overhead ledger.

Question 42

When actual overhead cost exceeds the overhead applied, overhead is said to be underapplied.

Question 43

If actual overhead incurred during a period exceeds applied overhead, the difference will be a credit balance in the Factory Overhead account at the end of the period.

Question 44

There should be a "cause and effect" relation between the overhead allocation base and overhead costs.

Question 45

Predetermined overhead rates are calculated before the start of the accounting period, and are therefore based on estimates.

Question 46

Since a predetermined overhead rate is established before a period begins, this rate is revised many times during the period to compensate for inaccurate estimates previously made.

Question 47

Predetermined overhead rates are calculated at the end of the accounting period once the actual amount of factory overhead is known.

Question 48

Under a job order costing system, individual jobs are always charged with actual overhead costs when they are transferred to finished goods.

Question 49

The predetermined overhead rate is used to allocate overhead cost to jobs.

Question 50

A time ticket is a source document used by an employee to record the total number of hours worked and serves as a source document for entries to record labor costs.

Question 51

Underapplied overhead is the amount by which actual overhead cost exceeds the overhead applied to products during the period.

Question 52

Direct materials and direct labor are examples of costs that are debited to the Factory Overhead account in a job costing system.

Question 53

In a job order costing system, indirect labor costs are debited to the Factory Overhead account.

Question 54

Predetermined overhead rates are necessary because cost accountants use periodic inventory systems.

Question 55

Overapplied overhead is the amount by which actual overhead cost exceeds the overhead applied to products during the period.

Question 56

Actual factory overhead incurred in a job costing system is debited to a Factory Overhead general ledger account and credited to various other accounts.

Question 57

When actual overhead cost exceeds the overhead applied, overhead is said to be overapplied.

Question 58

The predetermined overhead rate based on direct labor cost is the ratio of estimated overhead cost to estimated direct labor cost for the period.

Question 59

When time ticket information is entered into the accounting system, the journal entry is a debit to Factory Wages Payable and a credit to Work in Process Inventory.

Question 60

In a job order costing system, any immaterial underapplied overhead at the end of the period can be charged entirely to Cost of Goods Sold.

Question 61

The Factory Overhead account will have a debit balance at the end of a period if overhead applied during the period is greater than the overhead incurred.

Question 62

Manufacturing costs incurred for jobs completed during an accounting period can bypass the inventory accounts on the balance sheet and be recorded directly in expense accounts.

Question 63

Underapplied overhead is the amount by which overhead applied to jobs using the predetermined overhead rate exceeds the actual overhead incurred during a period.

Question 64

If overhead is overapplied, it means that individual jobs have been charged too much overhead during the year and the cost of goods sold reported is too high.

Question 65

If overhead is underapplied, it means that individual jobs have not been charged enough during the year and the cost of goods sold reported is too low.

Question 66

Features of a job costing system include all but which of the following:

A) Separate manufacturing from other products.
B) Customization.
C) Mass production.
D) Diversity of products produced.
E) Heterogeneity.

Question 67

Overapplied overhead is the amount by which overhead applied to jobs using the predetermined overhead rate exceeds the actual overhead incurred during a period.

Question 68

If actual overhead incurred during a period exceeds applied overhead, the difference will be a debit balance in the Factory Overhead account at the end of the period.

Question 69

Job order costing systems normally use:

A) Perpetual inventory systems.
B) Periodic inventory systems.
C) Real inventory systems.
D) Weighted average inventory systems.
E) General inventory systems.

Question 70

Cost accounting systems used by manufacturing companies are based on the:

A) Periodic inventory system.
B) Finished goods inventories.
C) Perpetual inventory system.
D) Weighted average inventories.
E) LIFO inventory system.

Question 71

The two basic types of cost accounting systems are:

A) Job order costing and customized service costing.
B) Job order costing and perpetual costing.
C) Job order costing and periodic costing.
D) Job order costing and customized product costing.
E) Job order costing and process costing.

Question 72

A system of accounting for production operations that produces timely information about inventories and manufacturing costs per unit of product is a:

A) General accounting system.
B) Manufacturing accounting system.
C) Production accounting system.
D) Finished goods accounting system.
E) Cost accounting system.

Question 73

The schedule of cost of goods manufactured for a job costing system includes total actual factory overhead.

Question 74

Period costs for a manufacturing company, such as selling and administrative expenses, are recorded directly to Work In Process Inventory when they are incurred.

Question 75

Material amounts of under- or overapplied factory overhead are always closed entirely to Cost of Goods Sold at the end of an accounting period.

Question 76

The Factory Overhead account will have a credit balance at the end of a period if overhead applied during the period is greater than the overhead incurred.

Question 77

Overapplied or underapplied overhead should be removed from the Factory Overhead account at the end of each accounting period.

Question 78

If overhead is underapplied, it means that individual jobs have been charged too much during the year and the cost of goods sold reported is too high.

Question 79

If overhead is overapplied, it means that individual jobs have not been charged enough overhead during the year and the cost of goods sold reported is too low.

Question 80

In comparison to a general accounting system, a cost accounting system for a manufacturing company places an emphasis on:

A) Total costs.
B) Continually updating costs of materials, work in process, and finished goods inventories.
C) Periodic inventory counts.
D) Products and average costs.
E) Large volume operations involving standardized products.