Deck 4: Job Costing

Question 1

A process costing system assigns costs to groups of similar units during a specified time period and then computes the average unit cost.

Answer 1

True

Question 2

To smooth seasonal fluctuating levels of output, separate indirect-cost rates should be calculated for each month.

Answer 2

False

Question 3

A cost allocation base is only financial in nature, and is usually the cost driver of the particular costs being measured.

Answer 3

False

Question 4

The cost driver of an indirect cost is often used as the cost allocation base.

Question 5

Fixed and variable costs may be allocated to a cost object.

Question 6

A job cost record (or job cost sheet) is a document where the costs are recorded and accumulated.

Question 7

It is not a requirement to identify the indirect costs associated with each job when assigning costs to individual jobs.

Question 8

Direct costs are allocated to the cost object using a cost-allocation method.

Question 9

Managers and accountants gather the information that goes into their cost systems through source documents, which are the original records that support journal entries in an accounting system.

Question 10

Which of the following includes both traced direct costs and allocated indirect costs?

A) cost tracing
B) cost pools
C) assigned costs
D) cost allocation
E) cost recording

Question 11

Process costing is a useful system for tracking the costs of building a house.

Question 12

In each period, job costing divides the total cost of producing an identical or similar product by the total number of units produced to obtain a per-unit cost.

Question 13

For each cost pool, the indirect cost rate equals the indirect cost pool divided by the cost allocation base.

Question 14

The objective of allocating indirect costs is to measure the underlying usage of indirect resources by jobs.

Question 15

Transferring costs from pools to jobs is called

A) cost allocation.
B) cost control.
C) cost pool.
D) cost factoring.
E) cost processing.

Question 16

Raw materials that can be traced to a cost object are an example of an indirect cost.

Question 17

Cost assignment includes cost allocation for indirect costs and direct costs.

Question 18

A job costing system assigns costs to a distinct unit or set of units of a product or service.

Question 19

Cost pools are defined as groupings of individual cost items which can range from broad, company-wide categories to very narrow categories.

Question 20

A factor used to systematically link an indirect cost to a cost object is called

A) a cost allocation base.
B) a cost pool.
C) cost assignment.
D) a traceable cost.
E) a non-traceable cost.

Question 21

For each item below indicate the source documents that would most likely authorize the journal entry in a job-costing system. Required:

A) direct materials purchased
B) direct materials used
C) direct manufacturing labour
D) indirect manufacturing labour
E) finished goods control
F) cost of goods sold

Question 22

Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs: A. Select the cost allocation base
B) Compute the indirect cost allocation rate
C) Compute the total cost of the job
D) Identify the direct costs of the job
E) Compute the indirect cost assigned to the job
F) Identify and add the indirect costs into one cost pool
G) Identify the distinct job that is the cost object

A) G, F, A, B, E, D, C
B) G, D, A, B, F, E, C
C) G, A, F, B, E, D, C
D) G, A, D, F, B, E, C
E) G, D, A, F, B, E, C

Question 23

Managers and accountants collect most of the cost information that goes into their information systems through

A) an information databank.
B) computer programs.
C) source documents.
D) time surveys.
E) interviewing workers.

Question 24

The process of assigning costs to a particular product or service is called

A) a cost allocation system.
B) a cost assigning system.
C) a job costing system.
D) a process costing system.
E) a cost recording system.

Question 25

Which of the following is one of the steps used in assigning manufacturing overhead costs to individual jobs?

A) combine different cost objects into pools
B) assign direct costs to the cost object
C) identify the direct cost pools associated with the job
D) calculate the direct cost allocation rate for each direct cost pool
E) select the cost-allocation base to use in allocating indirect costs to the cost object

Question 26

A materials requisition record and a labour time record are examples of which of the following?

A) normal cost schedule
B) job cost sheets
C) job cost records
D) cost object statements
E) source documents

Question 27

Many large companies which have multiple production methods and processes have hybrid costing systems that are

A) mostly job-costing.
B) combined using actual and normal costing.
C) mostly process costing.
D) a mix of job-costing and process costing.
E) combined using joint allocation costing.

Question 28

Assigning direct costs to a cost object is called

A) cost allocation.
B) job costing.
C) cost pooling.
D) process costing.
E) cost tracing.

Question 29

Which of the following would be appropriately costed using a process costing system?

A) oil refining
B) a law firm managing individual legal cases
C) assembly of individual aircraft by Bombardier
D) movies produced by Lions Gate Entertainment
E) audit engagements performed by KPMG

Question 30

Which of the following would most likely be a direct cost in a manufacturing company?

A) supervision and engineering
B) utilities
C) repairs
D) utilities and repairs
E) raw materials

Question 31

The new manager of the insurance division does not understand how the company can have so many overhead rates for assigning costs to the activities of the company's life insurance underwriters. There is one rate schedule for average assignable costs when agents write standard policies. There is another rate schedule which the agents must complete when they write special policies, and these policies are costed out differently from those that are categorized as standard policies.
Required:
Why might the company have different costing systems with different overhead rates for the standard and specialized policies?

Question 32

Based on the following data, calculate the actual indirect cost rate, using direct labour hours as the allocation base.

A) $384.00
B) $7.68
C) $18.00
D) $19.00
E) $138.89

Question 33

The first step in job costing is to

A) identify the cost object.
B) identify the direct costs.
C) select the cost allocation base.
D) identify the indirect costs.
E) compute the rate per unit.

Question 34

In a costing system

A) cost tracing allocates indirect costs.
B) cost allocation assigns direct costs.
C) there may never be more than one indirect cost pool.
D) a cost object should be a product and not a department or a geographic territory.
E) a cost allocation base can be either financial or nonfinancial.

Question 35

A grouping of individual cost items is called a

A) cost objective.
B) costing group.
C) cost department.
D) cost pool.
E) cost base.

Question 36

In a job-costing system, explain why it is necessary to apply indirect costs to production through the use of a manufacturing overhead cost allocation rate.

Question 37

A law office employs full-time attorneys and five paraprofessionals. For 2012 indirect costs were budgeted at $225,000, but actually amounted to $350,000. Direct and indirect costs are applied on a professional labour-hour basis which includes both attorney and paraprofessional hours. Total budgeted labour-hours were 25,000; however, actual labour-hours were 30,000.
What is the actual indirect-cost rate, if a client used 5,000 professional labour-hours?

A) $5.00
B) $9.00
C) $7.50
D) $14.00
E) $11.67

Question 38

The General Ledger account that combines the separate job cost records is called the ________ account.

A) Cost of Goods Sold
B) Finished Goods Control
C) Manufacturing Overhead Allocated
D) Manufacturing Overhead Control
E) Work-in-Process Control

Question 39

Describe job-costing and process-costing systems. Explain when it would be appropriate to use each.

Question 40

Which of the following is not possible to use as a cost allocation base for manufacturing overhead?

A) direct labour dollars
B) direct labour hours
C) direct material dollars
D) direct labour hours or dollars
E) indirect labour hours

Question 41

Cowley County Hospital uses a job-costing system for all patients who have surgery. In March, the Pre-Operating Room (PRE-OP) and Operating Room (OR) had budgeted allocation bases of 4,000 nursing hours and 2,000 nursing hours, respectively. The budgeted nursing overhead costs for each department for the month were $168,000 and $132,000, respectively. The hospital floor for surgery patients had budgeted overhead costs of $1,200,000 and 15,000 nursing hours for the month. For patient Fred Adams, actual hours incurred were eight and four hours, respectively, in the PRE-OP and OR rooms. He was in the hospital for 4 days (96 hours). Other costs related to Adams were:
The hospital uses a budgeted overhead rate for applying overhead to patient stays.
Required:
What is the total cost of the stay of patient Fred Adams?

Question 42

The following data were taken from the records of a manufacturing company. The company has been calculating the actual indirect cost allocation rate using direct labour hours as the allocation base. Calculate the rate using machine hours as the allocation base.

A) $60.67
B) $10.67
C) $7.89
D) $4.05
E) $3.84

Question 43

Normandeau Company's actual indirect cost pool amounted to $1,400,000 and the direct labour pool was $5,400,000. Overhead is allocated on the basis of direct labour hours. Actual and budgeted direct labour hours were 25,000 and 30,000 for the period. What is the manufacturing overhead cost allocation rate using actual direct labour hours as the cost allocation base?

A) $46.67
B) $272.00
C) $75.00
D) $226.67
E) $56.00

Question 44

General Hospital uses a job-costing system for all patients. In March the Critical Care and Special Care facilities had cost allocation bases of 4,000 nursing days and 3,000 nursing days, respectively. The nursing care charges for each department for the month were $2,106,000 and $1,500,000, respectively. The General Care area had costs of $2,700,000 and 7,500 nursing days for the month.
Patient Jim Hansen spent 5 days in Critical Care, 4 days in Special Care and 21 days in General Care during March.
Required:
a. Determine the cost allocation rate for each department.
b. What are the total charges to Mr. Hansen if he was in the facility the entire month of March?

Question 45

Sedgewick County Hospital uses a job-costing system for all patients. In June, the nursing care charges for each department and the cost allocation bases of nursing days are as follows:
Patient Ms. Graves spent six days in Critical Care and eight days in Special Care during June. The remainder of the 30-day month was spent in the General Care area.
Required:
a. Determine the budgeted overhead rate for each department.
b. What are the total charges to Ms. Graves if she was in the facility the entire month?

Question 46

Fixed costs remain constant at $200,000 per month. During high-output months variable costs are $160,000, and during low-output months variable costs are $40,000. What are the respective high and low indirect cost allocation rates if professional labour-hours are 8,000 for high-output months and 2,000 for low-output months?

A) $45.00 per hour; $120.00 per hour
B) $45.00 per hour; $45.00 per hour
C) $25.00 per hour; $20.00 per hour
D) $56.20 per hour; $120.00 per hour
E) $25.00 per hour; $100.00 per hour

Question 47

Copley Enterprises manufactures digital video equipment. For each unit $1,475 of direct material is used and there is $1,500 of direct manufacturing labour at $30 per hour. Manufacturing overhead is applied at $35 per direct manufacturing labour hour. Calculate the cost of each unit.

A) $2,975
B) $4,025
C) $1,750
D) $3,150
E) $4,725

Question 48

A local attorney employs ten full-time professionals. The budgeted compensation per employee is $80,000. The maximum billable hours for each client are 400. Clients always receive their full amount of time. All professional labour costs are included in a single direct cost category and are traced to jobs on a per-hour basis. Any other costs are included in a single indirect cost pool, allocated according to professional labour-hours. Budgeted indirect costs for the year are $400,000 and the firm had 20 clients.
Required:
a. What is the direct labour budgeted cost rate per hour?
b. What is the indirect cost pool budgeted cost rate per hour?

Question 49

Professional labour costs in a CGA firm are traced directly to the cost object of a given job. Generally, other indirect operating costs are

A) first traced to a cost pool and then allocated to the final cost object, the given job.
B) allocated directly to the final cost object, the given job.
C) allocated to an intermediate cost object, assigned to a given auditor, and then traced to a cost pool which is then allocated to the final cost object, the given job.
D) costs which are assigned to a given job using indirect cost tracing.
E) treated the same as direct costs in a service firm.

Question 50

ZamTech Moldings allocates manufacturing overhead to jobs based on machine hours. The company has the following estimated costs for the upcoming year: The company estimates that 1,800 direct labour hours will be worked in the upcoming year, while 2,000 machine hours will be used during the year. The predetermined indirect allocation rate per machine hour is closest to

A) $56.
B) $36.
C) $100.
D) $15.
E) $40

Question 51

A local engineering firm is bidding on a design project for a new client. The total budgeted direct labour costs for the firm are $800,000. The total budgeted indirect costs are $1,200,000. It is estimated that there are 16,000 billable hours in total.
Required:
a. What is the budgeted direct labour cost rate?
b. What is the budgeted indirect cost allocation rate assuming direct labour cost is the cost allocation base?
c. What should be the engineering firm bid on the project if the direct labour hours are estimated at 500 hours?

Question 52

Last week Job # WPP 298 was charged: DM of $4,606; DL of $1,579; and, MOH of $3,960 based on machine hours. The materials requisition record for this week showed an additional purchase of 10 brackets at a unit cost of $16; the direct labour costs were the same as the first week; and, the total machine hours for both weeks are now 140 hours at $45 per machine hour. Calculate the revised total job cost. (direct materials + direct labour + manufacturing overhead).

A) $10,145
B) $11,884
C) $12,645
D) $18,184
E) $14,224

Question 53

Jordan Company has two departments, X and Y. Overhead is applied based on budgeted direct labour cost in Department X, and budgeted machine hours in Department Y. The following additional information is available.
Required:
a. Compute the budgeted factory indirect cost allocation rate for Department X.
b. Compute the budgeted factory indirect cost allocation rate for Department Y.
c. What is the total overhead cost of Job 10?
d. If Job 10 consists of 50 units of product, what is the unit cost of this job?

Question 54

Camden Company gathered the following information for the year ended December 31: Clyde Company uses a job costing system.
What is the indirect cost allocation rate for the year be using direct labour hours as the allocation base?

A) $1.11 per direct labour hour
B) $0.90 per direct labour hour
C) $1.20 per direct labour hour
D) $0.60 per direct labour hour
E) $0.47 per direct labour hour

Question 55

A company currently has 30 full-time employees. Actual time for each employee was as follows: Consumer demand for the company's services is at 100 percent of time available. Each employee receives a salary of $75,000 per year.
What is the total actual indirect cost allocation rate if management believes that clients should be charged for the employees' benefits?

A) $10.00
B) $6.67
C) $30.00
D) $6.00
E) $37.50

Question 56

Larry's Appliance Shop operates retail stores that sell appliances. The cost objects are the individual sales of a given type of appliance and sales support. For refrigerators in July, the following costs were recorded:
Required:
a. Which of the costs will be subject to direct cost tracing?
b. What is the total cost for refrigerators?
c. What is the total cost of the Sales Support for refrigerators?

Question 57

A local attorney employs ten full-time professionals. The budgeted compensation per employee is $75,000. The maximum billable hours for each client are 200. Clients always receive their full amount of time. All professional labour costs are included in a single direct cost category and are traced to jobs on a per-hour basis. Any other costs are included in a single indirect cost pool, allocated according to professional labour-hours. Budgeted indirect costs for the year are $1,000,000 and the firm had 20 clients.
Required:
a. What is the direct labour budgeted cost rate per hour?
b. What is the indirect cost pool budgeted cost rate per hour?

Question 58

John wants to identify the total cost for computing the corporate tax return he prepared for his client. Labour is the only direct cost at $50 per hour. Indirect costs are $60 per labour hour. What is the total direct cost, indirect cost, and job cost, respectively, if 15 hours are spent preparing the tax return?

A) $700, $850, $1,550
B) $750, $800, $1,550
C) $750, $900, $1,650
D) $800, $640, $1,440
E) $800, $900, $1,440

Question 59

Hill Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to products. Manufacturing overhead costs are applied on the basis of machine hours in the Machining Department and on the basis of direct labour hours in the Assembly Department. At the beginning of 2012, the following estimates were provided for the coming year:
The accounting records of the company show the following data for Job #846:
Required:
a. Compute the manufacturing indirect cost allocation rate for each department.
b. Compute the total cost of Job #846.
c. Provide possible reasons why Hill Manufacturing uses two different cost allocation rates.

Question 60

Fox Manufacturing is a small textile manufacturer using machine-hours as the single indirect cost allocation rate to allocate indirect manufacturing costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Maize High School Science Olympiad job.
Required:
a. For Fox Manufacturing, determine the annual manufacturing indirect cost allocation rate.
b. Determine the amount of manufacturing overhead costs allocated to the Maize High School job.
c. Determine the estimated total manufacturing costs for the Maize High School job.

Question 61

Sambell Manufacturing uses a predetermined manufacturing overhead rate to allocate
overhead to individual jobs. At the beginning of the year, the company expected to incur the following:
At the end of the year, the company had actually incurred the following:
Required:
1. Compute Trident's indirect cost allocation rate based on labour cost.
2. Compute Trident's indirect cost allocation rate based on machine hours.
3. How much overhead was allocated during the year if the allocation base was direct labour cost?
4. How much manufacturing overhead was incurred during the year?

Question 62

The main advantage of using budgeted cost rates rather than actual cost rates is

A) budgeted costs allow managers to have cost information on a timely basis.
B) budgeted costs may be subject to short-run fluctuations.
C) budgeted indirect-cost rates are known prior to the inception of a new job.
D) actual indirect-cost rates are affected by work done on other jobs.
E) budgeted rates are just as accurate and require less effort.

Question 63

Normal costing refers to

A) the average cost.
B) costs within the relevant range.
C) costs that behave like other similar costs.
D) costs included in normal pools.
E) allocating indirect costs at standard rates.

Question 64

A company may choose to use budgeted rates to allocate direct labour accounts if direct labour costs are difficult to trace to jobs as they are completed.

Question 65

Budgeted fixed indirect costs remain constant at $150,000 per month. During high-output months variable indirect costs are budgeted at $120,000, and during low-output months budgeted variable costs are $60,000. What are the respective high and low indirect cost rates if budgeted professional labour-hours are 6,000 for high-output months and 2,000 for low-output months?

A) $31.25 per hour, $87.50 per hour
B) $45.00 per hour, $95.00 per hour
C) $45.00 per hour, $105.00 per hour
D) $56.20 per hour, $105.00 per hour
E) $59.00 per hour, $105.00 per hour

Question 66

The difference between the actual costing and normal costing methods is that actual costing uses a budgeted indirect cost rate while normal costing uses an actual indirect cost rate.

Question 67

At the end of the year, the direct costs traced to jobs using the budgeted rates will equal actual direct costs.

Question 68

For normal costing, even though the budgeted indirect-cost rate is based on estimates, indirect costs are allocated to products based on actual levels of the cost-allocation base.

Question 69

A local financial consulting firm employs 30 full-time employees. The budgeted compensation per employee is $50,000. The annual maximum chargeable time to each client is 1,000 hours. Clients always receive their full amount of time. All labour costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. Any other costs are included in a single indirect-cost pool, allocated according to professional labour-hours. Budgeted indirect costs for the year are $1,050,000, and the firm expects to have 60 clients during the coming year.
What is the budgeted indirect-cost rate per hour?

A) $1,050.00 per hour
B) $50.00 per hour
C) $35.00 per hour
D) $17.50 per hour
E) $10.00 per hour

Question 70

Actual costing traces direct costs to a cost object by multiplying the budgeted direct cost rate and the actual quantity.

Question 71

Actual costing can also be a method of job costing.

Question 72

A machine shop has direct materials cost of $1,800,000 direct labour of $4,200,000 (direct labour rate is $50 per hour) and budgeted indirect manufacturing costs of $850,000. Management believes that indirect manufacturing costs increase with direct labour hours. What is the budgeted indirect manufacturing cost rate?

A) $2.12
B) $2.33
C) $4.94
D) $10.12
E) $17.00

Question 73

Using normal costing the amount of supervisory salaries to allocate is determined by calculating

A) actual direct-cost rates times actual quantities of direct-cost inputs.
B) actual indirect-cost rates times actual quantities of cost-allocation bases.
C) actual direct-cost rates times budgeted quantities of input.
D) budgeted indirect-cost rates times actual quantities of cost-allocation bases.
E) none of the above.

Question 74

A local financial consulting firm employs 30 full-time staff. The budgeted compensation per employee is $50,000, for 2,000 hours. All direct labour costs are charged to clients. Any other costs are included in a single indirect-cost pool, allocated according to labour-hours. Actual indirect costs were $750,000. Budgeted indirect costs for the year are $525,000 and the firm expects to have 60 clients during the coming year.
What is the total cost of a job which took 27 hours, using normal costing?

A) $911.25
B) $1,012.50
C) $27,337.50
D) $30,375.00
E) $50,000.00

Question 75

Which of the following is part of the approach to computing the budgeted indirect cost allocation rate?

A) identify the costs which are part of the indirect cost pool
B) identify costs associated with the direct cost pool
C) estimate the cost items for direct cost pool
D) adjust the cost allocation base for variances
E) divide the total quantity of the cost allocation base into the total costs in the direct cost pool

Question 76

Which of the following statements about normal costing is true?

A) Direct costs and indirect costs are allocated using an actual rate.
B) Direct costs and indirect costs are traced using budgeted rates.
C) Direct costs are traced using a budgeted rate, and indirect costs are allocated using an actual rate.
D) Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate.
E) Direct costs are traced by using the actual direct-cost rate times the budgeted quantity of the direct costs input.

Question 77

Northern Manufacturing uses a predetermined manufacturing overhead rate to allocate
overhead to individual jobs. At the beginning of the year, the company expected to incur the following:
Required:
1. Compute Trident's indirect cost allocation rate based on labour cost.
2. Compute Trident's indirect cost allocation rate based on machine hours.
3. How much overhead was allocated during the year if the allocation base was machine hours?
4. How much manufacturing overhead was incurred during the year?

Question 78

Direct costs are traced the same way for actual costing and normal costing.

Question 79

A company employs 25 full-time staff. The company spent $75,000 in advertising in the year (this amount is a period cost with a constant amount spent each year). Budgeted indirect manufacturing costs total $250,000 and the direct labour rate is $15 per hour. Budgeted labour hours were 500,000, and actual labour hours were 524,000. Actual indirect overhead was $274,600. What are the actual and normal indirect-cost rates respectively?

A) $0.52 and $0.50
B) $0.50 and $0.52
C) $0.55 and $0.48
D) $0.67 and $0.65
E) $0.65 and $0.67

Question 80

In normal costing the budgeted or standard rate are the same.