Deck 2: How Is Job Costing Used to Track Production Costs

Question 1

The journal entry for recording timesheet submissions by employees working on various jobs will include a debit to the Direct Labor account.

Answer 1

False

Question 2

Job cost sheets are used as a subsidiary ledger to the Raw Materials Inventory account.

Answer 2

False

Question 3

Which of the following is typically used as a subsidiary ledger for Work in Process in a job cost system?

A)Job cost sheet.
B)Balance sheet.
C)Materials requisition.
D)Timesheet.
E)None of the answer choices is correct.

Answer 3

A

Question 4

All of the following are reasons that managers track revenues and costs using a job costing system except:

A)Managers use the information to record product costs as period costs.
B)Managers want to know if individual jobs are profitable.
C)Managers compare actual costs with estimated costs throughout the project to identify unexpected changes as early as possible.
D)Managers assess the accuracy of original cost estimates.
E)None of the answer choices is correct.

Question 5

Normal costing is preferred by most companies because it assigns actual overhead costs to jobs.

Question 6

The overhead costs applied to jobs using a predetermined overhead rate are recorded by debiting Work in Process Inventory and crediting Manufacturing Overhead.

Question 7

All account names for job costing systems in service organizations are the same as those used by manufacturing companies.

Question 8

Which of the following companies would probably not use job order costing?

A)A window washing service.
B)A milk manufacturer.
C)A car repair business.
D)An electrician.
E)None of the answer choices is correct.

Question 9

The three most common allocation bases for establishing a predetermined overhead rate include direct labor hours,machine hours,and direct labor costs.

Question 10

When direct materials are transferred into production,the journal entry includes a debit to the Work in Process Inventory account.

Question 11

Underapplied overhead occurs when actual overhead costs are lower than overhead costs applied to jobs.

Question 12

When a manufacturing company purchases raw materials,the Raw Materials Inventory account is debited.

Question 13

All of the following are examples of firms who would use job costing except:

A)An automobile repair business.
B)A custom sailboat builder.
C)An interior designing firm.
D)A sport drink manufacturing company.
E)None of the answer choices is correct.

Question 14

A process costing system is used by companies that make identical units of product in batches.

Question 15

The predetermined overhead rate is calculated as the estimated activity in the allocation base divided by the estimated overhead costs.

Question 16

All of the following are examples of firms who would use process costing except:

A)A chewing gum manufacturer.
B)An ice cream manufacturer.
C)An oil refinery.
D)A plumbing contractor.
E)None of the answer choices is correct.

Question 17

Underapplied manufacturing overhead results in a debit balance in the Manufacturing Overhead account.

Question 18

Process costing is best described by which statement?

A)Only direct materials and manufacturing overhead are assigned to products under process costing.
B)Units produced in a process costing system are unique and are produced individually.
C)Product costs are tracked by department and assigned to products passing through each department.
D)There cannot be any beginning or ending Work in Process Inventory with process costing.
E)None of the answer choices is correct.

Question 19

Service organizations often use a predetermined overhead rate similar to manufacturing companies.

Question 20

A movie production company would likely use a job costing system to track revenues and costs.

Question 21

When using a job cost system,which of the following will not appear on a job cost sheet?

A)Direct labor.
B)Direct materials.
C)Actual manufacturing overhead incurred.
D)Manufacturing overhead applied.
E)None of the answer choices is correct.

Question 22

If the under- or overapplied overhead amount is considered to be material,which of the following accounts would be the least likely to be used when closing the Manufacturing Overhead account at the end of the period?

A)Raw Materials Inventory.
B)Work in Process Inventory.
C)Finished Goods Inventory.
D)Cost of Goods Sold.
E)None of the answer choices is correct.

Question 23

Assume Clayton Company has an immaterial credit balance in the Manufacturing Overhead account.The entry to close the Manufacturing Overhead account should include a:

A)credit to Finished Goods Inventory.
B)credit to Work in Process Inventory.
C)credit to Cost of Goods Sold.
D)debit to Cost of Goods Sold.
E)None of the answer choices is correct.

Question 24

All of the following are ways that a job costing system used by a service organization may differ from one used by a manufacturing company except:

A)Costs in service organizations are typically tracked by customer rather than product.
B)Account names for service organizations are slightly different from those used by manufacturers.
C)Service organizations tend to use fewer materials.
D)The process of tracking labor for service organizations is completely different from the process used by manufacturers.
E)None of the answer choices is correct.

Question 25

Adams Company placed $2,000 of direct materials into production.Which one of the following journal entries should Jones record for this transaction?

A)Raw Materials Inventory 2,000
Accounts Payable 2,000
B)Work in Process Inventory 2,000
Manufacturing Overhead 2,000
C)Manufacturing Overhead 2,000
Raw Materials Inventory 2,000
D)Work in Process Inventory 2,000
Raw Materials Inventory 2,000
E)None of the answer choices is correct.

Question 26

All of the following are reasons that companies prefer normal costing except:

A)Normal costing averages overhead costs and levels out overhead fluctuations that might occur from month to month.
B)Normal costing tracks actual direct materials,actual direct labor costs,and actual manufacturing overhead costs.
C)Normal costing simplifies recordkeeping.
D)Normal costing provides information for managers to quote customers the price of products based on estimated costs.
E)None of the answer choices is correct.

Question 27

Burton Company purchased $45,000 of raw materials on account.Which one of the following journal entries should Burton record for this transaction?

A)Work in Process Inventory 45,000
Raw Materials Inventory 45,000
B)Raw Materials Inventory 45,000
Accounts Payable 45,000
C)Work in Process Inventory 45,000
Accounts Payable 45,000
D)Accounts Payable 45,000
Raw Materials Inventory 45,000
E)None of the answer choices is correct.

Question 28

Silo Manufacturing received timesheets submitted by employees reflecting $5,000 of direct labor costs to be paid next week.Which one of the following journal entries should Silo record for this transaction?

A)Work in Process Inventory 5,000
Wages Payable 5,000
B)Direct Labor 5,000
Work in Process Inventory 5,000
C)Wages Payable 5,000
Work in Process Inventory 5,000
D)Work in Process Inventory 5,000
Manufacturing Overhead 5,000
E)None of the answer choices is correct.

Question 29

Goodman Company has $30,000 in underapplied overhead,which is considered by the company to be a material amount.Other account balances include:
Work in Process Inventory $140,000
Finished Goods Inventory 40,000
Cost of Goods Sold 20,000
Which one of the following would be the correct journal entry for closing the underapplied overhead?

A)Work in Process Inventory 21,000
Finished Goods Inventory 6,000
Cost of Goods Sold 3,000
Manufacturing Overhead 30,000
B)Manufacturing Overhead 30,000
Work in Process Inventory 21,000
Finished Goods Inventory 6,000
Cost of Goods Sold 3,000
C)Manufacturing Overhead 30,000
Work in Process Inventory 10,000
Finished Goods Inventory 10,000
Cost of Goods Sold 10,000
D)Work in Process Inventory 10,000
Finished Goods Inventory 10,000
Cost of Goods Sold 10,000
Manufacturing Overhead 30,000
E)None of the answer choices is correct.

Question 30

Kaplan Inc.applies overhead on the basis of direct labor hours.During 2012,the predetermined overhead rate used was $9.00.If overhead was underapplied by $16,500 during 2012,which of the following would not be a reason for the underapplied overhead?

A)Estimated direct labor hours differed from actual direct labor hours.
B)Applied overhead was lower than actual overhead.
C)Estimated overhead costs differed from actual overhead costs.
D)Applied overhead was higher than actual overhead.
E)None of the answer choices is correct.

Question 31

If the Manufacturing Overhead account has a credit balance after overhead has been applied to products,manufacturing overhead:

A)has been closed.
B)has been applied incorrectly.
C)is underapplied.
D)is overapplied.
E)None of the answer choices is correct.

Question 32

The law firm,Keen and Sholer,assigns overhead to clients based on direct labor hours using normal costing.During June,they compiled the following information regarding hours worked and costs:
Actual direct labor hours 900 hours
Actual overhead costs $7,200
Estimated direct labor hours 1,000 hours
Estimated overhead costs $9,000
The amount of applied overhead for June is:

A)$8,100
B)$7,200
C)$6,480
D)$9,000
E)None of the answer choices is correct.

Question 33

Specialty Chocolates recently expanded its operations beyond its existing kitchen to serve its retail operations by establishing a new kitchen to serve a wholesale market for local specialty shops.With this new arrangement,Specialty Chocolates will continue to have a retail shop attached to its original kitchen (Department 1)and the new wholesale operations shipping out of the new kitchen (Department 2).Using normal costing,the company applies monthly overhead using predetermined overhead rates based on direct labor hours for the older operation in Department 1 and machine hours for overhead rates in the more automated Department 2.

Given this information,what are the respective overhead application rates to be used per pound of chocolate for Departments 1 and 2?

A)Department 1: $1.50 per pound;Department 2: $0.20 per pound.
B)Department 1: $0.25 per pound;Department 2: $0.20 per pound.
C)Department 1: $2.50 per pound;Department 2: $0.80 per pound.
D)Department 1: $0.25 per pound;Department 2: $2.00 per pound.
E)None of the answer choices is correct.

Question 34

Records at Sandy Inc.indicate that indirect materials totaling $800 were requisitioned and placed in production.Which one of the following journal entries should Sandy record for this transaction?

A)Raw Materials Inventory 800
Work in Process Inventory 800
B)Manufacturing Overhead 800
Raw Materials Inventory 800
C)Raw Materials Inventory 800
Accounts Payable 800
D)Work in Process Inventory 800
Raw Materials Inventory 800
E)None of the answer choices is correct.

Question 35

The entry to record depreciation on the factory building should include a:

A)debit to Work in Process Inventory.
B)debit to Manufacturing Overhead.
C)debit to Cost of Goods Sold.
D)credit to Work in Process Inventory.
E)None of the answer choices is correct.

Question 36

The law firm,Keen and Sholer,assigns overhead to clients based on direct labor hours using normal costing.During June,they compiled the following information regarding hours worked and costs:
Actual direct labor hours 900 hours
Actual overhead costs $7,200
Estimated direct labor hours 1,000 hours
Estimated overhead costs $9,000
For June,overhead was:

A)$720 overapplied.
B)$720 underapplied.
C)$900 underapplied.
D)$900 overapplied.
E)None of the answer choices is correct.

Question 37

The Work in Process Inventory account for Baja Manufacturing Company shows a balance of $7,200 at the end of the accounting period.The job cost sheets of the only two uncompleted jobs,Jobs 4 and 7,show respective charges of $2,400 and $1,200 for direct materials used.Jobs 4 and 7 also show respective charges of $1,600 and $800 for direct labor used.Based on this information,what is the predetermined overhead rate as a percentage of direct labor costs that Morris is using?

A)200%
B)50%
C)33.3%
D)16.7%
E)None of the answer choices is correct.

Question 38

The entry to record the requisition of indirect materials in a job cost system includes a:

A)debit to Work in Process Inventory.
B)debit to Manufacturing Overhead.
C)credit to Accounts Payable.
D)credit to Work in Process Inventory.
E)None of the answer choices is correct.

Question 39

The entry to record wages owed to the production supervisor should include a debit to:

A)Wages Payable.
B)Wages Expense.
C)Work in Process Inventory.
D)Manufacturing Overhead.
E)None of the answer choices is correct.

Question 40

Nguyen Inc.applies overhead to products based on direct labor hours using normal costing.During 2012,total overhead costs were estimated to be $500,000.Actual overhead totaled $540,000 based on 32,000 actual direct labor hours.At the end of the year,overhead was overapplied by $20,000.Based on this information,what was the predetermined overhead rate used during 2012?

A)$16.88 per direct labor hour.
B)$16.25 per direct labor hour.
C)$15.63 per direct labor hour.
D)$17.50 per direct labor hour.
E)None of the answer choices is correct.

Question 41

Which of the following accounts would probably not be found in the Job Costing accounts of a service organization?

A)Finished Goods.
B)Overhead.
C)Cost of Services.
D)Supplies Inventory.
E)None of the answer choices is correct.

Question 42

Auto Machinery makes automobile production equipment and uses normal costing.Overhead is applied on the basis of $12 per machine hour.The following information relates to the August jobs:

Jobs 22 and 33 were completed and sold,but Job 44 remained in inventory at the end of August.For August,actual overhead incurred totaled $274,000.

Question 43

Landscape Design Company incurred the following actual overhead costs for the month of March:
Indirect materials $175,000
Indirect labor 145,000
Factory depreciation 11,000
Factory utilities 6,000
Landscape Design applies overhead on a predetermined rate of $1.90 per direct labor dollar and direct labor costs were $151,000 for the month.

Question 44

Industrial Products Inc.expects to incur $1,200,000 in manufacturing overhead costs this year.Industrial Products expects to use 15,000 direct labor hours at a cost of $192,000 and a total of 80,000 machine hours.Management of Delgado would like to evaluate the cost of Job 12 using three different approaches to allocating overhead costs.