Deck 19: Job Order Costing

Question 1

The information from a cost accounting system allows managers to make decisions about planning and directing,but not about controlling.

Answer 1

False

Question 2

A major purpose of a cost accounting system is to

A) compute the cost of goods sold for the income statement.
B) classify all costs as operating or marketing costs.
C) assist creditors in determining whether to grant a loan.
D) show investors a company is operating efficiently.

Answer 2

A

Question 3

A process costing system is used when a company produces identical units through a series of production steps.

Answer 3

True

Question 4

Which of the following companies is most likely to use process costing?

A) a music studio
B) a breakfast cereal company
C) an accounting firm
D) a building contractor

Question 5

Which of the following would use a process costing system rather than a job order costing system?

A) a health-care service provider
B) a music production studio
C) a paint manufacturer
D) a home remodeling contracting company

Question 6

Cost accounting systems are primarily concerned with accumulating product cost information.

Question 7

Define a job order costing system and list two types of businesses that would use a job order costing system.

Question 8

Which of the following businesses is most likely to use a process costing system?

A) a baker producing cakes to order
B) a legal service provider
C) an audit service provider
D) a candy manufacturer

Question 9

Which one of the following companies is most likely to use job order costing?

A) a gold refinery
B) a law firm
C) a surfboard manufacturer
D) a soft drink company

Question 10

For each of the following types of business,indicate why the manager needs to know the unit cost information.
$$\begin{array} { | l | l | } \hline \text { Managers of a } & \text { Need to know the cost to } \\\hline \text { Bakery } & \\\hline \text { Computer } & \\\text { manufacturer } & \\\hline \text { Bank } & \\\hline \text { Seamstress } & \\\hline\end{array}$$

Question 11

A job order costing system would be appropriate for a manufacturing company that manufactures identical units through a series of uniform production steps.

Question 12

Define a process costing system and list two types of businesses that would use a process costing system.

Question 13

Which of the following is a reason why a job order costing system is appropriate for a custom furniture manufacturer?

A) The cost incurred for each job will differ as per the order specifications.
B) The direct costs incurred for each job are the same, only indirect costs vary.
C) The raw materials used have already been accounted for using process costing.
D) Custom furniture manufacturers produce large quantities of similar products.

Question 14

Accounting firms,building contractors,and healthcare providers use process costing.

Question 15

A job order costing system is used by companies that manufacture batches of unique products or provide specialized services.

Question 16

Cost accounting systems are used ________.

A) to accumulate product cost information
B) to accumulate and assign period costs to products
C) by manufacturing companies, not service companies
D) by stockholders for decision-making purposes

Question 17

Which of the following is the correct order of the four steps of tracking product costs?

A) assign → accumulate → allocate → adjust
B) accumulate → assign → allocate → adjust
C) adjust → allocate → accumulate → assign
D) allocate → adjust → accumulate → assign

Question 18

A cost accounting system will assist a manager in determining how many and which products to produce.

Question 19

Which of the following statements is TRUE of costing systems?

A) A process costing system would be used by manufacturers of custom-made perfumes.
B) A job order costing system would be used by manufacturers of baking utensils.
C) A construction company would likely use a process costing system.
D) An accounting firm would likely use a job order costing system.

Question 20

Both job order and process costing systems use a four-step method to track product costs.List each of the four steps.

Question 21

Manufacturing Overhead is a temporary account used to ________ indirect production costs during the accounting period.

A) allocate
B) assign
C) accumulate
D) approximate

Question 22

The accounts of Delphinia Dreams,Inc.showed the following balances at the beginning of October: $$\begin{array} { | l | r | } \hline \text { Account } & \text { Debit } \\\hline \text { Raw Materials Inventory } & \$ 31,000 \\\hline \text { Work-in-Process Inventory } & 44,000 \\\hline \text { Finished Goods Inventory } & 54,000 \\\hline \text { Manufacturing Overhead } & 20,000 \\\hline\end{array}$$ During the month,direct materials amounting to $21,000 and indirect materials amounting to $6000 were issued to production.What is the ending balance in the Work-in-Process Inventory account following these two transactions?

A) $44,000
B) $65,000
C) $10,000
D) $26,000

Question 23

Broxsie Fabrication,Inc.issued $60,000 of direct materials and $15,500 of indirect materials to production.Prepare the journal entry to record the transaction.Omit explanation.

Question 24

The cost of indirect materials is transferred out of the Manufacturing Overhead account and accumulated in the Raw Materials Inventory account.

Question 25

The journal entry to issue $600 of direct materials and $30 of indirect materials to production involves debit(s)to the ________.

A) Work-in-Process Inventory account for $600 and Finished Goods Inventory account for $30
B) Manufacturing Overhead account for $630
C) Work-in-Process Inventory account for $600 and Manufacturing Overhead account for $30
D) Work-in-Process Inventory account for $630

Question 26

The accounts of Melissa Manufacturing showed the following balances at the beginning of December: $$\begin{array} { | l | r | } \hline \text { Account } & \text { Debit } \\\hline \text { Raw Materials Inventory } & \$ 55,000 \\\hline \text { Work-in-Process Inventory } & 81,000 \\\hline \text { Finished Goods Inventory } & 38,000 \\\hline \text { Manufacturing Overhead } & 17,000 \\\hline\end{array}$$ The following transactions took place during the month:
December 2: Issued direct materials $37,000 and indirect materials $4000 to production.
December 15: Incurred $6000 and $5000 toward factory's direct labor cost and indirect labor cost,respectively.
What should be the balance in the Work-in-Process Inventory following these transactions?

A) $124,000
B) $87,000
C) $75,000
D) $86,000

Question 27

Uniq Works purchased raw materials amounting to $126,000 on account and $16,000 for cash.The materials will be used to manufacture upholstery for furniture manufacturers on a contract basis.Which of the following journal entries correctly records this transaction?

A) $$\begin{array} { | l | r | r | } \hline \text { Accounts Payable } & 126,000 & \\\hline \text { Cash } & 16,000 & \\\hline \text { Raw Materials Inventory } & & 142,000 \\\hline\end{array}$$
B) $$\begin{array} { |l| r | r | } \hline \text { Finished Goods Inventory } & 142,000 & \\\hline \text { Accounts Payable } & & 142,000 \\\hline\end{array}$$
C) $$\begin{array} { |l | r | r | } \hline \text { Work-in-Process Inventory } & 142,000 & \\\hline \text { Accounts Payable } & & 142,000 \\\hline\end{array}$$
D) $$\begin{array} { | l | r | r | } \hline \text { Raw Materials Inventory } & 142,000 & \\\hline \text { Cash } & & 16,000 \\\hline \text { Accounts Payable } & & 126,000 \\\hline\end{array}$$

Question 28

When direct materials are received on the production floor,they are recorded on the job cost record.

Question 29

The entry to record the purchase of raw materials on account would include a ________.

A) debit to the Raw Materials Inventory account
B) debit to the Work-in-Process Inventory account
C) credit to the Work-in-Process Inventory account
D) credit to the Raw Materials Inventory account

Question 30

Which of the following would most likely be accounted for using a job order costing system?

A) The production of potato chips
B) The production of sports energy drinks
C) The creation of wedding photography portraits
D) The refining of gasoline

Question 31

For each of the following accounts,indicate what event causes the account to increase and to decrease.The answer is not debit or credit.
$$\begin{array} { | l | l | l | } \hline \text { Account } & \text { Is increased by: } & \text { Is decreased by: } \\\hline \text { Raw Materials } & & \\\text { Inventory } & & \\\hline \text { Work-in-Process } & & \\\text { Inventory } & & \\\hline \text { Finished Goods } & & \\\text { Inventory } & & \\\hline \text { Cost of Goods Sold } & & \\\hline\end{array}$$

Question 32

Manufacturing Overhead is a temporary account used to accumulate indirect production costs during the accounting period.

Question 33

When raw materials are requisitioned for a job,the Raw Materials Inventory account is debited.

Question 34

What is cost of goods sold? Describe the flow of this cost through the job order costing system.Your answer should include the accounts involved and whether the flow involves a debit or credit.

Question 35

Which of the following accounts would be debited in the journal entry to record the issuance of direct materials?

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

Question 36

On June 1,Dalton Productions had beginning balances as shown in the T-accounts below. During June,the following transaction took place:
June 2: Issued $2200 of direct materials and $700 of indirect materials to production.
What was the balance in the Manufacturing Overhead account following this transaction?

A) $43,900
B) $43,200
C) $41,700
D) $41,000

Question 37

On June 1,Westbrook Productions had beginning balances as shown in the T-accounts below. During June,the following transactions took place:
June 2: Issued $3300 of direct materials and $600 of indirect materials to production.
June 13: Incurred $7400 of direct factory labor cost and $14,800 of indirect factory labor cost.
What was the balance in the Manufacturing Overhead account following these transactions?

A) $41,600
B) $56,400
C) $55,800
D) $59,100

Question 38

Adelphia Manufacturing issued $70,000 of direct materials and $10,000 of indirect materials for production.Which of the following journal entries would correctly record the transaction?

A) $$\begin{array} { | l | r | r | } \hline \text { Raw Materials Inventory } & 80,000 & \\\hline \text { Finished Goods Inventory } & & 70,000 \\\hline \text { Work-in-Process Inventory } & & 10,000 \\\hline\end{array}$$
B) $$\begin{array} { | l | r | r | } \hline \text { Work-in-Process Inventory } & 80,000 & \\\hline \text { Raw Materials Inventory } & & 80,000 \\\hline\end{array}$$
C) $$\begin{array} { | c | r | r | } \hline \text { Work-in-Process Inventory } & 70,000 & \\\hline \text { Manufacturing Overhead } & 10,000 & \\\hline \text { Raw Materials Inventory } & & 80,000 \\\hline\end{array}$$
D) $$\begin{array} { | l | r | r | } \hline \text { Manufacturing Overhead } & 80,000 & \\\hline \text { Raw Materials Inventory } & & 80,000 \\\hline\end{array}$$

Question 39

What is cost of goods manufactured? Describe the flow of this cost through the job order costing system.Your answer should include the accounts involved and whether the flow involves a debit or credit.

Question 40

The journal entry to issue indirect materials to production should include a debit to the ________.

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

Question 41

The journal entry to record direct labor costs actually incurred involves a debit to the ________.

A) Work-in-Process Inventory account
B) Wages Payable account
C) Manufacturing Overhead account
D) Raw Materials Inventory account

Question 42

Work-in-Process Inventory is debited when indirect labor costs are incurred in a job order costing system.

Question 43

Which of the following best describes a job cost record?

A) A form used to track the transfer of raw materials to the production floor
B) A record that shows the raw materials balance as well as raw materials received and issued
C) A document that shows direct materials, direct labor and manufacturing overhead costs for an individual job.
D) A record of employee productivity and downtime for a particular job

Question 44

The actual direct labor costs are assigned to individual jobs,and the actual direct labor cost is recorded with a debit to Work-in-Process Inventory.

Question 45

Costs identified as indirect labor should be charged to ________.

A) manufacturing overhead
B) direct labor on the job cost record
C) ignored since they are not relevant
D) salaries payable

Question 46

Most companies streamline the tracking of labor costs through electronic means,using employee ID cards and job numbers to assign labor charges to individual jobs.

Question 47

Manufacturing reports the following data for the month:
$$\begin{array} { l r } \text { Purchases of raw materials, on account } & \$ 55,250 \\\text { Materials requisitions: } & \\\text { Direct materials } & 49,750 \\\text { Indirect materials } & 3,700 \\\text { Labor incurred (not yet paid): } & \\\quad \text { Direct labor } & 51,000 \\\text { Indirect labor } & 2,500\end{array}$$ Journalize the entries relating to materials and labor.Omit explanations.

Question 48

The costs transferred from Work-in-Process Inventory to Finished Goods Inventory are called Cost of Goods Manufactured.

Question 49

When would direct labor costs associated with building a custom home be assigned to the job?

A) Only indirect labor is assigned to construction, not direct labor
B) When the labor is incurred during construction
C) After first being added to manufacturing overhead
D) After the construction has moved from work-in-process to the finished product

Question 50

The flow of costs in a job order costing system ________.

A) cannot be determined until all jobs are complete
B) transfers all costs to manufacturing overhead
C) involves accumulating costs and then assigning costs to jobs
D) includes the major steps of accumulating and amortizing

Question 51

The journal entry to record indirect labor costs incurred involves a debit to the ________.

A) Manufacturing Overhead account
B) Wages Payable account
C) Finished Goods Inventory account
D) Work-in-Process Inventory account

Question 52

Specialty Wood Products,Inc.had the following manufacturing labor costs last month:
$$\begin{array} { | l | r | } \hline \text { Woodworkers' wages } & \$ 100,000 \\\hline \text { Indirect laborers' wages } & 20,000 \\\hline \text { Maintenance personnel wages } & 10,000 \\\hline\end{array}$$ Provide the journal entry to record the labor costs incurred,which will be paid at a later date.Omit explanation.

Question 53

What is an advantage of using a raw materials subsidiary ledger?

A) It includes only one large record for all materials used, so materials details are combined into one location.
B) It is less detailed than the general ledger, giving a broader overview for decision purposes.
C) It allows for better control of inventory because it tracks each type of material used in production.
D) It contributes to easier recordkeeping since the sum of the balances of the subsidiary ledger do not have to match general ledger totals.

Question 54

In a manufacturing operation,depreciation of plant equipment should be debited to the Depreciation Expense account.

Question 55

The amount of taxes and insurance incurred and paid for the plant of a manufacturing company should be debited to the Manufacturing Overhead account.

Question 56

The journal entry to record $1600 of direct labor and $200 of indirect labor incurred will include debit(s)to the ________.

A) Manufacturing Overhead account for $1800
B) Work-in-Process Inventory account for $1600 and Finished Goods Inventory account for $200
C) Finished Goods Inventory account for $1800
D) Work-in-Process Inventory account for $1600 and Manufacturing Overhead account for $200

Question 57

When would raw materials associated with the building of a custom home be assigned to the job?

A) When they are transferred from the warehouse to the job site to be used in construction
B) When they are purchased and delivered to the storage warehouse
C) After the job is completed and all materials usage is known
D) After they have accumulated in manufacturing overhead

Question 58

Actual manufacturing overhead costs are credited to the Manufacturing Overhead account.

Question 59

Altec Designs makes fashion clothing and reports the following data for the month of September: $$\begin{array} { | l | r | } \hline \text { Salaries paid to seamstresses } & \$ 140,000 \\\hline \text { Wages paid to fabric cutters } & 20,000 \\\hline \text { Indirect wages } & 5000 \\\hline\end{array}$$ What is the journal entry to record the total labor charges incurred during September,which will be paid at a later date?

A) $$\begin{array} { | c | r | r | } \hline \text { Work-in-Process Inventory } & 160,000 & \\\hline \text { Manufacturing Overhead } & 5000 & \\\hline \text { Wages Payable } & & 165,000 \\\hline\end{array}$$
B) $$\begin{array} { | c | r | r | } \hline \text { Work-in-Process Inventory } & 165,000 & \\\hline \text { Wages Payable } & & 165,000 \\\hline\end{array}$$
C) $$\begin{array} { | l | r | r | } \hline \text { Wages Payable } & 165,000 & \\\hline \text { Finished Goods Inventory } & & 145,000 \\\hline \text { Work-in-Process Inventory } & & 20,000 \\\hline\end{array}$$
D) $$\begin{array} { | c | r | r | } \hline \text { Manufacturing Overhead } & 165,000 & \\\hline \text { Wages Payable } & & 165,000 \\\hline\end{array}$$

Question 60

Pandora Manufacturing purchased $95,000 of raw materials on account and $5,000 of raw materials for cash.The materials will be used to produce furniture.Provide the journal entry for the purchase of materials.Omit explanation.

Question 61

The accounting for the allocation of overhead costs is a three-step process and occurs at three different points in the accounting cycle.List each of the three steps.For each step indicate when the step occurs and why the step is needed.

Question 62

The predetermined overhead allocation rate is the rate used to ________.

A) assign direct material costs to jobs
B) allocate actual manufacturing overhead costs incurred during a period
C) allocate estimated manufacturing overhead costs to jobs
D) trace manufacturing and nonmanufacturing costs to jobs

Question 63

The Equinox Fabrication Plant suffered a fire incident in August,and most of the records for the year were destroyed.The following accounting data for the year were recovered: $$\begin{array} { | l | l | } \hline \text { Total manufacturing overhead estimated at the beginning of the year } & \$ 103,520 \\\hline \text { Total direct labor costs estimated at the beginning of the year } & \$ 185,000 \\\hline \text { Total direct labor hours estimated at the beginning of the year } & 3500 \text { direct labor hours } \\\hline \text { Actual manufacturing overhead costs for the year } & \$ 99,570 \\\hline \text { Actual direct labor costs for the year } & \$ 150,000 \\\hline \text { Actual direct labor hours for the year } & 2950 \text { direct labor hours } \\\hline\end{array}$$ The company bases its manufacturing overhead allocation on the number of direct labor hours.What was the predetermined overhead allocation rate for the year? (Round your answer to the nearest cent.)

A) $35.09
B) $1.86
C) $29.58
D) $62.71

Question 64

Which of the following will be debited to the Manufacturing Overhead account of a watch manufacturer?

A) office telephone costs
B) salaries paid to accountants
C) factory electricity costs
D) cost of printing brochures

Question 65

Archangel Manufacturing calculated a predetermined overhead allocation rate at the beginning of the year based on direct labor costs.The production details for the year are given below: $$\begin{array} { | l | l | } \hline \text { Total manufacturing overhead costs estimated at the beginning of the year } & \$ 150,000 \\\hline \text { Total direct labor costs estimated at the beginning of the year } & \$ 340,000 \\\hline \text { Total direct labor hours estimated at the beginning of the year } & 10,000 \text { direct labor hours } \\\hline \text { Actual manufacturing overhead costs for the year } & \$ 150,000 \\\hline \text { Actual direct labor costs for the year } & \$ 360,000 \\\hline \text { Actual direct labor hours for the year } & 11,000 \text { direct labor hours } \\\hline\end{array}$$ Calculate the manufacturing overhead allocation rate for the year based on the above data.(Round your final answer to two decimal places.)

A) 44.12%
B) 240.00%
C) 11.33%
D) 27.27%

Question 66

Arabica Manufacturing uses a predetermined overhead allocation rate based on the number of machine hours.At the beginning of the year,it estimated total manufacturing overhead costs to be $1,050,000,total number of direct labor hours to be 4000,and total number of machine hours to be 20,000 hours.What was the predetermined overhead allocation rate? (Round your answer to the nearest cent.)

A) $262.50 per machine hour
B) $43.75 per direct labor hour
C) $52.50 per machine hour
D) $65.63 per direct labor hour

Question 67

Manufacturing overhead costs are allocated to the Work-in-Process Inventory account by a debit to the Manufacturing Overhead account.

Question 68

When a job order costing system is used,actual manufacturing overhead costs are debited to ________.

A) expense accounts
B) the Manufacturing Overhead account
C) the Cost of Goods Sold account
D) the Work-In-Process Inventory account

Question 69

Which of the following describes the allocation base for allocating manufacturing overhead costs?

A) the primary cost driver of indirect manufacturing costs
B) the estimated base amount of manufacturing overhead costs in a year
C) the percentage used to allocate direct labor to Work-in-Process Inventory
D) the main element that causes direct costs

Question 70

The total amount of manufacturing overhead costs incurred during the period is recorded on the credit side of the Manufacturing Overhead account.

Question 71

The predetermined overhead allocation rate is calculated by dividing ________.

A) the total estimated overhead costs by total number of days in a year
B) the estimated amount of cost driver by actual total overhead costs
C) the actual overhead costs by actual amount of the cost driver or allocation base
D) the estimated overhead costs by total estimated quantity of the overhead allocation base

Question 72

Which of the following will be categorized as a manufacturing overhead cost?

A) depreciation on factory plant and equipment
B) wages paid to assembly line workers
C) administration charges of showroom
D) cost of direct materials used

Question 73

Which of the following correctly describes the term cost driver?

A) the inflation rate that causes costs to rise
B) the average inventory costs incurred at any point of time
C) the primary factor that causes a cost to be incurred
D) the total material, labor, and overhead costs of a completed job

Question 74

Sybil,Inc.uses a predetermined overhead allocation rate to allocate manufacturing overhead costs to jobs.The company recently completed Job 300X.This job used 11 machine hours and 5 direct labor hours.The predetermined overhead allocation rate is calculated to be $43 per machine hour.What is the amount of manufacturing overhead allocated to Job 300X using machine hours as the allocation base?

A) $473
B) $215
C) $688
D) $258

Question 75

Jeremy Corporation estimated manufacturing overhead costs for the year to be $540,000.Jeremy also estimated 9000 machine hours and 2000 direct labor hours for the year.It bases the predetermined overhead allocation rate on machine hours.On January 31,Job 25 was completed.It required 6 machine hours and 4 direct labor hours.What is the amount of manufacturing overhead allocated to the completed job? (Round intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

A) $60
B) $600
C) $360
D) $1620

Question 76

Aaron,Inc.estimates direct labor costs and manufacturing overhead costs for the coming year to be $750,000 and $550,000,respectively.Aaron allocates overhead costs based on machine hours.The estimated total labor hours and machine hours for the coming year are 18,000 hours and 7000 hours,respectively.What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.)

A) $107.14 per machine hour
B) $30.56 per labor hour
C) $1.36 per labor hour
D) $78.57 per machine hour

Question 77

Manufacturing overhead is allocated by debiting the Finished Goods Inventory account.

Question 78

Manufacturing overhead is allocated by debiting the Work-in-Process Inventory account and crediting the Manufacturing Overhead account.

Question 79

The predetermined overhead allocation rate for a given production year is calculated ________.

A) at the end of the production year
B) before the accounting period begins
C) after completion of each job
D) after the preparation of financial statements for the year

Question 80

Zephyros Corporation had estimated manufacturing overhead costs for the coming year to be $303,000.The total estimated direct labor hours and machine hours for the coming year are 7000 and 12,000,respectively.Manufacturing overhead costs are allocated based on direct labor hours.What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.)

A) $25.25 per machine hour
B) $15.95 per direct labor hour
C) $43.29 per direct labor hour
D) $1.71 per machine hour