Deck 4: Job-Order Costing and Normal Cost Overhead Application

Question 1

A job-order cost sheet is the source document where direct labor costs are assigned to individual jobs.

Answer 1

False

Question 2

The difference between actual overhead and applied overhead is called an overhead variance.

Answer 2

True

Question 3

The raw materials account is an inventory account located on the income statement.

Answer 3

False

Question 4

In an actual cost system, actual direct materials, actual direct labor and estimated overhead are used to determine unit cost.

Question 5

Overhead costs are assigned to Finished Goods using a predetermined rate.

Question 6

Using a time ticket, the cost accounting department can enter the cost of direct materials onto the correct job-order cost sheet.

Question 7

Departmental overheads cannot be added together to get plantwide overhead.

Question 8

The work-in-process account consists of all the job-order cost sheets for the completed jobs.

Question 9

The three manufacturing cost elements are direct materials, direct labor, and overhead.

Question 10

Actual overhead is reconciled with applied overhead at the beginning of the period.

Question 11

Manufacturing and service firms producing unique products or services require job-order accounting systems.

Question 12

If actual overhead is greater than applied overhead, the variance is called underapplied overhead.

Question 13

If the overhead variance is immaterial, it is allocated among the ending balances of Work in Process, Finished Goods, and Cost of Goods Sold.

Question 14

The use of a departmental rate has the advantage of being simple and reduces data collection requirements.

Question 15

The use of normal costing means that actual overhead costs are assigned directly to jobs.

Question 16

Production costs consist of direct materials, direct labor, and overhead.

Question 17

In a normal costing system, actual overhead is used to arrive at the cost of goods manufactured.

Question 18

There are other source documents besides the time ticket and the material requisition form used to fill out the job-order cost sheet.

Question 19

Costs reported on the financial statements must be estimated costs.

Question 20

The key feature of job-order costing is that the cost of one job differs from that of another job and must be kept track of separately.

Question 21

The difference between actual overhead and applied overhead is called a (n) _________________.

Question 22

If actual overhead is greater than applied overhead, then the variance is called ___________________.

Question 23

In job-order costing, the journal entry for $1,700 of unpaid direct labor is:
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Question 24

Strict ______________________ are rarely used because they cannot provide accurate unit cost information on a timely basis.

Question 25

In job-order costing, the journal entry for $7,200 raw materials requisitioned for use in production is:
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Question 26

Actual overhead costs are accumulated in the overhead control account.

Question 27

A(n) ___________________________ determines unit cost by adding actual direct materials, actual direct labor, and estimated overhead.

Question 28

In a _______________________________ costs are accumulated by job.

Question 29

In job-order costing, the journal entry for a completed job costing $7,000 but not sold is:

Question 30

The cost of goods sold appearing on the income statement as an expense, when using a normal costing system, is the normal cost of goods sold.

Question 31

When materials are put into production, they are taken from the Raw Materials account and put into the Work in Process account.

Question 32

A _______ is one distinct unit or set of units.

Question 33

A _____________________ is a single overhead rate calculated by using all estimated overhead for a factory divided by the estimated activity level across the entire factory.

Question 34

_________________ is found by multiplying the predetermined overhead rate by the actual use of the associated activity for the period.

Question 35

The journal entry for $17 of underapplied overhead is:

Question 36

The cost of completed units is always debited to Work-in-Process and credited to Finished Goods.

Question 37

__________________________ is a costing system that accumulates production costs by process or by department for a given period of time.

Question 38

The ___________________________ is calculated at the beginning of the year by dividing the total estimated annual overhead by the total estimated level of cost driver.

Question 39

In job-order costing, the journal entry for overhead applied at the rate of $3 per direct labor hour when 210 direct labor hours were worked is:

Question 40

The journal entry for $17,000 materials purchased on account is:
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Question 41

Which of the following is the assignment process used with normal costing?

A) Actual direct materials, actual direct labor and actual overhead cost are assigned to products.
B) Actual direct materials cost is assigned to products, but direct labor and overhead costs are assigned using predetermined rates.
C) Actual direct labor cost is assigned to products, but direct material and overhead costs are assigned using predetermined rates.
D) Actual direct material and direct labor costs are assigned to products, but overhead costs are assigned using predetermined rates.
E) All manufacturing costs are assigned using predetermined rates.

Question 42

When units are sold, their total cost is debited to _______________ and credited to ____________.

Question 43

_________________________ is the amount that appears as an expense on the income statement after the adjustment for the period's overhead variance is recorded.

Question 44

The cost of goods sold before an adjustment for an overhead variance is called ____________________.

Question 45

Which of the following statements describes a characteristic of overhead costs?

A) Overhead costs are distorted due to uneven production from period to period.
B) Overhead costs have a direct relationship with units produced like direct materials.
C) High production in a month leads to high unit overhead costs.
D) All of these are correct.
E) None of these are correct.

Question 46

A __________________________ is used by the cost accounting department to enter the cost of direct materials onto the correct job-order cost sheet.

Question 47

When materials are requested for production the cost is removed from ____________ and added to ____________.

Question 48

Which of the following are fairly easy to trace to individual jobs?

A) Direct materials and maintenance
B) Direct materials and direct labor
C) Direct labor and overhead
D) Overhead and indirect labor
E) Depreciation on machinery and overhead

Question 49

Which of the following is not true about job-order costing?

A) It is used in firms that produce homogeneous products.
B) The cost of each job is accumulated on the job-order cost sheet.
C) The key document for accumulating manufacturing costs is the job-order cost sheet.
D) All of these are correct.
E) None of these are correct.

Question 50

Which method of measuring costs associated with production is more widely used in practice?

A) normal costing
B) actual costing
C) both are used equally.
D) neither one is used.
E) cannot be determined.

Question 51

The _____________________ is subsidiary to the work-in-process account and is the primary document for accumulating all costs related to a particular job.

Question 52

Which of the following is not a characteristic of job-order costing?

A) Wide variety of distinct products.
B) Unit cost is computed by dividing process costs of the period by the units produced in the period.
C) Unit cost is computed by dividing total job costs by units produced on that job.
D) Costs accumulated by job.
E) Typically, the cost of one job is different from that of another job.

Question 53

Applied overhead costs are charged to ________________.

Question 54

The ____________________ of allocation recognizes all interactions among support departments.

Question 55

Unit costs are calculated by:

A) dividing the total costs associated with the units produced by the overhead cost.
B) adding all the variable costs per unit associated with the units produced.
C) subtracting total fixed costs from the applied overhead.
D) dividing the process costs for the given period by the output of the period.
E) multiplying unit variable costs and estimated overhead.

Question 56

In an actual cost system, it is difficult to determine the _____ per unit.

A) direct labor cost
B) overhead cost
C) cost of direct material consumed
D) All of these are correct.
E) None of these are correct.

Question 57

A source document by which direct labor costs are assigned to individual jobs is known as a _______________.

Question 58

Production costs do not include

A) direct materials.
B) direct labor.
C) variable overhead.
D) fixed overhead.
E) All of these are production costs.

Question 59

________________________ are directly responsible for creating the products or services sold to customers.

Question 60

Which of the following businesses uses a process costing system?

A) A printing business
B) A dental clinic
C) An interior designing firm
D) An automobile service center
E) A refinery

Question 61

Which of the following mathematical equations is used to calculate a predetermined overhead rate?

A) Predetermined Overhead Rate = Estimated Annual Manufacturing Cost / Estimated Quarterly Activity Level
B) Predetermined Overhead Rate = Actual Annual Cost of Goods Sold / Estimated Semi-annual Labor Hours
C) Predetermined Overhead Rate = Estimated Annual Overhead / Actual Annual Activity Level
D) Predetermined Overhead Rate = Actual Annual Overhead / Actual Annual Activity Level
E) Predetermined Overhead Rate = Estimated Annual Overhead / Estimated Annual Activity Level

Question 62

The overhead variance is least likely to be

A) zero (actual overhead equals applied overhead).
B) underapplied.
C) overapplied.
D) immaterial.
E) underapplied and material.

Question 63

The unit cost of a job consists of the total costs of

A) materials used on the job.
B) labor worked on the job.
C) applied overhead.
D) All of these are correct.
E) None of these are correct.

Question 64

A normal job-order costing system is a system that uses:

A) actual costs for direct materials and estimated costs for direct labor and overhead.
B) estimated costs for direct materials, direct labor, and overhead.
C) actual costs for direct materials and direct labor and estimated costs for overhead.
D) actual costs for direct materials and overhead, estimated costs for direct labor.

Question 65

Victryl Company applies overhead based on direct labor hours.At the beginning of the year, Victryl estimates overhead to be $700,000, machine hours to be 200,000, and direct labor hours to be 35,000.During February, Victryl has 5,000 direct labor hours and 10,000 machine hours.
If the actual overhead for February is $98,300, what is the overhead variance, and is it overapplied or underapplied?

A) $1200 underapplied
B) $800 overapplied
C) $1,000 underapplied
D) $1,700 overapplied
E) $600 overapplied

Question 66

The Kraig Corporation manufactures custom-made purses.The following data pertains to Job XY5:
Plantwide overhead is applied using a plant-wide rate based on direct labor hours.Plantwide overhead was budgeted at $60,000 for the year and the direct labor hours were estimated to be 15,000.Job XY5 consists of 50 units.What is overhead cost assigned to Job XY5?

A) $200
B) $400
C) $750
D) $1,500

Question 67

On March 1, Job 10 had a beginning balance of $500.During March, direct materials of $800 and direct labor of $300 were added to the job.Overhead is applied to production at a rate of 40% of direct labor.There are 4 units in Job 10.
What is the unit cost?

A) $312
B) $430
C) $492
D) $850
E) None of these.

Question 68

Bronzit Company estimated the following at the beginning of the year:
Bronzit uses departmental overhead rates.In the assembly department, direct labor hours are used to apply overhead.Machine hours are used to apply overhead in the testing department.
Actual data for the month of May is as follows:


Bronzit decides to continue using departmental overhead rates.What are the predetermined rates for the Assembly and Testing departments respectively? (Note: Round to two decimal places.)

A) Assembly: $5.25 per direct labor hour; Testing: $7.33 per machine hour
B) Assembly: $4.65 per direct labor hour; Testing: $1.39 per machine hour
C) Assembly: $2.23 per direct labor hour; Testing: $6.15 per direct labor hour
D) Assembly: $5.12 per machine hour; Testing: $7.22 per machine hour
E) None of these.

Question 69

Trust Company applies overhead based on direct labor hours.At the beginning of the year, Trust estimates overhead to be $700,000, machine hours to be 200,000, and direct labor hours to be 35,000.During February, Trust has 5,000 direct labor hours and 10,000 machine hours.

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What is the predetermined overhead rate?

A) $15.00 per machine hour
B) $14.00 per direct labor hour
C) $20.00 per direct labor hour
D) $18.00 per machine hour
E) None of these are correct.

Question 70

Carlson Company uses a predetermined rate to apply overhead.At the beginning of the year, Carlson estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000.Actual overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were 11,000. If the predetermined overhead rate is based on machine hours, what is the total amount credited to the plantwide overhead account for the year for Carlson?

A) $249,280
B) $246,000
C) $240,000
D) $264,000

Question 71

Manufacturing overhead

A) consists of all costs other than direct materials.
B) consists of all manufacturing costs other than direct materials.
C) consists of all costs other than direct materials and direct labor.
D) consists of all manufacturing costs other than direct materials and direct labor.

Question 72

At the beginning of the year, Zinc Inc.estimated that overhead would be $115,000 and direct labor hours would be 23,000.At the end of the year, actual overhead was $175,900 and there were actually 35,000 direct labor hours. What is the overhead variance?

A) $600 overapplied
B) $900 underapplied
C) $300 underapplied
D) $700 overapplied
E) $800 underapplied

Question 73

Mitchell's Softball Gloves Company estimated the following at the beginning of the year:
Mitchell uses departmental overhead rates.In the assembly department, direct labor hours are used to apply overhead.Machine hours are used to apply overhead in the testing department.
Actual data for August is as follows:

Using departmental overhead rates, which of the following is correct?

A) Applied overhead for the assembly department is $54,000.
B) Applied overhead for the testing department is $4,860.
C) Applied overhead for both departments combined is $63,720.
D) Overhead for the assembly department is underapplied.
E) None of these are correct.

Question 74

Trust Company applies overhead based on direct labor hours.At the beginning of the year, Trust estimates overhead to be $700,000, machine hours to be 200,000, and direct labor hours to be 35,000.During February, Trust has 5,000 direct labor hours and 10,000 machine hours.

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What is the amount of overhead applied for February?

A) $69,500
B) $22,000
C) $124,000
D) $185,200
E) $100,000

Question 75

Bronzit Company estimated the following at the beginning of the year:

Bronzit uses departmental overhead rates.In the assembly department, direct labor hours are used to apply overhead.Machine hours are used to apply overhead in the testing department.
Actual data for the month of May is as follows:

If Bronzit uses a plant wide overhead rate based on direct labor hours, instead of departmental rates, what is the predetermined overhead rate rounded to the nearest cent?

A) $5 per direct labor hour
B) $8.65 per direct labor hour
C) $4.19 per direct labor hour
D) $4.50 per direct labor hour
E) $0.33 per direct labor hour

Question 76

At the beginning of the year, Wilson Company estimated the following:
Wilson used normal costing and applies overhead on the basis of direct labor hours.For the month of September, direct labor hours equaled 9,350 and actual overhead equaled $46,750.
Calculate the overhead applied to production in September.

A) $56,100
B) $30,000
C) $46,750
D) $5 per direct labor hour
E) None of these.

Question 77

The predetermined overhead rate is usually calculated

A) at the end of each month.
B) at the beginning of each month.
C) at the beginning of the year.
D) at the end of the year.

Question 78

John has applied overhead of $80,000 and actual overhead of $70,600 for the month of November.He applies overhead based on direct labor hours, and that amounts to 10,000 hours for the month of November.The overhead for the year was estimated to be $1,120,000.How many direct labor hours were estimated for the year?

A) 225,200
B) 140,000
C) 500,000
D) 150,000
E) 650,700

Question 79

At the beginning of the year, Titanium Inc.estimated that overhead would be $100,000 and direct labor hours would be 20,000.At the end of the year, actual overhead was $175,900 and there were actually 35,000 direct labor hours.
What is the predetermined overhead rate?

A) $5 per direct labor hour
B) $3 per direct labor hour
C) $4 per direct labor hour
D) $6 per direct labor hour
E) None of these are correct.

Question 80

Mitchell's Softball Gloves Company estimated the following at the beginning of the year:
Mitchell uses departmental overhead rates.In the assembly department, direct labor hours are used to apply overhead.Machine hours are used to apply overhead in the testing department.
Actual data for August is as follows:


Mitchell decides to continue using departmental overhead rates.If a job spends 4 hours in assembly and 3 hours in testing, what is the amount of overhead charged to the job?

A) $22
B) $20
C) $28
D) $50.54
E) None of these.