Deck 4: Job Costing

Question 1

A manufacturer utilizes three separate indirect cost pools.Which of the following is true?

A)Each indirect cost pool utilizes a separate cost-allocation rate
B)Each indirect cost pool is a subset of total direct costs
C)Each indirect cost pool relates to multiple cost centers
D)Each indirect cost pool utilizes the same cost-allocation rate for all costs incurred

Answer 1

A

Question 2

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

A)cost tracing
B)cost pools
C)cost assignments
D)cost allocations

Answer 2

C

Question 3

Differentiate between a cost pool and a cost-allocation base.

Answer 3

A cost pool is a grouping of individual indirect cost items.The cost-allocation base (number of machine-hours)is a systematic way to link an indirect cost or group of indirect costs (operating costs of all metal-cutting machines)to cost objects (different products).

Question 4

The cost allocation base ________.

A)is a grouping of individual indirect cost items
B)are costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way
C)is anything for which a measurement of costs is desired
D)is a systematic way to link an indirect cost or group of indirect costs to cost objects

Question 5

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 labor
d.indirect manufacturing labor
e.finished goods control
f.cost of goods sold

Question 6

A ________ is a grouping of individual indirect cost items.

A)cost-allocation base
B)cost assignment
C)cost pool
D)job-costing system

Question 7

When an organization allocated indirect costs to departments by relative size of the budgets,it is based on the criterion of benefits received.

Question 8

A ________ is anything for which a measurement of costs is desired.

A)cost-allocation base
B)cost pool
C)cost object
D)cost-application base

Question 9

A cost is considered direct if it can be traced to a particular cost object in a cost effective way which means it can be

A)traced easily with the aid of technology
B)traced in a manner that is accurate
C)traced in an economically feasible way
D)possibly traced accurately with an investment in hardware and software

Question 10

The cost-allocation base is a systematic way to link an indirect cost or group of indirect costs to cost objects.

Question 11

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

Question 12

Direct costs of a cost object are costs related to a particular cost object that can be allocated to that cost object in an economically feasible (cost-effective)way.

Question 13

Assigning direct costs to a cost object is called ________.

A)cost allocation
B)cost assignment
C)cost pooling
D)cost tracing

Question 14

Allocating indirect costs to departments based on the relative revenue earned by those departments is done based on which of the following criterion?

A)direct hours utilized
B)benefits received
C)material resources used
D)cause-and-effect relationships

Question 15

________ is the process of assigning indirect costs to products.

A)Cost allocation
B)Job cost recording
C)Cost pooling
D)Cost tracing

Question 16

In a costing system,________.

A)cost tracing allocates indirect costs
B)cost allocation assigns direct costs
C)a cost-allocation base can be either financial or nonfinancial
D)a cost object should be a product and not a department or a geographic territory

Question 17

Cost objects may be jobs,products,or customers.

Question 18

Process costing is ________.

A)used to enhance employees' job satisfaction
B)used by businesses to price unique products or identical products produced in batches
C)used by businesses to price identical products
D)used by businesses when manufacturing goods above normal capacity

Question 19

Direct costs ________.

A)are anything for which a measurement of costs is desired
B)are costs related to a particular cost object that can be traced to that cost object in an economically feasible manner
C)focus specifically on the costing needs of the CFO
D)are costs related to a particular cost object that cannot be traced to that cost object in a cost-effective manner

Question 20

A cost object is anything for which a measurement of costs is desired.

Question 21

A company may use job costing to assign costs to different product lines and then use process costing to calculate unit costs within each product line.

Question 22

Which of the following companies will use a process costing system?

A)an oil refining company
B)a manufacturer of ships
C)a custom kitchen cabinet company
D)an advertising firm

Question 23

When calculating indirect cost rates,the longer the time period,the greater the
influence of seasonal patterns on the amount of costs.

Question 24

Job-costing is likely to be used by________.

A)oil refining companies
B)advertising agencies
C)Mortgage payment processors
D)breakfast cereal producers

Question 25

The actual indirect-cost rate is calculated by ________.

A)dividing actual total indirect costs by the actual total quantity of the cost-allocation base
B)multiplying actual total indirect costs by the actual total quantity of the cost-allocation base
C)dividing the actual total quantity of the cost allocation base by actual total indirect costs
D)multiplying the actual total quantity of the cost allocation base by actual total indirect costs

Question 26

Oil refining companies primarily use job costing to estimate costs.

Question 27

Process costing ________.

A)allocates all product costs,including materials,and labor
B)results in different costs for different units produced
C)is commonly used by general contractors who construct custom-built homes
D)is used exclusively in manufacturing

Question 28

Which of the following differentiates job costing from process costing?

A)Job costing is used when each unit of output is identical,and process costing deals with unique products.
B)Job costing is used when each unit of output is identical and not produced in batches,and process costing deals with unique products produced on large scale.
C)Process costing is used when each unit of output is identical,and job costing deals with unique products not produced in batches.
D)Job costing is used by manufacturing industries,and process costing is used by service industries.

Question 29

Process costing is used to assign manufacturing costs to unique batches of a product.

Question 30

Job costing ________.

A)cannot be used by the service industry
B)records the flow of costs for each product or service
C)allocates an equal amount of cost to each unit made during a time period
D)is used when each unit of output is identical

Question 31

An example of a numerator reason for calculating annual indirect-cost rates includes ________.

A)fewer production workdays in a month
B)cost of raw materials purchased
C)higher snow-removal costs during the winter
D)the number of units produced

Question 32

Which of the following are reasons for using longer periods,such as a year,to calculate indirect cost rates?

A)shorter the period,the greater is the influence of seasonal patterns on the amount of costs
B)longer the period,the greater is the influence of seasonal patterns on the amount of costs
C)shorter the period,the smaller is the influence of seasonal patterns on the amount of opportunity costs
D)longer the period,the smaller is the influence of seasonal patterns on the amount of opportunity costs

Question 33

Actual costing is a costing system that traces direct costs to a cost object by ________.

A)using the budgeted direct cost rates times the budgeted quantities of direct-cost inputs
B)using the actual direct costs rates times the budgeted quantities of the direct-cost inputs
C)using the actual direct cost rates times the actual quantities of the direct-cost inputs
D)using the budgeted direct cost rates times the actual quantities of the direct cost inputs

Question 34

In a job-costing system the cost object is an individual unit,batch,or lot of a distinct product or service.

Question 35

Whether a company chooses to use either a job ob costing system or process costing system depends on the nature of the product or service - whether the products or services are heterogeneous or homogeneous.

Question 36

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

Question 37

Job costing is ________.

A)used by businesses to price identical products
B)used by businesses to price unique products for different jobs
C)used to calculate equivalent units
D)used to calculate the percentage of work completed

Question 38

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

Question 39

An example of a denominator reason for calculating annual indirect-cost rates includes ________.

A)Budgeted annual indirect costs divided by actual quantity of cost-allocation base
B)semi-annual insurance payments in March and September
C)higher levels of output demanded during the fall months
D)prepaid rent in January for the months January through June

Question 40

Using job costing would not be appropriate in the shipping industry.

Question 41

Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs:

A)ACDB
B)CADB
C)BACD
D)DCAB

Question 42

Problems with costing occur when ________.

A)incorrect job numbers are recorded on source documents
B)bar coding is used to record materials used on the job
C)a computer screen requests an employee number before that employee is able to work on information related to a specific job
D)incorrect product delivery forms are entered into the system

Question 43

For 2018,Rest-Well Bedding uses machine-hours as the only overhead cost-allocation base.The direct cost rate is $6.00 per unit.The selling price of the product is $21.00.The estimated manufacturing overhead costs are $275,000 and estimated 40,000 machine hours.The actual manufacturing overhead costs are $350,000 and actual machine hours are 50,000.
Using job costing,the 2018 actual indirect-cost rate is ________.

A)$7.00 per machine-hour
B)$5.50 per machine-hour
C)$8.75 per machine-hour
D)$8.50 per machine-hour

Question 44

X-Industries manufactures 3-D printers.For each unit,$3,400 of direct material is used and there is $2,600 of direct manufacturing labor at $16 per hour.Manufacturing overhead is applied at $20 per direct manufacturing labor hour.Calculate the profit earned on 46 units if each unit sells for $9,500.

A)$65,320
B)$35,880
C)$11,500
D)$3,250

Question 45

For a given job the direct costs associated with the job are ________.

A)actual overhead that has been applied to the job
B)raw materials that can be traced to the job in an economically feasible way
C)All sunk costs that can be traced to the job in an economically feasible way
D)all fixed costs

Question 46

An increase in direct labor cost per unit ________.

A)increases the fixed cost
B)increases profits
C)increases the variable cost
D)increases overhead costs

Question 47

The formula for the predetermined indirect cost rate is:

A)Budgeted annual indirect costs divided by actual quantity of cost-allocation base
B)Budgeted annual indirect costs divided by budgeted annual quantity of cost-allocation base
C)Actual annual indirect costs divided by budgeted annual quantity of cost-allocation base
D)Actual annual indirect costs divided by actual annual quantity of cost-allocation base

Question 48

In a job-costing system,a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job.

A)direct materials
B)direct labor
C)manufacturing overhead costs
D)total costs

Question 49

Fixed costs remain constant at $450,000 per month.During high-output months variable costs are $300,000,and during low-output months variable costs are $125,000.What are the respective high and low indirect-cost rates if budgeted professional labor-hours are 24,000 for high-output months and 5,000 for low-output months?

A)$31.25 per hour;$115.00 per hour
B)$31.25 per hour;$31.25 per hour
C)$18.75 per hour;$25.00 per hour
D)$12.50 per hour;$115.00 per hour

Question 50

The actual indirect-cost rate is calculated by dividing actual total indirect costs by the budgeted total quantity of the cost-allocation base.

Question 51

Smith Office Equipment Company's budgeted manufacturing overhead is $5,400,000.Overhead is allocated on the basis of direct labor hours.The budgeted direct labor hours for the period are 30,000.What is the manufacturing overhead rate?

A)$15.00
B)$54.00
C)$195.00
D)$180.00

Question 52

A job that shows low profitability may be the result of ________.

A)excessive usage of direct materials
B)inefficient direct manufacturing labor
C)overpricing the job
D)insurance claim of the damaged goods

Question 53

A manufacturer estimates that it will incur variable indirect costs for the month of October of $70,000 and $30,000 of fixed costs.The company uses direct labor hours to calculate the predetermined overhead rate and predicted that 3,000 direct labor hours would be used in October.Actual direct labor hours amounted to 3,200.
Required:

A)What is the variable predetermined indirect rate for October?
B)What is the fixed predetermined indirect cost rate for October?
C)What is the total allocation rate per direct labor hour for October?

Question 54

A job-cost sheet details the ________.

A)direct materials purchased and paid
B)direct labor costs incurred
C)indirect labor costs incurred
D)actual indirect overhead costs incurred

Question 55

If indirect-cost rates are calculated monthly,distortions might occur because of ________.

A)rental costs paid monthly
B)property tax payments made in July and December
C)routine monthly preventive-maintenance costs that benefit future months
D)salary hikes at the beginning of the financial year

Question 56

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

A)an information data bank
B)computer programs
C)source documents
D)time surveys

Question 57

The budgeted indirect-cost rate for each cost pool is computed as ________.

A)budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base
B)budgeted annual quantity of cost allocation base divided by budgeted annual indirect costs
C)actual annual indirect costs divided by budgeted annual quantity of cost allocation base
D)budgeted annual indirect costs divided by budgeted actual quantity of cost allocation base

Question 58

A job-cost record uses information from ________.

A)a materials-requisition record to record raw material purchases from suppliers
B)a materials-requisition report to record the type and quantity of item received in an order from a supplier
C)a labor-time card to record an employee's wage rate and hours spent on a particular job
D)the bill of materials to ensure the goods are of the prescribed quality

Question 59

________ is used to record and accumulate all the costs assigned to a specific job.

A)Job-cost record
B)Materials-requisition record
C)Cost-allocation base
D)Labor-requisition record

Question 60

The basic source document for direct manufacturing labor is the ________.

A)job-cost record
B)materials-requisition record
C)labor-time record
D)labor-requisition record

Question 61

Each cost pool will have one cost-allocation base.

Question 62

One reason for using longer time periods to calculate indirect-cost rates is seasonal cost fluctuations.

Question 63

Grounds-maintenance costs incurred during the summer months will distort indirect-cost rates that are computed monthly.

Question 64

Rally Company manufactures garage storage systems for homeowners.It uses a normal costing system with two direct cost categories - direct materials and direct labor - an one indirect-cost pool,manufacturing overhead costs.
For 2018:
Budgeted manufacturing overhead costs $1,000,000
Budgeted manufacturing labor-hours 20,000 hours
Actual manufacturing overhead costs $1,100,000
Actual direct manufacturing labor-hours 22,000
Actual direct material costs $10,000
Actual direct manufacturing labor hours 200
Actual direct manufacturing labor rate $20 per hour
Required:
Calculate the total manufacturing costs using normal costing.

Question 65

In job costing,only direct costs are used to determine the cost of a job.

Question 66

If indirect-cost rates were based on actual short-term usage,periods of lower demand would result in lower costs per unit.

Question 67

What are the direct costs of a job and in which source documents are they recorded?

Question 68

Companies often use multiple cost-allocation bases to allocate indirect costs because different indirect costs have different cost drivers.

Question 69

A materials-requisition record is an example of a source document.

Question 70

Smith and Jones CPA firm employs 12 accountants and 10 paraprofessionals.Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours.Following is information for 2018:

What are the actual direct-cost rate and the actual indirect-cost rate,respectively,per professional labor-hour?

A)$63.60;$11.60
B)$70.00;$14.50
C)$79.50;$12.40
D)$63.60;$12.40

Question 71

What is the difference between an actual cost system and a normal cost system?

Question 72

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

Question 73

The budgeted indirect-cost rate is calculated ________.

A)at the beginning of the year
B)during the year
C)at the end of each quarter
D)at the end of the year

Question 74

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 labor
d.indirect manufacturing labor
e.finished goods control
f.cost of goods sold

Question 75

For 2018,Winters Manufacturing uses machine-hours as the only overhead cost-allocation base.The direct cost rate is $2.00 per unit.The selling price of the product is $27.00.The estimated manufacturing overhead costs are $220,000 and estimated 20,000 machine hours.The actual manufacturing overhead costs are $225,000 and actual machine hours are 25,000.What is the profit margin earned if each unit requires two machine-hours?

A)45.00%
B)25.93%
C)50.00%
D)90.00%

Question 76

Indirect manufacturing costs should be allocated equally to each job.

Question 77

All costs other than direct materials and direct manufacturing labor are classified as indirect costs.

Question 78

Francis and Hartley Law Office employs 12 full-time attorneys and 10 paraprofessionals.Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours.Following is information for 2018:

How much should the client be billed in an actual costing system if 220 professional labor-hours are used?

A)$5,940
B)$7,744
C)$8,228
D)$7,040

Question 79

Normal costing is a method of job costing that allocates an indirect cost based on the actual indirect-cost rate times the actual quantity of the cost-allocation base.

Question 80

Better Products Company manufactures insulation and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $18 per direct labor-hour.The following data are obtained from the accounting records for October 2018:

The actual amount of manufacturing overhead costs incurred in October 2018 totals ________.

A)$277,500
B)$116,000
C)$162,000
D)$123,000