Deck 20: Costing Systems: Job Order Costing

Question 1

The production process determines the product costing system needed.

Answer 1

True

Question 2

Job order cost cards for incomplete jobs make up the subsidiary ledger for the Finished Goods Inventory account.

Answer 2

False

Question 3

In a job order costing system, at the end of the accounting period, the balance in the subsidiary ledger for unfinished jobs should equal the ending balance in the Work in Process Inventory account.

Answer 3

True

Question 4

In a process costing system, each product is assigned the same amount of costs.

Question 5

In a process costing system, product costs are traced to individual products.

Question 6

Unlike a job order costing system, a process costing system is not restricted to one Work in Process Inventory account.

Question 7

Unique products are produced in a continuous flow production process.

Question 8

In a job order costing system, when overhead costs are applied, they increase the Work in Process Inventory account.

Question 9

The typical product costing system in a factory incorporates parts of both job order costing and process costing to create a hybrid system.

Question 10

Companies that produce custom-made products usually use a process costing system.

Question 11

The types of computations for costs to be transferred out of Work in Process Inventory differ if the production process involves multiple departments rather than a single department.

Question 12

A process costing system is used by companies that manufacture large amounts of similar products or liquid products.

Question 13

In a job order costing system, product costs are traced to work cells.

Question 14

Few actual production processes fit the definitions of job order costing or process costing exactly.

Question 15

A basic part of a job order costing system is the set of procedures and entries used to record the costs incurred for materials, labor, and overhead.

Question 16

Costs for individual jobs are maintained on job order cost cards when job order costing is in use.

Question 17

A company that manufactures potato chips would probably use a process costing system.

Question 18

In a job order costing system, the Factory Payroll account is a clearing account.

Question 19

Job order costing is used by companies that make large or unique products.

Question 20

When a job has been completed, all of the costs assigned to that job order are moved to the Finished Goods Inventory account.

Question 21

In a job order costing system, indirect labor costs are transferred to the Overhead account by increasing the Factory Payroll account and decreasing the Overhead account.

Question 22

In a job order costing system, a separate job order cost card is used for each individual job.

Question 23

In a job order costing system, indirect labor costs incurred are charged to the Work in Process Inventory account.

Question 24

In a job order costing system, when the goods are sold, the Cost of Goods Sold account is increased, and the Finished Goods Inventory account is decreased for the selling price of the goods sold.

Question 25

If applied overhead exceeds actual overhead, cost of goods sold must be reduced by the amount of the overcharge in a job order costing system.

Question 26

A zero balance in Finished Goods Inventory at the start of the period means all previously completed products have been shipped.

Question 27

A job order cost card is a type of subsidiary ledger.

Question 28

Accounting for the incurrence of __________ does not change significantly between job order costing and process costing.

A) selling expenses
B) direct materials and conversion costs
C) direct materials costs
D) conversion costs

Question 29

The ending balance in the Work in Process Inventory account is supported by individual Overhead account balances.

Question 30

After a job is completed, the product unit cost can be determined from the job order cost card.

Question 31

To prepare financial statements at the end of the accounting period, the actual overhead cost for the period and the estimated overhead that was applied during the period must be reconciled in a job order costing system.

Question 32

Product costs appear on the income statement in the form of

A) cost of goods sold.
B) materials inventory.
C) sales commissions.
D) none of these.

Question 33

Regardless of the cost accounting system used, when the products are completed, they are transferred from work in process inventory to finished goods inventory.

Question 34

In a job order costing system, the transfer of overhead costs to the Work in Process Inventory account must take place before product unit costs can be computed.

Question 35

A company should use process costing rather than job order costing if

A) production is only partially completed during the accounting period.
B) the product is produced in batches only as orders are received.
C) the product is composed of mass-produced homogeneous units.
D) the product goes through single stage of production.

Question 36

Job costs in a service organization end up in the Finished Goods Inventory account when a job is completed.

Question 37

In a service organization using a job order costing system, actual overhead will be the same as applied overhead.

Question 38

In cost-plus contracts, the "plus" is the sales price.

Question 39

The type of product costing system used by a company is dictated by the

A) project manager.
B) production process.
C) company president.
D) plant supervisor.

Question 40

In a job order costing system, when supplies are issued from inventory to production, the Overhead account is increased.

Question 41

Which of the following is not a characteristic of a process costing system?

A) A specific time period is used.
B) Several Work in Process Inventory accounts are used.
C) Product costs are grouped by processes, departments, or work cells.
D) Customized products are manufactured.

Question 42

Which of the following characteristics applies to process costing, but does not apply to job order costing?

A) The need for averaging
B) The use of equivalent units
C) Separate, identifiable jobs
D) The use of predetermined overhead rates

Question 43

If there is a credit balance in the Factory Payroll Payable at the end of the accounting period, it represents

A) the amount by which applied payroll was greater than actual payroll.
B) the amount by which actual payroll was greater than applied payroll.
C) labor costs which have not yet been distributed.
D) an amount that should be charged to Cost of Goods Sold.

Question 44

When Dimock Construction's Designer House #10 is completed, Dimock's

A) work in process is increased.
B) total assets are increased.
C) work in process is decreased.
D) total assets are decreased.

Question 45

Which of the following products probably would be produced by a company using a process costing system?

A) A house
B) A customized ice cream
C) Paper
D) A movie

Question 46

The basic document for keeping track of costs in a job order costing system is a

A) job order cost card.
B) labor time card.
C) process cost report.
D) materials requisition form.

Question 47

Which of the following products probably would be manufactured using a job order costing system?

A) Paper
B) Baseball
C) Computer monitors
D) Company business cards

Question 48

Which of the following is not an objective of product costing systems?

A) To provide information for cost planning
B) To assist in the preparation of the income statement
C) To determine the optimal amount of products to manufacture
D) To provide information for product pricing

Question 49

A process costing system accounts for product costs

A) for a specific period of time.
B) almost always in a single Work in Process Inventory account.
C) without regard to the process that created the cost.
D) for specific orders.

Question 50

The total of the dollar amounts on the job order cost cards that have not been completed would be equal to the

A) cost of goods completed.
B) balance in the Finished Goods Inventory account.
C) Cost of Goods Sold account.
D) balance in the Work in Process Inventory account.

Question 51

If the applied overhead is more than actual overhead by an immaterial dollar amount, which of the following is part of the entry?

A) A credit to the Overhead account
B) A debit to the Overhead account
C) A debit to the Cost of Goods Sold account
D) A debit to the Work in Process Inventory account

Question 52

Which of the following accurately describes a difference between job order and process costing systems?

A) In job order costing systems, overhead costs are treated as product costs, whereas in process costing systems, overhead costs are treated as period costs.
B) Job order costing systems do not need to assign costs to production, whereas process costing systems do.
C) In job order costing systems, costs are traced to a specific job order, whereas in process costing systems, costs are traced to work cells and then assigns costs to products manufactured.
D) Since costs are assigned to products in a job order costing system, selling costs are treated as period costs in the job order costing system, whereas they are treated as product costs in process costing systems.

Question 53

Which of the following entities probably would use a process costing system?

A) An oil refinery
B) A yacht builder
C) A custom furniture company
D) A custom screw manufacturer

Question 54

Applied overhead exceeds actual overhead when the

A) Overhead account has a credit balance.
B) journal entry to account for the difference involves a debit to Cost of Goods Sold.
C) Overhead account has a debit balance.
D) company has overspent in the overhead cost area.

Question 55

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

A) Uses only one Work in Process Inventory account
B) Uses job cost cards to keep track of each job in process
C) Assigns costs to specific batches of products
D) Measures costs for a set time period

Question 56

Process costing is applicable to production operations that

A) utilize several processes, departments, or work cells in a series.
B) do not assign overhead costs to operations.
C) produce products that are made to order.
D) are found in only a few industries.

Question 57

Under a job order costing system, the dollar amount of the entry involved in the transfer of goods from work in process to finished goods is the total of the costs charged to all jobs

A) started during the period.
B) completed and sold during the period.
C) completed during the period.
D) started and completed during the period.

Question 58

Which of the following items most likely would be manufactured using a process costing system?

A) Income tax services
B) Soup
C) A hotel
D) Wedding invitations

Question 59

Costs assigned to the building of a house should appear on the income statement when

A) the house is completed.
B) the house is sold.
C) the purchase order to manufacture the house is received.
D) cash is collected for the sale of the house.

Question 60

When the amount of overhead applied differs from actual, if it is an insignificant dollar amount it is usually written off to

A) Cost of Goods Sold.
B) Work in Process Inventory.
C) Finished Goods Inventory.
D) Miscellaneous Expense.

Question 61

The following partially completed T accounts summarize the transactions of Carlton Company for last year: The cost of direct materials used in production is

A) $12,000.
B) $13,000.
C) $16,000.
D) $20,000.

Question 62

The balance in the Work in Process account equals the

A) balance in the Finished Goods Inventory account.
B) balance in the Cost of Goods Sold account.
C) balances on the job cost sheets of uncompleted jobs.
D) balance in the Overhead account.

Question 63

The following partially completed T accounts summarize the transactions of Carlton Company for last year: The indirect labor cost is

A) $6,000.
B) $13,000.
C) $16,000.
D) $31,000.

Question 64

The following partially completed T accounts summarize the transactions of Carlton Company for last year: The applied overhead is

A) $28,000.
B) $29,000.
C) $30,000.
D) $40,000.

Question 65

The Work in Process Inventory account for Corbett Company for the month ended June 30 appears below.
Overhead is applied based on direct labor dollars. Direct material costs for the one job remaining in work in process on June 30 was $12,300.
a. What was the overhead rate used to apply overhead to jobs?
b. Determine the amount of direct labor charged to the one remaining job.

Question 66

Service organizations incur little or no cost for

A) applied overhead.
B) actual overhead.
C) materials.
D) labor.

Question 67

The balance in the Work in Process Inventory account on April 1 was $25,000, and the balance on April 30 was $22,600. Costs incurred during the month were as follows: direct materials, $41,250; direct labor, $21,300; and overhead, $32,600. What amount was transferred to the Finished Goods Inventory account for April?

A) $97,550
B) $2,400
C) $88,550
D) $120,150

Question 68

Which of the following could not be learned by analyzing job order cost cards?

A) The balance of Work in Process Inventory at the end of the period
B) The cost of all jobs done for a particular customer
C) The completion time of jobs yet to be completed
D) The type of products ordered by a particular customer

Question 69

Pretty Pillows, Mfg., manufactures silk throw pillows. Last month the company produced 3,890 pillows. Using job order costing, determine the product unit cost for one pillow based on the following costs: production facility utilities, $1,600; depreciation on production equipment, $650; indirect materials, $400; direct materials, $5,300; indirect labor, $1,000; direct labor, $3,500; sales commissions, $4,000; president's salary, $8,000; insurance on production facility, $1,000; advertising expense, $900; rent on production facility, $6,000; rent on sales office, $4,000; and legal expense, $600. Carry your answer to two decimal places.

Question 70

When a job is completed in a service organization, the job costs are transferred to the

A) Work in Process Inventory account.
B) Finished Goods Inventory account.
C) Cost of Goods Sold account.
D) Cost of Services account.

Question 71

The following information is available at the end of May: If $72,400 of materials were charged to Job 88's job cost card, how much overhead was applied to Job 88?

A) $35,100
B) $70,000
C) $72,400
D) $120,000

Question 72

Explain the similarities and differences between job order costing and process costing. Focus on the characteristics of each type of system.

Question 73

The following information is available at the end of the period for the completed Job 713: What is the unit cost for Job 713?

A) $3.76
B) $3.71
C) $3.82
D) $3.91

Question 74

The following partially completed T accounts summarize the transactions of Carlton Company for last year: The cost of goods sold (after adjusting for under- or overapplied overhead) is

A) $62,300.
B) $63,300.
C) $64,300.
D) $65,300.

Question 75

When direct materials are issued from inventory to production under a job order costing system, an increase is recorded in

A) Overhead.
B) Work in Process Inventory.
C) Materials Inventory.
D) Finished Goods Inventory.

Question 76

The following partially completed T accounts summarize the transactions of Carlton Company for last year: The cost of goods manufactured is

A) $57,300
B) $59,300
C) $60,300
D) $61,300

Question 77

The _________ provide(s) the most direct means of calculating unit costs for a job.

A) job order cost card
B) Finished Goods Inventory account
C) general ledger
D) Overhead and Work in Process Inventory accounts

Question 78

Teddy's To Hug, produces Teddy Bears for heart patients. Last month the company produced 5,000 bears. Using job order costing, determine the product unit cost for one bear based on the following costs: production facility utilities, $600; depreciation on production equipment, $550; indirect materials, $450; direct materials, $1,300; indirect labor, $900; direct labor, $2,500; sales commissions, $3,000; president's salary, $5,000; insurance on production facility, $700; advertising expense, $600; rent on production facility, $5,000; rent on sales office, $3,000; and legal expense, $300. Carry your answer to two decimal places.

Question 79

Unit costs for each job are computed by dividing

A) estimated total costs by planned units to be produced.
B) actual costs by actual units sold.
C) cost of direct materials, direct labor, and overhead by number of units produced.
D) estimated total costs by actual units produced.

Question 80

In a job order costing system, the subsidiary ledger for the Work in Process Inventory account consists of

A) time cards.
B) conversion cost cards.
C) job order cost cards.
D) product cost cards.