Deck 5: Job Costing

Question 1

Allocated overhead generally does not accurately measure a job's overhead resources.

Answer 1

True

Question 2

A separate cost allocation base must be chosen for each job in a job costing system.

Answer 2

False

Question 3

Information from job costing systems is subject to uncertainties and implementing a job costing system requires judgment.

Answer 3

True

Question 4

Job costing can be used in both manufacturing and service organizations.

Question 5

The first step in overhead allocation is to identify the cost object.

Question 6

When goods are customized, all costs are easily traced to individual cost objects.

Question 7

A "job" refers to a group of individual overhead costs that are accumulated for a particular purpose.

Question 8

In actual costing systems, overhead is allocated using the following formula: actual allocation base volume  actual allocation rate.

Question 9

One of the primary differences between actual and normal costing systems is their treatment of direct material and direct labour costs.

Question 10

In a job costing system, costs are very accurate because jobs are customized.

Question 11

In a job costing system, costs flow out of work-in-process into finished goods inventory.

Question 12

Direct costs are subject to less uncertainty than indirect costs in a job costing system, but managers still exercise judgment regarding direct cost tracing.

Question 13

Because overhead costs are allocated in a job costing system they can be considered "variable" for the purpose of decision making.

Question 14

Overhead allocation is the process of tracing costs to products or services.

Question 15

In normal costing systems, overhead is allocated using the following formula: normal allocation base volume  normal allocation rate.

Question 16

Overhead is typically allocated to jobs in a job costing system, rather than being traced directly.

Question 17

Direct material and direct labour costs are typically traced to individual jobs in a job costing system.

Question 18

Both actual costing and normal costing systems use the actual quantity of the allocation base to assign overhead costs to jobs.

Question 19

Actual costing and normal costing are two different names for the same overhead allocation system.

Question 20

Identifying a cost driver is the first step in allocating overhead in a job costing system.

Question 21

Kelita's Kar Kare Kompany had the following cost and inventory data for the month: Costs incurred for the month:
Direct labour $6,900
Indirect labour 1,500
Direct materials purchased 4,500
Factory utilities 2,200
Factory amortization 3,000
Factory supervision 1,200
Inventories:
Ending Beginning
Direct materials $1,500 $1,800
Work in process 4,500 4,050
Finished goods 6,000 5,250
What were the direct materials available for the month?

A)$4,500
B)$6,000
C)$6,300
D)$7,800

Question 22

Spoilage is typically identified as part of the overhead allocation process.

Question 23

Kelita's Kar Kare Kompany had the following cost and inventory data for the month: Costs incurred for the month:
Direct labour $6,900
Indirect labour 1,500
Direct materials purchased 4,500
Factory utilities 2,200
Factory amortization 3,000
Factory supervision 1,200
Inventories:
Ending Beginning
Direct materials $1,500 $1,800
Work in process 4,500 4,050
Finished goods 6,000 5,250
Assume that the total production costs incurred for the month were $15,000. What was the cost of jobs completed?

A)$14,550
B)$19,050
C)$15,000
D)$15,450

Question 24

Direct Direct Direct Materials Labour Cost Labour Hours
Job 200 $ 500 $800 40
Job 201 350 200 10
Job 202 1,000 600 30
Franks Fabricating uses job costing and applies overhead using a normal costing system and uses direct labour cost as the allocation base. This period's estimated overhead cost is $100,000 and estimated direct labour cost of $50,000 and 2,500 direct labour hours.
What is the total manufacturing cost of Job 201?

A)$550
B)$950
C)$850
D)$1,500

Question 25

Reworked units can always be sold at the regular market price.

Question 26

Accounting processes influence manager behaviour in many organizations.

Question 27

Kelita's Kar Kare Kompany had the following cost and inventory data for the month: Costs incurred for the month:
Direct labour $6,900
Indirect labour 1,500
Direct materials purchased 4,500
Factory utilities 2,200
Factory amortization 3,000
Factory supervision 1,200
Inventories:
Ending Beginning
Direct materials $1,500 $1,800
Work in process 4,500 4,050
Finished goods 6,000 5,250
What were the direct costs of production incurred during the month?

A)$12,000
B)$11,700
C)$10,200
D)$10,500

Question 28

Direct Direct Direct Materials Labour Cost Labour Hours
Job 200 $ 500 $800 40
Job 201 350 200 10
Job 202 1,000 600 30
Franks Fabricating uses job costing and applies overhead using a normal costing system and uses direct labour cost as the allocation base. This period's estimated overhead cost is $100,000 and estimated direct labour cost of $50,000 and 2,500 direct labour hours.
What is the overhead allocation rate?

A)200%
B)50%
C)30%
D)60%

Question 29

Direct Direct Direct Materials Labour Cost Labour Hours
Job 400 $200 $800 40
Job 401 250 200 10
Job 402 500 600 32
Sparkle Company uses job costing and applies overhead using an actual costing system using direct labour hours as the allocation base. This period's estimated overhead cost is $400,000, estimated direct labour cost is $500,000 and estimated direct labour hours are 25,000. This period's actual overhead cost was $420,000, actual direct labour cost was $390,000, and actual direct labour hours were 20,000.
What is the overhead allocation rate?

A)$21/hour
B)$10/hour
C)$16/hour
D)$18/hour

Question 30

Direct Direct Direct Materials Labour Cost Labour Hours
Job 400 $200 $800 40
Job 401 250 200 10
Job 402 500 600 32
O'Hare Sisters Manufacturing uses job costing and applies overhead using a normal costing system using direct labour hours as the allocation base. This period's estimated overhead cost is $400,000, estimated direct labour cost is $500,000 and estimated direct labour hours are 25,000. This period's actual overhead cost was $420,000, actual direct labour cost was $390,000, and actual direct labour hours were 20,000.
What is the total manufacturing cost of Job 400?

A)$1,200
B)$1,000
C)$1,320
D)$1,640

Question 31

Spoilage, rework, and scrap are irrelevant in job costing systems.

Question 32

Direct Direct Direct Materials Labour Cost Labour Hours
Job 400 $200 $800 40
Job 401 250 200 10
Job 402 500 600 32
Sparkle Company uses job costing and applies overhead using an actual costing system using direct labour hours as the allocation base. This period's estimated overhead cost is $400,000, estimated direct labour cost is $500,000 and estimated direct labour hours are 25,000. This period's actual overhead cost was $420,000, actual direct labour cost was $390,000, and actual direct labour hours were 20,000.
What is the total manufacturing cost of Job 402?

A)$1,100
B)$1,772
C)$1,320
D)$1,640

Question 33

Only spoiled goods are reworked.

Question 34

Professional Other Direct Professional Labour Cost Costs Labour Hours
Client 57 $2,000 $800 20
Client 58 1,000 200 10
Client 59 5,000 600 50
Allen's Accounting Services uses job costing and applies overhead using a normal costing system using professional labour hours as the allocation base. This period's estimated overhead cost is $400,000, estimated professional labour cost is $800,000 and estimated direct labour hours are 8,000. This period actual overhead cost was $426,400, actual direct labour cost was $820,000, and actual direct labour hours were 8,200.
What is the total cost for Client 58?

A)$1,300
B)$1,200
C)$1,720
D)$1,700

Question 35

Quality initiatives have both quantitative and qualitative benefits.

Question 36

Professional Other Direct Professional Labour Cost Costs Labour Hours
Client 57 $2,000 $800 20
Client 58 1,000 200 10
Client 59 5,000 600 50
Allen's Accounting Services uses job costing and applies overhead using a normal costing system using professional labour hours as the allocation base. This period's estimated overhead cost is $400,000, estimated professional labour cost is $800,000 and estimated direct labour hours are 8,000. This period actual overhead cost was $426,400, actual direct labour cost was $820,000, and actual direct labour hours were 8,200.
What is the overhead allocation rate?

A)$60/hour
B)$55/hour
C)$52/hour
D)$50/hour

Question 37

Although they may be significant in amount, quality costs are often measured imprecisely.

Question 38

Direct Direct Direct Materials Labour Cost Labour Hours
Job 400 $200 $800 40
Job 401 250 200 10
Job 402 500 600 32
O'Hare Sisters Manufacturing uses job costing and applies overhead using a normal costing system using direct labour hours as the allocation base. This period's estimated overhead cost is $400,000, estimated direct labour cost is $500,000 and estimated direct labour hours are 25,000. This period's actual overhead cost was $420,000, actual direct labour cost was $390,000, and actual direct labour hours were 20,000.
What is the overhead allocation rate?

A)$21/hour
B)$10/hour
C)$16/hour
D)$18/hour

Question 39

Scrap can be sold, discarded, or used in other creative ways.

Question 40

Potential loss of reputation and market share are opportunity costs of spoilage and rework.

Question 41

Which costing system does not include over- or underapplied overhead?

A)Actual costing system
B)Normal costing system
C)Process costing system
D)Activity-based costing system

Question 42

Assume that variable overhead is overapplied by $200 and fixed overhead is underapplied by $100. If these variances are considered immaterial, the effect on cost of goods sold is:

A)$300 increase
B)$100 increase
C)$300 decrease
D)$100 decrease

Question 43

Kelita's Kar Company projects the following costs: Direct material $300,000
Direct labour 500,000
Indirect labour wages 50,000
Sales commissions 30,000
Production foremen salaries 75,000
Production equipment leases 125,000
Production amortization 60,000
Property taxes-plant 25,000
If overhead is allocated on the basis of direct labour hours and 25,000 direct labour hours are budgeted for next year, the estimated overhead allocation rate will be

A)$13.40 per direct labour hours
B)$14.60 per direct labour hours
C)$12.40 per direct labour hours
D)$33.40 per direct labour hours

Question 44

Allen, Inc. has budgeted $120,000 in variable overhead and $72,000 in fixed overhead for the current month. 8,000 custom units were expected to be produced using 60,000 machine hours. During the month, Allen actually used 68,096 machine hours and produced 8,960 units. Actual overhead costs were: $132,000 variable and $73,600 fixed. Assume Allen uses a normal costing system. The variable overhead allocated would be:

A)$136,192
B)$132,000
C)$134,400
D)$120,000

Question 45

Allen, Inc. has budgeted $120,000 in variable overhead and $72,000 in fixed overhead for the current month. 8,000 custom units were expected to be produced using 60,000 machine hours. During the month, Allen actually used 68,096 machine hours and produced 8,960 units. Actual overhead costs were: $132,000 variable and $73,600 fixed. Assume Allen uses an actual costing system. The amount of over- or underapplied overhead for the current month is:

A)$9,440 overapplied
B)$12,307 overapplied
C)$0
D)$13,600 overapplied

Question 46

A firm had the following balances at the end of the period Work in process $400
Finished goods 600
Cost of goods sold 1,000
Overapplied overhead 400
It was determined that the overapplied overhead should be treated as immaterial. After any adjustments for overapplied overhead are made, the balance of work in process would be:

A)$320
B)$400
C)$480
D)$534

Question 47

In a normal costing system, which of the following costs are traced to each job? Direct Materials Direct Labour

A)Yes Yes
B)No Yes
C)No No
D)Yes No

Question 48

For which costing system is overhead allocated on the basis of the actual direct labour hours worked?

A)Actual costing system
B)Normal costing system
C)Process costing system
D)Activity-based costing system

Question 49

In an actual costing system, the overhead allocation rate is calculated as:

A)Actual overhead cost + actual quantity of allocation base
B)Actual overhead cost  actual quantity of allocation base
C)Actual quantity of allocation base  actual overhead cost
D)Actual overhead cost  standard quantity of allocation base

Question 50

Normal costing overhead rates are developed at the beginning of each period based on the:

A)Actual overhead costs of the previous period
B)Actual activity level of the previous period
C)Direct labour hours at maximum capacity
D)Expected activity level of the coming period

Question 51

Asadi Company uses a job costing system and allocates overhead using an estimated overhead allocation rate based on direct labour hours. Information for 20x5 is as follows: Estimated Actual
Manufacturing overhead $166,500 $165,000
Direct labour hours 50,000 60,000
The overhead allocated to work in process during 20x5 before the year-end adjustment was:

A)$199,800
B)$165,000
C)$166,500
D)$198,000

Question 52

For which of the following products would a job costing system be appropriate?

A)Brewery, where each brand is produced in a separate batch process
B)Jewellery store that manufactures and sells handcrafted jewellery
C)Cement kiln, where a single identical type of cement product is manufactured
D)Chemical plant, where each polymer is produced in a separate continuous process

Question 53

Asadi Company uses a job costing system and allocates overhead using an estimated overhead allocation rate based on direct labour hours. Information for 20x5 is as follows: Estimated Actual
Manufacturing overhead $166,500 $165,000
Direct labour hours 50,000 60,000
The amount of over- or underapplied overhead for 20x5 was:

A)$1,500 underapplied
B)$3,000 underapplied
C)$1,500 overapplied
D)$34,800 overapplied

Question 54

Kelita's Kar Kare Kompany had the following cost and inventory data for the month: Costs incurred for the month:
Direct labour $6,900
Indirect labour 1,500
Direct materials purchased 4,500
Factory utilities 2,200
Factory amortization 3,000
Factory supervision 1,200
Inventories:
Ending Beginning
Direct materials $1,500 $1,800
Work in process 4,500 4,050
Finished goods 6,000 5,250
Assume that total production costs incurred for the month were $15,000. What was the cost of goods sold?

A)$13,800
B)$15,300
C)$19,800
D)$20,550

Question 55

A costing system that charges jobs with actual direct costs and uses an estimated overhead allocation rate is called a(n):

A)Actual costing system
B)Normal costing system
C)Process costing system
D)Activity-based costing system

Question 56

The denominator in an overhead allocation rate for normal costing is:

A)Actual overhead costs
B)Estimated activity level
C)Estimated overhead costs
D)Actual activity level

Question 57

When overhead is underapplied:

A)Cost of goods sold is understated
B)Work in process inventory is overstated
C)Gross profit is understated
D)Finished goods inventory is overstated

Question 58

Following are the budgeted costs for a manufacturing plant producing custom products: Materials (70% direct and 30% indirect)$15,000
Labour (60% direct and 40% indirect)12,000
Supervision 5,000
Amortization 10,000
Utilities 4,860
Total $46,860
The company uses a normal costing system and overhead is allocated on the basis of direct labour cost. If actual direct labour cost was $7,500, the overhead allocated was:

A)$29,160
B)$20,688
C)$30,375
D)$48,813

Question 59

Assume there is $2,000 of overapplied fixed overhead, which is to be prorated. Current balances of selected accounts are: Work in process $15,000
Finished goods 25,000
Cost of goods sold 60,000
The adjusting journal entry is:

A)Overapplied fixed overhead 2,000 Work in process 300
Finished goods 500
Cost of goods sold 1,200
B)Work in process 300 Finished goods 500
Cost of goods sold 1,200
Overapplied fixed overhead 2,000
C)Fixed overhead control 2,000 Work in process 300
Finished goods 500
Cost of goods sold 1,200
D)Work in process 300 Finished goods 500
Cost of goods sold 1,200
Fixed overhead allocated 2,000

Question 60

Asadi Company uses a job costing system and allocates overhead using an estimated overhead allocation rate based on direct labour hours. Information for 20x5 is as follows: Estimated Actual
Manufacturing overhead $166,500 $165,000
Direct labour hours 50,000 60,000
The estimated overhead allocation rate for 20x5 was:

A)$2.75
B)$3.30
C)$3.33
D)$2.76

Question 61

Rework costs are:

A)Always tracked
B)Never tracked
C)Sometimes tracked
D)Deferred until the cash cycle is complete

Question 62

Units of product that are unacceptable and are either discarded or sold at a reduced price are called:

A)Scrap
B)Rework
C)Spoilage
D)Work in process

Question 63

The cost of normal spoilage arising from a production process common to several jobs is:

A)Written off as a period expense
B)Charged to overhead for the jobs with the greatest total cost
C)Charged to overhead for the jobs with the least total cost
D)Charged to overhead and allocated with other overhead costs to all jobs

Question 64

Spoiled units that are repaired and sold as if they were originally produced correctly are called:

A)Rework
B)Scrap
C)Normal spoilage
D)Abnormal spoilage

Question 65

An out-of-control manufacturing process is most likely to produce:

A)Normal spoilage
B)Abnormal spoilage
C)Finished goods
D)Research and development expense

Question 66

Which of the following statements regarding overhead allocation is true?

A)Actual job costs are almost always higher than estimated job costs
B)Actual job costs are almost always lower than estimated job costs
C)Actual job costs are almost always the same as estimated job costs
D)Actual job costs are almost always different from estimated job costs

Question 67

How is spoilage typically identified?

A)Through analysis at the account level
B)Through an inspection process
C)By regression analysis
D)By using a scatter plot

Question 68

If the cost of rework is tracked, it is recorded in the accounting system in the same manner as:

A)A period cost
B)Spoilage
C)Scrap
D)A deferred asset

Question 69

With respect to the uses and limitations of job costing information, accountants' responsibilities include:

A)Eliminating uncertainty
B)Educating managers about appropriate information use
C)Eliminating biases
D)Classifying fixed costs as variable whenever possible

Question 70

Managers reconcile actual and allocated overhead when they use this job costing system:

A)Actual
B)Normal
C)Relevant
D)Product

Question 71

In a normal costing system, the overhead allocation rate is calculated as

A)Estimated overhead cost / estimated quantity of allocation base
B)Estimated overhead cost / actual quantity of allocation base
C)Actual overhead cost / actual quantity of allocation base
D)Actual overhead cost / estimated quantity of allocation base

Question 72

Which of the following statements regarding the uses and limitations of job costing is true?

A)Overhead is allocated to match revenues and costs
B)Most overhead costs are relevant for short-term decisions
C)Managers frequently assume variable overhead costs are fixed
D)Overhead costs are not relevant for most short-term decisions

Question 73

In a normal costing system, an immaterial amount of overapplied overhead is allocated 100% to:

A)Work in process
B)Finished goods
C)Retained earnings
D)Cost of goods sold

Question 74

Which of the following statements regarding the uses and limitations of job costing is true?

A)Job costs are measured accurately
B)The total job cost of an individual unit is an incremental cost, that is, it does not include average costs of any type
C)Developing information within job costing systems requires judgment
D)Job costing systems are not subject to uncertainties

Question 75

Bits of direct material left over from normal manufacturing processes are called:

A)Scrap
B)Normal spoilage
C)Abnormal spoilage
D)Rework

Question 76

Abnormal spoilage is recorded in a Loss from Abnormal Spoilage account so that managers can:

A)Monitor abnormal spoilage problems
B)Hide them on the income statement
C)Minimize income taxes
D)Decide later which jobs to assign it to

Question 77

Jerry and Damien are partners in a house-painting business. Which of the following costs is subject to the least uncertainty for a specific painting job?

A)Cost of supervisory labour
B)Amortization on company vehicle
C)Cost of fuel used to drive to a specific job site
D)All of the preceding costs involve uncertainty

Question 78

Managers use judgment in job costing systems to decide:

A)Whether to use any source documents
B)Which direct costs to trace to a job
C)Which indirect costs to trace to a job
D)Which fixed costs to trace to a job

Question 79

Job costing information can be used to:
I) Report inventory and cost of goods sold on financial statements
II) Estimate average costs for future jobs
III) Report the costs of marketing for a product

A)I and II only
B)II and III only
C)I and III only
D)I, II, and III

Question 80

Managers use estimates in job costing systems to:
I) Establish a bid for a job
II) Decide whether to accept a job
III) Monitor actual operations

A)I and II only
B)I and III only
C)II and III only
D)I, II, and III