Deck 19: Job Order Costing

Question 1

Perpetual inventory controlling accounts and subsidiary ledgers are maintained for materials, work in process, and finished goods in cost accounting systems.

Answer 1

True

Question 2

Materials are transferred from the storeroom to the factory in response to materials requisitions.

Answer 2

True

Question 3

Depreciation expense on factory equipment is part of factory overhead cost.

Answer 3

True

Question 4

A manufacturer may employ a job order cost system for some of its products and a process cost system for others.

Question 5

Cost accounting systems are used to supply cost data information on costs incurred by a manufacturing process or department.

Question 6

A job order cost system would be appropriate for a crude oil refining business.

Question 7

When the goods are sold, their costs are transferred from Work in Process to Finished Goods.

Question 8

A law firm would use a job order cost system to accumulate all of the costs associated with a particular client engagement, such as lawyer time, copying charges, filing fees, and overhead.

Question 9

A process cost accounting system is best used by manufacturers of like units of product that are not distinguishable from each other during a continuous production process.

Question 10

The document that serves as the basis for recording direct labor on a job cost sheet is the time ticket.

Question 11

The job order costing system is not used by service organizations.

Question 12

Factory overhead is applied to production using a predetermined overhead rate.

Question 13

A process cost accounting system provides for a separate record of the cost of each particular quantity of product that passes through the factory.

Question 14

If factory overhead applied exceeds the actual costs, the factory overhead account will have a credit balance.

Question 15

The document that serves as the basis for recording direct labor on a job cost sheet is the time card.

Question 16

A job order cost accounting system provides for a separate record of the cost of each particular quantity of product that passes through the factory.

Question 17

The job order costing system is used by service firms to determine revenues, expenses, and ultimately profit.

Question 18

The process cost system is appropriate where few products are manufactured and each product is made to customers' specifications.

Question 19

The materials requisition serves as the source document for debiting the accounts in the materials ledger.

Question 20

A process cost accounting system accumulates costs for each of the departments or processes within the factory.

Question 21

On the balance sheet for a manufacturing business, the cost of direct materials, direct labor, and factory overhead, which have entered into the manufacturing process but are associated with products that have not been finished, is reported as direct materials inventory.

Question 22

If the underapplied factory overhead amount is immaterial, it is transferred to Cost of Goods Sold at the end of the fiscal year.

Question 23

The debit to factory overhead for the cost of indirect materials is obtained from the summary of the materials requisitions.

Question 24

Job order cost systems can be used to compare unit costs of similar jobs to determine if costs are staying within expected ranges.

Question 25

Generally accepted accounting principles require companies to use only one factory overhead rate for product costing.

Question 26

Nonmanufacturing costs are generally classified into two categories: selling and administrative.

Question 27

If factory overhead applied exceeds the actual costs, overhead is said to be underapplied.

Question 28

Interim financial statements for a manufacturing business would report overapplied factory overhead as a deferred item on the balance sheet.

Question 29

If the underapplied factory overhead amount is material, it is transferred to Cost of Goods Sold at the end of the fiscal year.

Question 30

The inventory accounts generally maintained by a manufacturing firm are only finished goods and materials.

Question 31

Direct labor cost is an example of a period cost.

Question 32

In the job order system, the finished goods account is the controlling account for the factory overhead ledger.

Question 33

A receiving report is prepared when purchased materials are first received by the manufacturing department.

Question 34

Period costs are costs that are incurred for the production requirements of a certain period.

Question 35

The current year's advertising costs are normally considered period costs.

Question 36

In a factory with several processing departments, a single factory overhead rate may not provide accurate product costs and effective cost control.

Question 37

A manufacturing business reports just two types of inventory on its balance sheet: work in process inventory and finished goods inventory.

Question 38

Each account in the cost ledger in a job order system is called a job cost sheet.

Question 39

Activity-based costing is a method of accumulating and allocating costs by department.

Question 40

As product costs are incurred in the manufacturing process, they are accounted for as assets and reported on the balance sheet as inventory.

Question 41

For which of the following businesses would the process cost system be appropriate?

A) Book retailer
B) Dress designer
C) Lumber mill
D) Printing firm

Question 42

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

A) Number 2 pencils
B) Computer monitors.
C) Wedding invitations.
D) Paper.

Question 43

Match each of the following terms with the phrase that most closely describes it. Each answer may be used only once.

Question 44

Job order cost accounting systems may be used for planning and controlling a service business.

Question 45

In a job order cost accounting system for a service business, materials costs are normally included as part of overhead.

Question 46

For which of the following businesses would the job order cost system be appropriate?

A) Meat processor
B) Automobile manufacturer
C) Oil refinery
D) Construction contractor

Question 47

Information about costs developed through a job order cost system can not be used to evaluate an organization's cost performance.

Question 48

Using the job order cost system, service organizations are able to bill customers on a weekly or monthly basis, even when the job has not been completed.

Question 49

Job order cost accounting systems may be used to evaluate a company's efficiency.

Question 50

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

A) It accumulates cost for each department within the factory.
B) It provides a separate record for the cost of each quantity of product that passes through the factory.
C) It is best suited for industries that manufactures custom goods.
D) Uses only one work in process account.

Question 51

Job order cost accounting systems can be used only for companies that manufacture a product.

Question 52

A staff department or unit is one directly involved in the basic objective of the organization.

Question 53

Match each of the following terms with the phrase that most closely describes it. Each answer may be used only once.

Question 54

Which of the following systems provides for a separate record of the cost of each particular quantity of product that passes through the factory?

A) Job order cost system
B) General cost system
C) Replacement cost system
D) Process cost system

Question 55

Which of the following would most likely use a job order costing system?

A) A paper mill
B) A swimming pool installer
C) A company that manufactures chlorine for swimming pools
D) An oil refinery

Question 56

The direct labor and overhead costs of providing services to clients are accumulated in a work-in-process account.

Question 57

A service organization will not use the job order costing method because it has no direct materials.

Question 58

Which of the following would be most likely to use process costing?

A) A custom furniture manufacturer.
B) An auto body repair shop.
C) A law firm
D) A lawn fertilizer manufacturer.

Question 59

Job cost sheets can provide information to managers on unit cost trends, the cost impact of continuous improvement in the manufacturing process, the cost impact of materials changes, and the cost impact of direct materials price or direct labor rate changes over time.

Question 60

Which of the following are the two main types of cost accounting systems for manufacturing operations?

A) Process cost and general accounting systems
B) Job order cost and process cost systems
C) Job order and general accounting systems
D) Process cost and replacement cost systems

Question 61

Which of the following costs are NOT included in finished goods inventory?

A) Direct labor
B) Factory overhead
C) Company president's salary
D) Direct materials

Question 62

The document authorizing the issuance of materials from the storeroom is the:

A) materials requisition
B) purchase requisition
C) receiving report
D) purchase order

Question 63

The basis for recording direct and indirect labor costs incurred is a summary of the period's:

A) job order cost sheets
B) time tickets
C) employees' earnings records
D) clock cards

Question 64

In a job order cost accounting system, the entry to record the flow of direct materials into production is:

A) debit Work in Process, credit Materials
B) debit Materials, credit Work in Process
C) debit Factory Overhead, credit Materials
D) debit Work in Process, credit Supplies

Question 65

The amount of time spent by an employee in the factory is usually recorded on:

A) time tickets
B) job order cost sheets
C) employees' earnings records
D) statement of owners' equity

Question 66

The amount of time spent by each employee and the labor cost incurred for each individual job or for factory overhead are recorded on:

A) pay stubs.
B) in-and-out cards.
C) time tickets.
D) employees' earnings records.

Question 67

Which of the following is not true about why a service firm will use the job order costing system?

A) to help control costs
B) to determine client billing
C) to determine department costs within the firm
D) to determine profit

Question 68

At the end of the year, overhead applied was $35,000,000. Actual overhead was $34,300,000. Closing over/under applied overhead into cost of goods sold would cause net income to:

A) Increase by $700,000
B) Decrease by $700,000
C) Remain constant
D) Decrease by $300,000

Question 69

Job order costing and process costing are

A) pricing systems.
B) cost accounting systems.
C) cost flow systems.
D) inventory tracking systems.

Question 70

A summary of the materials requisitions completed during a period serves as the basis for transferring the cost of the materials from the controlling account in the general ledger to the controlling accounts for:

A) work in process and cost of goods sold
B) work in process and factory overhead
C) finished goods and cost of goods sold
D) work in process and finished goods

Question 71

At the end of July, the first month of the current fiscal year, the factory overhead account had a debit balance. Which of the following describes the nature of this balance and how it would be reported on the interim balance sheet?

A) Overapplied, deferred credit
B) Underapplied, deferred debit
C) Underapplied, deferred credit
D) Overapplied, deferred debit

Question 72

Which of the following would record the labor costs to an individual job?

A) Clock card
B) In-and-out cards
C) Time tickets
D) Payroll register

Question 73

Which of the following would most likely be a product cost?

A) Salary of VP of sales.
B) Advertising for a particular product.
C) Drill bits for a drill press used in the plant assembly area.
D) Salary of the company receptionist.

Question 74

The entry to record the flow of direct labor costs into production in a job order cost accounting system is:

A) debit Factory Overhead, credit Work in Process
B) debit Finished Goods, credit Wages Payable
C) debit Work in Process, credit Wages Payable
D) debit Factory Overhead, credit Wages Payable

Question 75

The Thomlin Company forecasts that total overhead for the current year will be $15,000,000 and that total machine hours will be 300,000 hours. Year to date, the actual overhead is $16,000,000 and the actual machine hours are 330,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, what is that overhead rate?

A) $48 per machine hour
B) $53 per machine hour
C) $45 per machine hour
D) $50 per machine hour

Question 76

Which of the following is the correct flow of manufacturing costs?

A) Raw materials, work in process, finished goods, cost of goods sold
B) Raw materials, finished goods, cost of goods sold, work in process.
C) Work in process, finished goods, raw materials, cost of goods sold
D) Cost of goods sold, raw materials, work in process, finished goods.

Question 77

The source of the data for debiting Work-in-Process for direct materials is the:

A) purchase order
B) purchase requisition
C) materials requisition
D) receiving report

Question 78

In a job order cost accounting system, when goods that have been ordered are received, the receiving department personnel count, inspect the goods, and complete a:

A) purchase order
B) sales invoice
C) receiving report
D) purchase requisition

Question 79

Which of the following would most likely be a period cost?

A) Depreciation on factory lunchroom furniture.
B) Salary of telephone receptionist in the sales office.
C) Salary of a security guard for the factory parking lot.
D) Computer chips used by a computer manufacturer.

Question 80

The Thomlin Company forecasts that total overhead for the current year will be $15,000,000 and that total machine hours will be 300,000 hours. Year to date, the actual overhead is $16,000,000 and the actual machine hours are 330,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, as of this point in time (year to date) the overhead is over/under applied by

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