Deck 27: Job Order Cost Accounting

Question 1

When a perpetual inventory system is used, the balance of the Raw Materials Inventory account at the end of an accounting period should reflect the cost of materials on hand.

Answer 1

True

Question 2

A(n) ____________________ cost accounting system is normally used when standard types of products are made in continuous operations.

Answer 2

pro cess

Question 3

When perpetual inventories are maintained in a job order cost system, as each job is completed its cost is transferred from Work in Process Inventory to Finished Goods Inventory.

Answer 3

True

Question 4

Indirect labor is recorded by debiting the _________________________ account.

Question 5

There is no need for a raw materials inventory account when a just-in-time inventory system is used.

Question 6

The monthly total of the Overhead Applied section of all job order cost sheets should agree with the balance in the control account Manufacturing Overhead.

Question 7

The entry to charge work in process inventory with the appropriate amount of applied overhead consists of a debit to Work in Process Inventory and a credit to Manufacturing Overhead Applied.

Question 8

Idle time is generally charged to manufacturing overhead.

Question 9

The manufacturing overhead recorded in the Work in Process Inventory account is not necessarily the actual overhead incurred.

Question 10

Standard cost accounting may be used with either a job order cost system or a process cost system.

Question 11

The entry to record applied overhead includes a(n) ____________________ to Manufacturing Overhead Applied.

Question 12

The entry to record applied overhead includes a(n) ____________________ to the Work in Process Inventory account.

Question 13

At the end of the month, if the total of the credits in the Manufacturing Overhead Applied account is greater than the total of the debits in the Manufacturing Overhead account, overhead has been underapplied.

Question 14

A(n) ____________________ cost accounting system permits a firm to compare what its costs should be with its actual costs in order to evaluate efficiency.

Question 15

At the end of each year, the underapplied or overapplied overhead usually is closed out to the Cost of Goods Sold account.

Question 16

Purchases of raw materials are debited to the Work in Process Inventory account.

Question 17

In a job order cost system, the entry to record the labor costs for a period includes a debit to Work in Process Inventory for direct labor and a debit to Manufacturing Overhead for indirect labor.

Question 18

There is no need to take a physical count of inventory periodically when the perpetual inventory system is used.

Question 19

If a firm estimates that for the coming year it will have expected total direct labor costs of $60,000 and total manufacturing overhead costs of $36,000, its overhead application rate will be 60 percent.

Question 20

Under the LIFO method of inventory pricing, the quantities issued are priced from the oldest inventory items available in the order they were received.

Question 21

If actual overhead costs exceed the overhead applied during the year, the difference represents ____________________ overhead.

Question 22

When a perpetual inventory system is used, sales revenue is recorded as products are sold,

A) but the cost of the goods sold is not recorded.
B) and the cost of the goods sold is transferred from the Finished Goods Inventory account to the Cost of Goods Sold account.
C) and the cost of the goods sold is transferred from the Work in Process Inventory account to the Cost of Goods Sold account.
D) and the cost of goods sold is transferred from the Cost of Goods Manufactured to the Cost of Goods Sold account.

Question 23

Materials may be withdrawn from the storeroom only on completion of a materials ___________________.

Question 24

At the end of the fiscal year, any overapplied or underapplied overhead is

A) transferred to the Cost of Goods Sold account in an adjustment.
B) shown on the balance sheet as either a deferred charge or a deferred credit.
C) allocated to Cost of Goods Sold, Finished Goods Inventory, and Work in Process Inventory.
D) transferred to the Cost of Goods Manufactured account in an adjustment.

Question 25

Actual overhead costs are

A) debited to Work in Process Inventory when incurred.
B) debited to Manufacturing Overhead when incurred.
C) debited to Manufacturing Overhead Applied when incurred.
D) credited to Manufacturing Overhead when incurred.

Question 26

When perpetual inventories are maintained in a job order cost system, the balance of the Work in Process Inventory account represents

A) the actual costs incurred for labor, materials, and overhead on all jobs that were started but are not yet complete.
B) the actual costs for the labor and materials used in uncompleted jobs and estimate of the overhead associated with these jobs.
C) only the actual costs for the labor and materials used in uncompleted jobs.
D) only the actual costs for the labor and materials used in completed jobs.

Question 27

Workers who perform direct labor prepare a series of ____________________ to account for all time spent in the plant.

Question 28

When a cost accounting system is used, perpetual inventory records are kept for raw materials, work in process, and ___________________.

Question 29

In a just-in-time inventory system, the _________________________ account is debited when goods arrive.

Question 30

The _________________________ rate is often computed by dividing estimated overhead costs by estimated direct labor costs.

Question 31

Under a job order cost system, unit costs are determined for products manufactured under each ___________________.

Question 32

In a perpetual inventory system, each inventory account is supported by a(n) ____________________ ledger.

Question 33

A standard cost system may be used

A) only with a process cost system.
B) only with a job order cost system.
C) with either a job order cost system or a process cost system.
D) in neither a job order cost system or a process cost system.

Question 34

When indirect materials are requisitioned from the materials storeroom and placed in production, an entry is made crediting Raw Materials Inventory and debiting

A) Work in Process Inventory.
B) Cost of Goods Manufactured.
C) Manufacturing Overhead Applied.
D) Manufacturing Overhead.

Question 35

Job order cost accounting is appropriate

A) when there are continuous operations on standard types of products.
B) when a company produces more than one product in batches rather than on a continuous basis.
C) only for goods produced on special order.
D) for all manufacturing companies.

Question 36

When materials that will become part of a finished product are removed from the storeroom and placed in production,

A) Work in Process Inventory is debited.
B) Manufacturing Overhead is debited.
C) Raw Materials Inventory is debited.
D) Work in Process Inventory is credited.

Question 37

A job order cost sheet summarizes

A) the direct labor, direct materials used, and actual overhead costs incurred on a specific job.
B) the direct labor, direct materials used, and applied overhead association with a specific job.
C) the estimated costs that will be required to complete a specific job.
D) the direct labor and direct materials used only.

Question 38

Under a perpetual inventory system, when goods are sold the Cost of Goods Sold account is ___________________.

Question 39

Under a perpetual inventory system, when goods are completed the Work in Process Inventory account is ___________________.

Question 40

The entry to record the application of overhead to jobs consists of

A) a debit to Manufacturing Overhead Applied and a credit to Manufacturing Overhead.
B) a debit to Manufacturing Overhead and a credit to Manufacturing Overhead Applied.
C) a debit to Work in Process Inventory and a credit to Manufacturing Overhead Applied.
D) a debit to Manufacturing Overhead Applied and a credit to Work in Process Inventory.

Question 41

The McGreen Company employees worked 10,000 hours last year with an average hourly rate of $11 per hour. The overhead was $495,000. If overhead is based on direct labor costs, then the overhead rate is ________ per direct labor dollar.

A) $11.00
B) $49.50
C) $4.50
D) $4.95 495,000/(10,000 x 11).

Question 42

What is the subsidiary ledger that contains a record for each overhead item called?

A) Manufacturing Overhead Control
B) Manufacturing Overhead Ledger
C) Manufacturing Overhead Records Book
D) Manufacturing Overhead Card

Question 43

A firm purchased 50 units of materials with a unit price of $1.30 on June 1. On June 15, the firm purchased 50 units with a unit price of $1.20. If the firm uses the FIFO method of inventory pricing, the total cost of 65 units issued on June 20 would be

A) $83.00.
B) $79.50.
C) $78.00.
D) $84.50. (50 x 1.30) + (15 x 1.20) = 83.00.

Question 44

A firm purchased 50 units of materials with a unit price of $1.30 on June 1. On June 15, the firm purchased 50 units with a unit price of $1.20. If the firm uses the LIFO method of inventory pricing, the total cost of 65 units issued on June 20 would be

A) $83.00.
B) $79.50.
C) $78.00.
D) $84.50. (50 x 1.20) + (15 x 1.30) = 79.50.

Question 45

Process cost accounting is appropriate

A) exclusively for companies that produce only one product.
B) when a company produces more that one product in batches rather than on a continuous basis.
C) when a company produces what each customer wants on special order.
D) when there are continuous operations on standard types of products.

Question 46

A raw material subsidiary ledger

A) contains a raw materials card for each item of direct materials only.
B) contains a raw materials card for each item of indirect materials only.
C) contains a raw materials card for each item of direct materials and indirect materials.
D) contains a raw material card for each supplier of raw materials.

Question 47

The ______ is a record of all manufacturing costs charged to a specific job.

A) Cost of Goods Sold
B) Standard Costs Card
C) Work in Process Inventory
D) Job Order Cost Sheet

Question 48

At the end of the year the Manufacturing Overhead account is closed into what account?

A) Work in Process
B) Finished Goods
C) Cost of Goods Sold
D) Manufacturing Overhead Control

Question 49

Wilson Enterprises applies overhead based on direct labor cost. The company estimates that their overhead for the year will be $240,000, and direct labor cost to be $300,000. Actual direct labor cost for Martinez Manufacturing was $280,000 and actual overhead costs were $220,000. At the end of the year, manufacturing overhead was:

A) Overapplied by $20,000.
B) Underapplied by $20,000.
C) Overapplied by $4,000.
D) Underapplied by $4,000.

Question 50

Job order cost sheets constitute a subsidiary ledger that supports

A) the Work in Process Inventory account.
B) the Finished Goods Inventory account.
C) the Raw Materials Inventory account.
D) the Cost of Goods Manufactured account.

Question 51

Manufacturing overhead includes all of the following except

A) indirect labor.
B) direct labor.
C) utilities.
D) payroll taxes on factory labor.

Question 52

At the end of the year, Harding Company had a balance in Manufacturing Overhead of $19,000, and a balance in Manufacturing Overhead Applied of $20,000. When the Manufacturing Overhead account is closed, the Cost of Goods Sold account will be:

A) Increased by $1,000.
B) Decreased by $1,000.
C) Unaffected.
D) Closed to Manufacturing Overhead Applied.

Question 53

The total direct labor charged to all job cost sheets must agree with the direct labor debited to

A) Time Tickets.
B) Wages Payable.
C) Work in Process Inventory.
D) Wages Expense.

Question 54

A firm purchased 25 units of materials with a unit price of $2.00 on May 5. On May 15, the firm purchased 25 units with a unit price of $2.10. If the firm uses the LIFO method of inventory pricing, the total cost of 30 units issued on May 20 would be

A) $62.50.
B) $60.00.
C) $63.00.
D) $60.50. (25 x 2.10) + (5 x 2) = 62.50.

Question 55

Martinez Manufacturing applies overhead based on direct labor hours. The company estimates that their overhead for the year will be $180,000, and that they will use 72,000 direct labor hours. Martinez Manufacturing actually used 75,000 direct labor hours. The journal entry to record manufacturing overhead would include a:

A) Debit to Work in Process Inventory for $187,500.
B) Credit to Manufacturing Overhead Applied for $180,000.
C) Debit to Work in Process Inventory for $180,000.
D) Debit to Manufacturing Overhead Applied for $187,500.

Question 56

Wilson Enterprises applies overhead based on direct labor cost. The company estimates that their overhead for the year will be $240,000, and direct labor cost to be $300,000. Actual direct labor cost for Martinez Manufacturing was $280,000. The journal entry to record manufacturing overhead would include a:

A) Debit to Work in Process Inventory for $240,000.
B) Credit to Manufacturing Overhead Applied for $350,000.
C) Credit to Work in Process Inventory for $224,000.
D) Credit to Manufacturing Overhead Applied for $224,000.

Question 57

If manufacturing overhead is applied at a rate of $1.50 per direct labor dollar and the Department B worker had worked 200 hours at $12 an hour on Job L1147, then the applied overhead would be

A) $3,600.
B) $18.
C) $300.
D) $2,400. (200 x 12) x 1.50 = 3,600.

Question 58

If the manufacturing overhead was overapplied, then

A) the manufacturing overhead account had more debits than credits.
B) the manufacturing overhead account had more credits than debits.
C) the actual overhead expenses were more than the amount going to Work in Process.
D) the debits to Work in Process were more than the credits to Work in Process.

Question 59

A firm purchased 25 units of materials with a unit price of $2.00 on May 5. On May 15, the firm purchased 25 units with a unit price of $2.10. If the firm uses the FIFO method of inventory pricing, the total cost of 30 units issued on May 20 would be

A) $62.50.
B) $60.00.
C) $63.00.
D) $60.50. (25 x 2) + (5 x 2.10) = 60.50.

Question 60

Martinez Manufacturing applies overhead based on direct labor hours. The company estimates that their overhead for the year will be $180,000, and that they will use 72,000 direct labor hours. During the year, Martinez Manufacturing actually used 75,000 direct labor hours and actual overhead costs were $190,000. At the end of the year, manufacturing overhead was:

A) Overapplied by $2,500.
B) Overapplied by $10,000.
C) Underapplied by $2,500.
D) Underapplied by $10,000.

Question 61

During the year, a firm's direct labor costs were $95,000. The firm applies overhead at the rate of 75 percent of direct labor costs. The firm's actual overhead costs for the year were $72,315.
1. What was the amount of overhead applied?
2. Did the firm have overapplied or underapplied overhead for the year?
3. What amount was overapplied or underapplied?

Question 62

What form is used to keep track of inventory of raw materials? What additional information does the form provide if a perpetual inventory system is utilized?

Question 63

How often are direct labor costs entered on the Job Order Cost Sheets?

A) Daily
B) Weekly
C) Monthly
D) Immediately-as time cards are completed

Question 64

During the year, Job EH-02 for 500 units was begun and completed. Costs entered on the job order cost sheet for this job were $15,400 for materials and $6,500 for labor. The firm applies overhead at the rate of 75 percent of direct labor costs.
1. What is the amount of overhead that should be applied to the job?
2. What is the total cost of the job?
3. What is the unit cost of the units produced?

Question 65

Fill in the blanks for each of the following. (Blanks are indicated by numbers in parentheses.)

Question 66

Every job includes some idle time that is usually handled in one of two ways. What are they and under what circumstances is each utilized?

Question 67

Based on the information given, complete the Job Order Cost Sheet for Job A1-13.

Question 68

Morion Hat Manufacturing made the following charge purchases on February 4 of the current year. Felt $5,687; Ribbon $1,234; Straw $6,723; Dye (for the straw) $39; Thread $47;
Various plastic fruits, flowers, etc. $179; and Glue $28. Assume that all items purchased were requisitioned for production during the year. Complete one journal entry for all purchases and one summary journal entry dated February 20 for the requisitioning of those materials into production.
Also, explain the internal controls applied to safeguard raw materials.
Note: Only the dye, glue, and thread are considered overhead. Some students may put the various plastic fruits, flower, etc. into indirect materials. If so the direct material would be $13,644 and the total for indirect materials would be $293.

Question 69

The Manufacturing Overhead Applied account for Djos Domal Company had activity of $567 in indirect materials and supplies, $785 in indirect labor, and $3,455 in other overhead costs recorded in the account at August 31 of the current year. The Manufacturing Overhead Applied account had a total of $4,600 in overhead applied during August. What is the over-or underapplied overhead for August? Prepare the journal entry to close the related overhead accounts.

Question 70

Briefly describe a Just-in-Time (JIT) system. List the advantages and disadvantages of a JIT system.

Question 71

During the year, a firm's direct labor costs were $115,000. The firm applies overhead at the rate of 80 percent of direct labor costs. The firm's actual overhead costs for the year were $90,665.
1. What was the amount of overhead applied?
2. Did the firm have overapplied or underapplied overhead for the year?
3. What amount was overapplied or underapplied?

Question 72

What form is presented at the storeroom to obtain materials or supplies?

A) Materials Request Form
B) Materials Requisition Form
C) Raw Materials Ledger Card
D) Production Order Form

Question 73

Prepare a partial income statement for the month. Adjust the cost of goods sold for the amount of any overapplied or underapplied overhead.

Question 74

Record the necessary entries on page 8 of a general journal. Omit descriptions.

Question 75

Millenium Manufacturing is considering two methods for applying overhead. Estimated data for the next year, 2013, follows. 1. What would be the overhead application rate based on direct labor costs?
2. What would be the overhead application rate based on direct labor hours?
3. If a job requires 650 hours of direct labor, what would be the amount of overhead applied to the job using the rate based on direct labor hours?

Question 76

What are the two principle cost accounting systems and give an example of a type of business which would use this system?

Question 77

Based on the information given:
1. Determine the overhead rate for Davit Boat Building;
2. Prepare the journal entry to apply manufacturing overhead to manufacturing process for the month of November;
3. Determine the balance in the Work in Process account.
1. The overhead application rate for the current year is 1.5 times direct labor cost. (367,500/245,000)
2.

Question 78

The Manufacturing Overhead Applied account for Cullverin Manufacturing had activity of $860 in indirect materials and supplies, $992 in indirect labor, and $4,654 in other overhead costs recorded in the account at April 30 of the current year. The Manufacturing Overhead Applied account had a total of $6,740 in overhead applied during April. What is the over-or underapplied overhead for April? Prepare the journal entry to close the related overhead accounts.

Question 79

At the end of the year, Easton Company had a balance in Manufacturing Overhead of $20,000, and a balance in Manufacturing Overhead Applied of $19,000. When the Manufacturing Overhead account is closed, the Cost of Goods Sold account will be:

A) Increased by $1,000.
B) Decreased by $1,000.
C) Unaffected.
D) Closed to Manufacturing Overhead Applied.

Question 80

List the four manufacturing operations and define each. For the second operation, Production, summarize the flow of costs through a job order cost accounting system.