Deck 21: Cost Accounting Systems

Question 1

Manufacturing entities use two basic types of cost accounting systems. They are:

A) Variable costing and indirect costing
B) Job order costing and process costing
C) Job order costing and variable costing
D) Absorption costing and process costing

Answer 1

B

Question 2

Master Antiques produces antique reproduction furniture using a job order costing system. The following data is available for 3 jobs worked on during the first month of operations. $$\begin{array} { l r r c } & \text { Job 110 } & \text { Job 111 } & \text { Job 112 } \\\text { Units of product on the job } & 20 & 10 & 20 \\\text { Direct labour hours worked } & 400 & 280 & 200 \\\text { Direct materials cost } & \$ 5500 & \$ 2500 & \$ 2000 \\\text { Direct Labour cost } & \$ 6000 & \$ 3000 & \$ 2200\end{array}$$
Manufacturing overhead cost is applied to jobs on the basis of direct labour hours at a predetermined rate of $12 per hour. Jobs 110 and 111 were completed during the month, and Job 112 remained in work in process at the end of the month. Compute the unit cost for Job 111.

A) $815
B) $886
C) $330
D) $443

Answer 2

$886

Question 3

Which of the following control accounts are used in job costing?
I) Factory Overhead
II) Work in process Inventory
III) Finished Goods Inventory
IV) Raw Materials Inventory

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

Answer 3

D

Question 4

Which of the following statements concerning the job cost order is incorrect?

A) It provides an itemised list of all costs charged to a particular job.
B) It traces all costs to jobs.
C) The control number assigned to each job is recorded on the job order.
D) Orders for incomplete jobs serve as a subsidiary ledger for the work in process account.

Question 5

Which best describes the set of costs that are debited directly to work in process inventory?

A) Actual indirect materials, actual indirect labour, actual overhead
B) Actual indirect materials, actual direct labour, applied overhead
C) Actual direct materials, actual direct labour, applied overhead
D) Actual direct materials, actual direct labour, actual overhead

Question 6

Overhead has been underapplied when the:

A) manufacturing overhead account has a debit balance.
B) manufacturing overhead account has a credit balance.
C) company has underspent in the manufacturing overhead cost area.
D) adjusting entry for the underapplied overhead involves a credit to cost of sales.

Question 7

A job costing system tracks:

A) the use of materials.
B) direct labour and the use of materials.
C) the conversion of the inputs into work in process.
D) direct labour, the use of materials and the conversion of the inputs into work-in-process.

Question 8

The total of the dollar amounts on the job order cards for jobs that had not been completed would be equal to:

A) cost of sales account.
B) costs of goods completed.
C) balance in the work in process inventory account.
D) balance in the finished goods inventory account.

Question 9

In a job cost system, the overhead costs are assigned using:

A) variable costs.
B) direct costs.
C) actual overhead rate.
D) a predetermined overhead rate.

Question 10

The costing system used when entities provide goods or services in response to customer orders and specifications is known as:

A) job costing.
B) process costing.
C) conversion costing.
D) just-in-time processing.

Question 11

In a factory with several processes, there may be one or more service departments that do not process the materials directly. Which of the following is not an example of a service department?

A) Smelting department
B) Factory office
C) Power plant
D) Repair shop

Question 12

Which account would be adjusted for the disposal of an immaterial amount of overapplied manufacturing overhead?

A) Cost of sales
B) Finished goods inventory
C) The overapplied overhead account
D) Work in process inventory

Question 13

Which account is not classified as an asset?

A) Materials
B) Cost of sales
C) Work in process
D) Finished goods

Question 14

Which of the following is not a manufacturing overhead cost?

A) Indirect labour
B) Direct materials
C) Rent of factory
D) Factory manager's salary

Question 15

The overhead budget, based on a budgeted volume of 100 000 direct labour hours, was $325 000. Actual overhead costs amounted to $340 000 and actual direct labour hours were 106 000. By how much was overhead under or overapplied?

A) $4 500 overapplied
B) $4 500 underapplied
C) $15 000 overapplied
D) $15 000 underapplied

Question 16

When Job No. 1010 at the Saunders Manufacturing Company emerges with its final finishing touches completed, the company's:

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

Question 17

Which industry generally uses a job costing system?

A) Oil refining
B) Soft drink manufacturing
C) Motor vehicle manufacturing
D) Custom-built furniture manufacturing

Question 18

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

A) production process.
B) plant supervisor.
C) project manager.
D) chief executive officer.

Question 19

Match the business with the most likely type of costing system.
1) Oil refinery
2) Automotive brake repairer
3) Bathroom renovator
4) Commercial printer
5) Management consultant
I Job costing
II Process costing

A) 1 and I, 2 and II, 3 and I, 4 and II, 5 and I
B) 1 and I, 2 and I, 3 and I, 4 and II, 5 and II
C) 1 and II, 2 and I, 3 and I, 4 and I, 5 and I
D) 1 and II, 2 and II, 3 and I, 4 and I, 5 and I

Question 20

The Murphy Manufacturing Company distributes overhead based on direct labour dollars. The estimated manufacturing overhead for the year was $728 000 and the estimated direct labour dollars for the year were $160 000. Indicate the amount of underapplied or overapplied overhead if actual direct labour was $148 000 and actual manufacturing overhead was $665 000.

A) $12 000 overapplied
B) $12 000 underapplied
C) $8 400 overapplied
D) $8 400 underapplied

Question 21

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

A) materials inventory account.
B) manufacturing overhead account.
C) finished goods inventory account.
D) work in process inventory account.

Question 22

Equivalent units are:

A) the number of whole units represented by the finished units.
B) the units represented by the total manufacturing costs for the period.
C) the units that would have been produced under optimum circumstances.
D) the number of whole units represented by the finished units plus the partly completed units.

Question 23

Greg's Repair Services uses job order costing. At the end of the month the following information was available.
$$\begin{array} { l l l l } & \text { Job D-1 } & \text { Job D-2 } & \text { Job D-3 } \\\text { Direct materials } & \$ 40 & \$ 60 & \$ 50 \\\text { Direct labour } & \$ 20 & \$ 30 & \$ 10\end{array}$$
Actual overhead costs are $150. Overhead is applied on the basis of 200% of direct labour costs. Jobs D-1 and D-2 have been completed and sold. Job D-3 is not yet complete. At month-end the work in process inventory balance is:

A) $50.
B) $60.
C) $80.
D) $150.

Question 24

Which of the following is not a section of a cost of production report?

A) GST summary
B) Costs accounted for
C) Costs to be accounted for
D) Physical flow schedule

Question 25

Which of the following is not included on a cost of production report?

A) Physical flow section
B) The number of each job
C) Costs to be accounted for section
D) Costs accounted for section

Question 26

Predetermined overhead rates are necessary for which of the following reasons?
I) Actual overheads are not incurred evenly over the period.
II) Product costs need to be calculated promptly for decision- making.
III) Overhead cannot be traced directly to products because of its indirect nature.

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

Question 27

The work in process account of Blue Manufacturing shows a balance of $84 000 at the end of an accounting period. The job cost orders of the two uncompleted jobs show charges of $29 000 and $10 000 for materials used and charges of $20 000 and $16 000 for direct labour used. From this information it appears that the company is using a predetermined overhead rate as a percentage of direct labour costs, of:

A) 20%.
B) 25.0%.
C) 33.3%.
D) 400%.

Question 28

Derbyshire Ltd distributes overhead based on direct labour dollars. The estimated manufacturing overhead for the year was $800 000 and the estimated direct labour dollars for the year were $160 000. Indicate the amount of underapplied or overapplied overhead if actual direct labour was $135 000 and actual manufacturing overhead was $658 000.

A) $17 000 underapplied
B) $17 000 overapplied
C) $25 000 overapplied
D) $25 000 underapplied

Question 29

Young Manufacturing uses the weighted average method of computing equivalent units of production. In beginning work in process, there were 7000 units 40% complete as to conversion. In ending work in process, there were 4000 units 80% complete. 11 000 units were completed during the year. Determine the equivalent units of production.

A) 14 200
B) 11 000
C) 13 800
D) 11 400

Question 30

Manufacturing costs assigned to inventory should appear on the income statement in the period in which:

A) the sale of goods is recorded.
B) the goods are completed.
C) they are incurred.
D) the purchase order to manufacture the goods is received.

Question 31

The flow of costs through the accounting system is most accurately described as:

A) Factory overhead applied, to work in process, to finished goods
B) Purchases, to finished goods, to work in process
C) Purchases, to factory overhead, to cost of sales
D) Work in process, to cost of sales

Question 32

The number of full units that could have been completely produced with the effort expended are known as:

A) conversion units.
B) work-in-process.
C) equivalent units.
D) completed units.

Question 33

In 2018, Brewster's Painting Supplies planned the following: $$\begin{array} { l r } \text { Factory overhead costs } & \$ 220000 \\\text { Direct labour costs } ( 18000 \text { hours at } \$ 9.00 \text { per hour) } & \$ 162000 \\\text { Machine Hours } & 54000 \\\text { Direct material costs } & \$ 134000\end{array}$$
The predetermined overhead rate is based on direct labour hours and planned production during 2018 is 20 000 units. The estimated cost per unit produced is:

A) $25.80
B) $19.10
C) $28.50
D) $ 8.10

Question 34

Process costs are determined by:

A) dividing the costs of the period by the number of equivalent units produced.
B) adding up all the job costs.
C) allocating the overhead by machine hours.
D) costing each process individually.

Question 35

Wessex Pty Ltd applies overhead to completed jobs using a predetermined rate of 75% of direct labour costs. If Job No. 34 shows $30 000 of factory overhead applied, how much was the direct labour cost of the job?

A) $10 000
B) $22 500
C) $30 000
D) $40 000

Question 36

Fresco Production uses a predetermined overhead rate based upon direct labour hours. The firm has the following budgeted and actual data for the current year:
$$\begin{array} { l r } \text { Budgeted factory overhead cost } & \$ 12000 \\\text { Actual factory overhead cost } & \$ 13500 \\\text { Budgeted direct labour hours } & 2000 \\\text { Actual direct labour hours } & 2400\end{array}$$
What was the amount of underapplied or overapplied overhead for the year?

A) $1 500 overapplied
B) $1 500 underapplied
C) $900 underapplied
D) $900 overapplied

Question 37

In 2018 Valentino Coffee Supplies planned the following:
$$\begin{array} { l r } \text { Factory overhead costs } & \$ 120000 \\\text { Direct labour costs (12 } 000 \text { hours at } \$ 8.00 \text { per hour) } & \$ 96000 \\\text { Machine Hours } & 45000 \\\text { Direct material costs } & \$ 85000\end{array}$$
The predetermined overhead rate is based on direct labour hours and planned production during 2018 is 20 000 units. By the end of 2018, a total of 18 000 units had been produced and 11 000 direct labour hours used. How much overhead was applied to work in process?

A) $85 000
B) $88 000
C) $110 000
D) $120 000

Question 38

Johnson's Metal Works planned the following for the year ended 31 December 2019.
$$\begin{array} { l r } \text { Factory overhead costs } & \$ 114000 \\\text { Direct labour cost } ( \$ 6.00 \text { an hour } ) \mathrm { x } ( 12000 \mathrm { hrs } ) & \$ 72000 \\\text { Machine hours } & 24000 \\\text { Direct material cost } & \$ 66000\end{array}$$
The predetermined overhead rate is based on direct labour hours and planned production during 2019 is 6 000 units. The estimated cost per unit produced is:

A) $19.
B) $23.
C) $42.
D) $30.

Question 39

Which of the following is not a source document for job costing?

A) Materials requisition record
B) Labour hours/time sheets record
C) Invoice for factory expense
D) The administration manager's expense sheet

Question 40

Under a process costing system, which of the following inputs are debited to a work-in-process account?

A) Direct materials and direct labour
B) Direct labour and factory overhead applied
C) Direct materials and factory overhead applied
D) Direct materials, direct labour and factory overhead applied

Question 41

The flow of goods in a firm that uses process costing is, work in process at the start 8 000 units 50% complete, units started 32 000, units finished 26 000, work in process end of period 14 000 units 25% complete. Raw materials are issued at the end of the production process. Using the weighted average method, the equivalent units as to conversion cost for the period are:

A) 29 500 units.
B) 32 000 units.
C) 40 000 units.
D) 26 000 units.

Question 42

The method of calculating equivalent units where the costs assigned to the beginning inventory of work-in-process are combined with the current periods costs of production and the degree of completion of the beginning units is ignored is the:

A) first-in-first-out method.
B) weighted average method.
C) last-in-last-out method.
D) last-in-first-out method.

Question 43

Which of the following statements concerning Activity-Based Costing [ABC] is incorrect?

A) production processes are broken down into activities.
B) cost drivers are used to assign costs between activities.
C) it is now used by firms much more commonly than traditional costing.
D) the use of cost drivers allows management to apply overhead more accurately to products with different production requirements.

Question 44

A cost allocation base may be any of the following except:

A) a cost pool.
B) a cost driver.
C) a non-financial quantity.
D) a way to link indirect costs to a cost object.

Question 45

An activity-based approach to designing a costing system focuses on:

A) direct costs.
B) activities.
C) departments.
D) traceable costs.

Question 46

Equivalent units of production measures:

A) the number of partial jobs completed in the period.
B) the number of jobs started but not completed in the period.
C) the production level which could have been achieved under optimum circumstances.
D) the number of full units that could have been completely produced with the effort expended.

Question 47

Which of the following statements concerning activity-based costing (ABC)is not true?

A) ABC can be applied in service businesses as well as in manufacturing businesses.
B) It has been introduced to overcome distortions in costing multiple products which occur when a single base is used to apply overhead to products.
C) ABC is cheaper and less time consuming to implement than traditional costing systems.
D) Overhead costs are accumulated by activities and then assigned to cost objects using a different cost driver for each activity.

Question 48

Service organisations incur little or no cost for:

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

Question 49

Which of the following differs between job order and process costing?

A) Cost flows
B) Basic purpose
C) Focal point for cost accumulation
D) Tracing of direct costs and allocation of indirect costs

Question 50

Which of the following statements concerning process costing is correct?

A) the type of production is heterogeneous.
B) the flow of products is separated by jobs.
C) the control document is a cost of production report.
D) record keeping is more detailed than for job costing.

Question 51

In an 'ideal' just-in-time processing plant, the inventories held are:

A) finished goods.
B) direct materials.
C) work in process.
D) supplies of packaging.

Question 52

Which of the following statements concerning cost accounting for service type businesses is correct?

A) Cost accounting is not used in service business.
B) Cost information is needed for different reasons in a service business than in a manufacturing business.
C) To determine the rate at which direct labour costs are applied to a particular job a labour cost per hour is developed for each employee.
D) Actual costs rather than budgeted costs are used to determine overhead application rates.

Question 53

Dreamtime Manufacturing uses the weighted-average method of computing equivalent units of production. For beginning work in process there were 8000 units 20% complete as to materials and conversion costs. For ending work in process there were 10000 units 35% complete as to materials and conversion costs. 14 000 units were completed during the year. Determine the equivalent units of production.

A) 14 000
B) 17 500
C) 20 500
D) 24 000

Question 54

It is true that Just-in-time (JIT) processing:

A) runs the risk of interruptions in supply.
B) is only suitable for large businesses.
C) reflects a 'push' approach to manufacturing.
D) sounds good in theory but doesn't work in practice.

Question 55

Which of the following is not a cost object?

A) Cash at bank
B) A product
C) A service
D) An activity

Question 56

Which of the following are similar for job order and process costing?

A) Record keeping
B) Measures of output
C) Focal point of costs
D) Cost flows, i.e. raw materials to work in process to finished goods to cost of sales

Question 57

Which of the following is not a feature of just-in-time processing?

A) strict quality control.
B) a variable demand from customers.
C) efficiency in the production process.
D) a steady, reliable supply of raw materials and labour.

Question 58

Jones Company started 60 000 units into production during the current period and completed 42 000. The other 18 000 units were 40% complete as to conversion costs at the end of the period. Total costs were $160 000 for material and $116 000 for conversion costs. Material is added at the beginning of the production process. Unit raw material and conversion costs for the period were:
Raw materials cost; Conversion cost

A) $2.67; $6.44
B) $4.60; $4.83
C) $3.81; $2.76
D) $2.67; $2.36

Question 59

Which of the following statements concerning cost drivers is incorrect?

A) Inaccurate application of overhead to products can lead to wrong conclusions about which products are profitable.
B) As direct labour shrinks as a proportion of manufacturing costs it becomes a more accurate factor by which to apply overhead to products.
C) A cost driver is a measure of the activity that causes overhead costs.
D) In modern day manufacturing there has been a decline in labour costs and an increase in factory overheads as a percentage of product costs.

Question 60

Which of the following is not an element of Just-in-time processing (JIT)?

A) Steady demand from customers
B) Efficiency in production process
C) Buffer stocks of finished goods
D) Strict quality control

Question 61

Which of the following statements concerning activity-based costing is correct?

A) ABC is a refinement of job costing.
B) ABC was introduced because of globalisation.
C) ABC is most useful when a smaller number of similar products are produced by a firm.
D) Direct labour hours can be a cost driver for ABC.