Deck 2: Job Order Costing

Question 1

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

Answer 1

False

Question 2

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.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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 10

Each account in the work in process subsidiary ledger in a job order costing system is called a job cost sheet.

Question 11

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

Question 12

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

Question 13

Cost accounting systems measure, record, and report product costs.

Question 14

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

Question 15

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

Question 16

Perpetual inventory controlling accounts and subsidiary ledgers are maintained for materials, work in process, and finished goods in job order costing systems.

Question 17

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

Question 18

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

Question 19

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

Question 20

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

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, are reported as direct materials inventory.

Question 22

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

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

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 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

Direct labor cost is an example of a period cost.

Question 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

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 manufacture custom goods.
D) It uses only one work in process account.

Question 42

Job order costing and process costing are

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

Question 43

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

A) a cell phone
B) a highlighter pen
C) a graduation invitation
D) a recliner

Question 44

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

A) direct labor
B) factory overhead
C) chief financial officer's salary
D) direct materials

Question 45

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 46

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 47

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 48

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

Question 49

Which of the following is not a reason a service firm would use a 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 50

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 51

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 52

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 53

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

Question 54

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

A) a custom cabinet maker
B) a landscaper
C) a paper mill
D) a catering firm

Question 55

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 56

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

Question 57

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

Question 58

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

Question 59

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

A) canned soup processor
B) oil refinery
C) lumber mill
D) hospital

Question 60

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

Question 61

The amount of time spent by an employee on an individual job are recorded on

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

Question 62

Which of the following is a product cost?

A) salary of a sales manager
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 63

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 64

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 65

The Thomlin Company forecasts that total overhead for the current year will be $15,000,000 with 300,000 total machine 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

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

Question 66

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

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 67

Selected accounts with amounts omitted are as follows If the balance of Work in Process on August 31 is $220,000, what was the amount debited to Work in Process for direct materials in August?

A) $390,000
B) $170,000
C) $525,000
D) $580,000

Question 68

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 69

The Thomlin Company forecasts that total overhead for the current year will be $15,500,000 with 250,000 total machine hours. Year to date, the actual overhead is $16,000,000 and the actual machine hours are 330,000 hours. The predetermined overhead rate based on machine hours is

A) $48 per machine hour
B) $62 per machine hour
C) $45 per machine hour
D) $50 per machine hour

Question 70

Each document in the cost ledger is called a

A) finished goods sheet
B) stock record
C) materials requisition
D) job cost sheet

Question 71

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

A) clock cards
B) in-and-out cards
C) time tickets
D) a payroll register

Question 72

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

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 73

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 74

At the end of the year, overhead applied was $42,000,000. Actual overhead was $40,300,000. Closing over/underapplied overhead into Cost of Goods Sold would cause net income to

A) increase by $1,700,000
B) decrease by $1,700,000
C) increase by $3,400,000
D) decrease by $3,400,000

Question 75

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 76

The details concerning the costs incurred on each job order are accumulated in a work in process account and supported by a

A) stock ledger
B) materials ledger
C) cost ledger
D) creditors ledger

Question 77

At the end of the fiscal year, the balance in Factory Overhead is small. The balance would be

A) transferred to Work in Process
B) transferred to Cost of Goods Sold
C) transferred to Finished Goods
D) allocated between Work in Process and Finished Goods

Question 78

Which of the following is 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 79

The source document for the data for debiting Work in Process for direct materials is a

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

Question 80

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

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