Deck 5: Job-Order Costing

Question 1

In an actual cost system, actual direct materials, actual direct labour and actual overhead are used to calculate the unit cost.

Answer 1

True

Question 2

The raw materials account is an inventory account located on the balance sheet.

Answer 2

True

Question 3

The use of a departmental rate has the advantage of being simple and reduces data collection requirements.

Answer 3

False

Question 4

Production costs consist only of direct labour and manufacturing overhead.

Question 5

Actual overhead is reconciled with applied overhead at the end of the period.

Question 6

Overhead costs are assigned to Work-in-Process Inventory using a predetermined rate.

Question 7

If actual overhead is greater than applied overhead, the variance is called underapplied overhead.

Question 8

A primary characteristic of job-order costing is that the cost of each job is unique and must be tracked individually.

Question 9

Actual overhead is used to arrive at the cost of goods manufactured.

Question 10

There are other source documents besides the time ticket and the material requisition form used to fill out the job-order cost sheet.

Question 11

Using a time ticket, the cost accounting department can enter the cost of direct materials onto the correct job-order cost sheet.

Question 12

Departmental overheads can be added together to get plantwide overhead.

Question 13

If actual overhead is less than applied overhead, the variance is called underapplied overhead.

Question 14

The difference between actual overhead and applied overhead is the overhead variance.

Question 15

Process costing is used for manufacturing and service firms producing unique products or services.

Question 16

The Work-in-Process Inventory account consists of all the job-order costs sheets for the unfinished jobs.

Question 17

If the overhead variance is insignificant, it is allocated among the ending balances of Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold.

Question 18

A job-order cost sheet is the source document where direct labour costs are assigned to individual jobs.

Question 19

In a process costing environment, equivalent unit costs are computed by dividing the process costs for the given period by the output of the period.

Question 20

The use of normal costing means that actual overhead costs are NOT assigned directly to jobs.

Question 21

Which statement best describes job-order costing?

A) Products produced are identical in nature.
B) The cost of one job is typically different from that of another job.
C) Unit cost is computed by dividing total job costs by units sold on that job.
D) Unit cost is computed by dividing process costs of the period by the units produced in the period.

Question 22

Which of the following is a production cost in an automobile manufacturing company?

A) fixed selling costs
B) variable manufacturing overhead
C) secretary of the controller's wages
D) salary of the Chief Executive Officer

Question 23

The cost of completed units is always debited to Work-in-Process Inventory and credited to Finished Goods Inventory.

Question 24

The three manufacturing cost elements are direct materials, direct labour, and overhead.

Question 25

The journal entry for $7,200 raw materials requisitioned for use in production is:
Work-in-Process Inventory 7,200
Raw Materials Inventory 7,200

Question 26

Which costs are easy to trace to individual jobs?

A) direct materials and direct labour
B) direct labour and manufacturing overhead
C) manufacturing overhead and indirect labour
D) direct materials and manufacturing overhead

Question 27

What is characteristic of job-order costing?

A) Costs are collected by department.
B) It is used in firms that produce homogeneous products.
C) The total cost of each job is accumulated on the time card.
D) The document for accumulating manufacturing costs is the cost sheet.

Question 28

The journal entry for overhead applied at the rate of $3 per direct labour hour when 210 direct labour hours were worked is:
Work-in-Process Inventory 630
Overhead Control 630

Question 29

The journal entry for $17,000 materials purchased on account is:
Raw Materials Inventory 17,000
Accounts Payable 17,000

Question 30

Which type of business is most likely to use a process costing system?

A) petroleum
B) print shop
C) doctor's office
D) home building

Question 31

When materials are put into production, they are taken from the Raw Materials Inventory account and put into the Work-in-Process Inventory account.

Question 32

In job-order costing, the journal entry for $1,700 of unpaid direct labour is:
Wages Payable 1,700
Work-in-Process Inventory 1,700

Question 33

In job-order costing, the journal entry for a completed job costing $7,000 but NOT sold is:
Finished Goods Inventory 7,000
Work-in-Process Inventory 7,000

Question 34

In job-order costing, the journal entry for overhead applied at the rate of $3 per direct labour hour when 210 direct labour hours were worked is:
Work-in-Process Inventory 630
Applied Overhead 630

Question 35

In job-order costing, the journal entry for $7,200 raw materials requisitioned for use in production is:
Raw Materials Inventory 7,200
Work-in-Process Inventory 7,200

Question 36

The Cost of Goods Sold appearing on the income statement as an expense is the normal Cost of Goods Sold.

Question 37

The journal entry for $17 of underapplied overhead is:
Overhead Control 17
Cost of Goods Sold 17

Question 38

Actual overhead costs are accumulated in the overhead control account.

Question 39

From an operational perspective, which decision is generally NOT impacted by unit costs?

A) hiring a new CEO
B) evaluating performance on an ongoing basis
C) establishing a sales price for a product or service
D) determining the long-term feasibility of a business strategy

Question 40

The journal entry for $17 of underapplied overhead is:
Cost of Goods Sold 17
Applied Overhead 17

Question 41

Which statement best describes overhead costs?

A) Overhead costs are not incurred uniformly throughout the year.
B) Low production in one month would give rise to low unit overhead costs.
C) High production in one month would give rise to high unit overhead costs.
D) Overhead costs have a definite, identifiable relationship with units produced.

Question 42

What rarely occurs regarding the overhead variance?

A) overhead is overapplied
B) overhead is underapplied
C) overhead is a very small amount
D) actual overhead equals applied overhead

Question 43

What costs are used in a normal job-order costing system?

A) actual costs for direct materials, estimated costs for direct labour, and actual costs for overhead
B) estimated costs for direct materials, actual costs for direct labour, and actual costs for overhead
C) actual costs for direct materials and actual costs for direct labour, and estimated costs for overhead
D) estimated costs for direct materials, estimated costs for direct labour, and estimated costs for overhead

Question 44

Which total cost is included in the unit cost of a job?

A) the total costs of actual overhead
B) the total costs of applied overhead
C) the total costs of materials purchased
D) the total costs of labour worked on the in the factory

Question 45

Which type of business is most likely to use a job-order costing system?

A) food
B) lawyer
C) cement
D) chemicals

Question 46

In normal costing, how are direct materials, direct labour, and overhead costs assigned?

A) Actual direct materials, actual direct labour, and actual overhead costs are assigned to products.
B) Actual direct material and direct labour costs are assigned to products, but overhead costs are assigned using predetermined rates.
C) Actual direct materials cost is assigned to products, but direct labour and overhead costs are assigned using predetermined rates.
D) Actual direct labour cost is assigned to products, but direct material and overhead costs are assigned using predetermined rates.

Question 47

What is a characteristic of actual overhead using normal costing?

A) It is estimated easily at the beginning of the period.
B) It is reconciled at the end of a period with applied overhead.
C) It is recorded to the overhead control account at the beginning of the period.
D) It is separated into many smaller accounts, such as indirect labour and supplies.

Question 48

Which cost poses the most problems when using an actual cost system?

A) overhead
B) direct labour
C) direct materials
D) direct materials and direct labour

Question 49

What are the characteristics of process costing?

A) homogeneous products
B) costs accumulated by job
C) wide variety of distinct products
D) unit costs computed by dividing total job costs by number of units produced for that job

Question 50

When is the predetermined overhead rate usually calculated?

A) at the end of the year
B) at the end of each month
C) at the beginning of the year
D) at the beginning of each month

Question 51

What is a characteristic of normal costing?

A) Predetermined rates are not used to assign overhead.
B) Actual overhead costs are not assigned directly to jobs.
C) Applied overhead is not calculated on a job-specific basis.
D) Plant-wide and departmental rates cannot be used to assign overhead.

Question 52

Which statement most accurately describes a job-order costing?

A) Work-in-Process consists of all completed work.
B) Many different jobs are listed on a job-order cost sheet.
C) Direct labour is allocated to jobs along with manufacturing overhead.
D) Time tickets are used to assign the cost of direct labour to individual jobs.

Question 53

How are unit costs calculated for process costing and job-order costing?

A) by dividing total costs by the number of units produced
B) by dividing total fixed costs by the number of units produced
C) by adding total variable costs by the number of units produced
D) by dividing total production costs by the number of units produced

Question 54

Which method of measuring costs associated with production is more widely used in practice?

A) actual costing
B) normal costing
C) ordinary costing
D) authentic costing

Question 55

At the beginning of the year, Healthworks Company estimated the following for the coming year: Overhead $420,000
Direct labour hours 70,000
Healthworks used normal costing and applies overhead on the basis of direct labour hours. For the month of May, direct labour hours equalled 10,300 and actual overhead equalled $56,750.
What is the overhead applied to production in May?

A) $30,000
B) $46,750
C) $51,600
D) $61,800

Question 56

Which formula is used to calculate the predetermined overhead rate?

A) actual annual overhead / actual annual activity level
B) estimated annual overhead / actual annual activity level
C) actual annual overhead / estimated annual activity level
D) estimated annual overhead / estimated annual activity level

Question 57

When using normal costing, which costs never enter the Work-in-Process Inventory account?

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

Question 58

Which statement best describes manufacturing overhead?

A) Variances in overhead are expected every other month.
B) The adjusted Cost of Goods Sold is equal to the normal cost of goods manufactured plus or minus the overhead variance.
C) If the overhead variance shows underapplied overhead, then that amount would be subtracted from normal Cost of Goods Sold.
D) If the overhead variance shows overapplied overhead, then that amount would be subtracted from normal Cost of Goods Sold.

Question 59

Peterson Company has applied overhead of $75,000 and actual overhead of $87,600 for the month of October. It applies overhead on the basis of direct labour hours, which equalled 15,000 in October. Overhead for the year was estimated to be $925,000. What are the direct labour hours estimated for the year?

A) 150,000
B) 170,000
C) 175,200
D) 185,000

Question 60

How do process costing firms accumulate costs?

A) by job or process
B) by process or department
C) by process or business unit
D) by business unit or department

Question 61

Which statement best describes a characteristic of the job-order cost sheet?

A) It contains information about special orders only.
B) It is subsidiary to the Cost of Goods Sold account.
C) It contains only the materials information pertinent to a job.
D) It is the primary document for accumulating all costs related to a particular job.

Question 62

Blackfoot Softball Glove Company
Blackfoot Softball Glove Company estimated the following yearly data at the beginning of the year: $\begin{array}{lccc}&\text { Assembly }\\&\text { Department }&\text { Testing Department }&\text { Total }\\\text { Overhead } & \$ 570,000 & \$ 130,000 & \$ 700,000 \\\text { Direct Labour Hours } & 142,500 & 32,500 & 175,000 \\\text { Machine Hours } & 32,000 & 65,000 & 97,000\end{array}$ The company uses departmental overhead rates. In the assembly department, direct labour hours are used to apply overhead. Machine hours are used to apply overhead in the testing department.Actual data for August are as follows: $\begin{array}{lccc}& \text { Assembly } & \text { Testing } & \text { Total } \\ & \text { Department } & \text { Department } & \\\text { Overhead } & \$ 42,000 & \$ 12,000 & \$ 54,000 \\\text { Direct Labour Hours } & 13,500 & 2,430 & 15,930 \\\text { Machine Hours } & 4,020 & 11,000 & 15,020\end{array}$

-Refer to Blackfoot Softball Glove Company. Suppose that instead of departmental rates, Blackfoot uses a plant-wide overhead rate that is based on direct labour hours. What is the predetermined overhead rate rounded to the nearest cent?

A) $0.52 per direct labour hour
B) $2.57 per direct labour hour
C) $4.00 per direct labour hour
D) $5.00 per direct labour hour

Question 63

Refer to Rovetti, Inc. What is the overhead variance?

A) $19,150 overapplied
B) $19,150 underapplied
C) $56,000 overapplied
D) $56,000 underapplied

Question 64

Blackfoot Softball Glove Company
Blackfoot Softball Glove Company estimated the following yearly data at the beginning of the year: $\begin{array}{lccc}&\text { Assembly }\\&\text { Department }&\text { Testing Department }&\text { Total }\\\text { Overhead } & \$ 570,000 & \$ 130,000 & \$ 700,000 \\\text { Direct Labour Hours } & 142,500 & 32,500 & 175,000 \\\text { Machine Hours } & 32,000 & 65,000 & 97,000\end{array}$ The company uses departmental overhead rates. In the assembly department, direct labour hours are used to apply overhead. Machine hours are used to apply overhead in the testing department.Actual data for August are as follows: $\begin{array}{lccc}& \text { Assembly } & \text { Testing } & \text { Total } \\ & \text { Department } & \text { Department } & \\\text { Overhead } & \$ 42,000 & \$ 12,000 & \$ 54,000 \\\text { Direct Labour Hours } & 13,500 & 2,430 & 15,930 \\\text { Machine Hours } & 4,020 & 11,000 & 15,020\end{array}$

-Refer to Blackfoot Softball Glove Company. Suppose the company decides to continue using departmental overhead rates. What are the predetermined rates for the assembly and testing departments, respectively?

A) assembly: $2 per direct labour hour; testing: $4 per machine hour
B) assembly: $4 per direct labour hour; testing: $2 per machine hour
C) assembly: $4 per direct labour hour; testing: $4 per direct labour hour
D) assembly: $7.22 per machine hour; testing: $7.22 per machine hour

Question 65

Which item may be listed on a materials requisition form to maintain proper control over a firm's inventory of direct materials?

A) cost of supplies
B) the date and a signature
C) the date and the cost of the form
D) cost of lubricants for production machinery

Question 66

Refer to Company Inc. What is the overhead applied for January?

A) $26,800
B) $40,200
C) $44,000
D) $48,000

Question 67

Blackfoot Softball Glove Company
Blackfoot Softball Glove Company estimated the following yearly data at the beginning of the year: $\begin{array}{lccc}&\text { Assembly }\\&\text { Department }&\text { Testing Department }&\text { Total }\\\text { Overhead } & \$ 570,000 & \$ 130,000 & \$ 700,000 \\\text { Direct Labour Hours } & 142,500 & 32,500 & 175,000 \\\text { Machine Hours } & 32,000 & 65,000 & 97,000\end{array}$ The company uses departmental overhead rates. In the assembly department, direct labour hours are used to apply overhead. Machine hours are used to apply overhead in the testing department.Actual data for August are as follows: $\begin{array}{lccc}& \text { Assembly } & \text { Testing } & \text { Total } \\ & \text { Department } & \text { Department } & \\\text { Overhead } & \$ 42,000 & \$ 12,000 & \$ 54,000 \\\text { Direct Labour Hours } & 13,500 & 2,430 & 15,930 \\\text { Machine Hours } & 4,020 & 11,000 & 15,020\end{array}$

-Refer to Blackfoot Softball Glove Company. Suppose Blackfoot decides to continue using departmental overhead rates and a job spends 4 hours in assembly and 3 hours in testing. What is the amount of overhead charged to the job?

A) $20.00
B) $22.00
C) $28.00
D) $50.54

Question 68

Refer to Company Inc. Suppose the actual overhead for January is $51,000. What is the overhead variance?

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

Question 69

What document lists the total cost for a single product?

A) time ticket
B) purchase order
C) job-order cost sheet
D) materials requisition form

Question 70

Solidwood
Solidwood Corporation manufactures custom-made furniture. The following data pertains to Job X4A: $\begin{array}{ll}\text { Direct materials placed into production } & \$ 9,000 \\\text { Direct labour hours w orked } & 300 \text { hours } \\\text { Direct labour rate per hour } & \$ 15 \\\text { Machine hours w orked } & 100 \text { hours }\end{array}$ Manufacturing overhead rate is $22.50 per machine hour.

-Refer to Solidwood Corporation. Suppose Job X4A consists of 500 units and one-half of Job X4A was sold for $10,000. What would be the cost per unit for Job X4A?

A) $18.00
B) $27.00
C) $31.50
D) $40.50

Question 71

Solidwood
Solidwood Corporation manufactures custom-made furniture. The following data pertains to Job X4A: $\begin{array}{ll}\text { Direct materials placed into production } & \$ 9,000 \\\text { Direct labour hours w orked } & 300 \text { hours } \\\text { Direct labour rate per hour } & \$ 15 \\\text { Machine hours w orked } & 100 \text { hours }\end{array}$ Manufacturing overhead rate is $22.50 per machine hour.

-Refer to Solidwood Corporation. Suppose one-half of Job X4A was sold for $10,000. What would be the total amount of costs assigned to Job X4A?

A) $9,000
B) $13,500
C) $15,750
D) $20,250

Question 72

The BeautyWorks Corporation manufactures custom-made purses. The following data pertains to Job AAA: Direct materials placed into production $4,000
Direct labour hours worked 60 hours
Direct labour rate per hour $15
Machine hours worked 100 hours
Manufacturing overhead is applied using a plantwide rate that is based on direct labour hours. Manufacturing overhead was budgeted at $120,000 for the year, and the direct labour hours were estimated to be 30,000. Job AAA consists of 50 units. What is the overhead cost assigned to Job AAA?

A) $240
B) $400
C) $750
D) $1,500

Question 73

Refer to Rovetti, Inc. What is the predetermined overhead rate?

A) $2.63 per direct labour hour
B) $3.00 per direct labour hour
C) $3.42 per direct labour hour
D) $4.00 per direct labour hour

Question 74

What form requires the job number and the type, quantity, and unit cost of direct materials issued?

A) time ticket
B) job-order cost sheet
C) labour summary sheet
D) materials requisition form

Question 75

On March 1, Job 492 had a beginning balance of $500. During March, direct materials of $700 and direct labour of $400 were added to the job. Overhead is applied to production at a rate of 60% of direct labour. There are ten units in Job 492. What is the unit cost?

A) $134
B) $184
C) $1,100
D) $1,840

Question 76

Blackfoot Softball Glove Company
Blackfoot Softball Glove Company estimated the following yearly data at the beginning of the year: $\begin{array}{lccc}&\text { Assembly }\\&\text { Department }&\text { Testing Department }&\text { Total }\\\text { Overhead } & \$ 570,000 & \$ 130,000 & \$ 700,000 \\\text { Direct Labour Hours } & 142,500 & 32,500 & 175,000 \\\text { Machine Hours } & 32,000 & 65,000 & 97,000\end{array}$ The company uses departmental overhead rates. In the assembly department, direct labour hours are used to apply overhead. Machine hours are used to apply overhead in the testing department.Actual data for August are as follows: $\begin{array}{lccc}& \text { Assembly } & \text { Testing } & \text { Total } \\ & \text { Department } & \text { Department } & \\\text { Overhead } & \$ 42,000 & \$ 12,000 & \$ 54,000 \\\text { Direct Labour Hours } & 13,500 & 2,430 & 15,930 \\\text { Machine Hours } & 4,020 & 11,000 & 15,020\end{array}$

-Refer to Blackfoot Softball Glove Company. Which statement best represents the departmental overhead rates?

A) Applied overhead for the testing department is $4,860.
B) Overhead for the assembly department is underapplied.
C) Applied overhead for the assembly department is $54,000.
D) Applied overhead for both departments combined is $63,720.

Question 77

At the beginning of the year, Shoeman Corporation estimates its overhead for the year will be $150,000. Suppose the actual overhead for the year is $160,000 and the applied overhead for the year is $145,000. Assume that the overhead variance is insignificant. What journal entry is needed to reconcile the overhead variance?

A) Cost of Goods Sold 15,000
Overhead Control 15,000
B) Overhead Control 15,000
Cost of Goods Sold 15,000
C) Cost of Goods Sold 5,000
Overhead Control 5,000
D) Overhead Control 5,000
Cost of Goods Sold 5,000

Question 78

Refer to Company Inc. What is the predetermined overhead rate?

A) $4 per machine hour
B) $6 per direct labour hour
C) $40,200
D) $44,000

Question 79

Which source document would NOT be used to help decide the cost of a job?

A) material requisition form
B) Cost of Goods Sold sheet
C) time ticket for direct labour
D) time ticket for indirect labour

Question 80

Shakers Manufacturing has the following information listed before reconciling the overhead variance. $$\begin{array} { l r } \text { Estimated Overhead } & \$ 760,000 \\\text { Applied Overhead } & 756,000 \\\text { Actual Overhead } & 740,000 \\\text { Cost of Goods Sold } & 935,000\end{array}$$ Assume that any overhead variance is insignificant. What is the adjusted Cost of Goods Sold after adjusting for the overhead variance?

A) $915,000
B) $919,000
C) $939,000
D) $951,000