Question 1

O'Hare Company is a manufacturing firm that uses a job-order costing system to determine the costs of its products.O'Hare Company counted the production supplies on hand at year-end and determined that the amount used was $125.The recognition of this event on the financial statements would include an increase to which of the following accounts?
A) Supply Expense
B) Work in Process Inventory
C) Manufacturing Overhead
D) Finished Goods Inventory

Accepted Answer

The amount used for production supplies represents a manufacturing overhead cost which is applied to work in process inventory. Therefore, the recognition of this event would increase the Manufacturing Overhead account.

Question 2

During the current accounting period,O'Hare Company paid $2,300 for selling and administrative expenses.Payment of cash for selling and administrative expenses is:
A) An asset exchange transaction.
B) An asset source transaction.
C) An asset use transaction.
D) A claims exchange transaction.

Accepted Answer

Payment of cash for selling and administrative expenses represents a decrease in cash, which is an asset. Since the expense has been incurred, it is considered an asset use transaction. Therefore, option C is the correct choice.

Question 3

O'Hare Company is a manufacturing firm that uses a job-order costing system to determine the costs of its products.During the current accounting period,O'Hare paid $700 for equipment rental and other indirect costs.The recognition of this event would:
A) Decrease total assets.
B) Increase total assets.
C) Reduce net income.
D) Have no impact on total assets.

Accepted Answer

Indirect costs are expensed in the period incurred and do not affect total assets.

Question 4

Drummond Company provides customized computer training to employees of large corporations.What kind of costing system should Drummond use?
A) Standard costing
B) Process costing
C) Job-order costing
D) None of these answers are correct.

Accepted Answer

Drummond provides customized computer training which can be considered as a type of service. Job-order costing system is best suited for service-based industries that provide customized services to clients. This system allows Drummond to track and allocate the costs associated with each training program individually, allowing them to accurately determine the cost of each program and invoice clients accordingly. Additionally, job-order costing system is flexible enough to accommodate changes in the training program and can be adjusted to reflect any changes in materials, labor, or overhead costs. Therefore, Job-order costing is the best choice for Drummond Company.

Question 5

During the current accounting period,O'Hare applied $14,500 of estimated overhead cost to production.Actual overhead costs were $14,325.Assuming that the balance in the Manufacturing Overhead is insignificant,the recognition of the transaction to close that account will:
A) Decrease cost of goods sold and increase stockholders' equity.
B) Increase cost of goods sold.
C) Decrease stockholders' equity.
D) Decrease total assets and total liabilities.

Accepted Answer

Since the estimated overhead applied to production ($14,500) exceeded the actual overhead costs ($14,325), there is an over-applied overhead balance. Closing the Manufacturing Overhead account involves recognizing this over-applied balance by transferring it to Cost of Goods Sold and increasing Stockholders' Equity. Therefore, option A is the correct choice. Option B is incorrect since the transaction would decrease, not increase, cost of goods sold. Option C is incorrect because stockholders' equity would actually increase, not decrease. Option D is incorrect because this transaction does not affect total assets or total liabilities.

Question 6

O'Hare Company is a manufacturing firm that uses a job-order costing system to determine the costs of its products.During the current accounting period,O'Hare applied estimated manufacturing overhead costs of $1,550 to Job #132.Which of the following statements regarding this transaction is correct?
A) Work in process inventory decreases.
B) Net income decreases.
C) Manufacturing overhead decreases.
D) Total equity increases.

Accepted Answer

When O'Hare applies the estimated manufacturing overhead costs to Job #132, the manufacturing overhead increases. This is because estimated manufacturing overhead cost is a component of manufacturing overhead. The increase in manufacturing overhead cost will be recorded as a credit to the manufacturing overhead account and a debit to the work in process inventory account. This means that the work in process inventory will increase rather than decrease. However, none of the other options are correct. Net income will not decrease because this transaction does not affect revenue or expenses. Total equity will not increase because this transaction does not involve any equity transactions.

Question 7

Job-order and process costing systems are used only in the United States.

Accepted Answer

Job-order and process costing systems are used in many countries around the world, not just in the United States. These systems are commonly used in manufacturing industries to track the costs of production and to assign costs to specific products or production processes.

Question 8

O'Hare Company is a manufacturing firm that uses a job-order costing system to determine the costs of its products.During the current accounting period,O'Hare recognized cost of goods sold of $4,850 for Job #132.The recognition of this event will include a decrease to which of the following accounts?
A) Cost of Goods Sold.
B) Production Supplies.
C) Work in Process Inventory.
D) Finished Goods Inventory.

Accepted Answer

The recognition of cost of goods sold for Job #132 means that the job has been completed and sold, thus reducing the Finished Goods Inventory as the costs are transferred out of this account and into Cost of Goods Sold.

Question 9

A laundry detergent manufacturer would most likely use:
A) Process costing.
B) Job-order costing.
C) Hybrid costing.
D) Batch-order costing.

Accepted Answer

A laundry detergent manufacturer produces a large quantity of identical products through a continuous process. Therefore, process costing is the most suitable cost accumulation method for this type of industry. Process costing is used to determine the cost of producing identical products in large quantities by averaging the cost over the entire production run.

Question 10

Which of the following statement(s)is (are)correct? I.It is easy to distinguish the balance sheet of a company that uses a process costing system from that of a company that uses job-order costing
II)A process costing system requires a Work in Process account for each processing department,while a job-order costing system uses a single Work in Process account
III)Process costing systems use multiple Finished Goods Inventory accounts
A) I only
B) II only
C) II and III
D) I, II, and III

Accepted Answer

Statement I is incorrect as it is not easy to distinguish the balance sheet of a company that uses a process costing system from that of a company that uses job-order costing. 
Statement II is correct as a process costing system requires a Work in Process account for each processing department, while a job-order costing system uses a single Work in Process account. 
Statement III is incorrect as process costing systems use a single Finished Goods Inventory account.

Question 11

The two most common types of costing systems are:
A) Process and transfer costing systems.
B) Job-order and process costing systems.
C) Job-order and direct costing systems.
D) Process and standard costing systems.

Accepted Answer

The two most common types of costing systems are job-order costing, which is used to track the cost of producing unique, customized products, and process costing, which is used to track the cost of producing large quantities of identical items. Therefore, option B - Job-order and process costing systems - is the correct answer.

Question 12

O'Hare Company is a manufacturing firm that uses a job-order costing system to determine the costs of its products.During the current accounting period,O'Hare transferred total product costs for Job #132 to finished goods.The recognition of this event would:
A) Increase total assets.
B) Decrease total assets.
C) Reduce net income.
D) Have no impact on total assets.

Accepted Answer

Transferring costs from work in progress to finished goods inventory does not change the total assets of a company; it merely reallocates costs within the assets category, from one type of inventory to another.

Question 13

Job-order and process costing systems are two different costing systems that a company chooses between based on the preference of management.

Accepted Answer

The choice between job-order and process costing systems is primarily based on the nature of the production process and the type of product being manufactured, not merely management preference.

Question 14

Both job-order and process costing systems require cost averaging procedures.

Accepted Answer

Both job-order and process costing systems require cost averaging procedures to allocate costs to individual jobs or production runs. In job-order costing, costs are averaged over the specific job or order, while in process costing, costs are averaged over all units produced during a specific time period.

Question 15

Steele Manufacturing Company reported the following Work in Process Inventory account activity measured in units.The ending inventory was estimated to be 70% complete. Beginning inventory 20,000
Started 90,000
Ending inventory 15,000
What is the number of equivalent units in Steele's ending work in process inventory?
A) 14,000
B) 15,000
C) 10,500
D) None of these answers are correct.

Accepted Answer

The equivalent units are calculated as the units completed and transferred out, plus the equivalent units in ending work in process inventory.

Units completed and transferred out = Beginning inventory + Units started - Ending inventory 
Units completed and transferred out = 20,000 + 90,000 - 15,000 
Units completed and transferred out = 95,000

Equivalent units in ending work in process inventory = Ending inventory x % complete 
Equivalent units in ending work in process inventory = 15,000 x 70% 
Equivalent units in ending work in process inventory = 10,500

Total equivalent units = Units completed and transferred out + Equivalent units in ending work in process inventory 
Total equivalent units = 95,000 + 10,500 
Total equivalent units = 105,500

Therefore, the number of equivalent units in Steele's ending work in process inventory is 10,500 units.

Question 16

O'Hare Company is a manufacturing firm that uses a job-order costing system to determine the costs of its products.During the current accounting period,O'Hare recognized depreciation of $600 on manufacturing equipment.Which of the following describes the effect of this event on the accounting equation?
A) Total assets and total equity are unaffected.
B) Both total assets and total equities increase.
C) Total assets and net income decrease.
D) Total assets increase and net income increase.

Accepted Answer

Depreciation is a non-cash expense and does not impact the total assets or total equity of the company. Therefore, the correct option is A where there is no effect on either the total assets or total equity.

Question 17

Which of the following items is provided on a work ticket?
A) Job number
B) Employee identification
C) Work description
D) All of these answers are correct.

Accepted Answer

All three items listed (job number, employee identification, and work description) are commonly provided on a work ticket. The job number helps identify the specific task or project being worked on, while the employee identification helps track who is responsible for completing the work. The work description outlines the specific tasks or requirements for the job.

Question 18

Beta Company determined that its manufacturing overhead for the current accounting period was overapplied by $1,400.It closed the amount to cost of goods sold.The recognition of this transaction will:
A) Decrease cost of goods sold.
B) Increase cost of goods sold.
C) Have no impact on cost of goods sold.
D) None of these answers are correct.

Accepted Answer

When manufacturing overhead is overapplied, it means that the overhead allocated to products is more than the actual overhead incurred. Closing this overapplied amount to the cost of goods sold decreases the cost of goods sold, because it corrects for the initial overestimation of overhead costs assigned to products.

Question 19

O'Hare Company is a manufacturing firm that uses a job-order costing system to determine the costs of its products.O'Hare Company sold Job #132 for $8,200 cash.The job cost sheet for that job reported total manufacturing costs of $5,900.The recognition of this event on the financial statements would include a(n):
A) Decrease to total assets and total equity.
B) Decrease to total liabilities.
C) Increase to total assets, total equity, and net income.
D) Decrease to net income.

Accepted Answer

When O'Hare Company sells Job #132 for $8,200, it will increase the total assets (cash) by $8,200. Since the total manufacturing costs for the job were $5,900, the sale will also increase net income by $2,300 ($8,200 - $5,900). This increase in net income will also increase total equity. No decrease to total liabilities is recorded in this transaction. Therefore, the best choice is C.

Question 20

Job-order costing systems are used by many service businesses; process costing systems are not applicable to service businesses.

Accepted Answer

Job-order costing systems can be used by service businesses that provide personalized services, such as law firms, accounting firms, and consulting firms. On the other hand, process costing systems are not applicable to service businesses as they involve the continuous production of uniform units, which is not the case for most services.

Quiz 12: Job-Order, process, and Hybrid Costing Systems

During the current accounting period,O'Hare Company paid $2,300 for selling and administrative expenses.Payment of cash for selling and administrative expenses is:

O'Hare Company is a manufacturing firm that uses a job-order costing system to determine the costs of its products.During the current accounting period,O'Hare paid $700 for equipment rental and other indirect costs.The recognition of this event would:

Drummond Company provides customized computer training to employees of large corporations.What kind of costing system should Drummond use?

During the current accounting period,O'Hare applied $14,500 of estimated overhead cost to production.Actual overhead costs were $14,325.Assuming that the balance in the Manufacturing Overhead is insignificant,the recognition of the transaction to close that account will:

Job-order and process costing systems are used only in the United States.

A laundry detergent manufacturer would most likely use:

The two most common types of costing systems are:

O'Hare Company is a manufacturing firm that uses a job-order costing system to determine the costs of its products.During the current accounting period,O'Hare transferred total product costs for Job #132 to finished goods.The recognition of this event would:

Job-order and process costing systems are two different costing systems that a company chooses between based on the preference of management.

Both job-order and process costing systems require cost averaging procedures.

Which of the following items is provided on a work ticket?

Beta Company determined that its manufacturing overhead for the current accounting period was overapplied by $1,400.It closed the amount to cost of goods sold.The recognition of this transaction will:

Job-order costing systems are used by many service businesses; process costing systems are not applicable to service businesses.