Deck 3: Cost Accounting Systems: Job Order Costing

Question 1

Cost accounting concepts and procedures are only useful in product manufacturing entities.

Answer 1

False

Question 2

In a job order costing system, product costs are recorded and accumulated for specific jobs or products.

Answer 2

True

Question 3

Managers use product costing information in determining budgets and setting prices for products.

Answer 3

True

Question 4

Job order costing is typically employed in companies that use assembly lines for producing identical products.

Question 5

Predetermined overhead rates are calculated by dividing estimates of total factory overhead cost in the upcoming accounting period (usually a year) by an estimated usage or capacity of some unit of related activity (such as direct labor hours).

Question 6

Overhead is always allocated on the basis of direct labor hours, so it is relatively simple and accurate to apply these costs to the products.

Question 7

Using a predetermined overhead rate reduces large changes in per-unit product costs that could result from production volume variances.

Question 8

When applying overhead, the total amount incurred for the period is debited to Work in Process Inventory.

Question 9

In the journal entries to record the issuance of materials into production, the costs of both direct and indirect materials are credited to the Materials Inventory account and debited directly to Work in Process Inventory.

Question 10

The entry to record direct labor for a job includes a debit to Work in Process Inventory.

Question 11

Time clocks or time records are used to track the amount of time an employee spends on each individual job.

Question 12

If overhead is allocated on the basis of direct labor hours, then overhead must be allocated for the labor hours spent on packaging.

Question 13

In a job order costing system, the amount transferred from Work in Process Inventory to Finished Goods Inventory should also equal the amount of Sales Revenue for a given job.

Question 14

If manufacturing overhead is under-applied at the end of the year, the entry to close the account requires a CREDIT to Manufacturing Overhead.

Question 15

In a service firm, the entries to record the completion of a project and billing the client include a CREDIT to Work in Process.

Question 16

Service department costs are considered product costs. They are accumulated in the service departments, and then allocated to the production departments as overhead, where they are then applied to the manufactured goods or provided services.

Question 17

Because service departments do not directly contribute to the production of goods, their costs are generally considered period costs rather than assigned to an individual product, department or activity.

Question 18

Service departments are those parts of a business that are not connected with production, such as Sales, Finance, or Customer Service.

Question 19

Service department costs are almost always allocated on the basis of Direct Labor hours.

Question 20

The predetermined plant-wide overhead rate is determined by dividing actual overhead costs incurred for the year by the amount of capacity used for the year.

Question 21

A departmental overhead rate is determined by dividing the estimated overhead associated with the department by the estimated utilization of the productive capacity of that department.

Question 22

Accumulating cost information on a per-unit basis is useful for making management decisions in companies such as:

A) Manufacturers
B) Hospitals
C) Insurance companies
D) None of the above
E) A, B, and C

Question 23

Using a cost accounting system to track product costs is needed for:

A) Managerial decision making
B) Financial statements
C) Setting product prices
D) All of the above
E) Both A and C

Question 24

A job order costing system does which of the following?

A) Allocates manufacturing costs to individual jobs to determine unit costs
B) Is used to determine period costs in a service company
C) Is used to determine unit costs when products are manufactured in a continuous flow process
D) Both B and C
E) None of the above

Question 25

Which of the following types of production would most likely use job-order costing?

A) Construction of custom homes
B) Farming
C) Manufacturing of heavy-duty machinery
D) Electrical power generation
E) Both A and C.

Question 26

If an actual monthly overhead rate were used to cost products rather than a predetermined rate based on yearly estimates, which of the following would be true?

A) Costs per unit would increase in months where production was greater.
B) Costs per unit would likely be more relevant, because they would reflect actual price fluctuations in the sources of overhead.
C) Costs per unit would probably not fluctuate very much.
D) Costs per unit would increase in months where overhead costs where higher.
E) A and B are both true.

Question 27

When calculating the predetermined overhead rate, which of the following is typically used?

A) Daily budgeted overhead
B) Yearly actual overhead incurred
C) Yearly budgeted overhead
D) Monthly actual overhead incurred
E) All of the above

Question 28

The predetermined manufacturing overhead rate for a company will generally be:

A) Based on monthly budgets.
B) Based on annual budgets.
C) Higher than actual manufacturing overhead rates.
D) Lower than actual manufacturing overhead rates.

Question 29

Which of the following would not appear on a job order cost sheet?

A) Direct Labor costs incurred
B) Direct Materials requisitioned for the job
C) General administrative expense
D) Total cost of the job
E) All of the above would appear on the job order cost sheet

Question 30

Which of the following lists the materials necessary to complete a job?

A) Bill of Materials
B) Production order
C) Job order cost sheet
D) Materials requisition

Question 31

If a company uses a perpetual inventory system, what journal entry would correctly record a purchase on account of materials to be used in production?

A) Purchases
Accounts Payable
B) Materials Inventory
Cash
C) Materials Inventory
Accounts Payable
D) Work in Process Inventory
Accounts Payable
E) None of these

Question 32

When recording depreciation on factory equipment, which of the following accounts would be credited?

A) Work in Process Inventory
B) Manufacturing Overhead
C) Equipment
D) Accounts Payable
E) Accumulated Depreciation-Equipment

Question 33

When packaging is part of a production process, which of the following accounts will not be affected by the entries to record packing? Assume that all packaging materials are purchased on account and held in materials inventory prior to use.

A) Work in Process Inventory
B) Manufacturing Overhead
C) Wages Payable
D) Materials Inventory
E) Cost of Goods Sold

Question 34

Which of the following is correctly included in the entry to record the sale of finished goods?

A) CREDIT to Work in Process Inventory
B) CREDIT to Finished Goods Inventory
C) CREDIT to Cost of Goods Sold
D) DEBIT to Sales Revenue
E) DEBIT to Accounts Payable

Question 35

Which of the following correctly explains what should be done with any under- or over-applied overhead?

A) At the end of a project, any insignificant under- or over-applied overhead should be closed to Work in Process prior to transferring the costs to Finished Goods.
B) Monthly, any significant amount of under- or over-applied overhead should be closed to Cost of Goods Sold.
C) At year end, if there is a significant amount of under- or over-applied overhead, it should be allocated proportionally to Work in Process, Finished Goods, and Cost of Goods sold.
D) At year end, if there is a significant amount of under- or over-applied overhead, it should all be closed to Cost of Goods Sold.
E) It is not normal for a company to have under- or over-applied overhead, because overhead is allocated based on actual costs incurred.

Question 36

Which of the following statements is most correct?

A) Service firms transfer the costs associated with services completed to a Finished Services account prior to billing the client for work performed.
B) Because they are not engaged in manufacturing work, employees working in service firms do not track the time that they spend on specific jobs or projects.
C) Service firms typically use some driver other than labor to allocate overhead, given that the work is not usually labor intensive.
D) Service firms typically do not use Job-order Costing, because they do not manufacture any products.
E) Service firms typically do not include the cost of any Direct Materials in their Work in Progress Inventory for services that they perform.

Question 37

Which of the following types of costs are not allocated to production departments?

A) Manufacturing overhead costs directly identifiable with the production departments
B) Manufacturing overhead costs requiring allocation to production departments
C) Selling department costs
D) Service department costs

Question 38

Which of the following is a cost incurred by or allocated to service departments?

A) Direct Materials
B) Direct Labor
C) Manufacturing Overhead (allocated based on a predetermined rate)
D) Selling Expenses
E) None of the above are service department costs.

Question 39

Which of the following could be used as a basis to allocate service department costs?

A) Machine Hours
B) Direct Labor Hours
C) Square feet of building used
D) Kilowatts per hour of electricity used
E) All of the above could be used.

Question 40

Which of the following would be the most appropriate measure of overhead allocation for a department that is highly automated?

A) Machine hours used
B) Direct Labor hours
C) Direct Materials usage
D) Square feet of floor space
E) Number of employees

Question 41

Which of the following is not a correct reason for using department overhead rates?

A) It provides a more equitable allocation of costs than a plant-wide overhead rate.
B) It is more accurate than activity-based costing when jobs are complex and varied.
C) Different departments may have different production capacities.
D) All of these are reasons to use department overhead rates.

Question 42

Wasatch Company anticipates that they will incur the following costs and expenses during the coming year:
If manufacturing overhead is assigned on the basis of direct labor hours, what is the predetermined manufacturing overhead rate for the coming year?

A) $6.71
B) $9.14
C) $11.86
D) $14.86
E) None of the above

Question 43

Job number 2288 had the following data:
Assuming this was the only job completed this month, what was the total cost of Job 2288?

A) $3,300
B) $3,550
C) $4,620
D) $4,870
E) None of the above

Question 44

Job #2333 incurred the following during production:
The following data is also available for the company:
The company incurs costs at the following rates:
Given this information, what was the total cost of the job that was transferred from Work in Process Inventory to the Finished Goods Inventory?

A) $4,500.00
B) $4,600.00
C) $4,607.50
D) $4,610.00
E) $19,607.50

Question 45

Which of the following is NOT a cost incurred by or allocated to service departments?

A) Direct Materials
B) Direct Labor
C) Manufacturing Overhead (allocated based on a predetermined rate)
D) Selling Expenses
E) None of the above are service department costs

Question 46

Which of the following could be used as a basis to allocate service department costs?

A) Machine Hours
B) Direct Labor Hours
C) Square feet of building used
D) Kilowatts per hour of electricity used
E) All of the above could be used

Question 47

Bricks and Mortar Manufacturing produces building materials for local construction contractors. BMM has 2 production departments (Mixing and Firing) and 2 service departments (Maintenance and Cleaning). Maintenance costs are allocated based on machine hours used. Cleaning costs are allocated based on square feet of floor space.
The following data is available for BMM:
Mixing: 600 square feet of floor space, 200 machine hours used
Firing: 400 square feet of floor space, 500 machine hours used
Maintenance costs incurred: $4,900
Cleaning costs incurred: $2,300
How much of the Cleaning costs should be allocated to the Firing department?

A) $ 657.14
B) $ 920.00
C) $1,380.00
D) $1,400.00
E) $2,057.14

Question 48

Bricks and Mortar Manufacturing produces building materials for local construction contractors. BMM has 2 production departments (Mixing and Firing) and 2 service departments (Maintenance and Cleaning). Maintenance costs are allocated based on machine hours used. Cleaning costs are allocated based on square feet of floor space.
The following data is available for BMM:
Mixing: 600 square feet of floor space, 200 machine hours used
Firing: 400 square feet of floor space, 500 machine hours used
Maintenance costs incurred: $4,900
Cleaning costs incurred: $2,300
How much total support department costs should be allocated to the Mixing department?

A) $ 657.14
B) $ 920.00
C) $1,380.00
D) $1,400.00
E) $2,780.00

Question 49

Bricks and Mortar Manufacturing produces building materials for local construction contractors. BMM has 2 production departments (Mixing and Firing) and 2 service departments (Maintenance and Cleaning). Maintenance costs are allocated based on machine hours used. Cleaning costs are allocated based on square feet of floor space. BMM also allocates depreciation on the factory to all departments on the basis of number of employee positions in the department.
The following data is available for BMM:
Mixing: 600 square feet of floor space, 200 machine hours used, 10 employees
Firing: 400 square feet of floor space, 500 machine hours used, 5 employees
Maintenance: $4,900 incurred, 4 employees
Cleaning: $2,300, 6 employees
Depreciation on factory: $4,500
How much in total costs should be allocated to the Mixing department?

A) $1,800.00
B) $2,720.00
C) $3,200.00
D) $5,433.71
E) $4,680.00

Question 50

Job #335 requires work in the following departments:
Machining: 4 hours (all automated)
Sanding: 1 hour (all direct labor)
Painting: 2 hours (including dry time of 1.5 hours)
The company uses departmental overhead rates. Overhead is allocated at the rate of $6/direct labor hour in Sanding, and $15/machine hour in Machining. Painting overhead is allocated on the basis of total time in the department and is allocated at a rate of $3/hour.
How much overhead is allocated to the job?

A) $45
B) $72
C) $67.50
D) $78
E) None of the above

Question 51

Acme Production, Inc. had the following data for their manufacturing process:
What was the overhead cost/unit allocated to the units produced in December, if the company's predetermined overhead rate is based on machine hours?

Question 52

Wasatch Company anticipates that they will incur the following costs and expenses during the coming year:
If manufacturing overhead is assigned on the basis of direct labor hours, what is the predetermined manufacturing overhead rate for the coming year?

Question 53

Peter Manufacturing, Inc. employs an overhead rate of 150% of direct labor cost. The Job 180 cost sheet shows that $10,000 in direct materials has been used and that $11,000 in direct labor has been incurred.
If 2,000 units of product have been produced on Job 180, what is the unit cost of the product?

Question 54

The following costs were recorded by Buddy Co. for the month of January:
Overhead is allocated based on a predetermined rate of $20 per direct labor hour.
What is the balance in the Manufacturing Overhead account at the end of January? (Assume that Buddy Co. reports their financial results on a calendar year basis).

Question 55

Job number 2873 had the following data:
Assuming this was the only job completed this month, what was the total cost of Job 2873?

Question 56

Materials purchases for the month were $2,000. The Materials Inventory account had a beginning balance of $250. Direct Materials used were $1,900, and Indirect Materials used were $300.
What is the correct ending balance for the Materials Inventory account?

Question 57

Job #5632 incurred the following during production:
The following data is also available for the company:
The company incurs costs at the following rates:
Given this information, what was the total cost of the job that was transferred from Work in Process Inventory to the Finished Goods Inventory?

Question 58

What is/are the correct journal entry(ies) to record the completion and billing of the following job?

Question 59

The following information is available for 20X1 for Ocra & Associates Oil Refinery:
Ending Work in Process: $50,000 (including applied overhead of $20,000)
Ending Finished Goods: $130,000 (including applied overhead of $40,000)
Cost of Goods Sold for the year: $1,200,000 (including applied overhead of $440,000 from this year)
At year end, the company had an under-applied overhead balance of $38,000. This amount is not considered significant.
What is the adjusting entry required with respect to overhead at year end?

Question 60

The following information is available for 20X5 for Ocra & Associates Oil Refinery:
Ending Work in Process: $50,000 (including applied overhead of $20,000)
Ending Finished Goods: $130,000 (including applied overhead of $40,000)
Cost of Goods Sold for the year: $1,200,000 (including applied overhead of $440,000 from this year)
At year end, the company had an under-applied overhead balance of $38,000. This amount IS considered significant.
What is the adjusting entry required with respect to overhead at year end?

Question 61

Hardluck Manufacturing produces building materials for local construction contractors. HM has two production departments (Mixing and Baking) and two service departments (Maintenance and Cleaning). Maintenance costs are allocated based on machine hours used. Cleaning costs are allocated based on square feet of floor space.
The following data is available for HM:
Mixing: 1,100 square feet of floor space, 200 machine hours used
Baking: 900 square feet of floor space, 500 machine hours used
Maintenance costs incurred: $49,000
Cleaning costs incurred: $23,000
How much of the Cleaning costs should be allocated to the Baking department?

Question 62

Hardluck Manufacturing produces building materials for local construction contractors. HM has 2 production departments (Mixing and Baking) and 2 service departments (Maintenance and Cleaning). Maintenance costs are allocated based on machine hours used. Cleaning costs are allocated based on square feet of floor space.
The following data is available for HM:
Mixing: 1,100 square feet of floor space, 200 machine hours used
Baking: 900 square feet of floor space, 500 machine hours used
Maintenance costs incurred: $49,000
Cleaning costs incurred: $23,000
How much total support department costs should be allocated to the Mixing department?

Question 63

Hardluck Manufacturing produces building materials for local construction contractors. HM has 2 production departments (Mixing and Baking) and 2 service departments (Maintenance and Cleaning). Maintenance costs are allocated based on machine hours used. Cleaning costs are allocated based on square feet of floor space. HM also allocates depreciation on the factory to all departments on the basis of number of employee positions in the department.
The following data is available for HM:
Mixing: 1,100 square feet of floor space, 200 machine hours used, 30 employees
Baking: 900 square feet of floor space, 500 machine hours used, 24 employees
Maintenance: $49,000 incurred, 4 employees
Cleaning: $23,000 incurred, 2 employees
Depreciation on factory: $45,000
What is the total amount that should be allocated to Baking from the Cleaning department?

Question 64

Hardluck Manufacturing produces building materials for local construction contractors. HM has 2 production departments (Mixing and Baking) and 2 service departments (Maintenance and Cleaning). Maintenance costs are allocated based on machine hours used. Cleaning costs are allocated based on square feet of floor space. HM also allocates depreciation on the factory to all departments on the basis of number of employee positions in the department.
The following data is available for HM:
Mixing: 1,100 square feet of floor space, 200 machine hours used, 30 employees
Baking: 900 square feet of floor space, 500 machine hours used, 24 employees
Maintenance: $49,000 incurred, 4 employees
Cleaning: $23,000, 2 employees
Depreciation on factory: $45,000
How much in total costs should be allocated to the Mixing department?

Question 65

Job #754 requires work in the following departments:
Machining: 9 hours (all automated)
Sanding: 3 hour (all direct labor)
Painting: 15 hours (including dry time of 9 hours)
The company uses departmental overhead rates. Overhead is allocated at the rate of $12/direct labor hour in Sanding, and $9/machine hour in Machining. Painting overhead is allocated strictly on the basis of total time in the department (because dry time is so substantial), and is allocated at a rate of $6/hour.
How much overhead is allocated to the job?

Question 66

BorrRedds Mfg. had the following data for their manufacturing process:
What was the overhead cost/unit allocated to the units produced in December, if the company's predetermined overhead rate is based on machine hours?

Question 67

Scraps'N'Co anticipates incurring the following costs and expenses during the coming year:
If manufacturing overhead is assigned on the basis of direct labor hours, what is the predetermined manufacturing overhead rate for the coming year?

Question 68

Rachael Productions Co. uses an overhead rate of 40% of direct labor cost. The cost sheet for Job 227 shows that $2,000 in direct materials has been used and that $3,000 in direct labor has been incurred.
If 500 units of product have been produced on Job 227, what is the unit cost of the product?

Question 69

The following costs were recorded by Grant Co. for the month of January:
Overhead is allocated based on a predetermined rate of $5 per direct labor hour.
What is the balance in the Manufacturing Overhead account at the end of January (assume that Grant Co. reports their financial results on a calendar year basis).

Question 70

Job number 24602 had the following data:
Assuming this was the only job completed this month, what was the total cost of Job 24602?

Question 71

Materials purchases for the month were $26,000. The Materials Inventory account had a beginning balance of $1,250. Direct Materials used were $23,700, and Indirect Materials used were $2,360.
What is the correct ending balance for the Materials Inventory account?

Question 72

Job #0098 incurred the following during production:
The following data is also available for the company:
The company incurs costs at the following rates:
Given this information, what was the total cost of the job that was transferred from Work in Process Inventory to the Finished Goods Inventory?

Question 73

What is/are the correct journal entry(ies) to record the completion and billing of the following job?

Question 74

The following information is available for 2019 for Mobile Mfg.:
Ending Work in Process: $7,000 (including applied overhead of $400)
Ending Finished Goods: $12,000 (including applied overhead of $1,000)
Cost of Goods Sold for the year: $79,000 (including applied overhead of $3,500 from this year)
At year end, the company had an over-applied overhead balance of $200. This amount is NOT considered significant.
What is the adjusting entry required with respect to overhead at year end?

Question 75

The following information is available for 2019 for Mobile Mfg.:
Ending Work in Process: $7,000 (including applied overhead of $400)
Ending Finished Goods: $12,000 (including applied overhead of $1,000)
Cost of Goods Sold for the year: $79,000 (including applied overhead of $3,500 from this year)
At year end, the company had an over-applied overhead balance of $200. This amount IS considered significant.
What is the adjusting entry required with respect to overhead at year end? (Round amounts to the nearest dollar.)

Question 76

JKL Mfg. cans food products. JKL has 2 production departments (Canning and Labelling) and 2 service departments (Maintenance and Cleaning). Maintenance costs are allocated based on machine hours used. Cleaning costs are allocated based on square feet of floor space. The following data is available for JKL:
Canning: 2,000 square feet of floor space, 300 machine hours used
Labelling: 1,000 square feet of floor space, 100 machine hours used
Maintenance costs incurred: $600
Cleaning costs incurred: $2,000
How much of the Cleaning costs should be allocated to the Labelling department? (Round to the nearest dollar.)

Question 77

JKL Mfg. cans food products. JKL has 2 production departments (Canning and Labelling) and 2 service departments (Maintenance and Cleaning). Maintenance costs are allocated based on machine hours used. Cleaning costs are allocated based on square feet of floor space. The following data is available for JKL:
Canning: 2,000 square feet of floor space, 300 machine hours used
Labelling: 1,000 square feet of floor space, 100 machine hours used
Maintenance costs incurred: $600
Cleaning costs incurred: $2,000
How much total support department costs should be allocated to the Canning department? (Round to the nearest dollar.)

Question 78

JKL Mfg. cans food products. JKL has 2 production departments (Canning and Labelling) and 2 service departments (Maintenance and Cleaning). Maintenance costs are allocated based on machine hours used. Cleaning costs are allocated based on square feet of floor space. JKL also allocates depreciation on the factory equipment to all departments on the basis of number of employee positions in the department. The following data is available for JKL:
Canning: 2,000 square feet of floor space, 300 machine hours used, 10 employees
Labelling: 1,000 square feet of floor space, 100 machine hours used, 5 employees
Maintenance: $600 incurred, 1 employee
Cleaning: $2,000 incurred, 4 employees
Depreciation on factory equipment: $500
What is the total amount that should be allocated to Canning from the Cleaning department? (Round to the nearest dollar.)

Question 79

JKL Mfg. cans food products. JKL has 2 production departments (Canning and Labelling) and 2 service departments (Maintenance and Cleaning). Maintenance costs are allocated based on machine hours used. Cleaning costs are allocated based on square feet of floor space. JKL also allocates depreciation on the factory equipment to all departments on the basis of number of employee positions in the department. The following data is available for JKL:
Canning: 2,000 square feet of floor space, 300 machine hours used, 10 employees
Labelling: 1,000 square feet of floor space, 100 machine hours used, 5 employees
Maintenance: $600 incurred, 1 employee
Cleaning: $2,000 incurred, 4 employees
Depreciation on factory equipment: $500
How much in total costs should be allocated to the Labelling department? (Round to the nearest dollar.)

Question 80

Job #33 requires work in the following departments:
The company uses departmental overhead rates. Overhead is allocated at the rate of $8/direct labor hour in Sanding, and $13/machine hour in Machining. Painting overhead is allocated on the basis of total time in the department and is allocated at a rate of $1/hour.
How much overhead is allocated to the job?