Deck 4: Job Costing

Question 1

Which of the following includes both traced direct costs and allocated indirect costs?

A)cost tracing
B)cost pools
C)cost assignments
D)cost allocations

Answer 1

C

Question 2

The cost allocation base

A)is a grouping of individual indirect cost items.
B)are costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way.
C)is anything for which a measurement of costs is desired.
D)is a systematic way to link an indirect cost or group of indirect costs to cost objects.

Answer 2

D

Question 3

Direct costs of a cost object are costs related to a particular cost object that can be allocated to that cost object in an economically feasible (cost-effective)way.

Answer 3

False

Question 4

A ________ is a grouping of individual indirect cost items.

A)cost allocation base
B)cost assignment
C)cost pool
D)job-costing system

Question 5

The cost-allocation base is a systematic way to link an indirect cost or group of indirect costs to cost objects.

Question 6

Give three examples of costs that can be considered indirect for a product and direct for a department.

Question 7

A ________ links an indirect cost to a cost object.

A)cost-allocation base
B)cost pool
C)cost assignment
D)cost tracing

Question 8

Assigning direct costs to a cost object is called:

A)cost allocation
B)cost assignment
C)cost pooling
D)cost tracing

Question 9

________ is the process of distributing indirect costs to products.

A)Cost allocation
B)Job cost recording
C)Cost pooling
D)Cost tracing

Question 10

Cost objects may be jobs, products, or customers.

Question 11

Direct costs

A)are anything for which a measurement of costs is desired.
B)are costs related to a particular cost object that can be traced to that cost object in an economically feasible (cost-effective)way
C)focus specifically on the costing needs of the CFO
D)provide all information for management decision needs

Question 12

For each item below indicate the source documents that would most likely authorize the journal entry in a job-costing system.
Required:
a. direct materials purchased
b. direct materials used
c. direct manufacturing labor
d. indirect manufacturing labor
e. finished goods control
f. cost of goods sold

Question 13

Each indirect-cost pool of a manufacturing firm:

A)utilizes a separate cost-allocation rate
B)is a subset of total indirect costs
C)relates to one cost object
D)All of these answers are correct.

Question 14

Direct costs are allocated to the cost object using a cost-allocation method.

Question 15

________ costing is used by a business to price homogeneous products.

A)Actual
B)Job
C)Process
D)Traditional

Question 16

In a costing system:

A)cost tracing allocates indirect costs
B)cost allocation assigns direct costs
C)a cost-allocation base can be either financial or nonfinancial
D)a cost object should be a product and not a department or a geographic territory

Question 17

Product costing information is used by managers:

A)to make decisions and strategy
B)for planning and control
C)for cost management
D)All of these answers are correct.

Question 18

The cost driver of an indirect cost is often used as the cost-allocation base.

Question 19

A cost object is anything for which a measurement of costs is desired.

Question 20

Job costing information is used:

A)to develop strategies
B)to make pricing decisions
C)for external financial reporting
D)All of these answers are correct.

Question 21

Job-costing may only be used by:

A)service companies
B)merchandising companies
C)manufacturing companies
D)All of these may use job-costing.

Question 22

Process costing:

A)allocates all product costs, including materials and labor
B)results in different costs for different units produced
C)is commonly used by general contractors who construct custom-built homes
D)is used exclusively in manufacturing

Question 23

A company may use job costing to assign costs to different product lines and then use process costing to calculate unit costs within each product line.

Question 24

Job costing:

A)can only be used in manufacturing
B)records the flow of costs for each customer
C)allocates an equal amount of cost to each unit made during a time period
D)is commonly used when each unit of output is identical

Question 25

The actual indirect-cost rate is calculated by

A)dividing actual total indirect costs by the actual total quantity of the cost-allocation base.
B)multiplying actual total indirect costs by the actual total quantity of the cost-allocation base.
C)dividing the actual total quantity of the cost allocation base by actual total indirect costs.
D)multiplying the actual total quantity of the cost allocation base by actual total indirect costs.

Question 26

Which of the following companies is most likely to use a process costing system.

A)a manufacturer of breakfast cereal
B)a manufacturer of large commercial aircraft
C)a custom jewelry manufacturer
D)a law firm

Question 27

Describe job-costing and process-costing systems. Explain when it would be appropriate to use each.

Question 28

Job costing and process costing systems share the same objective of estimating product costs.

Question 29

Many large companies which have multiple production methods and processes have hybrid costing systems that are:

A)job-costing
B)actual costing
C)process costing
D)a mix of job-costing and process costing

Question 30

Process costing is used to assign manufacturing costs to unique batches of a product.

Question 31

Actual costing is a costing system that traces direct costs to a cost object by

A)using the budgeted direct cost rates times the budgeted quantities of direct-cost inputs.
B)using the actual direct costs rates times the budgeted quantities of the direct-cost inputs.
C)using the actual direct cost rates times the actual quantities of the direct-cost inputs.
D)using the budgeted direct cost rates times the actual quantities of the direct cost inputs.

Question 32

While costs are measured for individual jobs in a job cost system, they are measured for individual process stages in a process costing system.

Question 33

When calculating indirect cost rates, the longer the time period, the greater the
influence of seasonal patterns on the amount of costs.

Question 34

An example of a denominator reason for calculating annual indirect-cost rates includes:

A)higher heating bills in the winter
B)semi-annual insurance payments in March and September
C)higher levels of output demanded during the fall months
D)All of these answers are correct.

Question 35

In a job-costing system the cost object is an individual unit, batch, or lot of a distinct product or service.

Question 36

In each period, job costing divides the total cost of producing an identical or similar product by the total number of units produced to obtain a per-unit cost.

Question 37

Which of the following are reasons for using longer periods, such as a year, to calculate indirect cost rates.

A)Numerator reason
B)Denominator reason
C)Both A and B
D)Neither A nor B

Question 38

Normal costing is a method of job costing that allocates an indirect cost based on the actual indirect-cost rate times the actual quantity of the cost-allocation base.

Question 39

Job costing is commonly used to estimate costs in beverage production.

Question 40

________ costing is used by a business to price unique products for different jobs.

A)Actual
B)Job
C)Process
D)Traditional

Question 41

Annual cost rates are preferred over actual cost rates for all of the following reasons EXCEPT:

A)budgeted costs allow managers to have cost information on a timely basis
B)budgeted costs may be subject to short-run fluctuations
C)budgeted indirect-cost rates are known prior to the inception of a new job
D)budgeted-cost rates can be used to allocate direct or indirect costs

Question 42

An example of a numerator reason for calculating annual indirect-cost rates includes:

A)fewer production workdays in a month
B)payment of estimated taxes four times a year
C)higher snow-removal costs during the winter
D)Both B and C are correct.

Question 43

Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs:

A)ACDB
B)CADB
C)BACD
D)DCAB

Question 44

Answer the following questions using the information below:
For 2010, Jake's Dog Supply Manufacturing uses machine-hours as the only overhead cost-allocation base. The accounting records contain the following information:

Using job costing, the 2010 actual indirect-cost rate is:

A)$4.00 per machine-hour
B)$4.80 per machine-hour
C)$5.00 per machine-hour
D)$6.00 per machine-hour

Question 45

In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job.

A)direct materials
B)direct labor
C)manufacturing overhead costs
D)total costs

Question 46

Fixed costs remain constant at $400,000 per month. During high-output months variable costs are $320,000, and during low-output months variable costs are $80,000. What are the respective high and low indirect-cost rates if budgeted professional labor-hours are 16,000 for high-output months and 4,000 for low-output months?

A)$45.00 per hour; $120.00 per hour
B)$45.00 per hour; $45.00 per hour
C)$25.00 per hour; $20.00 per hour
D)$56.20 per hour; $120.00 per hour

Question 47

A job-cost record uses information from:

A)a materials requisition record to record raw material purchases from suppliers
B)a receiving report that indicates the type and quantity of each item received in an order from a supplier
C)a labor-time card to record an employee's wage rate and hours spent on a particular job
D)All of these answers are correct.

Question 48

Actual costing systems are NOT commonly found in practice because actual costs CANNOT be computed in a timely manner.

Question 49

For a given job the direct costs associated with the job are:

A)actual overhead
B)direct material
C)direct manufacturing labor
D)Both b and c are correct.

Question 50

Managers and accountants collect most of the cost information that goes into their systems through:

A)an information databank
B)computer programs
C)source documents
D)time surveys

Question 51

Costs that are subject to short-run fluctuations for given jobs are:

A)actual costs
B)budgeted direct costs
C)budgeted indirect costs
D)normal costs

Question 52

A job that shows low profitability may be the result of:

A)wasting direct materials
B)inefficient direct manufacturing labor
C)underpricing the job
D)All of these answers are correct.

Question 53

If indirect-cost rates are calculated monthly, distortions might occur because of:

A)rental costs paid monthly
B)property tax payments made in July and December
C)routine monthly preventive-maintenance costs that benefit future months
D)Both B and C are correct.

Question 54

A job-cost sheet details the:

A)direct materials purchased and paid
B)direct labor costs incurred
C)indirect labor costs incurred
D)actual indirect overhead costs incurred

Question 55

O'Reilly Enterprises manufactures digital video equipment. For each unit $2,950 of direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $35 per direct manufacturing labor hour. Calculate the cost of each unit.

A)$4,950
B)$9,950
C)$8,450
D)$11,950

Question 56

The basic source document for direct manufacturing labor is the:

A)job-cost record
B)materials-requisition record
C)labor-time record
D)All of these answers are correct.

Question 57

The actual indirect-cost rate is calculated by dividing actual total indirect costs by
the actual total quantity of the cost-allocation base.

Question 58

The budgeted indirect-cost rate for each cost pool is computed as

A)budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base.
B)budgeted annual quantity of cost allocation base divided by budgeted annual indirect costs.
C)actual annual indirect costs divided by budgeted annual quantity of cost allocation base.
D)budgeted annual indirect costs divided by budgeted actual quantity of cost allocation base.

Question 59

Stewart Company's actual manufacturing overhead is $2,800,000. Overhead is allocated on the basis of direct labor hours. The direct labor hours were 50,000 for the period. What is the manufacturing overhead rate?

A)$47.00
B)$56.00
C)$75.00
D)None of the above are correct.

Question 60

Problems with accurate costing occur when:

A)incorrect job numbers are recorded on source documents
B)bar coding is used to record materials used on the job
C)a computer screen requests an employee number before that employee is able to work on information related to a specific job
D)All of these answers are correct.

Question 61

Each cost pool may have multiple cost allocation bases.

Question 62

The difference between actual costing and normal costing is:

A)normal costing uses actual quantities of direct-costs
B)actual costing uses actual quantities of direct-costs
C)normal costing uses budgeted indirect-costs
D)actual costing uses actual quantities of cost-allocation bases

Question 63

Answer the following questions using the information below:
Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 20X3:

What are the actual direct-cost rate and the actual indirect-cost rate, respectively, per professional labor-hour?

A)$27.00; $4.17
B)$29.80; $5.40
C)$32.40; $5.00
D)$27.00; $5.00

Question 64

The reliability of the job-cost records depends on the reliability of the inputs.

Question 65

What is the difference between an actual cost system and a normal cost system?

Question 66

Explain how a budgeted indirect-cost rate is determined.

Question 67

If indirect-cost rates were based on actual short-term usage, periods of lower demand would result in lower costs per unit.

Question 68

A materials-requisition record is an example of a source document.

Question 69

Grounds-maintenance costs incurred during the summer months will distort indirect-cost rates that are computed monthly.

Question 70

Answer the following questions using the information below:
Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 20X3:

How much should the client be billed in an actual costing system if 200 professional labor-hours are used?

A)$5,000
B)$6,960
C)$7,480
D)$6,400

Question 71

Answer the following questions using the information below:
Philadelphia Company manufactures pipes and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $15 per direct labor-hour. The following data are obtained from the accounting records for June 2010:

The actual amount of manufacturing overhead costs incurred in June 2010 totals:

A)$278,500
B)$100,000
C)$55,000
D)$40,000

Question 72

Answer the following questions using the information below:
For 2010, Jake's Dog Supply Manufacturing uses machine-hours as the only overhead cost-allocation base. The accounting records contain the following information:

Using actual costing, the amount of manufacturing overhead costs allocated to jobs during 2010 is:

A)$300,000
B)$250,000
C)$240,000.
D)$200,000

Question 73

The budgeted indirect-cost rate is calculated:

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

Question 74

In job costing, only direct costs are used to determine the cost of a job.

Question 75

One reason for using longer time periods to calculate indirect-cost rates is seasonal cost fluctuations.

Question 76

Normal costing is a costing system that traces direct costs to a cost object by using
the actual direct-cost rates times the actual quantities of the direct-cost inputs.

Question 77

To smooth fluctuating levels of output, separate indirect-cost rates should be calculated for each month.

Question 78

A job-cost record is a source document, but individual items of the job-cost record may also have source documents.

Question 79

Which of the following statements about normal costing is true?

A)Direct costs and indirect costs are traced using an actual rate.
B)Direct costs and indirect costs are traced using budgeted rates.
C)Direct costs are traced using a budgeted rate, and indirect costs are allocated using an actual rate.
D)Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate.

Question 80

Indirect manufacturing costs should be allocated equally to each job.