Question 1

Which of the following is an industry that would use a process costing system rather than a job order costing system?

Accepted Answer

A paint manufacturer would use a process costing system because it produces large quantities of homogeneous products, making it more efficient to track costs by process rather than by individual job.

Question 2

In job order costing, the journal entry to issue indirect materials to production should include which of the following?

Accepted Answer

The journal entry to issue indirect materials to production involves crediting the Materials Inventory account, as it reflects the reduction in materials available for use. Indirect materials are not directly traced to a specific job, so they are not credited to Work in Process or Finished Goods. Instead, they are included in Manufacturing Overhead, which is not credited in this transaction.

Question 3

All manufacturing overhead costs incurred are accumulated as debits to a general ledger account titled Manufacturing overhead.

Accepted Answer

This is because all manufacturing overhead costs are recorded in a single account titled Manufacturing overhead.

Question 4

Process costing is used by companies that produce large numbers of identical units in a continuous fashion.

Accepted Answer

Process costing is used in industries that produce large numbers of identical units in a continuous flow, such as food & beverages, chemicals, and textiles, among others. It involves the calculation of average costs per unit, as the cost of production is spread out over a large number of units that pass through a standardized production process.

Question 5

The entry to record the purchase of materials on account using a job order costing system would include a:

Accepted Answer

The answer of The entry to record the purchase of...

Question 6

Which of the following would be included in the journal entry to record the requisition of direct materials?

Accepted Answer

When direct materials are requisitioned for production, they are transferred from materials inventory to work in process inventory, so a debit is made to Work in process inventory.

Question 7

Which of the following would be included in the journal entry to record the requisition of indirect materials?

Accepted Answer

Indirect materials are charged to manufacturing overhead, so the journal entry would include a debit to Manufacturing overhead.

Question 8

When manufacturing overhead costs are incurred, the amounts are recorded as a credit to Manufacturing overhead.

Accepted Answer

When manufacturing overhead costs are incurred, they are recorded as a debit to Manufacturing overhead, not a credit.

Question 9

The journal entry to issue $500 of direct materials and $30 of indirect materials to production includes which of the following?

Accepted Answer

Direct materials are debited to Work in Process, and indirect materials are debited to Manufacturing Overhead.

Question 10

Which of the following companies would NOT use job order costing?

Accepted Answer

A beverage manufacturer typically uses process costing because it produces large quantities of identical products, unlike the other options which provide customized services or products.

Question 11

In a manufacturing operation, depreciation of the plant and plant equipment should be debited to Depreciation expense.

Accepted Answer

The answer of In a manufacturing operation, depreciation of the...

Question 12

Which of the following statements is FALSE?

Accepted Answer

A print and copy shop would likely use a job order costing system, not a process costing system, because it deals with customized orders rather than mass production of identical items.

Question 13

The journal entry to record the incurrence of $1 500 of direct labour and $200 of indirect labour includes which of the following?

Accepted Answer

Direct labor costs are debited to Work in Process Inventory, while indirect labor costs are debited to Manufacturing Overhead.

Question 14

When materials are requisitioned for a job, the materials inventory account is debited.

Accepted Answer

When materials are requisitioned for a job, the Work in Process (WIP) account is debited, indicating that these materials are now being used in production, while the Materials Inventory account is credited to reflect the decrease in inventory.

Question 15

A job order costing system is useful in which of the following circumstances?

Accepted Answer

A job order costing system is useful when manufacturing multiple products in separate batches because it allows for tracking costs for each specific job or batch, which is essential when products are customized or produced in distinct batches.

Question 16

A process costing system is useful in which of the following circumstances?

Accepted Answer

A process costing system is best suited for mass production of a single type of product, where costs are averaged over all units produced.

Question 17

Which of the following would be included in the journal entry to record direct labour costs actually incurred?

Accepted Answer

Direct labor costs are debited to Work in Process Inventory as they are part of the costs incurred to produce goods that are still in production.

Question 18

Job order costing is most likely used in which of the following industries?

Accepted Answer

Job order costing is typically used in industries where products or services are customized or produced in small batches, such as a medical clinic where each patient's treatment can be considered a separate job.

Question 19

Accounting firms, building contractors, and healthcare providers are companies that use job order costing.

Accepted Answer

Job order costing is commonly used in industries where goods or services are produced based on customer specifications or on a unique basis, such as accounting firms, building contractors, and healthcare providers.

Question 20

Which of the following would be included in the journal entry to record the incurrence of indirect labour costs?

Accepted Answer

Indirect labor costs are part of manufacturing overhead, so they are debited to the Manufacturing overhead account.

Quiz 20: Job Costing