Question 1

A process costing system assigns costs to groups of similar units during a specified time period and then computes the average unit cost.

Accepted Answer

This is an accurate definition of a process costing system.

Question 2

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

Accepted Answer

False

Question 3

A cost allocation base is only financial in nature, and is usually the cost driver of the particular costs being measured.

Accepted Answer

A cost allocation base can also be non-financial, such as direct labor hours or machine hours. The cost allocation base is used to allocate indirect costs to products or services.

Question 4

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

Accepted Answer

The cost driver of an indirect cost is often used as the cost allocation base because it is the factor that most directly affects the level of indirect cost incurred. Allocating indirect costs based on the cost driver helps to provide a more accurate picture of the true cost of a product or service.

Question 5

Fixed and variable costs may be allocated to a cost object.

Accepted Answer

Fixed and variable costs can be allocated to a cost object such as a product, service, or department in order to determine the total cost associated with that cost object.

Question 6

A job cost record (or job cost sheet) is a document where the costs are recorded and accumulated.

Accepted Answer

A job cost record is a document that tracks the direct and indirect expenses associated with a particular job or project, including labor, materials, and overhead costs. These costs are accumulated throughout the project to determine the total cost of the job and to aid in estimating future job costs.

Question 7

It is not a requirement to identify the indirect costs associated with each job when assigning costs to individual jobs.

Accepted Answer

It is a requirement to identify and allocate indirect costs, often called overhead costs, to individual jobs in order to accurately determine the total cost of each job. Ignoring indirect costs can lead to inaccurate job costing and ultimately, incorrect pricing decisions.

Question 8

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

Accepted Answer

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

Question 9

Managers and accountants gather the information that goes into their cost systems through source documents, which are the original records that support journal entries in an accounting system.

Accepted Answer

Managers and accountants do gather information for cost systems through source documents, which are the original records that support journal entries in an accounting system.

Question 10

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

Accepted Answer

The answer of Which of the following includes both traced...

Question 11

Process costing is a useful system for tracking the costs of building a house.

Accepted Answer

Process costing is a system used in industries that produce homogeneous products in large quantities, such as manufacturing or chemical plants. Building a house is a unique project and does not fit the characteristics of process costing. Instead, a job costing system would be more appropriate.

Question 12

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.

Accepted Answer

The answer of In each period, job costing divides the...

Question 13

For each cost pool, the indirect cost rate equals the indirect cost pool divided by the cost allocation base.

Accepted Answer

This statement accurately describes the formula for calculating indirect cost rates for each cost pool.

Question 14

The objective of allocating indirect costs is to measure the underlying usage of indirect resources by jobs.

Accepted Answer

The answer of The objective of allocating indirect costs is...

Question 15

Transferring costs from pools to jobs is called

Accepted Answer

Transferring costs from pools to jobs is known as cost allocation.

Question 16

Raw materials that can be traced to a cost object are an example of an indirect cost.

Accepted Answer

Raw materials that can be traced to a cost object are an example of a direct cost, as they directly contribute to the production or creation of the cost object. Indirect costs are costs that cannot be easily attributed to a specific cost object, such as overhead expenses like rent, utilities, and salaries for management or support staff.

Question 17

Cost assignment includes cost allocation for indirect costs and direct costs.

Accepted Answer

Cost assignment involves assigning costs to cost objects which includes both direct costs (e.g. cost of materials used in a product) and indirect costs (e.g. rent, utilities, salaries of staff not directly involved in production). Cost allocation is the process of assigning indirect costs to cost objects, while direct costs are already assigned directly to the cost object.

Question 18

A job costing system assigns costs to a distinct unit or set of units of a product or service.

Accepted Answer

A job costing system assigns costs to specific units of a product or service, whereas a process costing system assigns costs to a large number of identical units.

Question 19

Cost pools are defined as groupings of individual cost items which can range from broad, company-wide categories to very narrow categories.

Accepted Answer

Cost pools are indeed defined as groupings of individual cost items, which can be broad categories like company-wide costs or narrow categories like costs associated with a specific product or department.

Question 20

A factor used to systematically link an indirect cost to a cost object is called

Accepted Answer

A cost allocation base is the factor used to systematically link an indirect cost to a cost object.

Quiz 4: Job Costing