Question 1

After a job is completed,the product's unit cost can be determined from the job order cost card.

Accepted Answer

The job order cost card contains all the costs associated with a particular job, including direct material, direct labor, and overhead. Dividing the total cost by the number of units produced gives the unit cost of the product.

Question 2

Job costs in a service organization end up in the Finished Goods Inventory account when a job is completed.

Accepted Answer

Job costs in a service organization would not end up in the Finished Goods Inventory account, as services are not tangible products that can be inventoried. Instead, job costs for services would typically be recorded in the company's Cost of Services Sold or Cost of Goods Sold account.

Question 3

The process of assigning a collection of indirect costs is termed as cost pooling.

Accepted Answer

The answer of The process of assigning a collection of...

Question 4

Regardless of the cost accounting system used,when the products are completed,they are transferred from work in process inventory to finished goods inventory.

Accepted Answer

This statement is true as completed products are transferred from work in process inventory to finished goods inventory regardless of the cost accounting system used.

Question 5

Predetermined overhead rate is calculated by dividing actual overhead costs by actual cost driver activity.

Accepted Answer

Predetermined overhead rate is calculated by dividing estimated overhead costs by estimated cost driver activity, not actual.

Question 6

The ending balance of Work in Process account is compared with the total costs shown on the job order cost cards to ensure correctness.

Accepted Answer

This is a correct statement. The ending balance of Work in Process account should match the total costs on the job order cost cards to ensure that all costs have been properly recorded and accounted for.

Question 7

Job order cost cards and cost flows through the inventory accounts form the core of a job order costing system.

Accepted Answer

Job order cost cards are used to track the direct and indirect costs associated with each individual job, while the cost flows through the inventory accounts allow for the accumulation of costs as goods move through the production process. Together, they form the foundation of a job order costing system.

Question 8

In a job order costing system,indirect labor costs are recorded by increasing the Payroll Payable account and increasing the Overhead account.

Accepted Answer

Indirect labor costs are considered as overhead costs and are recorded by increasing the Overhead account. The increase in the Payroll Payable account would be for direct labor costs.

Question 9

In a service organization using a job order costing system,actual overhead will be the same as applied overhead.

Accepted Answer

In a job order costing system, actual overhead will not necessarily be the same as applied overhead. Actual overhead represents the actual costs incurred by the organization, while applied overhead represents the overhead costs that have been allocated to a particular job or cost center based on a predetermined rate or formula. The difference between actual overhead and applied overhead is known as overhead variance.

Question 10

In cost-plus contracts,a predetermined amount of profit is added to the cost of the contract.

Accepted Answer

In cost-plus contracts, the contractor receives reimbursement for all allowable expenses incurred during the construction process, plus a predetermined amount of profit added to the total cost of the contract.

Question 11

A zero balance in Work in Process Inventory at the start of the period means all previously completed products have been shipped.

Accepted Answer

A zero balance in Work in Process Inventory at the start of the period indicates that there were no partially completed products at that time, not necessarily that all previously completed products have been shipped. Completed products would be recorded in Finished Goods Inventory before being shipped.

Question 12

To prepare financial statements at the end of the accounting period,the actual overhead cost for the period and the estimated overhead that was applied during the period must be reconciled in a job order costing system.

Accepted Answer

This is true. Reconciling actual overhead with estimated overhead is necessary to accurately determine the overhead cost of each job and prepare accurate financial statements.

Question 13

Overhead applied is calculated by multiplying predetermined activity rate and actual cost driver activity.

Accepted Answer

Overhead applied is calculated by multiplying the predetermined activity rate (estimated overhead cost per unit of cost driver activity) by the actual cost driver activity level.

Question 14

In a job order costing system,the transfer of overhead costs to the Work in Process Inventory account must take place before product unit costs can be computed.

Accepted Answer

In a job order costing system, overhead costs are accumulated separately from direct material and direct labor costs in an Overhead Cost account. Before product unit costs can be computed, overhead costs must be allocated to the different jobs or work orders using a predetermined overhead rate. Once the overhead costs have been transferred or allocated to the Work in Process Inventory account, the total cost of each job or work order can be calculated by adding the direct material, direct labor, and overhead costs. Dividing the total cost by the number of units produced gives the product unit cost.

Question 15

If the actual overhead costs are more than applied overhead costs,the difference represents overapplied overhead costs.

Accepted Answer

If the actual overhead costs are more than applied overhead costs, then the difference represents underapplied overhead costs, not overapplied overhead costs. Overapplied overhead costs occur when applied overhead costs are more than actual overhead costs.

Question 16

In a job order costing system,when the goods are sold,the Cost of Goods Sold account is increased,and the Finished Goods Inventory account is decreased for the selling price of the goods sold.

Accepted Answer

In a job order costing system, when goods are sold, the Cost of Goods Sold account is increased, and the Finished Goods Inventory account is decreased for the cost of the goods sold, not the selling price.

Question 17

If applied overhead exceeds actual overhead,cost of goods sold must be increased by the amount of the overapplied overhead in a job order costing system.

Accepted Answer

When applied overhead exceeds actual overhead, it indicates overapplied overhead. In this case, the cost of goods sold is typically decreased (not increased) by the amount of the overapplied overhead to adjust the accounts accurately.

Question 18

In a job order costing system,a separate job order cost card is used for each individual job.

Accepted Answer

In a job order costing system, a separate job order cost card is prepared for each individual job. The cost card contains information on the direct and indirect costs incurred on that particular job. It helps in tracking the costs associated with a specific job order and assessing its profitability.

Question 19

In a job order costing system,when indirect materials are used,the Overhead account is increased.

Accepted Answer

In a job order costing system, indirect materials are considered part of overhead costs. Therefore, when they are used, the Overhead account is increased.

Question 20

The ending balance in the Work in Process Inventory account equals the ending Overhead balance.

Accepted Answer

The ending balance in the Work in Process Inventory account does not necessarily equal the ending Overhead balance, as the Overhead balance can be allocated to multiple accounts including Work in Process, Finished Goods, and Cost of Goods Sold.

Quiz 16: Costing Systems: Job Order Costing