Question 1

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

Accepted Answer

When applied overhead exceeds actual overhead in a job order costing system, it indicates that the jobs were charged too much for overhead. To correct this, the overcharge amount must be subtracted from the cost of goods sold, thereby reducing it to reflect the actual overhead costs accurately.

Question 2

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 for job order costing systems, as the applied overhead is based on estimates and the actual overhead costs may differ. The reconciliation ensures that the proper amount of overhead is allocated to each job and the financial statements accurately reflect the total overhead cost incurred.

Question 3

The flow of costs into a Work in Process Inventory account is very similar for job order and process costing systems.

Accepted Answer

In both job order and process costing systems, direct materials, direct labor, and manufacturing overhead costs flow into the Work in Process Inventory account. The main difference is the way that costs are accumulated and assigned to specific jobs or processes.

Question 4

A job order cost card is a type of subsidiary ledger.

Accepted Answer

A job order cost card is a record that is used to track the cost of producing a specific job or project. It contains information about the materials, labor, and overhead costs associated with the job. This makes it a type of subsidiary ledger, which is a detailed record of transactions that is used to support the information in the general ledger.

Question 5

The ending balance in the Work in Process Inventory account is supported by individual Overhead account balances.

Accepted Answer

The ending balance in the Work in Process Inventory account is primarily supported by direct materials, direct labor, and applied manufacturing overhead, not individual Overhead account balances.

Question 6

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 or sheet is used for each individual job to track the direct materials, direct labor, and manufacturing overhead costs associated with that job.

Question 7

Which of the following accurately describes a difference between job order and process costing systems?

Accepted Answer

The main difference between job order and process costing systems is the manner in which costs are assigned to products. In job order costing systems, costs are traced to individual jobs or orders, whereas in process costing systems, costs are traced to processes, departments, or work cells. Option A is incorrect because overhead costs are treated as product costs in both job order and process costing systems. Option B is incorrect as both systems assign costs to production. Option D is incorrect as selling costs are treated as period costs in both systems.

Question 8

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 do not end up in Finished Goods Inventory account because they do not produce tangible goods. Instead, they are recorded as expenses or in a Work in Process account.

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 costs may differ from applied overhead costs due to various factors such as fluctuations in the price of raw materials or additional repairs and maintenance expenses. Therefore, actual overhead will not always be the same as applied overhead.

Question 10

When the amount of overhead applied differs from actual, the dollar amount it is usually written off to

Accepted Answer

When the amount of overhead applied differs from actual, it results in either under-applied or over-applied overhead. Under-applied overhead means that the amount of overhead that was actually incurred is greater than the amount of overhead that was applied. Over-applied overhead means that the amount of overhead that was actually incurred is less than the amount of overhead that was applied. In either case, the difference is written off to Cost of Goods Sold.

Question 11

Which of the following is not an objective of product costing systems?

Accepted Answer

The determination of the optimal amount of products to manufacture is not an objective of product costing systems. Rather, it is a decision that is typically made based on a combination of factors including market demand, production capacity, and profitability analysis. The other objectives listed (providing information for cost planning, assisting in the preparation of the income statement, and providing information for product pricing) are all common objectives of product costing systems.

Question 12

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

Accepted Answer

The job order cost card contains all the costs incurred during the production process, including direct materials, direct labor, and manufacturing overhead. By dividing the total cost by the number of units produced, the product unit cost can be determined.

Question 13

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

Accepted Answer

A zero balance in Finished Goods Inventory at the start of the period indicates that all previously completed products have been shipped and there are no products left in the inventory.

Question 14

Which of the following products probably would be manufactured using a job order costing system?

Accepted Answer

Company business cards are typically produced in smaller batches and are unique to each customer or employee. This makes it a good candidate for a job order costing system, where the cost can be easily traced to each specific batch or order. The other products listed, such as paper, baseballs, and computer monitors, are typically produced in large quantities using a process costing system.

Question 15

In cost-plus contracts, the "plus" is the sales price.

Accepted Answer

In cost-plus contracts, the "plus" refers to the markup or profit added to the costs to determine the total contract price, not the sales price itself.

Question 16

Accounting for the incurrence of __________ does not change significantly between job order costing and process costing.

Accepted Answer

Both job order costing and process costing account for direct materials and conversion costs (labor and overhead) in a similar manner. The primary difference between the two methods lies in how these costs are allocated to products, not in the accounting for these specific costs themselves.

Question 17

Product costs appear on the income statement in the form of

Accepted Answer

Product costs are the costs associated with producing or purchasing a product for resale. These costs are then included in the cost of goods sold section of the income statement. Option B refers to the inventory of materials and not the cost associated with the product itself, while option C refers to a selling expense and not a product cost. Therefore, the correct choice is A.

Question 18

Which of the following is not a characteristic of a job order costing system?

Accepted Answer

A job order costing system assigns costs to specific jobs or batches of products, rather than measuring costs over a set time period. This is in contrast to process costing systems, which measure costs for a set time period.

Question 19

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 is true. Regardless of the cost accounting system used, when the products are completed, they are transferred from work in process inventory to finished goods inventory. This is a standard process in inventory management.

Question 20

The type of product costing system used by a company is dictated by the

Accepted Answer

The type of product costing system used by a company is determined by the production process. Different production processes may require different costing methods such as job order costing for custom manufacturing or process costing for mass production. The other options such as project manager, company president, or plant supervisor may have input on the decision, but ultimately it is the production process that determines the appropriate costing method.

Quiz 2: Costing Systems- Job Order Costing