Question 1

During the current accounting period, O'Hare applied $14,500 of estimated overhead cost to production. Actual overhead costs were $14,325. Assuming that the balance in the Manufacturing Overhead is insignificant, the recognition of the transaction to close that account will: This makes the explanation much easier
A)Decrease cost of goods sold and increase stockholder's equity.
B)Increase cost of goods sold.
C)Decrease stockholder's equity.
D)Decrease total assets and total liabilities. This makes the explanation much easier

Accepted Answer

Since the actual overhead costs were less than the estimated overhead cost applied to production, there will be a decrease in the cost of goods sold and an increase in stockholder's equity when recognizing the transaction to close the Manufacturing Overhead account. This is because the difference between the applied overhead cost and the actual overhead cost will be credited back to the Manufacturing Overhead account and transferred to the Cost of Goods Sold account, reducing the cost of goods sold, and increasing stockholder's equity.

Question 2

Beta Company determined that its manufacturing overhead for the current accounting period was overapplied by $1,400. It closed the amount to cost of goods sold. The recognition of this transaction will:
A)Decrease cost of goods sold.
B)Increase cost of goods sold.
C)Have no impact on cost of goods sold.
D)None of these.

Accepted Answer

When manufacturing overhead is overapplied, it means that the overhead allocated to products was more than the actual overhead incurred. Closing this overapplied amount to cost of goods sold will decrease the cost of goods sold.

Question 3

O'Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. During the current accounting period, O'Hare paid $2,100 to production employees who worked on job #132. The entry to record these wages would include an increase to which of the following accounts?
A)Cost of Goods Sold.
B)Work in Process Inventory.
C)Finished Goods Inventory.
D)Wage Expense.

Accepted Answer

The wages paid to production employees who worked on a specific job are allocated to the Work in Process Inventory account in a job-order cost system. This account represents the costs of materials, labor, and overhead that are incurred during the production process but have not yet been completed or sold. Therefore, the entry would include a debit to Work in Process Inventory and a credit to Wage Expense. Options A, C, and D are incorrect because they do not reflect the fact that the wages are associated with a specific job, rather than with the cost of goods sold or finished goods inventory in general.

Question 4

Job-order cost systems are used by many service businesses; process cost systems are not applicable to service businesses.

Accepted Answer

Process cost systems can be used by service businesses that provide a standardized service, such as a car wash or a dry cleaner. However, most service businesses use job-order cost systems, which allow them to track costs and revenues for each individual job or project.

Question 5

Which of the following items is provided on a work ticket?
A)Job-number
B)Employee identification
C)Work description
D)All of these.

Accepted Answer

All of these items are typically provided on a work ticket, including the job-number, employee identification, and work description.

Question 6

O'Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. During the current accounting period, O'Hare recognized depreciation of $600 on manufacturing equipment. Which of the following describes the effect of this event on the accounting equation?
A)Total assets and total equity are unaffected.
B)Both total assets and total equities increase.
C)Total assets and net income decrease.
D)Total assets increase and net income increase.

Accepted Answer

Depreciation expense reduces net income, which reduces equity. However, depreciation also reduces the book value of the manufacturing equipment, which reduces total assets. Therefore, total assets and total equity are both unaffected.

Question 7

O'Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. During the current accounting period, O'Hare transferred total product costs for job #132, to finished goods. The recognition of this event would:
A)Increase total assets.
B)Decrease total assets.
C)Reduce net income.
D)Have no impact on total assets.

Accepted Answer

Transferring costs from work in process to finished goods does not change total assets; it simply reclassifies inventory from one category to another within the asset section.

Question 8

Job-order and process cost systems are two different costing systems that a company chooses between based on the preference of management.

Accepted Answer

The answer of Job-order and process cost systems are two...

Question 9

A laundry detergent manufacturer would most likely use:
A)Process costing.
B)Job order costing.
C)Hybrid order costing.
D)Batch order costing.

Accepted Answer

A laundry detergent manufacturer typically produces large quantities of the same product through continuous processes. Therefore, process costing, which calculates the average cost per unit of a large number of identical products, is the most appropriate costing method for this type of manufacturing.

Question 10

O'Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. During the current accounting period, O'Hare paid $700 for equipment rental and other indirect costs. The recognition of this event would:
A)Decrease total assets.
B)Increase total assets.
C)Reduce net income.
D)Have no impact on total assets.

Accepted Answer

Indirect costs are expensed in the period incurred and do not affect total assets.

Question 11

During the current accounting period, O'Hare Company paid $2,300 for selling and administrative expenses. Payment of cash for selling and administrative expenses is:
A)An asset exchange transaction.
B)An asset source transaction.
C)An asset use transaction.
D)A claims exchange transaction.

Accepted Answer

Payment of cash for selling and administrative expenses is an example of an asset use transaction, as it involves using the company's cash resources to cover operating expenses.

Question 12

Job-order and process cost systems are used only in the United States.

Accepted Answer

Job-order and process cost systems are used not only in the United States, but also in many other countries around the world. They are common in manufacturing and other industries where products are produced in batches or by a continuous flow process.

Question 13

O'Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. During the current accounting period, O'Hare recognized cost of goods sold of $4,850 for job #132. The recognition of this event will include a decrease to which of the following accounts?
A)Cost of Goods Sold.
B)Production Supplies.
C)Work in Process Inventory.
D)Finished Goods Inventory.

Accepted Answer

The recognition of cost of goods sold for job #132 will decrease the Finished Goods Inventory account, as the goods have been sold and are no longer in inventory.

Question 14

O'Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. During the current accounting period, O'Hare applied estimated manufacturing overhead costs of $1,550 to job #132. Which of the following statements regarding this transaction is correct?
A)Work in process inventory decreases.
B)Net income decreases.
C)Manufacturing overhead decreases.
D)Total equity increases.

Accepted Answer

When O'Hare applies estimated manufacturing overhead costs to a job, manufacturing overhead increases, not decreases. This is because manufacturing overhead is an indirect cost and cannot be directly traced to a specific job, so it is allocated using estimates or predetermined rates. The other options are incorrect because there is no mention of any changes to work in process inventory, net income, or total equity specifically related to job #132.

Question 15

Which of the following statement(s) is (are) correct? I. It is easy to distinguish the balance sheet of a company that uses a process costing system from that of a company that uses job-order costing
II) A process cost system requires a work in process account for each processing department, while a job order system uses a single work in process account
III) Process cost systems use multiple Finished Goods Inventory accounts
A)I only
B)II only
C)II and III
D)I, II, and III

Accepted Answer

Statement I is incorrect because the balance sheet of a company that uses a process costing system is not readily distinguishable from that of a company that uses job-order costing.

Statement II is correct because a process cost system requires a work in process account for each processing department, while a job order system uses a single work in process account.

Statement III is incorrect because process cost systems generally use a single Finished Goods Inventory account, which contains the total cost of all the units completed during the period.

Question 16

The two most common types of costing systems are:
A)Process cost and transfer cost systems.
B)Job order and process cost systems.
C)Job order and direct cost systems.
D)Process cost and standard cost systems.

Accepted Answer

Job order and process cost systems are the two most common types of costing systems used by businesses. In a job order costing system, costs are assigned to specific jobs or orders, while in a process cost system, the costs are assigned to each production department or process. These two systems provide different approaches to cost accounting and are used in different types of manufacturing and service businesses. Therefore, option B is the correct answer.

Question 17

O'Hare Company is a manufacturing firm that uses a job-order cost system to determine the costs of its products. O'Hare Company counted the production supplies on hand at year-end and determined that the amount used was $125. The recognition of this event on the financial statements would include an increase to which of the following accounts? Delete the ","
Done JMF
A)Supply Expense
B)Work in Process Inventory
C)Manufacturing Overhead
D)Finished Goods Inventory
Delete the ","
Done JMF

Accepted Answer

The answer of O'Hare Company is a manufacturing firm that...

Question 18

O'Hare Company is a manufacturing firm that uses a job-order cost system to determine the costs of its products. O'Hare Company sold job #132 for $8,200 cash. The job cost sheet for that job reported total manufacturing costs of $5,900. The recognition of this event on the financial statements would include a(n):
A)Decrease to total assets and total equity.
B)Decrease to total liabilities.
C)Increase to total assets, total equity and net income.
D)Decrease to net income.

Accepted Answer

The recognition of the sale of job #132 would increase total assets and total equity by $8,200. The total manufacturing costs of $5,900 would be deducted from the revenue of $8,200 to determine the net income, which would also increase as a result of the sale. There would be no impact on total liabilities, and there is no reason to believe that there would be a decrease to total assets or total equity.

Question 19

Drummond Company provides customized computer training to employees of large corporations. What kind of costing system should Drummond use?
A)Standard costing
B)Process costing
C)Job-order costing
D)None of these.

Accepted Answer

Drummond Company should use job-order costing system. This is because each training program is customized to the specific needs of the corporation that hires Drummond. Job-order costing allows for the accumulation of costs by each individual job or program, which is necessary when the service provided is unique and differs from one job to another.

Question 20

Steele Manufacturing Company reported the following work in process inventory account activity measured in units. The ending inventory was estimated to be 70% to be complete.Beginning inventory 20,000 Started 90,000
Ending inventory 15,000
What is the number of equivalent whole units in Steele's ending work in process inventory?
A)14,000
B)15,000
C)10,500
D)None of these.

Accepted Answer

To calculate the number of equivalent whole units in the ending work in process inventory, we need to first determine the number of units that are fully completed and the number of units that are partially completed. Since the ending inventory is estimated to be 70% complete, we can multiply the ending inventory by 0.7 to get the number of equivalent whole units.

Number of units fully completed = 15,000 x 0.7 = 10,500 
Number of equivalent whole units in ending work in process inventory = 10,500. Therefore, the correct answer is C.

Quiz 12: Job-Order, Process, and Hybrid Costing Systems

Beta Company determined that its manufacturing overhead for the current accounting period was overapplied by $1,400. It closed the amount to cost of goods sold. The recognition of this transaction will:

Job-order cost systems are used by many service businesses; process cost systems are not applicable to service businesses.

Which of the following items is provided on a work ticket?

O'Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. During the current accounting period, O'Hare transferred total product costs for job #132, to finished goods. The recognition of this event would:

Job-order and process cost systems are two different costing systems that a company chooses between based on the preference of management.

A laundry detergent manufacturer would most likely use:

O'Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. During the current accounting period, O'Hare paid $700 for equipment rental and other indirect costs. The recognition of this event would:

During the current accounting period, O'Hare Company paid $2,300 for selling and administrative expenses. Payment of cash for selling and administrative expenses is:

Job-order and process cost systems are used only in the United States.

The two most common types of costing systems are:

Drummond Company provides customized computer training to employees of large corporations. What kind of costing system should Drummond use?