Financial and Managerial Accounting, 8e (Wild)
Chapter 15 Job Order Costing and Analysis
1) Cost accounting systems accumulate production costs and then assign them to products and
services.
2) A company that uses a cost accounting system normally has only two inventory accounts:
Finished Goods Inventory and Work in Process Inventory.
3) Cost accounting information is helpful to management for pricing decisions but has no effect
on controlling costs.
4) There are two basic types of cost accounting systems: job order costing and periodic costing.
5) There are two basic types of cost accounting systems: job order costing and process costing.
6) A company that produces a large number of standardized units would normally use a job order
costing system.
7) A company that produces products individually designed to meet the needs of a specific
customer, would normally use a job order costing system.
8) Job order costing would be appropriate for companies that produce custom homes and
specialized equipment.
9) Job order costing would be appropriate for companies that produce pencils.
10) A job order costing system would be appropriate for a manufacturer of automobile tires.
11) Job order costing would be appropriate for companies that produce training films for a
specific customer or custom-made furniture.
12) When a job involves producing more than one unit of a custom product, it is often called a
job lot.
13) The total costs on job cost sheets for jobs that are not yet completed equals the balance in the
Finished Goods Inventory account.
14) The total costs on job cost sheets for jobs that are not yet completed equals the balance in the
Work in Process Inventory account.
15) The total costs on job cost sheets for jobs that are completed but not yet sold equals the
balance in the Finished Goods Inventory account.
16) The total costs on job cost sheets for jobs that are completed but not yet sold equals the
balance in the Work in Process Inventory account.
17) The direct materials section of a job cost sheet shows the materials costs assigned to a
specific job, but the direct labor section only shows the total hours of labor allocated to the job.
18) The total manufacturing costs on job cost sheets for unfinished jobs equals the total amount
in the Work in Process Inventory account in the general ledger.
19) A job cost sheet does not contain information that is useful for managing the production
process.
20) Job cost sheets are used to track all of the costs assigned to a job, including direct materials,
direct labor, overhead, and all selling and administrative costs.
21) Job order costing is used to determine the cost of producing each job or job lot.
22) The total cost of completed but undelivered jobs equals the balance in the Work in Process
Inventory account.
23) Both direct and indirect labor costs are recorded on individual job cost sheets.
24) Job cost sheets include both product and period costs.
25) Only product costs are recorded on job cost sheets.
26) Service firms cannot use job order costing for determining a selling price for their services.
27) Job order costing applies to manufacturing firms only and not to service firms.
28) The cost of all direct materials issued to production is debited to Work in Process Inventory.
29) A materials requisition is a source document used by production managers to request
materials for production and also used to assign materials costs to specific jobs or to overhead.
30) Requisitions of indirect materials are not recorded on job cost sheets.
31) A materials requisition is a source document used for recording materials received.
32) A receiving report is the source document for recording materials received in both a
materials ledger card and in the general ledger.
33) In nearly all job order cost systems, materials ledger cards are perpetual records that are
updated each time materials are purchased or issued for use in production.
34) The journal entry to record direct materials used includes a debit to Work in Process
Inventory.
35) The journal entry to record indirect materials used includes a debit to Work in Process
Inventory.
36) The journal entry to record the purchase of materials includes a debit to Work in Process
Inventory.
37) Materials requisitions and time tickets are cost accounting source documents.
38) A time ticket is a source document used by an employee to record the number of hours
worked on a particular job during the work day.
39) Time tickets can be used to determine the amount of direct labor to charge to jobs.
40) A time ticket is a source document that an employee uses to report how much indirect labor
was performed for a job.
41) A time ticket is a source document used to record the total number of hours worked and
serves as a source document for entries to record direct labor costs.
42) When direct labor costs are recorded, the journal entry is a debit to Factory Wages Payable
and a credit to Work in Process Inventory.
43) The predetermined overhead rate is used to apply estimated overhead cost to jobs.
44) Factory overhead is often collected and summarized in a subsidiary factory overhead ledger.
45) Predetermined overhead rates are calculated at the end of the accounting period once the
actual amount of factory overhead is known.
46) Predetermined overhead rates are calculated before the start of the accounting period, and are
therefore based on estimates.
47) Predetermined overhead rates are necessary because cost accountants use periodic inventory
systems.
48) The predetermined overhead rate based on direct labor cost is the ratio of estimated overhead
cost to estimated direct labor cost for the period.
49) In a job order costing system, indirect labor costs are debited to the Factory Overhead
account.
50) The predetermined overhead rate is revised many times during the period to compensate for
inaccurate estimates previously made.
51) Under a job order costing system, individual jobs are charged with actual overhead costs
when they are transferred to finished goods.
52) Actual factory overhead incurred in a job costing system is debited to a Factory Overhead
general ledger account and credited to various other accounts.
53) Direct materials and direct labor costs are debited to the Factory Overhead account in a job
costing system.
54) There should be a “cause and effect” relation between the overhead allocation base and
overhead costs.
55) Overapplied overhead is the amount by which actual overhead cost exceeds the overhead
applied to products during the period.
56) Underapplied overhead is the amount by which actual overhead cost exceeds the overhead
applied to products during the period.
57) When actual overhead cost exceeds the overhead applied, overhead is said to be
underapplied.
58) When actual overhead cost exceeds the overhead applied, overhead is said to be overapplied.
59) In a job order costing system, any immaterial underapplied overhead at the end of the period
can be debited entirely to Cost of Goods Sold.
60) If actual overhead incurred during a period exceeds applied overhead, the difference will be a
credit balance in the Factory Overhead account at the end of the period.
61) If actual overhead incurred during a period exceeds applied overhead, the difference will be a
debit balance in the Factory Overhead account at the end of the period.
62) The Factory Overhead account will have a credit balance at the end of a period if overhead
applied during the period is greater than the overhead incurred.
63) The Factory Overhead account will have a debit balance at the end of a period if overhead
applied during the period is greater than the overhead incurred.
64) When overhead is underapplied at the end of a period, the adjusting journal entry includes a
credit to Cost of Goods Sold.
65) Underapplied overhead is the amount by which overhead applied to jobs exceeds the actual
overhead incurred during a period.
66) Overapplied overhead is the amount by which overhead applied to jobs using the
predetermined overhead rate exceeds the actual overhead incurred during a period.
67) Overapplied or underapplied overhead should be removed from the Factory Overhead
account at the end of each accounting period.
68) If overhead is underapplied, it means that individual jobs have not been charged enough
during the year and the cost of goods sold reported is too low.
69) If overhead is overapplied, it means that individual jobs have not been charged enough
overhead during the year and the cost of goods sold reported is too low.
70) If overhead is overapplied, it means that individual jobs have been charged too much
overhead during the year and the cost of goods sold reported is too high.
71) If overhead is underapplied, it means that individual jobs have been charged too much during
the year and the cost of goods sold reported is too high.
72) The schedule of cost of goods manufactured for a job costing system includes total actual
factory overhead.
73) Period costs for a manufacturing company, such as selling and administrative expenses, are
recorded directly to Work in Process Inventory when they are incurred.
74) Manufacturing costs incurred for jobs completed during an accounting period can bypass the
inventory accounts on the balance sheet and be recorded directly in expense accounts.
75) Cost accounting systems are used to:
A) Accumulate production and period costs and assign them to products or services.
B) Accumulate production costs and assign them to products or services.
C) Accumulate period cost and assign them to products or services.
D) Accumulate production costs and assign them to Raw Materials Inventory.
E) Analyze efficiency and effectiveness of inventory management.
76) A system of accounting for production operations that produces timely information about
inventories and manufacturing costs per unit of product is a:
A) Finished goods accounting system.
B) General accounting system.
C) Manufacturing accounting system.
D) Cost accounting system.
E) Production accounting system.