Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 17 Job Order Cost Systems and Overhead Allocations Answer
Key
True / False Questions
1.
A principal objective of cost accounting systems is to ensure that cost reports to
management are prepared in accordance with generally accepted accounting principles.
2.
Management uses a cost accounting system to evaluate and reward employee
performance.
3.
Since cost accounting systems provide managers with information necessary to manage
operations, the information from cost accounting systems is not useful for external
reporting purposes.
4.
Management can compute the per-unit cost of finished goods accurately only when a job
order cost system is in use.
5.
In a job order cost system, the costs of direct materials, direct labor, and manufacturing
overhead are accumulated separately for each department for a given period of time.
6.
Job order costing is appropriate for businesses that produce mass quantities of identical
units using the same amount of direct materials, direct labor, and manufacturing overhead.
7.
Pepsi Cola would most likely use a job order costing system.
8.
Job order costing cannot be used for a service company.
9.
Overhead application rates allow overhead to be assigned as units are being produced
throughout the accounting period.
10.
An overhead application rate is computed by dividing the actual overhead costs by the
expected amount of units in the activity base.
11.
A cost driver is an activity base that is highly correlated with manufacturing overhead
costs.
12.
An overhead application rate is a device used to assign overhead costs to units of product
in proportion to some "activity base" that can be traced directly to the manufactured
products.
13.
An activity-based costing system does not help managers make better product pricing
decisions.
14.
A collection of job cost sheets would be similar to a subsidiary ledger and the work-in-
process account would be similar to the controlling account.
15.
Metalworks Incorporated purchased $54,500 worth of direct materials to be used in Job
#222. During the accounting period, Job #222 used $45,600 of direct materials. The amount
of direct materials that would be shown in Job #222 Job Cost Sheet at the end of the
accounting period should be $54,500, since this is the amount of direct materials the
company had purchased for this particular job.
16.
Metalworks applies manufacturing overhead on the basis of direct materials used in
production. During the current period, direct materials used for job #123 amounted to
$22,545. If Metalworks' overhead rate is 0.65 of direct materials used, the overhead applied
to job #123 for the period was $15,000.
17.
Metalworks employs 3 assembly workers that, on average, each work 40 hours per week
and earn $9 per hour. During the current accounting period, Job #543 consumed 77 hours
of direct labor totaling $693.
18.
A credit balance in the manufacturing overhead account at month end indicates that the
actual overhead costs were less than the amount of overhead costs applied to jobs.
19.
A debit balance in the manufacturing overhead account at month end indicates overhead
applied to jobs was greater than the actual overhead costs.
20.
When goods are sold, a journal entry is made transferring the goods from cost of goods
sold to finished goods.
21.
A debit balance in the Manufacturing Overhead account at the end of the period indicates
that overhead has been under-applied to jobs.
22.
If the manufacturing overhead account at month end has a credit balance before
adjustment, this indicates that overhead is under-applied.
23.
If actual overhead costs are less than the amount of overhead applied to production, this
indicates that manufacturing overhead is over-applied.
24.
The two steps required in activity-based costing are identifying separate activity cost pools
and allocating each cost pool to the product using an appropriate cost driver.
25.
Activity-based costing tracks cost to the activities that consume resources.
26.
In activity-based costing, only one cost driver should be used in applying overhead.
27.
An increase in an activity base must cause an increase in actual overhead costs incurred
for that base to be considered a cost driver.
28.
Activity-based costing uses multiple activity bases to assign overhead costs to units of
production.
29.
Activity-based costing systems always result in more accurate measurements of unit
costs.
Multiple Choice Questions
30.
Which of the following is
not
a commonly used cost accounting system?
31.
An effective cost accounting system should match processes that consume resources with
the associated _____ in order to maintain competitive advantage. Select the best answer to
complete the sentence.
32.
The method used by managers when comparing unit costs with budgeted costs or other
measures is broadly known as:
33.
The basic types of cost accounting systems are:
34.
A job order cost system would be appropriate in the manufacturing of:
35.
Under a job order cost system, costs are accumulated for:
36.
The type of cost accounting system best suited to a particular company depends on:
37.
A job order cost system would be suitable for which of the following:
38.
Which of the following is a characteristic of manufacturing overhead in a job order cost
system?
39.
Which of the following is an advantage of developing a predetermined overhead application
rate?
40.
The advantage of using a predetermined overhead application rate is that:
41.
A predetermined overhead application rate:
42.
Manufacturing overhead is:
43.
Overhead costs are assigned to production using an overhead application rate, whereas no
such "application rate" is used to assign the costs of direct materials and direct labor to
production. The reason for this difference in procedures is that:
44.
Manufacturing overhead is
not
:
45.
The cost of salaries paid to employees who work in a factory maintaining the heating
system is considered:
46.
Moran Company uses a job order cost system and has established a predetermined
overhead application rate for the current year of 150% of direct labor cost, based on
budgeted overhead of $900,000 and budgeted direct labor cost of $600,000. Job no. 1 was
charged with direct materials of $36,000 and with overhead of $27,000. What is the total
cost of job no. 1?
47.
Doyle Co. uses a job order cost accounting system. At year-end the Work-in-Process
Inventory controlling account showed a debit balance of $43,125. For the two jobs in
process at year-end, one showed $6,000 in direct materials and $4,500 in direct labor. The
job cost sheet for the second job showed $9,000 in direct materials and $6,750 in direct
labor. If the company is using a predetermined overhead application rate based on
direct
labor cost
, the rate is:
48.
Edwards Auto Body uses a job order cost system. Overhead is applied to jobs on the basis
of direct labor hours. During the current period, Job No. 337 was charged $425 in direct
materials, $475 in direct labor, and $190 in overhead. If direct labor costs an average of $16
per hour, the company's overhead application rate is:
