Chapter 19
JOB ORDER COST ACCOUNTING
1. Cost accounting systems accumulate costs and then assign them to products or services.
2. A company that uses a cost accounting system normally has only two inventory accounts:
Finished Goods Inventory and Goods in Process Inventory.
3. Cost accounting information is helpful to management in controlling costs but has no effect
on pricing decisions.
4. There are two basic types of cost accounting systems: job order costing and periodic
costing.
5. A company that produces a large number of standardized units would normally use a job
order cost accounting system.
6. Job order production systems would be appropriate for companies that produce custom
homes, specialized equipment, and special computer systems.
7. Job order production systems would be appropriate for companies that produce compact
disks or disposable cameras.
8. A job order cost accounting system would be appropriate for a manufacturer of automobile
tires.
9. Job order production systems would be appropriate for companies that produce training
films for a specific customer or custom-made furniture to be used in a new five-star resort
hotel.
10. A company’s file of job cost sheets for finished but unsold jobs equals the balance in the
Finished Goods Inventory account.
11. The direct materials section of a job cost sheet shows the materials costs assigned to a job,
but the direct labor section only shows the total hours of labor allocated to the job.
12. The collection of cost sheets for unfinished jobs makes up a subsidiary ledger controlled
by the Goods in Process Inventory account in the general ledger.
13. A job cost sheet is useful for developing financial accounting numbers but does not
contain information that is useful for managing the production process.
14. 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.
15. When a job is finished, its job cost sheet is completed and moved from the file of jobs in
process to the file of finished jobs that are yet to be delivered to customers.
16. The file of job cost sheets for completed but undelivered jobs equals the balance in the
Goods in Process Inventory account.
17. Service firms, unlike manufacturing firms, should only use actual costs when determining
a selling price for their services.
18. Job order costing is applicable to manufacturing firms only and not service firms.
19. The cost of all materials issued to production is debited to Goods in Process Inventory.
20. 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.
21. When materials are used as indirect materials, their cost is debited to the Factory
Overhead account.
22. A materials requisition is a source document used by materials managers of a
manufacturing company to order raw materials from suppliers; it serves the same purpose as a
purchase order in a merchandising company.
23. Materials requisitions and time tickets are cost accounting source documents.
24. 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.
25. A clock card is a source document that an employee uses to report how much time was
spent working on a job or on overhead and that is used to determine the amount of direct labor
to charge to the job or to determine the amount of indirect labor to charge to factory
overhead.
26. A time ticket is a source document an employee uses to record the number of hours at
work and that is used each pay period to determine the total labor cost.
27. A clock card is a source document used by an employee to record the total number of
hours worked and serves as a source document for entries to record labor costs.
28. When time ticket information is entered into the accounting system, the journal entry is a
debit to Factory Payroll and a credit to Goods in Process Inventory.
29. The predetermined overhead allocation rate is used to allocate overhead cost to jobs.
30. Factory overhead is often collected and summarized in a subsidiary factory overhead
ledger.
31. Predetermined overhead rates are necessary because cost accountants use periodic
inventory systems.
32. The predetermined overhead allocation rate based on direct labor cost is the ratio of
estimated overhead cost for the period to estimated direct labor cost for the period.
33. In a job order cost accounting system, indirect labor costs are debited to the Factory
Overhead account.
34. Since a predetermined overhead allocation rate is established before a period begins, this
rate is revised many times during the period to compensate for inaccurate estimates previously
made.
35. Under a job order cost accounting system, individual jobs are always charged with actual
overhead costs when they are transferred to finished goods.
36. Overapplied overhead is the amount by which actual overhead cost exceeds the overhead
applied to products during the period.
37. In a job order cost accounting system, any immaterial underapplied overhead at the end of
the period can be charged entirely to Cost of Goods Sold.
38. 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.
39. 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.
40. Any material amount of under- or overapplied factory overhead must always be closed to
Cost of Goods Sold at the end of an accounting period.
41. Underapplied overhead is the amount by which overhead applied to jobs using the
predetermined overhead allocation rate exceeds the overhead incurred during a period.
42. Overapplied overhead is the amount by which overhead applied to jobs using the
predetermined overhead allocation rate exceeds the overhead incurred during a period.
43. Overapplied or underapplied overhead should be removed from the Factory Overhead
account at the end of each accounting period.
44. Cost accounting systems used by manufacturing companies are based on the:
A. Periodic inventory system.
B. Perpetual inventory system.
C. Finished goods inventories.
D. Weighted average inventories.
E. LIFO inventory system.
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45. 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.
46. Job order costing systems normally use:
A. Periodic inventory systems.
B. Perpetual inventory systems.
C. Real inventory systems.
D. General inventory systems.
E. All of inventory systems normally use job order costing.
47. In comparison to a general accounting system for a manufacturing company, a cost
accounting system places an emphasis on:
A. Periodic inventory counts.
B. Total costs.
C. Continually updating costs of materials, goods in process, and finished goods inventories.
D. Products and average costs.
E. Large volume operations involving standardized products.
48. A system of accounting for production operations that uses a periodic inventory system is
called a:
A. Manufacturing accounting system.
B. Production accounting system.
C. General accounting system.
D. Cost accounting system.
E. Finished goods accounting system.
49. The two basic types of cost accounting systems are:
A. Job order costing and perpetual costing.
B. Job order costing and customized product costing.
C. Job order costing and customized service costing.
D. Job order costing and process costing.
E. Job order costing and periodic costing.
50. The production activities for a customized product represent a(n):
A. Operation.
B. Job.
C. Unit.
D. Pool.
E. Process.
51. A job order cost accounting system would best fit the needs of a company that makes:
A. Shoes and apparel.
B. Paint.
C. Cement.
D. Custom machinery.
E. Pencils and erasers.
52. Job order production is also known as:
A. Mass production.
B. Process production.
C. Unit production.
D. Customized production.
E. Standard costing.
53. Dell Builders manufactures each house to customer specifications. It most likely would
use:
A. Process costing.
B. A periodic inventory system.
C. Unique costing.
D. Job order costing.
E. Activity-based costing.
54. A type of production that yields customized products or services for each customer is
called:
A. Customer orientation production.
B. Job order production.
C. Just-in-time production.
D. Job lot production.
E. Process production.
55. Target cost is calculated as
A. direct costs + desired profit
B. direct costs – desired profit
C. expected selling price – direct costs
D. expected selling price – desired profit
E. expected selling price + desired profit
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56. A job order production system would be appropriate for a company that produces which
one of the following items?
A. A landscaping design for a new hospital.
B. Seedlings for sale in a nursery.
C. Sacks of yard fertilizer.
D. Packets of flower seeds.
E. Small gardening tools, including rakes, shovels, and hoes.
57. Large aircraft producers such as McDonnell Douglas normally use:
A. Job order costing.
B. Process costing.
C. Mixed costing.
D. Full costing.
E. Simple costing.
58. A document in a job order cost accounting system that is used to record the costs of
producing a job is a(n):
A. Job cost sheet.
B. Job lot.
C. Finished goods summary.
D. Process cost system.
E. Units-of-production sheet.
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59. A job cost sheet shows information about each of the following items except:
A. The direct labor costs assigned to the job.
B. The name of the customer.
C. The costs incurred by the marketing department in selling the job.
D. The overhead costs assigned to the job.
E. The direct materials costs assigned to the job.
60. The job order cost sheets used by Garza Company revealed the following:
Job. No. Bal., May 1 May Production Costs
124 $1,700 $—-
125 1,200 300
126 —- 900
Job No. 125 was completed during May and Jobs No. 124 and 125 were shipped to customers
in May. What was the company’s cost of goods sold for May and the goods in process
inventory on May 31?
A. $3,200; $ 900.
B. $2,900; $1,200.
C. $1,200; $2,900.
D. $1,700; $1,200.
E. $4,100; $ 0.
61. A job cost sheet includes:
A. Direct materials, direct labor, operating costs.
B. Direct materials, overhead, administrative costs.
C. Direct labor, overhead, selling costs.
D. Direct material, direct labor, overhead.
E. Direct materials, direct labor, selling costs.
62. The Goods in Process Inventory account of a manufacturing company that uses an
overhead rate based on direct labor cost has a $4,400 debit balance after all posting is
completed. The cost sheet of the one job still in process shows direct material cost of $2,000
and direct labor cost of $800. Therefore, the company’s overhead application rate is:
A. 40%.
B. 50%.
C. 80%.
D. 200%.
E. 220%.
63. A perpetual record of a raw materials item that records data on the quantity and cost of
units purchased, units issued for use in production, and units that remain in the raw materials
inventory, is called a(n):
A. Materials ledger card.
B. Materials requisition.
C. Purchase order.
D. Materials voucher.
E. Purchase ledger.