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Chapter 19 Job Order Costing
MULTIPLE CHOICE QUESTIONS
1)
Cost accounting systems accumulate manufacturing costs and then assign them to products and
services.
A)
True
B)
False
2)
A company that uses a cost accounting system normally has only two inventory accounts: Finished
Goods Inventory and Work in Process Inventory.
A)
True
B)
False
3)
Cost accounting information is helpful to management for pricing decisions but has no effect on
controlling costs.
A)
True
B)
False
4)
There are two basic types of cost accounting systems: job order costing and periodic costing.
A)
True
B)
False
5)
There are two basic types of cost accounting systems: job order costing and process costing.
A)
True
B)
False
6)
A company that produces a large number of standardized units would normally use a job order
costing system.
A)
True
B)
False
7)
A company that produces products individually designed to meet the needs of a specific customer,
would normally use a job order costing system.
A)
True
B)
False
8)
Job order production systems would be appropriate for companies that produce custom homes,
specialized equipment, and special computer systems.
A)
True
B)
False
9)
Job order production systems would be appropriate for companies that produce compact disks or
disposable cameras.
A)
True
B)
False
10)
A job order costing system would be appropriate for a manufacturer of automobile tires.
A)
True
B)
False
11)
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.
A)
True
B)
False
12)
When a job involves producing more than one unit of a custom product, it is often called a job lot.
A)
True
B)
False
13)
A company's file of job cost sheets for jobs that are not yet completed equals the balance in the
Finished Goods Inventory account.
A)
True
B)
False
14)
A company's file of job cost sheets for jobs that are not yet completed equals the balance in the
Work in Process Inventory account.
A)
True
B)
False
15)
A company's file of job cost sheets for jobs that are completed but not yet sold equals the balance
in the Finished Goods Inventory account.
A)
True
B)
False
16)
A company's file of job cost sheets for jobs that are completed but not yet sold equals the balance
in the Work in Process Inventory account.
A)
True
B)
False
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.
A)
True
B)
False
18)
The collection of cost sheets for unfinished jobs makes up a subsidiary ledger controlled by the
Work in Process Inventory account in the general ledger.
A)
True
B)
False
19)
A job cost sheet is useful for developing financial accounting numbers but does not contain
information that is useful for managing the production process.
A)
True
B)
False
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.
A)
True
B)
False
21)
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.
A)
True
B)
False
22)
The file of job cost sheets for completed but undelivered jobs equals the balance in the Work in
Process Inventory account.
A)
True
B)
False
23)
Both direct and indirect labor costs are recorded on the individual job cost sheets.
A)
True
B)
False
24)
Job cost sheets include both product and period costs.
A)
True
B)
False
25)
Only product costs are recorded on job cost sheets.
A)
True
B)
False
26)
Service firms, unlike manufacturing firms, should only use actual costs when determining a selling
price for their services.
A)
True
B)
False
27)
Job order costing is applicable to manufacturing firms only and not service firms.
A)
True
B)
False
28)
The cost of all direct materials issued to production is debited to Work in Process Inventory.
A)
True
B)
False
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.
A)
True
B)
False
30)
When materials are used as indirect materials, their cost is debited to the Factory Overhead
account.
A)
True
B)
False
31)
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.
A)
True
B)
False
32)
A receiving report serves as the source document for recording materials received in both a
materials ledger card and in the general ledger.
A)
True
B)
False
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.
A)
True
B)
False
34)
The journal entry to record the usage of Direct Materials includes a debit to Work in Process
Inventory.
A)
True
B)
False
35)
The journal entry to record the usage of Indirect Materials includes a debit to Work in Process
Inventory.
A)
True
B)
False
36)
The journal entry to record the purchase of materials includes a debit to Work in Process Inventory.
A)
True
B)
False
37)
Materials requisitions and time tickets are cost accounting source documents.
A)
True
B)
False
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.
A)
True
B)
False
39)
A time ticket is a source document that an employee uses to report how much direct labor was
performed for a job and is used to determine the amount of direct labor to charge to the job.
A)
True
B)
False
40)
A time ticket is a source document that an employee uses to report how much indirect labor was
performed for a job and is used to determine the amount of direct labor to charge to the job.
A)
True
B)
False
41)
A time ticket 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.
A)
True
B)
False
42)
When time ticket information is entered into the accounting system, the journal entry is a debit to
Factory Wages Payable and a credit to Work in Process Inventory.
A)
True
B)
False
43)
The predetermined overhead rate is used to allocate overhead cost to jobs.
A)
True
B)
False
44)
Factory overhead is often collected and summarized in a subsidiary factory overhead ledger.
A)
True
B)
False
45)
Predetermined overhead rates are calculated at the end of the accounting period once the actual
amount of factory overhead is known.
A)
True
B)
False
46)
Predetermined overhead rates are calculated before the start of the accounting period, and are
therefore based on estimates.
A)
True
B)
False
47)
Predetermined overhead rates are necessary because cost accountants use periodic inventory
systems.
A)
True
B)
False
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.
A)
True
B)
False
49)
In a job order costing system, indirect labor costs are debited to the Factory Overhead account.
A)
True
B)
False
50)
Since a predetermined overhead rate is established before a period begins, this rate is revised many
times during the period to compensate for inaccurate estimates previously made.
A)
True
B)
False
51)
Under a job order costing system, individual jobs are always charged with actual overhead costs
when they are transferred to finished goods.
A)
True
B)
False
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.
A)
True
B)
False
53)
Direct materials and direct labor are examples of costs that are debited to the Factory Overhead
account in a job costing system.
A)
True
B)
False
54)
There should be a "cause and effect" relation between the overhead allocation base and overhead
costs.
A)
True
B)
False
55)
Overapplied overhead is the amount by which actual overhead cost exceeds the overhead applied to
products during the period.
A)
True
B)
False
56)
Underapplied overhead is the amount by which actual overhead cost exceeds the overhead applied
to products during the period.
A)
True
B)
False
57)
When actual overhead cost exceeds the overhead applied, overhead is said to be underapplied.
A)
True
B)
False
58)
When actual overhead cost exceeds the overhead applied, overhead is said to be overapplied.
A)
True
B)
False
59)
In a job order costing system, any immaterial underapplied overhead at the end of the period can be
charged entirely to Cost of Goods Sold.
A)
True
B)
False
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.
A)
True
B)
False
