CHAPTER 2
Job-Order Costing for Manufacturing and Service Companies
Summary of Questions by Objectives and Bloom’s Taxonomy
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Multiple Choice Questions
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Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
2-2
TRUE-FALSE STATEMENTS
1. All costs other than direct materials, direct labor, indirect materials, and indirect labor are
classified as period costs.
2. The wages of a factory machine maintenance worker are classified as direct labor.
3. Insurance on factory equipment is a part of manufacturing overhead.
4. Sales commissions are considered a product cost.
5. Period costs are identified with accounting periods rather than with goods produced.
6. Rent of the office building for the sales staff is a period cost.
7. Raw Materials Inventory, Work in Process Inventory, and Cost of Goods Sold will appear on a
company’s balance sheet.
8. Cost of Goods Manufactured appears on the balance sheet.
9. Overhead is related ideally to production using an allocation base.
10. Indirect labor is added directly to the Work in Process account in a job-order costing system.
11. Direct labor costs are traced to each job.
12. Process costing systems are generally used by companies that produce large quantities of
identical items.
13. A company that builds custom homes would likely use a process costing system.
14. A company that designs advertising campaigns for other companies would likely use job-order
costing.
15. In a job-order costing system, the Finished Goods account includes the cost of all jobs
completed and sold during an accounting period.
16. In a job-order costing system, the Cost of Goods Sold account consists of costs transferred
out of the Finished Goods account.
17. A job cost sheet is a form used to accumulate costs of a particular job in a job-order costing
system.
18. When overhead is applied to jobs, Manufacturing Overhead is debited and Work in Process is
credited.
19. In a job-order costing system, the Cost of Goods Manufactured account is increased and the
Finished Goods account is decreased when a job is completed.
20. In a job-order costing system, Work in Process is debited and Finished Goods is credited
when a job is sold.
Chapter 2 Job-Order Costing for Manufacturing and Service Companies
2-3
21. Increases in overhead costs should be driven by increases in the overhead allocation base.
22. Underapplied overhead occurs when actual overhead is greater than the amount of overhead
applied to jobs.
23. If the amount of over– or under-applied overhead is material, the amount should be closed to
Work in Process.
24. If the amount of overapplied overhead is not material, the amount should be closed to Cost of
Goods Sold.
25. If overhead is underapplied, closing it to Cost of Goods Sold will increase income.
26. Job-order costing is often used by service companies, such as lawyers who need to
determine the cost of lawsuit or consultants who need to determine the cost of an
engagement.
27. Because H&R Block provides no materials when it completes a tax return for a client, it does
not assign overhead costs to each tax return client.
28. The use of computer-controlled manufacturing systems has had a significant effect on the
composition of product costs.
29. One goal of just-in-time systems is to minimize inventory levels.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
2-4
MULTIPLE CHOICE
30. Which of the following is not a reason for companies to know the cost of their products?
A. The company must set appropriate prices for the products.
B. The salary of the company president is based on the cost of the product.
C. The cost of the product is used in the calculation of profit when the product is sold.
D. The management of the company needs to assess the reasonableness of the costs
incurred in purchasing or manufacturing the products.
31. Which of the following is a manufacturing cost?
A. Cost of supplies used by sales personnel
B. Indirect factory labor
C. Product advertising costs
D. Administrative expenses
32. Which of the following is an example of a manufacturing overhead cost?
A. Wages paid to security personnel at the corporate office building
B. The cost of electricity used to run the oven in which Domino’s bakes it pizzas
C. Cost of shipping product to customers
D. The salary of the president of the company
33. Which of the following is a manufacturing cost?
A. Indirect materials
B. Advertising expense
C. Depreciation of the office equipment used by the sales staff
D. Salary of clerical workers
34. Westerhouse manufactures refrigerators. Which of the following items is most likely
considered an indirect material cost for Westerhouse?
A. Supplies used by the factory janitor
B. Gasoline costs for trucks used to deliver products to customers
C. Glass shelves for the refrigerators
D. Refrigerator motors
35. Which of the following costs is not part of manufacturing overhead?
A. Electricity for the factory
B. Depreciation of factory equipment
C. Salaries for the production supervisors
D. Health insurance for sales staff
36. Which of the following costs is part of manufacturing overhead?
A. Indirect labor
B. Direct labor
C. Salaries for the accounting personnel
D. Wages for the janitorial staff for the sales offices
37. Product costs
A. are also called period costs.
B. are considered an asset until the finished goods are sold.
C. become an expense in the period the costs are incurred.
D. All of these answer choices are correct.
Chapter 2 Job-Order Costing for Manufacturing and Service Companies
2-5
38. Which of the following is a period cost?
A. Rent on a factory machine
B. Maintenance on production equipment
C. Indirect labor
D. Janitorial costs for the corporate office
39. Which of the following is not a period cost?
A. Advertising costs
B. Accounting staff salaries
C. Direct materials
D. Depreciation of accounting office equipment
40. Which of the following accounts does not appear on the balance sheet?
A. Raw Materials Inventory
B. Finished Goods Inventory
C. Work in Process Inventory
D. Cost of Goods Manufactured
41. Work in Process Inventory includes the cost of
A. goods which are only partially completed.
B. all goods sold during the period.
C. all materials purchased during the last period.
D. all goods which are completed and ready to sell.
42. Which of the following is not a cost that is included in the ending balances of the Work in
Process Inventory account in a job-order cost system?
A. Cost of Goods Sold
B. Costs of tires attached to wagons by a toy manufacturer
C. Factory-related costs
D. Cost of wages earned by assembly workers
43. Which of the following lists presents the accounts in the order in which product costs flow?
A. Cost of Goods Sold, Work in Process Inventory, Raw Materials Inventory, Finished
Goods Inventory
B. Work in Process Inventory, Finished Goods Inventory, Cost of Goods Sold, Raw
Materials Inventory
C. Raw Materials Inventory, Finished Goods Inventory, Work in Process Inventory, Cost
of Goods Sold
D. Raw Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Cost
of Goods Sold
44. Cost of goods manufactured
A. is the amount transferred from Work in Process Inventory to Finished Goods Inventory
during the period.
B. is equal to the beginning Work in Process Inventory plus the current period’s
manufacturing costs plus the ending Work in Process Inventory.
C. is always equal to cost of goods sold.
D. is transferred to Raw Material Inventory account.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
2-6
45. DistaBricks manufactures custom brick and applies job-order costing. The following
information relates to the fiscal year ending December 31, 2017.
Beginning balance in Raw Materials Inventory $ 13,600
Purchases of raw material 211,000
Ending balance in Raw Materials Inventory 15,100
Beginning balance in Work in Process 18,700
Ending balance in Work in Process 16,500
Direct labor cost 78,600
Manufacturing overhead applied 47,900
Actual manufacturing overhead 44,800
Beginning balance in Finished Goods 26,200
Ending balance in Finished Goods 24,500
Sales 421,000
Selling expenses 115,400
General and administrative expenses 75,900
How much is the cost of direct materials transferred into production?
A. $224,600
B. $212,500
C. $209,500
D. $211,000
46. DistaBricks manufactures custom brick and applies job-order costing. The following
information relates to the fiscal year ending December 31, 2017.
Beginning balance in Raw Materials Inventory $ 13,600
Purchases of raw material 211,000
Ending balance in Raw Materials Inventory 15,100
Beginning balance in Work in Process 18,700
Ending balance in Work in Process 16,500
Direct labor cost 78,600
Manufacturing overhead applied 47,900
Actual manufacturing overhead 44,800
Beginning balance in Finished Goods 26,200
Ending balance in Finished Goods 24,500
Sales 421,000
Selling expenses 115,400
General and administrative expenses 75,900
How much is the cost of goods manufactured?
A. $336,000
B. $338,200
C. $335,100
D. None of these answer choices are correct
Chapter 2 Job-Order Costing for Manufacturing and Service Companies
2-7
47. DistaBricks manufactures custom brick and applies job-order costing. The following
information relates to the fiscal year ending December 31, 2017.
Beginning balance in Raw Materials Inventory $ 13,600
Purchases of raw material 211,000
Ending balance in Raw Materials Inventory 15,100
Beginning balance in Work in Process 18,700
Ending balance in Work in Process 16,500
Direct labor cost 78,600
Manufacturing overhead applied 47,900
Actual manufacturing overhead 44,800
Beginning balance in Finished Goods 26,200
Ending balance in Finished Goods 24,500
Sales 421,000
Selling expenses 115,400
General and administrative expenses 75,900
How much is cost of goods sold prior to closing under or overapplied overhead?
A. $339,900
B. $338,200
C. $336,000
D. None of these answer choices are correct
48. The manufacturing operations of Saltic Enterprises had the following balances for the month of
March:
March 1, 2017 March 31, 2017
Raw Materials $11,000 $14,000
Work in Process 8,000 10,000
Finished Goods 25,000 28,000
If Saltic calculated cost of goods to be $249,000 in March, how much did it transfer out of
Work in Process as completed goods?
A. $277,000
B. $246,000
C. $251,000
D. $252,000
49. Blue Dynamics manufactures custom water fountains and employs job-order costing system.
Beginning raw materials on October 1 totaled $15,600. During October, Blue Dynamic’s
transactions and accounts included the following:
Raw materials acquired for cash $ 7,500
Raw materials received on account 88,900
Direct materials requisitioned and transferred to production 91,200
Cost of goods manufactured 187,900
How much is the balance of Raw Materials on October 31?
A. $20,800
B. $96,400
C. $5,200
D. $9,800
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
2-8
50. Hard Walks Inc. designs and builds custom sidewalks and employs a job-order costing
system. During June, the company’s transactions and accounts included the following:
Raw materials purchased $282,000
Direct materials used in production 290,000
Raw materials inventory, beginning 11,400
Corporate administrative costs 22,500
Selling expenses 16,500
Sales 389,000
Total manufacturing overhead applied 45,300
Total manufacturing overhead incurred 49,100
Finished goods, beginning 21,400
Work in process inventory, beginning 31,800
Work in process inventory, ending 28,700
Direct labor cost incurred 42,300
Finished goods, ending 23,500
How much is cost of goods manufactured for June?
A. $348,900
B. $377,600
C. $380,700
D. $384,500
51. Tranham, Inc. uses a job-order costing system. It reported the following amounts for March:
Work in process, March 1 $38,000 Finished goods, March 1 $14,000
Work in process, March 31 35,000 Finished goods, March 31 17,500
Cost of goods manufactured 169,000 Raw materials, March 1 12,300
Direct labor used 64,000 Raw materials, March 31 12,000
Selling costs incurred 32,000 Direct materials used 63,000
How much of the above amounts will Tranham report on its balance sheet at the end of
March?
A. $64,500
B. $233,500
C. $192,500
D. $169,000
52. Tranham, Inc. uses a job-order costing system. It reported the following amounts for March:
Work in process, March 1 $38,000 Finished goods, March 1 $14,000
Work in process, March 31 35,000 Finished goods, March 31 17,500
Cost of goods manufactured 169,000 Raw materials, March 1 12,300
Direct labor used 64,000 Raw materials, March 31 12,000
Selling costs incurred 32,000 Direct materials used 63,000
How much will Tranham report as cost of goods sold for the month of March?
A. $169,000
B. $172,000
C. $183,000
D. $165,500
Chapter 2 Job-Order Costing for Manufacturing and Service Companies
2-9
53. On December 31, 2017, Barnett Tools has a balance in the Work in Process Inventory account
of $62,000. On January 1, 2017, the balance in Work in Process Inventory was $55,000.
Current manufacturing costs for the year are $292,000, and cost of goods sold is $284,000.
How much is cost of goods manufactured?
A. $292,000
B. $299,000
C. $277,000
D. $285,000
54. Palm Works Inc. has a beginning balance in the Work in Process Inventory account of
$20,000. Current manufacturing costs for the period are $325,000. The ending balance in the
Work in Process Inventory account is $23,000. How much is cost of goods manufactured?
A. $322,000
B. $328,000
C. $348,000
D. Not enough information is provided
55. If the balance in the Finished Goods Inventory account is increased by $34,000 during the
period and the cost of goods manufactured was $321,000, how much is cost of goods sold?
A. $287,000
B. $321,000
C. $355,000
D. Not enough information is provided
56. The balance in the Finished Goods Inventory account on July 31, 2017, was $41,000 and the
June 30, 2017, balance in the Finished Goods Inventory account was $34,000. Cost of goods
sold is $200,000 and direct materials used in production total $86,000. How much is cost of
goods manufactured?
A. $286,000
B. $193,000
C. $207,000
D. Not enough information is provided.
57. Ink Technology’s Work in Process Inventory account has a beginning balance of $50,000 and
an ending balance of $40,000. Direct materials used are $70,000 and direct labor incurred
totals $35,000. Cost of goods sold totals $135,000. Manufacturing overhead applied is
$20,000. How much is cost of goods manufactured?
A. $145,000
B. $115,000
C. $125,000
D. $135,000
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
2-10
58. DynaSpa manufactures solar spa heaters and employs a job-order costing system. Beginning
raw materials totaled $4,200 and beginning work in process totaled $6,700. Ending work in
process totaled $7,700. During October, DynaSpa’s transactions and accounts included the
following:
Raw materials acquired $91,000
Manufacturing overhead applied 34,000
Direct materials requisitioned and transferred to production 65,400
Cost of goods manufactured 331,000
How much is the amount of the current manufacturing costs?
A. $332,000
B. $99,400
C. $430,400
D. Not enough information is provided
59. Sanitize Systems had current production costs of $211,000 for March. Inventories were as
follows:
Beginning Ending
Raw material $13,000 $9,000
Work in Process $14,000 $15,000
Finished Goods $18,000 $16,000
How much is the cost of goods manufactured?
A. $213,000
B. $212,000
C. $210,000
D. Not enough information is provided
60. Watson Specialties bought $100,000 of raw materials during June, incurred $90,000 in direct
labor cost, and applied $130,000 in manufacturing overhead. Inventories for June were as
follows:
Beginning Ending
Raw material $22,000 $24,000
Work in Process $23,000 $19,000
Finished Goods $32,000 $31,000
How much is cost of goods sold for June?
A. $323,000
B. $322,000
C. $324,000
D. $325,000
Chapter 2 Job-Order Costing for Manufacturing and Service Companies
2-11
61. The following information has been collected from Harper Tools’ accounting records for the
month of April:
Direct materials added to Work in Process Inventory $ 160,000
Indirect materials added to Manufacturing Overhead 40,000
Direct labor added to Work in Process Inventory 150,000
Indirect labor added to Manufacturing Overhead 65,000
Manufacturing overhead added to Work in Process Inventory100,000
Depreciation Expense added to Manufacturing Overhead 50,000
Cost of Goods Sold 340,000
Cost of Goods Manufactured 380,000
What is the amount of the current manufacturing costs?
A. $410,000
B. $565,000
C. $500,000
D. $550,000
62. Reason Apparel applied overhead totaling $140,000 during March. Inventories were as
follows:
Beginning Ending
Raw material $15,000 $21,000
Work in Process $24,000 $26,000
Finished Goods $11,000 $15,000
How much is cost of goods manufactured?
A. $138,000
B. $136,000
C. $140,000
D. Not enough information provided
63. During the month of August, Ross MotorCo applied overhead to jobs using an overhead rate
of $0.80 per dollar of direct labor. Direct labor incurred in August was $138,000. Estimated
overhead in August was $112,800. Actual overhead was composed of the following items:
Indirect materials $ 16,400
Indirect labor 24,900
Utilities 24,500
Depreciation 38,700
Repair expense 13,500
Total $118,000
How much will be recorded as a debit to Work in Process for overhead during the year for
Ross MotorCo?
A. $112,800
B. $118,000
C. $110,400
D. More information is needed to answer
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
2-12
64. During the month of August, Ross MotorCo applied overhead to jobs using an overhead rate
of $0.80 per dollar of direct labor. Direct labor in August was $138,000. Estimated overhead in
August was $112,800. Actual overhead was composed of the following items:
Indirect materials $ 16,400
Indirect labor 24,900
Utilities 24,500
Depreciation 38,700
Repair expense 13,500
Total $118,000
How much will Ross MotorCo record as a debit to Manufacturing Overhead during the year?
A. $112,800
B. $118,000
C. $110,400
D. More information is needed to answer
65. A job-order costing system is most likely to be used by a
A. soft-drink bottler.
B. breakfast cereal manufacturer.
C. paint manufacturer.
D. caterer.
66. Which of the following companies will most likely use a process costing system?
A. A company that produces recycle bins
B. A company that designs and bakes wedding cakes
C. An ambulance service
D. An attorney that handles divorce cases
67. Companies that use process costing systems
A. generally produce large quantities of identical items.
B. trace costs to specific items produced.
C. accumulate costs by completed products rather than by departments.
D. All of these answer choices are correct.
68. When work is completed on a job, costs for the completed job are found in which of the
following accounts?
A. Cost of Goods Manufactured
B. Work in Process Inventory
C. Finished Goods Inventory
D. Cost of Goods Sold
69. Which of the following statements about job-order costing is not true?
A. Materials are traced to jobs using materials requisition forms.
B. Indirect labor is traced to jobs using time tickets.
C. Manufacturing overhead cannot be traced directly to jobs, so it is assigned using an
overhead allocation rate.
D. Manufacturing overhead costs are applied to jobs by crediting the Manufacturing
Overhead account and debiting it to Work in Process Inventory.
Chapter 2 Job-Order Costing for Manufacturing and Service Companies
2-13
70. Load King Manufacturing transferred $265,000 of costs from the Work in Process Inventory
account to the Finished Goods Inventory account during the month. The company’s inventory
balances follow:
Beginning Ending
Work in Process $22,000 $25,400
Finished Goods $31,500 $29,200
How much is cost of goods sold for the month?
A. $262,700
B. $261,600
C. $267,300
D. Not enough information is provided
71. In April, Walston Enterprises had the following results:
Beginning Finished Goods Inventory $17,400
Ending Finished Goods Inventory $25,400
Sales $965,000
Gross Margin $450,000
How much is Cost of Goods sold for April?
A. $458,000
B. $515,000
C. $507,000
D. $423,000
72. Title Audio manufactures industrial sound systems and employs a job-order costing system.
During June, Title Audio’s transactions and accounts included the following:
Raw materials purchased $126,000
Direct labor cost incurred 34,000
Total manufacturing overhead applied 42,100
Raw Materials Inventory, beginning 12,500
Raw Materials Inventory, ending 11,600
Finished Goods Inventory, beginning 10,400
Work in Process Inventory, beginning 13,000
Work in Process Inventory, ending 14,100
Total manufacturing overhead incurred 44,300
How much is the cost of direct materials issued to production during June?
A. $126,900
B. $126,000
C. $125,100
D. None of these answer choices are correct
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
2-14
73. Winslow Windows manufactures custom windows for high rise buildings and employs a job–
order costing system. During June, Winslow’s transactions and accounts included the
following:
Raw materials purchased $106,000
Direct labor cost incurred 42,000
Total manufacturing overhead applied 35,800
Raw Materials Inventory, beginning 13,100
Raw Materials Inventory, ending 11,600
Finished Goods Inventory, beginning 9,000
Work in Process Inventory, beginning 13,000
Work in Process Inventory, ending 14,100
Total manufacturing overhead incurred 34,200
How much is the cost of goods manufactured for June?
A. $185,300
B. $184,200
C. $182,600
D. $182,700
74. Dax Productions produces commercials for companies wishing to advertise on television. It
uses job-order costing. Dax utilized annual estimates of overhead and machine hours in
determining its overhead rate of $1.50 per machine hour. Data from the month of June is as
follows:
Factory rent $20,400
Direct labor $56,000
Factory depreciation $15,000
Administrative salaries $42,000
Indirect materials used in production $16,000
Direct materials used in production $11,500
Actual machine hours 33,000
Estimated machine hours 31,800
How much are total manufacturing costs added to Work in Process during the period?
A. $118,900
B. $114,000
C. $117,000
D. None of these answer choices are correct.
75. Olive Productions utilizes job-order costing for textbook production. It allocates overhead at a
rate of 130% of direct labor costs. The following is data regarding three jobs:
Work in Process
balance Costs added in February
On February 1 Direct Labor Direct Materials
Job #64 $600 $500 $200
Job #65 $700 $300 $300
Job #66 $500 $100 $250
How much are total manufacturing overhead costs applied for February?
A. $3,510
B. $900
C. $1,440
D. $1,170
Chapter 2 Job-Order Costing for Manufacturing and Service Companies
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76. Olive Productions utilizes job-order costing for textbook production. It allocates overhead at a
rate of 130% of direct labor costs. The following is data regarding three jobs:
Work In Process
balance Costs added in February
On February 1 Direct Labor Direct Materials
Job #64 $600 $500 $200
Job #65 $700 $300 $300
Job #66 $500 $100 $250
Jobs #64 and #66 were completed and sold in February. How much is the balance in the Work
in Process account at the end of February?
A. $990
B. $1,690
C. $1,650
D. $1,300
77. Cost of goods manufactured equals $44,000 for 2017. Finished goods inventory is $2,500 at
the beginning of the year and $5,500 at the end of the year. Total manufacturing overhead
applied is $4,500. Beginning and ending work in process for 2017 are $6,000 and $5,000
respectively. How much is cost of goods sold for the year?
A. $41,000
B. $47,000
C. $43,000
D. More information is needed.
78. Occi-Predictions manufactures weather forecasting circuits for meteorologists and uses a job–
order costing system. During June, Occi-Predictions accounts included the following balances
and transactions:
Raw Materials Inventory, beginning $ 700 Direct materials purchased $45,000
Raw Materials Inventory, ending 4,850 Direct labor cost incurred 16,400
Manufacturing overhead cost applied 9,500 Administrative expenses 13,000
Marketing expenses 11,000 Work in Process Inventory, beginning 7,800
Sales 98,000 Work in Process Inventory, ending 6,600
How much is the cost of direct materials issued to production during June?
A. $45,000
B. $45,700
C. $49,150
D. $40,850
79. Value Wood utilizes job-order costing. The company began the month of July with $35,000 in
raw materials. During the month $300,000 of additional raw materials were purchased and
$295,000 of direct materials were requisitioned from the storeroom. How much will be reported
on Value Wood’s balance sheet for Raw Materials at the end of July?
A. $40,000
B. $5,000
C. $30,000
D. $335,000
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
2-16
80. Occi-Predictions manufactures weather forecasting circuits for meteorologists machines and
uses a job-order costing system. During June, Occi-Predictions accounts included the
following balances and transactions:
Raw Materials Inventory, beginning $ 700 Direct materials purchased $45,000
Raw Materials Inventory, ending 4,850 Direct labor cost incurred 16,400
Manufacturing overhead cost applied 9,500 Administrative expenses 13,000
Marketing expenses 11,000 Work in Process Inventory, beginning 7,800
Sales 98,000 Work in Process Inventory, ending 6,600
How much is cost of goods manufactured?
A. $67,950
B. $58,540
C. $72,100
D. $66,750
81. DynaMore applies overhead to each window cleaning job it provides to customers based on
direct labor hours. Information concerning manufacturing overhead and labor for July follows:
Estimated direct labor 5,000 hours @ $14.20 = $71,000
Direct labor incurred 5,100 hours @ $14.50 = $73,950
Estimated manufacturing overhead $269,800
Actual manufacturing overhead $281,400
How much is the predetermined overhead rate?
A. $3.80
B. $3.65
C. $53.96
D. $52.90
82. RedEx Shipping determined the rate to apply overhead based on direct labor hours would be
$5.40, and based on machine hours would be $4.20. Job 664 used $26.00 of direct materials,
2.5 machine hours, and 4 hours of direct labor at a cost of $14 per hour. How much is the
manufacturing cost of job 664 if RedEx Shipping applies overhead based on machine hours?
A. $92.50
B. $10.50
C. $21.60
D. $103.60
83. National Production Company applies manufacturing overhead based on direct labor cost.
Information concerning manufacturing overhead and labor for August follows:
Estimated Actual
Overhead cost $174,000 $171,100
Direct labor hours 5,800 5,900
Direct labor cost $87,000 $89,975
How much is the predetermined overhead rate?
A. $2.00
B. $1.90
C. $30.00
D. $1.93
Chapter 2 Job-Order Costing for Manufacturing and Service Companies
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84. A form used to accumulate the cost of producing products is called a(n)
A. job cost sheet.
B. material requisition.
C. time sheet.
D. purchase order.
85. Which of the following is true in a job-order costing system?
A. Cost of goods sold will include the costs of all jobs that have been completed during
the accounting period.
B. Work in Process Inventory will include the cost of all jobs that are currently completed
and ready to deliver to customers.
C. Finished Goods Inventory will include the cost of all jobs that are completed but not yet
shipped and sold.
D. Raw Materials Inventory will include the cost of jobs that have been started but are not
yet completed.
86. An allocation base is
A. a common activity that jobs share, which is used to spread the overhead costs among
the various jobs.
B. the total amount of overhead assigned to a job.
C. used to estimate how many labor hours are needed to complete a job.
D. used to determine the total cost of a job completed during the period.
87. Direct labor hours are a good basis for applying overhead when
A. most direct laborers are doing the same type of work and use about the same amount
of low-level technology.
B. the process is very capital intensive.
C. labor is a very small part of total cost.
D. some labor is manual and other labor uses very expensive equipment.
88. Which of the following accounts is debited, when overhead is applied to jobs?
A. Manufacturing Overhead
B. Finished Goods Inventory
C. Indirect Labor
D. Work in Process Inventory
89. When manufacturing overhead is applied to jobs, which of the following accounts is credited?
A. Manufacturing Overhead
B. Work in Process Inventory
C. Accounts Payable
D. Raw Materials Inventory
90. When a job is sold, it is recorded with a
A. debit to Work in Process Inventory and a credit to Finished Goods Inventory.
B. debit to Finished Goods Inventory and a credit to Work in Process Inventory.
C. debit to Cost of Goods Sold and a credit to Finished Goods Inventory.
D. debit to Work in Process Inventory and a credit to Cost of Goods Sold.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
2-18
91. When a job is completed, the transaction is recorded with a
A. debit to Work in Process Inventory and a credit to Cost of Goods Sold.
B. debit to Finished Goods Inventory and a credit to Work in Process Inventory.
C. debit to Cost of Goods Sold and a credit to Finished Goods Inventory.
D. debit to Work in Process Inventory and a credit to Finished Goods Inventory.
92. Which of the following is not a commonly used measure of activity for allocating overhead?
A. Direct labor cost
B. Machine hours
C. Sales commissions
D. Direct labor hours
93. During the month of August, Ranson Productions applied overhead to jobs using an overhead
rate of $0.60 per dollar of direct labor. Actual direct labor in August was 12,000 hours at
$15.00 per hour, for a total of $180,000. Estimated overhead in August was $111,600. Actual
overhead was composed of the following items:
Indirect materials $ 16,400
Indirect labor 22,000
Utilities 24,500
Depreciation 38,700
Repair expense 13,500
Total $115,100
How much overhead was applied during the year by Ranson Productions?
A. $108,000
B. $115,100
C. $111,600
D. More information is needed to answer
94. Which of the following is the most reasonable allocation base for a highly mechanized
process?
A. Direct labor hours
B. Machine hours
C. Direct materials cost
D. The number of different materials used to produce the product
95. To what should the allocation base used to apply overhead be most strongly associated?
A. The cost of direct materials
B. The cost of direct labor
C. The estimated overhead cost
D. The total product cost
96. Predetermined overhead rates are calculated using
A. actual overhead costs and actual levels of the allocation base.
B. estimated overhead costs and estimated levels of the allocation base.
C. actual overhead costs and estimated levels of the allocation base.
D. estimated overhead costs and actual levels of the allocation base.
Chapter 2 Job-Order Costing for Manufacturing and Service Companies
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97. The calculation for the predetermined overhead rate is
A. estimated overhead cost times the estimated level of the allocation base.
B. estimated overhead cost divided by the estimated level of the allocation base.
C. estimated level of the allocation base divided by the estimated overhead cost.
D. estimated overhead cost minus the actual overhead cost.
98. For which period of time, the predetermined overhead rate is generally set in advance?
A. A day, because costs can change on a daily basis
B. A week, because labor costs differ from week to week
C. A month, because job-order cost sheets are generated each month
D. A year, because of the need for the overhead rate to stay the same from month to
month
99. Wilson Company applies overhead using machine hours as the allocation base, at a rate of
$15 per machine hour. Job 44 requires $320 worth of material, 11 hours of labor at $16 per
hour and 9 machine hours. What is the cost of job 44?
A. $496
B. $135
C. $661
D. $631
100. Savannah Factory applies manufacturing overhead based on direct labor cost. Information
concerning manufacturing overhead and labor for August follows:
Estimated Actual
Overhead cost $174,000 $171,100
Direct labor hours 5,800 5,900
Direct labor cost $87,000 $89,975
How much overhead should be applied in total during August?
A. $179,950
B. $174,000
C. $177,000
D. $171,100
101. Walsam Tools applies manufacturing overhead based on direct labor hours. Information
concerning manufacturing overhead and labor for August follows:
Estimated Actual
Overhead cost $160,000 $161,000
Direct labor hours 8,000 8,200
Direct labor cost $120,000 $115,800
How much is the predetermined overhead rate?
A. $1.33
B. $20.00
C. $1.03
D. $19.63
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
2-20
102. If Duffy Company budgets total overhead costs for the next year of $40,000 and anticipates
using machine hours as the overhead allocation base, which of the following statements is
true?
A. If Duffy Company expects to use 60,000 machine hours, the predetermined overhead
rate is $1.50 per machine hour.
B. If Duffy Company expects to use 160,000 machine hours, the predetermined overhead
rate is $4.00 per machine hour.
C. If Duffy Company expects to use 80,000 machine hours, the predetermined overhead
rate is $0.50 per machine hour.
D. None of these answer choices are true
103. Builder Giant estimates the following overhead costs for 2017:
Equipment depreciation $ 30,000
Equipment maintenance 64,000
Factory management salaries 150,000
Factory rent 50,000
Total manufacturing overhead $294,000
Builder Giant incurred the following costs for 2017 for job A56:
Direct material $40,000
Direct labor $12,800
Other jobs incurred $183,200 of direct labor. Builder Giant also budgeted $210,000 in direct
labor costs and 20,000 machine hours for 2017. Actual manufacturing overhead for 2017 was
$336,000. How much is the predetermined overhead rate using direct labor cost as the
allocation base?
A. $14.70
B. $1.60
C. $1.50
D. $1.40
104. Wunder Builders estimates the following overhead costs for 2017:
Equipment depreciation $ 30,000
Equipment maintenance 64,000
Factory management salaries 150,000
Factory rent 50,000
Total manufacturing overhead $294,000
Wunder Builders incurred the following costs for 2017 for job 23:
Direct material $80,000
Direct labor $60,000
Wunder applies manufacturing overhead based on direct labor cost. Other jobs incurred
$320,000 of direct labor. Wunder Builders budgeted $350,000 in direct labor costs and 20,000
machine hours for 2017. Actual manufacturing overhead for 2017 was $300,000. How much
overhead will Wunder Builders apply to job 23?
A. $168,800
B. $294,000
C. $58,800
D. $50,400