Managerial Accounting, 16e (Garrison)
Chapter 3 Job Order Costing: Cost Flows and External Reporting
1) When raw materials are purchased, they are recorded as an asset.
2) The absorption cost approach provides for the absorption of all manufacturing costs, fixed and
variable, into units of product.
3) The following entry would be used to record depreciation on manufacturing equipment:
Manufacturing Overhead
XXX
Accumulated Depreciation
XXX
4) If a company uses a predetermined overhead rate, actual manufacturing overhead costs of a
period will be recorded in the Manufacturing Overhead account and will be recorded on the job
cost sheets.
5) The journal entry for cost of goods manufactured includes the costs of units that are partially
completed.
6) Advertising costs should NOT be charged to the Manufacturing Overhead account.
7) The following entry would be used to record the transfer of $40,000 of direct material and
$10,000 of indirect material from the storeroom to production:
Direct Materials
40,000
Indirect Materials
10,000
Raw Materials
50,000
8) Entry (16) in the below T-account represents the cost of goods manufactured transferred to
Finished Goods from Work in Process.
Finished Goods
Bal.
(16)
520,000
(15)
Bal.
9) Entry (11) in the below T-account could represent overhead cost applied to Work in Process.
Work In Process
Bal.
(11)
330,000
(2)
(3)
(7)
Bal.
10) Entry (1) in the below T-account represents the purchase rather than use of raw materials.
Raw Materials
Bal.
(2)
60,000
(1)
Bal.
11) Entry (4) in the below T-account could represent the cost of overhead applied to Work in
Process.
Manufacturing Overhead
(2)
(7)
180,000
(3)
(4)
(5)
(6)
180,000
Bal.
12) Entry (4) in the T-account below represents raw materials requisitioned for use in production.
Raw Materials
Bal.
(4)
87,000
(3)
Bal.
13) Entry (4) in the below T-account could represent the cost of property taxes and insurance
incurred on the factory.
Manufacturing Overhead
(2)
(7)
180,000
(3)
(4)
(5)
(6)
180,000
Bal.
14) The $5,000 balance in the T-account below represents overapplied manufacturing overhead
for the period.
Manufacturing Overhead
(2)
(7)
180,000
(3)
(4)
(5)
(6)
180,000
Bal.
15) In the Schedule of Cost of Goods Manufactured, Cost of goods manufactured = Total
manufacturing costs + Beginning work in process inventory – Ending work in process inventory.
16) Assume that a company closes out any manufacturing overhead overapplied or underapplied to
cost of goods sold. Then in the Schedule of Cost of Goods Sold, Adjusted cost of goods sold =
Unadjusted cost of goods sold + Overapplied overhead – Underapplied overhead.
17) In the Schedule of Cost of Goods Manufactured, Total raw materials available = Ending raw
materials inventory + Purchases of raw materials.
18) In the Schedule of Cost of Goods Sold, Cost of goods available for sale = Ending finished
goods inventory + Cost of goods manufactured.
19) In the Schedule of Cost of Goods Sold, Unadjusted cost of goods sold = Beginning finished
goods inventory + Cost of goods manufactured − Ending finished goods inventory.
20) On a manufacturing company’s income statement, direct labor is separately listed as an
expense.
21) In the Schedule of Cost of Goods Manufactured, Raw materials used in production =
Beginning raw materials inventory + Purchases of raw materials − Ending raw materials
inventory.
22) The schedule of cost of goods manufactured contains three elements of product costs—direct
materials, direct labor, and manufacturing overhead—and it summarizes the portions of those
costs that remain in ending Work in Process inventory and that are transferred out of Work in
Process into Finished Goods.
23) In the Schedule of Cost of Goods Manufactured, Total direct materials = Raw materials used in
production – Ending raw materials inventory.
24) If a company closes any underapplied or overapplied manufacturing overhead to the Cost of
Goods Sold account, then Cost of Goods Sold will be debited if manufacturing overhead is
overapplied for the period.
25) A credit balance in the Manufacturing Overhead account at the end of the year means that
manufacturing overhead was overapplied.
26) Two of the reasons why manufacturing overhead may be underapplied are: (1) the estimated
total manufacturing overhead cost may have been too high; and (2) the estimated total amount of
the allocation base may have been too low.
27) If the actual manufacturing overhead cost for a period exceeds the manufacturing overhead
cost applied, then manufacturing overhead would be considered to be overapplied.
28) The entire difference between the actual manufacturing overhead cost for a period and the
applied manufacturing overhead cost is typically closed to the Work In Process account.
29) Which of the following statements is true?
I.
Overhead can be applied slowly as a job is worked on.
II.
Overhead can be applied when the job is completed.
III.
Overhead should be applied to any job not completed at year-end in order to
properly value the work in process inventory.
A) Only statement I is true.
B) Only statement II is true.
C) Both statements I and II are true.
D) Statements I, II, and III are all true.
30) In a job-order costing system, indirect labor cost is usually recorded as a debit to:
A) Manufacturing Overhead.
B) Finished Goods.
C) Work in Process.
D) Cost of Goods Sold.
31) In a job-order costing system, manufacturing overhead applied is recorded as a debit to:
A) Raw Materials inventory.
B) Finished Goods inventory.
C) Work in Process inventory.
D) Cost of Goods Sold.
32) In a job-order costing system, which of the following events would trigger recording data on a
job cost sheet?
A) the purchase of direct materials
B) the payment of fire insurance on the factory building
C) the payment for product advertising
D) none of the choices
33) The journal entry to record applying overhead during the production process is:
A)
Manufacturing Overhead
XXX
Work In Process
XXX
B)
Finished Goods
XXX
Manufacturing Overhead
XXX
C)
Manufacturing Overhead
XXX
Finished Goods
XXX
D)
Work In Process
XXX
Manufacturing Overhead
XXX
34) Refer to the T-account below:
Manufacturing Overhead
(2)
(2)
167,000
(3)
(4)
(5)
(6)
167,000
Bal.
8,000
The ending balance of $8,000 represents which of the following?
A) Underapplied overhead.
B) Manufacturing overhead that will be carried over to the next period.
C) Overapplied overhead.
D) A bookkeeping error.
15
35) Refer to the T-account below:
Raw Materials
Bal.
(9)
75,000
(5)
Bal.
Entry (5) could represent which of the following?
A) Payments for raw materials.
B) Requisitions of raw materials to be used in production.
C) Purchases of raw materials.
D) Overhead cost applied to Work in Process.
36) Refer to the T-account below:
Prepaid Insurance
Bal.
(8)
9,000
Entry (8) could represent which of the following?
A) Payment of insurance for the upcoming period.
B) Insurance cost incurred on the factory which is added to the Manufacturing Overhead account.
C) Overhead cost applied to Work in Process.
D) Overhead cost applied to Finished Goods.
37) When manufacturing overhead is applied to production, it is added to:
A) the Cost of Goods Sold account.
B) the Raw Materials account.
C) the Work in Process account.
D) the Finished Goods inventory account.
38) Under a job-order costing system, the dollar amount transferred from Work in Process to
Finished Goods is the sum of the costs charged to all jobs:
A) started in process during the period.
B) in process during the period.
C) completed and sold during the period.
D) completed during the period.
39) Refer to the T-account below:
Manufacturing Overhead
(2)
(7)
150,000
(3)
(4)
(5)
(6)
150,000
Bal.
Entry (4) could represent which of the following except?
A) Indirect labor cost incurred.
B) Factory insurance cost.
C) Overhead cost applied to Work in Process.
D) Depreciation on factory equipment.
40) Refer to the T-account below:
Work In Process
Bal.
(12)
270,000
(4)
(6)
(9)
Bal.
Entry (12) could represent which of the following?
A) Direct labor cost incurred in production.
B) Purchases of raw materials.
C) The cost of goods manufactured transferred to Finished Goods.
D) The cost of indirect materials incurred in production.
41) In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the “Total raw
materials available” is computed by adding together the “Beginning raw materials inventory” and:
A) Ending raw materials inventory
B) Raw materials used in production
C) Purchases of raw materials
D) Indirect materials included in manufacturing overhead
42) In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the cost of goods
manufactured is computed according to which of the following equations?
A) Cost of goods manufactured = Total manufacturing costs + Ending work in process inventory –
Beginning work in process inventory
B) Cost of goods manufactured = Total manufacturing costs + Beginning work in process
inventory – Ending work in process inventory
C) Cost of goods manufactured = Total manufacturing costs + Beginning finished goods inventory
– Ending finished goods inventory
D) Cost of goods manufactured = Total manufacturing costs + Ending finished goods inventory –
Beginning finished goods inventory
43) When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the
following would be true?
A) Work in Process will decrease.
B) Cost of Goods Sold will increase.
C) Net income will decrease.
D) Gross margin will increase.
44) If manufacturing overhead is underapplied, then:
A) actual manufacturing overhead cost is less than estimated manufacturing overhead cost.
B) the amount of manufacturing overhead cost applied to Work in Process is less than the actual
manufacturing overhead cost incurred.
C) the predetermined overhead rate is too high.
D) the Manufacturing Overhead account will have a credit balance at the end of the year.
45) Overapplied manufacturing overhead would result if:
A) the plant was operated at less than normal capacity.
B) manufacturing overhead costs incurred were less than estimated manufacturing overhead costs.
C) manufacturing overhead costs incurred were less than manufacturing overhead costs charged to
production.
D) manufacturing overhead costs incurred were greater than manufacturing overhead costs
charged to production.