Chapter 4
1. Manufacturing and service firms producing unique products or services require job-order accounting systems.
a. True
b. False
2. The key feature of job-order costing is that the cost of one job differs from that of another job and must be kept track of
separately.
a. True
b. False
3. Production costs consist of direct materials, direct labor, and overhead.
a. True
b. False
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4. The difference between actual overhead and applied overhead is called an overhead variance.
a. True
b. False
5. If actual overhead is greater than applied overhead, the variance is called underapplied overhead.
a. True
b. False
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6. Costs reported on the financial statements must be estimated costs.
a. True
b. False
7. If the overhead variance is immaterial, it is allocated among the ending balances of Work in Process, Finished Goods,
and Cost of Goods Sold.
a. True
b. False
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8. Departmental overheads cannot be added together to get plantwide overhead.
a. True
b. False
9. In an actual cost system, actual direct materials, actual direct labor and estimated overhead are used to determine unit
cost.
a. True
b. False
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10. Overhead costs are assigned to Finished Goods using a predetermined rate.
a. True
b. False
11. A job-order cost sheet is the source document where direct labor costs are assigned to individual jobs.
a. True
b. False
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12. Using a time ticket, the cost accounting department can enter the cost of direct materials onto the correct job-order
cost sheet.
a. True
b. False
13. The work-in–process account consists of all the job-order cost sheets for the completed jobs.
a. True
b. False
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14. There are other source documents besides the time ticket and the material requisition form used to fill out the job-
order cost sheet.
a. True
b. False
15. The raw materials account is an inventory account located on the income statement.
a. True
b. False
16. The three manufacturing cost elements are direct materials, direct labor, and overhead.
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a. True
b. False
17. The use of normal costing means that actual overhead costs are assigned directly to jobs.
a. True
b. False
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18. The use of a departmental rate has the advantage of being simple and reduces data collection requirements.
a. True
b. False
19. Actual overhead is reconciled with applied overhead at the beginning of the period.
a. True
b. False
20. In a normal costing system, actual overhead is used to arrive at the cost of goods manufactured.
a. True
b. False
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21. The cost of goods sold appearing on the income statement as an expense, when using a normal costing system, is the
normal cost of goods sold.
a. True
b. False
22. When materials are put into production, they are taken from the Raw Materials account and put into the Work in
Process account.
a. True
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b. False
23. Actual overhead costs are accumulated in the overhead control account.
a. True
b. False
24. The cost of completed units is always debited to Work-in-Process and credited to Finished Goods.
a. True
b. False
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25. The journal entry for $17,000 materials purchased on account is:
Raw Materials 17,000
Accounts Payable 17,000
a. True
b. False
26. In job-order costing, the journal entry for $7,200 raw materials requisitioned for use in production is:
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Work in Process 7,200
Raw Materials 7,200
a. True
b. False
27. In job-order costing, the journal entry for $1,700 of unpaid direct labor is:
Work in Process 1,700
Wages Payable 1,700
a. True
b. False
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28. In job-order costing, the journal entry for overhead applied at the rate of $3 per direct labor hour when 210 direct labor
hours were worked is:
Work in Process 630
Applied Overhead 630
a. True
b. False
29. In job-order costing, the journal entry for a completed job costing $7,000 but not sold is:
Finished Goods 7,000
Work in Process 7,000
a. True
b. False
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30. The journal entry for $17 of underapplied overhead is:
Cost of Goods Sold 17
Applied Overhead 17
a. True
b. False
31. A _______ is one distinct unit or set of units.
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32. In a _______________________________ costs are accumulated by job.
33. __________________________ is a costing system that accumulates production costs by process or by department for
a given period of time.
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34. Strict ______________________ are rarely used because they cannot provide accurate unit cost information on a
timely basis.
35. A(n) ___________________________ determines unit cost by adding actual direct materials, actual direct labor, and
estimated overhead.
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36. The ___________________________ is calculated at the beginning of the year by dividing the total estimated annual
overhead by the total estimated level of cost driver.
37. _________________ is found by multiplying the predetermined overhead rate by the actual use of the associated
activity for the period.
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38. The difference between actual overhead and applied overhead is called a (n) _________________.
39. If actual overhead is greater than applied overhead, then the variance is called ___________________.
40. A _____________________ is a single overhead rate calculated by using all estimated overhead for a factory divided
by the estimated activity level across the entire factory.
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41. The _____________________ is subsidiary to the work-in-process account and is the primary document for
accumulating all costs related to a particular job.
42. A __________________________ is used by the cost accounting department to enter the cost of direct materials onto
the correct job-order cost sheet.