Chapter 16—Job-Order Costing Key
1. Manufacturing and service firms producing unique products or services require job-order accounting
systems.
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.
3. Production costs consist of direct materials, direct labor, and overhead.
4. The difference between actual overhead and applied overhead is called an overhead variance.
5. If actual overhead is greater than applied overhead, the variance is called underapplied overhead.
6. Costs reported on the financial statements must be estimated costs.
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.
8. Departmental overheads cannot be added together to get plantwide overhead.
9. In an actual cost system, actual direct materials, actual direct labor and estimated overhead are used to
determine unit cost.
10. A job-order cost sheet is the source document where direct labor costs are assigned to individual jobs.
11. Using a time ticket, the cost accounting department can enter the cost of direct materials onto the correct
job-order cost sheet.
12. The work-in-process account consists of all the job-order cost sheets for the completed jobs.
13. There are other source documents besides the time ticket and the material requisition form used to fill out
the job-order cost sheet.
14. The raw materials account is an inventory account located on the income statement.
15. The three manufacturing cost elements are direct materials, direct labor, and overhead.
16. The use of normal costing means that actual overhead costs are assigned directly to jobs.
17. The use of a departmental rate has the advantage of being simple and reduces data collection requirements.
18. Actual overhead is reconciled with applied overhead at the beginning of the period.
19. Actual overhead is used to arrive at the cost of goods manufactured.
20. The cost of goods sold appearing on the income statement as an expense is the normal cost of goods sold.
21. When materials are put into production, they are taken from the Raw Materials account and put into the
Work in Process account.
22. Overhead costs are assigned to Finished Goods using a predetermined rate.
23. Actual overhead costs are accumulated in the overhead control account.
24. The cost of completed units is always debited to Work-in-Process and credited to Finished Goods.
25. The journal entry for $17,000 materials purchased on account is:
Raw Materials
17,000
Accounts Payable
17,000
26. In job-order costing, the journal entry for $7,200 raw materials requisitioned for use in production is:
Work in Process
7,200
Raw Materials
7,200
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
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
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
30. The journal entry for $17 of underapplied overhead is:
Cost of Goods Sold
17
Applied Overhead
17
31. Match each item with the correct statement below.
1. An approach that assigns actual costs of direct
normal cost
2. A costing system in which costs are collected and
3. A costing system that accumulates production costs by
job-order costing
4. An approach that assigns the actual costs of direct
materials and direct labor to products but uses a
process-costing
32. Match each item with the correct statement below.
predetermined
underapplied
overapplied
plantwide overhead
departmental
33. A _______ is one distinct unit or set of units.
34. In a _______________________________ costs are accumulated by job.
35. __________________________ is a costing system that accumulates production costs by process or by
department for a given period of time.
36. Strict ______________________ are rarely used because they cannot provide accurate unit cost information
on a timely basis.
37. A(n) ___________________________ determines unit cost by adding actual direct materials, actual direct
labor, and estimated overhead.
38. The ___________________________ is calculated at the beginning of the year by dividing the total
estimated annual overhead by the total estimated level of cost driver.
39. _________________ is found by multiplying the predetermined overhead rate by the actual use of the
associated activity for the period.
40. The difference between actual overhead and applied overhead is called a (n) _________________.
41. If actual overhead is greater than applied overhead, then the variance is called ___________________.
42. 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.
43. The _____________________ is subsidiary to the work-in-process account and is the primary document for
accumulating all costs related to a particular job.
44. A __________________________ is used by the cost accounting department to enter the cost of direct
materials onto the correct job-order cost sheet.
45. A source document by which direct labor costs are assigned to individual jobs is known as a
_______________.
46. The cost of goods sold before an adjustment for an overhead variance is called ____________________.
47. _________________________ is the amount that appears as an expense on the income statement after the
adjustment for the period’s overhead variance is recorded.
48. When materials are requested for production the cost is removed from ____________ and added to
____________.
49. Applied overhead costs are charged to ________________.
50. When units are sold, their total cost is debited to _______________ and credited to ____________.
51. ________________________ are directly responsible for creating the products or services sold to
customers.
52. The ____________________ of allocation recognizes all interactions among support departments.
53. Which of the following is not a characteristic of job-order costing?
54. How are unit costs calculated?
55. Production costs do not include:
56. Which of the following are easy to trace to individual jobs?
57. Firms in the ____ business are most likely to use a process-costing system.
58. Which of the following is the assignment process used with normal costing?
59. Which method of measuring costs associated with production is more widely used in practice?
60. Which type of cost poses the most problems in using an actual cost system?
61. Which of the following statements is true about overhead?
62. Figure 5-1.
Morrow Company applies overhead based on direct labor hours. At the beginning of the year, Morrow estimates
overhead to be $620,000, machine hours to be 180,000, and direct labor hours to be 40,000. During February,
Morrow has 4,200 direct labor hours and 8,000 machine hours.
Refer to Figure 5-1. What is the predetermined overhead rate?
63. Figure 5-1.
Morrow Company applies overhead based on direct labor hours. At the beginning of the year, Morrow estimates
overhead to be $620,000, machine hours to be 180,000, and direct labor hours to be 40,000. During February,
Morrow has 4,200 direct labor hours and 8,000 machine hours.
Refer to Figure 5-1. What is the amount of overhead applied for February?
64. Figure 5-1.
Morrow Company applies overhead based on direct labor hours. At the beginning of the year, Morrow estimates
overhead to be $620,000, machine hours to be 180,000, and direct labor hours to be 40,000. During February,
Morrow has 4,200 direct labor hours and 8,000 machine hours.
Refer to Figure 5-1. If the actual overhead for February is $64,700, what is the overhead variance and is it
overapplied or underapplied?
65. Figure 5-2.
At the beginning of the year, Kyla Inc. estimated that overhead would be $880,000 and direct labor hours would
be 220,000. At the end of the year, actual overhead was $920,600 and there were actually 230,000 direct labor
hours.
Refer to Figure 5-2. What is the overhead variance?
66. Figure 5-2.
At the beginning of the year, Kyla Inc. estimated that overhead would be $880,000 and direct labor hours would
be 220,000. At the end of the year, actual overhead was $920,600 and there were actually 230,000 direct labor
hours.
Refer to Figure 5-2. What is the predetermined overhead rate?
67. Figure 5-3.
Mitchell’s Softball Gloves Company estimated the following at the beginning of the year:
Assembly Department
Testing Department
Total
Overhead
$570,000
$130,000
$700,000
Direct Labor Hours
142,500
32,500
175,000
Machine Hours
32,000
65,000
97,000
Mitchell uses departmental overhead rates. In the assembly department, direct labor hours are used to apply overhead. Machine hours are used to
apply overhead in the testing department.
Actual data for August is as follows:
Assembly Department
Testing Department
Total
Overhead
$42,000
$12,000
$54,000
Direct Labor Hours
13,500
2,430
15,930
Machine Hours
4,020
11,000
15,020
Refer to Figure 5-3. If Mitchell uses a plantwide overhead rate based on direct labor hours, instead of departmental rates, what is the predetermined
overhead rate rounded to the nearest cent?
68. Figure 5-3.
Mitchell’s Softball Gloves Company estimated the following at the beginning of the year:
Assembly Department
Testing Department
Total
Overhead
$570,000
$130,000
$700,000
Direct Labor Hours
142,500
32,500
175,000
Machine Hours
32,000
65,000
97,000
Mitchell uses departmental overhead rates. In the assembly department, direct labor hours are used to apply overhead. Machine hours are used to
apply overhead in the testing department.
Actual data for August is as follows:
Assembly Department
Testing Department
Total
Overhead
$42,000
$12,000
$54,000
Direct Labor Hours
13,500
2,430
15,930
Machine Hours
4,020
11,000
15,020
Refer to Figure 5-3. Using departmental overhead rates, which of the following is correct?
69. Figure 5-3.
Mitchell’s Softball Gloves Company estimated the following at the beginning of the year:
Assembly Department
Testing Department
Total
Overhead
$570,000
$130,000
$700,000
Direct Labor Hours
142,500
32,500
175,000
Machine Hours
32,000
65,000
97,000
Mitchell uses departmental overhead rates. In the assembly department, direct labor hours are used to apply overhead. Machine hours are used to
apply overhead in the testing department.
Actual data for August is as follows:
Assembly Department
Testing Department
Total
Overhead
$42,000
$12,000
$54,000
Direct Labor Hours
13,500
2,430
15,930
Machine Hours
4,020
11,000
15,020
Refer to Figure 5-3. Mitchell decides to continue using departmental overhead rates. What are the predetermined rates for the Assembly and Testing
departments respectively?
70. Figure 5-3.
Mitchell’s Softball Gloves Company estimated the following at the beginning of the year:
Assembly Department
Testing Department
Total
Overhead
$570,000
$130,000
$700,000
Direct Labor Hours
142,500
32,500
175,000
Machine Hours
32,000
65,000
97,000
Mitchell uses departmental overhead rates. In the assembly department, direct labor hours are used to apply overhead. Machine hours are used to
apply overhead in the testing department.
Actual data for August is as follows:
Assembly Department
Testing Department
Total
Overhead
$42,000
$12,000
$54,000
Direct Labor Hours
13,500
2,430
15,930
Machine Hours
4,020
11,000
15,020
Refer to Figure 5-3. Mitchell decides to continue using departmental overhead rates. If a job spends 4 hours in assembly and 3 hours in testing, what
is the amount of overhead charged to the job?
71. The predetermined overhead rate is calculated by:
72. The overhead variance is least likely to be
73. The unit cost of a job consists of the total costs of
74. Smith has applied overhead of $73,000 and actual overhead of $87,600 for the month of November. It
applies overhead based on direct labor hours and those equaled 14,600 in November. Overhead for the year was
estimated to be $900,000. How many direct labor hours were estimated for the year?
75. At the beginning of the year, Wilson Company estimated the following:
Overhead
$360,000
Direct labor hours
60,000
Wilson used normal costing and applies overhead on the basis of direct labor hours. For the month of September, direct labor hours equaled 9,350
and actual overhead equaled $46,750.
Calculate the overhead applied to production in September.
76. On February 1, Job 12 had a beginning balance of $200. During February, direct materials of $500 and
direct labor of $200 were added to the job. Overhead is applied to production at a rate of 55% of direct labor.
There are 5 units in Job 12.
What is the unit cost?
77. Manufacturing overhead
78. The predetermined overhead rate is usually calculated
79. A normal job-order costing system is a system that uses:
80. The Kraig Corporation manufactures custom-made purses. The following data pertains to Job XY5:
Direct materials placed into production
$4,000
Direct labor hours worked
50 hours
Direct labor rate per hour
$ 15
Machine hours worked
100 hours
Plantwide overhead is applied using a plant-wide rate based on direct labor hours. Plantwide overhead was budgeted at $60,000 for the year and the
direct labor hours were estimated to be 15,000. Job XY5 consists of 50 units. What is overhead cost assigned to Job XY5?
81. Carlson Company uses a predetermined rate to apply overhead. At the beginning of the year, Carlson
estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000. Actual
overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were
11,000.
If the predetermined overhead rate is based on machine hours, what is the total amount credited to the plantwide
overhead account for the year for Carlson?
82. The document that lists the total cost for a single job is a
83. Which of the following is true about the job-order cost sheet?
84. Which of the following is not on a time ticket?
85. Which form asks for type, quantity, unit price of direct materials issued, and for the number of the job?
86. A source document that would not be used to help decide the cost of a job is (are)
87. Which of the following costs is not included on a job-order cost sheet?
88. What items may be on a materials requisition form to maintain proper control over a firm’s inventory of
direct materials?
89. Time tickets are filled out for
90. Which of the following is not true about job-order costing?
91. Which of the following can serve as a subsidiary ledger for the finished goods inventory?
92. Which of the following statements is true?
93. Labor cost flows reflect
94. Sanders Manufacturing has the following amounts listed before reconciling the overhead variance.
Estimated overhead
$760,000
Applied overhead
756,000
Actual overhead
740,000
Cost of goods sold
935,000
Assuming that any overhead variance is immaterial, calculate the adjusted Cost of Goods Sold after adjusting for the overhead variance.
95. Using normal costing requires that
96. Using normal costing, which costs never enter the work-in-process account?
97. Using normal costing, which of the following is false about actual overhead?
98. When a job is completed but not sold, the accounts affected are
99. A schedule that is used to ensure accuracy in computing product costs is (are)
100. Which account can sometimes be skipped when a good is produced for a particular customer?
101. The order that cost elements flow through accounts until they are recognized as an expense is
102. Which of the following is not a manufacturing cost element?
103. Which of the following sentences is not true?
104. Which of the following is true?
105. Costs associated with selling and general administrative activities are not