Chapter 17 – Costing Systems- Job Order Costing
TRUE/FALSE
1. The types of computations for costs to be transferred out of Work in Process Inventory differ if the
production process involves multiple departments rather than a single department.
2. Unlike a job order costing system, a process costing system is not restricted to one Work in Process
Inventory account.
3. Unique products are produced in a continuous flow production process.
4. Job order costing is used by companies that make large or unique products.
5. In a job order costing system, product costs are traced to work cells.
6. The typical product costing system in a factory incorporates parts of both job order costing and process
costing to create a hybrid system.
7. The production process determines the product costing system needed.
8. Few actual production processes fit the definitions of job order costing or process costing exactly.
9. A basic part of a job order costing system is the set of procedures and entries used to record the costs
incurred for materials, labor, and overhead.
10. In a job order costing system, at the end of the accounting period, the balance in the subsidiary ledger
for unfinished jobs should equal the ending balance in the Work in Process Inventory account.
11. In a job order costing system, the Factory Payroll account is a clearing account.
12. Costs for individual jobs are maintained on job order cost cards when job order costing is in use.
13. Job order cost cards for incomplete jobs make up the subsidiary ledger for the Finished Goods
Inventory account.
14. When a job has been completed, all of the costs assigned to that job order are moved to the Finished
Goods Inventory account.
15. In a job order costing system, when overhead costs are applied, they increase the Work in Process
Inventory account.
16. In a job order costing system, indirect labor costs incurred are charged to the Work in Process
Inventory account.
17. In a job order costing system, the transfer of overhead costs to the Work in Process Inventory account
must take place before product unit costs can be computed.
18. In a job order costing system, when supplies are issued from inventory to production, the Overhead
account is increased.
19. In a job order costing system, indirect labor costs are transferred to the Overhead account by
increasing the Factory Payroll account and decreasing the Overhead account.
20. In a job order costing system, when the goods are sold, the Cost of Goods Sold account is increased,
and the Finished Goods Inventory account is decreased for the selling price of the goods sold.
21. The ending balance in the Work in Process Inventory account is supported by individual Overhead
account balances.
22. A zero balance in Finished Goods Inventory at the start of the period means all previously completed
products have been shipped.
23. To prepare financial statements at the end of the accounting period, the actual overhead cost for the
period and the estimated overhead that was applied during the period must be reconciled in a job order
costing system.
24. If applied overhead exceeds actual overhead, cost of goods sold must be reduced by the amount of the
overcharge in a job order costing system.
25. After a job is completed, the product unit cost can be determined from the job order cost card.
26. Job costs in a service organization end up in the Finished Goods Inventory account when a job is
completed.
27. In cost-plus contracts, the “plus” is the sales price.
28. In a service organization using a job order costing system, actual overhead will be the same as applied
overhead.
29. A job order cost card is a type of subsidiary ledger.
30. In a job order costing system, a separate job order cost card is used for each individual job.
31. Regardless of the cost accounting system used, when the products are completed, they are transferred
from work in process inventory to finished goods inventory.
32. The flow of costs into a Work in Process Inventory account is very similar for job order and process
costing systems.
MULTIPLE CHOICE
1. The type of product costing system used by a company is dictated by the
a.
project manager.
b.
production process.
c.
company president.
d.
plant supervisor.
2. Product costs appear on the income statement in the form of
a.
cost of goods sold.
b.
materials inventory.
c.
sales commissions.
d.
none of these.
3. Accounting for the incurrence of __________ does not change significantly between job order costing
and process costing.
a.
selling expenses
b.
direct materials and conversion costs
c.
direct materials costs
d.
conversion costs
4. Which of the following is not an objective of product costing systems?
a.
To provide information for cost planning
b.
To assist in the preparation of the income statement
c.
To determine the optimal amount of products to manufacture
d.
To provide information for product pricing
5. Which of the following is not a characteristic of a job order costing system?
a.
Uses only one Work in Process Inventory account
b.
Uses job cost cards to keep track of each job in process
c.
Assigns costs to specific batches of products
d.
Measures costs for a set time period
6. Which of the following products probably would be manufactured using a job order costing system?
a.
Paper
b.
Baseball
c.
Computer monitors
d.
Company business cards
7. Which of the following accurately describes a difference between job order and process costing
systems?
a.
In job order costing systems, overhead costs are treated as product costs, whereas in
process costing systems, overhead costs are treated as period costs.
b.
Job order costing systems do not need to assign costs to production, whereas process
costing systems do.
c.
In job order costing systems, costs are traced to products, whereas in process costing
systems, costs are traced to processes, departments and work cells.
d.
Since costs are assigned to products in a job order costing system, selling costs are treated
as product costs in the job order costing system, whereas they are treated as period costs in
process costing systems.
8. When the amount of overhead applied differs from actual, the dollar amount it is usually written off to
a.
Cost of Goods Sold.
b.
Work in Process Inventory.
c.
Finished Goods Inventory.
d.
Miscellaneous Expense.
9. If the applied overhead is more than actual overhead, which of the following is part of the entry?
a.
A credit to the Overhead account
b.
A debit to the Overhead account
c.
A debit to the Cost of Goods Sold account
d.
A debit to the Work in Process Inventory account
10. Applied overhead exceeds actual overhead when the
a.
Overhead account has a credit balance.
b.
journal entry to account for the difference involves a debit to Cost of Goods Sold.
c.
Overhead account has a debit balance.
d.
company has overspent in the overhead cost area.
11. If there is a credit balance in the Factory Payroll Payable at the end of the accounting period, it
represents
a.
the amount by which applied payroll was greater than actual payroll.
b.
the amount by which actual payroll was greater than applied payroll.
c.
labor costs which have not yet been distributed.
d.
an amount that should be charged to Cost of Goods Sold.
12. When Dimock Construction’s Designer House #10 is completed, Dimock’s
a.
work in process is increased.
b.
total assets are increased.
c.
work in process is decreased.
d.
total assets are decreased.
13. The total of the dollar amounts on the job order cost cards that have not been completed would be
equal to the
a.
cost of goods completed.
b.
balance in the Finished Goods Inventory account.
c.
Cost of Goods Sold account.
d.
balance in the Work in Process Inventory account.
14. Costs assigned to the building of a house should appear on the income statement when
a.
the house is completed.
b.
the house is sold.
c.
the purchase order to manufacture the house is received.
d.
cash is collected for the sale of the house.
15. The basic document for keeping track of costs in a job order costing system is a
a.
job order cost card.
b.
labor time card.
c.
process cost report.
d.
materials requisition form.
16. Under a job order costing system, the dollar amount of the entry involved in the transfer of goods from
work in process to finished goods is the total of the costs charged to all jobs
a.
started during the period.
b.
completed and sold during the period.
c.
completed during the period.
d.
started and completed during the period.
17. In a job order costing system, the subsidiary ledger for the Work in Process Inventory account consists
of
a.
time cards.
b.
conversion cost cards.
c.
job order cost cards.
d.
product cost cards.
18. When direct materials are issued from inventory to production under a job order costing system, an
increase is recorded in
a.
Overhead.
b.
Work in Process Inventory.
c.
Materials Inventory.
d.
Finished Goods Inventory.
19. The following information is available at the end of May:
Balance in work in process on May 1
$141,800
Direct materials costs for May
174,500
Direct labor costs for May
162,500
Overhead applied at rate of 140% of direct labor dollars
Jobs completed during May:
Job 84
$198,780
Job 85
102,520
Job 86
119,450
Job 87
93,150
Job 88 was not complete at the end of May.
If $72,400 of materials were charged to Job 88’s job cost card, how much overhead was applied to Job
88?
a.
$35,100
b.
$70,000
c.
$72,400
d.
$120,000
20. The balance in the Work in Process Inventory account on April 1 was $26,800, and the balance on
April 30 was $22,600. Costs incurred during the month were as follows: direct materials, $41,250;
direct labor, $21,300; and overhead, $32,600. What amount was transferred to the Finished Goods
Inventory account for April?
a.
$99,350
b.
$4,200
c.
$90,350
d.
$121,950
21. Unit costs for each job are computed by dividing
a.
estimated total costs by planned units to be produced.
b.
actual costs by actual units sold.
c.
cost of direct materials, direct labor, and overhead by number of units produced.
d.
estimated total costs by actual units produced.
22. The _________ provide(s) the most direct means of calculating unit costs for a job.
a.
job order cost card
b.
Finished Goods Inventory account
c.
general ledger
d.
Overhead and Work in Process Inventory accounts
23. The following information is available at the end of the period for the completed Job 713:
Beginning balance
$21,500.00
Direct materials
30,600
Direct labor
24,500
Overhead applied
41,700
Adjustment—overapplied overhead
1,600
Total number of units produced
30,000
Total number of units sold
28,500
What is the unit cost for Job 713?
a.
$3.94
b.
$3.89
c.
$4.00
d.
$4.09
24. The balance in the Work in Process account equals the
a.
balance in the Finished Goods Inventory account.
b.
balance in the Cost of Goods Sold account.
c.
balances on the job cost sheets of uncompleted jobs.
d.
balance in the Overhead account.
25. Actual overhead during the year was more than applied overhead, the journal entry to close the
Overhead account for the difference?
a.
Overhead XX
Cost of Goods Sold XX
b.
Cost of Goods Sold XX
Overhead XX
c.
Overhead XX
Finished Goods Inventory XX
d.
Cost of Goods Sold XX
Finished Goods Inventory XX
26. Which one of the following entries includes the initial application of indirect labor to production?
a.
Work in Process Inventory XX
Overhead XX
b.
Overhead XX
Work in Process Inventory XX
c.
Overhead XX
Factory Payroll XX
d.
Factory Payroll XX
Overhead XX
27. In a job order costing system, the purchase of materials on account should be recorded as follows:
a.
Materials Inventory XX
Work in Process Inventory XX
b.
Materials Inventory XX
Accounts Payable XX
c.
Work in Process Inventory XX
Accounts Payable XX
d.
Accounts Payable XX
Materials Inventory XX
28. Service organizations incur little or no cost for
a.
applied overhead.
b.
actual overhead.
c.
materials.
d.
labor.
29. The following partially completed T accounts summarize the transactions of Carlton Company for last
year:
Materials Inventory
Beg Bal
5,000
20,000
(2)
(1)
17,000
Work in Process Inventory
Beg Bal
9,000
63,600
(7)
(2)
13,000
(4)
16,000
(6)
29,000
Overhead
(2)
7,000
29,000
(6)
(3)
14,000
(4)
6,000
(5)
3,000
Cost of Goods Sold
Accounts Payable
17,000
(1)
3,000
(5)
Finished Goods Inventory
Beg Bal
16,000
(7)
63,600
End Bal
13,000
Payroll Payable
5,000
Beg Bal
31,000
(4)
Office Salaries Expense
(4)
9,000
Accumulated Depreciation (Factory)
80,000
Beg Bal
14,000
(3)
At the end of the year, the company closes out the balance in the Overhead account to Cost of Goods
Sold.
The indirect labor cost is
a.
$6,000.
b.
$13,000.
c.
$16,000.
d.
$31,000.
30. The following partially completed T accounts summarize the transactions of Carlton Company for last
year:
Materials Inventory
Beg Bal
5,000
20,000
(2)
(1)
17,000
Work in Process Inventory
Beg Bal
9,000
63,600
(7)
(2)
13,000
(4)
16,000
(6)
29,000
Overhead
(2)
7,000
29,000
(6)
(3)
14,000
(4)
6,000
(5)
3,000
Cost of Goods Sold
Accounts Payable
17,000
(1)
3,000
(5)
Finished Goods Inventory
Beg Bal
16,000
(7)
63,600
End Bal
13,000
Payroll Payable
5,000
Beg Bal
31,000
(4)
Office Salaries Expense
(4)
9,000
Accumulated Depreciation (Factory)
80,000
Beg Bal
14,000
(3)
At the end of the year, the company closes out the balance in the Overhead account to Cost of Goods
Sold.
The cost of goods manufactured is
a.
$59,600.
b.
$61,600.
c.
$62,600.
d.
$63,600.
31. The following partially completed T accounts summarize the transactions of Carlton Company for last
year:
Materials Inventory
Beg Bal
5,000
20,000
(2)
(1)
17,000
Work in Process Inventory
Beg Bal
9,000
63,600
(7)
(2)
13,000
(4)
16,000
(6)
29,000
Overhead
(2)
7,000
29,000
(6)
(3)
14,000
(4)
6,000
(5)
3,000
Cost of Goods Sold
Accounts Payable
17,000
(1)
3,000
(5)
Finished Goods Inventory
Beg Bal
16,000
(7)
63,600
End Bal
13,000
Payroll Payable
5,000
Beg Bal
31,000
(4)
Office Salaries Expense
(4)
9,000
Accumulated Depreciation (Factory)
80,000
Beg Bal
14,000
(3)
At the end of the year, the company closes out the balance in the Overhead account to Cost of Goods
Sold.
The cost of goods sold (after adjusting for under- or overapplied overhead) is
a.
$64,600.
b.
$65,600.
c.
$66,600.
d.
67,600
32. The following partially completed T accounts summarize the transactions of Carlton Company for last
year:
Materials Inventory
Beg Bal
5,000
20,000
(2)
(1)
17,000
Work in Process Inventory
Beg Bal
9,000
63,600
(7)
(2)
13,000
(4)
16,000
(6)
29,000
Overhead
(2)
7,000
29,000
(6)
(3)
14,000
(4)
6,000
(5)
3,000
Cost of Goods Sold
Accounts Payable