Chapter 17—Job Order Costing Key
1. Cost accounting systems are used to supply cost data information on costs incurred by a manufacturing
process or department.
2. A manufacturer may employ a job order cost system for some of its products and a process cost system for
others.
3. A job order cost accounting system provides for a separate record of the cost of each particular quantity of
product that passes through the factory.
4. A process cost accounting system provides for a separate record of the cost of each particular quantity of
product that passes through the factory.
5. A process cost accounting system accumulates costs for each of the departments or processes within the
factory.
6. A process cost accounting system is best used by manufacturers of like units of product that are not
distinguishable from each other during a continuous production process.
7. The process cost system is appropriate where few products are manufactured and each product is made to
customers’ specifications.
8. A job order cost system would be appropriate for a crude oil refining business.
9. A law firm would use a job order cost system to accumulate all of the costs associated with a particular client
engagement, such as lawyer time, copying charges, filing fees, and overhead.
10. The job order costing system is not used by service organizations.
11. The job order costing system is used by service firms to determine revenues, expenses, and ultimately
profit.
12. Perpetual inventory controlling accounts and subsidiary ledgers are maintained for materials, work in
process, and finished goods in cost accounting systems.
13. When the goods are sold, their costs are transferred from Work in Process to Finished Goods.
14. The materials requisition serves as the source document for debiting the accounts in the materials ledger.
15. Materials are transferred from the storeroom to the factory in response to materials requisitions.
16. The document that serves as the basis for recording direct labor on a job cost sheet is the time card.
17. The document that serves as the basis for recording direct labor on a job cost sheet is the time ticket.
18. Depreciation expense on factory equipment is part of factory overhead cost.
19. Factory overhead is applied to production using a predetermined overhead rate.
20. If factory overhead applied exceeds the actual costs, the factory overhead account will have a credit
balance.
21. If factory overhead applied exceeds the actual costs, overhead is said to be underapplied.
22. If the underapplied factory overhead amount is material, it is transferred to Cost of Goods Sold at the end of
the fiscal year.
23. If the underapplied factory overhead amount is immaterial, it is transferred to Cost of Goods Sold at the end
of the fiscal year.
24. Each account in the cost ledger in a job order system is called a job cost sheet.
25. In the job order system, the finished goods account is the controlling account for the factory overhead
ledger.
26. The inventory accounts generally maintained by a manufacturing firm are only finished goods and
materials.
27. Generally accepted accounting principles require companies to use only one factory overhead rate for
product costing.
28. Activity-based costing is a method of accumulating and allocating costs by department.
29. Interim financial statements for a manufacturing business would report overapplied factory overhead as a
deferred item on the balance sheet.
30. The debit to factory overhead for the cost of indirect materials is obtained from the summary of the
materials requisitions.
31. In a factory with several processing departments, a single factory overhead rate may not provide accurate
product costs and effective cost control.
32. Nonmanufacturing costs are generally classified into two categories: selling and administrative.
33. The current year’s advertising costs are normally considered period costs.
34. Direct labor cost is an example of a period cost.
35. A manufacturing business reports just two types of inventory on its balance sheet: work in process inventory
and finished goods inventory.
36. On the balance sheet for a manufacturing business, the cost of direct materials, direct labor, and factory
overhead, which have entered into the manufacturing process but are associated with products that have not
been finished, is reported as direct materials inventory.
37. As product costs are incurred in the manufacturing process, they are accounted for as assets and reported on
the balance sheet as inventory.
38. A receiving report is prepared when purchased materials are first received by the manufacturing
department.
39. Period costs are costs that are incurred for the production requirements of a certain period.
40. Job order cost systems can be used to compare unit costs of similar jobs to determine if costs are staying
within expected ranges.
41. Job cost sheets can provide information to managers on unit cost trends, the cost impact of continuous
improvement in the manufacturing process, the cost impact of materials changes, and the cost impact of direct
materials price or direct labor rate changes over time.
42. Job order cost accounting systems may be used to evaluate a company’s efficiency.
43. Information about costs developed through a job order cost system can not be used to evaluate an
organization’s cost performance.
44. A staff department or unit is one directly involved in the basic objective of the organization.
45. Job order cost accounting systems may be used for planning and controlling a service business.
46. Job order cost accounting systems can be used only for companies that manufacture a product.
47. The direct labor and overhead costs of providing services to clients are accumulated in a work–in-process
account.
48. In a job order cost accounting system for a service business, materials costs are normally included as part of
overhead.
49. A service organization will not use the job order costing method because it has no direct materials.
50. Using the job order cost system, service organizations are able to bill customers on a weekly or monthly
basis, even when the job has not been completed.
51. Match each of the following terms with the phrase that most closely describes it. Each answer may be used
only once.
Activity based
2. Typically used by companies whose products are
3. System that uses a different overhead rate for each
Overapplied
4. Applied overhead is more than actual overhead
Job order cost
Process cost
6. Applied overhead is less than actual overhead
Finished goods
7. Typically used by companies that make custom
Underapplied
52. Match each of the following terms with the phrase that most closely describes it. Each answer may be used
only once.
Cost of
Job cost
3. Serves as the basis for recording direct labor on a job cost
4. Service providers use this account similarly to the cost of
Receiving
5. Prepared when materials that have been ordered are
Material
53. Which of the following are the two main types of cost accounting systems for manufacturing operations?
54. Which of the following would most likely use a job order costing system?
55. Which of the following would be most likely to use process costing?
56. Which of the following systems provides for a separate record of the cost of each particular quantity of
product that passes through the factory?
57. For which of the following businesses would the job order cost system be appropriate?
58. For which of the following businesses would the process cost system be appropriate?
59. Which of the following is not a characteristic of a job order costing system?
60. Which of the following products probably would be manufactured using a job order costing system?
61. Job order costing and process costing are
62. Which of the following is not true about why a service firm will use the job order costing system?
63. Which of the following costs are NOT included in finished goods inventory?
64. Which of the following is the correct flow of manufacturing costs?
65. Which of the following would record the labor costs to an individual job?
66. The Thomlin Company forecasts that total overhead for the current year will be $15,000,000 and that total
machine hours will be 300,000 hours. Year to date, the actual overhead is $16,000,000 and the actual machine
hours are 330,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours
for applying overhead, what is that overhead rate?
67. The Thomlin Company forecasts that total overhead for the current year will be $15,000,000 and that total
machine hours will be 300,000 hours. Year to date, the actual overhead is $16,000,000 and the actual machine
hours are 330,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours
for applying overhead, as of this point in time (year to date) the overhead is over/under applied by
68. At the end of the year, overhead applied was $35,000,000. Actual overhead was $34,300,000. Closing
over/under applied overhead into cost of goods sold would cause net income to:
69. Which of the following would most likely be a period cost?
70. Which of the following would most likely be a product cost?
71. The document authorizing the issuance of materials from the storeroom is the:
72. The source of the data for debiting Work-in-Process for direct materials is the:
73. In a job order cost accounting system, the entry to record the flow of direct materials into production is:
74. A summary of the materials requisitions completed during a period serves as the basis for transferring the
cost of the materials from the controlling account in the general ledger to the controlling accounts for:
75. In a job order cost accounting system, when goods that have been ordered are received, the receiving
department personnel count, inspect the goods, and complete a:
76. The amount of time spent by each employee and the labor cost incurred for each individual job or for
factory overhead are recorded on:
77. The amount of time spent by an employee in the factory is usually recorded on:
78. The basis for recording direct and indirect labor costs incurred is a summary of the period’s:
79. The entry to record the flow of direct labor costs into production in a job order cost accounting system is:
80. At the end of July, the first month of the current fiscal year, the factory overhead account had a debit
balance. Which of the following describes the nature of this balance and how it would be reported on the
interim balance sheet?
81. At the end of the fiscal year, the balance in Factory Overhead is small. This balance would normally be:
82. The details concerning the costs incurred on each job order are accumulated in a work in process account,
which is supported by a:
83. Each account in the cost ledger is called a:
84. Selected accounts with some debits and credits omitted are presented as follows:
Balance
275,000
Aug. 31
Goods finished
1,030,000
Direct materials
X
Direct labor
450,000
Factory overhead
X
Costs incurred
145,000
Aug. 1
Balance
15,000
31
Applied
(30% of direct
labor cost)
X
If the balance of Work in Process at August 31 is $220,000, what was the amount debited to Work in Process for direct materials in August?
85. Selected accounts with some debits and credits omitted are presented as follows:
Balance
275,000
Aug. 31
Goods finished
1,030,000
Direct materials
X
Direct labor
450,000
Factory overhead
X
Costs incurred
145,000
Aug. 1
Balance
15,000
31
Applied
X
If the balance of Work in Process at August 31 is $220,000, what was the amount debited to Work in Process for factory overhead in August,
assuming a factory overhead rate of 30% of direct labor costs?
86. Selected accounts with some debits and credits omitted are presented as follows:
Balance
20,000
Oct. 31
Goods finished
X
Direct materials
96,700
Direct labor
201,000
Factory overhead
X
Balance
52,000
Goods finished
360,000
If the balance of Work in Process at October 31 is $21,000, what was the amount of factory overhead applied in October?
87. Selected accounts with a credit amount omitted are presented as follows:
Balance
7,000
Apr. 30
Goods finished
X
Direct materials
78,400
Direct labor
195,000
Factory overhead
136,500
Balance
42,000
Goods finished
387,000
What was the balance of Work in Process as of April 30?
88. If the amount of factory overhead cost incurred exceeds the amount applied, the factory overhead account
will have a:
89. The recording of the factory labor incurred for general factory use would include a debit to:
90. The recording of the application of factory overhead costs to jobs would include a credit to:
91. The recording of the jobs completed would include a debit to:
92. The recording of the jobs completed would include a credit to:
93. The recording of the jobs shipped and customers billed would include a debit to:
94. The recording of the jobs shipped and customers billed would include a credit to:
95. The finished goods account is the controlling account for the:
96. The controlling account for the cost ledger is:
97. Poobah Manufacturers Inc. has estimated total factory overhead costs of $95,000 and 10,000 direct labor
hours for the current fiscal year. If job number 117 incurred 2,300 direct labor hours, the work in process
account will be debited and factory overhead will be credited for:
98. A widely used activity base for developing factory overhead rates in highly automated settings is:
99. When job 711 was completed, direct materials totaled $4,000; direct labor, $5,600; and factory overhead,
$2,400 respectively. Units produced totaled 1,000. Unit costs are:
100. The entries to record cost and sale of a finished good on account is:
101. All of the following are examples of activity bases except:
102. Materials purchased on account during the month amounted to $180,000. Materials requisitioned and
placed in production totaled $165,000. From the following, select the entry to record the transaction on the day
the materials were bought.
103. Materials purchased on account during the month amounted to $180,000. Materials requisitioned and
placed in production totaled $165,000. From the following, select the entry to record the transaction on the day
the materials were requisitioned by the production department.
104. During the period, labor costs incurred on account amounted to $275,000 including $200,000 for
production orders and $75,000 for general factory use. In addition, factory overhead charged to production was
$32,000. From the following, select the entry to record the direct labor costs.
105. During the period, labor costs incurred on account amounted to $275,000 including $200,000 for
production orders and $75,000 for general factory use. In addition, factory overhead applied to production was
$32,000. From the following, select the entry to record the actual factory overhead costs incurred.
106. During the period, labor costs incurred on account amounted to $275,000 including $200,000 for
production orders and $75,000 for general factory use. In addition, factory overhead applied to production was
$32,000. From the following, select the entry to record the factory overhead applied to production.
107. The cost of production of completed and finished goods during the period amounted to $450,000, and the
finished products shipped to customers had total production costs of $357,000. From the following, select the
entry to record the transfer of costs from work in process to finished goods.
108. The cost of production of completed and finished goods during the period amounted to $450,000, and the
finished products shipped to customers had total production costs of $357,000. From the following, select the
entry to record the transfer of costs from finished goods to cost of goods sold.
109. Costs that are used in generating revenues during the current period, but are not involved in the
manufacturing process are often referred to as:
110. Costs that are treated as assets until the product is sold are called:
111. The period costs of a textbook publisher would include:
112. Which types of inventories does a manufacturing business report on the balance sheet?
113. For the manufacturing business, inventory which is in the process of being manufactured is referred to as:
114. The proper journal entry to record the purchase of $30,000 of raw materials on account would be:
115. Select the proper journal entry to record the movement of 1,700 units of part number 116B to work in
process when each unit of 116B has a value of $2.00.
116. Which of the following represents the factory overhead applied to a product?
117. Which of the following is the correct formula to calculate the predetermined factory overhead rate?