Chapter 4—Job-Order Costing Key
1. Manufacturing and service firms producing unique products or services require process-costing accounting
systems.
2. The difference between actual overhead and applied overhead is the overhead variance.
3. If actual overhead is greater than applied overhead, the variance is called overapplied overhead.
4. Costs reported on the financial statements must be estimated costs.
5. If the overhead variance is immaterial, it is allocated among the ending balances of Work in Process,
Finished Goods, and Cost of Goods Sold.
6. Departmental overheads can be added together to get plantwide overhead.
7. A job-order cost sheet is the source document where direct labor costs are assigned to individual jobs.
8. The raw materials account is an inventory account located on the income statement.
9. 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.
10. In a process costing environment, unit costs are computed by dividing the process costs for the given period
by the output of the period.
11. Production costs consist only of direct materials and direct labor.
12. In an actual cost system, actual direct materials, actual direct labor and estimated overhead are used to
determine unit cost.
13. Using a time ticket, the cost accounting department can enter the cost of direct materials onto the correct
job-order cost sheet.
14. The work-in-process account consists of all the job-order costs sheets for the unfinished jobs.
15. There are other source documents besides the time ticket and the material requisition form used to fill out
the job-order cost sheet.
16. The three manufacturing cost elements are direct materials, direct labor, and overhead.
17. The use of normal costing means that actual overhead costs are not assigned directly to jobs.
18. The use of a departmental rate has the advantage of being simple and reduces data collection requirements.
19. Actual overhead is reconciled with applied overhead at the end of the period.
20. Actual overhead is used to arrive at the cost of goods manufactured.
21. The cost of goods sold appearing on the income statement as an expense is the normal cost of goods sold.
22. When materials are put into production, they are taken from the Raw Materials account and put into the
Finished Goods Account.
23. Overhead costs are assigned to Work-in-Process using a predetermined rate.
24. Actual overhead costs are accumulated in the overhead control account.
25. The cost of completed units is always debited to Work-in-Process and credited to Finished Goods.
26. The journal entry for $17,000 materials purchased on account is:
Raw Materials ………………….
17,000
Accounts Payable ……
17,000
27. In job-order costing, the journal entry for $7,200 raw materials requisitioned for use in production is:
Raw Materials ………………….
7,200
Work in Process ……
7,200
28. In job-order costing, the journal entry for $1,700 of unpaid direct labor is:
Work in Process ………………….
1,700
Wages Payable ……
1,700
29. 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
30. 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
31. The journal entry for $17 of underapplied overhead is:
Cost of Goods Sold……………..
17
Applied Overhead……
17
32. Which of the following is not a characteristic of job-order costing?
33. How are unit costs calculated?
34. Production costs do not include:
35. Which of the following are easy to trace to individual jobs?
36. Which of the following is the assignment process used with normal costing?
37. Which method of measuring costs associated with production is more widely used in practice?
38. Which type of cost poses the most problems in using an actual cost system?
39. Which of the following statements is true about overhead?
40. The document that lists the total cost for a single job is a
41. What items may be on a materials requisition form to maintain proper control over a firm’s inventory of
direct materials?
42. Time tickets are filled out for
43. Which of the following can serve as a subsidiary for the finished goods inventory?
44. Which of the following statements is true?
45. Labor cost flows reflect:
46. Using normal costing requires that
47. Using normal costing, which costs never enter the Work-in-Process account?
48. Using normal costing, which of the following is false about actual overhead?
49. When a job is completed but not sold, the accounts affected are:
50. A schedule that is used to ensure accuracy in computing product costs is (are)
51. Which account can sometimes be skipped when a good is produced for a particular customer?
52. When the Work-in-Process account is debited for direct labor, what account is usually credited?
53. When overhead is debited to Overhead Control, what is the credit?
54. Firms in the ____ business are most likely to use a process-costing system.
55. The predetermined overhead rate is calculated by:
56. The overhead variance is least likely to be
57. The unit cost of a job consists of the total costs of
58. Which of the following is true about the job-order cost sheet?
59. Which of the following is not on a time ticket?
60. Which form asks for type, quantity, unit price of direct materials issued, and for the number of the job?
61. A source document that would not be used to help decide the cost of a job is (are)
62. The order that cost elements flow through accounts until they are recognized as an expense is
63. Which of the following is not a manufacturing cost element?
64. Which of the following sentences is not true?
65. Which of the following is true?
66. Costs associated with selling and general administrative activities are not
67. Which of the following is not true about job-order costing?
68. Which of the following accounts is debited when goods are sold?
69. What account is credited when goods are sold?
70. What type of event would cause two separate journal entries to be made?
71. When purchasing raw materials on account, what type of accounts would increase?
72. When a job costing $5,000 is completed, the following journal entry is made:
73. Figure 4-1.
Jones Company applies overhead based on direct labor hours. At the beginning of the year, Jones estimates
Overhead to be $480,000, Machine Hours to be 120,000, and Direct Labor to be 80,000. During January, Jones
has 6,700 direct labor hours and 11,000 machine hours.
Refer to Figure 4-1
What is the predetermined overhead rate?
74. Figure 4-1.
Jones Company applies overhead based on direct labor hours. At the beginning of the year, Jones estimates
Overhead to be $480,000, Machine Hours to be 120,000, and Direct Labor to be 80,000. During January, Jones
has 6,700 direct labor hours and 11,000 machine hours.
Refer to Figure 4-1. What is the amount of overhead applied for January?
75. Figure 4-1.
Jones Company applies overhead based on direct labor hours. At the beginning of the year, Jones estimates
Overhead to be $480,000, Machine Hours to be 120,000, and Direct Labor to be 80,000. During January, Jones
has 6,700 direct labor hours and 11,000 machine hours.
Refer to Figure 4-1. If the actual overhead for January is $41,000, what is the overhead variance and is it
overapplied or underapplied?
76. 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?
77. 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.
78. Figure 4-2.
At the beginning of the year, Lola, Inc. estimated that overhead would be $540,000 and direct labor hours
would be 180,000. At the end of the year, actual overhead was $616,000 and there were actually 205,200 direct
labor hours.
Refer to Figure 4-2. What is the overhead variance?
79. Figure 4-2.
At the beginning of the year, Lola, Inc. estimated that overhead would be $540,000 and direct labor hours
would be 180,000. At the end of the year, actual overhead was $616,000 and there were actually 205,200 direct
labor hours.
Refer to Figure 4-2. What is the predetermined overhead rate?
80. At the beginning of the year, Fluman Corporation estimates overhead will be $150,000. If the actual
overhead for the year is $152,000 and the applied overhead for the year is $143,000, what is the journal entry
needed to reconcile the overhead variance? Assume that the overhead variance is immaterial.
81. Sanders Manufacturing has the following amounts listed before reconciling the overhead variance.
Estimated overhead
Applied overhead
Actual overhead
Cost of goods sold
Assuming that any overhead variance is immaterial, calculate the adjusted Cost of Goods Sold after adjusting for the overhead variance.
82. Figure 4-3.
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 4-3. 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?
83. Figure 4-3.
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 4-3. Using Departmental overhead rates, which of the following is correct?
84. Figure 4-3.
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 4-3. Mitchell decides to continue using departmental overhead rates. What are the predetermined rates for the Assembly and Testing
departments respectively?
85. Figure 4-3.
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 4-3. 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?
86. 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?
87. Kratzer Company designs and builds fire trucks. During May it had applied overhead of $105,000.
Overhead is applied at the rate of 70% of direct labor cost. Direct labor wages average $10 per hour.
How many direct labor hours did Kratzer company have for the month of May?
88. Bryant Company designs and builds fancy dining room tables for individual customers. On July 1, there
were two jobs in process: Job 391 with a beginning balance of $21,700 and Job 392 with a beginning balance of
$8,790. Overhead costs are applied by using a rate of 70% of direct labor costs. Both jobs are unfinished on July
31. Data on July costs for both jobs are as follows:
Job 391
Job 392
Direct Materials
$5,100
$ 9,200
Direct Labor Cost
2,700
11,000
What is the total of the Work-in-Process Account at July 31?
89. Ending Work-in–Process for Lee’s Carpentry was $64,000 for January. Direct labor and direct materials
together for the month were $39,000. Direct labor was twice as much as direct materials. The overhead rate is
70% of direct labor. No jobs were finished during the month. What was beginning Work-in-Process?
90. Wright’s Construction builds custom houses for individual buyers. On June 1, it had one job started with a
beginning Work-in-Process of $56,000. During June the job was finished and sold. Direct labor for the job in
June was $75,000 and direct materials used were $57,000. Overhead is computed at a rate of 65% of direct
labor. There is a markup of 35% on all sales. What was the selling price of the house?
91. Figure 4-4.
Tiger Company uses job-order costing. At the end of the month, the following data was gathered:
Job #
Total Cost
Complete?
Sold?
429
$409
no
no
430
$513
yes
no
431
$115
no
no
432
$790
yes
yes
433
$650
yes
no
434
$540
no
no
435
$ 90
no
no
436
$970
yes
yes
437
$179
no
no
438
$400
no
no
Tiger’s selling price is cost plus 50% for each of its houses.
Refer to Figure 4-4. What is the total in the Work-in-Process account?
92. Figure 4-4.
Tiger Company uses job-order costing. At the end of the month, the following data was gathered:
Job #
Total Cost
Complete?
Sold?
429
$409
no
no
430
$513
yes
no
431
$115
no
no
432
$790
yes
yes
433
$650
yes
no
434
$540
no
no
435
$ 90
no
no
436
$970
yes
yes
437
$179
no
no
438
$400
no
no
Tiger’s selling price is cost plus 50% for each of its houses.
Refer to Figure 4-4. What is the total in Finished Goods?
93. Figure 4-4.
Tiger Company uses job-order costing. At the end of the month, the following data was gathered:
Job #
Total Cost
Complete?
Sold?
429
$409
no
no
430
$513
yes
no
431
$115
no
no
432
$790
yes
yes
433
$650
yes
no
434
$540
no
no
435
$ 90
no
no
436
$970
yes
yes
437
$179
no
no
438
$400
no
no
Tiger’s selling price is cost plus 50% for each of its houses.
Refer to Figure 4-4. What is Cost of Goods Sold for the month?