Chapter 5—Product and Service Costing: Job-Order System Key
1. A production process may yield a tangible product or a service and their unique characteristics determine the
best approach for developing a cost management system.
2. Manufacturing firms produce intangible products that cannot be inventoried.
3. Service firms produce intangible products that are not separable from the customer.
4. Heterogeneity means that services cannot be inventoried and must be consumed when performed.
5. Inseparability means that production and consumption are inseparable for services.
6. The uniqueness of the products or units for cost accounting purposes relates to their common costs.
7. Cost accumulation is the determination of the dollar amounts of direct materials, direct labor and overhead
costs, and cost measurement is the recognition and recording of costs.
8. cost assignment is the assignment of costs to products or services once the costs have been accumulated and
measured.
9. Unit cost is a critical piece of information for a manufacturing business as well as a service company.
10. Activity level is the average activity usage over the long term and normal activity level is the production
level for one year.
11. Companies operating in job-order industries produce a wide variety of products or jobs that are quite
different from each other.
12. The job-order cost sheet accumulates the cost of all the jobs produced.
13. The collection of all job-order cost sheets defines a work-in-process inventory file.
14. The source document known as a time ticket assigns the direct overhead to each particular job.
15. A job-order costing process would be applicable for to airplane manufacturer.
16. Cost flow follows costs from the point they are incurred to the point they are recognized as an expense on
the income statement.
17. When materials are purchased, the costs of the materials “flows” into the materials inventory account.
18. In a job-order costing system, direct labor costs assigned to a job are different than the costs assigned to
work-in-process inventory.
19. In a job-order costing system, actual overhead costs never enter the work-in-process inventory accounts
20. The costs of a completed job are transferred from the work-in-process inventory account to the finished
goods inventory account.
21. A debit balance in overhead control implies that actual overhead costs exceed overhead applied.
22. In job-order costing, departmental overhead rates and activity-based costing affect only the application of
overhead.
23. In an activity-based costing system activity cost is applied to each job by multiplying productivity rate by
the job’s use of the associated driver.
24. Costs of normal spoilage are included in overhead and applied to all good units produced.
25. Abnormal spoilage is charged to the job that caused it.
26. In __________ a single product is produced on a continuous basis.
27. A __________ service organization does not use raw material or tangible items for the customer.
28. __________ means that services cannot be inventoried but must be consumed when performed.
29. __________ is the recognition and recording of costs.
30. Determining the dollar amounts of direct materials, direct labor, and overhead used in production involves
__________ .
31. The association of production costs with the units produced is called __________ .
32. The __________ activity level is the production level a firm expects to attain for the coming year.
33. The __________ costing system assigns costs by the job.
job-order or
34. The __________ form indicates the type and quantity of each material issued to the factory.
35. A __________ inventory file is a file of job-order cost sheets.
36. The actual __________ costs are not included on a job-order sheet.
37. Purchases of direct materials are recorded as a debit to the __________ account.
38. The entry that captures the flow of material from the storeroom to work-in-process is called
the __________ inventory account.
39. __________ are the source of information for posting the labor cost flows.
40. The total applied overhead at a given point in time is given by the credit balance in the __________ control
account.
41. When a job is completed the total costs are transferred to a __________ inventory file.
42. When a job is shipped to a customer, the finished job cost becomes the cost of the __________ sold.
43. In job-order costing, departmental overhead rates and activity-based costing affect only the application of
__________ .
44. The defective units expected due to the nature of the typical production process are called __________ .
45. The defective units due to the exacting nature of a particular job is called __________ .
46. Which of the following is a manufactured product?
47. Manufacturers producing unique or customized products would employ a(n)
48. Which of the following is a pure service?
49. A pure service organization has
50. Inseparability refers to the
51. Heterogeneity refers to the
52. Intangibility refers to the
53. Perishability refers to the
54. Which of the following firms would make extensive use of service costing?
55. Which of the following products would NOT use job-order costing?
56. Which of the following firms would make extensive use of a job-order costing?
57. Process costing would be most applicable for
58. Which of the following would NOT use a process costing system?
59. Homogeneous products refer to
60. Which cost accounting process would be most appropriate for accumulating costs of identical, standardized
units?
61. The process where a single product is produced on a continuous basis is called:
62. A source document
63. Which of the following costs is usually NOT easily traceable to finished units of product?
64. Manufacturing overhead consists of all
65. The recognition and recording of costs is called:
66. Determining the dollar amounts of direct materials, direct labor, and overhead used in production involves:
67. An actual overhead rate can be calculated
68. Disadvantages of actual costing include
69. The effect of uniform production levels on unit production costs can be achieved
70. Normal costing uses which cost in work in process?
71. A normal costing system records which costs in work in process?
72. The predetermined overhead rate is usually calculated at the
73. Which of the following costing systems assigns actual costs of materials to inventory?
74. The principal difficulty with normal costing is that
75. Unit cost information is needed for
76. The association of production costs with the units produced is called:
77. The production level the firm expects to attain for the coming year is called:
78. Unit costs are critical for
79. In developing unit costs, overhead costs should be assigned using activity drivers. Which would be the
likely activity driver for a production process using a lathe?
80. Unit cost is important information for which of the following?
81. The average activity that a firm experiences in the long term (more than one year) is called:
82. The absolute maximum production activity of a manufacturing firm is called:
83. The maximum output that can be realized if everything operates efficiently is referred to as:
84. The system which assign(s) costs by the job is termed:
85. A job-order costing process would be most applicable for
86. The document which indicates the type and quantity of each material issued to the factory is called the:
87. The collection of all job cost sheets defines a
88. The document that identifies each job and accumulates its manufacturing costs is called:
89. Which of the following items is a basic costing system record in a job-order costing system?
90. The cost of direct materials is assigned to a job by the use of a source document known as a
91. A work-in-process inventory file is
92. Direct labor costs are assigned to individual jobs using a source document known as a
93. Figure 5 – 1
The Nautical Corporation manufactures custom-made wood wall units. The following data pertains to Job X4A:
Direct materials placed into production
$9,000
Direct labor hours worked
300 hours
Direct labor rate per hour
$15
Machine hours worked
100 hours
Factory overhead rate is $22.50 per machine hour. Job X4A consists of 500 units.
Refer to Figure 5-1. One-half of Job X4A was sold for $10,000. What is the total amount of costs assigned to Job X4A?
94. Figure 5 – 1
The Nautical Corporation manufactures custom-made wood wall units. The following data pertains to Job X4A:
Direct materials placed into production
$9,000
Direct labor hours worked
300 hours
Direct labor rate per hour
$15
Machine hours worked
100 hours
Factory overhead rate is $22.50 per machine hour. Job X4A consists of 500 units.
Refer to Figure 5-1. One-half of Job X4A was sold for $10,000. What is the cost per unit for Job X4A?
95. Figure 5 – 2
The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:
$4,000
50 hours
$ 15
100 hours
Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $80,000 for the year and the
direct labor hours were estimated to be 20,000. Job XY5 consists of 50 units.
Refer to Figure 5-2. What is overhead cost assigned to Job XY5?
96. Figure 5 – 2
The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:
$4,000
50 hours
$ 15
100 hours
Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $80,000 for the year and the
direct labor hours were estimated to be 20,000. Job XY5 consists of 50 units.
Refer to Figure 5-2. What is the materials cost per unit for Job XY5?
97. Figure 5 – 2
The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:
$4,000
50 hours
$ 15
100 hours
Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $80,000 for the year and the
direct labor hours were estimated to be 20,000. Job XY5 consists of 50 units.
Refer to Figure 5-2. What is the labor cost per unit for Job XY5?
98. Figure 5 – 2
The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:
$4,000
50 hours
$ 15
100 hours
Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $80,000 for the year and the
direct labor hours were estimated to be 20,000. Job XY5 consists of 50 units.
Refer to Figure 5-2. What the total cost assigned to Job XY5?
99. Which of the following costs is NOT included on a job-order cost sheet?
100. A debit to Materials Inventory indicates materials were
101. Figure 5 – 3
Robinson Corporation constructs new homes. Assume that Robinson uses a job costing system. During July
2014, the following transactions occurred:
Robinson purchased $4,500 of lumber on account.
Robinson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.
Depreciation of $1,500 on equipment used to build new houses was recorded.
A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.
Refer to Figure 5-3. The journal entry to record the requisition of lumber for Robinson would include a
102. Figure 5 – 3
Robinson Corporation constructs new homes. Assume that Robinson uses a job costing system. During July
2014, the following transactions occurred:
Robinson purchased $4,500 of lumber on account.
Robinson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.
Depreciation of $1,500 on equipment used to build new houses was recorded.
A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.
Refer to Figure 5-3. The journal entry to record labor for Robinson would include a
103. Figure 5 – 4
Lanyard Company uses a job-order costing system to account for product costs. The following information
pertains to 2014:
Materials placed into production
$140,000
Indirect labor
40,000
Direct labor (10,000 hours)
160,000
Depreciation of factory building
60,000
Other factory overhead
100,000
Increase in work-in-process inventory
30,000
Factory overhead rate is $18 per direct labor hour.
Refer to Figure 5-4. What is the total amount credited to Materials Inventory for Lanyard in 2014?
104. Figure 5 – 4
Lanyard Company uses a job-order costing system to account for product costs. The following information
pertains to 2014:
Materials placed into production
$140,000
Indirect labor
40,000
Direct labor (10,000 hours)
160,000
Depreciation of factory building
60,000
Other factory overhead
100,000
Increase in work-in-process inventory
30,000
Factory overhead rate is $18 per direct labor hour.
Refer to Figure 5-4. What is the total amount debited to Finished Goods Inventory in 2011?
105. A journal entry debiting Work-in-Process would normally NOT be accompanied by a credit to
106. If there is a debit balance in overhead control, that implies
107. For a manufacturer, the three inventory accounts on the balance sheet are
108. In a traditional enterprise, the flow of costs through the system is
109. When normal costing is used, actual overhead costs are
110. Collossal Company uses a predetermined rate to apply overhead. At the beginning of the year, Collossal
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 factory
overhead account for the year for Collossal?
111. On March 9, 2014, Job XX4 was completed. The job cost sheet showed a total of $6,000 in direct materials
and $8,000 in direct labor at a rate of $20 per direct labor hour. Factory overhead is applied at $30 per direct
labor hour. The debit to Finished Goods Inventory to record the completion of Job XX4 is
112. Figure 5-5
Tonneau Corporation had the following information available for October 2014:
Work in Process, October 1
$20,000
Materials placed into production, October
27,500
Direct labor, October
37,500
Factory overhead rate is 150 percent of direct labor costs.
Job cost sheets had the following balances:
Job Z1
$32,500
Job Z2
55,000
Job Z3
35,000
Job Z4
18,750
Jobs Z3 and Z4 were not completed at the end of December.
Refer to Figure 5-5. What is the balance in Work-in-Process for Tonneau at the end of October?