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Chapter 5 - Job-Order Costing
1. Manufacturing and service firms producing unique products or services require job-order accounting systems.
a.
True
b.
False
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.
a.
True
b.
False
3. Production costs consist of direct materials, direct labor, and overhead.
a.
True
b.
False
4. The difference between actual overhead and applied overhead is called an overhead variance.
a.
True
b.
False
5. If actual overhead is greater than applied overhead, the variance is called underapplied overhead.
a.
True
b.
False
6. Costs reported on the financial statements must be estimated costs.
a.
True
b.
False
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.
a.
True
b.
False
8. Departmental overheads cannot be added together to get plantwide overhead.
a.
True
b.
False
9. In an actual cost system, actual direct materials, actual direct labor and estimated overhead are used to determine unit
cost.
a.
True
Chapter 5 - Job-Order Costing
b.
False
10. A job-order cost sheet is the source document where direct labor costs are assigned to individual jobs.
a.
True
b.
False
11. Using a time ticket, the cost accounting department can enter the cost of direct materials onto the correct job-order
cost sheet.
a.
True
b.
False
12. The work-in-process account consists of all the job-order cost sheets for the completed jobs.
a.
True
b.
False
13. There are other source documents besides the time ticket and the material requisition form used to fill out the job-
order cost sheet.
a.
True
b.
False
14. The raw materials account is an inventory account located on the income statement.
a.
True
b.
False
15. The three manufacturing cost elements are direct materials, direct labor, and overhead.
a.
True
b.
False
16. The use of normal costing means that actual overhead costs are assigned directly to jobs.
a.
True
b.
False
17. The use of a departmental rate has the advantage of being simple and reduces data collection requirements.
a.
True
b.
False
Chapter 5 - Job-Order Costing
18. Actual overhead is reconciled with applied overhead at the beginning of the period.
a.
True
b.
False
19. In a normal costing system, actual overhead is used to arrive at the cost of goods manufactured.
a.
True
b.
False
20. The cost of goods sold appearing on the income statement as an expense, when using a normal costing system, is the
normal cost of goods sold.
a.
True
b.
False
21. When materials are put into production, they are taken from the Raw Materials account and put into the Work in
Process account.
a.
True
b.
False
22. Overhead costs are assigned to Finished Goods using a predetermined rate.
a.
True
b.
False
23. Actual overhead costs are accumulated in the overhead control account.
a.
True
b.
False
24. The cost of completed units is always debited to Work-in-Process and credited to Finished Goods.
a.
True
b.
False
25. The journal entry for $17,000 materials purchased on account is:
Chapter 5 - Job-Order Costing
Raw Materials
17,000
Accounts Payable
17,000
a.
True
b.
False
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
a.
True
b.
False
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
a.
True
b.
False
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
a.
True
b.
False
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
a.
True
b.
False
30. The journal entry for $17 of underapplied overhead is:
Chapter 5 - Job-Order Costing
Cost of Goods Sold
17
Applied Overhead
17
a.
True
b.
False
31. A _______ is one distinct unit or set of units.
32. In a _______________________________ costs are accumulated by job.
33. __________________________ is a costing system that accumulates production costs by process or by department for
a given period of time.
34. Strict ______________________ are rarely used because they cannot provide accurate unit cost information on a
timely basis.
35. A(n) ___________________________ determines unit cost by adding actual direct materials, actual direct labor, and
estimated overhead.
36. The ___________________________ is calculated at the beginning of the year by dividing the total estimated annual
overhead by the total estimated level of cost driver.
37. _________________ is found by multiplying the predetermined overhead rate by the actual use of the associated
activity for the period.
38. The difference between actual overhead and applied overhead is called a (n) _________________.
39. If actual overhead is greater than applied overhead, then the variance is called ___________________.
40. 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.
41. The _____________________ is subsidiary to the work-in-process account and is the primary document for
accumulating all costs related to a particular job.
Chapter 5 - Job-Order Costing
42. A __________________________ is used by the cost accounting department to enter the cost of direct materials onto
the correct job-order cost sheet.
43. A source document by which direct labor costs are assigned to individual jobs is known as a _______________.
44. The cost of goods sold before an adjustment for an overhead variance is called ____________________.
45. _________________________ is the amount that appears as an expense on the income statement after the adjustment
for the period’s overhead variance is recorded.
46. When materials are requested for production the cost is removed from ____________ and added to ____________.
47. Applied overhead costs are charged to ________________.
48. When units are sold, their total cost is debited to _______________ and credited to ____________.
49. ________________________ are directly responsible for creating the products or services sold to customers.
50. The ____________________ of allocation recognizes all interactions among support departments.
51. Which of the following is not a characteristic of job-order costing?
a.
Wide variety of distinct products.
b.
Unit cost is computed by dividing process costs of the period by the units produced in the period.
c.
Unit cost is computed by dividing total job costs by units produced on that job.
d.
Costs accumulated by job.
e.
Typically, the cost of one job is different from that of another job.
52. How are unit costs calculated?
a.
by dividing total cost associated with the units produced by the unit cost
b.
by adding all variable costs per unit associated with the units produced
c.
by dividing total fixed costs by the number of units produced
d.
by dividing total cost associated with the units produced by the number of units produced
e.
by adding unit variable costs to total fixed costs
53. Production costs do not include
Chapter 5 - Job-Order Costing
a.
direct materials.
b.
direct labor.
c.
variable overhead.
d.
fixed overhead.
e.
All of these are production costs.
54. Which of the following are easy to trace to individual jobs?
a.
direct materials and overhead
b.
direct materials and direct labor
c.
direct labor and overhead
d.
overhead and indirect labor
e.
depreciation on machinery and indirect labor
55. Firms in the ____ business are most likely to use a process-costing system.
a.
printing
b.
dental
c.
construction
d.
petroleum
e.
automobile repair
56. Which of the following is the assignment process used with normal costing?
a.
Actual direct materials, actual direct labor and actual overhead cost are assigned to products.
b.
Actual direct materials cost is assigned to products, but direct labor and overhead costs are assigned using
predetermined rates.
c.
Actual direct labor cost is assigned to products, but direct material and overhead costs are assigned using
predetermined rates.
d.
Actual direct material and direct labor costs are assigned to products, but overhead costs are assigned using
predetermined rates.
e.
All manufacturing costs are assigned using predetermined rates.
57. Which method of measuring costs associated with production is more widely used in practice?
a.
normal costing
b.
actual costing
c.
both are used equally.
d.
neither one is used.
e.
cannot be determined.
58. Which type of cost poses the most problems in using an actual cost system?
a.
direct materials
b.
overhead
Chapter 5 - Job-Order Costing
c.
direct labor
d.
All of these are correct.
e.
None of these are correct.
59. Which of the following statements is true about overhead?
a.
Overhead costs are not incurred uniformly throughout the year.
b.
Overhead costs have a definite, identifiable relationship with units produced.
c.
Low production in one month would give rise to low unit overhead costs.
d.
All of these are correct.
e.
None of these are correct.
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.
60. Refer to Figure 5-1. What is the predetermined overhead rate?
a.
$3.44 per machine hour
b.
$147.62 per direct labor hour
c.
$15.50 per direct labor hour
d.
$77.50 per machine hour
e.
None of these are correct.
61. Refer to Figure 5-1. What is the amount of overhead applied for February?
a.
$65,100
b.
$42,000
c.
$24,000
d.
$78,200
e.
$66,410
62. 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?
a.
$400 underapplied
b.
$200 overapplied
c.
$1,000 underapplied
d.
$400 overapplied
e.
$600 overapplied
Chapter 5 - Job-Order Costing
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.
63. Refer to Figure 5-2. What is the overhead variance?
a.
$600 underapplied
b.
$600 overapplied
c.
$200 underapplied
d.
$400 overapplied
e.
$800 underapplied
64. Refer to Figure 5-2. What is the predetermined overhead rate?
a.
$4 per direct labor hour
b.
$2.63 per direct labor hour
c.
$4.18 per direct labor hour
d.
$880,000
e.
None of these are correct.
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 hrs.
32,500 hrs.
175,000 hrs.
Machine Hours
32,000 hrs.
65,000 hrs.
97,000 hrs.
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 hrs.
2,430 hrs.
15,930 hrs.
Machine Hours
4,020 hrs.
11,000 hrs.
15,020 hrs.
65. 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?
a.
$5 per direct labor hour
b.
$7.22 per machine hour
c.
$4 per direct labor hour
d.
$2.57 per direct labor hour
Chapter 5 - Job-Order Costing
e.
$0.52 per direct labor hour
66. Refer to Figure 5-3. Using departmental overhead rates, which of the following is correct?
a.
Applied overhead for the assembly department is $54,000.
b.
Applied overhead for the testing department is $4,860.
c.
Applied overhead for both departments combined is $63,720.
d.
Overhead for the assembly department is underapplied.
e.
None of these are correct.
67. 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?
a.
assembly: $4 per direct labor hour; testing: $2 per machine hour
b.
assembly: $2 per direct labor hour; testing: $4 per machine hour
c.
assembly: $4 per direct labor hour; testing: $4 per direct labor hour
d.
assembly: $7.22 per machine hour; testing: $7.22 per machine hour
e.
None of these.
68. 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?
a.
$22
b.
$20
c.
$28
d.
$50.54
e.
None of these.
69. The predetermined overhead rate is calculated by
a.
estimated annual overhead/Estimated manufacturing cost.
b.
actual annual overhead/Estimated annual activity level.
c.
estimated annual overhead/Actual annual activity level.
d.
actual annual overhead/Actual annual activity level.
e.
estimated annual overhead/Estimated annual activity level.
70. The overhead variance is least likely to be
Chapter 5 - Job-Order Costing
a.
zero (actual overhead equals applied overhead).
b.
underapplied.
c.
overapplied.
d.
immaterial.
e.
underapplied and material.
71. The unit cost of a job consists of the total costs of
a.
materials used on the job.
b.
labor worked on the job.
c.
applied overhead.
d.
All of these are correct.
e.
None of these are correct.
72. 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?
a.
175,200
b.
180,000
c.
$5
d.
150,000
e.
$6
73. At the beginning of the year, Wilson Company estimated the following:
Overhead
$360,000
Direct labor hours
60,000 hrs.
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.
a.
$56,100
b.
$30,000
c.
$46,750
d.
$5 per direct labor hour
e.
None of these.
74. On February 1, Job 12 had a beginning balance of $200. During February, direct materials of $500 and direct labor of
Chapter 5 - Job-Order Costing
$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?
a.
$202
b.
$1,010
c.
$162
d.
$810
e.
None of these.
75. Manufacturing overhead
a.
consists of all costs other than direct materials.
b.
consists of all manufacturing costs other than direct materials.
c.
consists of all costs other than direct materials and direct labor.
d.
consists of all manufacturing costs other than direct materials and direct labor.
76. The predetermined overhead rate is usually calculated
a.
at the end of each month.
b.
at the beginning of each month.
c.
at the beginning of the year.
d.
at the end of the year.
77. A normal job-order costing system is a system that uses:
a.
actual costs for direct materials and estimated costs for direct labor and overhead.
b.
estimated costs for direct materials, direct labor, and overhead.
c.
actual costs for direct materials and direct labor and estimated costs for overhead.
d.
actual costs for direct materials and overhead, estimated costs for direct labor.
78. 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?
Chapter 5 - Job-Order Costing
a.
$200
b.
$400
c.
$750
d.
$1,500
79. 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?
a.
$249,280
b.
$246,000
c.
$240,000
d.
$264,000
80. The document that lists the total cost for a single job is a
a.
job-order cost sheet.
b.
materials requisition form.
c.
time ticket.
d.
purchase order.
e.
None of these are correct.
81. Which of the following is true about the job-order cost sheet?
a.
It is prepared for every job.
b.
It is subsidiary to the work-in-process account.
c.
It is the primary document for accumulating all costs related to a particular job.
d.
It contains all information pertinent to a job.
e.
All of these are correct.
82. Which of the following is not on a time ticket?
a.
employee's name
b.
employee's wage rate
c.
hours worked on each job
d.
cost of materials
e.
All of these are on a time ticket.
Chapter 5 - Job-Order Costing
83. Which form asks for type, quantity, unit price of direct materials issued, and for the number of the job?
a.
time ticket
b.
materials requisition form
c.
job-order cost sheet
d.
None of these are correct.
e.
All of these are correct.
84. A source document that would not be used to help decide the cost of a job when using normal costing is (are)
a.
a material requisition form.
b.
a time ticket for direct labor.
c.
a time ticket for indirect labor.
d.
a material requisition form and a time ticket for direct labor.
e.
all items listed are helpful to decide the cost of a job.
85. Which of the following costs is not included on a job-order cost sheet?
a.
direct material costs
b.
applied plantwide overhead costs
c.
direct labor costs
d.
actual plantwide overhead costs
86. What items may be on a materials requisition form to maintain proper control over a firm's inventory of direct
materials?
a.
cost of supplies
b.
cost of lubricants for production machinery
c.
the date and a signature
d.
All of these are correct.
e.
None of these are correct.
87. Time tickets are filled out for
a.
indirect laborers.
b.
direct laborers.
c.
both direct laborers and indirect laborers.
d.
direct materials.
e.
supervisors.
88. Which of the following is not true about job-order costing?
a.
It is used in firms that produce homogeneous products.
b.
The cost of each job is accumulated on the job-order cost sheet.
c.
The key document for accumulating manufacturing costs is the job-order cost sheet.
d.
All of these are correct.
Chapter 5 - Job-Order Costing
e.
None of these are correct.
89. Which of the following can serve as a subsidiary ledger for the finished goods inventory?
a.
job-order cost sheets for completed jobs
b.
job-order cost sheets for incomplete jobs
c.
work-in-process inventory
d.
raw material inventory
e.
All of these are correct.
90. Which of the following statements is true?
a.
There will be many different jobs on a job-order cost sheet.
b.
Direct labor is allocated to jobs along with overhead using a cost driver.
c.
Work-in-process consists of all complete work.
d.
Time tickets are used to post the cost of direct labor to individual jobs.
e.
None of these.
91. Labor cost flows reflect
a.
direct labor cost.
b.
indirect labor cost.
c.
administration cost.
d.
both indirect and direct labor cost.
e.
administration cost and indirect cost.
92. 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.
a.
$919,000
b.
$951,000
c.
$939,000
d.
$955,000
e.
$915,000
Chapter 5 - Job-Order Costing
93. Using normal costing requires that
a.
actual overhead costs are not assigned directly to jobs.
b.
predetermined rates are not used to assign overhead.
c.
applied overhead is not calculated on a job specific basis.
d.
Neither plantwide or departmental rates can be used to assign overhead.
e.
All of these are correct.
94. Using normal costing, which costs never enter the work-in-process account?
a.
applied overhead
b.
actual overhead
c.
direct materials
d.
direct labor
e.
None of these.
95. Using normal costing, which of the following is false about actual overhead?
a.
Actual overhead is recorded to the overhead control account during the period.
b.
It is reconciled at the end of a period with applied overhead.
c.
It is separated into many smaller accounts, such as indirect labor, supplies, etc.
d.
All of these are correct.
e.
None of these.
96. When a job is completed but not sold, the accounts affected are
a.
Raw Materials and Work-in-Process.
b.
Work-in-Process and Finished Goods.
c.
Work-in-Process and Cost of Goods Sold.
d.
Finished Goods and Cost of Goods Sold.
e.
Finished Goods and Overhead Control.
97. A schedule that is used to ensure accuracy in computing product costs is (are)
a.
the schedule of the cost of goods manufactured.
b.
the schedule of the cost of goods sold.
c.
the schedules of the cost of goods manufactured and cost of goods sold.
d.
the schedule of raw materials used.
e.
None of the schedules listed here.
98. Which account can sometimes be skipped when a good is produced for a particular customer?
a.
raw materials
b.
work-in-process
c.
finished goods
d.
cost of goods sold
Chapter 5 - Job-Order Costing
e.
accounts can never be skipped
99. The order that cost elements flow through accounts until they are recognized as an expense is
a.
Work-in-Process, Cost of Goods Sold, Finished Goods
b.
Finished Goods, Work-in-Process, Cost of Goods Sold
c.
Finished Goods, Cost of Goods Sold, Work-in-Process
d.
Work-in-Process, Finished Goods, Cost of Goods Sold
100. Which of the following is not a manufacturing cost element?
a.
direct materials
b.
direct labor
c.
advertising expense
d.
overhead
e.
All of these are correct.
101. Which of the following sentences is not true?
a.
Actual overhead costs always enter the Work-in-Process account.
b.
The cost of a job includes direct materials, direct labor, and applied overhead.
c.
When a job is complete, it must leave Work-in-Process and be entered into Finished Goods or Cost of Goods
Sold.
d.
All of these are correct.
e.
None of these are correct.
102. Which of the following is true?
a.
The adjusted cost of goods sold is equal to normal cost of goods sold plus or minus the overhead variance.
b.
If the overhead variance shows overapplied overhead, then that amount would be subtracted from normal cost
of goods sold.
c.
Variances in overhead are expected every month.
d.
All of these.
e.
None of these.
103. Costs associated with selling and general administrative activities are not
a.
period costs.
b.
nonmanufacturing costs.
c.
manufacturing costs.
d.
period costs and nonmanufacturing costs.
e.
any of these.
104. Ring Company designs and builds jewelry. During June it had applied overhead of $120,000. Overhead is applied at
the rate of 75% of direct labor cost. Direct labor wages average $20 per hour.
Chapter 5 - Job-Order Costing
How many direct labor hours did Ring Company have for the month of June?
a.
12,000
b.
6,000
c.
10,000
d.
8,000
e.
9,000
105. 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?
a.
$28,000
b.
$58,490
c.
$68,080
d.
$37,590
e.
none of these
106. 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?
a.
$6,800
b.
$25,000
c.
$4,250
d.
$15,250
e.
$0
Chapter 5 - Job-Order Costing
107. 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?
a.
$319,612.50
b.
$236,750
c.
$82,862.5
d.
$272,600
e.
262,087.5
108. Wright Corporation had the following information available for December of the current year:
Work in process, December 1
$20,000
Materials placed into production, December
27,500
Direct labor, December
37,500
Plantwide overhead rate is 150% 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. What is the balance in work-in process for Wright at the end
of December?
a.
$85,000
b.
$87,500
c.
$56,250
d.
$53,750
Figure 5-4.
Hill Company uses job-order costing. At the end of the month, the following data was gathered:
Job #
Total Cost
Complete?
Sold?
803
$611
yes
yes
804
423
yes
no
805
805
no
no
Chapter 5 - Job-Order Costing
806
682
yes
yes
807
525
yes
no
808
250
no
no
809
440
yes
yes
810
773
yes
no
811
267
no
no
812
341
no
no
Hill's selling price is cost plus 50% for each of its products.
109. Refer to Figure 5-4. What is the total in the work-in-process account?
a.
$1,980
b.
$2,510
c.
$1,663
d.
$1,840
e.
$1,163
110. Refer to Figure 5-4. What is the total in Finished Goods?
a.
$1,721
b.
$2,230
c.
$1,700
d.
$1,860
e.
$2,163
111. Refer to Figure 5-4. What is Cost of Goods Sold for the month?
a.
$1,760
b.
$1,181
c.
$1,733
d.
$1,353
e.
$2,440
