CHAPTER 15
JOB ORDER COSTING
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY
Item
LO
BT
Item
LO
BT
Item
LO
BT
Item
BT
Item
LO
BT
True-False Statements
1.
1
K
8.
2
K
15.
2
K
22.
4
C
29.
6
C
2.
1
C
9.
2
C
16.
2
K
23.
4
K
30.
6
C
3.
1
C
10.
2
C
17.
3
K
24.
4
C
sg31.
1
C
4.
1
C
11.
2
C
18.
3
K
25.
5
C
sg32.
2
K
5.
1
C
12.
2
C
19.
3
C
26.
5
K
sg33.
3
K
6.
1
K
13.
2
K
20.
3
C
27.
5
K
sg34.
4
K
7.
1
C
14.
2
C
21.
3
K
28.
5
K
sg35.
6
K
Multiple Choice Questions
36.
1
K
59.
2
C
82.
4
AP
105.
5
C
128.
6
C
37.
1
K
60.
2
C
83.
4
AP
106.
5
AP
129.
6
C
38.
1
K
61.
3
K
84.
4
AP
107.
5
C
130.
6
K
39.
1
C
62.
3
K
85.
4
AP
108.
5
C
131.
6
C
40.
1
C
63.
3
AP
86.
4
AP
109.
5
C
132.
6
AP
41.
1
C
64.
3
K
87.
4
AP
110.
5
C
133.
6
C
42.
1
C
65.
3
C
88.
4
AP
111.
5
AP
134.
6
C
43.
1
C
66.
3
K
89.
4
C
112.
5
AP
135.
6
C
44.
2
AP
67.
3
K
90.
4
K
113.
5
AP
136.
6
C
45.
2
K
68.
3
K
91.
4
C
114.
5
C
137.
6
C
46.
2
K
69.
3
C
92.
4
C
115.
5
C
138.
6
C
47.
2
C
70.
3
C
93.
4
K
116.
5
AP
139.
6
C
48.
2
K
71.
3
K
94.
4
AP
117.
5
AP
140.
6
C
49.
2
C
72.
3
K
95.
4
C
118.
5
AP
st141.
1
K
50.
2
C
73.
3
C
96.
4
K
119.
5
AP
sg142.
2
K
51.
2
C
74.
3
C
97.
4
AP
120.
5
AP
st143.
2
K
52.
2
K
75.
3
K
98.
4
AP
121.
5
AP
sg144.
3
K
53.
2
C
76.
3
AP
99.
4
AP
122.
5
AP
st145.
3
K
54.
2
K
77.
3
AP
100.
4
AP
123.
5
AP
sg146.
4
AP
55.
2
K
78.
3
AP
101.
4
AP
124.
6
AP
st147.
4
K
56.
2
AP
79.
3
AP
102.
5
AP
125.
6
AP
sg148.
6
C
57.
2
K
80.
3
AP
103.
5
C
126.
6
AP
st149.
6
K
58.
2
K
81.
4
AP
104.
5
C
127.
6
C
sg150.
6
K
Brief Exercises
151
2
AP
153.
3
AP
155.
4,6
AP
157.
5
AP
159.
6
AP
152
2
AP
154.
3
AP
156.
4
AP
158.
6
AP
160.
6
AP
sg This question also appears in the Study Guide.
st This question also appears in a self-test at the student companion website.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
15 – 2
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY
Exercises
161.
2
AP
167.
2–5
AP
173.
2–6
AP
179.
3,5
AP
185.
4,6
AP
162.
2–4
C
168.
2–5
AN
174.
2,3,6
AP
180.
3,4,6
AP
186.
4,6
AP
163.
2–4
AP
169.
2–5
AP
175.
2–6
AP
181.
4,6
AP
187.
5
AP
164.
2–4
C
170.
2,3
AP
176.
3
AP
182.
4,6
AP
188.
5
AP
165.
2,3
AP
171.
2–5
AP
177.
3–5
AN
183.
4
AP
166.
2–5
AP
172.
2,5
AP
178.
3,5
AP
184.
4,6
AP
Completion Statements
189.
1
K
191.
1
K
193.
2
K
195.
3
K
197.
6
K
190.
1
K
192.
2
K
194.
3
AP
196.
4
K
198.
6
K
Matching Statements
199.
1
K
Short-Answer Essay
200.
1
S
202.
4
S
204.
3
S
201.
2
S
203.
4
S
205.
4
S
SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE
Item
Type
Item
Type
Item
Type
Item
Type
Item
Type
Item
Type
Item
Type
Learning Objective 1
1.
TF
5.
TF
36.
MC
40.
MC
141.
MC
199.
MA
2.
TF
6.
TF
37.
MC
41.
MC
189.
C
200.
SA
3.
TF
7.
TF
38.
MC
42.
MC
190.
C
4.
TF
31.
TF
39.
MC
43.
MC
191.
C
Learning Objective 2
8.
TF
15.
TF
48.
MC
55.
MC
143.
MC
165.
Ex
172.
Ex
9.
TF
16.
TF
49.
MC
56.
MC
151.
BE
166.
Ex
173.
Ex
10.
TF
32.
TF
50.
MC
57.
MC
152.
BE
167.
Ex
175.
Ex
11.
TF
44.
MC
51.
MC
58.
MC
161.
Ex
168.
Ex
192.
C
12.
TF
45.
MC
52.
MC
59.
MC
162.
Ex
169.
Ex
193.
C
13.
TF
46.
MC
53.
MC
60.
MC
163.
Ex
170.
Ex
201.
SA
14.
TF
47.
MC
54.
MC
142.
MC
164.
Ex
171.
Ex
Learning Objective 3
17.
TF
63.
MC
71.
MC
79.
MC
164.
Ex
173.
Ex
194.
C
18.
TF
64.
MC
72.
MC
80.
MC
165.
Ex
174.
Ex
195.
C
19.
TF
65.
MC
73.
MC
144.
MC
166.
Ex
175.
Ex
204.
SA
20.
TF
66.
MC
74.
MC
145.
MC
167.
Ex
176.
Ex
21.
TF
67.
MC
75.
MC
153.
BE
168.
Ex
177.
Ex
33.
TF
68.
MC
76.
MC
154.
BE
169.
Ex
178.
Ex
61.
MC
69.
MC
77.
MC
162.
Ex
170.
Ex
179.
Ex
62.
MC
70.
MC
78.
MC
163.
Ex
171.
Ex
180.
Ex
Job Order Costing
15 – 3
Learning Objective 4
22.
TF
85.
MC
93.
MC
101.
MC
166.
Ex
180.
Ex
202.
SA
23.
TF
86.
MC
94.
MC
146.
MC
167.
Ex
181.
Ex
203.
SA
24.
TF
87.
MC
95.
MC
147.
MC
168.
Ex
182.
Ex
205.
SA
34.
TF
88.
MC
96.
MC
155.
BE
169.
Ex
183.
Ex
81.
MC
89.
MC
97.
MC
156.
BE
171.
Ex
184.
Ex
82.
MC
90.
MC
98.
MC
162.
Ex
173.
Ex
185.
Ex
83.
MC
91.
MC
99.
MC
163.
Ex
175.
Ex
186.
Ex
84.
MC
92.
MC
100.
MC
164.
Ex
177.
Ex
196.
C
Learning Objective 5
25.
TF
104.
MC
110.
MC
116.
MC
122.
MC
169.
Ex
178.
Ex
26.
TF
105.
MC
111.
MC
117.
MC
123.
MC
171.
Ex
179.
Ex
27.
TF
106.
MC
112.
MC
118.
MC
157.
BE
172.
Ex
187.
Ex
28.
TF
107.
MC
113.
MC
119.
MC
166.
Ex
173.
Ex
188.
Ex
102.
MC
108.
MC
114.
MC
120.
MC
167.
Ex
175.
Ex
103.
MC
109.
MC
115.
MC
121.
MC
168.
Ex
177.
Ex
Learning Objective 6
29.
TF
127.
MC
133.
MC
139.
MC
159.
BE
182.
Ex
30.
TF
128.
MC
134.
MC
140.
MC
160.
BE
184.
Ex
35.
TF
129.
MC
135.
MC
148.
MC
173.
Ex
185.
Ex
124.
MC
130.
MC
136.
MC
149.
MC
175.
Ex
186.
Ex
125.
MC
131.
MC
137.
MC
150.
MC
180.
Ex
197.
C
126.
MC
132.
MC
138.
MC
158.
BE
181.
Ex
198.
C
Note: TF = True-False BE = Brief Exercise C = Completion
MC = Multiple Choice Ex = Exercise MA = Matching
SA = Short-Answer Essay
CHAPTER LEARNING OBJECTIVES
1. Explain the characteristics and purposes of cost accounting. Cost accounting involves
the procedures for measuring, recording, and reporting product costs. From the data
accumulated, companies determine the total cost and the unit cost of each product. The two
basic types of cost accounting systems are job order cost and process cost.
2. Describe the flow of costs in a job order cost system. In job order costing, companies first
accumulate manufacturing costs in three accounts: Raw Materials Inventory, Factory Labor,
and Manufacturing Overhead. They then assign the accumulated costs to Work in Process
Inventory and eventually to Finished Goods Inventory and Cost of Goods Sold.
3. Explain the nature and importance of a job cost sheet. A job cost sheet is a form used to
record the costs chargeable to a specific job and to determine the total and unit costs of the
completed job. Job cost sheets constitute the subsidiary ledger for the Work in Process
Inventory control account.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
15 – 4
4. Indicate how the predetermined overhead rate is determined and used. The
predetermined overhead rate is based on the relationship between estimated annual
overhead costs and expected annual operating activity. This is expressed in terms of a
common activity base, such as direct labor cost. Companies use this rate to assign overhead
costs to work in process and to specific jobs.
5. Prepare entries for jobs completed and sold. When jobs are completed, companies debit
the cost to Finished Goods Inventory and credit it to Work in Process Inventory. When a job is
sold the entries are: (a) Debit Cash or Accounts Receivable and credit Sales Revenue for the
selling price, and (b) Debit Cost of Goods Sold and credit Finished Goods Inventory for the
cost of the goods.
6. Distinguish between under– and overapplied manufacturing overhead. Underapplied
manufacturing overhead indicates that the overhead assigned to work in process is less than
the overhead incurred. Overapplied overhead indicates that the overhead assigned to work in
process is greater than the overhead incurred.
TRUE-FALSE STATEMENTS
1. Cost accounting is primarily concerned with accumulating information about product costs.
2. A job order cost system is most appropriate when a large volume of uniform products are
produced.
3. A process cost accounting system is appropriate for similar products that are continuously
mass produced.
4. The perpetual inventory method cannot be used in a job order cost system.
5. A job order cost system and a process cost system are two alternative methods for
valuing inventories.
6. A job order cost system identifies costs with a particular job rather than with a set time
period.
7. A company may use either a job order cost system or a process cost system, but not both.
8. Raw Materials Inventory, Factory Labor, and Manufacturing Overhead are all control
accounts in the general ledger when a job order cost accounting system is used.
Job Order Costing
15 – 5
9. Accumulating and assigning manufacturing costs are two important activities in a job order
cost system.
10. Recording the acquisition of raw materials is a part of accumulating manufacturing costs.
11. Manufacturing costs are generally incurred in one period and recorded in a subsequent
period.
12. The Purchases account is credited for all raw materials purchase returns and allowances.
13. When raw materials are received, there is no effort at this point to associate the cost of
materials with specific jobs.
14. When raw materials are purchased, the Work in Process Inventory account is debited.
15. Factory labor should be assigned to selling and administrative expenses on a
proportionate basis.
16. Fringe benefits and payroll taxes associated with factory workers should be accumulated
as a part of Factory Labor.
17. Job order cost sheets constitute the subsidiary ledger of the control account Work In
Process Inventory.
18. In a job order cost system, each entry to the Work In Process Inventory account should be
accompanied by a posting to one or more job cost sheets.
19. Direct materials requisitioned from the storeroom should be charged to the Work In
Process Inventory account and the job cost sheets for the individual jobs on which the
materials were used.
20. Manufacturing overhead is the only product cost that can be assigned to jobs as soon as
the costs are incurred.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
15 – 6
21. There should be a separate job cost sheet for each job.
22. Actual manufacturing overhead costs are assigned to each job by tracing each overhead
cost to a specific job.
FSA
23. The formula for the predetermined overhead rate is estimated annual overhead costs
divided by an expected annual operating activity.
24. Actual manufacturing overhead costs should be charged to the Work in Process Inventory
account as they are incurred.
25. A good system of internal control requires that the job order cost sheet be destroyed as
soon as the job is complete.
26. Finished Goods Inventory is charged for the cost of jobs completed during a period.
27. When goods are sold, the Cost of Goods Sold account is debited and Work in Process
Inventory account is credited.
FSA
28. Total manufacturing costs for a period consists of the costs of direct materials used, the
cost of direct labor incurred, and the manufacturing overhead applied during the period.
29. Overapplied overhead means that actual manufacturing overhead costs were greater than
the manufacturing overhead costs applied to jobs.
30. At the end of the year, the accountant credits the amount of the overapplied overhead to
Cost of Goods Sold.
31. A cost accounting system consists of manufacturing cost accounts that are fully integrated
into the general ledger of a company.
32. The cost of raw materials purchased is credited to Raw Materials Inventory when
materials are received.
Job Order Costing
15 – 7
33. Requisitions for direct materials are posted daily to the individual job cost sheets.
34. The predetermined overhead rate is based on the relationship between estimated annual
overhead costs and expected annual operating activity expressed in terms of a common
activity base.
35. At the end of the year, underapplied overhead is usually credited to Cost of Goods Sold.
Answers to True-False Statements
MULTIPLE CHOICE QUESTIONS
36. Which of the following is one of the components of cost accounting?
a. It involves measuring product costs.
b. It involves the determination of company profits.
c. It requires GAAP to be applied.
d. It requires cost minimizing principles.
37. A major purpose of cost accounting is to
a. classify all costs as operating or nonoperating.
b. measure, record, and report period costs.
c. provide information to stockholders for investment decisions.
d. measure, record, and report product costs.
38. The two basic types of cost accounting systems are
a. job order and job accumulation systems.
b. job order and process cost systems.
c. process cost and batch systems.
d. job order and batch systems.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
15 – 8
39. A process cost system would most likely be used by a company that makes
a. motion pictures.
b. repairs to automobiles.
c. breakfast cereal.
d. college graduation announcements.
40. Which of the following would be accounted for using a job order cost system?
a. The production of personal computers.
b. The production of automobiles.
c. The refining of petroleum.
d. The construction of a new campus building.
41. Process costing is used when
a. the production process is continuous.
b. production is aimed at filling a specific customer order.
c. dissimilar products are involved.
d. costs are to be assigned to specific jobs.
42. Process costing is not used when
a. similar goods are being produced.
b. large volumes are produced.
c. jobs have distinguishing characteristics.
d. a series of connected manufacturing processes is necessary.
43. An important feature of a job order cost system is that each job
a. must be similar to previous jobs completed.
b. has its own distinguishing characteristics.
c. must be completed before a new job is accepted.
d. consists of one unit of output.
44. As of December 31, 2013, Stand Still Industries had $2,500 of raw materials inventory. At
the beginning of 2013, there was $2,000 of materials on hand. During the year, the
company purchased $325,000 of materials; however, it paid for only $312,500. How much
inventory was requisitioned for use on jobs during 2013?
a. $312,000
b. $324,500
c. $325,500
d. $313,000
Job Order Costing
15 – 9
45. The flow of costs in a job order cost system
a. involves accumulating manufacturing costs incurred and assigning the accumulated
costs to work done.
b. cannot be measured until all jobs are complete.
c. measures product costs for a set time period.
d. generally follows a LIFO cost flow assumption.
46. In a job order cost accounting system, the Raw Materials Inventory account is
a. an expense.
b. a control account.
c. not used.
d. a period cost.
47. When a job is completed and all costs have been accumulated on a job cost sheet, the
journal entry that should be made is
a. Finished Goods Inventory
Direct Materials
Direct Labor
Manufacturing Overhead
b. Work In Process Inventory
Direct Materials
Direct Labor
Manufacturing Overhead
c. Raw Materials Inventory
Work In Process Inventory
d. Finished Goods Inventory
Work In Process Inventory
48. The two major steps in the flow of costs are
a. allocating and assigning.
b. acquiring and accumulating.
c. accumulating and assigning.
d. accumulating and amortizing.
49. The Raw Materials Inventory account is
a. a subsidiary account.
b. debited for invoice costs and freight costs chargeable to the purchaser.
c. debited for purchase discounts taken.
d. debited for purchase returns and allowances.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
15 – 10
50. Records of individual items of raw materials would not be maintained
a. electronically.
b. manually.
c. on stores ledger cards.
d. in the Raw Materials Inventory account.
Project Management, IMA: Business Applications
51. Cost of raw materials is debited to Raw Materials Inventory when the
a. materials are ordered.
b. materials are received.
c. materials are put into production.
d. bill for the materials is paid.
52. Which of the following is not included in factory labor costs?
a. Gross earnings.
b. Net earnings.
c. Fringe benefits.
d. Employer payroll taxes.
53. All of the following would be entries in assigning accumulated costs to the Work In
Process Inventory except
a. the purchase of raw materials.
b. raw materials are used.
c. overhead is applied.
d. factory labor is used.
54. Factory labor costs
a. are accumulated in a control account.
b. do not include pension costs.
c. include vacation pay.
d. are based on workers’ net pay.
55. Factory Labor is a(n)
a. expense account.
b. control account.
c. subsidiary account.
d. temporary account.
Job Order Costing
15 – 11
56. Kline Manufacturing has the following labor costs:
Factory—Gross wages $490,000
Factory—Net wages 420,000
Employer Payroll Taxes Payable 50,000
The entry to record the cost of factory labor and the associated payroll tax expense will
include a debit to Factory Labor for
a. $540,000.
b. $490,000.
c. $470,000.
d. $440,000.
57. Factory labor costs
a. accumulate in advance of utilization.
b. accumulate in a control account.
c. include sick pay earned by factory workers.
d. accumulate in the Factory Labor Expense account.
58. Which of the following is not a control account?
a. Manufacturing Overhead
b. Factory Labor
c. Accounts Receivable
d. Raw Materials Inventory
59. Manufacturing Overhead would not have a subsidiary account for
a. utilities.
b. property taxes.
c. insurance.
d. raw materials inventory.
60. The entry to record the acquisition of raw materials on account is
a. Work in Process Inventory
Accounts Payable
b. Manufacturing Overhead
Raw Materials Inventory
Accounts Payable
c. Accounts Payable
Raw Materials Inventory
d. Raw Materials Inventory
Accounts Payable
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
15 – 12
61. Which one of the following best describes a job cost sheet?
a. It is a form used to record the costs chargeable to a specific job and to determine the
total and unit costs of the completed job.
b. It is used to track manufacturing overhead costs to specific jobs.
c. It is used by management to understand how direct costs affect profitability.
d. It is a daily form that management uses for tracking worker productivity on which
employee raises are based.
62. Job cost sheets constitute the subsidiary ledger for the
a. Finished Goods Inventory account.
b. Cost of Goods Sold account.
c. Work In Process Inventory account.
d. Cost of Goods Manufactured account.
63. A materials requisition slip showed that direct materials requested were $63,000 and
indirect materials requested were $9,000. The entry to record the transfer of materials
from the storeroom is
a. Work In Process Inventory …………………………………………… 63,000
Raw Materials Inventory ……………………………………… 63,000
b. Direct Materials ………………………………………………………….. 63,000
Indirect Materials ……………………………………………………….. 9,000
Work in Process Inventory …………………………………… 72,000
c. Manufacturing Overhead …………………………………………….. 72,000
Raw Materials Inventory ……………………………………… 72,000
d. Work In Process Inventory …………………………………………… 63,000
Manufacturing Overhead …………………………………………….. 9,000
Raw Materials Inventory ……………………………………… 72,000
64. The job cost sheet does not show
a. costs chargeable to a specific job.
b. the total costs of a completed job.
c. the unit cost of a completed job.
d. the cost of goods sold.
65. Under an effective system of internal control, the authorization for issuing materials is
made
a. orally.
b. on a prenumbered materials requisition slip.
c. by the accounting department.
d. by anyone on the production line.
Job Order Costing
15 – 13
66. A copy of the materials requisition slip would not include the:
a. quantity.
b. stock number.
c. cost per unit.
d. name of the supplier.
67. Materials requisition slips are costed
a. by production supervisors.
b. by factory personnel who work on the production line.
c. after the goods have been sold.
d. using any of the inventory costing methods.
68. Postings to control accounts in a costing system are made
a. monthly.
b. daily.
c. annually.
d. semi-annually.
69. Which one of the following should be equal to the balance of the Work In Process
Inventory account at the end of the period?
a. The total of the amounts transferred from raw materials for the current period
b. The sum of the costs shown on the job cost sheets of unfinished jobs
c. The total of manufacturing overhead applied to work in process for the period
d. The total manufacturing costs for the period
70. Which of the following shows entries only to control accounts?
a. Factory Labor
Factory Wages Payable
b. Work in Process
Factory Labor
Raw Materials Inventory
Factory Wages Payable
c. Work in Process
Manufacturing Overhead
Raw Materials Inventory
d. Factory Labor
Raw Materials Inventory
Accounts Payable
Factory Wages Payable
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
15 – 14
71. A time ticket does not indicate the
a. employee’s name.
b. account to be charged.
c. number of personal exemptions claimed by the employee.
d. job number.
72. Which one of the following is a source document that impacts the job cost sheet?
a. Raw materials receiving slips.
b. Materials purchase orders.
c. Labor time tickets.
d. Finished goods shipping documents.
73. Time tickets should be approved by
a. the audit committee.
b. co-workers.
c. the employee’s supervisor.
d. the payroll department.
74. If the entry to assign factory labor showed only a debit to Work In Process Inventory, then
all labor costs were
a. direct labor.
b. indirect labor.
c. overtime related.
d. regular hours.
75. The principal accounting record used in assigning costs to jobs is
a. a job cost sheet.
b. the cost of goods manufactured schedule.
c. the Manufacturing Overhead control account.
d. the stores ledger cards.
76. The following information is available for completed Job No. 402: Direct materials,
$80,000; direct labor, $120,000; manufacturing overhead applied, $60,000; units
produced, 5,000 units; units sold, 4,000 units. The cost of the finished goods on hand from
this job is
a. $40,000.
b. $260,000.
c. $52,000.
d. $208,000.
Job Order Costing
15 – 15
77. Sportly, Inc. completed Job No. B14 during 2013. The job cost sheet listed the following:
Direct materials $55,000
Direct labor $30,000
Manufacturing overhead applied $20,000
Units produced 3,000 units
Units sold 1,800 units
How much is the cost of the finished goods on hand from this job?
a. $105,000
b. $63,000
c. $42,000
d. $51,000
78. Madison Inc. uses job order costing for its brand new line of sewing machines. The cost
incurred for production during 2013 totaled $18,000 of materials, $9,000 of direct labor
costs, and $6,000 of manufacturing overhead applied. The company ships all goods as
soon as they are completed which results in no finished goods inventory on hand at the
end of any year. Beginning work in process totaled $15,000, and the ending balance is
$9,000. During the year, the company completed 20 machines. How much is the cost per
machine?
a. $1,350
b. $1,950
c. $1,650
d. $2,400
79. As of December 31, 2013, Nilsen Industries had $2,000 of raw materials inventory. At the
beginning of 2013, there was $1,600 of materials on hand. During the year, the company
purchased $324,000 of materials; however it paid for only $314,000. How much inventory
was requisitioned for use on jobs during 2013?
a. $324,400
b. $314,400
c. $313,600
d. $323,600
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
15 – 16
80. Cost of goods manufactured equals $65,000 for 2013. Finished goods inventory is $2,000
at the beginning of the year and $5,500 at the end of the year. Beginning and ending work
in process for 2013 are $4,000 and $5,000, respectively. How much is cost of goods sold
for the year?
a. $67,500
b. $63,000
c. $61,500
d. $68,500
81. A company expected its annual overhead costs to be $1,800,000 and direct labor costs to
be $1,000,000. Actual overhead was $1,740,000, and actual labor costs totaled
$1,100,000. How much is the company’s predetermined overhead rate to the nearest
cent?
a. $1.74
b. $1.57
c. $1.80
d. $1.64
82. Vektek, Inc. thinks machine hours is the best activity base for its manufacturing overhead.
The estimate of annual overhead costs for its jobs was $1,025,000. The company used
1,000 hours of processing on Job No. B12 during the period and incurred overhead costs
totaling $1,050,000. The budgeted machine hours for the year totaled 20,000. How much
overhead should be applied to Job No. B12?
a. $1,050
b. $51,250
c. $52,500
d. $1,025
83. Barr Mfg. provided the following information from its accounting records for 2013:
Expected production 30,000 labor hours
Actual production 28,000 labor hours
Budgeted overhead $900,000
Actual overhead $870,000
How much is the overhead application rate if Barr bases the rate on direct labor hours?
a. $32.14 per hour
b. $30.00 per hour
c. $29.00 per hour
d. $31.07 per hour
Job Order Costing
15 – 17
84. Kinney Company applies overhead on the basis of 150% of direct labor cost. Job No. 176
is charged with $100,000 of direct materials costs and $120,000 of manufacturing
overhead. The total manufacturing costs for Job No. 176 is
a. $220,000.
b. $400,000.
c. $300,000.
d. $270,000.
85. Redman Company manufactures customized desks. The following pertains to Job No.
978:
Direct materials used $11,450
Direct labor hours worked 360
Direct labor rate per hour $15.00
Machine hours used 300
Applied factory overhead rate per machine hour $22.00
What is the total manufacturing cost for Job No. 978?
a. $21,650
b. $23,450
c. $24,950
d. $26,750
86. Henson Company applies overhead on the basis of 120% of direct labor cost. Job No. 190
is charged with $120,000 of direct materials costs and $180,000 of manufacturing
overhead. The total manufacturing costs for Job No. 190 is
a. $300,000.
b. $516,000.
c. $324,000.
d. $450,000.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
15 – 18
87. Norman Company manufactures customized desks. The following pertains to Job No.
953:
Direct materials used $18,800
Direct labor hours worked 600
Direct labor rate per hour $16.00
Machine hours used 400
Applied factory overhead rate per machine hour $30.00
What is the total manufacturing cost for Job No. 953?
a. $37,200
b. $40,400
c. $43,200
d. $46,400
88. Minton Company provided the following information from its accounting records for 2013:
Expected production 60,000 labor hours
Actual production 56,000 labor hours
Budgeted overhead $1,500,000
Actual overhead $1,450,000
How much is the overhead application rate if Minton Company bases it on direct labor
hours?
a. $25.00 per hour
b. $26.79 per hour
c. $25.89 per hour
d. $24.17 per hour
89. The labor costs that have been identified as indirect labor should be charged to
a. manufacturing overhead.
b. direct labor.
c. the individual jobs worked on.
d. salary expense.
90. Manufacturing overhead is applied to each job
a. at the time when the overhead cost is incurred.
b. by means of a predetermined overhead rate.
c. at the end of the year when actual costs are known.
d. only if the overhead costs can be directly traced to that job.
Job Order Costing
15 – 19
91. The predetermined overhead rate is based on the relationship between
a. estimated annual costs and actual activity.
b. estimated annual costs and expected annual activity.
c. actual monthly costs and actual annual activity.
d. estimated monthly costs and actual monthly activity.
92. The predetermined overhead rate is
a. determined on a moving average basis throughout the year.
b. not calculated until actual overhead costs are incurred.
c. determined at the beginning of the year.
d. determined at the end of the current year.
93. In calculating a predetermined overhead rate, a recent trend in automated manufacturing
operations is to choose an activity base related to
a. direct labor hours.
b. indirect labor dollars.
c. machine hours.
d. raw materials dollars.
94. If annual overhead costs are expected to be $800,000 and direct labor costs are expected
to be $1,000,000, then if the activity base is direct labor costs:
a. $1.25 is the predetermined overhead rate.
b. for every dollar of manufacturing overhead, 80 cents of direct labor will be assigned.
c. for every dollar of direct labor, 80 cents of manufacturing overhead will be assigned.
d. a predetermined overhead rate cannot be determined.
95. Overhead application is recorded with a
a. credit to Work in Process Inventory.
b. credit to Manufacturing Overhead.
c. debit to Manufacturing Overhead.
d. credit to job cost sheets.
96. Manufacturing overhead applied is added to direct labor incurred and to what other item to
equal total manufacturing costs for the period?
a. Goods available for sale.
b. Raw materials purchased.
c. Work in process.
d. Direct materials used.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
15 – 20
97. Simmons Inc. applies overhead to production at a predetermined rate of 90% based on
direct labor cost. Job No. 250, the only job still in process at the end of August, has been
charged with manufacturing overhead of $7,200. What was the amount of direct materials
charged to Job 250 assuming the balance in Work in Process inventory is $30,000?
a. $7,500.
b. $8,000.
c. $14,800.
d. $30,000.
98. Spencer Inc. applies overhead to production at a predetermined rate of 80% based on
direct labor cost. Job No. 130, the only job still in process at the end of August, has been
charged with manufacturing overhead of $5,000. What was the amount of direct materials
charged to Job 130 assuming the balance in Work in Process inventory is $20,000?
a. $5,000.
b. $6,250.
c. $8,750.
d. $20,000.
99. For Jacobs Company, the predetermined overhead rate is 70% of direct labor cost. During
the month, $300,000 of factory labor costs are incurred of which $70,000 is indirect labor.
Actual overhead incurred was $160,000. The amount of overhead debited to Work in
Process Inventory should be:
a. $161,000
b. $160,000
c. $210,000
d. $230,000
100. Simpson Company applies overhead on the basis of 200% of direct labor cost. Job No.
305 is charged with $150,000 of direct materials costs and $200,000 of manufacturing
overhead. The total manufacturing costs for Job No. 305 is:
a. $350,000
b. $450,000
c. $500,000
d. $550,000