Deck 2: Job Order Costing and Analysis

Question 1

Job order costing would be appropriate for companies that produce pencils.

Answer 1

False

Question 2

Job order costing would be appropriate for companies that produce custom homes and specialized equipment.

Answer 2

True

Question 3

A company that uses a cost accounting system normally has only two inventory accounts: Finished Goods Inventory and Work in Process Inventory.

Answer 3

False

Question 4

The total costs on job cost sheets for jobs that are completed but not yet sold equals the balance in the Work in Process Inventory account.

Question 5

Cost accounting systems accumulate production costs and then assign them to products and services.

Question 6

The direct materials section of a job cost sheet shows the materials costs assigned to a specific job, but the direct labor section only shows the total hours of labor allocated to the job.

Question 7

Job order costing would be appropriate for companies that produce training films for a specific customer or custom-made furniture.

Question 8

When a job involves producing more than one unit of a custom product, it is often called a job lot.

Question 9

A job cost sheet does not contain information that is useful for managing the production process.

Question 10

A company that produces a large number of standardized units would normally use a job order costing system.

Question 11

The total manufacturing costs on job cost sheets for unfinished jobs equals the total amount in the Work in Process Inventory account in the general ledger.

Question 12

A company that produces products individually designed to meet the needs of a specific customer, would normally use a job order costing system.

Question 13

The total costs on job cost sheets for jobs that are not yet completed equals the balance in the Finished Goods Inventory account.

Question 14

The total costs on job cost sheets for jobs that are completed but not yet sold equals the balance in the Finished Goods Inventory account.

Question 15

A job order costing system would be appropriate for a manufacturer of automobile tires.

Question 16

There are two basic types of cost accounting systems: job order costing and periodic costing.

Question 17

The total costs on job cost sheets for jobs that are not yet completed equals the balance in the Work in Process Inventory account.

Question 18

Cost accounting information is helpful to management for pricing decisions but has no effect on controlling costs.

Question 19

Job cost sheets are used to track all of the costs assigned to a job, including direct materials, direct labor, overhead, and all selling and administrative costs.

Question 20

There are two basic types of cost accounting systems: job order costing and process costing.

Question 21

Only product costs are recorded on job cost sheets.

Question 22

Both direct and indirect labor costs are recorded on individual job cost sheets.

Question 23

A materials requisition is a source document used for recording materials received.

Question 24

A time ticket is a source document used by an employee to record the number of hours worked on a particular job during the work day.

Question 25

The journal entry to record indirect materials used includes a debit to Work in Process Inventory.

Question 26

A time ticket is a source document that an employee uses to report how much indirect labor was performed for a job.

Question 27

Requisitions of indirect materials are not recorded on job cost sheets.

Question 28

Job order costing applies to manufacturing firms only and not to service firms.

Question 29

Job order costing is used to determine the cost of producing each job or job lot.

Question 30

Job cost sheets include both product and period costs.

Question 31

The journal entry to record the purchase of materials includes a debit to Work in Process Inventory.

Question 32

In nearly all job order cost systems, materials ledger cards are perpetual records that are updated each time materials are purchased or issued for use in production.

Question 33

Materials requisitions and time tickets are cost accounting source documents.

Question 34

Time tickets can be used to determine the amount of direct labor to charge to jobs.

Question 35

A receiving report is the source document for recording materials received in both a materials ledger card and in the general ledger.

Question 36

A materials requisition is a source document used by production managers to request materials for production and also used to assign materials costs to specific jobs or to overhead.

Question 37

The journal entry to record direct materials used includes a debit to Work in Process Inventory.

Question 38

Service firms cannot use job order costing for determining a selling price for their services.

Question 39

The total cost of completed but undelivered jobs equals the balance in the Work in Process Inventory account.

Question 40

The cost of all direct materials issued to production is debited to Work in Process Inventory.

Question 41

Factory overhead is often collected and summarized in a subsidiary factory overhead ledger.

Question 42

A time ticket is a source document used to record the total number of hours worked and serves as a source document for entries to record direct labor costs.

Question 43

The predetermined overhead rate is revised many times during the period to compensate for inaccurate estimates previously made.

Question 44

The predetermined overhead rate based on direct labor cost is the ratio of estimated overhead cost to estimated direct labor cost for the period.

Question 45

Under a job order costing system, individual jobs are charged with actual overhead costs when they are transferred to finished goods.

Question 46

Predetermined overhead rates are calculated at the end of the accounting period once the actual amount of factory overhead is known.

Question 47

Predetermined overhead rates are necessary because cost accountants use periodic inventory systems.

Question 48

In a job order costing system, indirect labor costs are debited to the Factory Overhead account.

Question 49

When actual overhead cost exceeds the overhead applied, overhead is said to be underapplied.

Question 50

Overapplied overhead is the amount by which actual overhead cost exceeds the overhead applied to products during the period.

Question 51

In a job order costing system, any immaterial underapplied overhead at the end of the period can be debited entirely to Cost of Goods Sold.

Question 52

Direct materials and direct labor costs are debited to the Factory Overhead account in a job costing system.

Question 53

There should be a "cause and effect" relation between the overhead allocation base and overhead costs.

Question 54

When direct labor costs are recorded, the journal entry is a debit to Factory Wages Payable and a credit to Work in Process Inventory.

Question 55

Underapplied overhead is the amount by which actual overhead cost exceeds the overhead applied to products during the period.

Question 56

If actual overhead incurred during a period exceeds applied overhead, the difference will be a credit balance in the Factory Overhead account at the end of the period.

Question 57

Actual factory overhead incurred in a job costing system is debited to a Factory Overhead general ledger account and credited to various other accounts.

Question 58

The predetermined overhead rate is used to apply estimated overhead cost to jobs.

Question 59

Predetermined overhead rates are calculated before the start of the accounting period, and are therefore based on estimates.

Question 60

When actual overhead cost exceeds the overhead applied, overhead is said to be overapplied.

Question 61

Job order costing would be used for all of the following except:

A) Construction of a custom home.
B) Production of running shoes.
C) Production of a Pixar movie.
D) Production of wedding invitations.
E) Conducting an audit.

Question 62

Features of job order production include all of the following except:

A) Diversity of products produced.
B) Mass production.
C) Heterogeneity.
D) Customization.
E) Separate manufacturing from other products.

Question 63

The schedule of cost of goods manufactured for a job costing system includes total actual factory overhead.

Question 64

Overapplied overhead is the amount by which overhead applied to jobs using the predetermined overhead rate exceeds the actual overhead incurred during a period.

Question 65

Underapplied overhead is the amount by which overhead applied to jobs exceeds the actual overhead incurred during a period.

Question 66

If overhead is overapplied, it means that individual jobs have not been charged enough overhead during the year and the cost of goods sold reported is too low.

Question 67

The Factory Overhead account will have a debit balance at the end of a period if overhead applied during the period is greater than the overhead incurred.

Question 68

If overhead is underapplied, it means that individual jobs have not been charged enough during the year and the cost of goods sold reported is too low.

Question 69

If overhead is overapplied, it means that individual jobs have been charged too much overhead during the year and the cost of goods sold reported is too high.

Question 70

Overapplied or underapplied overhead should be removed from the Factory Overhead account at the end of each accounting period.

Question 71

The Factory Overhead account will have a credit balance at the end of a period if overhead applied during the period is greater than the overhead incurred.

Question 72

Cost accounting systems are used to:

A) Accumulate production and period costs and assign them to products or services.
B) Accumulate production costs and assign them to products or services.
C) Accumulate period cost and assign them to products or services.
D) Accumulate production costs and assign them to Raw Materials Inventory.
E) Analyze efficiency and effectiveness of inventory management.

Question 73

If actual overhead incurred during a period exceeds applied overhead, the difference will be a debit balance in the Factory Overhead account at the end of the period.

Question 74

Period costs for a manufacturing company, such as selling and administrative expenses, are recorded directly to Work in Process Inventory when they are incurred.

Question 75

A system of accounting for production operations that produces timely information about inventories and manufacturing costs per unit of product is a:

A) Finished goods accounting system.
B) General accounting system.
C) Manufacturing accounting system.
D) Cost accounting system.
E) Production accounting system.

Question 76

When overhead is underapplied at the end of a period, the adjusting journal entry includes a credit to Cost of Goods Sold.

Question 77

If overhead is underapplied, it means that individual jobs have been charged too much during the year and the cost of goods sold reported is too high.

Question 78

Manufacturing costs incurred for jobs completed during an accounting period can bypass the inventory accounts on the balance sheet and be recorded directly in expense accounts.

Question 79

The two basic types of cost accounting systems are:

A) Job order costing and perpetual costing.
B) Job order costing and customized product costing.
C) Job order costing and customized service costing.
D) Job order costing and process costing.
E) Job order costing and periodic costing.

Question 80

Compared to a general accounting system, a cost accounting system for a manufacturing company emphasizes:

A) Periodic inventory counts.
B) Total costs.
C) Continually updating costs of materials, work in process, and finished goods inventories.
D) Products and average costs.
E) Large volume operations involving standardized products.