Question 1

The advantages of a just-in-time inventory system include all of the following except:

Accepted Answer

A just-in-time inventory system aims to minimize inventory levels and maintain only the necessary inventory to meet customer demand. This approach can lead to a reduction in storage and warehousing costs, as well as a reduction in working capital requirements and costs associated with recordkeeping. However, one disadvantage of this system is the increased risk of stockouts, which can result in lost sales and dissatisfied customers. Therefore, option B, the cost associated with stockouts, is not an advantage of a just-in-time inventory system.

Question 2

Materials may be withdrawn from the storeroom only on completion of a materials ___________________.

Accepted Answer

The answer of Materials may be withdrawn from the storeroom...

Question 3

At the end of the fiscal year,any immaterial overapplied or underapplied overhead is

Accepted Answer

Immaterial overapplied or underapplied overhead is closed to the Cost of Goods Sold account at the end of the fiscal year. This is because it is not significant enough to impact the balance sheet, and it is more appropriate to recognize it as an expense in the income statement.

Question 4

Job order cost accounting is appropriate

Accepted Answer

Job order cost accounting is used when a company produces different products in batches rather than on a continuous basis. This method is suitable when different products require different materials, labor, and overhead costs. It allows companies to track the cost of each batch or job separately, which enables them to determine the profitability of each product line or job. Job order cost accounting is not limited to goods produced on special order, and it is not used for all manufacturing companies.

Question 5

Actual labor and manufacturing overhead costs for Smith Manufacturing were $65,000 and $123,500 respectively.The estimated costs for the year were $75,000 labor and $150,000.The over (under)applied overhead for the year was:

Accepted Answer

To calculate the over(under)applied overhead, we need to subtract the actual overhead amount from the estimated overhead amount:
$150,000 - $123,500 = $26,500 overapplied
Therefore, the correct answer is B.

Question 6

Jacson Corp.was undecided whether to use labor hours or labor cost in establishing the annual overhead rate.Labor costs are prone to fluctuate based on new hires,raises,retirements,and personnel leaving.They decided to compute both rates.The overhead costs for the year were estimated at $525,000 with expected direct labor hours of 35,000 and indirect hours of 15,000.Direct and indirect labor costs are estimated to be $420,000 and $210,000 respectively.The overhead application rate using either base (labor hours,labor cost)would be:

Accepted Answer

The overhead application rate using labor hours would be $15 per hour ($525,000 / 35,000 hours). The overhead application rate using labor cost would be 125% of labor cost ($525,000 / $420,000).

Question 7

At the end of the accounting period,the balance in the Raw Materials inventory account reflects the cost of materials

Accepted Answer

The Raw Materials inventory account reflects the cost of materials on hand and available for use at the end of the accounting period. This includes materials that have been purchased during the period, as well as any materials that were not used or issued to production. The cost of materials that have been assigned to manufacturing overhead or issued to production would be reflected in other accounts (such as Work in Process or Manufacturing Overhead).

Question 8

Workers who perform direct labor prepare a series of ____________________ to account for all time spent in the plant.

Accepted Answer

The answer of Workers who perform direct labor prepare a...

Question 9

When materials that will become part of a finished product are removed from the storeroom and placed in production,

Accepted Answer

When materials are placed into production, they are considered part of the Work in Process Inventory, which is debited to reflect the increase in production costs.

Question 10

The entry to record the application of overhead to jobs consists of

Accepted Answer

The application of overhead to jobs involves debiting Work in Process Inventory and crediting Manufacturing Overhead Applied, reflecting the allocation of overhead costs to production.

Question 11

A standard cost system may be used

Accepted Answer

A standard cost system can be used with either a job order cost system or a process cost system. It involves setting predetermined standards for the costs of direct materials, direct labor, and manufacturing overhead and then comparing those standards to actual costs incurred. This allows for better cost control and variance analysis.

Question 12

A job order cost sheet summarizes

Accepted Answer

A job order cost sheet summarizes the direct labor, direct materials used, and applied overhead associated with a specific job. It includes the cost of materials used, direct labor, and all applicable overhead costs associated with a specific job order. It also provides a record of the total costs incurred and the unit cost of production for the job. Option A only includes the actual overhead costs incurred, whereas option C deals with estimated costs needed for a job, and option D only considers direct labor and materials used.

Question 13

When perpetual inventories are maintained in a job order cost system,the balance of the Work in Process Inventory account represents

Accepted Answer

The answer of When perpetual inventories are maintained in a...

Question 14

At the end of the accounting period,the balance in the Work in Process inventory account reflects the cost

Accepted Answer

The Work in Process inventory account reflects the cost of partially completed units at the end of the accounting period. This means that the total cost incurred up to that point for units that are still in process of being manufactured is recorded in the Work in Process account. Once the units are completed, their costs are transferred to the Finished Goods inventory account. Therefore, the balance in the Work in Process account is not the cost of goods manufactured nor completed units nor goods sold.

Question 15

When indirect materials are requisitioned from the materials storeroom and placed in production,an entry is made crediting Raw Materials Inventory and debiting

Accepted Answer

Indirect materials are part of manufacturing overhead, so when they are used, the Manufacturing Overhead account is debited.

Question 16

Actual overhead costs are

Accepted Answer

Actual overhead costs are debited to the Manufacturing Overhead account when incurred. This is because overhead costs cannot be directly traced to a specific product or job, and so they are accumulated in the Manufacturing Overhead account until they can be allocated to the appropriate cost objects using a predetermined overhead rate.

Question 17

A firm purchased 25 units of materials with a unit price of $2.00 on May 5.On May 15,the firm purchased 25 units with a unit price of $2.10.If the firm uses the FIFO method of inventory pricing,the total cost of 30 units issued on May 20 would be

Accepted Answer

The answer of A firm purchased 25 units of materials...

Question 18

The following are benefits of a standard cost system except:

Accepted Answer

A standard cost system can assist in consistently costing products, identifying manufacturing inefficiencies, and setting selling prices. However, it typically involves additional accounting workload to establish and maintain cost standards, so it does not reduce accounting workload.

Question 19

When a perpetual inventory system is used,sales revenue is recorded as products are sold,

Accepted Answer

In a perpetual inventory system, the cost of goods sold is recorded and transferred from the Finished Goods Inventory account to the Cost of Goods Sold account at the time of sale. This allows for real-time tracking of inventory levels and costs.

Question 20

A job order cost sheet would be utilized to track the cost of the following costs except for:

Accepted Answer

A job order cost sheet is used to track the direct costs of a specific job, such as material, labor, and overhead costs. Sales commission is not a direct cost of the job and would not be tracked on the job order cost sheet.

Quiz 27: Job Order Cost Accounting