Question 1

The difference between the sales price and the job cost is

Accepted Answer

The difference between the sales price and the job cost is referred to as gross profit. Cost of goods sold is the direct cost associated with producing goods or services, net income is the total profit after all expenses and taxes have been deducted, and operating income is the profit earned from a company's regular business operations.

Question 2

Job 2301 requires $12,000 of direct materials, $5,000 of direct labour, 500 direct labour hours, and 300 machine hours. Manufacturing overhead is computed at $15 per direct labour hour used and $12 per machine hour used. The total cost of Job 1547 is

Accepted Answer

A) $12,000 + 5,000 + ($15 × 500 ) + ($12 × 300) = $28,100

Question 3

A local attorney employs ten full-time professionals. The budgeted compensation per employee is $75,000. The maximum billable hours for each client are 200. Clients always receive their full amount of time. All professional labour costs are included in a single direct cost category and are traced to jobs on a per-hour basis. Any other costs are included in a single indirect cost pool, allocated according to professional labour-hours. Budgeted indirect costs for the year are $1,000,000 and the firm had 20 clients.
Required:
a. What is the direct labour budgeted cost rate per hour?
b. What is the indirect cost pool budgeted cost rate per hour?

Accepted Answer

The answer of A local attorney employs ten full-time professionals....

Question 4

Wesley Corporation charged Job 110 with $12,000 of direct materials and $13,500 of direct labour. Allocation for manufacturing overhead is 80% of direct labour costs. What is the total cost of Job 110?

Accepted Answer

C) $12,000 + 13,500 + 80% (13,500) = $36,300

Question 5

Carlisle Carts manufactures custom carts for a variety of uses. The following data have been recorded for Job 557, which was recently completed. Direct materials used cost $6,300. There were 180 direct labour hours worked on this job at a direct labour wage rate of $20 per hour. There were 75 machine hours used on this job. The predetermined overhead rate is $32 per machine hour used. What is the total manufacturing cost of Job 557?

Accepted Answer

B) $6,300 + (180 × $20) + (75 × $32) = $12,300

Question 6

If a job consists of a batch of identical units, managers find the unit cost by

Accepted Answer

When a job consists of a batch of identical units, the unit cost can be found by dividing the total job cost by the number of units in the job. This is because there is no variation in the cost of direct materials or direct labor for each unit, as they are all identical. Therefore, tracing direct materials or direct labor to each unit (options A and C) is unnecessary and would result in the same unit cost as dividing the total job cost by the number of units in the job. Multiplying the total job cost by the number of units in the job (option B) would result in the total cost for all units, rather than the unit cost.

Question 7

The cost-plus price is determined as

Accepted Answer

The cost-plus price is determined by adding the markup on cost to the cost of producing the product. This is represented mathematically as Cost + (Cost x Markup on Cost). Therefore, choice A is the correct option.

Question 8

The total cost of a job shown on the job cost record is the sum of the direct materials and direct labour traced to the job.

Accepted Answer

The total cost of a job shown on the job cost record includes the sum of the direct materials, direct labor traced to the job, and an allocated portion of manufacturing overhead.

Question 9

In terms of direct and indirect costs, what is the difference between an actual cost system and a system that uses a predetermined manufacturing overhead rate?

Accepted Answer

The answer of In terms of direct and indirect costs,...

Question 10

In a job-costing system, explain why it is necessary to apply indirect costs to production through the use of a budgeted indirect-cost rate.

Accepted Answer

The answer of In a job-costing system, explain why it...

Question 11

Sambell Manufacturing uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs. At the beginning of the year, the company expected to incur the following:
  
Required:
1. Compute Sambell's indirect cost allocation rate based on labour cost.
2. Compute Sambell's indirect cost allocation rate based on machine hours.
3. How much overhead was allocated during the year if the allocation base was direct labour cost?
4. How much manufacturing overhead was incurred during the year?

Accepted Answer

The answer of Sambell Manufacturing uses a predetermined manufacturing overhead...

Question 12

Fulton Corporation uses estimated direct labour hours of 210,000 and estimated manufacturing overhead costs of $840,000 in establishing manufacturing overhead rates. Actual manufacturing overhead was $960,000, and allocated manufacturing overhead was $980,000. What were the number of actual direct hours worked?

Accepted Answer

B) $840,000/210,000 = $4; $980,000/$4 = 245,000

Question 13

Job 241 has an ending balance of $26,000. It has been charged manufacturing overhead costs of $6,000. The rate is 75% of direct labour. What was the amount of direct materials charged to the job?

Accepted Answer

The amount of direct materials charged to the job can be calculated by subtracting the total of direct labor and manufacturing overhead costs from the ending balance. Given that the manufacturing overhead rate is 75% of direct labor, let's denote the direct labor cost as DL. Therefore, the manufacturing overhead costs are 0.75 * DL = $6,000. Solving this equation gives us DL = $8,000. The ending balance of $26,000 includes direct materials, direct labor, and manufacturing overhead costs. Subtracting the direct labor ($8,000) and manufacturing overhead costs ($6,000) from the ending balance gives us the direct materials cost: $26,000 - $8,000 - $6,000 = $12,000.

Question 14

The total cost of a job shown on the job cost record is the sum of the direct materials and direct labour traced to the job plus the manufacturing overhead allocated to the job.

Accepted Answer

This statement is correct as the total cost of a job includes direct materials and direct labor which are traced to the job and manufacturing overhead which is allocated to the job based on a predetermined overhead rate.

Question 15

The gross profit on the sale of a job is the difference between the sales price and the total cost reported on the job cost record.

Accepted Answer

Gross profit is calculated by subtracting the total cost from the sales price. Therefore, the statement is true.

Question 16

Management can use the job cost information to control costs on future jobs.

Accepted Answer

Job cost information provides valuable insights into the actual cost of completing a particular job. By analyzing this information, management can identify areas where cost overruns occurred and take corrective action to control costs on future jobs. This helps to improve profitability, minimize waste, and ensure that projects are completed on time and within budget. Therefore, it is true that management can use job cost information to control costs on future jobs.

Question 17

Northern Manufacturing uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs. At the beginning of the year, the company expected to incur the following:
  Required:
1. Compute Northern's indirect cost allocation rate based on labour cost.
2. Compute Northern's indirect cost allocation rate based on machine hours.
3. How much overhead was allocated during the year if the allocation base was machine hours?
4. How much manufacturing overhead was incurred during the year?

Accepted Answer

The answer of Northern Manufacturing uses a predetermined manufacturing overhead...

Question 18

If a job consists of a batch of identical units, managers find the unit cost by dividing the total job cost by the number of units in the job.

Accepted Answer

This is true. The unit cost is found by dividing the total job cost by the number of units in the job when the units are identical.

Question 19

Using subsidiary manufacturing overhead accounts facilitates providing information needed for sustainability purposes.

Accepted Answer

Subsidiary manufacturing overhead accounts provide detailed information on the allocation and usage of overhead costs, which can be useful in measuring and improving sustainability efforts in areas such as energy consumption and waste reduction.

Question 20

The total cost of a job shown on the job cost record is the sum of the direct materials traced to the job and the manufacturing overhead allocated to the job.

Accepted Answer

The total cost of a job shown on the job cost record includes the sum of the direct materials traced to the job, the direct labor attributed to the job, and the manufacturing overhead allocated to the job.

Quiz 5: Job Costing