Question 1

How many of these control accounts are used in job costing?
i. Factory Overhead
ii. Work in process Inventory
iii. Finished Goods Inventory
iv. Raw Materials Inventory

Accepted Answer

All four control accounts (Factory Overhead, Work in process Inventory, Finished Goods Inventory, and Raw Materials Inventory) are used in job costing.

Question 2

Which industry generally uses a job costing system?

Accepted Answer

Custom-built furniture manufacturing typically uses a job costing system because the cost of each individual piece of furniture can vary greatly based on materials used, labor hours, and customization requests from the customer. Oil refining, motor vehicle manufacturing, and soft drink manufacturing typically use process costing systems.

Question 3

The costing system used when entities provide goods or services in response to customer orders and specifications is known as:

Accepted Answer

Job costing is the costing system used when entities provide goods or services in response to customer orders and specifications. In job costing, each unit produced is considered a separate job and costs are accumulated for each job separately. This allows for accuracy in tracking costs and pricing products or services.

Question 4

Which of these is not a manufacturing overhead cost?

Accepted Answer

Direct materials are not considered manufacturing overhead costs because they are directly related to the production of a product and are therefore considered part of the cost of goods sold. Manufacturing overhead costs are indirect costs that cannot be directly traced to a specific product, such as factory rent, utilities, and indirect labor costs.

Question 5

The total of the dollar amounts on the job order cards for jobs that had not been completed would be equal to:

Accepted Answer

The balance in the work in process inventory account represents the cost of jobs that have been started but not yet completed. Therefore, the total of the dollar amounts on the job order cards for jobs that had not been completed would be equal to the balance in the work in process inventory account.

Question 6

Accepted Answer

The answer of 
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Question 7

Carlo Limited supplied the following information and advised that manufacturing overhead is applied on the basis of direct labour hours.
Estimated manufacturing overhead costs $2 295 000
Estimated direct labour hours 340 000
Actual direct labour hours 348 000
Actual manufacturing overhead costs $2 357 000
What is the predetermined overhead rate?

Accepted Answer

The answer of Carlo Limited supplied the following information and...

Question 8

In a factory with several processes, there may be one or more service departments that do not process the materials directly. Which of the following is not an example of a service department?

Accepted Answer

The smelting department is a processing department that directly processes materials, so it is not an example of a service department. The factory office, power plant, and repair shop are all examples of service departments.

Question 9

Which best describes the set of costs that are debited directly to work in process inventory?

Accepted Answer

The set of costs that are debited directly to work in process inventory typically includes actual direct materials, actual direct labor, and applied overhead. This is because these costs are directly attributable to the production process. Indirect costs, such as indirect materials and indirect labor, are not debited directly to work in process but are allocated as part of overhead.

Question 10

The type of product costing system used by a company is dictated by the:

Accepted Answer

The type of product costing system used by a company is dictated by the production process. The chosen costing system must be able to accurately capture the costs incurred in the production of each unit of the product.

Question 11

Match the following.

Accepted Answer

Job order costing and process costing are both commonly used in manufacturing to determine the cost of production. Job order costing is used for custom-made products, while process costing is used for mass-produced products.

Answer: B
 Job order costing and variable costing are both used to determine the cost of production for individual products. Variable costing only considers the variable costs associated with production, while absorption costing includes both variable and fixed costs.

Answer: C
 Absorption costing and process costing are both used in manufacturing to determine the cost of production. Absorption costing includes both variable and fixed costs associated with production, while process costing is used for mass-produced products.

Answer: D
 Variable costing only considers the variable costs associated with production, while indirect costing includes both direct and indirect costs associated with production.

Question 12

A job costing system tracks:

Accepted Answer

A job costing system tracks direct labor, the use of materials, and the conversion of the inputs into work-in-process. This allows for accurate tracking and allocation of costs to each individual job or project.

Question 13

In the year 2014, Arden Panel Works planned the following.
Factory overhead costs $180 000
Direct labour costs (15 000 hours at $8.00 per hour) $120 000
Machine Hours 48 000
Direct material costs $108 000
The predetermined overhead rate is based on direct labour hours and planned production during 2014 of 12 000 units. The direct material cost in each unit would be:

Accepted Answer

The answer of In the year 2014, Arden Panel Works...

Question 14

Which account is not classified as an asset?

Accepted Answer

Cost of sales is not classified as an asset, but rather as an expense that is deducted from revenue to determine a company's gross profit. Materials, work in process, and finished goods are all classified as assets in the manufacturing process.

Question 15

Match the business with the most likely type of costing system.
1) Oil refinery
2) Automotive brake repairer
3) Bathroom renovator
4) Commercial printer
5) Management consultant
I Job costing
II Process costing

Accepted Answer

1) Oil refinery - Process costing, as the refining process involves continuous production.
2) Automotive brake repairer - Job costing, as each repair job is unique and requires custom pricing.
3) Bathroom renovator - Job costing, as each renovation project is unique and requires custom pricing.
4) Commercial printer - Job costing, as each printing order is unique and requires custom pricing.
5) Management consultant - Job costing, as each consulting project is unique and requires custom pricing.

Question 16

When Job 105 at the Blyth Cabinet Company emerges with its final finishing touches completed, the company's:

Accepted Answer

When Job 105 is completed, it moves out of the work in process (WIP) category, thereby decreasing the amount of work in process. This reflects the transition of the job from an unfinished state to a finished state, ready for sale or delivery.

Question 17

The overhead budget, based on a budgeted volume of 100 000 direct labour hours, was $255 000. Actual overhead costs amounted to $270 000 and actual direct labour hours were 105 000. By how much was overhead under or overapplied?

Accepted Answer

The predetermined overhead rate is calculated as follows:
$255,000 / 100,000 direct labour hours = $2.55 per direct labour hour

The actual overhead cost incurred is $270,000, which is higher than the budgeted overhead cost of $255,000. However, the actual direct labour hours worked are also higher than the budgeted hours, meaning that more overhead cost would be expected.

To calculate the amount of overhead applied, we multiply the actual direct labour hours by the predetermined overhead rate:
$2.55 per direct labour hour x 105,000 actual direct labour hours = $267,750 applied overhead

To find if there is under or overapplied overhead, we compare the applied overhead to the actual overhead:
$270,000 actual overhead - $267,750 applied overhead = $2,250 underapplied overhead

Therefore, the answer is C, $2250 underapplied.

Question 18

In a job cost system the overhead costs are assigned using:

Accepted Answer

In a job cost system, overhead costs are assigned using a predetermined overhead rate. This rate is calculated by dividing the estimated total overhead costs by the estimated total direct labor hours, machine hours, or another appropriate measure of activity. This method allows for a more accurate allocation of overhead costs to individual jobs based on their respective levels of activity.

Question 19

The McIntyre Manufacturing Company distributes overhead based on direct labour dollars. The estimated manufacturing overhead for the year was $484 000 and the estimated direct labour dollars for the year were $110 000. Indicate the amount of underapplied or overapplied overhead if actual direct labour was $98 000 and actual manufacturing overhead was $418 800.

Accepted Answer

The overhead application rate is calculated as estimated manufacturing overhead divided by estimated direct labour dollars, which is $484,000 / $110,000 = 4.4. With actual direct labour at $98,000, the applied overhead is $98,000 * 4.4 = $431,200. The actual manufacturing overhead was $418,800, so the difference is $431,200 - $418,800 = $12,400, indicating overhead was overapplied.

Question 20

Which of the following statements concerning the job cost order is incorrect?

Accepted Answer

Job cost orders do not trace all costs to jobs; they only trace direct costs. Indirect costs are allocated to jobs using predetermined overhead rates.

Quiz 9: Cost Accounting Systems

How many of these control accounts are used in job costing? i. Factory Overhead ii. Work in process Inventory iii. Finished Goods Inventory iv. Raw Materials Inventory