ACCT EXAM 3

process-costing system

Firms in process industries mass-produce large quantities of similar or homogeneous products EX: Food canning and manufacturing

underapplied overhead

If actual overhead is $400,000 for the year but $390,000 was applied to production If overhead has been underapplied, then product cost has been understated.

overapplied overhead

If actual overhead is $400,000 for the year but $410,000 was applied to production If overhead has been overapplied, then product cost has been overstated.

predetermined overhead rate

calculated at the beginning of the year by dividing the total estimated annual overhead by the total estimated level of associated activity or cost driver Overhead Rate = Estimated Annual Overhead ÷ Estimated annual activity level

job-order accounting system

company's products/ services are unique

job-order costing system

costs are accumulated by job EX: furniture making

Which of the following costs is not included on job order cost sheet? a. Direct materials cost b. Applied plantwide overhead costs c. Direct labor costs d. Actual plant wide overhead costs

d. Actual plant wide overhead costs

Which of the following is true? a. The adjusted cost of goods sold is equal to normal cost of goods sold plus or minus the overhead variance. b. Variances in overhead are expected every month. c. If the overhead variance shows overapplied overhead, then that amount would be subtracted from normal cost of goods sold. d. All of these choices are correct. e. None of these choices are correct.

d. All of these choices are correct.

process-costing accounting system

firms producing similar products or services

Applied overhead

is found by multiplying the predetermined overhead rate by the actual use of the associated activity for the period: Applied overhead = Predetermined overhead rate x Actual activity level

Total costs

=Actual direct materials + Actual direct labor + Applied overhead

job-order cost sheet

Accounting for job-order production begins by preparing the source documents that are used to keep track of the costs of jobs

A normal job-order costing system is a system that uses:

Actual costs for direct materials and direct labor and estimated costs for overhead.

materials requisition form

The cost of direct materials is assigned to a job by the use of a source document

overhead variance

The difference between actual overhead and applied overhead.

time ticket

The means by which direct labor costs are assigned to individual jobs

Unit costs are measured using the following equation

Unit costs = Process Costs ÷ Output

Which of the following is not true about job-order costing? a . It is used in firms that produce homogeneous products. b. The cost of each job is accumulated on the job order cost sheet. c. The key document for accumulating manufacturing costs is the job order cost sheet. d. All of these are correct. e. None of these are correct.

a . It is used in firms that produce homogeneous products.

Using normal costing requires that a. Actual overhead costs are not assigned directly to jobs. b. Applied overhead is not calculated on a job specific basis. c. Neither plantwide or departmental rates can be used to assign overhead. d. Predetermined rates are not used to assign overhead.

a. Actual overhead costs are not assigned directly to jobs.

Using normal costing requires that a. Actual overhead costs are not assigned directly to jobs. b. Applied overhead is not calculated on a job specific basis. c. Neither plantwide or departmental rates can be used to assign overhead. d. Predetermined rates are not used to assign overhead. e. All of these choices are correct.

a. Actual overhead costs are not assigned directly to jobs.

The document that lets the total cost for a single job is a a. job order cost sheet b. material requisition form c. Time ticket d. purchase order e. none of these are correct

a. job order cost sheet

The overhead variance is least likely to be a. zero (actual overhead equals applied overhead). b. over applied. c. Immaterial. d. Under applied and material

a. zero (actual overhead equals applied overhead).

Using normal costing, which costs never enter the work-in-process account? a. Applied Overhead b. Actual Overhead c. Direct Labor d. Direct Materials e. None of these choices are correct.

b. Actual Overhead

Which of the following or is it a trace individual jobs? a. Direct materials and overhead b. Direct materials and direct labor c. Direct to labor and overhead d. overhead and indirect labor e. depreciation on machinery and indirect labor

b. Direct materials and direct labor

Which is the following is not a characteristic of a job order costing? a. Wide variety of distant products. b. Unit cost is computed by dividing process costs of the period by the units produced in the period. c. Unit cost is computed by dividing total job cost by units produced on that job. d. Costs accumulated by job. e. Typically, the cost of one job is different from that of another job.

b. Unit cost is computed by dividing process costs of the period by the units produced in the period.

Wanted job is completed but not sold, the job order class she moves from which account to which other account? a. Raw materials and working process. b. Work in process and finished goods. c. Work in process in cost of goods sold. d. Finished goods in cost of goods sold. e. Finished goods and overhead control.

b. Work in process and finished goods.

Which of the following sentences is not true? a. The cost of a job includes direct materials, direct labor, and applied overhead. b. When a job is complete, it must leave Work-in-Process and be entered into Finished Goods or Cost of Goods Sold. c. Actual overhead costs always enter the Work-in-Process account. d. All of these choices are correct.

c. Actual overhead costs always enter the Work-in-Process account.

The predetermined overhead rate is usually calculated a. At the end of each month. b. At the beginning of each month. c. At the beginning of the year. d. At the end of the current year.

c. At the beginning of the year.

How are you costs calculated? a. By dividing total costs associated with the units produced by the unit cost. b. By adding on variable cost per unit associated with the units produced. c. By dividing total fixed costs by the number of units produced. d. By dividing total costs associated with the units produced by the number of units produced. e. By adding unit variable costs to total fixed costs.

d. By dividing total costs associated with the units produced by the number of units produced.

Which of the following statements is true? a. Work-in-process consists of all complete work. b. Direct labor is allocated to jobs along with overhead using a cost driver. c. There will be many different jobs on a job-order cost sheet. d. Time tickets are used to post the cost of direct labor to individual jobs. e. None of these choices are correct.

d. Time tickets are used to post the cost of direct labor to individual jobs.

Firms in the ___ business are most likely to use process-costing system. a. printing b. dental c. construction d. petroleum e. auto repair

d. petroleum

normal cost system

determines unit cost by adding actual direct materials, actual direct labor, and estimated overhead.

plantwide overhead rate

dividing all estimated overhead for a factory by the estimated activity level across the entire factory

Manufacturing overhead a. consists of all costs other than direct materials. b. Consists of all manufacturing costs other than direct materials. d. Consists of all costs other than direct materials and direct labor. e. Consist of all manufacturing costs other than direct materials and direct labor

e. Consist of all manufacturing costs other than direct materials and direct labor

departmental overhead rate

estimated overhead for a department divided by the estimated activity level for that same department.