BUAD 281 Chapter 3
A company incurred $15,000 worth of labor cost of which $12,000 is for direct labor and $3,000 is for indirect labor. The journal entry to record this includes a debit to Work-in-Process Inventory for $
12,000
True or false: The only organizations that use product costing are manufacturing firms.
False: Product costing is used by service firms, nonprofits, governmental entities, etc. The use of product costing helps ensure that the benefits of decisions regarding the use of organizational resources exceed the cost of those resources.
True or false: Raw-Materials inventory is moved into production by crediting Work-in-Process inventory.
False: Raw-Materials inventory is credited and Work-in-Process inventory is debited.
Which of the following entries is made upon completion of a job?
Finished goods inventory Work-in-process inventory
Which of the following entries reflect the use of indirect materials in production?
Manufacturing Overhead Manufacturing Supplies Inventory
Which account(s) is/are credited when a production job is completed?
Work-in-Process Inventory
The most accurate assignment of overhead costs is generally achieved by using ______.
activity-based costing
The overhead rate is computed at the end of the period when using ______.
actual costing only
The first stage in a two-stage cost allocation involves ______.
assigning overhead costs to the production departments
Job order costing ______. a) accumulates costs for large quantities of similar products and calculates an average cost per unit b) is frequently used in service industries c) accumulates costs by each distinct batch of production d) is used in the production of custom products
b, c, and d
The calculation of the predetermined overhead rate is ______.
budgeted manufacturing overhead costs/budgeted amount of cost driver
Job-order costing is used in ______. a) manufacturing companies only b) manufacturing and nonmanufacturing companies only c) manufacturing, service and nonmanufacturing companies
c
Which of the following statements is incorrect regarding the use of product costing in managerial accounting? a) Product costing is used to make decisions about the pricing of products or services. b) Product costing is used in controlling and reducing production costs. c) The determination of a product cost is objective. d) Product costing is used to determine the profit provided by a specific product.
c
The cost of goods sold schedule shows the ______. a) total manufacturing costs for the period b) beginning raw materials inventory c) cost of goods manufactured d) changes in finished goods inventory for the period
c and d
Under and over applied manufacturing overhead is most commonly ______.
closed into cost of goods sold
Manufacturing overhead is __.
costs that must be incurred for production to take place, but are difficult to trace to individual jobs or units of product
When goods are sold, entries are made that include a (debit/credit) ___________ to Sales Revenue and a (debit/credit) ____________ to Cost of Goods.
credit and debit
A company is currently working on two production jobs and indirect labor costs for the week totals $5,000. Which of the following statement is correct? a) The Work-in-Process Inventory account for each job will be debited for $2,500. b) The use of the indirect labor should be traced to the jobs based on use. c) Entries will be made on the job-cost records of both production jobs. d) The entire $5,000 will be debited to Manufacturing Overhead.
d
The assignment of all manufacturing overhead costs to departmental centers is called cost ___________ or cost _____________.
distribution and allocation
Under applied manufacturing overhead ______ cost of goods sold.
increases
A subsidiary ledger, called a(n) ______ ______ ______ is assigned to each job to keep track of the manufacturing costs for that job.
job cost record
A subsidiary ledger designed to keep track of the manufacturing costs assigned to each job is called a(n) ______.
job-cost record
In service industries the term engagement costs is equivalent to ______ costing.
job-order
The two basic sets of procedures used in product-costing systems are _______-_________ costing and _________ costing
job-order and process
Which account is debited when factory utility bills are paid?
manufacturing overhead
Selling and administrative costs are ______.
period costs
Changes in the finished goods inventory for the period are shown on the ______.
schedule of cost of goods sold
The flow of goods, services and information into and out of the organization is called the _______ _______.
supply chain
The form that records the hours spent by an individual employee on each production activity is called a ______ record.
time
The cost of goods manufactured schedules shows the amount of goods ______.
transferred into finished goods inventory
When companies use departmental overhead rates, _________ __________ cost allocation is used to assign manufacturing overhead to production.
two stage
In traditional product-costing systems, the measure of productive activity used as a basis for overhead application is usually some ___________-___________ cost driver or activity base.
volume-based
Which of the following is the entry to record the use of indirect labor in production?
Manufacturing overhead Wages payable
Product costing is used for all of the following except ______. a) determining the amount of bonuses paid to executives b) determining how an organization earns its profits c) determining the relative profitability of different products and services d) helping managers with planning and decision making
a
A company that produces a large number of identical items would most like use a ______ costing system.
process
A system that accumulates costs incurred in a production process and assigns those costs to outputs is called a(n) ______ costing system
product
The second step in stage one of the cost allocation process is to ______.
reassign all service department costs to production departments
The process of working proactively with other companies and organizations to improve service or reduce costs is called ______ management.
supply chain
When a company choses to use a single, _______-_________ cost driver, it should be some productive input that is common across all the firm's products.
volume-based
Costs added to the production process are accumulated in the ______ inventory account.
work-in process
When goods are sold, they are transferred from ______.
finished goods inventory to cost of goods sold
The formula to apply overhead costs is ______.
predetermined overhead rate x quantity of activity required
The right side of the Manufacturing Overhead account ______.
1) accumulates entries based on estimated overhead and 2) records overhead applied to Work-in-Process Inventory
The difference between normal costing and actual costing is ______.
1) normal costing uses predetermined overhead rates and 2) actual costing uses actual overhead rates
The term "product" is used to refer to ______.
1) services delivered 2) manufactured goods and 3) merchandise to be resold
An unsold, but completed product is shown in ______
finished goods inventory
True or false: During a single work day, an employee's time record can show both direct labor and indirect labor time.
True: Employees can have idle time,clean up time or other time that is classified as indirect labor.
True or false: Departmental overhead rates are frequently used by organizations because the relationship between overhead costs and a single cost driver are substantially different between production departments.
True: Since the activities can vary greatly between departments, most companies use departmental overhead rates.
Which of the following entries to used to record direct labor costs in a job-costing system?
Work-in-process Wages payable
Which of the following entries records the release of direct materials to production in a job-order costing system?
Work-in-process inventory Raw materials inventory
The cost of goods manufactured schedule shows the ______. a) direct labor cost b) total manufacturing costs c) changes in finished goods inventory for the period d) cost of goods sold
a and b
When choosing a cost driver consideration should be given to ______. a) an activity that is common across all products b) a correlation between the cost and the activity chosen as the driver c) the production capacity of the organization d) the total cost of manufacturing overhead
a and b
What entry(s) are made when goods are sold? a) Accounts receivable Sales revenue b) Finished goods inventory Work-in-process inventory c) Cost of goods sold Finished goods inventory d) Finished goods inventory Cost of goods sold
a and c
The production systems below that are most likely to use job-order costing are ______. a) batch b) continuous-flow c) assembly d) job-shop
a and d
Which of the following statements are incorrect regarding accounting for manufacturing overhead? a) The manufacturing overhead account is increased by the manufacturing overhead applied b) Manufacturing overhead is applied to production using a predetermined overhead rate x the activity based required for the period's production. c) A predetermined manufacturing overhead rate is calculated for use in applying manufacturing overhead to production. d) Actual manufacturing overhead will always equal applied manufacturing overhead. e) The manufacturing overhead account is increased by the actual manufacturing overhead costs incurred.
a and d
Job-cost records include ______. a) total job cost b) direct materials c) selling expenses d) average cost per unit e) direct labor
a, b, d, and e
Production systems that may use process costing include ______. a) assembly b) job-shop c) batch d) continuous-flow
a, c, and d
Which of the following are part of the flow of manufacturing costs? a) work-in-process inventory to finished goods inventory b) direct materials, direct labor and manufacturing overhead to finished goods inventory c) finished goods inventory to cost of goods sold d) direct materials, direct labor and manufacturing overhead to work-in-process inventory
a, c, and d
Under or over applied manufacturing overhead is the result of ______. a) actual manufacturing overhead being less than applied manufacturing overhead. b) actual manufacturing overhead being less than budgeted manufacturing overhead c) actual manufacturing overhead being greater than applied manufacturing overhead. d) actual manufacturing overhead is greater than budgeted manufacturing overhead e) the inaccuracy of the predetermined overhead rate
a, c, and e
Selling and administrative costs include ______. a) sales commissions b) depreciation expense-factory equipment c) office supplies expense d) insurance expense - showroom e) advertising expense
a, c, d, and e
The sections on the job-cost record are used to ______. a) track units shipped to customers b) calculate the selling and administrative cots c) record the net profit earned from the job d) calculate average unit cost e) record total cost f) accumulate direct materials, labor and manufacturing overhead
a, d, e, and f
Which of the following statements is correct? a) Product costing is only used for manufacturing firms. b) Product costing concepts are used in manufacturing and merchandising companies, but not service firms. c) Nonprofit organizations have no need for product costing concepts. d) Service firms and nonprofit organizations need information about the cost of producing services.
d
Manufacturing overhead costs are applied to jobs with journal entries that ______.
debit Work-in-process inventory and credit Manufacturing overhead
Manufacturing overhead is underapplied when actual manufacturing overhead is ______ manufacturing overhead.
greater than applied
The two procedures used in product costing systems are ______ costing.
job-order costing and process
Manufacturing overhead is overapplied when actual manufacturing overhead is ______ manufacturing overhead.
less than applied
The cost accounting department receives a copy of the _______ ______ form as the basis for transferring costs from Raw-Materials Inventory to Work-in-Process Inventory.
material requisition
The document used to authorize the release of materials into production is called a(n) ______,
materials requisition form