Ch. 02 SmartBook

Producing products that are individually designed to meet the needs of a specific customer where each customized product is manufactured separately is the definition of:

job order production

Companies use job cost sheets to track the costs of:

materials, labor, and overhead costs of a job

All of the following are manufacturing costs except:

office salaries

The journal entry to record indirect labor costs used in production includes a debit to Factory ________.

overhead

The predetermined overhead rate is based on total _________costs and activity base.

overhead

After adjusting for over- or underapplied overhead, the balance in the Factory Overhead account will be $________.

$0

A company uses direct labor hours as its allocation base. Management estimates the company will have 10,000 hours of direct labor during the year and total overhead costs of $120,000. The predetermined overhead rate will be $_______ per hour

$12 120,000/10,000 = 12

A tax accounting firm pays tax preparers $44 per hour. The firm has a predetermined overhead rate of $24 per labor hour. The Jones tax return required 2.5 hours to complete. The total cost of this job is $

$170

A company has a predetermined overhead rate of 50% of direct labor costs. Job 62 incurs $560 in labor costs. Overhead allocated to Job 62 will be $_______.

$280 560 * .05 = 280

A company has a predetermined overhead rate of $14 per machine hour. Job 846 uses 27.5 machine hours. Overhead allocated to Job 846 will be $________.

$385 14 * 27.5 = 385

A consulting firm has a predetermined overhead rate of $120 per labor hour. The Smith job required 5 hours to compete. The overhead cost applied to this job is $_______.

$600

Match the following activities to their effect on the general ledger accounts.

Allocate indirect labor : Credit Factory Wages Payable Pay factory property tax : Debit Factory Overhead Purchase materials : Debit Raw Materials Inventory Use direct materials : Credit Raw Materials Inventory Complete job : Debit Finished Goods Inventory Sold job : Credit Finished Goods Inventory

Designate the following as either from job order or process operations.

Custom Orders : Job Order operations Mass Production : Process operations

Choose the product(s) that are most likely to be manufactured as a job, rather than as a job lot. (Check all that apply.)

Customized home Tailored wedding dress

After jobs are completed and delivered to customers, the job cost sheet is used to provide a permanent record for:

Cost of Goods Sold

Time tickets are used in job order costing to:

report hours worked on specific jobs during the payroll period

One important difference between service companies and manufacturing companies is that:

service companies do not have raw materials inventory

Journal entries for materials used in production are posted to:(Check all that apply.)

subsidiary records. general ledger accounts.

During production, job cost sheets represent:

the balance in the work in process inventory account

A Schedule of Cost of Goods Manufactured includes all of the following costs:

work in process inventory direct labor used direct materials used factory overhead applied

A company incurs factory overhead costs of $1,200 and applied $1,500. If the difference is considered immaterial, then the: (Check all that apply.)

Factory Overhead account has a credit balance of $300 before adjusting. adjusting entry will require a credit to Cost of Goods Sold.

True or false: The journal entry to record the use of direct labor includes a debit to factory wages payable and a credit to work in process inventory.

False

Match the following overhead costs with their source documents.

Indirect materials : Material requisition forms Indirect labor : Time tickets Factory utilities : Vouchers authorizing payment Depreciation on factory equipment : Adjusting entries

A cost accounting system includes which of the following?

It accumulates production costs and assigns them to products and services.

At the end of the accounting period, a company's overhead was overapplied by $400. The Factory Overhead account was properly adjusted. What effect did the adjustment have on net income?

It increased net income by $400.

At the end of the accounting period, a company's overhead was underapplied by $150. If not adjusted, how does this affect net income?

Net income will be overstated by $150.

Manufacturing of products in a repetitive manner is referred to as (process/job order) ________ operations while manufacturing custom products is referred to as (process/job order)__________ operations.

Process Job order

List the following documents in the order in which they are used when recording indirect materials costs in job order cost accounting, with the first document on top.

Receiving Reports Materials Ledger Cards Material Requisitions Factory Overhead Ledger

List the following documents in the order in which they are used when recording direct materials costs in job order cost accounting, with the first document on top.

Receiving Reports Materials Ledger Cards Materials Requisitions Job Cost Sheets

True or false: A job order costing system requires the company to keep separate records for each job.

True

Which of the following are characteristics of materials ledger cards? Select all that apply.

Used to record materials issued for use in production Perpetual records Used to record materials purchases

The base to which overhead costs are linked, such as direct labor or machine hours, is known as the overhead_________base.

allocation

Time tickets are used in job order costing to record the time and cost of:

both direct and indirect labor in the production department

A Schedule of Cost of Goods Manufactured includes all of the following costs except:

cost of goods sold

The Factory Overhead account is (debited/credited)________for applied overhead costs.

credited

Job order production is most likely used by companies that produce:

customized wedding cakes

The journal entry to record depreciation on factory equipment is to:

debit Factory Overhead and credit Accumulated Depreciation - Equipment

The journal entry to record indirect labor used in production is to:

debit Factory Overhead and credit Factory Wages Payable

The journal entry to record indirect materials in production is to:

debit Factory Overhead and credit Raw Materials Inventory

The journal entry to record the use of indirect materials in production is to:

debit Factory Overhead and credit Raw Materials Inventory.

The journal entry to record the accrual of factory utilities is to:

debit Factory Overhead and credit Utilities Payable

The journal entry to record the purchase of materials on account is to:

debit Raw Materials Inventory and credit Accounts Payable

The journal entry to record the allocation of factory overhead to work in process is:

debit Work in Process Inventory and credit Factory Overhead

The journal entry to record the use of direct materials in production is to:

debit Work in Process Inventory and credit Raw Materials Inventory.

If the factory overhead is overapplied, then the adjusting journal entry to close the factory overhead account includes a: (Check all that apply.)

debit to Factory Overhead. credit to Cost of Goods Sold.

Receiving reports are used in job order costing to record the cost and quantity of materials:

delivered from suppliers

Overhead may be applied based on:

direct labor machine hours

Both service companies and manufacturing companies have: (Check all that apply).

direct labor overhead

The three types of manufacturing costs in a job order costing system include:

direct materials direct labor overhead

The correct order of cost flows in a job order costing system is:

work in process; finished goods, cost of goods sold

The journal entry to record the allocation of factory overhead is:

Debit Work in Process Inventory and credit Factory Overhead

True or false: Factory overhead includes direct materials and direct labor.

False

Manufacturing costs include direct materials, direct labor, and

applied overhead costs.

The journal entry to record direct labor in production is a(n):

increase in assets and an increase in liabilities.

All of the following are inventory accounts for a manufacturer except:

indirect materials inventory

A cost accounting system: (Check all that apply.)

is used to control costs of manufacturing activities. helps managers' determine selling prices.

A job which involves producing more than one unit of a custom product is called a

job lot

To determine the cost of producing each job or job lot, companies use a:

job order costing system.

Job cost sheets can be used to: (Check all that apply.)

provide a record for the Cost of Goods Sold account. provide a subsidiary ledger for the Finished Goods Inventory account. monitor costs incurred and to predict costs for each job.

Match the following activities to their effect on the general ledger accounts.

Allocate overhead costs to jobs : Credit Factory Overhead Pay factory utilities : Debit Factory Overhead Purchase indirect materials : Debit Raw Materials Inventory Use indirect materials : Credit Raw Materials Inventory Direct labor used : Debit Work in Process Inventory

List the following documents in the order in which they are used when recording indirect labor costs in job order costing, with the first document on top.

Time tickets Factory overhead ledger Allocated to specific jobs through factory overhead

List the following documents in the order in which they are used when recording direct labor costs in job order costing, with the first document on top.

Time tickets Job cost sheets Factory wages payable

Managers use a predetermined overhead rate for which of the following reasons? (Check all that apply.)

To estimate total job costs before the job is completed To assist in setting prices for jobs

If the factory overhead is underapplied, then: (Check all that apply.)

actual overhead cost > applied overhead costs. the Factory Overhead account has a debit balance.

The journal entry to record the purchase of materials on account is a(n):

increase in assets and an increase in liabilities