Job Order Costing

a

1 Cost accounting systems are used ________. A) to accumulate product cost information B) to accumulate and assign period costs to products C) by manufacturing companies, not service companies D) by stockholders for decision-making purposes

c

1 The journal entry to issue $800 of direct materials and $60 of indirect materials to production involves debit(s) to the ________. A) Work-in-Process Inventory account for $800 and Finished Goods Inventory account for $60 B) Manufacturing Overhead account for $860 C) Work-in-Process Inventory account for $800 and Manufacturing Overhead account for $60 D) Work-in-Process Inventory account for $860

b

2 Which of the following companies is most likely to use process costing? A) a music studio B) a breakfast cereal company C) an accounting firm D) a building contractor

d

3 Which of the following businesses is most likely to use a process costing system? A) a baker producing cakes to order B) a legal service provider C) an audit service provider D) a candy manufacturer

b

6 The journal entry to record direct labor costs actually incurred involves a debit to the ________. A) Work-in-Process Inventory account B) Wages Payable account C) Manufacturing Overhead account D) Raw Materials Inventory account

labor time record

A record used to assign direct labor cost to specific jobs.

underallocated by 200

Actual overhead was $2,800, however only $2,600 was applied to overhead. Therefore it is

underallocated

After allocating manufacturing overhead to jobs for 2020, a $15,400 debit balance remains in the Manufacturing Overhead account. This means that Smart Touch Learning's actual overhead costs of $83,000 were greater than the overhead allocated to jobs in Work-in-Process Inventory of $67,600. We say that Smart Touch Learning's Manufacturing Overhead is

accumulate, allocate, assign, and adjust

Both job order and process costing systems use a four-step method to track product costs:

job order

Companies that manufacture unique products or provide specialized services—such as accounting firms, music studios, health care providers, building contractors, and custom furniture manufacturers—use what systems?

no

Do service firms have inventory?

raw matierals inventory

During 2020, Smart Touch Learning purchased raw materials of $367,000 on account. This is a product cost that accumulates in _______ account?

POAR

Estimated overhead cost per unit of the allocation base, calculated at the beginning of the accounting period. Total estimated overhead costs / Total estimated quantity of the overhead allocation base.

asset

Finished Goods Inventory is an __________ account.

50 per hour

Fox's salary and benefits total $100,000 per year. Assuming a 40-hour workweek and 50 workweeks in each year (which allows for a standard two-week vacation), Fox has 2,000 available work hours per year (50 weeks×40 hours per week). Fox's hourly pay rate is

overcosted

If the manufacturing overhead account was instead overallocated, the jobs would be

each job

In a job order costing system, companies must accumulate costs and then assign costs to

DR costs of goods sold 25000 CR Manufacturing overhead 25000

Manufacturing and labor accounts: Estimated manufacturing overhead - 500,000 Estimated direct labor hours 10,000 Actual manufacturing overhead - 550,000 Actual direct labor hours - 10,500 hours Allocated overhead was underallocated by $25,000 - Record the journal entry to adjust Manufacturing Overhead.

products, services

Name two reasons why it is important to know unit costs?

under allocated overhead

Occurs when the actual manufacturing overhead costs are more than allocated manufacturing overhead costs.

increase

Purchases of materials on account accumulate the cost into the Raw Materials Inventory account, which is an ...

Dr Work in process inventory 6,000 Dr manufacturing overhead 500 CR raw materials inventory 6500

Record the following journal entries for Smith Company: 7. Used $6,000 in direct materials and $500 in indirect materials in production.

DR work in process inventory 6400 Dr manufacturing overhead 1600 CR wages payable 8000

Record the following journal entries for Smith Company: 8. Incurred $8,000 in labor costs, of which 80% was direct labor.

Dr raw materials inventory 10,000 CR Accounts payable 10,000

Record the following journal entries for Smith Company: 6. Purchased raw materials on account, $10,000.

raw materials inventory

The cost of direct materials is transferred out of Raw Materials and assigned to

accumulated

The cost of indirect materials is transferred out of the Raw Materials Inventory account and is _____________ in the Manufacturing Overhead account.

costs of goods manufactured

The costs transferred to Finished Goods Inventory are called

purchasing materials, using materials in production

There are two aspects to accounting for raw materials:

raw materials inventory

There are two aspects to accounting for raw materials: purchasing materials and using materials in production. Because raw materials do not have to be used immediately when purchased and can be stored for later use, materials purchased accumulate in the __________ __________ _______________ account until they are assigned to each job

finished goods, work in process

To transfer finished units to finished goods, the journal entry is to debit __________ and credit

job order

Would the following companies most likely use a job order costing system or a process costing system? 3. Caterer

process

Would the following companies most likely use a job order costing system or a process costing system? 1. Paint manufacturer

process

Would the following companies most likely use a job order costing system or a process costing system? 4. Soft drink bottler

job order

Would the following companies most likely use a job order costing system or a process costing system? Yacht builder

job order

Would the following companies most likely use a job order costing system or a process costing system? print shop

manufacturing overhead

a temporary account used to accumulate indirect production costs during the accounting period.

direct materials, direct labor, manufacturing overhead

a) A job cost record is a document that shows the what three costs for an individual job?

manufacturing overhead

account should have a zero balance at the end of each accounting period.

job order costing

accumulates costs for each unique batch or job

process costing

accumulates the costs of each process needed to complete the product over a period of time instead of assigning costs to specific jobs. For example, a soft drink company's processes may include mixing, bottling, and packaging.

costs

are accumulated when the company purchases raw materials, incurs direct labor, and incurs manufacturing overhead. T

subsidiary ledger

contains the details of a general ledger account,

debited

manufacturing overhead is _________- (increased) for actual overhead costs.

credited

manufacturing overhead is __________ (decreased) for allocated overhead costs.

job

may be a single unique product or specialized service, or a batch of unique products

cost accounting system

measure, record, and report product costs. They are used to accumulate product cost information so that managers can measure how much it costs to produce each unit of product. Knowing these unit costs helps managers do the following: Determine which products to produce. Set sales prices that will lead to profits. Determine how many products to produce. Compute cost of goods sold for the income statement. Compute the cost of inventory for the balance sheet.

general ledger

raw materials inventory is what kind of account?

b

10 When goods are transferred from the Work-in-Process Inventory account to the Finished Goods Inventory account, ________. A) total assets and total liabilities increase by the same amount B) total assets of the company remain constant C) total equity and total assets increase by the same amount D) total liabilities increase and total equity decreases by the same amount

b

2 The accounts of Delphinia Dreams, Inc. showed the following balances at the beginning of October: Account Debit Raw Materials Inventory $34,000 Work-in-Process Inventory 40,000 Finished Goods Inventory 50,000 Manufacturing Overhead 23,000 During the month, direct materials amounting to $21,000 and indirect materials amounting to $5000 were issued to production. What is the ending balance in the Work-in-Process Inventory account following these two transactions? A) $40,000 B) $61,000 C) $10,000 D) $28,000

a

3 The accounts of Melissa Manufacturing showed the following balances at the beginning of December: Account Debit Raw Materials Inventory $59,000 Work-in-Process Inventory 75,000 Finished Goods Inventory 30,000 Manufacturing Overhead 24,000 The following transactions took place during the month: December 2: Issued direct materials $39,000 and indirect materials $6000 to production. December 15: Incurred $5000 and $4000 toward factory's direct labor cost and indirect labor cost, respectively. What should be the balance in the Work-in-Process Inventory following these transactions? A) $119,000 B) $80,000 C) $69,000 D) $79,000

d

4 Aaron, Inc. estimates direct labor costs and manufacturing overhead costs for the coming year to be $760,000 and $520,000, respectively. Aaron allocates overhead costs based on machine hours. The estimated total labor hours and machine hours for the coming year are 16,000 hours and 8000 hours, respectively. What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.) A) $95.00 per machine hour B) $32.50 per labor hour C) $1.46 per labor hour D) $65.00 per machine hour

c

4 The journal entry to issue $800 of direct materials and $60 of indirect materials to production involves debit(s) to the ________. A) Work-in-Process Inventory account for $800 and Finished Goods Inventory account for $60 B) Manufacturing Overhead account for $860 C) Work-in-Process Inventory account for $800 and Manufacturing Overhead account for $60 D) Work-in-Process Inventory account for $860

c

5 The journal entry to issue indirect materials to production should include a debit to the ________. A) Finished Goods Inventory account B) Raw Materials Inventory account C) Manufacturing Overhead account D) Work-in-Process Inventory account

c

5 Zephyros Corporation had estimated manufacturing overhead costs for the coming year to be $301,000. The total estimated direct labor hours and machine hours for the coming year are 7000 and 13,000, respectively. Manufacturing overhead costs are allocated based on direct labor hours. What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.) A) $23.15 per machine hour B) $15.05 per direct labor hour C) $43.00 per direct labor hour D) $1.86 per machine hour

a

6 Archangel Manufacturing calculated a predetermined overhead allocation rate at the beginning of the year based on direct labor costs. The production details for the year are given below: Total manufacturing overhead costs estimated at the beginning of the year $140,000 Total direct labor costs estimated at the beginning of the year $320,000 Total direct labor hours estimated at the beginning of the year 10,000 direct labor hours Actual manufacturing overhead costs for the year $160,000 Actual direct labor costs for the year $360,000 Actual direct labor hours for the year 12,200 direct labor hours Calculate the manufacturing overhead allocation rate for the year based on the above data. (Round your final answer to two decimal places.) A) 43.75% B) 257.14% C) 11.43% D) 22.95%

a

7 Iglesias, Inc. completed Job 12 on November 30. The details of Job 12 are given below: Direct labor cost $850 Direct materials cost $1000 Machine hours 8 hours Direct labor hours 24 hours Predetermined overhead allocation rate $70 per machine hour What is the total cost of Job 12? A) $2410 B) $1850 C) $1410 D) $1560

b

7 When a job order costing system is used, actual manufacturing overhead costs are debited to ________. A) expense accounts B) the Manufacturing Overhead account C) the Cost of Goods Sold account D) the Work-In-Process Inventory account

c

8 Which of the following will be debited to the Manufacturing Overhead account of a watch manufacturer? A) office telephone costs B) salaries paid to accountants C) factory electricity costs D) cost of printing brochures

c

9 Altima, Inc. finished Job A40 on the last working day of the year. It utilized $360 of direct materials and $3370 of direct labor. Altima uses a predetermined overhead allocation rate based on direct labor costs, which has been fixed at 40%. The entry to record the completion of the job should involve a ________. A) debit to Finished Goods Inventory $5078 and a credit to Materials Inventory $5078 B) debit to Cost of Goods Sold $5078 and a credit to Finished Goods Inventory $5078 C) debit to Finished Goods Inventory $5078 and a credit to Work-in-Process Inventory $5078 D) debit to Work-in-Process Inventory $5078 and a credit to Finished Goods Inventory $5078

allocation base

A denominator that links indirect costs to cost objects; the primary cost driver of the indirect costs.

materials requisition

A document that requests the transfer of raw materials to the production floor.

job cost record

A document that shows the direct materials, direct labor, and manufacturing overhead costs for an individual job

equity, expense

Cost of Goods Sold is considered an________________ account and an ________________.

d

Haddows, Inc. completed Job GH6 last month. The cost details of GH6 are shown below. Direct labor cost $2200 Direct materials cost $81 Direct labor hours 7 hours Predetermined overhead allocation rate per direct labor hour $70 Number of units of finished product 34 Calculate the cost per unit of the finished product of Job GH6. (Round your answer to the nearest cent.) A) $571.00 B) $16.79 C) $79.12 D) $81.50

b

Halcyon, Inc. completed Job 10B last month. The cost details of Job 10B are shown below. Direct labor cost $2110 Direct materials cost $80 Machine hours 7 hours Direct labor hours 73 hours Predetermined overhead allocation rate per direct labor hour $32 Calculate the total job cost for Job 10B. A) $2414 B) $4526 C) $2190 D) $4750

d

Happy Clicks, Inc. uses a predetermined overhead allocation rate of $5.00 per machine hour. Actual overhead costs incurred during the year are as follows: Indirect materials $6600 Indirect labor $3200 Plant depreciation $43 Plant utilities and insurance $9900 Other plant overhead costs $11,700 Total machine hours used during year 7000 hours What is the amount of manufacturing overhead cost allocated to Work-in-Process Inventory during the year? A) $38,443 B) $9800 C) $28,643 D) $35,000

job

In job order costing, costs are accumulated by

process

In process costing, costs are accumulated by

manufacturing overhead

Indirect labor and indirect materials costs are accumulated in

account

Jobs are sold on...

increase

Labor incurred increases Wages Payable. Direct labor is assigned to Work-in-Process Inventory, which is an increase. Indirect labor is accumulated in Manufacturing Overhead, which is also an

DR work in process inventory 525000 CR manufacturing overhead 525000

Manufacturing and labor accounts: Estimated manufacturing overhead - 500,000 Estimated direct labor hours 10,000 Actual manufacturing overhead - 550,000 Actual direct labor hours - 10,500 hours Determine the amount of overhead allocated during the year. Record the journal entry

over allocated overhead

Occurs when the actual manufacturing overhead costs are less than allocated manufacturing overhead costs.

10,625

Smith Company expected to incur $10,000 in manufacturing overhead costs and use 4,000 machine hours for the year. Actual manufacturing overhead was $9,700, and the company used 4,250 machine hours. 10. How much manufacturing overhead was allocated during the year?

2.50

Smith Company expected to incur $10,000 in manufacturing overhead costs and use 4,000 machine hours for the year. Actual manufacturing overhead was $9,700, and the company used 4,250 machine hours. 9. Calculate the predetermined overhead allocation rate using machine hours as the allocation base.

true

T or F: 3 A process costing system is used when a company produces identical units through a series of production steps.

true

T or F: A job order costing system is used by companies that manufacture batches of unique products or provide specialized services.

false

T or F: Accounting firms, building contractors, and healthcare providers use process costing

true

T or F: Manufacturing Overhead is a temporary account used to accumulate indirect production costs during the accounting period.

true

T or F: The amount of taxes and insurance incurred and paid for the plant of a manufacturing company should be debited to the Manufacturing Overhead account.

true

T or F: The cost of goods manufactured is recorded with a debit to the Finished Goods Inventory account and a credit to the Work-in-Process Inventory account.

false

T or F: The cost of indirect materials is transferred out of the Manufacturing Overhead account and accumulated in the Raw Materials Inventory account.

false

T or F: The total amount of manufacturing overhead costs incurred during the period is recorded on the credit side of the Manufacturing Overhead account.

true

T or F: When a job is completed, the total cost of the job is recorded with a debit to Finished Goods Inventory and a credit to Work-in-Process Inventory.

false

T or F: When raw materials are requisitioned for a job, the Raw Materials Inventory account is debited.

allocation rate, allocating, adjusting

The accounting for the allocation of overhead costs is a three-step process and occurs at three different points in the accounting cycle: Calculating the predetermined overhead _____________ __________- before the period ____________-- overhead during the period _______________ overhead at the end of the period

overallocated by 1000

The amount of overhead applied is $9,000 ($3 per machine hour x 3,000 actual machine hours). Actual overhead was $8,000 and $9,000 was applied. Therefore it was ...

1000

The amount of overhead applied is $9,000 ($3 per machine hour x 3,000 actual machine hours). Actual overhead was $8,000 and $9,000 was applied. Therefore it was overallocated by

sum

The balance of the Raw Materials Inventory account in the general ledger should always equal the ______ of the balances in the raw materials subsidiary ledger.

work in process inventory

The cost of direct labor is transferred and assigned to

assigned

The cost of direct materials is transferred out of Raw Materials Inventory and is __________- to Work-in-Process Inventory.

50

The following information pertains to Smith Company for the year: Manufacturing and labor accounts: Estimated manufacturing overhead - 500,000 Estimated direct labor hours 10,000 Actual manufacturing overhead - 550,000 Actual direct labor hours - 10,500 hours 13. Calculate the predetermined overhead allocation rate using direct labor hours as the allocation base.

DR finished goods inventory 25000 CR work in process inventory 25000

The following information pertains to Smith Company, which you worked with previously in this chapter: 11. Smith Company completed jobs that cost $25,000 to manufacture. Record the journal entry.

DR Accounts receivable 2000 CR Sales revenue 2000 DR Cost of goods sold 22000 CR Finished goods inventory 22000

The following information pertains to Smith Company, which you worked with previously in this chapter: 12. Smith Company sold jobs to customers on account for $52,000 that cost $22,000 to manufacture. Record the journal entries.

manufacturing overhead

The journal entry to allocate manufacturing overhead costs to production would include a debit to Work-in-Process Inventory. The credit would be to

work in process inventory, manufacturing overhead

The journal entry to allocate manufacturing overhead costs to production would include a debit to _______________________________. The credit would be to ____________________________.

finished goods, work in process inventory

The journal entry to record goods that are finished but not yet sold is a debit to _____________________ and a credit to _______________________ for the cost of goods manufactured.

costs of goods sold, finished goods

The journal entry to record the cost of the goods sold would be a debit to _____________________________ and a credit to ________________________________

cost driver

The primary factor that causes a cost to increase or decrease.

estimates

The total debits to the Manufacturing Overhead account rarely equal the total credits. Why? Because companies allocate overhead to jobs using a predetermined overhead allocation rate that is based on...

income statement

The transfer from Finished Goods Inventory to Cost of Goods Sold moves the product costs from the balance sheet to the..

subsidiary ledger

The use of a ______________ ______________ allows for better control of inventory because it helps track each type of material used in production

increase

The use of indirect materials are accumulated in Manufacturing Overhead, which is also an i

increase

The use of materials decreases Raw Materials Inventory. The use of direct materials are assigned to Work-in-Process Inventory, which is an

costs of goods sold

To close out the Manufacturing overhead account, there would need to be a credit entry to Manufacturing overhead (for the $2,000 balance). Therefore, the debit entry would be to ________________________________ (to increase the dollar amount of the goods sold).

direct labor hours, direct labor costs, machine hours

Traditionally, manufacturing companies have used what three things as cost drivers?

true

True or false?: Some companies may use both job order and process costing.

true

True or false?: The balance of the Raw Materials Inventory account in the general ledger should always equal the sum of the balances in the raw materials subsidiary ledger.

7.50

Wesson Company is a consulting firm. The firm expects to have $45,000 in indirect costs during the year and bill customers for 6,000 hours. The cost of direct labor is $75 per hour. 16. Calculate the predetermined overhead allocation rate for Wesson using estimated billable hours for the allocation base.

1237.50

Wesson Company is a consulting firm. The firm expects to have $45,000 in indirect costs during the year and bill customers for 6,000 hours. The cost of direct labor is $75 per hour. 17. Wesson completed a consulting job for George Peterson and billed the customer for 15 hours. What was the total cost of the consulting job?

1980

Wesson Company is a consulting firm. The firm expects to have $45,000 in indirect costs during the year and bill customers for 6,000 hours. The cost of direct labor is $75 per hour. The total cost is 1237.50. 18. If Wesson wants to earn a profit equal to 60% of the cost of a job, how much should the company charge Mr. Peterson?

direct materials, direct labor, manufacturing overhead

What three things are assigned to work in process inventory?

work in process inventory

When direct labor costs are recorded, the debit entry is to _________________________ and the credit is to Wages Payable.

raw materials inventory

When direct materials are used in production, costs are assigned by debiting Work-In-Process and crediting

raw materials inventory

When direct materials are used in production, costs are assigned by debiting Work-In-Process and crediting ...

costs of goods sold

When finished goods are sold, where are the costs recorded?

manufacturing overhead, wages payable

When indirect labor costs are recorded, the debit entry is to _____________________________ and the credit is to ____________________________

manufacturing overhead, wages payable

When indirect labor costs are recorded, the debit entry is to _________________________and the credit is to __________________________

asset

Work-in-Process Inventory is an _____________ account

job order

the production of a single unique product or specialized service, or a batch or unique products.

job order costing

tracks costs as raw materials move from the storeroom to the production floor, where they are converted into finished products.

process costing

used primarily by companies that produce large quantities of similar products

process costing

used primarily by companies that produce large quantities of similar products.

Total estimated overhead costs/Total estimated quantity of overhead allocation base

what is the formula for POAR?

DR Manufacturing overhead CR costs of goods sold

what is the journal entry for adjusting manufacturing overhead due to overcosted jobs?

DR costs of goods sold CR manufacturing overhead

what is the journal entry for adjusting manufacturing overhead due to undercosted jobs?

DR work in process inventory for direct labor DR manufacturing overhead for indirect labor CR wages payable

what is the journal entry for incurring direct and indirect labor?

DR finished goods inventory CR Work in process inventory

what is the journal entry for jobs completed?

DR Accounts receivable CR Sales Revenue DR cost of goods sold CR finished goods inventory

what is the journal entry for jobs sold?

DR work in process inventory CR Manufacturing overhead

what is the journal entry for overhead allocation?

Dr Raw materials inventory Cr accounts payable

what is the journal entry for purchasing materials?

DR work in process inventory for direct materials DR manufacturing overhead for indirect materials CR raw materials inventory

what is the journal entry for using direct and indirect materials?

finished goods inventory

when jobs in work in process inventory are completed, where do they go next?