ACCT Test 2 Ch. 19 Assessment

Of the following manufacturing operations, which is best suited to the utilization of a job order system? A-Helicopter manufacturing. B-Soft drink bottling operation. C-Crude oil refining. D-Plastic molding operation.

A

The overhead application rate is calculated by: A- Dividing the estimated factory overhead by the estimated application base. B-Dividing estimated per unit factory overhead by the sum of the per unit cost for direct labor and direct materials. C-Multiplying the estimated factory overhead by the estimated application base. D-Dividing the estimated application base by the estimated factory overhead.

A

Under normal circumstances the Work in Process account used in a job costing system: A-Will include charges for direct labor, direct materials, and applied overhead. B- Will include only charges for direct materials and applied overhead. The labor is charged to expense as incurred. C-Will include charges for direct labor, direct materials, and actual overhead. D- Will include only charges for direct labor and direct materials.

A

Which of the following statements concerning job costing systems is incorrect? A- Cost drivers are those items which cause actual overhead to exceed applied overhead. B- Job costing systems are appropriate to both manufacturing and service businesses. C-Traditionally, direct labor has been a very popular overhead application base. D- In a service business, indirect costs of providing a service are treated as overhead and applied in a manner similar to that for factory overhead.

A

Modern events that have facilitated job costing methods include the utilization of database technologies and:

Automated tracking of labor and materials

The appropriate journal entry to record the application of overhead in a job costing system involves a debit to Work in Process and a credit to: A- Cost of Goods Sold B-Factory Overhead C-Cash D- Income Summary

B

Which of the following statements concerning job cost sheets is incorrect? A- A job cost sheet would show the direct materials used on that specific job. B- A job cost sheet would reveal the selling costs associated with a particular job. C- The total costs recorded on a job cost sheet should also be reflected in the Work in Process account in the general ledger. D- The amount of overhead on a job cost sheet is the applied factory overhead rather than the actual factory overhead.

B

Jensen Manufacturing uses a job order cost system. Overhead is applied at the rate of $20 per direct labor hour. Job #777 includes $2,000 of direct labor cost and 150 direct labor hours. $1,500 of indirect labor cost was actually incurred. The proper journal entry to record the wage related cost is: A- Debit Work in Process, $3,500; credit Wages Payable, $3,500. B- Debit Wage Expense, $3,500; credit Wages Payable, $3,500. C- Debit Work in Process, $2,000; debit Factory Overhead, $1,500; credit Wages Payable, $3,500. D- Debit Work in Process, $3,500; credit Factory Overhead, $1,500; credit Wage Expense, $2,000.

C

The Factory Overhead account in a job costing system is credited for the: A- Excess of applied overhead over actual overhead. B- Actual overhead. C- Applied overhead. D- Indirect materials and indirect labor.

C

The cost of each job is accumulated on a separate job _____________ sheet.

Cost

The theoretically correct method of allocating under- or overapplied overhead is to: A- Allocate the amount to cost of goods sold. B- Allocate the amount to finished goods. C- Allocate the amount to work in process and finished goods. D- Allocate the amount among work in process, finished goods, and cost of goods sold.

D

With the job order cost system a credit balance in the Factory Overhead account at the end of an accounting period would indicate: A- That an error in the job cost system has occurred. B-That the company lost money during the period. C-The presence of underapplied overhead. D- The presence of overapplied overhead.

D

What is the impact on the Factory Overhead account of recording actual overhead costs?

Debit

The amount of manufacturing overhead to divide by the estimated application base (in determining the overhead application rate) is the:

Estimated Amount

The applied overhead is credited to the _____________ _____________ account.

Factory Overhead

Indirect labor costs incurred would be debited to the:

Factory Overhead account

(T/F) A job costing system employs a job cost sheet and does away with the need for a Work in Process account.

False

(T/F) For a service organization, indirect costs are not allocated to specific jobs, but are instead charged directly to Income Summary.

False

(T/F) Job costing systems are not applicable to service organizations.

False

(T/F) The concept of lean manufacturing is focused solely on cost cutting:

False

With a _____________ cost system, costs are gathered by job or order.

Job

This Japanese term refers to a blitz-like study of business processes, relying on input from front line employees for suggestions:

Kaizen

Which of the following documents would provide input regarding the amount of direct materials for a specific job?

Materials Requisition

(Y/N) The balance in Work in Process must always be closed to finished goods at the end of each accounting period:

No

In a manufacturing system the three cost elements which flow into work in process are direct materials, direct labor, and factory _____________ .

Overhead

Materials are kept in a storeroom or warehouse and issued upon receipt of a materials _____________ .

Requisition

A trademarked approach for seeking near-zero defects in all productive and business processes is known as:

Six-Sigma

Setting prices for global exchanges between affiliated companies is referred to as:

Transfer Pricing

(T/F) Automation of factory production results in both an increase in the expected amount of total overhead and a reduction in the relevance of direct labor as an appropriate cost driver.

True

(T/F) The estimated overhead cost for a job or product is determined by using an overhead application rate. The application rate relates overhead to a specific application base.

True

(T/F) The presence of a credit balance in the Factory Overhead account indicates that overhead has been overapplied.

True

The appropriate journal entry to record applied overhead involves a debit to:

Work in Progress

The _____________ _____________ _____________ _____________ account is adjusted for under- or overapplied overhead.

cost of goods sold

_____________ costs are those costs that are easily traced to a job and are charged to individual jobs that are worked on during the accounting period

direct

Cost _____________ are the factors that cause specific costs to be incurred within an organization.

drivers

The overhead application rate is computed by dividing _____________ factory overhead by the estimated application base.

estimated

Items not easily traced to individual jobs like sandpaper, lubricants, and so on are considered to be_____________ materials.

indirect

Labor costs are accumulated by means of _____________ sheets and labor summaries.

time

After recording actual and applied overhead in the factory overhead account, a resulting debit balance would indicate _____________ factory overhead.

underapplied