chapter 3

Match the following concepts to their descriptions: 1. Document specifying when jobs will be manufactured 2. Product costing system used by mass manufacturers 3. Bill from supplier 4. Document specifying parts needed to produce a job 5. Product costing system used by manufacturers of unique products 6. Document containing the details and balance of each part in stock 7. Document for recording incoming shipments 8. Products normally kept on hand in order to fill orders quickly

1. production schedule 2. process costing 3. invoice 4. bill of materials 5. job costing 6. raw materials record 7. receiving report 8. stock inventory

Whenever direct material, direct labor, and manufacturing overhead are recorded on a job cost record, an associated journal entry is made to debit which of the following accounts? a. Work in Process Inventory b. Cost of Goods Sold c. Finished Goods Inventory d. Sales Revenue

A

Which of the following documents is used to accumulate all of the manufacturing costs assigned to a job? a. Job cost record b. Labor time record c. Materials requisition d. Purchase order

A

process costing

A system for assigning costs to a large number of identical units that typically pass through a series of uniform production steps. Costs are averaged over the units produced such that each unit bears the same unit cost.

job costing

A system for assigning costs to products or services that differ in the amount of materials, labor, and overhead required. Typically used by manufacturers that produce unique, or custom-ordered products in small batches; also used by professional service firms.

raw materials record

A written or electronic document listing the number and cost of all units used and received, and the balance currently in stock; a separate record is maintained for each type of raw material kept in stock.

receiving report

A written or electronic document listing the quantity and type of raw materials received in an incoming shipment; the report is typically a duplicate of the purchase order without the quantity pre-listed on the form.

materials requisition

A written or electronic document requesting that specific materials be transferred from the raw materials inventory storeroom to the production floor.

labor time records

A written or electronic document that identifies the employee, the amount of time spent on a particular job, and the labor cost charged to a job.

Assuming the amount of manufacturing overhead overallocation or underallocation is not material, which account is adjusted at the end of the period? a. Raw Materials Inventory b. Cost of Goods Sold c. Sales Revenue d. Work in Process Inventory

B

The amount of manufacturing overhead recorded on a job cost record for a particular job is found by: a. Tracing manufacturing overhead to the job. b. Allocating manufacturing overhead to the job. c. Either tracing or allocating manufacturing overhead costs (management's choice). d. None of the answer listed is correct.

B

When a job is completed, the total cost of manufacturing the job should be moved to which of the following general ledger accounts?a. Cost of Goods Sold b. Finished Goods Inventory c. Sales Revenue d. Work in Process Inventory

B

Which of the following documents specifies the materials needed to produce a job? a. Production schedule b. Bill of materials c. Raw materials records d. Receiving report

B

Which of the following is true when using job costing at a service firm? a. Office rent would be considered a direct cost of serving the client. b. Both direct and indirect costs are assigned to client jobs. c. The professional billing rate consists solely of the professionals' labor cost. d. Professional labor cost would be considered an indirect cost of serving the client.

B

For which of the following would job costing not be appropriate? a. Law firm b. Electrician c. Manufacturer of mass-produced carbonated beverages d. Manufacturer of custom-ordered production equipment

C

Which of the following is false? a. A cost-plus price is determined by adding a markup to the cost. b. Non-manufacturing costs can be assigned to jobs only for internal decision making, never for external financial reporting. c. Direct costing focuses on only the direct costs found on the job cost record. d. Job cost information is not useful for assessing the profitability of different products.

D

Which of the following is true? a. If manufacturing overhead is overallocated, then jobs will be undercosted. b. If manufacturing overhead is underallocated, then jobs will be overcosted. c. Both of the statements are true. d. None of the statements are true.

D

If jobs have been overcosted due to overallocation of MOH, then Cost of Goods Sold is too high, so...

DECREASE COGS for the amount of overallocation

job cost record has 3 manufacturing costs:

DM DL MOH

Close MOH account journal entry

Debit: COGS Credit: MOH

completion of jobs journal entry

Debit: FG Inventory Credit: WIP

Use of indirect materials journal entry

Debit: Manufacturing Overhead Credit: Raw Materials Inventory

use of indirect labor journal entry

Debit: Manufacturing Overhead Credit: Wages Payable

Purchase of Raw Materials Journal Entry

Debit: Raw Materials Credit: Accounts Payable

Allocating Manufacturing Overhead to a Job journal entry

Debit: WIP Credit: MOH

Use of Direct Materials Journal Entry

Debit: WIP Credit: Raw Materials Inventory

Use of Direct Labor Journal Entry

Debit: WIP Credit: Wages Payable

if jobs have been undercosted due to underallocation of MOH, then Cost of Goods Sold is too low, so...

INCREASE COGS for the amount of the underallocation

extended producer responsibility (EPR)

Laws that require product manufacturers to "take back" a large percentage of the products they manufacture at the end of the product's life in order to reduce the amount of waste ending up in landfills and the environment.

Whenever a cost is added to a job cost record, a corresponding journal entry is made to increase WIP Inventory. T or F

T

Underallocated Manufacturing Overhead

The amount of manufacturing overhead allocated to jobs is less than the amount of manufacturing overhead costs actually incurred; this results in jobs being undercosted.

predetermined moh rate

The rate used to allocate MOH to individual jobs

bill of materials

a list of all the raw materials needed to manufacture a job

cost plus pricing

a pricing approach in which the company adds a desired level of profit to the product's cost

purchase order

a written or electronic document authorizing the purchase of specific raw materials from a specific supplier

production schedule

a written or electronic document indicating the quantity and types of inventory that will be manufactured during a specified time frame

Job Cost Record

a written or electronic document that lists the direct materials, direct labor, and manufacturing overhead costs assigned to each individual job

invoice

bill from a supplier

how are labor costs traced to a job

by labor time records

how are material costs traced to a job

by materials requisition

cost plus pricing=

cost + markup on cost

MOH allocated to a job=

predetermined MOH rate x ACTUAL amount of allocation base used by the job

what are the two product costing systems

process costing job costing

stock inventory

products normally kept on hand in order to quickly fill customer orders

flow of inventory through a manufacturing system

rm inventory wip inventory fg inventory COGS

pick

storeroom workers remove items from raw materials inventory that are needed by production

overallocated manufacturing overhead

the amount of manufacturing overhead allocated to jobs is more than the amount of manufacturing overhead costs actually incurred; results in jobs being overcosted

predetermined MOH rate=

total estimated manufacturing overhead costs / total estimated amount of the allocation base