Job Order Costing

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If a company applies overhead to jobs on the basis of a predetermined overhead rate, a credit balance in the Manufacturing Overhead account at the end of any period means that: a. more overhead cost has been charged to jobs than has been incurred during the period. b. more overhead cost has been incurred during the period than has been charged to jobs. c. the amount of overhead cost charged to jobs is greater than the estimated cost for the period. d. the amount of overhead cost charged to jobs is less than the estimated overhead cost for the period.

A

In a normal cost system, a debit to Work in Process Inventory would be made for not a. actual overhead. b. applied overhead. c. actual direct material. d. actual direct labor.

A

Spoiled units are a. units that cannot be economically reworked to bring them up to standard. b. units that can be economically reworked to bring them up to standard. c. the same as defective units. d. considered abnormal losses.

A

The use of standard material or labor costs in job-order costing a. is similar to the use of predetermined overhead rates in a normal costing system. b. will keep actual costs of jobs from fluctuating due to changes in component costs. c. is appropriate for any company making units to customer specification. d. all answers are correct.

A

What is the best cost accumulation procedure to use when many batches, each differing as to product specifications, are produced? a. job-order b. process c. actual d. standard

A

Which of the following organizations would be most likely to use a job-order costing system? a. the loan department of a bank b. the check clearing department of a bank c. a manufacturer of processed cheese food d. a manufacturer of video cassette tapes

A

A company producing which of the following would be most likely to use a price standard for material? a. furniture b. NFL-logo jackets c. custom-made picture frames d. none of the above

B

In job-order costing, payroll taxes paid by the employer for factory employees are commonly accounted for as a. direct labor cost. b. manufacturing overhead cost. c. indirect labor cost. d. administrative cost.

B

Normal spoilage is defined as production that unacceptable a. arises because of a special job or process. b. occurs in on-going operations. c. is caused specifically by human error. d. is in excess of that which is expected.

B

Overapplied overhead would result if a. the plant were operated at less than normal capacity. b. overhead costs incurred were less than costs charged to production. c. overhead costs incurred were unreasonably large in relation to units produced. d. overhead costs incurred were greater than costs charged to production.

B

Shrinkage should be treated as a. defective units. b. spoiled units. c. miscellaneous expense. d. a reduction of overhead.

B

The net cost of normal spoilage in a job-order costing system in which spoilage is common to all jobs should be a. assigned directly to the jobs that caused the spoilage. b. charged to manufacturing overhead during the period of the spoilage. c. charged to a loss account during the period of the spoilage. d. allocated only to jobs that are completed during the period.

B

The primary accounting document in a job-order costing system is a(n) a. bill of materials. b. job-order cost sheet. c. employee time sheet. d. materials requisition.

B

The trend in job-order costing is to a. eliminate the data entry function for the accounting system. b. automate the data collection and data entry functions. c. use accounting software to change the focal point of the job-order system. d. create an Intranet to share information between competitors.

B

Underapplied overhead resulting from unanticipated and immaterial price increases for overhead items should be written off by a. decreasing Cost of Goods Sold. b. increasing Cost of Goods Sold. c. decreasing Cost of Goods Sold, Work in Process Inventory, and Finished Goods Inventory. d. increasing Cost of Goods Sold, Work in Process Inventory, and Finished Goods Inventory.

B

Which of the following could be used in job-order c not osting? a. standards b. an average cost per unit for all jobs c. normal costing d. overhead allocation based on the job's direct labor hours

B

Which of the following statements about job-order cost sheets is true? a. All job-order cost sheets serve as the general ledger control account for Work in Process Inventory. b. Job-order cost sheets can serve as subsidiary ledger information for both Work in Process Inventory and Finished Goods Inventory. c. If material requisition forms are used, job-order cost sheets do not need to be maintained. d. Job-order cost sheets show costs for direct material and direct labor, but not for manufacturing overhead since it is an applied amount.

B

A credit to the Manufacturing Overhead control account represents the a. actual cost of overhead incurred. b. actual cost of overhead paid this period. c. amount of overhead applied to production. d. amount of indirect material and labor used during the period.

C

A journal entry includes a debit to Work in Process Inventory and a credit to Raw Material Inventory. The explanation for this would be that a. indirect material was placed into production. b. raw material was purchased on account. c. direct material was placed into production. d. direct labor was used for production.

C

A service organization would be most likely to use a predetermined overhead rate based on a. machine hours. b. standard material cost. c. direct labor. d. number of complaints.

C

In a job-order costing system, the subsidiary ledger for Finished Goods Inventory is comprised of a. all job-order cost sheets. b. job-order cost sheets for all uncompleted jobs. c. job-order cost sheets for all completed jobs not yet sold. d. job-order cost sheets for all ordered, uncompleted, and completed jobs.

C

In a production environment that manufactures goods to customer specifications, a job-order costing system a. can be used only if standard costs are used for materials and labor. b. will provide reasonable product cost information only when all jobs utilize approximately the same quantities of material and labor. c. may be maintained using either actual or predetermined overhead rates. d. emphasizes that large customers create the most costs even though they also provide the most revenues.

C

Overhead is applied to jobs in a job-order costing system a. at the end of a period. b. as jobs are completed. c. at the end of a period or as jobs are completed, whichever is earlier. d. at the end of a period or as jobs are completed, whichever is later.

C

Production overhead does include the costs of not a. factory depreciation and supplies. b. factory employees' cafeteria departments. c. production line labor. d. the maintenance department for the factory.

C

The cost sheets for incomplete jobs at the end of the period comprise the subsidiary ledger for a. Finished Goods Inventory. b. Raw Material Inventory. c. Work in Process Inventory. d. Supplies Inventory.

C

These costs are long-term in nature and cannot be eliminated even for short periods of time without affecting the profitability or long-term goals of the firm A. Avoidable costs B. Committed fixed costs C. Variable costs D. Controllable costs

C

Total manufacturing costs for the year plus beginning Work in Process Inventory cost equals a. cost of goods manufactured in the year. b. ending Work in Process Inventory. c. total manufacturing costs to account for. d. cost of goods available for sale.

C

A job-order costing system is likely to provide better (1) inventory valuations for financial statements. (2) control over inventory. (3) information about ability to accept additional production work. (1) (2) (3) a. yes no no b. no yes yes c. no no no d. yes yes yes

D

A material requisition form should show all of the following information except a. job number. b. quantity required. c. unit cost. d. purchase order number.

D

A unit that is rejected at a quality control inspection point, but that can be reworked and sold, is referred to as a a. spoiled unit. b. scrap unit. c. abnormal unit. d. defective unit.

D

After the completion of production, standard and actual costs are compared determine the of to the production process. a. effectiveness b. complexity c. homogeneity d. efficiency

D

In a job-order costing system, a. standards cannot be used. b. an average cost per unit within a job cannot be computed. c. costs are accumulated by departments and averaged among all jobs. d. overhead is typically assigned to jobs on the basis of some cost driver.

D

In a job-order costing system, the dollar amount of the entry that debits Finished Goods Inventory and credits Work in Process Inventory is the sum of the costs charged to all jobs a. started in process during the period. b. in process during the period. c. completed and sold during the period. d. completed during the period.

D

In a job-order costing system, the net cost of normal spoilage is equal to a. estimated disposal value plus the cost of spoiled work. b. the cost of spoiled work minus estimated spoilage cost. c. the units of spoiled work times the predetermined overhead rate. d. the cost of spoiled work minus the estimated disposal value.

D

In a job-order costing system, the net cost of normal spoilage is equal to a. estimated disposal value plus the cost of spoiled work. b. the cost of spoiled work minus estimated spoilage cost. c. the units of spoiled work times the predetermined overhead rate. d. the cost of spoiled work minus the estimated disposal value.

D

Knowing specific job costs enables managers to effectively perform which of the following tasks? a. estimate costs of future jobs. b. establish realistic job selling prices. c. evaluate job performance. d. all answers are correct.

D

The source document that records the amount of raw material that has been requested by production is the a. job-order cost sheet. b. bill of lading. c. interoffice memo. d. material requisition.

D

When job-order costing is used, the primary focal point of cost accumulation is the a. department. b. supervisor. c. item. d. job.

D

Which of the following are drawbacks to applying actual overhead to production? a. A delay occurs in assigning costs to jobs or products. b. Fluctuations in quantities produced during a period could cause varying per-unit charges for fixed overhead. c. Seasonality of overhead costs may cause distortions in job or product costs. d. all answers are correct.

D

Which of the following costing systems allows management to quickly recognize materials, labor, and overhead variances and take measures to correct them? Actual Cost System | Normal Cost System a. yes yes b. yes no c. no yes d. no no

D

Which of the following journal entries records the accrual of the cost of indirect labor used in production? a. debit Work in Process Inventory, credit Wages Payable b. debit Work in Process Inventory, credit Manufacturing Overhead c. debit Manufacturing Overhead, credit Work in Process Inventory d. debit Manufacturing Overhead, credit Wages Payable

D

A credit balance in the Manufacturing Overhead account at the end of the year means that overhead was underapplied.

FALSE

If the finished goods inventory increases between the beginning and the end of a period, then the cost of goods manufactures is smaller than the cost of goods sold.

FALSE

In job-order costing, the Work in Process inventory account contains the actual costs of direct labor, direct materials, and manufacturing overhead incurred on partially completed jobs.

FALSE

In order to improve the accuracy of unit costs, most companies recompute the predetermined overhead rate each month.

FALSE

Rent of factory building used in the production process would be classified as a period cost and as a fixed cost.

FALSE

Depreciation on office equipment would not be included in the cost of goods manufactured.

TRUE

Manufacturing overhead is an indirect cost with respect to units of product.

TRUE

Variable cost per unit is affected by changes in activity.

TRUE


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