Chapter 02--job Order Costing


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Chapter 02--Job Order Costing

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1. Cost accounting systems are used to supply cost data information on costs incurred by a manufacturing process or department. 
True    False


 

2. A manufacturer may employ a job order cost system for some of its products and a process cost system for others. 
True    False


 

3. A job order cost accounting system provides for a separate record of the cost of each particular quantity of product that passes through the factory. 
True    False


 

4. A process cost accounting system provides for a separate record of the cost of each particular quantity of product that passes through the factory. 
True    False


 

5. A process cost accounting system accumulates costs for each of the departments or processes within the factory. 
True    False


 

6. A process cost accounting system is best used by manufacturers of like units of product that are not distinguishable from each other during a continuous production process. 
True    False


 

7. The process cost system is appropriate where few products are manufactured and each product is made to customers' specifications. 
True    False


 

8. A job order cost system would be appropriate for a crude oil refining business. 
True    False


 

9. A law firm would use a job order cost system to accumulate all of the costs associated with a particular client engagement, such as lawyer time, copying charges, filing fees, and overhead. 
True    False


 

10. The job order costing system is not used by service organizations. 
True    False


 

11. The job order costing system is used by service firms to determine revenues, expenses, and ultimately profit. 
True    False


 

12. Perpetual inventory controlling accounts and subsidiary ledgers are maintained for materials, work in process, and finished goods in cost accounting systems. 
True    False


 

13. When the goods are sold, their costs are transferred from Work in Process to Finished Goods. 
True    False


 

14. The materials requisition serves as the source document for debiting the accounts in the materials ledger. 
True    False


 

15. Materials are transferred from the storeroom to the factory in response to materials requisitions. 
True    False


 

16. The document that serves as the basis for recording direct labor on a job cost sheet is the time card. 
True    False


 

17. The document that serves as the basis for recording direct labor on a job cost sheet is the time ticket. 
True    False


 

18. Depreciation expense on factory equipment is part of factory overhead cost. 
True    False


 

19. Factory overhead is applied to production using a predetermined overhead rate. 
True    False


 

20. If factory overhead applied exceeds the actual costs, the factory overhead account will have a credit balance. 
True    False


 

21. If factory overhead applied exceeds the actual costs, overhead is said to be underapplied. 
True    False


 

22. If the underapplied factory overhead amount is material, it is transferred to Cost of Goods Sold at the end of the fiscal year. 
True    False


 

23. If the underapplied factory overhead amount is immaterial, it is transferred to Cost of Goods Sold at the end of the fiscal year. 
True    False


 

24. Each account in the cost ledger in a job order system is called a job cost sheet. 
True    False


 

25. In the job order system, the finished goods account is the controlling account for the factory overhead ledger. 
True    False


 

26. The inventory accounts generally maintained by a manufacturing firm are only finished goods and materials. 
True    False


 

27. Generally accepted accounting principles require companies to use only one factory overhead rate for product costing. 
True    False


 

28. Activity-based costing is a method of accumulating and allocating costs by department. 
True    False


 

29. Interim financial statements for a manufacturing business would report overapplied factory overhead as a deferred item on the balance sheet. 
True    False


 

30. The debit to factory overhead for the cost of indirect materials is obtained from the summary of the materials requisitions. 
True    False


 

31. In a factory with several processing departments, a single factory overhead rate may not provide accurate product costs and effective cost control. 
True    False


 

32. Nonmanufacturing costs are generally classified into two categories: selling and administrative. 
True    False


 

33. The current year's advertising costs are normally considered period costs. 
True    False


 

34. Direct labor cost is an example of a period cost. 
True    False


 

35. A manufacturing business reports just two types of inventory on its balance sheet: work in process inventory and finished goods inventory. 
True    False


 

36. On the balance sheet for a manufacturing business, the cost of direct materials, direct labor, and factory overhead, which have entered into the manufacturing process but are associated with products that have not been finished, is reported as direct materials inventory. 
True    False


 

37. As product costs are incurred in the manufacturing process, they are accounted for as assets and reported on the balance sheet as inventory. 
True    False


 

38. A receiving report is prepared when purchased materials are first received by the manufacturing department. 
True    False


 

39. Period costs are costs that are incurred for the production requirements of a certain period. 
True    False


 

40. Job order cost systems can be used to compare unit costs of similar jobs to determine if costs are staying within expected ranges. 
True    False


 

41. Job cost sheets can provide information to managers on unit cost trends, the cost impact of continuous improvement in the manufacturing process, the cost impact of materials changes, and the cost impact of direct materials price or direct labor rate changes over time. 
True    False


 

42. Job order cost accounting systems may be used to evaluate a company's efficiency. 
True    False


 

43. Information about costs developed through a job order cost system can not be used to evaluate an organization’s cost performance. 
True    False


 

44. A staff department or unit is one directly involved in the basic objective of the organization. 
True    False


 

45. Job order cost accounting systems may be used for planning and controlling a service business. 
True    False


 

46. Job order cost accounting systems can be used only for companies that manufacture a product. 
True    False


 

47. The direct labor and overhead costs of providing services to clients are accumulated in a work-in-process account. 
True    False


 

48. In a job order cost accounting system for a service business, materials costs are normally included as part of overhead. 
True    False


 

49. A service organization will not use the job order costing method because it has no direct materials. 
True    False


 

50. Using the job order cost system, service organizations are able to bill customers on a weekly or monthly basis, even when the job has not been completed. 
True    False


 

51. Which of the following are the two main types of cost accounting systems for manufacturing operations? 
A. Process cost and general accounting systems
B. Job order cost and process cost systems
C. Job order and general accounting systems
D. Process cost and replacement cost systems


 

52. Which of the following would most likely use a job order costing system? 
A. A paper mill
B. A swimming pool installer
C. A company that manufactures chlorine for swimming pools
D. An oil refinery


 

53. Which of the following would be most likely to use process costing? 
A. A custom furniture manufacturer.
B. An auto body repair shop.
C. A law firm
D. A lawn fertilizer manufacturer.


 

54. Which of the following systems provides for a separate record of the cost of each particular quantity of product that passes through the factory? 
A. Job order cost system
B. General cost system
C. Replacement cost system
D. Process cost system


 

55. For which of the following businesses would the job order cost system be appropriate? 
A. Meat processor
B. Automobile manufacturer
C. Oil refinery
D. Construction contractor


 

56. For which of the following businesses would the process cost system be appropriate? 
A. Book retailer
B. Dress designer
C. Lumber mill
D. Printing firm


 

57. Which of the following is not a characteristic of a job order costing system? 
A. It accumulates cost for each department within the factory.
B. It provides a separate record for the cost of each quantity of product that passes through the factory.
C. It is best suited for industries that manufactures custom goods.
D. Uses only one work in process account.


 

58. Which of the following products probably would be manufactured using a job order costing system? 
A. Number 2 pencils
B. Computer monitors.
C. Wedding invitations.
D. Paper.


 

59. Job order costing and process costing are 
A. pricing systems.
B. cost accounting systems.
C. cost flow systems.
D. inventory tracking systems.


 

60. Which of the following is not true about why a service firm will use the job order costing system? 
A. to help control costs
B. to determine client billing
C. to determine department costs within the firm
D. to determine profit


 

61. Which of the following costs are NOT included in finished goods inventory? 
A. Direct labor
B. Factory overhead
C. Company president's salary
D. Direct materials


 

62. Which of the following is the correct flow of manufacturing costs? 
A. Raw materials, work in process, finished goods, cost of goods sold
B. Raw materials, finished goods, cost of goods sold, work in process.
C. Work in process, finished goods, raw materials, cost of goods sold
D. Cost of goods sold, raw materials, work in process, finished goods.


 

63. Which of the following would record the labor costs to an individual job? 
A. Clock card
B. In-and-out cards
C. Time tickets
D. Payroll register


 

64. The Thomlin Company forecasts that total overhead for the current year will be $15,000,000 and that total machine hours will be 200,000 hours. Year to date, the actual overhead is $15,500,000 and the actual machine hours are 220,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, what is that overhead rate? 
A. $71 per machine hour
B. $78 per machine hour
C. $68 per machine hour
D. $75 per machine hour


 

65. The Thomlin Company forecasts that total overhead for the current year will be $15,000,000 and that total machine hours will be 200,000 hours. Year to date, the actual overhead is $15,500,000 and the actual machine hours are 220,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, as of this point in time (year to date) the overhead is over/under applied by? 
A. $1,000,000 over
B. $1,000,000 under
C. $500,000 over
D. $500,000 under


 

66. At the end of the year, overhead applied was $35,000,000. Actual overhead was $34,200,000. Closing over/under applied overhead into cost of goods sold would cause net income to increase/decrease by? 
A. Increase by $800,000
B. Decrease by $800,000
C. Not effect net income.
D. Decrease net income by $200,000


 

67. Which of the following would most likely be a period cost? 
A. Depreciation on factory lunchroom furniture.
B. Salary of telephone receptionist in the sales office.
C. Salary of a security guard for the factory parking lot.
D. Computer chips used by a computer manufacturer.


 

68. Which of the following would most likely be a product cost? 
A. Salary of VP of sales.
B. Advertising for a particular product.
C. Drill bits for a drill press used in the plant assembly area.
D. Salary of the company receptionist.


 

69. The document authorizing the issuance of materials from the storeroom is the: 
A. materials requisition
B. purchase requisition
C. receiving report
D. purchase order


 

70. The source of the data for debiting Work-in-Process for direct materials is the: 
A. purchase order
B. purchase requisition
C. materials requisition
D. receiving report


 

71. In a job order cost accounting system, the entry to record the flow of direct materials into production is: 
A. debit Work in Process, credit Materials
B. debit Materials, credit Work in Process
C. debit Factory Overhead, credit Materials
D. debit Work in Process, credit Supplies


 

72. A summary of the materials requisitions completed during a period serves as the basis for transferring the cost of the materials from the controlling account in the general ledger to the controlling accounts for: 
A. work in process and cost of goods sold
B. work in process and factory overhead
C. finished goods and cost of goods sold
D. work in process and finished goods


 

73. In a job order cost accounting system, when goods that have been ordered are received, the receiving department personnel count, inspect the goods, and complete a: 
A. purchase order
B. sales invoice
C. receiving report
D. purchase requisition
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