Cornerstones of Cost Management 2nd Edition By Don R. Hansen, Maryanne M. Mowen - Test Bank

Cornerstones of Cost Management 2nd Edition By Don R. Hansen, Maryanne M. Mowen – Test Bank

 

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Sample Questions Are Posted Below

 

Chapter 5–Product and Service Costing: Job-Order System

Student: ___________________________________________________________________________

1. A production process may yield a tangible product or a service and their unique characteristics determine the best approach for developing a cost management system.
   True    False

 

2. Manufacturing firms produce intangible products that cannot be inventoried.
   True    False

 

3. Service firms produce intangible products that are not separable from the customer.
   True    False

 

4. Heterogeneity means that services cannot be inventoried and must be consumed when performed.
   True    False

 

5. Inseparability means that production and consumption are inseparable for services.
   True    False

 

6. The uniqueness of the products or units for cost accounting purposes relates to their common costs.
   True    False

 

7. Cost accumulation is the determination of the dollar amounts of direct materials, direct labor and overhead costs, and cost measurement is the recognition and recording of costs.
   True    False

 

8. cost assignment is the assignment of costs to products or services once the costs have been accumulated and measured.
   True    False

 

9. Unit cost is a critical piece of information for a manufacturing business as well as a service company.
   True    False

 

10. Activity level is the average activity usage over the long term and normal activity level is the production level for one year.
    True    False

 

11. Companies operating in job-order industries produce a wide variety of products or jobs that are quite different from each other.
    True    False

 

12. The job-order cost sheet accumulates the cost of all the jobs produced.
    True    False

 

13. The collection of all job-order cost sheets defines a work-in-process inventory file.
    True    False

 

14. The source document known as a time ticket assigns the direct overhead to each particular job.
    True    False

 

15. A job-order costing process would be  applicable for to airplane manufacturer.
    True    False

 

16. Cost flow follows costs from the point they are incurred to the point they are recognized as an expense on the income statement.
    True    False

 

17. When materials are purchased, the costs of the materials “flows” into the materials inventory account.
    True    False

 

18. In a job-order costing system, direct labor costs assigned to a job are different than the costs assigned to work-in-process inventory.
    True    False

 

19. In a job-order costing system, actual overhead costs never enter the work-in-process inventory accounts
    True    False

 

20. The costs of a completed job are transferred from the work-in-process inventory account to the finished goods inventory account.
    True    False

 

21. A debit balance in overhead control implies that actual overhead costs exceed overhead applied.
    True    False

 

22. In job-order costing, departmental overhead rates and activity-based costing affect only the application of overhead.
    True    False

 

23. In an activity-based costing system activity cost is applied to each job by multiplying productivity rate by the job’s use of the associated driver.
    True    False

 

24. Costs of normal spoilage are included in overhead and applied to all good units produced.
    True    False

 

25. Abnormal spoilage is charged to the job that caused it.
    True    False

 

26. In __________ a single product is produced on a continuous basis.
    ________________________________________

 

27. A __________ service organization does not use raw material or tangible items for the customer.
    ________________________________________

 

28. __________ means that services cannot be inventoried but must be consumed when performed.
    ________________________________________

 

29. __________ is the recognition and recording of costs.
    ________________________________________

 

30. Determining the dollar amounts of direct materials, direct labor, and overhead used in production involves __________ .
    ________________________________________

 

31. The association of production costs with the units produced is called __________ .
    ________________________________________

 

32. The __________ activity level is the production level a firm expects to attain for the coming year.
    ________________________________________

 

33. The __________ costing system assigns costs by the job.
    ________________________________________

 

34. The __________ form indicates the type and quantity of each material issued to the factory.
    ________________________________________

 

35. A __________ inventory file is a file of job-order cost sheets.
    ________________________________________

 

36. The actual __________ costs are not included on a job-order sheet.
    ________________________________________

 

37. Purchases of direct materials are recorded as a debit to the  __________ account.
    ________________________________________

 

38. The entry that captures the flow of material from the storeroom to work-in-process is called
    the __________ inventory account.
    ________________________________________

 

39. __________ are the source of information for posting the labor cost flows.
    ________________________________________

 

40. The total applied overhead at a given point in time is given by the credit balance in the __________ control account.
    ________________________________________

 

41. When a job is completed the total costs are transferred to a  __________ inventory file.
    ________________________________________

 

42. When a job is shipped to a customer, the finished job cost becomes the cost of the __________ sold.
    ________________________________________

 

43. In job-order costing, departmental overhead rates and activity-based costing affect only the application of __________ .
    ________________________________________

 

44. The defective units expected due to the nature of the typical production process are called __________ .
    ________________________________________

 

45. The defective units due to the exacting nature of a particular job is called __________ .
    ________________________________________

 

46. Which of the following is a manufactured product?
    A. bungee jumping
    B. beauty salon
    C. automobile
    D. restaurant

 

47. Manufacturers producing unique or customized products would employ a(n)
    A. process costing system.
    B. job-costing system.
    C. homogeneous costing system.
    D. all of the above.

 

48. Which of the following is a pure service?
    A. bungee jumping
    B. beauty salon
    C. restaurant
    D. software

 

49. A pure service organization has
    A. no raw materials, no inventories, and a definite separation between the plant and the customer.
    B. raw materials, tangible items, and no separation between the plant and the customer.
    C. no raw materials, no tangible items, and no separation between the plant and the customer.
    D. none of these.

 

50. Inseparability refers to the
    A. nonphysical nature of services as opposed to products.
    B. fact that production and consumption are inseparable for services.
    C. greater chances for variation in the performance of services than in the production of products.
    D. fact that services cannot be inventoried but must be consumed when performed.

 

51. Heterogeneity refers to the
    A. nonphysical nature of services as opposed to products.
    B. fact that production and consumption are inseparable for services.
    C. greater chances for variation in the performance of services than in the production of products.
    D. fact that services cannot be inventoried but must be consumed when performed.

 

52. Intangibility refers to the
    A. nonphysical nature of services as opposed to products.
    B. fact that production and consumption are inseparable for services.
    C. greater chances for variation in the performance of services than in the production of products.
    D. fact that services cannot be inventoried but must be consumed when performed.

 

53. Perishability refers to the
    A. nonphysical nature of services as opposed to products.
    B. fact that production and consumption are inseparable for services.
    C. greater chances for variation in the performance of services than in the production of products.
    D. fact that services cannot be inventoried but must be consumed when performed.

 

54. Which of the following firms would make extensive use of service costing?
    A. Law firm
    B. furniture manufacturer
    C. auto dealer
    D. auto manufacturer

 

55. Which of the following products would NOT use job-order costing?
    A. houses
    B. chemicals
    C. ships
    D. custom-built furniture

 

56. Which of the following firms would make extensive use of a job-order costing?
    A. dental and medical services
    B. canned foods
    C. discount brokers
    D. petroleum

 

57. Process costing would be most applicable for
    A. custom machining.
    B. an electronics producer.
    C. high rise building construction.
    D. CPA audits.

 

58. Which of the following would NOT use a process costing system?
    A. electrical wire
    B. cotton yarn
    C. newsprint
    D. satellites

 

59. Homogeneous products refer to
    A. products similar in nature.
    B. the nonphysical nature of services and opposed to products.
    C. great variation in the nature products.
    D. products that can be inventoried.

 

60. Which cost accounting process would be most appropriate for accumulating costs of identical, standardized units?
    A. job-order costing
    B. process costing
    C. normal costing
    D. standard costing

 

61. The process where a single product is produced on a continuous basis is called:
    A. process production
    B. job-order production
    C. job production
    D. both a and c

 

62. A source document
    A. is only an external document.
    B. provides transaction data that can be recorded in a database.
    C. is only used to record a transaction between an organization and an outside vendor.
    D. is only an internal document.

 

63. Which of the following costs is usually NOT easily traceable to finished units of product?
    A. direct labor
    B. direct materials
    C. manufacturing overhead
    D. all of the above

 

64. Manufacturing overhead consists of all
    A. costs other than direct materials.
    B. manufacturing costs other than direct materials.
    C. costs other than direct materials and direct labor.
    D. manufacturing costs other than direct materials and direct labor.

 

65. The recognition and recording of costs is called:
    A. Cost assignment
    B. Cost measurement
    C. Cost accumulation
    D. Job order costing

 

66. Determining the dollar amounts of direct materials, direct labor, and overhead used in production involves:
    A. Job order costing
    B. Cost accumulation
    C. Cost assignment
    D. Cost measurement

 

67. An actual overhead rate can be calculated
    A. at the beginning of the year.
    B. at the end of each month.
    C. at the beginning of each month.
    D. either at the beginning of the year or at the beginning of the month.

 

68. Disadvantages of actual costing include
    A. actual cost systems cannot provide accurate unit cost information on a timely basis.
    B. actual cost systems produce unit costs that fluctuate from period to period.
    C. estimates must be used when calculating the actual overhead rate.
    D. both a and b.

 

69. The effect of uniform production levels on unit production costs can be achieved
    A. by using a factory overhead rate based on long-run normal production activity level.
    B. by using a factory overhead rate based on selling price.
    C. by closing the factory overhead at the end of the accounting period.
    D. by using a factory overhead rate based on different production levels for each year.

 

70. Normal costing uses which cost in work in process?
    A. applied direct materials
    B. actual overhead
    C. applied overhead
    D. budgeted overhead

 

71. A normal costing system records which costs in work in process?
    A. actual direct materials, actual direct labor, actual manufacturing overhead
    B. applied direct materials, applied direct labor, applied manufacturing overhead
    C. applied materials and labor and actual manufacturing overhead
    D. actual materials and labor and applied manufacturing overhead

 

72. The predetermined overhead rate is usually calculated at the
    A. end of each month.
    B. beginning of each month.
    C. beginning of the year.
    D. end of the year.

 

73. Which of the following costing systems assigns actual costs of materials to inventory?
    A. actual costing system
    B. normal costing system
    C. standard costing system
    D. both a and b

 

74. The principal difficulty with normal costing is that
    A. the unit cost information is not received on a timely basis.
    B. it can result in fluctuating per-unit overhead costs.
    C. estimated overhead and estimated activity are likely to differ from actual overhead and actual costs, resulting in underapplied or overapplied overhead.
    D. there is no difficulty associated with using normal costing.

 

75. Unit cost information is needed for
    A. costing inventory.
    B. financial reporting requirements.
    C. decision making.
    D. all of the above.

 

76. The association of production costs with the units produced is called:
    A. Job-order costing
    B. Cost assignment
    C. Cost measurement
    D. Cost accumulation

 

77. The production level the firm expects to attain for the coming year is called:
    A. Practical activity level
    B. Normal activity level
    C. Theoretical activity level
    D. Expected activity level

 

78. Unit costs are critical for
    A. valuing inventory.
    B. determining net income.
    C. decisions to enter a new product line.
    D. all of the above.

 

79. In developing unit costs, overhead costs should be assigned using activity drivers. Which would be the likely activity driver for a production process using a lathe?
    A. units produced
    B. direct labor hours
    C. machine hours
    D. direct materials cost

 

80. Unit cost is important information for which of the following?
    A. valuing inventory
    B. determining income
    C. decision making
    D. all of the above

 

81. The average activity that a firm experiences in the long term (more than one year) is called:
    A. Expected activity level
    B. Normal activity level
    C. Theoretical activity level
    D. Practical activity level

 

82. The absolute maximum production activity of a manufacturing firm is called:
    A. Expected activity level
    B. Normal activity level
    C. Theoretical activity level
    D. Practical activity level

 

83. The maximum output that can be realized if everything operates efficiently is referred to as:
    A. Expected activity level
    B. Normal activity level
    C. Theoretical activity level
    D. Practical activity level

 

84. The system which assign(s) costs by the job is termed:
    A. The process costing system
    B. The job-order costing system
    C. The project costing system
    D. Both a and c

 

85. A job-order costing process would be most applicable for
    A. a food processing plant.
    B. natural gas processing.
    C. airplane manufacturing.
    D. fertilizer production.

 

86. The document which indicates the type and quantity of each material issued to the factory is called the:
    A. control account
    B. materials requisition form
    C. production list
    D. work ticket

 

87. The collection of all job cost sheets defines a
    A. materials file.
    B. finished goods file.
    C. cost of goods file.
    D. work-in-process file.

 

88. The document that identifies each job and accumulates its manufacturing costs is called:
    A. job-order cost sheet
    B. control account
    C. production order
    D. bill of materials

 

89. Which of the following items is a basic costing system record in a job-order costing system?
    A. materials requisition form
    B. job-order cost sheet
    C. job time ticket
    D. all of the above

 

90. The cost of direct materials is assigned to a job by the use of a source document known as a
    A. job cost sheet.
    B. control account.
    C. materials requisition form.
    D. production order.

 

91. A work-in-process inventory file is
    A. a file of electronic job-order cost sheets.
    B. a file cabinet where work tickets are stored.
    C. a file of electronic materials requisitions.
    D. none of these.

 

92. Direct labor costs are assigned to individual jobs using a source document known as a
    A. job-order cost sheet.
    B. payroll check.
    C. time sheet.
    D. requisition form.

 

93. Figure 5 – 1

    The Nautical Corporation manufactures custom-made wood wall units. The following data pertains to Job X4A:

Direct materials placed into production	$9,000
Direct labor hours worked	300 hours
Direct labor rate per hour	$15
Machine hours worked	100 hours

Factory overhead rate is $22.50 per machine hour. Job X4A consists of 500 units.

Refer to Figure 5-1. One-half of Job X4A was sold for $10,000. What is the total amount of costs assigned to Job X4A?
A. $20,250
B. $15,750
C. $13,500
D.  $9,000

 

94. Figure 5 – 1

    The Nautical Corporation manufactures custom-made wood wall units. The following data pertains to Job X4A:

Direct materials placed into production	$9,000
Direct labor hours worked	300 hours
Direct labor rate per hour	$15
Machine hours worked	100 hours

Factory overhead rate is $22.50 per machine hour. Job X4A consists of 500 units.

Refer to Figure 5-1. One-half of Job X4A was sold for $10,000. What is the cost per unit for Job X4A?
A. $18
B. $31.50
C. $27
D. $40.50

 

95. Figure 5 – 2

    The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production	$4,000
Direct labor hours worked	50 hours
Direct labor rate per hour	$    15
Machine hours worked	100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours.  Factory overhead was budgeted at $80,000 for the year and the direct labor hours were estimated to be 20,000.  Job XY5 consists of 50 units.

Refer to Figure 5-2. What is overhead cost assigned to Job XY5?
A. $200
B. $400
C. $750
D. $1,500

 

96. Figure 5 – 2

    The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production	$4,000
Direct labor hours worked	50 hours
Direct labor rate per hour	$    15
Machine hours worked	100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours.  Factory overhead was budgeted at $80,000 for the year and the direct labor hours were estimated to be 20,000.  Job XY5 consists of 50 units.

Refer to Figure 5-2. What is the materials cost per unit for Job XY5?
A. $267
B. $80
C. $40
D. $4

 

97. Figure 5 – 2

    The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production	$4,000
Direct labor hours worked	50 hours
Direct labor rate per hour	$    15
Machine hours worked	100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours.  Factory overhead was budgeted at $80,000 for the year and the direct labor hours were estimated to be 20,000.  Job XY5 consists of 50 units.

Refer to Figure 5-2. What is the labor cost per unit for Job XY5?
A. $4
B. $15
C. $0.80
D. $40

 

98. Figure 5 – 2

    The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production	$4,000
Direct labor hours worked	50 hours
Direct labor rate per hour	$    15
Machine hours worked	100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours.  Factory overhead was budgeted at $80,000 for the year and the direct labor hours were estimated to be 20,000.  Job XY5 consists of 50 units.

Refer to Figure 5-2. What the total cost assigned to Job XY5?
A. $5,1500
B. $4,400
C. $4,200
D. $4,950

 

99. Which of the following costs is NOT included on a job-order cost sheet?
    A. direct material costs
    B. applied factory overhead costs
    C. direct labor costs
    D. actual factory overhead costs

 

100. A debit to Materials Inventory indicates materials were
     A. ordered.
     B. requisitioned.
     C. put into production.
     D. purchased.

 

101. Figure 5 – 3

     Robinson Corporation constructs new homes. Assume that Robinson uses a job costing system. During July 2014, the following transactions occurred:

     Robinson purchased $4,500 of lumber on account.

     Robinson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.

     Depreciation of $1,500 on equipment used to build new houses was recorded.

     A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

     Refer to Figure 5-3. The journal entry to record the requisition of lumber for Robinson would include a
     A. debit to Work-in-Process of $4,500.
     B. debit to Materials Inventory of $3,750.
     C. credit to Finished Goods of $3,750.
     D. debit to Work-in-Process of $3,750.

 

102. Figure 5 – 3

     Robinson Corporation constructs new homes. Assume that Robinson uses a job costing system. During July 2014, the following transactions occurred:

     Robinson purchased $4,500 of lumber on account.

     Robinson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.

     Depreciation of $1,500 on equipment used to build new houses was recorded.

     A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

     Refer to Figure 5-3. The journal entry to record labor for Robinson would include a
     A. debit to Finished Goods of $750.
     B. debit to Wages Payable of $750.
     C. credit to Finished Goods of $750.
     D. debit to Work-in-Process of $750.

 

103. Figure 5 – 4

     Lanyard Company uses a job-order costing system to account for product costs. The following information pertains to 2014:

Materials placed into production	$140,000
Indirect labor	40,000
Direct labor (10,000 hours)	160,000
Depreciation of factory building	60,000
Other factory overhead	100,000
Increase in work-in-process inventory	30,000

Factory overhead rate is $18 per direct labor hour.

Refer to Figure 5-4. What is the total amount credited to Materials Inventory for Lanyard in 2014?
A. $480,000
B. $170,000
C. $140,000
D. $110,000

 

104. Figure 5 – 4

     Lanyard Company uses a job-order costing system to account for product costs. The following information pertains to 2014:

Materials placed into production	$140,000
Indirect labor	40,000
Direct labor (10,000 hours)	160,000
Depreciation of factory building	60,000
Other factory overhead	100,000
Increase in work-in-process inventory	30,000

Factory overhead rate is $18 per direct labor hour.

Refer to Figure 5-4. What is the total amount debited to Finished Goods Inventory in 2011?
A. $490,000
B. $510,000
C. $450,000
D. $550,000

 

105. A journal entry debiting Work-in-Process would normally NOT be accompanied by a credit to
     A. Materials Inventory.
     B. Finished Goods.
     C. Overhead Control.
     D. Wages Payable.

 

106. If there is a debit balance in overhead control, that implies
     A. applied overhead exceeds actual overhead.
     B. actual overhead costs exceed overhead applied. a
     C. actual overhead has not been closed to cost of goods sold.
     D. none of the above.

 

107. For a manufacturer, the three inventory accounts on the balance sheet are
     A. Materials, Finished Goods, and Cost of Goods Sold.
     B. Materials, Overhead, and Cost of Goods Sold.
     C. Materials, Direct Labor, and Overhead.
     D. Materials, Work-in-Process, and Finished Goods.

 

108. In a traditional enterprise, the flow of costs through the system is
     A. materials inventory, work-in-process inventory, finished goods inventory, cost of goods sold.
     B. materials inventory, work-in-process inventory, cost of goods sold, finished goods inventory.
     C. work-in-process inventory, materials inventory, finished goods inventory, cost of goods sold.
     D. work-in-process inventory, materials inventory, finished goods.

 

109. When normal costing is used, actual overhead costs are
     A. recorded in the work-in-process account.
     B. recorded in the overhead control account.
     C. recorded in the finished goods account.
     D. not recorded.

 

110. Collossal Company uses a predetermined rate to apply overhead. At the beginning of the year, Collossal estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000. Actual overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were 11,000.

     If the predetermined overhead rate is based on machine hours, what is the total amount credited to the factory overhead account for the year for Collossal?
     A. $249,280
     B. $246,000
     C. $240,000
     D. $264,000

 

111. On March 9, 2014, Job XX4 was completed. The job cost sheet showed a total of $6,000 in direct materials and $8,000 in direct labor at a rate of $20 per direct labor hour. Factory overhead is applied at $30 per direct labor hour. The debit to Finished Goods Inventory to record the completion of Job XX4 is
     A. $17,000.
     B. $11,000.
     C. $6,000.
     D. $26,000.

 

112. Figure 5-5
     
     Tonneau Corporation had the following information available for October 2014:

Work in Process, October 1	$20,000
Materials placed into production, October	27,500
Direct labor, October	37,500

Factory overhead rate is 150 percent of direct labor costs.

Job cost sheets had the following balances:

Job Z1	$32,500
Job Z2	55,000
Job Z3	35,000
Job Z4	18,750

Jobs Z3 and Z4 were not completed at the end of December.

Refer to Figure 5-5. What is the balance in Work-in-Process for Tonneau at the end of October?
A. $85,000
B. $87,500
C. $56,250
D. $53,750

 

113. Figure 5-5
     
     Tonneau Corporation had the following information available for October 2014:

Work in Process, October 1	$20,000
Materials placed into production, October	27,500
Direct labor, October	37,500

Factory overhead rate is 150 percent of direct labor costs.

Job cost sheets had the following balances:

Job Z1	$32,500
Job Z2	55,000
Job Z3	35,000
Job Z4	18,750

Jobs Z3 and Z4 were not completed at the end of December.

Refer to Figure 5-5. What is the cost of goods finished during October for Tonneau Corporation?
A. $85,000
B. $87,500
C. $56,250
D. $53,750

 

114. Figure 5 – 6

     In the Monroe Company, the following Job cards were totaled at the end of the month:
     Job 243      $5,750
     Job 244      $4,980
     Job 245      $3,675
     Job 246      $4,250
     Job 247      $5,100
     Job 248      $3,800

     Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.

     Refer to Figure 5-6. What is the cost of goods sold for the month?

     A. $10,730
     B. $10,850
     C. $12,575
     D. none of these

 

115. Figure 5 – 6

     In the Monroe Company, the following Job cards were totaled at the end of the month:
     Job 243      $5,750
     Job 244      $4,980
     Job 245      $3,675
     Job 246      $4,250
     Job 247      $5,100
     Job 248      $3,800

     Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.

     Refer to Figure 5-6. What is the ending work-in-process inventory for the month?

     A. $10,730
     B. $4,250
     C. $12,575
     D. none of these

 

116. Figure 5 – 6

     In the Monroe Company, the following Job cards were totaled at the end of the month:
     Job 243      $5,750
     Job 244      $4,980
     Job 245      $3,675
     Job 246      $4,250
     Job 247      $5,100
     Job 248      $3,800

     Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.

     Refer to Figure 5-6. What is the cost of goods manufactured for the month?

     A. $10,730
     B. $10,850
     C. $12,575
     D. none of these

 

117. Canmore Company has the following data pertaining to 2014:

Beginning materials inventory	$ 50,000
Beginning work-in-process inventory	-0-
Beginning finished goods inventory	-0-
Materials placed into production	125,000
Materials purchased on account	137,500
Direct labor incurred (10,000 hours)	62,500
Cost of goods completed (Job BB8)	25,000

Factory overhead rate is 125 percent of direct labor costs.

What is the ending materials inventory balance for Canmore in 2014?
A. $50,000
B. $62,500
C. $12,500
D. $37,500

 

118. Samuelson Company has the following selected debit balance accounts at the end of the current year: Work-in-Process, $25,000; Finished Goods, $12,500; Cost of Goods Sold, $37,500; and Factory Overhead, $6,000. The pro-rated amount charged to Cost of Goods Sold for factory overhead will be
     A. $25,000.
     B. $3,000.
     C. $37,500.
     D. $6,000.

 

119. Under normal costing, which of the following statements is true regarding factory overhead?
     A. The balance in factory overhead at the end of the accounting period is closed.
     B. Different overhead rates are used for different quantities of predicted activity.
     C. The balance in factory overhead at the end of the accounting period is kept open.
     D. The immaterial balance in factory overhead at the end of the accounting period is allocated to the cost of goods sold and inventory accounts.

 

120. Total manufacturing-related costs incurred for Anhauser Company in August for all jobs is as follows:

Direct materials	$  900
Insurance-factory building	150
Direct labor	1,200
Property taxes-factory building	400
Other factory overhead costs	1,450
Factory overhead applied	1,650

Assuming Anhauser uses a normal costing system and applies overhead based on a predetermined rate, what is the credit to Overhead Control to close the account at the end of the year?
A. $900
B. $350
C. $1,450
D. $1,650

 

121. Which of the following transactions in a job-order costing system requires the procedure of merely moving a job-order cost sheet from one file to another?
     A. applying factory overhead to jobs
     B. closing overapplied factory overhead
     C. delivering a completed job to a customer
     D. moving the job from one production department to another

 

122. Figure 5-7
     
     The following information is available pertaining to the Production Division of Clarkson Enterprises:

	Assembly Dept.	Finishing Dept.	Total
Overhead costs	$7,500	$22,500	$30,000
Direct labor hours	7,500	2,500	10,000
Machine hours	2,500	7,500	10,000
Production information pertaining to Job 4X5:
	Assembly Dept.	Finishing Dept.	Total
Prime costs	$1,250	$-0-	$1,250
Direct labor hours	250	-0-	250
Machine hours	-0-	-0-	-0-
Units produced	500	-0-	500

Refer to Figure 5-7. What is the plantwide overhead rate based on direct labor hours?
A. $1.00
B. $1.50
C. $3.00
D. $9.00

 

123. Figure 5-7
     
     The following information is available pertaining to the Production Division of Clarkson Enterprises:

	Assembly Dept.	Finishing Dept.	Total
Overhead costs	$7,500	$22,500	$30,000
Direct labor hours	7,500	2,500	10,000
Machine hours	2,500	7,500	10,000
Production information pertaining to Job 4X5:
	Assembly Dept.	Finishing Dept.	Total
Prime costs	$1,250	$-0-	$1,250
Direct labor hours	250	-0-	250
Machine hours	-0-	-0-	-0-
Units produced	500	-0-	500

Refer to Figure 5-7. Using the plantwide overhead rate based on direct labor hours what is the cost of Job 4X5?
A. $1,250
B. $2,000
C. $8,750
D. $31,250

 

124. Figure 5-7
     
     The following information is available pertaining to the Production Division of Clarkson Enterprises:

	Assembly Dept.	Finishing Dept.	Total
Overhead costs	$7,500	$22,500	$30,000
Direct labor hours	7,500	2,500	10,000
Machine hours	2,500	7,500	10,000
Production information pertaining to Job 4X5:
	Assembly Dept.	Finishing Dept.	Total
Prime costs	$1,250	$-0-	$1,250
Direct labor hours	250	-0-	250
Machine hours	-0-	-0-	-0-
Units produced	500	-0-	500

Refer to Figure 5-7. What is the overhead rate for the Finishing Department based on machine hours?
A. $9.00
B. $3.00
C. $2.25
D. $1.00

 

125. Figure 5-7
     
     The following information is available pertaining to the Production Division of Clarkson Enterprises:

	Assembly Dept.	Finishing Dept.	Total
Overhead costs	$7,500	$22,500	$30,000
Direct labor hours	7,500	2,500	10,000
Machine hours	2,500	7,500	10,000
Production information pertaining to Job 4X5:
	Assembly Dept.	Finishing Dept.	Total
Prime costs	$1,250	$-0-	$1,250
Direct labor hours	250	-0-	250
Machine hours	-0-	-0-	-0-
Units produced	500	-0-	500

Refer to Figure 5-7. Based on departmental overhead rates, what is the cost of Job 4X5? Departmental overhead rates for the Assembly Department are based on direct labor hours, while departmental overhead rates for the Finishing Department are based on machine hours.
A. $31,250
B. $8,750
C. $2,000
D. $1,250

 

126. Figure 5-7
     
     The following information is available pertaining to the Production Division of Clarkson Enterprises:

	Assembly Dept.	Finishing Dept.	Total
Overhead costs	$7,500	$22,500	$30,000
Direct labor hours	7,500	2,500	10,000
Machine hours	2,500	7,500	10,000
Production information pertaining to Job 4X5:
	Assembly Dept.	Finishing Dept.	Total
Prime costs	$1,250	$-0-	$1,250
Direct labor hours	250	-0-	250
Machine hours	-0-	-0-	-0-
Units produced	500	-0-	500

Refer to Figure 5-7. What are the total overhead costs assigned to Job 4X5, assuming the Assembly and Finishing Departments use direct labor hours and machine hours for their bases, respectively?
A. $62.50
B. $250.00
C. $750.00
D. $1,500.00

 

127. In a job-order costing system, if costs are incurred to rework a job due to inadequate training of personnel, these costs would be
     A. debited to the job.
     B. debited to manufacturing overhead control.
     C. credited to manufacturing overhead control.
     D. credited to the cost of goods sold.

 

128. Figure 5 – 8

     Lamour Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
setups	$ 240,000	number of setups	6,000
purchasing	160,000	number of parts	20,000
other overhead	300,000	direct labor hours	80,000

The following information about the jobs was given for April.

	Job 101	Job 102	Job 103	Job 104
Balance 4/1	$64,900	$40,770	$30,500	0
direct materials	54,000	37,900	25,000	11,000
direct labor	80,000	38,500	43,000	21,000
number of setups	40	10	30	200
number of parts	300	80	400	500
direct labor hours	5,000	2,400	5,200	1,200

By April 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. What is the activity rate for purchasing?
A. $ 1.25
B. $ 8
C. $ 3.75
D. $ 40

 

129. Figure 5 – 8

     Lamour Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
setups	$ 240,000	number of setups	6,000
purchasing	160,000	number of parts	20,000
other overhead	300,000	direct labor hours	80,000

The following information about the jobs was given for April.

	Job 101	Job 102	Job 103	Job 104
Balance 4/1	$64,900	$40,770	$30,500	0
direct materials	54,000	37,900	25,000	11,000
direct labor	80,000	38,500	43,000	21,000
number of setups	40	10	30	200
number of parts	300	80	400	500
direct labor hours	5,000	2,400	5,200	1,200

By April 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. What is the cost of job 102?
A. $  86,440
B. $ 127,210
C. $ 117,170
D. none of the above

 

130. Figure 5 – 8

     Lamour Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
setups	$ 240,000	number of setups	6,000
purchasing	160,000	number of parts	20,000
other overhead	300,000	direct labor hours	80,000

The following information about the jobs was given for April.

	Job 101	Job 102	Job 103	Job 104
Balance 4/1	$64,900	$40,770	$30,500	0
direct materials	54,000	37,900	25,000	11,000
direct labor	80,000	38,500	43,000	21,000
number of setups	40	10	30	200
number of parts	300	80	400	500
direct labor hours	5,000	2,400	5,200	1,200

By April 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. What is the cost of goods manufactured?
A. $ 144,400
B. $ 215,670
C. $ 178,340
D. $ 249,610

 

131. Figure 5 – 8

     Lamour Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
setups	$ 240,000	number of setups	6,000
purchasing	160,000	number of parts	20,000
other overhead	300,000	direct labor hours	80,000

The following information about the jobs was given for April.

	Job 101	Job 102	Job 103	Job 104
Balance 4/1	$64,900	$40,770	$30,500	0
direct materials	54,000	37,900	25,000	11,000
direct labor	80,000	38,500	43,000	21,000
number of setups	40	10	30	200
number of parts	300	80	400	500
direct labor hours	5,000	2,400	5,200	1,200

By April 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. The ending work in process would consist of the costs of what jobs?
A. Job 102 + Job 103
B. Job 101 + Job 104
C. Job 101 + Job 102 + Job 103 + Job 104
D. Job 101 + Job 102 + Job 103

 

132. Figure 5 – 8

     Lamour Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
setups	$ 240,000	number of setups	6,000
purchasing	160,000	number of parts	20,000
other overhead	300,000	direct labor hours	80,000

The following information about the jobs was given for April.

	Job 101	Job 102	Job 103	Job 104
Balance 4/1	$64,900	$40,770	$30,500	0
direct materials	54,000	37,900	25,000	11,000
direct labor	80,000	38,500	43,000	21,000
number of setups	40	10	30	200
number of parts	300	80	400	500
direct labor hours	5,000	2,400	5,200	1,200

By April 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. The cost of goods sold would consist of the costs of what jobs?
A. Job 102 + Job 103
B. Job 101 + Job 104
C. Job 101 + Job 102 + Job 103 + Job 104
D. Job 101 + Job 102 + Job 103

 

133. Figure 5-9

     The Omega Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It requires the following:

	direct materials	$3,000
	direct labor ($10/hr)	1,000
	overhead (150% DL$)	1,500

After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the spoilage was considered normal, what is the cost of job 492?
A. $5,500
B. $5,640
C. $5,760
D. $3,000

 

134. Figure 5-9

     The Omega Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It requires the following:

	direct materials	$3,000
	direct labor ($10/hr)	1,000
	overhead (150% DL$)	1,500

After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the rework is considered normal spoilage, what is the journal entry for overhead control?
A. no journal entry is needed
B. materials                $ 60
payroll                    $80
overhead control             $140
C. overhead control     $ 140
materials                        $60
payroll                            $80
D. none of the above

 

135. Figure 5-9

     The Omega Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It requires the following:

	direct materials	$3,000
	direct labor ($10/hr)	1,000
	overhead (150% DL$)	1,500

After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the rework is considered abnormal spoilage, what is the journal entry for overhead control?
A. no journal entry is needed
B. materials                $ 60
payroll                    $80
overhead control             $140
C. overhead control     $ 140
materials                        $60
payroll                            $80
D. none of the above

 

136. Figure 5-9

     The Omega Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It requires the following:

	direct materials	$3,000
	direct labor ($10/hr)	1,000
	overhead (150% DL$)	1,500

After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the rework is considered abnormal spoilage, what is the cost of job 492?
A. $5,500
B. $5,760
C. $3,140
D. $5,640

 

137. The cost of spoilage is added to a job when it is considered to be
     A. a result of the process, no matter what job is being worked on.
     B. a normal consequence of working on that job.
     C. abnormal.
     D. all of these.

 

138. What is the most important factor that causes service firms to generally rank lower in customer satisfaction than manufacturing firms?

 

 

 

 

 

139. Compare and contrast perishability and intangibility in an automobile oil lubrication shop and architectural design firms.

 

 

 

 

 

140. Why are unit costs important? Why do full-cost unit costs change from accounting period to accounting period.

 

 

 

 

 

141. Why are firms reluctant to use actual costing? How does normal costing solve the problems?

 

 

 

 

 

142. Explain why actual costing systems are rarely used in practice.

 

 

 

 

 

143. What are the source documents used in a job-order costing system? How do the source documents relate to the job cost sheet? How do these documents inform work in process?

 

 

 

 

 

144. Sound of Thunder Company has a job costing system. The following items appeared in the Work-in-Process account during April 2014:

April 1, 2014, balance	$20,000
Materials placed into production	?
Direct labor (4,000 hours)	$120,000
Factory overhead applied	$96,000
Cost of goods manufactured	$400,000
April 30, 2014, balance	$16,000

Sound of Thunder applies overhead to production on the basis of direct labor hours. Job XX, the only job in process on April 30, has been charged $10,600 materials cost and has 100 labor hours of direct labor time assigned to it.

Required:

a.         Determine the predetermined factory overhead rate for Sound of Thunder Company.

b.         Determine the amounts of materials, direct labor, and factory overhead included in the
April 30, 2014, work in process.

c.         Determine the amount of materials placed into production during April 2014.

 

 

 

 

 

145. Matriarch Incorporated uses a job-order costing system and a predetermined overhead rate based on machine hours.

     At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000 and machine hours would be 8,000.

     The following information pertains to November of the current year:

     Job 10            Job 11            Job 12            Total
     Work-in-process, Nov. 1      $16,000            $26,000            $38,000            $80,000

     November production activity:
     Materials requisitioned      $4,000            $4,800            $7,200            $16,000
     Direct labor cost      $2,400            $3,600            $4,000            $10,000
     Machine hours            400            700            900            2,000
     Labor hours            120            180            200            500

     Actual manufacturing overhead cost incurred in November was $61,000.

     Required:

     a.      Compute the predetermined overhead application rate.

     b.      Determine the total cost associated with each job.

     c.      If jobs 10 and 12 were completed, prepared the journal entry to move the cost.

     d.      If job 10 was delivered to customers that paid $50,000 cash, prepare the journal
     entries.
     What is the gross profit for job 10?

     e.      Assuming no beginning work in process, what is the cost assigned to ending work in
     process?

     f.      Assuming no beginning finished goods what is the cost assigned to ending finished                          goods?

     g.      How much was overhead over/underapplied?

 

 

 

 

 

146. Selected account balances of Samaritan Company for 2014 are as follows:

Work in Process	$35,000 Debit
Finished Goods	$65,000 Debit
Cost of Goods Sold	$100,000 Debit
Factory Overhead	$22,000 Debit

Required:

a.	Were factory overhead costs underapplied or overapplied in 2014? Explain.
b.	Prepare the journal entry to dispose of the factory overhead balance assuming the amount is immaterial.
c.	Prepare the journal entry to dispose of the factory overhead balance using the allocation method.

 

 

 

 

 

 

147. Coyote Company had the following selected account balances at the end of 2014:

Work in Process	$120,000
Finished Goods	150,000
Cost of Goods Sold	180,000
Factory Overhead (overapplied)	63,000

Required:

a.	Prepare the journal entry to dispose of the factory overhead balance assuming it is written off to Cost of Goods Sold.
b.	Prepare the journal entry to dispose of the factory overhead balance assuming it is allocated among Work in Process, Finished Goods, and Cost of Goods Sold based on ending balances.
c.	Which method of disposing of under- or overapplied factory overhead cost is more accurate? Explain.

 

 

 

 

 

 

148. The following information was taken from the job cost sheet for Job 101 for McDonald Manufacturing Company:

Date started:	December 5, 2014
Date completed:	January 21, 2015

 

	Direct	Direct	Applied Factory	Job
Date	Materials	Labor	Overhead	Total
12-05-14	$3,000
12-15-14		$  900	$450
12-17-14	1,500
12-22-14		1,350	675
01-01-15	1,500
01-21-15		600	300

Job 101 was sold on account on January 25, 2015, for 160 percent of its cost. Factory overhead is applied on the basis of direct labor costs.

Required:

a.	Prepare the journal entries to record the costs incurred for Job 101 in 2014-2015 for direct materials, direct labor, and factory overhead.
b.	Prepare the journal entry to record the completion of Job 101.
c.	What is the predetermined factory overhead rate for McDonald Manufacturing?
d.	Prepare the journal entries to record the sale of Job 101.

 

 

 

 

 

 

149. Stainless Steel Company has two production departments: A and B. Stainless Steel has following budgeted overhead costs and  activity:

     Overhead costs          Direct labor hours          Machine hours
     Department A            $  50,000            10,000                    5,000
     Department B              175,000              5,000                  25,000
     Total                  $225,000            15,000                  30,000

     Production data for job 20 and 21 are given below:

     Job 20                              Job 21
                                         Dept A            Dept B            Dept A            Dept B
     Prime costs            $7,000            $12,000            $22,000            $30,000
     Direct labor hours      50            5            60            5
     Machine hours            10            40            10            50

     Job 20                  Job 21
     Units produced      100                  100

     Required:

     a.      Compare the costs per unit of Job 20 if Stainless Steel uses
     1.      a plantwide rate based on direct labor hours;
     2.      a plantwide rate based on machine hours;
     3.      departmental rates with Department A based on direct
     labor hours and Department B using machine hours.
     (round to 2 decimal places)
     b.      Why is there such a variation in the cost per unit? Which method provides the best
     cost assignment?

 

 

 

 

 

150. Salazar Company completed the following transactions with respect to its manufacturing operations during October 2014:

a.	Materials costing $140,000 and indirect materials costing $16,800 were purchased on account. Assume indirect materials was debited to materials.
b.	A total of $70,000 of materials was requisitioned to the factory for manufacturing operations conducted during October.
c.	Manufacturing payroll for the month consisted of 2,000 hours of direct labor and 500 hours of indirect labor, both at $14 per hour.
d.	Indirect materials costing $7,000 were requisitioned.
e.	Depreciation on the factory building and equipment was $14,000.
f.	Miscellaneous factory overhead expenses totaled $5,600 for October.
g.	Factory overhead cost was applied to work in process at the rate of 125 percent of direct labor costs.
h.	Units of product with a total manufacturing cost of $84,000 were completed and transferred to the finished goods warehouse.
i.	Finished goods costing $49,000 were sold during October for $77,000 cash.

Required:

Prepare journal entries for each of the transactions that occurred during October 2014.

 

 

 

 

 

151. Lowland Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
setups	$ 120,000	number of setups	6,000
purchasing	80,000	number of parts	20,000
other overhead	150,000	direct labor hours	75,000

The following information about the jobs was given for September.

	Job 1001	Job 1002	Job 1003	Job 1004
Balance 9/1	$44,900	$60,700	$30,500	0
direct materials	54,000	37,000	25,000	41,000
direct labor	80,000	38,500	43,000	71,000
number of setups	40	10	30	200
number of parts	300	180	400	500
direct labor hours	5,000	2,400	5,200	1,200

By September 30, Jobs 1001 and 1003 were completed and sold. The remaining jobs were still in process.

Required:
1.  Calculate the activity rates for each overhead activity.
2.  Calculate the cost of each job for September 30.
3. What is the beginning work in process on September 1 and October 1?
4. What is the cost of goods manufactured?
5.  What is the cost of goods sold?
6. Draw the T account for work in process. (include all debits and credits) Prepare the Statement of the Cost of Goods Manufactured.

 

 

 

 

 

 

 

Chapter 5–Product and Service Costing: Job-Order System Key

1. A production process may yield a tangible product or a service and their unique characteristics determine the best approach for developing a cost management system.
   TRUE

 

2. Manufacturing firms produce intangible products that cannot be inventoried.
   FALSE

 

3. Service firms produce intangible products that are not separable from the customer.
   TRUE

 

4. Heterogeneity means that services cannot be inventoried and must be consumed when performed.
   FALSE

 

5. Inseparability means that production and consumption are inseparable for services.
   TRUE

 

6. The uniqueness of the products or units for cost accounting purposes relates to their common costs.
   FALSE

 

7. Cost accumulation is the determination of the dollar amounts of direct materials, direct labor and overhead costs, and cost measurement is the recognition and recording of costs.
   FALSE

 

8. cost assignment is the assignment of costs to products or services once the costs have been accumulated and measured.
   TRUE

 

9. Unit cost is a critical piece of information for a manufacturing business as well as a service company.
   TRUE

 

10. Activity level is the average activity usage over the long term and normal activity level is the production level for one year.
    FALSE

 

11. Companies operating in job-order industries produce a wide variety of products or jobs that are quite different from each other.
    TRUE

 

12. The job-order cost sheet accumulates the cost of all the jobs produced.
    FALSE

 

13. The collection of all job-order cost sheets defines a work-in-process inventory file.
    TRUE

 

14. The source document known as a time ticket assigns the direct overhead to each particular job.
    FALSE

 

15. A job-order costing process would be  applicable for to airplane manufacturer.
    TRUE

 

16. Cost flow follows costs from the point they are incurred to the point they are recognized as an expense on the income statement.
    TRUE

 

17. When materials are purchased, the costs of the materials “flows” into the materials inventory account.
    TRUE

 

18. In a job-order costing system, direct labor costs assigned to a job are different than the costs assigned to work-in-process inventory.
    FALSE

 

19. In a job-order costing system, actual overhead costs never enter the work-in-process inventory accounts
    TRUE

 

20. The costs of a completed job are transferred from the work-in-process inventory account to the finished goods inventory account.
    TRUE

 

21. A debit balance in overhead control implies that actual overhead costs exceed overhead applied.
    TRUE

 

22. In job-order costing, departmental overhead rates and activity-based costing affect only the application of overhead.
    TRUE

 

23. In an activity-based costing system activity cost is applied to each job by multiplying productivity rate by the job’s use of the associated driver.
    TRUE

 

24. Costs of normal spoilage are included in overhead and applied to all good units produced.
    TRUE

 

25. Abnormal spoilage is charged to the job that caused it.
    TRUE

 

26. In __________ a single product is produced on a continuous basis.
    process production

 

27. A __________ service organization does not use raw material or tangible items for the customer.
    pure

 

28. __________ means that services cannot be inventoried but must be consumed when performed.
    Perishability

 

29. __________ is the recognition and recording of costs.
    cost accumulation

 

30. Determining the dollar amounts of direct materials, direct labor, and overhead used in production involves __________ .
    cost measurement

 

31. The association of production costs with the units produced is called __________ .
    cost assignment

 

32. The __________ activity level is the production level a firm expects to attain for the coming year.
    expected

 

33. The __________ costing system assigns costs by the job.
    job-orderor  
    job order

 

34. The __________ form indicates the type and quantity of each material issued to the factory.
    materials requisition

 

35. A __________ inventory file is a file of job-order cost sheets.
    work-in-processor  
    work in process

 

36. The actual __________ costs are not included on a job-order sheet.
    factory overhead

 

37. Purchases of direct materials are recorded as a debit to the  __________ account.
    materials inventory

 

38. The entry that captures the flow of material from the storeroom to work-in-process is called
    the __________ inventory account.
    work-in-processor  
    work in process

 

39. __________ are the source of information for posting the labor cost flows.
    Time tickets

 

40. The total applied overhead at a given point in time is given by the credit balance in the __________ control account.
    overhead

 

41. When a job is completed the total costs are transferred to a  __________ inventory file.
    finished goods

 

42. When a job is shipped to a customer, the finished job cost becomes the cost of the __________ sold.
    goods

 

43. In job-order costing, departmental overhead rates and activity-based costing affect only the application of __________ .
    overhead

 

44. The defective units expected due to the nature of the typical production process are called __________ .
    normal spoilage

 

45. The defective units due to the exacting nature of a particular job is called __________ .
    abnormal spoilage

 

46. Which of the following is a manufactured product?
    A.bungee jumping
    B. beauty salon
    C. automobile
    D. restaurant

 

47. Manufacturers producing unique or customized products would employ a(n)
    A.process costing system.
    B. job-costing system.
    C. homogeneous costing system.
    D. all of the above.

 

48. Which of the following is a pure service?
    A.bungee jumping
    B. beauty salon
    C. restaurant
    D. software

 

49. A pure service organization has
    A.no raw materials, no inventories, and a definite separation between the plant and the customer.
    B. raw materials, tangible items, and no separation between the plant and the customer.
    C. no raw materials, no tangible items, and no separation between the plant and the customer.
    D. none of these.

 

50. Inseparability refers to the
    A.nonphysical nature of services as opposed to products.
    B. fact that production and consumption are inseparable for services.
    C. greater chances for variation in the performance of services than in the production of products.
    D. fact that services cannot be inventoried but must be consumed when performed.

 

51. Heterogeneity refers to the
    A.nonphysical nature of services as opposed to products.
    B. fact that production and consumption are inseparable for services.
    C. greater chances for variation in the performance of services than in the production of products.
    D. fact that services cannot be inventoried but must be consumed when performed.

 

52. Intangibility refers to the
    A.nonphysical nature of services as opposed to products.
    B. fact that production and consumption are inseparable for services.
    C. greater chances for variation in the performance of services than in the production of products.
    D. fact that services cannot be inventoried but must be consumed when performed.

 

53. Perishability refers to the
    A.nonphysical nature of services as opposed to products.
    B. fact that production and consumption are inseparable for services.
    C. greater chances for variation in the performance of services than in the production of products.
    D. fact that services cannot be inventoried but must be consumed when performed.

 

54. Which of the following firms would make extensive use of service costing?
    A.Law firm
    B. furniture manufacturer
    C. auto dealer
    D. auto manufacturer

 

55. Which of the following products would NOT use job-order costing?
    A.houses
    B. chemicals
    C. ships
    D. custom-built furniture

 

56. Which of the following firms would make extensive use of a job-order costing?
    A.dental and medical services
    B. canned foods
    C. discount brokers
    D. petroleum

 

57. Process costing would be most applicable for
    A.custom machining.
    B. an electronics producer.
    C. high rise building construction.
    D. CPA audits.

 

58. Which of the following would NOT use a process costing system?
    A.electrical wire
    B. cotton yarn
    C. newsprint
    D. satellites

 

59. Homogeneous products refer to
    A.products similar in nature.
    B. the nonphysical nature of services and opposed to products.
    C. great variation in the nature products.
    D. products that can be inventoried.

 

60. Which cost accounting process would be most appropriate for accumulating costs of identical, standardized units?
    A.job-order costing
    B. process costing
    C. normal costing
    D. standard costing

 

61. The process where a single product is produced on a continuous basis is called:
    A.process production
    B. job-order production
    C. job production
    D. both a and c

 

62. A source document
    A.is only an external document.
    B. provides transaction data that can be recorded in a database.
    C. is only used to record a transaction between an organization and an outside vendor.
    D. is only an internal document.

 

63. Which of the following costs is usually NOT easily traceable to finished units of product?
    A.direct labor
    B. direct materials
    C. manufacturing overhead
    D. all of the above

 

64. Manufacturing overhead consists of all
    A.costs other than direct materials.
    B. manufacturing costs other than direct materials.
    C. costs other than direct materials and direct labor.
    D. manufacturing costs other than direct materials and direct labor.

 

65. The recognition and recording of costs is called:
    A.Cost assignment
    B. Cost measurement
    C. Cost accumulation
    D. Job order costing

 

66. Determining the dollar amounts of direct materials, direct labor, and overhead used in production involves:
    A.Job order costing
    B. Cost accumulation
    C. Cost assignment
    D. Cost measurement

 

67. An actual overhead rate can be calculated
    A.at the beginning of the year.
    B. at the end of each month.
    C. at the beginning of each month.
    D. either at the beginning of the year or at the beginning of the month.

 

68. Disadvantages of actual costing include
    A.actual cost systems cannot provide accurate unit cost information on a timely basis.
    B. actual cost systems produce unit costs that fluctuate from period to period.
    C. estimates must be used when calculating the actual overhead rate.
    D. both a and b.

 

69. The effect of uniform production levels on unit production costs can be achieved
    A.by using a factory overhead rate based on long-run normal production activity level.
    B. by using a factory overhead rate based on selling price.
    C. by closing the factory overhead at the end of the accounting period.
    D. by using a factory overhead rate based on different production levels for each year.

 

70. Normal costing uses which cost in work in process?
    A.applied direct materials
    B. actual overhead
    C. applied overhead
    D. budgeted overhead

 

71. A normal costing system records which costs in work in process?
    A.actual direct materials, actual direct labor, actual manufacturing overhead
    B. applied direct materials, applied direct labor, applied manufacturing overhead
    C. applied materials and labor and actual manufacturing overhead
    D. actual materials and labor and applied manufacturing overhead

 

72. The predetermined overhead rate is usually calculated at the
    A.end of each month.
    B. beginning of each month.
    C. beginning of the year.
    D. end of the year.

 

73. Which of the following costing systems assigns actual costs of materials to inventory?
    A.actual costing system
    B. normal costing system
    C. standard costing system
    D. both a and b

 

74. The principal difficulty with normal costing is that
    A.the unit cost information is not received on a timely basis.
    B. it can result in fluctuating per-unit overhead costs.
    C. estimated overhead and estimated activity are likely to differ from actual overhead and actual costs, resulting in underapplied or overapplied overhead.
    D. there is no difficulty associated with using normal costing.

 

75. Unit cost information is needed for
    A.costing inventory.
    B. financial reporting requirements.
    C. decision making.
    D. all of the above.

 

76. The association of production costs with the units produced is called:
    A.Job-order costing
    B. Cost assignment
    C. Cost measurement
    D. Cost accumulation

 

77. The production level the firm expects to attain for the coming year is called:
    A.Practical activity level
    B. Normal activity level
    C. Theoretical activity level
    D. Expected activity level

 

78. Unit costs are critical for
    A.valuing inventory.
    B. determining net income.
    C. decisions to enter a new product line.
    D. all of the above.

 

79. In developing unit costs, overhead costs should be assigned using activity drivers. Which would be the likely activity driver for a production process using a lathe?
    A.units produced
    B. direct labor hours
    C. machine hours
    D. direct materials cost

 

80. Unit cost is important information for which of the following?
    A.valuing inventory
    B. determining income
    C. decision making
    D. all of the above

 

81. The average activity that a firm experiences in the long term (more than one year) is called:
    A.Expected activity level
    B. Normal activity level
    C. Theoretical activity level
    D. Practical activity level

 

82. The absolute maximum production activity of a manufacturing firm is called:
    A.Expected activity level
    B. Normal activity level
    C. Theoretical activity level
    D. Practical activity level

 

83. The maximum output that can be realized if everything operates efficiently is referred to as:
    A.Expected activity level
    B. Normal activity level
    C. Theoretical activity level
    D. Practical activity level

 

84. The system which assign(s) costs by the job is termed:
    A.The process costing system
    B. The job-order costing system
    C. The project costing system
    D. Both a and c

 

85. A job-order costing process would be most applicable for
    A.a food processing plant.
    B. natural gas processing.
    C. airplane manufacturing.
    D. fertilizer production.

 

86. The document which indicates the type and quantity of each material issued to the factory is called the:
    A.control account
    B. materials requisition form
    C. production list
    D. work ticket

 

87. The collection of all job cost sheets defines a
    A.materials file.
    B. finished goods file.
    C. cost of goods file.
    D. work-in-process file.

 

88. The document that identifies each job and accumulates its manufacturing costs is called:
    A.job-order cost sheet
    B. control account
    C. production order
    D. bill of materials

 

89. Which of the following items is a basic costing system record in a job-order costing system?
    A.materials requisition form
    B. job-order cost sheet
    C. job time ticket
    D. all of the above

 

90. The cost of direct materials is assigned to a job by the use of a source document known as a
    A.job cost sheet.
    B. control account.
    C. materials requisition form.
    D. production order.

 

91. A work-in-process inventory file is
    A.a file of electronic job-order cost sheets.
    B. a file cabinet where work tickets are stored.
    C. a file of electronic materials requisitions.
    D. none of these.

 

92. Direct labor costs are assigned to individual jobs using a source document known as a
    A.job-order cost sheet.
    B. payroll check.
    C. time sheet.
    D. requisition form.

 

93. Figure 5 – 1

    The Nautical Corporation manufactures custom-made wood wall units. The following data pertains to Job X4A:

Direct materials placed into production	$9,000
Direct labor hours worked	300 hours
Direct labor rate per hour	$15
Machine hours worked	100 hours

Factory overhead rate is $22.50 per machine hour. Job X4A consists of 500 units.

Refer to Figure 5-1. One-half of Job X4A was sold for $10,000. What is the total amount of costs assigned to Job X4A?
A. $20,250
B. $15,750
C. $13,500
D.  $9,000

 

94. Figure 5 – 1

    The Nautical Corporation manufactures custom-made wood wall units. The following data pertains to Job X4A:

Direct materials placed into production	$9,000
Direct labor hours worked	300 hours
Direct labor rate per hour	$15
Machine hours worked	100 hours

Factory overhead rate is $22.50 per machine hour. Job X4A consists of 500 units.

Refer to Figure 5-1. One-half of Job X4A was sold for $10,000. What is the cost per unit for Job X4A?
A. $18
B. $31.50
C. $27
D. $40.50

 

95. Figure 5 – 2

    The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production	$4,000
Direct labor hours worked	50 hours
Direct labor rate per hour	$    15
Machine hours worked	100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours.  Factory overhead was budgeted at $80,000 for the year and the direct labor hours were estimated to be 20,000.  Job XY5 consists of 50 units.

Refer to Figure 5-2. What is overhead cost assigned to Job XY5?
A. $200
B. $400
C. $750
D. $1,500

 

96. Figure 5 – 2

    The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production	$4,000
Direct labor hours worked	50 hours
Direct labor rate per hour	$    15
Machine hours worked	100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours.  Factory overhead was budgeted at $80,000 for the year and the direct labor hours were estimated to be 20,000.  Job XY5 consists of 50 units.

Refer to Figure 5-2. What is the materials cost per unit for Job XY5?
A. $267
B. $80
C. $40
D. $4

 

97. Figure 5 – 2

    The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production	$4,000
Direct labor hours worked	50 hours
Direct labor rate per hour	$    15
Machine hours worked	100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours.  Factory overhead was budgeted at $80,000 for the year and the direct labor hours were estimated to be 20,000.  Job XY5 consists of 50 units.

Refer to Figure 5-2. What is the labor cost per unit for Job XY5?
A. $4
B. $15
C. $0.80
D. $40

 

98. Figure 5 – 2

    The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production	$4,000
Direct labor hours worked	50 hours
Direct labor rate per hour	$    15
Machine hours worked	100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours.  Factory overhead was budgeted at $80,000 for the year and the direct labor hours were estimated to be 20,000.  Job XY5 consists of 50 units.

Refer to Figure 5-2. What the total cost assigned to Job XY5?
A. $5,1500
B. $4,400
C. $4,200
D. $4,950

 

99. Which of the following costs is NOT included on a job-order cost sheet?
    A.direct material costs
    B. applied factory overhead costs
    C. direct labor costs
    D. actual factory overhead costs

 

100. A debit to Materials Inventory indicates materials were
     A.ordered.
     B. requisitioned.
     C. put into production.
     D. purchased.

 

101. Figure 5 – 3

     Robinson Corporation constructs new homes. Assume that Robinson uses a job costing system. During July 2014, the following transactions occurred:

     Robinson purchased $4,500 of lumber on account.

     Robinson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.

     Depreciation of $1,500 on equipment used to build new houses was recorded.

     A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

     Refer to Figure 5-3. The journal entry to record the requisition of lumber for Robinson would include a
     A. debit to Work-in-Process of $4,500.
     B. debit to Materials Inventory of $3,750.
     C. credit to Finished Goods of $3,750.
     D. debit to Work-in-Process of $3,750.

 

102. Figure 5 – 3

     Robinson Corporation constructs new homes. Assume that Robinson uses a job costing system. During July 2014, the following transactions occurred:

     Robinson purchased $4,500 of lumber on account.

     Robinson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.

     Depreciation of $1,500 on equipment used to build new houses was recorded.

     A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

     Refer to Figure 5-3. The journal entry to record labor for Robinson would include a
     A. debit to Finished Goods of $750.
     B. debit to Wages Payable of $750.
     C. credit to Finished Goods of $750.
     D. debit to Work-in-Process of $750.

 

103. Figure 5 – 4

     Lanyard Company uses a job-order costing system to account for product costs. The following information pertains to 2014:

Materials placed into production	$140,000
Indirect labor	40,000
Direct labor (10,000 hours)	160,000
Depreciation of factory building	60,000
Other factory overhead	100,000
Increase in work-in-process inventory	30,000

Factory overhead rate is $18 per direct labor hour.

Refer to Figure 5-4. What is the total amount credited to Materials Inventory for Lanyard in 2014?
A. $480,000
B. $170,000
C. $140,000
D. $110,000

 

104. Figure 5 – 4

     Lanyard Company uses a job-order costing system to account for product costs. The following information pertains to 2014:

Materials placed into production	$140,000
Indirect labor	40,000
Direct labor (10,000 hours)	160,000
Depreciation of factory building	60,000
Other factory overhead	100,000
Increase in work-in-process inventory	30,000

Factory overhead rate is $18 per direct labor hour.

Refer to Figure 5-4. What is the total amount debited to Finished Goods Inventory in 2011?
A. $490,000
B. $510,000
C. $450,000
D. $550,000

 

105. A journal entry debiting Work-in-Process would normally NOT be accompanied by a credit to
     A.Materials Inventory.
     B. Finished Goods.
     C. Overhead Control.
     D. Wages Payable.

 

106. If there is a debit balance in overhead control, that implies
     A.applied overhead exceeds actual overhead.
     B. actual overhead costs exceed overhead applied. a
     C. actual overhead has not been closed to cost of goods sold.
     D. none of the above.

 

107. For a manufacturer, the three inventory accounts on the balance sheet are
     A.Materials, Finished Goods, and Cost of Goods Sold.
     B. Materials, Overhead, and Cost of Goods Sold.
     C. Materials, Direct Labor, and Overhead.
     D. Materials, Work-in-Process, and Finished Goods.

 

108. In a traditional enterprise, the flow of costs through the system is
     A.materials inventory, work-in-process inventory, finished goods inventory, cost of goods sold.
     B. materials inventory, work-in-process inventory, cost of goods sold, finished goods inventory.
     C. work-in-process inventory, materials inventory, finished goods inventory, cost of goods sold.
     D. work-in-process inventory, materials inventory, finished goods.

 

109. When normal costing is used, actual overhead costs are
     A.recorded in the work-in-process account.
     B. recorded in the overhead control account.
     C. recorded in the finished goods account.
     D. not recorded.

 

110. Collossal Company uses a predetermined rate to apply overhead. At the beginning of the year, Collossal estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000. Actual overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were 11,000.

     If the predetermined overhead rate is based on machine hours, what is the total amount credited to the factory overhead account for the year for Collossal?
     A.$249,280
     B. $246,000
     C. $240,000
     D. $264,000

 

111. On March 9, 2014, Job XX4 was completed. The job cost sheet showed a total of $6,000 in direct materials and $8,000 in direct labor at a rate of $20 per direct labor hour. Factory overhead is applied at $30 per direct labor hour. The debit to Finished Goods Inventory to record the completion of Job XX4 is
     A.$17,000.
     B. $11,000.
     C. $6,000.
     D. $26,000.

 

112. Figure 5-5
     
     Tonneau Corporation had the following information available for October 2014:

Work in Process, October 1	$20,000
Materials placed into production, October	27,500
Direct labor, October	37,500

Factory overhead rate is 150 percent of direct labor costs.

Job cost sheets had the following balances:

Job Z1	$32,500
Job Z2	55,000
Job Z3	35,000
Job Z4	18,750

Jobs Z3 and Z4 were not completed at the end of December.

Refer to Figure 5-5. What is the balance in Work-in-Process for Tonneau at the end of October?
A. $85,000
B. $87,500
C. $56,250
D. $53,750

 

113. Figure 5-5
     
     Tonneau Corporation had the following information available for October 2014:

Work in Process, October 1	$20,000
Materials placed into production, October	27,500
Direct labor, October	37,500

Factory overhead rate is 150 percent of direct labor costs.

Job cost sheets had the following balances:

Job Z1	$32,500
Job Z2	55,000
Job Z3	35,000
Job Z4	18,750

Jobs Z3 and Z4 were not completed at the end of December.

Refer to Figure 5-5. What is the cost of goods finished during October for Tonneau Corporation?
A. $85,000
B. $87,500
C. $56,250
D. $53,750

 

114. Figure 5 – 6

     In the Monroe Company, the following Job cards were totaled at the end of the month:
     Job 243      $5,750
     Job 244      $4,980
     Job 245      $3,675
     Job 246      $4,250
     Job 247      $5,100
     Job 248      $3,800

     Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.

     Refer to Figure 5-6. What is the cost of goods sold for the month?

     A. $10,730
     B. $10,850
     C. $12,575
     D. none of these

 

115. Figure 5 – 6

     In the Monroe Company, the following Job cards were totaled at the end of the month:
     Job 243      $5,750
     Job 244      $4,980
     Job 245      $3,675
     Job 246      $4,250
     Job 247      $5,100
     Job 248      $3,800

     Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.

     Refer to Figure 5-6. What is the ending work-in-process inventory for the month?

     A. $10,730
     B. $4,250
     C. $12,575
     D. none of these

 

116. Figure 5 – 6

     In the Monroe Company, the following Job cards were totaled at the end of the month:
     Job 243      $5,750
     Job 244      $4,980
     Job 245      $3,675
     Job 246      $4,250
     Job 247      $5,100
     Job 248      $3,800

     Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.

     Refer to Figure 5-6. What is the cost of goods manufactured for the month?

     A. $10,730
     B. $10,850
     C. $12,575
     D. none of these

 

117. Canmore Company has the following data pertaining to 2014:

Beginning materials inventory	$ 50,000
Beginning work-in-process inventory	-0-
Beginning finished goods inventory	-0-
Materials placed into production	125,000
Materials purchased on account	137,500
Direct labor incurred (10,000 hours)	62,500
Cost of goods completed (Job BB8)	25,000

Factory overhead rate is 125 percent of direct labor costs.

What is the ending materials inventory balance for Canmore in 2014?
A. $50,000
B. $62,500
C. $12,500
D. $37,500

 

118. Samuelson Company has the following selected debit balance accounts at the end of the current year: Work-in-Process, $25,000; Finished Goods, $12,500; Cost of Goods Sold, $37,500; and Factory Overhead, $6,000. The pro-rated amount charged to Cost of Goods Sold for factory overhead will be
     A.$25,000.
     B. $3,000.
     C. $37,500.
     D. $6,000.

 

119. Under normal costing, which of the following statements is true regarding factory overhead?
     A.The balance in factory overhead at the end of the accounting period is closed.
     B. Different overhead rates are used for different quantities of predicted activity.
     C. The balance in factory overhead at the end of the accounting period is kept open.
     D. The immaterial balance in factory overhead at the end of the accounting period is allocated to the cost of goods sold and inventory accounts.

 

120. Total manufacturing-related costs incurred for Anhauser Company in August for all jobs is as follows:

Direct materials	$  900
Insurance-factory building	150
Direct labor	1,200
Property taxes-factory building	400
Other factory overhead costs	1,450
Factory overhead applied	1,650

Assuming Anhauser uses a normal costing system and applies overhead based on a predetermined rate, what is the credit to Overhead Control to close the account at the end of the year?
A. $900
B. $350
C. $1,450
D. $1,650

 

121. Which of the following transactions in a job-order costing system requires the procedure of merely moving a job-order cost sheet from one file to another?
     A.applying factory overhead to jobs
     B. closing overapplied factory overhead
     C. delivering a completed job to a customer
     D. moving the job from one production department to another

 

122. Figure 5-7
     
     The following information is available pertaining to the Production Division of Clarkson Enterprises:

	Assembly Dept.	Finishing Dept.	Total
Overhead costs	$7,500	$22,500	$30,000
Direct labor hours	7,500	2,500	10,000
Machine hours	2,500	7,500	10,000
Production information pertaining to Job 4X5:
	Assembly Dept.	Finishing Dept.	Total
Prime costs	$1,250	$-0-	$1,250
Direct labor hours	250	-0-	250
Machine hours	-0-	-0-	-0-
Units produced	500	-0-	500

Refer to Figure 5-7. What is the plantwide overhead rate based on direct labor hours?
A. $1.00
B. $1.50
C. $3.00
D. $9.00

 

123. Figure 5-7
     
     The following information is available pertaining to the Production Division of Clarkson Enterprises:

	Assembly Dept.	Finishing Dept.	Total
Overhead costs	$7,500	$22,500	$30,000
Direct labor hours	7,500	2,500	10,000
Machine hours	2,500	7,500	10,000
Production information pertaining to Job 4X5:
	Assembly Dept.	Finishing Dept.	Total
Prime costs	$1,250	$-0-	$1,250
Direct labor hours	250	-0-	250
Machine hours	-0-	-0-	-0-
Units produced	500	-0-	500

Refer to Figure 5-7. Using the plantwide overhead rate based on direct labor hours what is the cost of Job 4X5?
A. $1,250
B. $2,000
C. $8,750
D. $31,250

 

124. Figure 5-7
     
     The following information is available pertaining to the Production Division of Clarkson Enterprises:

	Assembly Dept.	Finishing Dept.	Total
Overhead costs	$7,500	$22,500	$30,000
Direct labor hours	7,500	2,500	10,000
Machine hours	2,500	7,500	10,000
Production information pertaining to Job 4X5:
	Assembly Dept.	Finishing Dept.	Total
Prime costs	$1,250	$-0-	$1,250
Direct labor hours	250	-0-	250
Machine hours	-0-	-0-	-0-
Units produced	500	-0-	500

Refer to Figure 5-7. What is the overhead rate for the Finishing Department based on machine hours?
A. $9.00
B. $3.00
C. $2.25
D. $1.00

 

125. Figure 5-7
     
     The following information is available pertaining to the Production Division of Clarkson Enterprises:

	Assembly Dept.	Finishing Dept.	Total
Overhead costs	$7,500	$22,500	$30,000
Direct labor hours	7,500	2,500	10,000
Machine hours	2,500	7,500	10,000
Production information pertaining to Job 4X5:
	Assembly Dept.	Finishing Dept.	Total
Prime costs	$1,250	$-0-	$1,250
Direct labor hours	250	-0-	250
Machine hours	-0-	-0-	-0-
Units produced	500	-0-	500

Refer to Figure 5-7. Based on departmental overhead rates, what is the cost of Job 4X5? Departmental overhead rates for the Assembly Department are based on direct labor hours, while departmental overhead rates for the Finishing Department are based on machine hours.
A. $31,250
B. $8,750
C. $2,000
D. $1,250

 

126. Figure 5-7
     
     The following information is available pertaining to the Production Division of Clarkson Enterprises:

	Assembly Dept.	Finishing Dept.	Total
Overhead costs	$7,500	$22,500	$30,000
Direct labor hours	7,500	2,500	10,000
Machine hours	2,500	7,500	10,000
Production information pertaining to Job 4X5:
	Assembly Dept.	Finishing Dept.	Total
Prime costs	$1,250	$-0-	$1,250
Direct labor hours	250	-0-	250
Machine hours	-0-	-0-	-0-
Units produced	500	-0-	500

Refer to Figure 5-7. What are the total overhead costs assigned to Job 4X5, assuming the Assembly and Finishing Departments use direct labor hours and machine hours for their bases, respectively?
A. $62.50
B. $250.00
C. $750.00
D. $1,500.00

 

127. In a job-order costing system, if costs are incurred to rework a job due to inadequate training of personnel, these costs would be
     A.debited to the job.
     B. debited to manufacturing overhead control.
     C. credited to manufacturing overhead control.
     D. credited to the cost of goods sold.

 

128. Figure 5 – 8

     Lamour Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
setups	$ 240,000	number of setups	6,000
purchasing	160,000	number of parts	20,000
other overhead	300,000	direct labor hours	80,000

The following information about the jobs was given for April.

	Job 101	Job 102	Job 103	Job 104
Balance 4/1	$64,900	$40,770	$30,500	0
direct materials	54,000	37,900	25,000	11,000
direct labor	80,000	38,500	43,000	21,000
number of setups	40	10	30	200
number of parts	300	80	400	500
direct labor hours	5,000	2,400	5,200	1,200

By April 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. What is the activity rate for purchasing?
A. $ 1.25
B. $ 8
C. $ 3.75
D. $ 40

 

129. Figure 5 – 8

     Lamour Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
setups	$ 240,000	number of setups	6,000
purchasing	160,000	number of parts	20,000
other overhead	300,000	direct labor hours	80,000

The following information about the jobs was given for April.

	Job 101	Job 102	Job 103	Job 104
Balance 4/1	$64,900	$40,770	$30,500	0
direct materials	54,000	37,900	25,000	11,000
direct labor	80,000	38,500	43,000	21,000
number of setups	40	10	30	200
number of parts	300	80	400	500
direct labor hours	5,000	2,400	5,200	1,200

By April 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. What is the cost of job 102?
A. $  86,440
B. $ 127,210
C. $ 117,170
D. none of the above

 

130. Figure 5 – 8

     Lamour Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
setups	$ 240,000	number of setups	6,000
purchasing	160,000	number of parts	20,000
other overhead	300,000	direct labor hours	80,000

The following information about the jobs was given for April.

	Job 101	Job 102	Job 103	Job 104
Balance 4/1	$64,900	$40,770	$30,500	0
direct materials	54,000	37,900	25,000	11,000
direct labor	80,000	38,500	43,000	21,000
number of setups	40	10	30	200
number of parts	300	80	400	500
direct labor hours	5,000	2,400	5,200	1,200

By April 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. What is the cost of goods manufactured?
A. $ 144,400
B. $ 215,670
C. $ 178,340
D. $ 249,610

 

131. Figure 5 – 8

     Lamour Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
setups	$ 240,000	number of setups	6,000
purchasing	160,000	number of parts	20,000
other overhead	300,000	direct labor hours	80,000

The following information about the jobs was given for April.

	Job 101	Job 102	Job 103	Job 104
Balance 4/1	$64,900	$40,770	$30,500	0
direct materials	54,000	37,900	25,000	11,000
direct labor	80,000	38,500	43,000	21,000
number of setups	40	10	30	200
number of parts	300	80	400	500
direct labor hours	5,000	2,400	5,200	1,200

By April 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. The ending work in process would consist of the costs of what jobs?
A. Job 102 + Job 103
B. Job 101 + Job 104
C. Job 101 + Job 102 + Job 103 + Job 104
D. Job 101 + Job 102 + Job 103

 

132. Figure 5 – 8

     Lamour Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
setups	$ 240,000	number of setups	6,000
purchasing	160,000	number of parts	20,000
other overhead	300,000	direct labor hours	80,000

The following information about the jobs was given for April.

	Job 101	Job 102	Job 103	Job 104
Balance 4/1	$64,900	$40,770	$30,500	0
direct materials	54,000	37,900	25,000	11,000
direct labor	80,000	38,500	43,000	21,000
number of setups	40	10	30	200
number of parts	300	80	400	500
direct labor hours	5,000	2,400	5,200	1,200

By April 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. The cost of goods sold would consist of the costs of what jobs?
A. Job 102 + Job 103
B. Job 101 + Job 104
C. Job 101 + Job 102 + Job 103 + Job 104
D. Job 101 + Job 102 + Job 103

 

133. Figure 5-9

     The Omega Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It requires the following:

	direct materials	$3,000
	direct labor ($10/hr)	1,000
	overhead (150% DL$)	1,500

After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the spoilage was considered normal, what is the cost of job 492?
A. $5,500
B. $5,640
C. $5,760
D. $3,000

 

134. Figure 5-9

     The Omega Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It requires the following:

	direct materials	$3,000
	direct labor ($10/hr)	1,000
	overhead (150% DL$)	1,500

After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the rework is considered normal spoilage, what is the journal entry for overhead control?
A. no journal entry is needed
B. materials                $ 60
payroll                    $80
overhead control             $140
C. overhead control     $ 140
materials                        $60
payroll                            $80
D. none of the above

 

135. Figure 5-9

     The Omega Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It requires the following:

	direct materials	$3,000
	direct labor ($10/hr)	1,000
	overhead (150% DL$)	1,500

After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the rework is considered abnormal spoilage, what is the journal entry for overhead control?
A. no journal entry is needed
B. materials                $ 60
payroll                    $80
overhead control             $140
C. overhead control     $ 140
materials                        $60
payroll                            $80
D. none of the above

 

136. Figure 5-9

     The Omega Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It requires the following:

	direct materials	$3,000
	direct labor ($10/hr)	1,000
	overhead (150% DL$)	1,500

After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the rework is considered abnormal spoilage, what is the cost of job 492?
A. $5,500
B. $5,760
C. $3,140
D. $5,640

 

137. The cost of spoilage is added to a job when it is considered to be
     A.a result of the process, no matter what job is being worked on.
     B. a normal consequence of working on that job.
     C. abnormal.
     D. all of these.

 

138. What is the most important factor that causes service firms to generally rank lower in customer satisfaction than manufacturing firms?

Employees are key to customer services. Service firms have a greater heterogeneity of labor due to different skills and abilities for interacting with customers and each other. Employees may not even behave the same from one day to another, creating inconsistency in the level of service. In manufacturing, employees are interacting with machinery in more routine tasks. Performance is more consistent.

 

139. Compare and contrast perishability and intangibility in an automobile oil lubrication shop and architectural design firms.

Intangibility refers to the nonphysical nature of services. There can be no inventory of services. Both lube jobs and architectural designs must be performed upon the demand of the customer to meet the specifications-of the car, land, etc. Perishability also means that services cannot be inventoried because they are consumed when they are performed. The consumption of service means that customers may need repeated treatments. Oil lubes are much more perishable than architectural designs. There is a more frequent need for lube jobs than design jobs.

 

140. Why are unit costs important? Why do full-cost unit costs change from accounting period to accounting period.

Unit costs are important for valuing inventory, calculating the COGS and net income, and for making decisions. Full-cost unit costs consist of direct materials, direct labor and manufacturing overhead. If there are changes in production volume, the fixed manufacturing overhead will be spread over different numbers of units causing unit costs to change.

 

141. Why are firms reluctant to use actual costing? How does normal costing solve the problems?

Actual costing systems do not provide accurate unit cost information on a timely basis because manufacturing overhead costs are indirect costs that may fluctuate dramatically from month to month and may be incurred independent of nonuniform production levels. Normal costing averages overhead over the entire year and applies it as production takes place.

 

142. Explain why actual costing systems are rarely used in practice.

Actual costing systems are rarely used in practice because they do not provide accurate unit cost information on a timely basis. Actual per-unit overhead costs can vary dramatically from period to period because (1) actual costs vary from period to period and/or (2) the number of units produced may vary from period to period. Thus, when actual costing is used, a unit produced during a low-volume month may be assigned a higher cost than a unit produced during a high-volume month, even though the units are identical.

To avoid fluctuations in per-unit costs using actual overhead costs, it is necessary to wait until the end of the period and use total actual overhead costs for the year to calculate per-unit amounts. However, that information is received too late to be used throughout the year for planning, control, and decision making. Using a normal costing system and a predetermined overhead rate avoids the problems associated with an actual costing system.

 

143. What are the source documents used in a job-order costing system? How do the source documents relate to the job cost sheet? How do these documents inform work in process?

The materials requisition form and job time tickets are the source documents for materials and labor. The materials requisition form is used to bring materials needed for production to the production floor for different jobs. The job time ticket is kept for each laborer. It reports the time spent working on different jobs. These source documents are used to assign materials and labor costs to job cost sheets. The job cost sheet collects all the materials, labor, and overhead applied to each job. The job cards are read and summarized to create the WIP account.

 

144. Sound of Thunder Company has a job costing system. The following items appeared in the Work-in-Process account during April 2014:

April 1, 2014, balance	$20,000
Materials placed into production	?
Direct labor (4,000 hours)	$120,000
Factory overhead applied	$96,000
Cost of goods manufactured	$400,000
April 30, 2014, balance	$16,000

Sound of Thunder applies overhead to production on the basis of direct labor hours. Job XX, the only job in process on April 30, has been charged $10,600 materials cost and has 100 labor hours of direct labor time assigned to it.

Required:

a.         Determine the predetermined factory overhead rate for Sound of Thunder Company.

b.         Determine the amounts of materials, direct labor, and factory overhead included in the
April 30, 2014, work in process.

c.         Determine the amount of materials placed into production during April 2014.

1. Factory overhead rate = $96,000/4,000 = $24 per direct labor hour

   b.         Costs assigned to Job XX:

materials	$10,600
direct labor (100 ´ $30*)	3,000
factory overhead applied (100 ´ $24)	2,400
work in process, April 30, 2014	$16,000

* $120,000/4000 = $30 per hour

c.         $X + $120,000 +$96,000 + $20,000 – $16,000 = $400,000
X = $180,000

 

145. Matriarch Incorporated uses a job-order costing system and a predetermined overhead rate based on machine hours.

     At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000 and machine hours would be 8,000.

     The following information pertains to November of the current year:

     Job 10            Job 11            Job 12            Total
     Work-in-process, Nov. 1      $16,000            $26,000            $38,000            $80,000

     November production activity:
     Materials requisitioned      $4,000            $4,800            $7,200            $16,000
     Direct labor cost      $2,400            $3,600            $4,000            $10,000
     Machine hours            400            700            900            2,000
     Labor hours            120            180            200            500

     Actual manufacturing overhead cost incurred in November was $61,000.

     Required:

     a.      Compute the predetermined overhead application rate.

     b.      Determine the total cost associated with each job.

     c.      If jobs 10 and 12 were completed, prepared the journal entry to move the cost.

     d.      If job 10 was delivered to customers that paid $50,000 cash, prepare the journal
     entries.
     What is the gross profit for job 10?

     e.      Assuming no beginning work in process, what is the cost assigned to ending work in
     process?

     f.      Assuming no beginning finished goods what is the cost assigned to ending finished                          goods?

     g.      How much was overhead over/underapplied?

146. $240,000/8,000 = $30

     b.                        Job 10            Job 11            Job 12            Total
     Work in process, Nov. 1      $16,000            $26,000            $38,000            $80,000
     Materials requisitioned      $  4,000            $  4,800            $  7,200            $16,000
     Direct labor cost      $  2,400            $  3,600            $  4,000            $10,000
     Overhead applied:
     Machine hours
     400 ´ $30      $12,000
     700 ´ $30                  $21,000
           900 ´ $30                               $27,000
           total                   34,400             55,400             76,200

     c.      Finished goods            $110,600
     Work in process            $110,600

     job 10 + job 12 = 34,400 + 76,200 = $110,600      (the cost of goods manufactured)

     d.      record a sale

     Cash       $50,000
     Sales      $50,000

     Cost of goods sold      $34,400
     Finished goods            $34,400

     Sales            $50,000
     CGS              34,400
     Gross Profit      $15,600

     e.      Job 11 is still in production = $55,400

     f.      Finished goods has one job – job 12 = $76,200

     g.      Actual overhead                                 $61,000
     Applied overhead      (12,000 + 21,000 + 27,000 )= $60,000
           Underapplied overhead                                 $  1,000

 

146. Selected account balances of Samaritan Company for 2014 are as follows:

Work in Process	$35,000 Debit
Finished Goods	$65,000 Debit
Cost of Goods Sold	$100,000 Debit
Factory Overhead	$22,000 Debit

Required:

a.	Were factory overhead costs underapplied or overapplied in 2014? Explain.
b.	Prepare the journal entry to dispose of the factory overhead balance assuming the amount is immaterial.
c.	Prepare the journal entry to dispose of the factory overhead balance using the allocation method.

 

 

a.	Underapplied by $22,000
	The actual costs were $22,000 greater than those applied to work-in-process.
b.	Cost of Goods Sold	22,000
	Factory Overhead		22,000
c.	Work in Process (35,000/200,000)	3,850
	Finished Goods (65,000/200,000)	7,150
	Cost of Goods Sold (100,000/200,000)	11,000
	Factory Overhead		22,000

 

147. Coyote Company had the following selected account balances at the end of 2014:

Work in Process	$120,000
Finished Goods	150,000
Cost of Goods Sold	180,000
Factory Overhead (overapplied)	63,000

Required:

a.	Prepare the journal entry to dispose of the factory overhead balance assuming it is written off to Cost of Goods Sold.
b.	Prepare the journal entry to dispose of the factory overhead balance assuming it is allocated among Work in Process, Finished Goods, and Cost of Goods Sold based on ending balances.
c.	Which method of disposing of under- or overapplied factory overhead cost is more accurate? Explain.

 

 

a.	Factory Overhead	63,000
	Cost of Goods Sold		63,000
b.	Factory Overhead	63,000
	Work in Process (120/450)		16,800
	Finished Goods (150/450)		21,000
	Cost of Goods Sold (180/450)		25,200
c.	When the amount of overapplied or underapplied overhead is immaterial, writing it off to Cost of Goods Sold is sufficient. If the amount is material, allocating the amount to the two inventories (WIP and FG) and Cost of Goods Sold is preferable.

 

148. The following information was taken from the job cost sheet for Job 101 for McDonald Manufacturing Company:

Date started:	December 5, 2014
Date completed:	January 21, 2015

 

	Direct	Direct	Applied Factory	Job
Date	Materials	Labor	Overhead	Total
12-05-14	$3,000
12-15-14		$  900	$450
12-17-14	1,500
12-22-14		1,350	675
01-01-15	1,500
01-21-15		600	300

Job 101 was sold on account on January 25, 2015, for 160 percent of its cost. Factory overhead is applied on the basis of direct labor costs.

Required:

a.	Prepare the journal entries to record the costs incurred for Job 101 in 2014-2015 for direct materials, direct labor, and factory overhead.
b.	Prepare the journal entry to record the completion of Job 101.
c.	What is the predetermined factory overhead rate for McDonald Manufacturing?
d.	Prepare the journal entries to record the sale of Job 101.

 

 

a.	Work-in-Process	6,000
	Materials		6,000
	Work-in-Process	2,850
	Wages Payable		2,850
	Work-in-Process	1,425
	Factory Overhead		1,425
b.	Finished Goods	10,275
	Work-in-Process		10,275
c.	$1,425/$2,850 = 50% of direct labor costs
d.	Accounts Receivable	16,440
	Sales		16,440
	Cost of Goods Sold	10,275
	Finished Goods		10,275

 

149. Stainless Steel Company has two production departments: A and B. Stainless Steel has following budgeted overhead costs and  activity:

     Overhead costs          Direct labor hours          Machine hours
     Department A            $  50,000            10,000                    5,000
     Department B              175,000              5,000                  25,000
     Total                  $225,000            15,000                  30,000

     Production data for job 20 and 21 are given below:

     Job 20                              Job 21
                                         Dept A            Dept B            Dept A            Dept B
     Prime costs            $7,000            $12,000            $22,000            $30,000
     Direct labor hours      50            5            60            5
     Machine hours            10            40            10            50

     Job 20                  Job 21
     Units produced      100                  100

     Required:

     a.      Compare the costs per unit of Job 20 if Stainless Steel uses
     1.      a plantwide rate based on direct labor hours;
     2.      a plantwide rate based on machine hours;
     3.      departmental rates with Department A based on direct
     labor hours and Department B using machine hours.
     (round to 2 decimal places)
     b.      Why is there such a variation in the cost per unit? Which method provides the best
     cost assignment?

150. Overhead rates if Stainless Steel uses
     1.      a plantwide rate based on direct labor hours;
     $225,000/15,000 =  $15.00 DLH
     2.      a plantwide rate based on machine hours;
     $225,000/30,000 = $7.50 MH
     3.      departmental rates with department A based on direct
     labor hours and department B using machine hours.
     A   $50,000/10,000 = $5 DLH
     B   $175,000/25,000 = $7 MH

     b.      The variation in the cost per unit is due to the variation in consumption.

          

 

150. Salazar Company completed the following transactions with respect to its manufacturing operations during October 2014:

a.	Materials costing $140,000 and indirect materials costing $16,800 were purchased on account. Assume indirect materials was debited to materials.
b.	A total of $70,000 of materials was requisitioned to the factory for manufacturing operations conducted during October.
c.	Manufacturing payroll for the month consisted of 2,000 hours of direct labor and 500 hours of indirect labor, both at $14 per hour.
d.	Indirect materials costing $7,000 were requisitioned.
e.	Depreciation on the factory building and equipment was $14,000.
f.	Miscellaneous factory overhead expenses totaled $5,600 for October.
g.	Factory overhead cost was applied to work in process at the rate of 125 percent of direct labor costs.
h.	Units of product with a total manufacturing cost of $84,000 were completed and transferred to the finished goods warehouse.
i.	Finished goods costing $49,000 were sold during October for $77,000 cash.

Required:

Prepare journal entries for each of the transactions that occurred during October 2014.

 

a.	Materials	156,800
	Accounts Payable		156,800
b.	Work-in-Process	70,000
	Materials		70,000
c.	Work-in-Process (2,000 ´ $14)	28,000
	Factory Overhead (500 ´ $14)	7,000
	Wages Payable		35,000
d.	Factory Overhead	7,000
	Materials		7,000
e.	Factory Overhead	14,000
	Accumulated Depreciation		14,000
f.	Factory Overhead	5,600
	Various Accounts		5,600
g.	Work-in-Process (28,000 ´ 125%)	35,000
	Factory Overhead		35,000
h.	Finished Goods	84,000
	Work-in-Process		84,000
i.	Cash	77,000
	Sales		77,000
	Cost of Goods Sold	49,000
	Finished Goods Inventory		49,000

 

151. Lowland Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
setups	$ 120,000	number of setups	6,000
purchasing	80,000	number of parts	20,000
other overhead	150,000	direct labor hours	75,000

The following information about the jobs was given for September.

	Job 1001	Job 1002	Job 1003	Job 1004
Balance 9/1	$44,900	$60,700	$30,500	0
direct materials	54,000	37,000	25,000	41,000
direct labor	80,000	38,500	43,000	71,000
number of setups	40	10	30	200
number of parts	300	180	400	500
direct labor hours	5,000	2,400	5,200	1,200

By September 30, Jobs 1001 and 1003 were completed and sold. The remaining jobs were still in process.

Required:
1.  Calculate the activity rates for each overhead activity.
2.  Calculate the cost of each job for September 30.
3. What is the beginning work in process on September 1 and October 1?
4. What is the cost of goods manufactured?
5.  What is the cost of goods sold?
6. Draw the T account for work in process. (include all debits and credits) Prepare the Statement of the Cost of Goods Manufactured.

Activity	Cost	Amount of Driver	Activity rate
setups	$ 120,000	6,000	$ 20
purchasing	80,000	20,000	4
other overhead	150,000	75,000	2

	Job 1001	Job 1002	Job 1003	Job 1004	Total
Balance 9/1	$44,900	$60,700	$30,500	0	136,100
dm	54,000	37,000	25,000	41,000	157,000
dl	80,000	38,500	43,000	71,000	232,500
# setups $20	( 40)    800	(10)  200	(30)  600	(200)  4,000	5,600
# parts  $4	(300)  1,200	(180)  720	(400)  1,600	(500)  2,000	5,520
dlhours  $2	(5,000)  10,000	(2,400)  4,800	(5,200)  10,400	(1,200) 2,400	27,600
TOTAL	$190,900	$141,920	$111,100	$120,400	$564,320

3. BWIP = $136,100
   EWIP 9/30 = BWIP 10/1 = jobs 1002 + 1004 = $141,920 + $120,400 = $262,320

   4.  CGM = jobs 1001 + 1003 = $190,900 + $111,100 = $302,000

   5.  CGS = jobs 1001 + 1003 = $190,900 + $111,100 = $302,000

   6.                               WIP
   ___________________________________________
   BI           136,100         |    302,000
   DM         157,000         |
   DL          232,500         |
   MOH        38,720         |
   _________________ |__________________________
   EI           262,320

   STATEMENT OF COST OF GOODS MANUFACTURED
   Lowland Corporation
   Month of September

   Direct materials used in production   $157,000
   Direct labor                          232,500
   Manufacturing overhead applied          38,720
   Total manufacturing costs added        428,220
   Add: beginning work in process          136,100
   Less: ending work in process               262,320
   Cost of Goods manufactured              302,000