Managerial Accounting 13e Carl Warren James M Reeve Jonathan Duchac - Test Bank

Managerial Accounting 13e Carl Warren James M Reeve Jonathan Duchac – Test Bank

Instant Download – Complete Test Bank With Answers

Sample Questions Are Posted Below

Cost accounting systems measure, record, and report product costs.
1. True
2. False

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.ACBSP.APC.35 – Process Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

A process cost accounting system provides product costs for each of the departments or processes within the factory.
1. True
2. False

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.ACBSP.APC.35 – Process Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.ACBSP.APC.35 – Process Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.ACBSP.APC.35 – Process Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Perpetual inventory controlling accounts and subsidiary ledgers are maintained for materials, work in process, and finished goods in job order costing systems.
1. True
2. False

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Each account in the work in process subsidiary ledger in a job order costing system is called a job cost sheet.
1. True
2. False

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The current year’s advertising costs are normally considered period costs.
1. True
2. False

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-03 – LO: 17-03

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-03 – LO: 17-03

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Job order cost accounting systems may be used to evaluate a company’s efficiency.
1. True
2. False

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-03 – LO: 17-03

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Information about costs developed through a job order cost system cannot be used to evaluate an organization’s cost performance.
1. True
2. False

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-03 – LO: 17-03

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: False

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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

ANSWER: True

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following are the two main types of cost accounting systems for manufacturing operations?
1. process cost and general accounting systems
2. job order cost and process cost systems
3. job order and general accounting systems
4. process cost and replacement cost systems

ANSWER: b

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following would most likely use a job order costing system?
1. a paper mill
2. a swimming pool installer
3. a company that manufactures chlorine for swimming pools
4. an oil refinery

ANSWER: b

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following would be most likely to use process costing?
1. a custom furniture manufacturer
2. an auto body repair shop
3. a law firm
4. a lawn fertilizer manufacturer

ANSWER: d

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.ACBSP.APC.35 – Process Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following systems provides for a separate record of the cost of each particular quantity of product that passes through the factory?
1. job order cost system
2. general cost system
3. replacement cost system
4. process cost system

ANSWER: a

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

For which of the following businesses would the job order cost system be appropriate?
1. canned soup processor
2. oil refinery
3. lumber mill
4. hospital

ANSWER: d

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

For which of the following businesses would the process cost system be appropriate?
1. a custom cabinet maker
2. a landscaper
3. a paper mill
4. a catering firm

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.ACBSP.APC.35 – Process Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following is not a characteristic of a job order costing system?
1. It accumulates cost for each department within the factory.
2. It provides a separate record for the cost of each quantity of product that passes through the factory.
3. It is best suited for industries that manufacture custom goods.
4. It uses only one work in process account.

ANSWER: a

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following products would be manufactured using a job order costing system?
1. a cell phone
2. a highlighter pen
3. a graduation invitation
4. a recliner

ANSWER: c

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Job order costing and process costing are
1. pricing systems
2. cost accounting systems
3. cost flow systems
4. inventory tracking systems

ANSWER: b

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following is not a reason a service firm would use a job order costing system?
1. to help control costs
2. to determine client billing
3. to determine department costs within the firm
4. to determine profit

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following costs are not included in finished goods inventory?
1. direct labor
2. factory overhead
3. chief financial officer’s salary
4. direct materials

ANSWER: c

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following is the correct flow of manufacturing costs?
1. raw materials, work in process, finished goods, cost of goods sold
2. raw materials, finished goods, cost of goods sold, work in process
3. work in process, finished goods, raw materials, cost of goods sold
4. cost of goods sold, raw materials, work in process, finished goods

ANSWER: a

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following would record the labor costs to an individual job?
1. clock cards
2. in-and-out cards
3. time tickets
4. a payroll register

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The Thomlin Company forecasts that total overhead for the current year will be $15,500,000 with 250,000 total machine hours. Year to date, the actual overhead is $16,000,000 and the actual machine hours are 330,000 hours. The predetermined overhead rate based on machine hours is
1. $48 per machine hour
2. $62 per machine hour
3. $45 per machine hour
4. $50 per machine hour

ANSWER: b

RATIONALE: Predetermined Overhead Rate = Estimated Total Overhead Costs / Estimated

Activity Base = $15,500,000 / 250,000 machine hours = $62 per machine hour

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The Thomlin Company forecasts that total overhead for the current year will be $15,000,000 with 300,000 total machine hours. Year to date, the actual overhead is $16,000,000 and the actual machine hours are 330,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, as of this point in time (year to date), the overhead is
1. $1,000,000 overapplied
2. $1,000,000 underapplied
3. $500,000 overapplied
4. $500,000 underapplied

ANSWER: c

RATIONALE: Predetermined Overhead Rate = Estimated Total Overhead Costs / Estimated

Activity Base = $15,000,000 / 300,000 machine hours = $50 per machine hour

Applied overhead = Predetermined overhead rate × Actual machine hours = $50

× 330,000 machine hours = $16,500,000

Overapplied overhead = Applied overhead – Actual overhead = $16,500,000 –

$16,000,000 = $500,000

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

At the end of the year, overhead applied was $42,000,000. Actual overhead was $40,300,000. Closing over/underapplied overhead into Cost of Goods Sold would cause net income to
1. increase by $1,700,000
2. decrease by $1,700,000
3. increase by $3,400,000
4. decrease by $3,400,000

ANSWER: a

RATIONALE: Net income will increase since overheads have been overapplied.

Increase in net income = Applied overhead – Actual overhead = $42,000,000 –

$40,300,000 = $1,700,000

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following is a period cost?
1. depreciation on factory lunchroom furniture
2. salary of telephone receptionist in the sales office
3. salary of a security guard for the factory parking lot
4. computer chips used by a computer manufacturer

ANSWER: b

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following is a product cost?
1. salary of a sales manager
2. advertising for a particular product
3. drill bits for a drill press used in the plant assembly area
4. salary of the company receptionist

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The document authorizing the issuance of materials from the storeroom is a
1. materials requisition
2. purchase requisition
3. receiving report
4. purchase order

ANSWER: a

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The source document for the data for debiting Work in Process for direct materials is a
1. purchase order
2. purchase requisition
3. materials requisition
4. receiving report

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

In a job order cost accounting system, the entry to record the flow of direct materials into production is to
1. debit Work in Process, credit Materials
2. debit Materials, credit Work in Process
3. debit Factory Overhead, credit Materials
4. debit Work in Process, credit Supplies

ANSWER: a

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

A summary of the materials requisitions completed during a period serves as the basis for transferring the cost of the materials from the controlling account in the general ledger to the controlling accounts for
1. Work in Process and Cost of Goods Sold
2. Work in Process and Factory Overhead
3. Finished Goods and Cost of Goods Sold
4. Work in Process and Finished Goods

ANSWER: b

DIFFICULTY: Challenging

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

In a job order cost accounting system, when goods that have been ordered are received, the receiving department personnel count, inspect the goods, and complete a
1. purchase order
2. sales invoice
3. receiving report
4. purchase requisition

ANSWER: c

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The amount of time spent by an employee on an individual job are recorded on
1. pay stubs
2. in-and-out cards
3. time tickets
4. employees’ earnings records

ANSWER: c

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The amount of time spent by an employee in the factory is usually recorded on
1. time tickets
2. job order cost sheets
3. employees’ earnings records
4. statement of owners’ equity

ANSWER: a

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The basis for recording direct and indirect labor costs incurred is a summary of the period’s
1. job order cost sheets
2. time tickets
3. employees’ earnings records
4. clock cards

ANSWER: b

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The entry to record the flow of direct labor costs into production in a job order cost accounting system is to
1. debit Factory Overhead, credit Work in Process
2. debit Finished Goods, credit Wages Payable
3. debit Work in Process, credit Wages Payable
4. debit Factory Overhead, credit Wages Payable

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

At the end of July, the first month of the current fiscal year, the factory overhead account had a debit balance. Which of the following describes the nature of this balance and how it would be reported on the interim balance sheet?
1. overapplied, deferred credit
2. underapplied, deferred debit
3. underapplied, deferred credit
4. overapplied, deferred debit

ANSWER: b

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

At the end of the fiscal year, the balance in Factory Overhead is small. The balance would be
1. transferred to Work in Process
2. transferred to Cost of Goods Sold
3. transferred to Finished Goods
4. allocated between Work in Process and Finished Goods

ANSWER: b

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The details concerning the costs incurred on each job order are accumulated in a work in process account and supported by a
1. stock ledger
2. materials ledger
3. cost ledger
4. creditors ledger

ANSWER: c

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Each document in the cost ledger is called a
1. finished goods sheet
2. stock record
3. materials requisition
4. job cost sheet

ANSWER: d

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Selected accounts with amounts omitted are as follows

Work in Process
Aug. 1	Balance	275,000	Aug. 31	Goods finished	1,030,000
31	Direct materials	X
31	Direct labor	450,000
31	Factory overhead	X

Factory Overhead
Aug. 1–31	Costs incurred	145,000	Aug. 1	Balance	15,000
			31	Applied
				(30% of direct labor cost)	X

If the balance of Work in Process on August 31 is $220,000, what was the amount debited to Work in Process for direct materials in August?

$390,000
$170,000
$525,000
$580,000

ANSWER: a

RATIONALE: Amount debited to Work in Process for direct materials in August = Finished

goods + Balance of Work in Process on August 31 – Balance of Work in Process

on August 1 – Direct labor – Applied factory overhead = $1,030,000 + $220,000

– $275,000 – $450,000 – ($450,000 × 30%) = $390,000

DIFFICULTY: Challenging

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Selected accounts with some amounts omitted are as follows

Work in Process
Aug. 1	Balance	275,000	Aug. 31	Goods finished	1,030,000
31	Direct materials	X
31	Direct labor	450,000
31	Factory overhead	X

Factory Overhead

Aug. 1–31

Costs incurred

145,000

Aug. 1

Balance

15,000

Applied

If the balance of Work in Process on August 31 is $220,000, what was the amount debited to Work in Process for factory overhead in August, assuming a factory overhead rate of 30% of direct labor costs?

$135,000
$10,000
$120,000
$70,000

ANSWER: a

RATIONALE: Amount debited to Work in Process for factory overhead in August = Direct

labor costs × Factory overhead rate = $450,000 × 30% = $135,000

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Selected accounts with some amounts omitted are as follows

Work in Process
Oct. 1	Balance	20,000	Oct. 31	Goods finished	X
31	Direct materials	96,700
31	Direct labor	201,000
31	Factory overhead	X

Finished Goods
Oct. 1	Balance	52,000
31	Goods finished	360,000

If the balance of Work in Process on October 31 is $21,000, what was the amount of factory overhead applied in October?

$63,300
$21,300
$42,300
$11,300

ANSWER: a

RATIONALE: Amount of factory overhead applied in October = Finished goods + Balance of

Work in Process on October 31 – Balance of Work in Process on October 1 –

Direct materials – Direct labor = $360,000 + $21,000 – $20,000 – $96700 –

$201,000 = $63,300

DIFFICULTY: Challenging

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Selected accounts with a credit amount omitted are as follows

Work in Process
Apr. 1	Balance	7,000	Apr. 30	Goods finished	X
30	Direct materials	78,400
30	Direct labor	195,000
30	Factory overhead	136,500

Finished Goods
Apr. 1	Balance	42,000
30	Goods finished	387,000

What was the balance of Work in Process as of April 30?

$8,100
$35,000
$29,900
$22,900

ANSWER: c

RATIONALE: Balance of Work in Process as of April 30 = Finished goods – Balance of Work

in Process on April 1 – Direct materials – Direct labor – Factory overhead =

$387,000 – $7,000 – $78,400 – $195,000 – $136,500 = $29,900

DIFFICULTY: Challenging

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

If the amount of factory overhead cost incurred exceeds the amount applied, the factory overhead account will have a
1. debit balance and be underapplied
2. credit balance and be underapplied
3. credit balance and be overapplied
4. debit balance and be overapplied

ANSWER: a

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The recording of the factory labor incurred for general factory use would include a debit to
1. Factory Overhead
2. Wages Payable
3. Wages Expense
4. Cost of Goods Sold

ANSWER: a

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The recording of the application of factory overhead costs to jobs would include a credit to
1. Factory Overhead
2. Wages Payable
3. Work in Process
4. Cost of Goods Sold

ANSWER: a

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The recording of the jobs completed would include a debit to
1. Factory Overhead
2. Finished Goods
3. Work in Process
4. Cost of Goods Sold

ANSWER: b

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Recording jobs completed would include a credit to
1. Factory Overhead
2. Finished Goods
3. Work in Process
4. Cost of Goods Sold

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Recording jobs shipped and customers billed would include a debit to
1. Accounts Payable
2. Cash
3. Finished Goods
4. Cost of Goods Sold

ANSWER: d

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Recording jobs shipped and customers billed would include a credit to
1. Accounts Payable
2. Cash
3. Finished Goods
4. Cost of Goods Sold

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The finished goods account is the controlling account for the
1. cost ledger
2. materials ledger
3. work in process ledger
4. stock ledger

ANSWER: d

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The controlling account for the cost ledger is
1. Finished Goods
2. Materials
3. Work in Process
4. Cost of Goods Sold

ANSWER: c

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Reynolds Manufacturers Inc. has estimated total factory overhead costs of $95,000 and expected direct labor hours of 9,500 for the current fiscal year. If job number 117 incurs 2,300 direct labor hours, Work in Process will be debited and Factory Overhead will be credited for
1. $21,850
2. $2,300
3. $95,000
4. $23,000

ANSWER: d

RATIONALE: Predetermined Factory Overhead Rate = Estimated Total Factory Overhead Costs

/ Estimated Activity Base = $95,000 / 9,500 labor hours = $10 per labor hour

Amount credited to Factory Overhead = Predetermined factory overhead rate ×

Direct labor hours = $10 × 2,300 labor hours = $23,000

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

A widely used activity base for developing factory overhead rates in highly automated settings is
1. direct labor hours
2. direct labor dollars
3. direct materials
4. machine hours

ANSWER: d

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

When Job 117 was completed, direct materials totaled $4,400; direct labor, $5,600; and factory overhead, $2,400. A total of 1,000 units were produced at a per-unit cost of
1. $12,400
2. $1,240
3. $124
4. $12.40

ANSWER: d

RATIONALE: Total cost = Direct materials + Direct labor + Factory overhead = $4,400 +

$5,600 + $2,400 = $12,400

Per unit cost = $12,400 / 1,000 units = $12.40

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The entries to record cost and sale of a finished good on account is
1. debit Cost of Goods Sold, credit Finished Goods
2. debit Cost of Goods Sold, credit Finished Goods, debit Accounts Receivable, credit Sales
3. debit Sales Expense, credit Finished Goods, credit Cash, credit Accounts Receivable
4. debit Work in Process, credit Finished Goods, debit Accounts Receivable, credit Sales

ANSWER: b

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

All of the following are examples of activity bases except
1. salaries of supervisors
2. quality inspections of products
3. number of machine setups
4. raw materials storage

ANSWER: a

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Materials purchased on account during the month totaled $190,000. Materials requisitioned and placed in production totaled $165,000. The journal entry to record the material purchase on account is
Materials 165,000

Accounts Payable 165,000

Materials 190,000

Accounts Payable 190,000

Materials 190,000

Cash 190,000

Accounts Payable 190,000

Materials 190,000

ANSWER: b

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Materials purchased on account during the month amounted to $190,000. Materials requisitioned and placed in production totaled $156,000. The entry to record the transaction for materials requisitioned by the production department is
Materials 156,000

Work in Process 156,000

Work in Process 190,000

Materials 190,000

Work in Process 156,000

Materials 156,000

Work in Process 156,000

Cash 156,000

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

During the period, labor costs incurred on account amounted to $175,000, including $150,000 for production orders and $25,000 for general factory use. In addition, factory overhead charged to production was $32,000. The entry to record the direct labor costs is
Work in Process 150,000

Wages Payable 150,000

Work in Process 175,000

Wages Payable 175,000

Wages Payable 175,000

Work in Process 175,000

Wages Payable 150,000

Work in Process 150,000

ANSWER: a

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

During the period, labor costs incurred on account amounted to $175,000, including $150,000 for production orders and $25,000 for general factory use. Factory overhead applied to production was $32,000. The entry to record the actual factory overhead costs incurred is
Accounts Payable 25,000

Factory Overhead 25,000

Factory Overhead 32,000

Accounts Payable 32,000

Work in Process 25,000

Wages Payable 25,000

Factory Overhead 25,000

Wages Payable 25,000

ANSWER: d

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

During the period, labor costs incurred on account amounted to $175,000, including $150,000 for production orders and $25,000 for general factory use. Factory overhead applied to production was $23,000. The entry to record the factory overhead applied to production is
Work in Process 25,000

Factory Overhead 25,000

Factory Overhead 23,000

Work in Process 23,000

Work in Process 23,000

Factory Overhead 23,000

Factory Overhead 25,000

Accounts Payable 25,000

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The cost of production of completed and transferred goods during the period amounted to $540,000, and the finished products shipped to customers had total production costs of $375,000. The entry to record the transfer of costs from work in process to finished goods is
Finished Goods 375,000

Work in Process 375,000

Finished Goods 540,000

Work in Process 540,000

Work in Process 540,000

Finished Goods 540,000

Work in Process 375,000

Finished Goods 375,000

ANSWER: b

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The cost of production of completed and transferred goods during the period amounted to $540,000, and the finished products shipped to customers had production costs of $375,000. The entry to record the transfer of costs from finished goods to cost of goods sold is
Finished Goods 540,000

Cost of Goods Sold 540,000

Finished Goods 375,000

Cost of Goods Sold 375,000

Cost of Goods Sold 375,000

Finished Goods 375,000

Cost of Goods Sold 540,000

Finished Goods 540,000

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Costs that are incurred in generating revenues during the period, but are not involved in the manufacturing process are referred to as
1. period costs
2. conversion costs
3. factory overhead costs
4. product costs

ANSWER: a

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Costs that are treated as assets until the product is sold are
1. product costs
2. period costs
3. conversion costs
4. selling expenses

ANSWER: a

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The period costs of a textbook printer would include
1. wages of a press operator
2. factory insurance costs
3. CEO salary expense
4. paper costs

ANSWER: c

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which types of inventories does a manufacturing business report on the balance sheet?
1. finished goods inventory and work in process inventory only
2. direct materials inventory and work in process inventory only
3. direct materials inventory, work in process inventory, and finished goods inventory
4. direct materials inventory and finished goods inventory only

ANSWER: c

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

For a manufacturing business, products that are in the process of being manufactured are referred to as
1. supplies inventory
2. work in process inventory
3. finished goods inventory
4. direct materials inventory

ANSWER: b

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The journal entry to record the purchase of $45,000 of raw materials is
Materials 45,000

Accounts Receivable 45,000

Materials 45,000

Accounts Payable 45,000

Inventory 45,000

Accounts Receivable 30,000

Inventory 45,000

Cash 45,000

ANSWER: b

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The journal entry to record the transfer of 1,600 units of part number 1177 with a value of $2.50 each, to work in process is
Materials 4,000

Work in Process 4,000

Work in Process 4,000

Factory Overhead 4,000

Work in Process 4,000

Materials 4,000

Work in Process 4,000

Cash 4,000

ANSWER: c

RATIONALE: Number of units × Unit price = 1,600 × $2.50 = $4,000

The journal entry to record the transfer of 1,600 units of part number 1177 with a

value of $2.50 each to work in process is to debit Work in Process and to credit

Materials for $4,000.

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following represents the factory overhead applied to a product?
1. predetermined factory overhead rate times estimated activity base
2. actual factory overhead rate times estimated activity base
3. predetermined factory overhead rate times actual activity base
4. actual factory overhead rate times actual activity base

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following is the formula to calculate the predetermined factory overhead rate?
1. estimated total factory overhead costs divided by estimated activity base
2. actual total factory overhead costs divided by estimated activity base
3. estimated total factory overhead costs divided by actual activity base
4. actual total factory overhead costs divided by actual activity base

ANSWER: a

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Aspen Technologies has the following budget data:

Estimated direct labor hours 15,000

Estimated direct labor dollars $90,000

Estimated factory overhead costs $198,000

If factory overhead is to be applied based on direct labor hours, the predetermined overhead rate is

$7.50
$13.20
$2.20
$16.50

ANSWER: b

RATIONALE: Predetermined Overhead Rate = Estimated Total Factory Overhead Costs /

Estimated Activity Base = $198,000 / 15,000 labor hours = $13.20 per labor hour

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $360,000 and direct labor hours would be 30,000. Actual factory overhead costs incurred were $377,200, and actual direct labor hours were 36,000. What is the amount of overapplied or underapplied manufacturing overhead at the end of the year?
1. $6,000 overapplied
2. $6,000 underapplied
3. $54,800 overapplied
4. $54,800 underapplied

ANSWER: c

RATIONALE: Predetermined Overhead Rate = Estimated Total Factory Overhead Costs /

Estimated Activity Base = $360,000 / 30,000 direct labor hours = $12 per direct

labor hour

Applied factory overhead costs = Predetermined overhead rate × Actual direct

labor hours = $12 × 36,000 direct labor hours = $432,000

Amount of overapplied overhead = Applied factory overhead costs – Actual

factory overhead costs = $432,000 – $377,200 = $54,800

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The following budget data are available for Sharp Company:

Estimated direct labor hours 12,000

Estimated direct labor dollars $90,000

Estimated factory overhead costs $179,000

Actual direct labor hours 11,500

Actual direct labor dollars $92,000

Actual factory overhead costs $180,000

If factory overhead is to be applied based on direct labor dollars, the predetermined overhead rate is

199%
196%
$14.92
$15.65

ANSWER: a

RATIONALE: Predetermined Overhead Rate = Estimated Total Factory Overhead Costs /

Estimated Activity Base = $179,000 / $90,000 direct labor hours = 199%

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $360,000 and direct labor hours would be 30,000. Actual manufacturing overhead costs incurred were $377,200, and actual direct labor hours were 36,000. What is the predetermined overhead rate per direct labor hour?
1. $12.00
2. $10.00
3. $12.57
4. $10.48

ANSWER: a

RATIONALE: Predetermined Overhead Rate = Estimated Total Factory Overhead Costs /

Estimated Activity Base = $360,000 / 30,000 direct labor hours = $12 per direct

labor hour

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $360,000 and direct labor hours would be 30,000. Actual manufacturing overhead costs incurred were $377,200, and actual direct labor hours were 36,000. The entry to apply the factory overhead costs for the year would include a
1. debit to Factory Overhead for $360,000
2. credit to Factory Overhead for $432,000
3. debit to Factory Overhead for $377,200
4. credit to Factory Overhead for $360,000

ANSWER: b

RATIONALE: Predetermined Overhead Rate = Estimated Total Factory Overhead Costs /

Estimated Activity Base = $360,000 / 30,000 direct labor hours = $12 per direct

labor hour

Applied factory overhead costs = Predetermined overhead rate × Actual direct

labor hours = $12 × 36,000 direct labor hours = $432,000

The journal entry to apply the factory overhead costs for the year would include a

credit to Factory Overhead for $432,000.

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The following budget data are available for Sharp Company:

Estimated direct labor hours 12,000

Estimated direct labor dollars $90,000

Estimated factory overhead costs $180,000

Actual direct labor hours 11,500

Actual direct labor dollars $92,000

Actual factory overhead costs $181,000

If factory overhead is applied based on direct labor hours, the amount of overhead to be applied is

$180,000
$181,000
$172,500
$184,000

ANSWER: c

RATIONALE: Predetermined Overhead Rate = Estimated Total Factory Overhead Costs /

Estimated Activity Base = $180,000 / 12,000 direct labor hours = $15 per direct

labor hour

Applied factory overhead costs = Predetermined overhead rate × Actual direct

labor hours = $15 × 11,500 direct labor hours = $172,500

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Adams Company is a manufacturing company that has worked on several production jobs during the first quarter of the year. Below is a list of all the jobs for the quarter:

Balance

Job No. 356 $ 450

Job No. 357 1,235

Job No. 358 378

Job No. 359 689

Job No. 360 456

Jobs 356, 357, 358, and 359 were completed. Jobs 356 and 357 were sold at a profit of $500 on each job.

What is the ending balance of Work in Process for Adams Company at the end of the first quarter?
1. $0
2. $456
3. $3,208
4. $2,752

ANSWER: b

RATIONALE: Only Job No. 360 is still incomplete and hence will be considered Work in

Process. Therefore, the ending balance of Work in Process for Adams Company

at the end of the first quarter is $456.

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

What is the ending balance of Cost of Goods Sold for Adams Company at the end of the first quarter?
1. $456
2. $2,685
3. $1,685
4. $685

ANSWER: c

RATIONALE: Jobs 356 and 357 were sold during the quarter. Ending balance of Cost of Goods

Sold for Adams Company at the end of the first quarter = Cost of Job 356 + Cost

of Job 357 = $450 + $1,235 = $1,685

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

What is the ending balance of Finished Goods for Adams Company at the end of the first quarter?
1. $456
2. $1,067
3. $1,685
4. $2,752

ANSWER: b

RATIONALE: Jobs 358 and 359 were completed during the quarter but not sold. Ending balance

of Finished Goods for Adams Company at the end of the first quarter = Ending

balance of Job 358 + Ending balance of Job 359 = $378 + $689 = $1,067

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

What is the balance of Sales for Adams Company at the end of the first quarter?
1. $1,685
2. $2,685
3. $1,000
4. $685

ANSWER: b

RATIONALE: Jobs 356 and 357 were sold during the quarter. Ending balance of Cost of Goods

Sold for Adams Company at the end of the first quarter = Cost of Job 356 + Cost

of Job 357 = $450 + $1,235 = $1,685

Jobs 356 and 357 were sold at a profit of $500 on each job. Balance of Sales for

Adams Company at the end of the first quarter = Ending balance of Cost of

Goods Sold for Adams Company at the end of the first quarter + Profit on Job

356 + Profit on Job 357 = $1,685 + $500 + $500 = $2,685

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

What is the gross profit for Adams Company at the end of the first quarter?
1. $1,685
2. $2,685
3. $1,000
4. $685

ANSWER: c

RATIONALE: Jobs 356 and 357 were sold at a profit of $500 on each job. Gross profit for

Adams Company at the end of the first quarter = Profit on Job 356 + Profit on

Job 357 = $500 + $500 = $1,000

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Bar code scanners are now being used to track incoming materials and to electronically transmit this data. Scanners have replaced which of the following?
1. receiving report
2. materials requisition
3. materials ledger
4. job cost sheet

ANSWER: a

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

A separate account for each material is found in a
1. general ledger
2. materials ledger
3. receiving report
4. job cost sheet

ANSWER: b

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The materials requisition is used to
1. release materials from the storeroom to the factory
2. release finished goods to the shipping department
3. record the acquisition of materials from a vendor
4. record and electronically transmit materials data in place of a receiving report

ANSWER: a

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Period costs are
1. found on the balance sheet
2. not involved in the production process
3. classified as direct labor, direct material, or factory overhead
4. found on the job order cost sheets

ANSWER: b

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The Cavy Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 40,000 hours. The machine hours for the month of April for all of the jobs were 4,780. If the actual factory overhead totaled $141,800, determine the over- or underapplied amount for the month.
1. $7,575 underapplied
2. $35,220 underapplied
3. $7,575 overapplied
4. $35,220 overapplied

ANSWER: c

RATIONALE: Predetermined Overhead Rate = Estimated Total Factory Overhead Costs /

Estimated Activity Base = $1,250,000 / 40,000 = $31.25 per machine hour

Applied factory overhead costs = Predetermined overhead rate × Actual machine

hours = $31.25 × 4,780 machine hours = $149,375

Amount of overapplied overhead = Applied factory overhead – Actual factory

overhead = $149,375 – $141,800 = $7,575

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Period costs are classified as either
1. selling expenses or production expenses
2. administrative expense or production expenses
3. selling expenses or administrative expenses
4. general expenses or selling expenses

ANSWER: c

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The Winston Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 50,000 hours. The total machine hours for the year were 54,300. The actual factory overhead costs for the year were $1,375,000. Determine the over- or underapplied amount for the year.
1. $17,500 overapplied
2. $17,500 underapplied
3. $118,250 overapplied
4. $118,250 underapplied

ANSWER: b

RATIONALE: Predetermined Overhead Rate = Estimated Total Factory Overhead Costs /

Estimated Activity Base = $1,250,000 / 50,000 = $25 per machine hour

Applied factory overhead costs = Predetermined overhead rate × Actual machine

hours = $25 × 54,300 machine hours = $1,357,500

Amount of underapplied overhead = Actual factory overhead – Applied factory

overhead = $1,375,000 – $1,357,500 = $17,500

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Sanders Inc. has applied $567,988 of overhead to jobs in the cost ledger. Actual overhead at the end of the year is $575,000. The adjustment for over- or underapplied overhead is
1. $7,012 overapplied, increase Cost of Goods Sold
2. $7,012 underapplied, increase Cost of Goods Sold
3. $7,012 overapplied, decrease Cost of Goods Sold
4. $7,012 underapplied, decrease Cost of Goods Sold

ANSWER: b

RATIONALE: Amount of underapplied overhead = Actual overhead – Applied overhead =

$575,000 – $567,988 = $7,012

This will increase the Cost of Goods Sold.

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

All of the following are true regarding product costs except
1. product costs are found on the balance sheet until they are sold
2. product costs consist of direct labor, direct materials, and factory overhead
3. product costs can be found in three accounts on the balance sheet
4. product costs include sales and administrative expenses

ANSWER: d

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Job cost sheets can provide information to managers for all except
1. the cost impact of materials changes
2. the cost impact of continuous improvement in the manufacturing process
3. the cost impact of materials price or direct labor rate changes over time
4. utilities, managerial salaries, and depreciation of computers in the corporate office

ANSWER: d

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-03 – LO: 17-03

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

A difference in quantity of materials used on two comparable jobs may be caused by
1. inadequately trained employees
2. poor quality materials
3. employee carelessness
4. all of these

ANSWER: d

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-03 – LO: 17-03

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following would not be found in the accounting system of a service provider?
1. cost ledger
2. finished goods ledger
3. deferred revenue account
4. job cost sheets

ANSWER: b

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Which of the following entries would not be found on the books of a service provider?
1. a debit to Work in Process; and a credit to Materials
2. a debit to Work in Process; and a credit to Wages Payable
3. a debit to Work in Process; and a credit to Overhead
4. a debit to Cost of Services; and a credit to Work in Process

ANSWER: a

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

In a job order cost accounting system used by a service business, which of the following items would normally not be included as part of overhead?
1. materials
2. direct labor
3. rent
4. supplies

ANSWER: b

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The direct labor and overhead costs of providing services to clients are accumulated in
1. finished services expense
2. work in process
3. administrative salaries expense
4. overhead

ANSWER: b

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

When a job is completed in a service organization, the job costs are transferred to the
1. work in process account
2. cost of services account
3. finished goods account
4. cost of goods sold account

ANSWER: b

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Match each of the following phrases with the term (a-g) that it most closely describes.

job order cost system
process cost system
activity-based costing
underapplied overhead
overapplied overhead
finished goods ledger
materials ledger

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.ACBSP.APC.35 – Process Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

a system that uses a different overhead rate for each activity

ANSWER: c

a subsidiary ledger that maintains a separate account for each type of material

ANSWER: g

applied overhead is more than actual overhead incurred

ANSWER: e

typically used by companies that make custom products

ANSWER: a

typically used by companies whose products are indistinguishable from each other

ANSWER: b

the stock ledger

ANSWER: f

applied overhead is less than actual overhead incurred

ANSWER: d

Match the costs that follow to the type of product cost (a-c) or designate as not a product cost (d).

direct labor
direct materials
factory overhead
not a product cost

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

factory depreciation

ANSWER: c

president’s salary

ANSWER: d

salesmen commissions

ANSWER: d

wood

ANSWER: b

factory supervisor’s salary

ANSWER: c

assembler’s wages

ANSWER: a

plastic parts

ANSWER: b

machine operator

ANSWER: a

maintenance supplies

ANSWER: c

Match each of the following phrases with the term (a-e) that it most closely describes it. Each term will be used only once.

job cost sheets
materials requisitions
receiving report
time tickets
cost allocation

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

the process by which factory overhead is assigned to a cost object

ANSWER: e

these make up the work in process subsidiary ledger

ANSWER: a

serves as the basis for recording direct labor on a job cost sheet

ANSWER: d

prepared when materials that have been ordered are received and inspected

ANSWER: c

serves as the basis for recording materials used

ANSWER: b

Define and discuss the two main types of cost accounting systems for manufacturing operations. What are their similarities and differences?

ANSWER: The two main types of cost accounting systems are job order cost systems and

process cost systems.

A job order cost system provides product costs for each quantity of product that

is manufactured. Each quantity of product that is produced is called a job. This

type of system is used by companies that manufacture custom products or

batches of similar products.

A process cost system provides product costs for each manufacturing department

or process. Process cost systems are used by companies that manufacture

products that are indistinguishable from each other and manufactured using a

continuous process.

They are similar in that both systems are widely used and a company may use

both—job order for some products and process costing for others.

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.ACBSP.APC.35 – Process Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Record the journal entries for the following transactions:
March 10: 500 units of raw materials were purchased on account at $4.00 per unit.
March 15: 250 units of raw materials were requisitioned at $4.50 per unit for production, Job 872.
March 25: 215 units of raw materials were requisitioned at $5.00 per unit for production, Job 879.

ANSWER: March 10 Materials 2,000

Accounts Payable 2,000

15 Work in Process 1,125

Materials 1,125

25 Work in Process 1,075

Materials 1,075

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-01 – LO: 17-01

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The Cavy Company accumulated 560 hours of direct labor on Job 345 and 800 hours on Job 777. The direct labor was incurred at a rate of $20 per direct labor hour for Job 345 and $21 per direct labor for Job 777. Journalize the entry to record the flow of labor costs into production.

ANSWER: Work in Process 28,000*

Wages Payable 28,000

*(560 × $20) + (800 × $21) = $28,000

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

During April, Cavy Company incurred factory overhead as follows:

Indirect materials $11,000

Factory supervision labor 4,000

Utilities 500

Depreciation (factory) 700

Small tools 300

Equipment rental 750

Record the entry for factory overhead incurred during April.

ANSWER: Factory Overhead 17,250

Materials 11,000

Wages Payable 4,000

Utilities Payable 500

Accumulated Depreciation 700

Small Tools 300

Equipment Rental Payable 750

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Cavy Company estimates that total factory overhead costs will be $660,000 for the year. Direct labor hours are estimated to be 100,000.

Determine (a) the predetermined factory overhead rate; (b) the amount of factory overhead applied to Job 345 if the amount of direct labor hours is 560 and Job 777 if the amount of direct labor hours is 800; and (c) prepare the journal entry to apply factory overhead for April according to the predetermined overhead rate.

ANSWER: (a) $660,000 / 100,000 = $6.60

(b) Job 345: 560 hrs. × $6.60 = $3,696
Job 777: 800 hrs. × $6.60 = $5,280

Factory Overhead 8,976

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The Cavy Company estimates that the factory overhead for the following year will be $1,470,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 40,000 hours. Calculate the predetermined overhead rate to apply factory overhead.

ANSWER: $1,470,000 / 40,000 = $36.75 per machine hour

DIFFICULTY: Easy

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The Cavy Company estimates that the factory overhead for the following year will be $1,250,000. The company has determined that the basis for applying factory overhead will be machine hours, which is estimated to be 40,000 hours. There are 4,780 machine hours for all of the jobs in the month of April. What is the amount that will be applied to all of the jobs for the month of April?

ANSWER: $1,250,000 / 40,000 hours = $31.25

4,780 hours × $31.25 = $149,375

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The Cavy Company estimates that the factory overhead for the following year will be $1,470,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 40,000 hours. The machine hours for the month of April for all of the jobs were 4,780. Prepare the journal entry to apply factory overhead.

ANSWER: Work in Process 175,665*

Factory Overhead 175,665

*($1,470,000/40,000) × 4,780

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

At the end of April, Cavy Company had completed Jobs 766 and 765. The individual job cost sheets reveal the following information:

Job Direct Materials Direct Labor Machine Hours

Job No. 765 $5,670 $3,500 27

Job No. 766 $8,900 $4,775 44

Job 765 produced 152 units, and Job 766 consisted of 250 units.

Assuming that the predetermined overhead rate is applied by using machine hours at a rate of $200 per hour, determine the (a) balance on the job cost sheets for each job, and (b) the cost per unit at the end of April.

ANSWER: a) Job No. 765 = $14,570 ($5,670 + $3,500 + (27 × $200)

Job No. 766 = $22,475 ($8,900 + $4,775 + (44 × $200)

b) Job No. 765 = $95.86 ($14,570 / 152)

Job No. 766 = $89.90 ($22,475 / 250)

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Cavy Company completed 26,000 units during the year at a cost of $2,139,800. The beginning finished goods inventory was 5,000 units valued at $405,000. Assuming a FIFO cost flow, determine the cost of goods sold for 20,000 units.

ANSWER: $405,000 + (15,000 × $82.30) = $1,639,500

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The Cavy Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 40,000 hours. The machine hours for the month of April for all of the jobs were 4,780. If the actual factory overhead totaled $141,800, determine the over- or underapplied amount for the month.

ANSWER: $1,250,000 / 40,000 = $31.25

$31.25 × 4,780 = 149,375 factory overhead applied

$141,800 – $149,375 = $7,575 overapplied

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The Winston Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 50,000 hours. The total machine hours for the year were 54,300 hours. The actual factory overhead for the year was $1,375,000.

(a) Determine the total factory overhead amount applied.

(b) Calculate the over- or underapplied amount for the year.

ANSWER: (a) $1,250,000 / 50,000 = $25

54,300 hours × $25 = $1,357,500

(b) $1,375,000 actual – $1,357,500 applied = $17,500 underapplied

Factory Overhead 17,500

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The Winston Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 50,000 hours. The total machine hours for the year were 54,300. The actual factory overhead for the year were $1,348,800.

(a) Determine the total factory overhead amount applied.

(b) Calculate the over- or underapplied amount for the year.

ANSWER: (a) $1,250,000 /50,000 = $25

54,300 hours × $25 = $1,357,500

(b) $1,348,800 actual – $1,357,500 applied = $8,700 overapplied

Cost of Goods Sold 8,700

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Cranston Company estimates the following overhead costs for the coming year:

Equipment depreciation $160,000
Equipment maintenance 60,000
Supervisory salaries 40,000
Factory rent 100,000
Total $360,000

Cranston is also budgeting $600,000 in direct labor costs and 15,000 machine hours for the coming year.

(a) Calculate the predetermined overhead rate using direct labor costs as the allocation base.

(b) Calculate the predetermined overhead rate using machine hours as the allocation base.

ANSWER: (a) $360,000 / $600,000 = 60% of direct labor costs

(b) $360,000/15,000 machine hours = $24.00 per machine hour

DIFFICULTY: Easy

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Flagler Company allocates overhead based on machine hours. It estimated overhead costs for the year to be $420,000. Estimated machine hours were 50,000. Actual hours and costs for the year were 46,000 machine hours and $380,000 of overhead.

(a) Calculate the overhead application rate for the year.
(b) What is the amount of applied overhead for the year?
(c) What is the amount of under or overapplied overhead for the year? Indicate whether it is over or underapplied.

ANSWER: (a) $420,000 / 50,000 = $8.40 per machine hour

(b) $8.40 × 46,000 = $386,400

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The Jase Company allocates overhead based on a predetermined overhead rate of $9.00 per direct labor hour. Job J904 required 8 tons of direct material at a cost of $600 per ton and took employees who earn $21 per hour a total of 80 hours to complete. What is the total cost of Job J904?

ANSWER: Direct materials 8 tons × $600 $4,800

Direct labor 80 hours × $21 1,680

Manufacturing overhead 80 hours × $9 720

Total cost of J904 $7,200

DIFFICULTY: Easy

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Technics Inc., a manufacturing company, utilizes job order costing. Each division establishes its own estimates regarding overhead, which are as follows:

Division A Division B

Total estimated overhead $128,000 $261,000
Total estimated machine hours 16,000 72,500
Total estimated direct labor costs $155,000 $290,000

If Division A allocates overhead on the basis of machine hours, and Division B allocates overhead as a percentage of direct labor costs, what would the predetermined overhead rate be for each division?

ANSWER: $128,000 / 16,000 = $8 per machine hour

$261,000 / $290,000 = 90% of direct labor costs

DIFFICULTY: Easy

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Crain Company budgeted 35,000 direct labor hours and incurred 40,000 direct labor hours. It incurred $780,000 of overhead and estimated overhead was $735,000.

What is Crain’s predetermined overhead rate? Was overhead overapplied or underapplied for the year? By how much?

ANSWER: Predetermined overhead rate: $735,000/35,000 = $21 per direct labor hour

Applied overhead: $21 × 40,000 = $840,000

Actual overhead 780,000

Overapplied overhead $ 60,000

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

National Survey Company uses a job order cost system.

(a) Indicate the source of the data for debiting Work in Process for each of the following:

(1) Direct materials requisitioned

(2) Direct labor used

(b) Indicate the source of the data for crediting Work in Process for jobs completed.

case, indicate the related subsidiary ledger.

ANSWER: (a) (1) Summary of materials requisitions

(2) Summary of time tickets

(b) Summary of job cost sheets for jobs completed

Materials Materials ledger

Work in Process Cost ledger

Finished Goods Finished goods ledger (or stock ledger)

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

During August, the receipts and distributions of Material No. B4G9 are as follows:

Received

Aug. 3 1,100 units at $15

16 1,700 units at $17

29 900 units at $18

Issued

Aug. 11 700 units for Job No. 116

18 1,900 units for Job No. 117

30 800 units for Job No. 118

(a) Determine the cost of each of the three issues under a perpetual system, using the first-in, first-out method.

(b) Present the journal entry to record the issuance of the materials for the month, assuming that the cost of

issuances is determined by the first-in, first-out method.

ANSWER: (a) Aug. 11 issue: 700 × $15 $10,500

18 issue: (400 × $15) + (1,500 × $17) 31,500

31 issue: (200 × $17) + (600 ×$18) 14,200

$56,200

(b) Work in Process 56,200

Materials 56,200

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

A summary of the time tickets for August follows:

Description Amount Description Amount

Job No. 321 $11,000 Job No. 342 $8,300

Job No. 329 9,200 Job No. 346 5,700

Job No. 336 5,000 Indirect labor 8,000

Present the journal entries to record (a) the labor cost incurred and (b) the application of factory overhead to production for August. The factory overhead rate is 70% of direct labor cost.

ANSWER: (a) Work in Process 39,200

Factory Overhead 8,000

Wages Payable 47,200

(b) Work in Process 27,440

Factory Overhead 27,440

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The following account appears in the ledger after only part of the postings have been completed for July, the first month of the current fiscal year:

Work in Process
July 1 Balance	60,200
Direct materials	147,000
Direct labor	120,000

Factory overhead is applied to jobs at the rate of 60% of direct labor cost. The actual factory overhead incurred for July was $75,000. Jobs completed during the month totaled $301,200.

(a) Prepare the journal entries to record (1) the application of factory overhead to production during July and (2) the

jobs completed during July.

(b) What is the balance of the factory overhead account on July 31?

(d) Determine the balance of Work in Process on July 31.

ANSWER: (a) (1) Work in Process 72,000

Factory Overhead 72,000

(2) Finished Goods 301,200

Work in Process 301,200

(b) $3,000 debit

(d) Total debits to work in process:

Balance, July 1 $ 60,200

Direct materials 147,000

Direct labor 120,000

Factory overhead 72,000 $399,200

Less cost of goods finished, during July 301,200

Balance, Work in Process, July 31 $ 98,000

DIFFICULTY: Challenging

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Present entries to record the following summarized operations related to production for a company using a job order cost system:

(a) Materials purchased on account $176,000

(b) Prepaid expenses incurred on account 12,200

For production orders 153,700

For general factory use 2,700

(d) Factory labor used:

On production orders 141,300

For general factory purposes 12,000

(e) Depreciation on factory equipment 37,000

(f) Expiration of prepaid expenses, chargeable to factory 6,100

(g) Factory overhead costs incurred on account 76,000

(h) Factory overhead applied, based on machine hours 105,300

(i) Jobs finished 415,300

(j) Jobs shipped to customers: Cost 412,000

Selling price (assume all sold on account) 638,000

ANSWER: (a) Materials 176,000

Accounts Payable 176,000

(b) Prepaid Expenses 12,200

Accounts Payable 12,200

Factory Overhead 2,700

Materials 156,400

(d) Work in Process 141,300

Factory Overhead 12,000

Wages Payable 153,300

(e) Factory Overhead 37,000

Accumulated Depreciation—
Factory Equipment 37,000

(f) Factory Overhead 6,100

Prepaid Expenses 6,100

(g) Factory Overhead 76,000

Accounts Payable 76,000

(h) Work in Process 105,300

Factory Overhead 105,300

(i) Finished Goods 415,300

Work in Process 415,300

(j) Cost of Goods Sold 412,000

Finished Goods 412,000

Accounts Receivable 638,000

Sales 638,000

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The balance of Material Q on May 1 and the receipts and issuances during May are as follows:

Balance, May 1 8 at $32

Received, May 11 23 at $33

Received, May 25 15 at $35

Issued, May 17 14

Issued, May 27 18

Determine the cost of each of the issuances under a perpetual system, using the FIFO method.

ANSWER: May 17 issue: (8 × $32) + (6 × $33) = $454

May 27 issue: (17 × $33) + (1 × $35) = $596

DIFFICULTY: Easy

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Prepare the journal entry for materials and labor, based on the following:

Raw materials issued: Job No. 609, $850; for general use in factory, $600

Labor time tickets: Job No. 609, $1,600; $400 for supervision

ANSWER: Work in Process 850

Factory Overhead 600

Raw Materials 1,450

Work in Process 1,600

Factory Overhead 400

Wages Payable 2,000

DIFFICULTY: Easy

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Six selected transactions for the current month are indicated by letters in the following T accounts in a job order cost accounting system:

Materials		Work in Process
	(a)	(a)	(d)
		(b)
		(c)
Wages Payable		(f)
	(b)

Factory Overhead		Finished Goods
(a)	(c)	(d)	(e)
(b)	(f)	(f)

Cost of Goods Sold
(e)
(f)

Describe each of the six transactions.

ANSWER: (a) direct and indirect materials are issued

(b) direct and indirect labor costs are incurred

(d) completed goods are transferred to finished goods

(e) goods are sold

(f) underapplied overhead is allocated

DIFFICULTY: Moderate

Bloom’s: Applying

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

On November 2, Newsprint Manufacturing purchases 5 rolls of paper on account at $125 per roll for use within the production process. On November 5, 4 rolls of this paper are issued to Job 157A in the Printing Department. The Printing Department records $675 in direct labor and $1,150 of factory overhead to Job 157A. On November 8, Printing transfers Job 157A to the Folding Department. The Folding Department applies $450 in direct labor and $655 in factory overhead to Job 157A. Job 157A is transferred to Finished Goods inventory on November 9.

(a) Journalize the purchase of the paper.

(b) Journalize the transfer of raw materials to work in process, the application of direct labor, and the application of

manufacturing overhead to Job 157A while in the Printing Department.

(d) Journalize the application of direct labor and the application of manufacturing overhead to Job 157A while in

the Folding Department.

(e) Journalize the transfer of Job 157A to Finished Goods Inventory at actual cost.

ANSWER: (a) Nov. 2 Raw Materials 625

Accounts Payable 625

(b) Nov. 5 Work in Process—Printing 500

Raw Materials 500

5 Work in Process—Printing 675

Wages Payable 675

5 Work in Process—Printing 1,150

Factory Overhead 1,150

Work in Process—Printing 2,325

(d) Nov. 8 Work in Process—Folding 450

Wages Payable 45

8 Work in Process—Folding 655

Factory Overhead 655

(e) Nov. 9 Finished Goods 3,430

Work in Process—Folding 3,430

DIFFICULTY: Challenging

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

On May 15, the stamping department accepted Job 051507A to make 1,000 funnels. Materials requisitioned were 1,100 sheets at $1.20 per sheet and 1,150 grommets at $0.15 per set. The cost driver used by stamping department is the drop-forge strokes indicated by a machine mounted counter. Overhead is applied at $2.25 for each drop-forge stroke. Additionally, $375.00 of overhead is applied to each job due to setup and tear down. Direct labor is applied at $22.50 per hour for the machine operator and $11.10 for the machine loader. The job required 6.5 hours of labor.

Upon completion, the job was transferred to Finished Goods Inventory.

Journalize all events as of May 15.

ANSWER: May 15 Work in Process ($1,320.00 + $172.50) 1,492.50 *

Raw Materials 1,492.50

*(1,100 × $1.20) + (1,150 × $0.15)

15 Work in Process 2,883.75 **

Factory Overhead 2,883.75

**$375 + (1,115 × $2.25)

15 Work in Process 218.40 ***

Wages Payable 218.40

***($22.50 + $11.10) × 6.5 hrs.

15 Finished Goods Inventory 4,594.65 ****

Work in Process 4,594.65

****$1,492.50 + $2,883.75 + $218.40

DIFFICULTY: Challenging

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

On November 14, the Milling Department accepted Job 111407A for 1,000 pounds of cereal mix.

Materials: Standard Qty. Standard Cost

Oats 525 pounds $1.25 per pound

Wheat 450 pounds $1.15 per pound

Barley 85 pounds $1.45 per pound

Malt 65 pounds $2.15 per pound

Honey 25 quarts $1.20 per quart

Water 25 gallons $0.45 per gallon

Time:

Miller 4 1/2 hours $22.75 per hour

Loader 1 1/2 hours $11.50 per hour

Overhead is applied at $5.75 per pound completed. The recipe produced 1,025 pounds of cereal mix.

(a) Record the journal entry to transfer raw materials to Job 111407A.

(b) Record the journal entry for direct labor incurred for Job 111407A.

(d) Record the journal entry to transfer Job 111407A to Finished Goods on November 14.

ANSWER: (a) Nov. 14 Work in Process 1,478.00

Materials 1,478.00

(525 × $1.25) + (450 × $1.15) + (85 × $1.45) + (65 × $2.15) + (25 × $1.20) + (25

× $0.45) = $1,478

(b) Nov. 14 Work in Process 119.63

Wages Payable 119.63

(4.5 × $22.75) + (1.5 × $11.50) = $119.63

Overhead 5,893.75

(1,025 × $5.75) = $5,893.75

(d) Nov. 14 Finished Goods 7,491.38

Work in Process 7,491.38

$1,478.00 + $119.63 + $5,893.75 = $7,491.38

DIFFICULTY: Challenging

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Put the following in the order of the flow of manufacturing costs for a company.

Closing under/overapplied factory overhead to Cost of Goods Sold
Materials purchased
Factory labor used and factory overhead incurred in production
Completed jobs moved to finished goods
Factory overhead applied to jobs according to the predetermined overhead rate
Materials requisitioned to jobs
Selling of finished product
Preparation of financial statements to determine gross profit

ANSWER: b. Materials purchased

Materials requisitioned to jobs
Factory labor used and factory overhead incurred in production
Factory overhead applied to jobs according to the predetermined

overhead rate

Completed jobs moved to finished goods
Closing under/overapplied factory overhead to Cost of Goods Sold
Selling of finished product
Preparation of financial statements to determine gross profit

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

At the end of the period, Carson Company had the following balances in selected accounts:

Materials $ 80,000
Finished goods 190,000
Work in process 70,000
Cost of goods sold 1,000,000

Factory overhead 30,000

(a) The factory overhead balance is relatively small; prepare the journal entry to close the Factory Overhead

account assuming a debit balance. What does a debit balance mean?

(b) The factory overhead balance is relatively small; prepare the journal entry to close the Factory Overhead

account assuming a credit balance. What does a credit balance mean?

ANSWER: (a) Cost of Goods Sold 30,000

Factory Overhead 30,000

A debit balance indicates that the factory overhead was underapplied.

(b) Factory Overhead 30,000

Cost of Goods Sold 30,000

A credit balance indicates the factory overhead was overapplied.

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

The following is a list of costs incurred by several business organizations:

(a) Telephone cable for a telephone company

(b) Membership fees for a health club for executives

(d) Long-distance telephone bill for calls made by salespersons

(e) Carrying cases for a manufacturer of video camcorders

(f) Cotton for a textile manufacturer of blue jeans

(g) Bandages for the emergency room of a hospital

(h) Cost of company holiday party

(i) Electricity used to operate factory machinery

(j) State unemployment compensation taxes for factory workers

(k) Gloves for factory machine operators

(l) Fees paid for lawn service for office grounds

(m) Salary of secretary to vice-president of finance

(n) Salary of secretary to vice-president of marketing

(o) Production supervisor’s salary

(p) Engine oil for manufacturer and distributor of motorcycles

(q) Oil lubricants for factory plant and equipment

(r) Cost of a radio commercial

(s) Depreciation on factory equipment

(t) Wages of checkout clerk in company-owned retail outlet

(u) Maintenance and repair costs for factory equipment

(v) Depreciation on office equipment

(w) Bonuses paid to salespersons

(x) Insurance on factory building

(y) Training for accounting personnel on use of microcomputer

(z) Steel for a construction contractor

Classify each of the preceding costs as product costs or period costs. For those costs classified as product costs, indicate whether the product cost is a direct materials cost, direct labor cost, or factory overhead cost. For those costs classified as period costs, indicate whether the period cost is a selling expense or an administrative expense. Use the following tabular headings for preparing your answer. Place an X in the appropriate column.

Product Cost

Period Cost

Cost

Direct
Materials
Cost

Direct
Labor
Cost

Factory
Overhead
Cost

Selling
Expense

Administrative
Expense

ANSWER:


	Product Cost			Period Cost
Cost	Direct Materials Cost	Direct Labor Cost	Factory Overhead Cost	Selling Expense	Administrative Expense
(a)	X
(b)					X
(c)					X
(d)				X
(e)	X
(f)	X
(g)	X
(h)					X
(i)			X
(j)		X
(k)			X
(l)					X
(m)					X
(n)				X
(o)			X
(p)	X
(q)			X
(r)				X
(s)			X
(t)				X
(u)			X
(v)					X
(w)				X
(x)			X
(y)					X
(z)	X

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs

ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

List the accounts used in the cost flow for (a) a manufacturer and (b) a service provider.

ANSWER: (a) Materials

Wages Payable

Factory Overhead

Work in Process

Finished Goods

Cost of Goods Sold

(b) Supplies

Wages Payable

Overhead

Work in Process

Cost of Services

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Discuss how job order cost information is used in decision making. What are some possible reasons that actual cost of materials would exceed expected costs for a job?

ANSWER: Since a job order cost system provides product costs for each quantity of product

that is manufactured, total and unit product costs can be compared to similar jobs

or expected costs. Thus, a job order cost system can be used by managers for

cost evaluation and control.

Possible reasons that actual material costs would exceed expected cost

include: poorly trained employees, poor quality materials, faulty equipment, or

incorrect instructions.

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-04 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

Discuss the use of job order costing for professional services businesses. What are the similarities and differences between service and manufacturing business job order costing?

ANSWER: Professional service providers—attorneys, physicians, advertising agencies,

etc.—may use job order cost accounting systems. In such cases, clients are

considered jobs.

Like manufacturers, direct labor and overhead costs for service companies are

accumulated in work in process accounts. Unlike manufacturers, materials cost

for service companies are usually insignificant and treated as overhead. When a

job is completed, it is transferred to Cost of Services, which is similar to Cost of

Goods Sold. Service companies do not use Finished Goods accounts.

DIFFICULTY: Moderate

Bloom’s: Remembering

LEARNING OBJECTIVES: FNMN.WARD.16.17-02 – LO: 17-04

ACCREDITING STANDARDS: ACCT.ACBSP.APC.34 – Job Order Costing

ACCT.IMA.07 – Cost Management

BUSPROG: Analytic

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