Job-costing-multiple-choice-questions compress Q Company uses a normal cost system. The following information is from its financial records for the year: Total manufacturing costs, P2,500,000 Cost PDF

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Q Company uses a normal cost system. The following information is from its financial records for the year:
Total manufacturing costs, P2,500,000
Cost of goods manufactured, P2,425,000
Applied overhead, 30% of total manufacturing costs
Predetermined OH rate, 80% of direct ...

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Multiple Choice -Theoretical 1. All of the following would most likely use a job order costing system except: a. a dental practice. b. an auto repair shop. c. a small appliance maker. d. an architectural firm.

a. Raw materials, work in process, cost of goods sold, finished goods b. Raw materials, work in process, finished goods, cost of goods sold c. Raw materials, overhead, work in process d. Direct material, finished goods, work in process

2. Which of the following costs is not charged to Work in Process in a normal cost system? a. Actual overhead b. Actual direct materials c. Actual direct labor d. Estimated indirect labor

8. The journal entry to apply overhead to production would include: a. a debit to Manufacturing Overhead Control. b. credits to various accounts such as Cash, Accumulated Depreciation, and Accounts Payable. c. a credit to Manufacturing Overhead Control. d. a credit to Work in Process.

3. Which of the following product costs would be charged to Work in Process assuming a standard costing system? a. Actual direct material costs b. Actual overhead costs c. Actual direct labor costs d. Applied overhead costs

9. The journal entry to transfer production from the Finishing Department to Finished Goods would include a: a. credit to Finished Goods. b. debit to Cost of Goods Manufactured. c. credit to WIP – Finishing. d. credit to Cost of Goods Manufactured.

4. Select the incorrect job order costing system characteristic. a. Costs are accumulated by job. b. A job may consist of multiple units provided all units are similar. c. Costs of different jobs cannot logically be averaged so a unique cost must be determined for each job. d. Jobs are usually produced to distinct customer specifications.

10. M Corporation manufactures a specialty line of jeans using a job-order-cost system. During May, the following costs were incurred in completing Job M1: direct materials, $13,700; direct labor, $4,800; administrative, $1,400; and selling, $5,600. Overhead was applied at the rate of $25 per machine hour, and Job M1 required 800 machine hours. If Job M1 resulted in 7,000 good jeans, the cost of goods sold per unit would be a. $5.50. b. $6.30. c. $5.70. d. $8.50.

5. Which of the following serves at a subsidiary ledger for the Work in Process account? a. Standard cost card b. Material requisition form c. Job requisition form d. Job order cost sheet 6. Which of the following is not a source document used in job order costing systems? a. Cost of production report b. Employee time sheet c. Job cost sheet d. Material requisition form

7. Select the response that represents the correct flow of costs in a job order costing system.

11. Q Company uses a normal cost system. The following information is from its financial records for the year: Total manufacturing costs, $2,500,000 Cost of goods manufactured, $2,425,000 Applied overhead, 30% of total manufacturing costs Predetermined OH rate, 80% of direct labor cost Assuming the company’s work in process inventory at January 1 was 75 percent of its December 31 work in process inventory, what is the carrying value of the company’s work in process inventory at December 31? a. $75,000 b. $100,000 c. $225,000 d. $300,000

12. Which of the following costing systems does not involve computing cost variances? a. Actual costing system b. Normal costing system c. Standard costing system d. All of the above systems involve computing cost variances 13. Select the incorrect statement concerning standard costs and job order costing. a. A standard cost system determines product cost by using predetermined norms in the inventory accounts for prices and/or quantities of cost components. b. Standards can be used in a job order cost system only if a company typically engages in jobs that produce fairly similar products. c. Under GAAP, standard cost job order systems may not substitute for actual or normal costing systems. d. Standard cost variances can be computed for actual-to-standard differences regardless of whether standards have been established for both quantities and prices or for prices or rates only. 15. Which of the following statements is true concerning job order costing and management decision making? a. Job order costing assists managers in their planning, controlling, decision making and performance evaluations functions. b. Job order costing allows managers to trace costs associated with specific current jobs to better estimate costs of future jobs. c. Job order costing provides a means by which managers can better control the costs associated with their operations. d. All of the above are true statements. 16. Select the incorrect statement regarding the accounting for product losses. a. Normal losses that are anticipated on all jobs are estimated and included in the development of the predetermined OH rate. b. Normal losses that are associated with a particular job are charged to a loss account in the period they are incurred. c. Abnormal losses are charged to a loss account in the period they are incurred. d. The difference between normal and abnormal loss is one of degree and therefore must be determined by management.

16. Cost of goods sold is a component of the income statement. In a merchandising establishement, this refers to purchases adjusted for changes in inventory. In a manufacturing company, what replaces purchases to arrive at cost of goods sold. a. Fixed mfg. overhead. b. WIP c. Finished Goods d. CGM 17. Actual costs are: a. the costs incurred b. budgeted costs c. estimated costs d. forecasted costs 18. Budgeted costs are: a. the costs incurred this year b. the costs incurred last year c. planned or forecasted costs d. competitor’s costs 19. Classifying a cost as either direct or indirect depends upon: a. the behavior of the cost in response to volume changes b. whether the cost is expensed in the period in which it is incurred c. whether the cost can be easily identified with the cost object d. whether an expenditure is avoidable or not in the future 20. All of the following are true EXCEPT that indirect costs: a. may be included in prime costs b. are not easily traced to products or services c. vary with the selection of the cost object d. may be included in manufacturing overhead

1. All of the following are reasons for using predetermined overhead rates in product costing except: a. to overcome the problem of fluctuations in activity levels that have no impact on fixed overhead costs. b. to overcome the problem caused by overhead containing both fixed and variable costs. c. to adjust for variations in actual overhead costs that are unrelated to fluctuations in activity. d. to allow management to determine whether a product, product line, or customer is profitable. 2. What is the best method for disposing of significant underapplied factory overhead? a. Charge the underapplied amount to cost of goods sold b. Prorate the underapplied amount to cost of goods sold, finished goods, and work in process c. Prorate the underapplied amount to inventory only (work in process and finished goods) d. Charge the underapplied amount to a loss account at the end of the period 3. Select the incorrect statement concerning overapplied overhead. a. The overhead control account will have a debit balance. b. The amount of overhead transferred to WIP from the overhead control account exceeded the actual amount of overhead incurred. c. Overapplied overhead must be closed at year-end because a single year’s activity level was used to set the predetermined overhead rate. d. Overapplied overhead may result if the company’s actual utilization of capacity is greater than expected.

4. Select the incorrect matching of cost and cost level. a. Unit level : Direct material b. Facility level : Equipment maintenance c. Product level : Product development d. Batch level : Setup costs 5. Which costing system assigns costs within multiple cost pools to products using multiple drivers? a. Activity-based costing b. Variable costing c. Traditional costing d. None of the above 6. The use of activity-based costing normally results in: a. substantially lower unit costs for low-volume products than is reported by traditional product costing. b. equalizing setup costs for all product lines. c. decreased setup costs being charged to lowvolume products. d. substantially greater unit costs for low-volume products than is reported by traditional product costing.

7. Because of the changes that are occurring in the basic operations of many firms, all of the following represent trends in the way indirect costs are allocated except: a. treating direct labor as an indirect manufacturing cost in an automated factory. b. using throughput time as an application base to increase awareness of the costs associated with lengthened throughput time. c. preferring plant-wide application rates that are applied to machine hours rather than incurring the cost of detailed allocations. d. using several machine cost pools to measure product costs on the basis of time in a machine center

8. Activity-Based Costing is appropriate for which of the following organizations? a. One that produces and sells a wide variety of products. b. One that produces and sells a single complex product. c. One that provides a single service to customers. d. All of the above

B) customers C) departments D) All of these answers are correct.

9. A number of barriers must be overcome to implement activity-based costing systems successfully. Select the barrier that is not matched up properly with its type. a. Fear of change Individual barrier b. Regulatory agencies Environmental barrier c. Corporate culture issues Organizational barrier d. All of the above barriers are properly classified

3) The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is: A) cost accumulation B) cost assignment C) cost tracing D) conversion costing

10. The document that summarizes the expected quantities and costs needed to produce a unit is called a a. bill of materials. b. total cost of ownership document. c. operations flow document. d. standard cost card.

5) The collection of accounting data in some organized way is: A) cost accumulation B) cost assignment C) cost tracing D) conversion costing

11. Which of the following items is not included in annual inventory carrying costs? a. Inventory storage cost b. Inventory purchase cost c. Insurance on inventory d. Property taxes on inventory

2) Actual costs are: A) the costs incurred B) budgeted costs C) estimated costs D) forecasted costs

6) Budgeted costs are: A) the costs incurred this year B) the costs incurred last year C) planned or forecasted costs D) competitor's costs

12. When the level of safety stock is increased: a. lead time will increase. b. carrying costs will decrease. c. the frequency of stock outs will decrease. d. lead time will decrease.

7) Cost assignment : A) is always arbitrary B) is includes tracing and allocating C) is the same as cost accumulation D) is finding the difference between budgeted and actual costs Answer: B

11) Cost accounting: A) provides information on the efficiency of factory labor B) provides information on the cost of servicing commercial customers C) provides information on the performance of an operating division D) All of these answers are correct.

8) A cost system determines the cost of a cost object by: A) accumulating and then assigning costs B) accumulating costs C) assigning and then accumulating costs D) assigning costs

1) Cost objects include: A) products

2) Which of the following statements about the direct/indirect cost classification is NOT true? A) Indirect costs are always traced. B) Indirect costs are always allocated.

C) The design of operations affects the direct/indirect classification. D) The direct/indirect classification depends on the choice of cost object.

3) Cost tracing is: A) the assignment of direct costs to the chosen cost object B) a function of cost allocation C) the process of tracking both direct and indirect costs associated with a cost object D) the process of determining the actual cost of the cost object 4) Cost allocation is: A) the process of tracking both direct and indirect costs associated with a cost object B) the process of determining the actual cost of the cost object C) the assignment of indirect costs to the chosen cost object D) a function of cost tracing

5) The determination of a cost as either direct or indirect depends upon the: A) accounting system B) allocation system C) cost tracing system D) cost object chosen 6) Classifying a cost as either direct or indirect depends upon: A) the behavior of the cost in response to volume changes B) whether the cost is expensed in the period in which it is incurred C) whether the cost can be easily identified with the cost object D) whether an expenditure is avoidable or not in the future

10) Indirect manufacturing costs: A) can be traced to the product that created the costs B) can be easily identified with the cost object C) generally include the cost of material and the cost of labor D) may include both variable and fixed costs

11) All of the following are true EXCEPT that indirect costs: A) may be included in prime costs B) are not easily traced to products or services C) vary with the selection of the cost object D) may be included in manufacturing overhead A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the: A) average range B) cost-allocation range C) cost driver range D) relevant range 1) A unit cost is computed by: A) multiplying total cost by the number of units B) dividing total cost by the number of units C) dividing variable cost by the number of units D) adding variable cost to fixed cost 12) For a manufacturing company, direct material costs may be included in: A) direct materials inventory only B) merchandise inventory only C) both work-in-process inventory and finished goods inventory D) direct materials inventory, work-in-process inventory, and finished goods inventory accounts 13) For a manufacturing company, direct labor costs may be included in: A) direct materials inventory only B) merchandise inventory only C) both work-in-process inventory and finished goods inventory D) direct materials inventory, work-in-process inventory, and finished goods inventory accounts

14) For a manufacturing company, indirect manufacturing costs may be included in: A) direct materials inventory only B) merchandise inventory only C) both work-in-process inventory and finished goods inventory D) direct materials inventory, work-in-process inventory, and finished goods inventory accounts

18) Manufacturing overhead costs are also referred to as: A) indirect manufacturing costs B) prime costs C) period costs D) direct material

20) Direct materials inventory would normally include: A) direct materials in stock and awaiting use in the manufacturing process B) goods partially worked on but not yet fully completed C) goods fully completed but not yet sold D) products in their original form intended to be sold without changing their basic form 21) Work-in-process inventory would normally include: A) direct materials in stock and awaiting use in the manufacturing process B) goods partially worked on but not yet fully completed C) goods fully completed but not yet sold D) products in their original form intended to be sold without changing their basic form 22) Finished goods inventory would normally include: A) direct materials in stock and awaiting use in the manufacturing process B) goods partially worked on but not yet fully completed C) goods fully completed but not yet sold D) products in their original form intended to be sold without changing their basic form 24) ________ are the acquisition costs of all materials that eventually become part of the cost object and can be traced to the cost object. A) Direct manufacturing labor costs

B) Direct material costs C) Indirect manufacturing costs D) Manufacturing overhead costs

25) ________ include the compensation of all manufacturing labor that can be traced to the cost object. A) Direct manufacturing labor costs B) Indirect manufacturing costs C) Direct material costs D) Manufacturing overhead costs 26) ________ are all manufacturing costs that are related to the cost object but CANNOT be traced to that cost object. A) Direct material costs B) Period costs C) Indirect manufacturing costs D) Direct manufacturing labor costs 42) Prime costs include: A) direct materials and direct manufacturing labor costs B) direct manufacturing labor and manufacturing overhead costs C) direct materials and manufacturing overhead costs D) only direct materials 43) Conversion costs include: A) direct materials and direct manufacturing labor costs B) direct manufacturing labor and manufacturing overhead costs C) direct materials and manufacturing overhead costs D) only direct materials 44) Total manufacturing costs equal: A) direct materials + prime costs B) direct materials + conversion costs C) direct manufacturing labor costs + prime costs D) direct manufacturing labor costs + conversion costs

48) Which of the following formulas determine cost of goods sold in a merchandising entity? A) Beginning inventory + Purchases + Ending inventory = Cost of goods sold B) Beginning inventory + Purchases - Ending inventory = Costs of goods sold

C) Beginning inventory - Purchases + Ending inventory = Cost of goods sold D) Beginning inventory - Ending inventory - Purchases = Cost of goods sold 49) Which of the following formulas determine cost of goods sold in a manufacturing entity? A) Beginning work-in-process inventory + Cost of goods manufactured - Ending work-in-process inventory = Cost of goods sold B) Beginning work-in-process inventory + Cost of goods manufactured + Ending work-in-process inventory = Cost of goods sold C) Cost of goods manufactured - Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold D) Cost of goods manufactured + Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold

3) A ________ is a grouping of individual indirect cost items. A) cost allocation base B) cost assignment C) cost pool D) job-costing system 5) Direct costs A) are anything for which a measurement of costs is desired. B) are costs related to a particular cost object that can be traced to that cost object in an economically feasible (cost-effective) way C) focus specifically on the costing needs of the CFO D) provide all information for management decision needs 7) Assigning direct costs to a cost object is called: A) cost allocation B) cost assignment C) cost pooling D) cost tracing 8) ________ is the process of distributing indirect costs to products. A) Cost allocation B) Job cost recording C) Cost pooling D) Cost tracing

9) A ________ links an indirect cost to a cost object. A) cost-allocation base B) cost pool C) cost assignment D) cost tracing 10) Which of the following includes both traced direct costs and allocated indirect costs? A) cost tracing B) cost pools C) cost assignments D) cost allocations

11) The cost allocation base A) is a grouping of individual indirect cost items. B) are costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way. C) is anything for which a measurement of costs is desired. D) is a systematic way to link an indirect cost or group of indirect costs to cost objects.

1) ________ costing is used by a business to price homogeneous products. A) Actual B) Job C) Process D) Traditional 2) Process costing: A) allocates all product costs, including materials and labor B) results in different costs for different units produced C) is commonly used by general contractors who construct custom-built homes D) is used...