Ch 2

Question 1

Coat accounting system

Answer 1

Acct system for manufacturing activities based on perpetual inventory system

Question 2

Job order production

Answer 2

Production of secial order products; aka customized production

Question 3

Job

Answer 3

Production of a customized product

Question 4

Process operations

Answer 4

Processing of products in a continuous (sequential) flow of steps; aka process manufacturing or process production

Question 5

Job order production requires

Answer 5

Materials, labor, & overhead costs

Question 6

Direct materials

Answer 6

Key parts of finished product & are clearly identified w/ 1 job

Question 7

Direct labor

Answer 7

Employee effort to directly convert materials to finished product on 1 job

Question 8

Overhead or factory overhead

Answer 8

Manufacturing costs that indirectly support production of more than 1 job

Question 9

Work in process inventory

Answer 9

Account in which costs are accumulated for products that are in process of being produced but are not yet complete; aka goods in process inventory

Question 10

Finished goods inventory

Answer 10

Account that controls finished goods files, which acts as a subsidiary ledger (of inventory account) in which costs of finished goods that are ready for sale are recorded

Question 11

Cost of goods sold (cogs)

Answer 11

Coat of inventory sold to customers during a period of time; aka cost of sales

Question 12

General ledger

Answer 12

Record containing all accounts (w/ amounts) for a business; aka ledger

Question 13

Subsidiary records

Answer 13

Job order costing, the job cost sheets that store l job-spwcific cost data

Question 14

Job order costing system

Answer 14

Cost accounting system to determine cost of producing each job/ job lot

Question 15

Job cost sheet

Answer 15

Separate record maintained for each job

Question 16

A cost accounting system:

Answer 16

is used to control costs of manufacturing activities.
&
helps managers’ determine selling prices.

Question 17

Job order production is most likely used by companies that produce:

Answer 17

customized wedding cakes, tattoos, acct audits, factory building, custome home.

Question 18

The cost accounting system used when producing customized products is called

Answer 18

job order production.

Question 19

A job which involves producing more than one unit of a custom product is called a

Answer 19

job lot

Question 20

Manufacturing of products in a repetitive manner is referred to as ….. operations while manufacturing custom products is referred to as …..
operations.

Answer 20

Process & job order

Question 21

A cost accounting system includes which of the following?

Answer 21

It accumulates production costs and assigns them to products and services.

Question 22

The three types of manufacturing costs in a job order costing system include:

Answer 22

direct materials, overhead. direct labor

Question 23

True or false: The principle of customization is applicable to both service and manufacturing companies.

Answer 23

True

Question 24

The correct order of cost flows in a job order costing system is:

Answer 24

work in process; finished goods, cost of goods sold

Question 25

To determine the cost of producing each job or job lot, companies use a:

Answer 25

job order costing system.

Question 26

Job cost sheets can be used to:

Answer 26

provide a record for the Cost of Goods Sold account.

monitor costs incurred and to predict costs for each job.

provide a subsidiary ledger for the Finished Goods Inventory account.

Question 27

Choose the product(s) that are most likely to be manufactured as a job, rather than as a job lot.

Answer 27

Tailored wedding dress

Customized home

Question 28

During production, job cost sheets represent:

Answer 28

the balance in the work in process inventory account

Question 29

Custom orders matches to …
Mass production matches to …

Answer 29

Order operations
Process operations

Question 30

List the following documents in the order in which they are used when recording direct materials costs in job order cost accounting, with the first document on top:
Materials requisition
Job costs sheets
Receiving reports
Materials ledger

Answer 30

1. Receiving reports
2. Materials ledger
3. Materials requisition
4. Job cost sheets

Question 31

All of the following are manufacturing costs

Answer 31

direct labor

direct materials

overhead costs

Question 32

Receiving report

Answer 32

Form used to report that ordered goods were received and to describe their quantity and condition

Question 33

Materials ledger card

Answer 33

Perpetual record updated each time materials are purchased or issued for production use

Question 34

Labor costs classified as

Answer 34

Direct or Indirect

Question 35

Time tickets

Answer 35

Docu used to report time employee spent working on a job or on overhead activities and then to determine amount of direct labor to charge the job or amount of indirect labor to charge overhead.

Question 36

following are characteristics of materials ledger cards:

Answer 36

Perpetual records

Used to record materials purchases

Used to record materials issued for use in production

Question 37

following are inventory accounts for a manufacturer:

Answer 37

three inventory accounts include raw materials inventory, work in process inventory, and finished goods inventory.

Question 38

I direct materials for manufacturer go where?

Answer 38

Indirect materials are part of factory overhead

Question 39

journal entry to record the purchase of materials on account is to:

Answer 39

debit Raw Materials Inventory
credit Accounts Payable

Question 40

Companies use job cost sheets to track the costs of:

Answer 40

materials, labor, and overhead costs of a job

Question 41

After jobs are complete, the job cost sheet is used to provide a subsidiary ledger for which account?

Answer 41

Finished Goods Inventory

Question 42

List the following documents in the order in which they are used when recording indirect materials costs in job order cost accounting, with the first document on top:
Materials requisition
Materials lager cards
Factory overhead ladder
Receiving reports

Question 43

The journal entry to record the use of direct materials in production is to:

Answer 43

debit Work in Process Inventory and credit Raw Materials Inventory.

Question 44

Requisitions are used in job order costing to record the cost and quantity of:

Answer 44

both direct and indirect materials requested by the production department

Question 45

The journal entry to record the purchase of materials on account is a(n):

Answer 45

increase in assets and an increase in liabilities

Question 46

Time tickets are used in job order costing to record the time and cost of:

Answer 46

both direct and indirect labor in the production department

Question 47

Job cost sheets can be used to:

Answer 47

provide a record for the Cost of Goods Sold account.

monitor costs incurred and to predict costs for each job.

provide a subsidiary ledger for the Finished Goods Inventory account.

Question 48

During production, job cost sheets represent:

Answer 48

the balance in the work in process inventory account

Question 49

True or false: Journal entries are not required when direct materials are requisitioned.

Answer 49

False

Question 50

following are characteristics of materials ledger cards

Answer 50

Used to record materials purchases

Used to record materials issued for use in production

Perpetual records

Question 51

Time tickets are used in job order costing to:

Answer 51

report hours worked on specific jobs during the payroll period

Question 52

The recording of direct labor will result in a:

Answer 52

debit to Work in Process Inventory and credit Factory Wages Payable

Question 53

After jobs are complete, the job cost sheet is used to provide a subsidiary ledger for which account?

Answer 53

Finished Goods Inventory

Question 54

Overhead may be applied based on:

Answer 54

machine hours

direct labor

Question 55

After jobs are completed and delivered to customers, the job cost sheet is used to provide a permanent record for:

Answer 55

Cost of Goods Sold

Question 56

A company has a predetermined overhead rate of $14 per machine hour. Job 846 uses 27.5 machine hours. Overhead allocated to Job 846 will be $

Answer 56

$385

Question 57

journal entry to record the allocation of factory overhead is:

Question 58

Managers use a predetermined overhead rate for which of the following reasons?

Answer 58

To estimate total job costs before the job is completed

To assist in setting prices for jobs

Question 59

The predetermined overhead rate is based on total ….. costs and activity base.

Answer 59

Overhead

Question 60

The journal entry to record indirect materials in production is to:

Answer 60

debit Factory Overhead and credit Raw Materials Inventory

Question 61

The base to which overhead costs are linked, such as direct labor or machine hours, is known as the overhead ….. base.

Answer 61

Activity

Question 62

The journal entry to record indirect labor costs used in production includes a debit to Factory ……

Answer 62

Overhead

Question 63

A company works on three jobs and incurs the following: Direct materials - $50,000 and Direct labor - $100,000. The company uses a predetermined overhead rate of 60% of direct labor costs. How much overhead will be allocated to the three jobs?

Answer 63

$60,000

   ($100,000 x .60 = $60,000.)

Question 64

journal entry to record the accrual of factory utilities is to:

Answer 64

debit Factory Overhead and credit Utilities Payable

Question 65

journal entry to record the allocation of factory overhead to work in process is:

Answer 65

debit Work in Process Inventory and credit Factory Overhead

Question 66

Allocate indirect labor credit …

Answer 66

Credit Factory Wages Payable

Question 67

Pay factory property tax debit …

Answer 67

Debit Factory Overhead

Question 68

Purchase materials debit…

Answer 68

Debit Raw Materials Inventory

Question 69

Use direct materials credit …..

Answer 69

Credit Raw Materials Inventory

Question 70

Complete job debit ….

Answer 70

Debit Finished Goods Inventory

Question 71

Sold job credit …..

Answer 71

Credit Finished Goods Inventory

Question 72

True or false: Factory overhead includes direct materials and direct labor.

Answer 72

False
(Reason: Overhead includes all production costs except direct material and direct labor.)

Question 73

Schedule of Cost of Goods Manufactured includes all of the following

Answer 73

factory overhead applied

direct materials used

direct labor

work in process

Question 74

journal entry to record indirect labor used in production is to:

Answer 74

debit Factory Overhead and credit Factory Wages Payable

Question 75

Factory Overhead account is (debited/credited)……
for applied overhead costs.

Answer 75

credited

Question 76

journal entry to record depreciation on factory equipment is to:

Answer 76

debit Factory Overhead and credit Accumulated Depreciation - Equipment

Question 77

company incurs factory overhead costs of $1,200 and applied $1,500. If the difference is considered immaterial, then the: (cogs & f.oh beginning balance)

Answer 77

adjusting entry will require a credit to Cost of Goods Sold.

Factory Overhead account has a credit balance of $300 before adjusting.

Question 78

Allocate overhead costs to jobs credit

Answer 78

Credit Factory Overhead

Question 79

Pay factory utilities debit

Answer 79

Debit Factory Overhead

Question 80

Indirect materials source docu

Answer 80

Material requisition forms

Question 81

Indirect labor source docu

Answer 81

Time tickets

Question 82

Factory utilities source docu

Answer 82

Vouchers authorizing payment

Question 83

Depreciation on factory equipment source docu

Answer 83

Adjusting entries

Question 84

At the end of the accounting period, a company’s overhead was overapplied by $400. The Factory Overhead account was properly adjusted. What effect did the adjustment have on net income?

Answer 84

It increased net income by $400.

Question 85

Schedule of Cost of Goods Manufactured includes all of the following costs:

Answer 85

direct labor used

factory overhead applied

work in process inventory

direct materials used

Question 86

One important difference between service companies and manufacturing companies is that:

Answer 86

service companies do not have raw materials inventory

Question 87

If the factory overhead is overapplied, then:

Answer 87

applied overhead costs > actual overhead costs.

the Factory Overhead account has a credit balance.

Question 88

Factory overhead is a _____ account.

Answer 88

temporary

Question 89

Allocate indirect labor credit

Answer 89

Credit Factory Wages Payable

Question 90

Pay factory property tax debit

Answer 90

Debit Factory Overhead

Question 91

Purchase materials debit

Answer 91

Debit Raw Materials Inventory

Question 92

Complete job debit

Answer 92

Debit Finished Goods Inventory

Question 93

Sold job credit

Answer 93

Credit Finished Goods Inventory

Question 94

A tax accounting firm pays tax preparers $44 per hour. The firm has a predetermined overhead rate of $24 per labor hour. The Jones tax return required 2.5 hours to complete. The total cost of this job is $….

Answer 94

$170
Reason: (44×2.5)+(24×2.5)

Question 95

At the end of the accounting period, a company’s overhead was underapplied by $150. If not adjusted, how does this affect net income?

Answer 95

Net income will be overstated by $150.

Question 96

Both service companies and manufacturing companies have:

Answer 96

direct labor

overhead

Question 97

The Factory Overhead account is (debited/credited) ……..
for applied overhead costs.

Answer 97

credited

Question 98

If the factory overhead is underapplied, then the adjusting journal entry to close the factory overhead account includes a:

Answer 98

debit to Cost of Goods Sold.

credit to Factory Overhead.

Question 99

A consulting firm has a predetermined overhead rate of $120 per labor hour. The Smith job required 5 hours to compete. The overhead cost applied to this job is $

Answer 99

$600

Question 100

At the end of the accounting period, a company’s overhead was overapplied by $400. The Factory Overhead account was properly adjusted. What effect did the adjustment have on net income?

Answer 100

It increased net income by $400.

Question 101

If the factory overhead is underapplied, then:

Answer 101

the Factory Overhead account has a debit balance.

actual overhead cost > applied overhead costs.

Question 102

The architecture firm of Dream Design Company uses a job order cost system in pricing the home blueprints it designs for its clients. The company‘s predetermined overhead rate is 130% of direct labor cost (which, in this situation, is the amount paid to the company‘s designers). Dream Design Company estimates that it will take 32 labor hours (paying the designers $3,200) to complete the home designs for its client Joan Smitte. What is the total cost to Dream Design Company to complete this project?

Answer 102

$7,360
(3,200*130%) + 3,200
(Reason: total cost to complete the project is $7,360, which is made up of the $3,200 to be paid to the designers and the $4,160 of overhead costs (or $3,200 × 130%)

Question 103

What is the chronological order of the material cost flows through the subsidiary records?

Answer 103

Receiving Reports, Materials Ledger Card, Requisitions, Job Cost Sheets

Question 104

What account is debited when materials are purchased on credit for later use in production?

Answer 104

Raw Materials Inventory

Question 105

A _______blank is used to track each employee’s direct labor time.

Answer 105

time ticket

Question 106

What account is debited when direct labor is recorded for the month?

Answer 106

Work in Process Inventory

Question 107

Bridge Building Company estimates that it will incur $1,200,000 in overhead costs for the year. Additionally, the company estimates 50,000 direct labor hours will be spent building custom walking bridges for the year at a total direct labor cost of $600,000. What is the predetermined overhead rate for Bridge Building Company if direct labor costs are to be used as an allocation base?

Answer 107

200% of direct labor cost
(1,200,000÷600,000)
×100

Question 108

Dream House Builders, Incorporated applies overhead by linking it to direct labor. At the start of the current period, management predicts total direct labor costs of $100,000 and total overhead costs of $20,000. On January 31, the direct labor for this job equals $2,700.

Complete the following journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Answer 108

Work in process inventory: 540 (debit)
Factory overhead: 540 (credit)

(20,000/100,000)*2,700 = 540

Question 109

During January, Dream House Builders, Incorporated incurred $550 of actual indirect materials costs, as supported by materials requisitions.

Complete the following journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Answer 109

Factory overhead: 550 (debit)
Raw materials inventory: 550 (credit)

Question 110

Bridge Builders Company examined its Factory Overhead account at the end of the year and discovered a debit balance. What does this indicate?

Answer 110

Overhead has been underapplied

Question 111

Bridge Builders Company examined its Factory Overhead account at the end of the year and discovered a credit balance of $2,000. The journal entry to close this account includes which of the following?

Answer 111

Credit to Cost of Goods Sold

Question 112

A marketing agency used 76 hours of direct labor in creating advertising for a film festival. Direct labor costs $65 per hour. The agency applies overhead at a rate of $57 per direct labor hour.

What is the total estimated cost for this job?
If the company applies a markup of 10% of total costs (price quote is 110% of total costs), what price should it quote for this job?

Note: Round your intermediate calculations and final answer to the nearest whole dollars.

Answer 112

1. Total estimated job cost $9,272
2. Price quote $10,199

(Reason: (7665)+(7657) = 9272; (9272*10%) = 927; 9272+927 = 10199)

Question 113

An advertising agency is estimating costs for promoting a music festival. The job will require 230 direct labor hours at a cost of $56 per hour. Overhead costs are applied at a rate of $68 per direct labor hour.

What is the total estimated cost for this job?
If the company applies a markup of 20% of total costs (price quote is 120% of total costs), what price should it quote for this job?

Answer 113

1. Total estimated job cost $28,520
2. Price quote $34,224

(Reason: (23056)+(23068) = 28520. (28520*20%) = 5704; 28520+5704)

Question 114

Auto Safe’s job cost sheet for Job A40 shows that the total cost to add security features to a car was $12,000. The car was delivered to the customer, who paid $16,700 cash for this job. Prepare the journal entries for Job A40 to record

(a) its completion and
(b) its sale.

Answer 114

a. ) Finished goods inventory 12,000 (debit)
Work in process inventory 12,000 (credit)

b1.) Cost of goods sold 12,000 (debit)
Finished goods inventory 12,000 (credit)

b2.) Cash 16,700 (debit)
Sales 16,700 (credit)

Question 115

At the beginning of the year, a company estimates total overhead costs of $960,000. The company applies overhead using machine hours and estimates it will use 1,600 machine hours during the year.

What amount of overhead should be applied to Job 65A if that job uses 33 machine hours that year?

Answer 115

Overhead applied to Job 65A $19,800

(Reason: (960,000÷1,600)×33 = 19800)

Question 116

On March 1, a dressmaker starts work on three different custom-designed wedding dresses. The company uses job order costing and applies overhead to each job (dress) at the rate of 43% of direct materials costs. During the month, the jobs used direct materials as shown below. Compute the amount of overhead applied to each of the three jobs.

Job 1 Job 2 Job 3

Direct materials used: $ 6,400; $ 8,400; $ 2,900

Answer 116

Overhead Applied
Job 1 $2,752
Job 2 3,612
Job 3 1,247

(Reason: (direct materials used * rate %))

Question 117

A company estimates the following manufacturing costs at the beginning of the period: direct labor, $496,000; direct materials, $203,000; and factory overhead, $122,000.

Required:
Compute its predetermined overhead rate as a percent of direct labor.
Compute its predetermined overhead rate as a percent of direct materials.

Answer 117

1. Numerator: Estimated overhead cost.
   Denominator: Estimated direct labor
   Overhead Rate: $122,000/$496,000=25%
2. Numerator: Estimated overhead cost.
   Denominator: Estimated direct materials.
   Overhead Rate: $122,000 / $203,000 = 60%

Question 118

A company that uses job order costing incurred a monthly factory payroll of $208,000. Of this amount, $53,000 is indirect labor and $155,000 is direct labor.

Prepare journal entries to record the

(a) use of direct labor and
(b) use of indirect labor.

Answer 118

a. Work in process inventory: 155,000 (debit)
Factory wages payable: 155,000
(Credit)

b. Factory overhead: 53,000 (debit)
Factory wages payable: 53,000 (credit)

Question 119

Indicate whether each item a through e is a feature of a job order or process operation.

a. Low production volume
b. High production volume
c. Low product standardization
d. High product flexibility
e. High standardization

Answer 119

a. Low production volume: Job order operation
b. High production volume: Process operation
c. Low product standardization: Job order operation
d. High product flexibility: Job order operation
e. High standardization: Process operation

Question 120

The following information is available for ADT Company, which produces special-order security products and uses a job order costing system. Overhead is applied using a predetermined overhead rate of 55% of direct labor cost.

Inventories Beginning of period End of Period
Raw materials $ 40,000; $ 45,000
Work in process 9,300; 18,900
Finished goods 62,000; 33,100
Cost incurred for the period
Raw materials purchases $ 179,000
Factory payroll 250,000
Factory overhead (actual)
Indirect materials used 7,000
Indirect labor used 57,500
Other overhead costs 101,000
1. Raw materials purchases for cash.
2. Direct materials used.
3. Indirect materials used.

Answer 120

1. Raw materials inventory 179,000 (debit)
   Cash 179,000 (credit)
2. Work in process inventory 167,000(debit)
   Raw materials inventory 167,000(credit)

(Reason: ((40,000+179,000)
−7,000)−45,000 = 167,000)

3. Factory overhead 7,000 (debit)
   Raw materials inventory 7,000 (credit)

Question 121

The following information is available for ADT Company, which produces special-order security products and uses a job order costing system. Overhead is applied using a predetermined overhead rate of 55% of direct labor cost.

Inventories Beginning of period End of Period
Raw materials $ 40,000; $ 45,000
Work in process 9,300; 18,900
Finished goods 62,000; 33,100
Cost incurred for the period
Raw materials purchases $ 179,000
Factory payroll 250,000
Factory overhead (actual)
Indirect materials used 7,000
Indirect labor used 57,500
Other overhead costs 101,000

1. Direct labor used (recorded as factory wages payable).
2. Indirect labor used (recorded as factory wages payable).

Answer 121

1. Work in process inventory 192,500 (debit)
   Factory wages payable 192,500 (credit)

(Reason: 250,000−57,500 = 192500)

2. Factory overhead 57,500 (debit)
   Factory wages payable 57,500 (credit)

Question 122

The following information is available for ADT Company, which produces special-order security products and uses a job order costing system. Overhead is applied using a predetermined overhead rate of 55% of direct labor cost.

Inventories Beginning of period End of Period
Raw materials $ 40,000 ; $ 45,000
Work in process 9,300; 18,900
Finished goods 62,000; 33,100
Cost incurred for the period
Raw materials purchases $ 179,000
Factory payroll 250,000
Factory overhead (actual)
Indirect materials used 7,000
Indirect labor used 57,500
Other overhead costs 101,000

1. Incurred other actual overhead costs (all paid in Cash).
2. Applied overhead to work in process.

Answer 122

1. Factory overhead 101,000 (debit)
   Cash 101,000 (credit)
2. Work in process inventory 105,875 (debit)
   Factory overhead 105,875 (credit)

(Reason: (250,000−57,500)×55% = 105875; bc OH applied is 55% of direct labor)

Question 123

Match each of the terms with the best definition a through d.

a. The expected selling price of a job minus its desired profit:
b. Measures the cost to produce a job:
c. A system that records manufacturing costs:
d. Production of more than one unit of a custom product

Answer 123

a. The expected selling price of a job minus its desired profit: Target cost
b. Measures the cost to produce a job: Job order costing system
c. A system that records manufacturing costs: Cost accounting system
d. Production of more than one unit of a custom product: Job lots