Chapter 2- job order costing

Question 1

Cost accounting system

Answer 1

consists of accounts for the various manufacturing costs. These accounts are fully integrated into the general ledger of a company.
-uses a perpetual inventory system

Question 2

2 basic types of accounting systems

Answer 2

• job cost order

- process cost system

Question 3

process cost system

Answer 3

is used when a series of connected manufacturing processes or departments produce a large volume of similar products.
-a cost system that identifies costs with a set time period

Question 4

Job order cost system

Answer 4

• a cost system that is best for producing items with unique, distinguished features
• identifies costs by batch rather then a set time period.
  ex. a batch of 250 wedding invitations.
  ex. product- cost of high speed drilling machine

Question 5

2 steps in the flow of costs in the job order cost system

Answer 5

1. accumulating the manufacturing costs incurred.

2. assigning the accumulated costs to the work done.

Question 6

entering job order

Answer 6

the costs of raw materials purchased are debited to raw materials inventory when the materials are received and credited to accounts payable

Question 7

Cost of factory labor

Answer 7

1. gross earning of factory workers

2. employer payroll taxes on such earnings 3.fringe benefits incurred by the employer

Question 8

entering of factory labor

Answer 8

labor costs are debited to factory labor when the are incurred.
- factory wages payable and employer payroll taxes are credited

Question 9

perpetual inventory system

Answer 9

provides immediate up-to-date information on the cost of a product

Question 10

Job order cost flow

Answer 10

1. manufacturing costs
2. WIP inventory
3. Finished good inventory
4. Costs of goods sold

Question 11

Entry of WIP

Answer 11

1. debits to WIP

2. Credits to RM,FL,MO

Question 12

job cost sheet

Answer 12

a form used to record the costs chargeable to a specific job and to determine the total and unit cost of the completed job

Question 13

predetermined overhead rate formula

Answer 13

estimated annual overhead cost/ expected annual operating activity

Question 14

manufacturing overhead costs are assigned to WIP

Answer 14

actual activity base used X predetermined overhead rate

Question 15

end of each month WIP

Answer 15

the balance in the WIP inventory should be equal to the sum of the costs shown on the job sheets of unfinished jobs

Question 16

predetermined overhead rate

Answer 16

is based on the relationship between estimated annual overhead costs and expected annual operating activity, expressed in terms of a common activity base.

Question 17

estimated annual operating activities include

Answer 17

• Direct labor cost
• direct labor hours
• machine hours

Question 18

underapplied overhead

Answer 18

1. manufacturing overhead has a debit balance
2. the overhead assigned to work in process is less than the overhead incurred
   - If actual is greater than applied, manufacturing overhead is underapplied.

Question 19

over-applied overhead

Answer 19

1. manufacturing overhead has a credit balance
2. the overhead has a credit assigned to work in process is greater than the overhead incurred
   - If actual is less than applied, manufacturing overhead is overapplied.

Question 20

entry for over or under applied

Answer 20

• Under- or overapplied overhead is usually considered to be an adjustment to cost of goods sold.
• Thus, underapplied overhead is debited to Cost of Goods Sold and overapplied overhead is credited to Cost of Goods Sold.