Chapter 5

Question 1

Job-order costing and process costing are widely used for what?

Answer 1

to track costs

Question 2

What type of costing is used where the organization offers many different products or services, such as in furniture manufacturers, hospitals, and legal firms?

Answer 2

Job-order costing

Question 3

What type of costing is used where units of product are homogeneous (many units of a single product), such as in flour milling or cement production?

Answer 3

Process costing

Question 4

What two things are used to assign direct materials and direct labour costs to jobs in a job-order costing system?

Answer 4

Materials requisition forms and labour time tickets

Question 5

How and when is the predetermined overhead rate established?

Answer 5

when
- before the period begins
how
- by dividing the estimated total manufacturing overhead cost for the period by the estimated total allocation base for the period

Question 6

How is overhead applied to jobs?

Answer 6

by multiplying the predetermined overhead rate by the actual amount of the allocation base used by the job

Question 7

TRUE/FALSE:
the actual overhead costs incurred during a period may be more or less than the amount of overhead cost applied to production

Answer 7

TRUE - referred to as under-applied or over-applied overhead

Question 8

What are the three ways to deal with under- or over-applied overhead for a period?

Answer 8

1. closed out to COGS
2. allocated among WIP, FG, and COGS
3. carried forward to the EOY

Question 9

TRUE/FALSE
The predetermined overhead rate is always equal to the actual overhead rate

Answer 9

FALSE - it’s an estimate

Question 10

When overhead is under-applied, what happens to overhead costs and what must be done to expenses?

Answer 10

-MOC has been understated
-expenses must be adjusted upwards

Question 11

When overhead is over-applied, what happens to overhead costs and what must be done to expenses and/or inventories?

Answer 11

-MOC has been overstated
-expenses/inventories must be adjusted downwards

Question 12

In job-order costing, what needs to be charged to each job as work is performed? (2)

Answer 12

direct materials and direct labour

Question 13

What is a materials requisition form? (3)

Answer 13

1. Specifies the type and quantity of
   materials to be drawn from the
   storeroom and
2. Identifies the job to which the costs of the materials are to be charged.
3. The form controls the flow of materials
   into production and also makes entries
   in the accounting records.

Question 14

What is a job cost sheet?

Answer 14

a form prepared for each separate job that records the materials, labour, and overhead costs charged to the job

Question 15

What gets posted to a job cost sheet?

Answer 15

direct labour costs, applied overhead cost (estimated), direct materials

Question 16

What are types of allocation bases?

Answer 16

direct labour hours, direct labour dollars, machine hours

Question 17

Can the average unit cost be used to calculate the costs that would be incurred if an additional were produced?

Answer 17

No, fixed overhead would not change if
another unit were produced, so the
incremental cost of another unit may
be somewhat less than the average
unit cost

Question 18

Actual overhead costs are debited or credited to the MOH account?

Answer 18

debited

Question 19

Overhead applied to WIP using the POHR is debited or credited to the MOH account?

Answer 19

credited

Question 20

When an amount is leftover in the debit side of the MOH account, was the POHR over-applied or under-applied?

Answer 20

under-applied

Question 21

TRUE/FALSE
Actual overhead appears on the job cost sheet and in the WIP account

Answer 21

FALSE - only the applied OH cost, based on the POHR appears on the job cost sheet and in the WIP account

Question 22

Is sales a Dr or Cr account?

Answer 22

credit

Question 23

If a company applied $95,000 in MOH to WIP while incurring actual MOH of only $90,000, then the overhead would be over or under applied and by how much?

Answer 23

over-applied by $5,000