Exam 2 (Quiz 4) - Chapter 17

Question 1

List:

Characteristics of a Company using Job Order Costing System

Answer 1

1. Produce large, unique, and high-cost items
2. Not mass production, it’s a built to order product
3. Many costs can be traced directly to each job

Question 2

Answer:

For a company using job order costing system for job orders, sometimes these products are a/an ___(a)___ and sometimes there is a/an ___(b)___. This is not ___(c)___, it is a ___(d)___ or ___(e)___ product

Answer 2

a. single unique product
b. limited number of products
c. a mass produced
d. built to order
e. customized

Question 3

Answer:

A company using job order costing system for job orders usually produces ___(a)___, ___(b)___, and ___(c)___ items

Answer 3

a. large
b. unique
c. high-cost

Question 4

Answer:

For a company using job order costing system for job orders, many costs can be directly traced to ___(a)___

Answer 4

a. each job

Question 5

List:

Examples of products made by a company using job order costing system for job orders,

Answer 5

1. films

2. custom houses

Question 6

List:

Types of Product Costing Systems

Answer 6

1. Job Order Costing System
2. Process Order Costing System
   3.

Question 7

List:

Characteristics of Companies using Process Order Costing System

Answer 7

1. Produce small, identical, low-cost items
2. Mass production
3. Most of the cost cannot be directly traced to each unit of product

Question 8

Answer:

In process order costing system, why can most of the costs not be directly traced to each unit of product?

Answer 8

For each batch of product, the company does not use unique labor or unique raw materials, so there are similarities across all of the products

Question 9

Answer:

In process order costing system, costs can be classified as either ___(a)___ or ___(b)__

Answer 9

a. direct costs

b. indirect costs

Question 10

Answer:

In process order costing system, direct costs include ___(a)___ and ___(b)___

Answer 10

a. direct materials

b. direct labors

Question 11

Answer:

In process order costing system, indirect costs include ___(a)___ or ___(b)___ that cannot be ___(c)___

Answer 11

a. indirect materials
b. indirect labor
c. directly traced to the specific cost object

Question 12

Answer:

In practice when using the process order costing system, the costs that are difficult to trace to a specific object, are grouped as ___(a)___ and then down the road the pool of these are ___(b)___ to ___(c)___

Answer 12

a. indirect costs
b. allocated
c. specific cost objects

Question 13

Answer:

Some materials purchased are ___(a)___ and some are ___(b)___, however before you start using either, they are a/an ___(c)___

Answer 13

a. direct materials
b. indirect materials
c. asset

Question 14

Answer:

Materials before you use them are ___(a)___ that ___(b)___ in the ___(c)___ account

Answer 14

a. assets
b. accumulate
c. inventory

Question 15

Answer:

In production, when you start using materials, you have to confirm which materials are are ___(a)___ and which are ___(b)___

Answer 15

a. direct materials

b. indirect materials

Question 16

Answer:

When you use direct materials, they will transferred to the ___(a)___ of a/an ___(b)___

Answer 16

a. work in progress

b. specific job order

Question 17

Answer:

If you have ___(a)___ materials that you know were used for a specific job order, you transfer the___(b)___ of those materials to the ___(c)___ for the ___(d)___ job order

Answer 17

a. direct
b. cost
c. work in progress account
d. specific

Question 18

Answer:

Materials are considered to be indirect materials when ___(a)___ or when ___(b)___, and if that’s the case, you ___(c)___

Answer 18

a. you don’t know the specific job the materials were used for
b. they are materials used in every job order
c. accumulate these materials in the manufacturing overhead account

Question 19

Answers:

When in the process of producing product, direct materials are recorded in the ___(a)___ account, and the indirect materials are recorded in the ___(b)___ account

Answer 19

a. work in progress

b. manufacturing overhead

Question 20

Answers:

When in the process of producing product, direct labor is recorded in the ___(a)___ account, and the indirect labor is recorded in the ___(b)___ account

Answer 20

a. work in progress

b. manufacturing overhead

Question 21

Answer:

Direct labor cost is ___(a)___

Answer 21

a. labor salary

Question 22

Answer:

Indirect labor, for example ___(a)___ because they ___(b)___ and not just ___(c)___, so their salary is ___(d)___

Answer 22

a. quality control employees
b. check all of the products in the plant
c. specific job orders
d. Spread over all work product

Question 23

Answer:

When you start using materials and labor in the job costing system, you have to first categorize them as ___(a)___ or ___(b)___

Answer 23

a. direct

b. indirect

Question 24

Answer:

In job order costing system, the cost of all direct material is transferred to the ___(a)___ which ___(b)___ direct materials costs as the ___(c)___

Answer 24

a. work in progress
b. absorbs all of the
c. direct materials are used

Question 25

Answer:

The work in progress account is a ___(a)___ account

Answer 25

a. debit

Question 26

Answer:

In the job order costing system, the indirect materials have to stop at the ___(a)___ and ___(b)___ in this account, which is a/an ___(c)___ account

Answer 26

a. manufacturing overhead
b. accumulate
c. debit

Question 27

Answer:

Describe the difference between direct materials and indirect materials

Answer 27

Direct materials are the physical part that can easily be traced to a specific job order (such as lumber for a custom house), whereas indirect materials are usually supporting materials that cannot be traced to specific job orders

Question 28

Answer:

Describe the difference between direct labor and indirect labor

Answer 28

All of the direct labor used will be traced to specific work on specific product such as the specific labor to install a roof, whereas indirect labor cannot be traced to a specific labor product such as quality control that checks all products throughout the period

Question 29

Answer:

What is the name of the ratio used in calculating total manufacturing cost?

Answer 29

Allocation Ratio

aka Predetermined and Manufacturing Overhead Ratio

Question 30

Answer:

Where do we get the figures in the allocation ration equation and why?

Answer 30

The budget because they are both estimates

Question 31

Answer:

Why do we use estimates and not actual values for the allocation ratio?

Answer 31

Because you only have the actual values at the end of the period, but managers frequently need the information at the beginning of the period when you only have the estimates

Question 32

Answer:

The allocation base in the allocation ration is also known as the ___(a)___ and it is the reason why you have the ___(b)___

Answer 32

a. cost driver

b. manufacturing overhead

Question 33

Answer:

If a cost driver is pegged correctly, the higher the ___(a)___ you pick, the higher the ___(b)___, and the higher the ___(c)___, so this is what we call a ___(d)___ cost driver

Answer 33

a. allocation base
b. cost driver
c. manufacturing overhead
d. proper

Question 34

Answer:

If you have a product whose manufacturing requires a high use of machines and equipment, you cost driver is most likely ___(a)___ and the more of these you use the higher the ___(b)___

Answer 34

a. machine hours

b. manufacturing overhead

Question 35

Answer:

If you have a product whose manufacturing requires a lot of manual labor, you cost driver is most likely ___(a)___ and the more of this you use the higher the ___(b)___

Answer 35

a. direct labor hours or direct labor cost

b. manufacturing overhead

Question 36

Answer:

Using a traditional costing system, you can only choose one ___(a)___

Answer 36

a. cost driver

Question 37

Answer:

If you pick the incorrect cost driver, you will probably allocate ___(a)___, which means ___(b)___ and when this happens you will probably set up a ___(c)___ that is ___(d)___. In this case the more you produce and sell, the ___(e)___

Answer 37

a. zero manufacturing overhead to your job order
b. the final cost of the job order will be underestimated
c. price
d. lower than the actual price
e. more loss you will experience

Question 38

Answer:

The second step in the process of calculating the allocated manufacturing overhead is to use ___(a)___ and ___(b)___ it by ___(c)___

Answer 38

a. predetermined overhead ratio you calculated
b. multiply
c. the actual quantity of th allocation base used by each job

Question 39

List (in order):

Steps in Determining Allocated Manufacturing Overhead

Answer 39

1. Calculate Allocation Ratio
2. Multiply Allocation Ratio by Actual Quantity of Allocation Base
3. Transfer this data to the work in progress account

Question 40

Answer:

In calculating the predetermined overhead allocation ratio you use ___(a)___, and in the second step this is ___(b)___ by ___(c)___, which is. ___(d)___

Answer 40

a. estimated data
b. multiplied
c. the actual quantity of allocation base
d. actual data

Question 41

Answer:

You must be sure the ___(a)___ used in determining predetermined overhead allocation ratio, is consistent with the ___(b)___ used in the second step of determining manufacturing overhead cost

Answer 41

a. allocation base/cost driver

b. allocation base/cost driver

Question 42

Answer:

After you calculate the allocated manufacturing data in steps 1 and 2, what do you do with this data?

Answer 42

Transfer it into the work in progress account

Question 43

Answer:

The ___(a)___ manufacturing overhead cost is ___(b)___ from the ___(c)___ manufacturing overhead cost because ___(d)___

Answer 43

a. allocated
b. different
c. actual
d. estimates are used in determining allocated manufacturing overhead cost

Question 44

Answer:

The predetermined overhead ratio (allocation ration) is based on ___(a)___ from the ___(b)___ and is ___(c)___

Answer 44

a. estimates
b. budget
c. before production begins

Question 45

Answer:

If a company calculates the predetermined overhead ratio to be 40%, 40% of the direct labor cost, they are using direct labor cost as the ___(a)___ and that for every dollar of direct labor cost, they assign/allocate ___(b)___

Answer 45

a. cost driver

b. $0.40 to the manufacturing overhead cost

Question 46

Answer:

The actual manufacturing overhead cost is presented by the ___(a)___ on the ___(b)___, while the allocated manufacturing cost is given to the ___(c)___, but the problem is this number is ___(d)___and this information will flow to ___(e)___ and finally reach the ___(f)___, at which point we must ___(g)___

Answer 46

a. financial accountants
b. income statement
c. managers
d. already flows to the work in progress account
e. finished goods
f. cost of goods sold
g. account for any difference between estimated and actual cost

Question 47

Answer:

The difference between the allocated manufacturing overhead cost and the actual manufacturing overhead cost should be included in the ___(a)___

Answer 47

a. cost of goods sold

Question 48

Define:

Underallocated

Answer 48

What you calculated from estimates and allocated for cost is lower than the actual cost

Question 49

Define:

Overallocation

Answer 49

What you calculated from estimates and allocated for cost is higher than the actual cost

Question 50

List (in order):

Flow of Manufacturing Cost

Answer 50

1. Accumulation of materials
2. Allocation of manufacturing cost - Predetermined Overhead Ratio (estimate based on budget)
3. Estimate into work in progress account
4. Information flows into finished goods
5. Information flows into cost of goods sold

Question 51

Answer:

Allocation ratio is a/an ___(a)___ divided by a/an ___(b)___

Answer 51

a. estimate

b. estimate

Question 52

Answer:

The allocated overhead is a/an ___(a)___, and the overhead based on this is called the ___(b)___

Answer 52

a. estimate

b. applied

Question 53

Answer:

Once the allocated manufacturing overhead is calculated, you ___(a)___ the ___(b)___ and you ___(c)___ the ___(d)___ for the ___(e)___

Answer 53

a. debit
b. work in progress inventory
c. credit
d. manufacturing overhead
e. for the allocated manufacturing amount you calculated

Question 54

Answer:

If you under allocate the cost of manufacturing overhead, you apply the ___(a)__ to the ___(b)___. So you ___(c)___ the ___(d)___ because it ___(e)___ and you ___(f)___ the ___(g)___ from the ___(h)___

Answer 54

a. difference
b. cost of goods sold
c. debit
d. cost of goods sold
e. increased
f. credit
g. difference
h. manufacturing overhead

Question 55

Answer:

With underallocation you ___(a)___ the ___(b)___ and ___(c)___ the ___(d)___

Answer 55

a. debit
b. cost of goods sold
c. credit
d. manufacturing overhead

Question 56

Answer:

With overallocation you ___(a)___ the ___(b)___ and ___(c)___ the ___(d)___

Answer 56

a. debit
b. manufacturing overhead
c. credit
d. cost of goods sold

Question 57

Answer:

What does it mean if your actual manufacturing overhead is significantly higher than your estimated/allocated overhead?

Answer 57

That there is a lot going on in your manufacturing that isn’t being accounted for in the budget and you have a serious underestimation of your manufacturing costs which may lead to incorrect price decisions