Overview

Question 1

Job-order costing systems are used when:

Answer 1

1) Many different products are produced each period.
2) Products are manufactured to order.
3) The unique nature of each order requires tracing or allocating costs to each job and maintaining cost records for each job.

Question 2

Charge direct material and direct labor costs to each job

Answer 2

as work is performed.

Question 3

Manufacturing Overhead, including

Answer 3

indirect materials and indirect labor, are allocated to all jobs rather than directly traced to each job.

Question 4

An allocation base, such as direct labor hours, direct labor dollars, or machine hours,

Answer 4

is used to assign manufacturing overhead to individual jobs

Question 5

We use an allocation base because:

Answer 5

1) It is impossible or difficult to trace overhead costs to particular jobs.
2) Manufacturing overhead consists of many different items ranging from the grease used in machines to the production manager’s salary.
3) Many types of manufacturing overhead costs are fixed even though output fluctuates during the period.

Question 6

Ideally, the allocation base is a

Answer 6

cost driver that causes overhead

Question 7

The predetermined overhead rate (POHR) used to apply

Answer 7

overhead to jobs is determined before the period begins

Question 8

POHR fomula

Answer 8

estimated total manufacturing overhead costs for coming period / estimated total units in the allocation based for the common period

Question 9

Predetermined overhead rates that rely upon estimated data are often used because

Answer 9

1) Actual overhead for the period is not known until the end of the period, thus inhibiting the ability to estimate job costs during the period.
2) Actual overhead costs can fluctuate seasonally, thus misleading decision makers.

Question 10

Apply overhead cost to jobs using a

Answer 10

predetermined overhead rate.

Question 11

Raw materials

Answer 11

include any materials that go into the final product.

Question 12

Work in the process consists of

Answer 12

units of production that are only partially complete and will require further work before they are ready for sale to customers.

Question 13

Finished goods consist of

Answer 13

completed units of product that have not been sold to customers.

Question 14

Cost of goods manufactured include

Answer 14

the manufacturing costs associated with the goods that were finished during the period,

Question 15

Costs

Answer 15

Material purchases
Direct labor
Manufacturing Overhead

Question 16

balance sheet inventories

Answer 16

Raw materials, work in process, finished goods

Question 17

Cost connection in balance sheet via inventories

Answer 17

Raw materials (material purchases)
work in process (direct labor and manufacturing overhead)
Finished goods

Question 18

balance sheet connection to P&L

Answer 18

Cost of Goods Sold (Finished goods)

Question 19

Nonmanufacturing costs are not assigned to individual jobs, rather

Answer 19

they are expensed in the period incurred.

Question 20

Prepare schedules of

Answer 20

cost of goods manufactured and cost of goods sold and an income statement.

Question 21

Schedule of Cost of Goods Manufactured. This schedule contains three types of costs, namely

Answer 21

direct materials, direct labor, and manufacturing overhead.

Question 22

Cost of Goods Manufactured, calculates the cost of

Answer 22

raw material and direct labor used in production and the amount of manufacturing overhead applied to production

Question 23

It calculates the manufacturing costs associated with

Answer 23

goods that were finished during the period.

Question 24

As items are removed from raw materials inventory and placed into the production process, they are called

Answer 24

direct materials.

Question 25

Conversion costs are costs incurred to convert the direct material into a finished product. includes

Answer 25

Direct labor and overhead applied

Question 26

total manufacturing cost*

Answer 26

Conversion cost + direct material*

Question 27

total work in process*

Answer 27

beginning work in process inventory + total manufacturing cots

Question 28

All manufacturing costs added to production during the period are added to

Answer 28

the beginning balance of work in process.

Question 29

cost of goods manufactured* =

Answer 29

total work in process for the period - ending work in process inventory

Question 30

Costs associated with the goods that are completed during the period are transferred to the

Answer 30

finished goods inventory.

Question 31

Cost of goods available for sale*

Answer 31

cost of good manufactured + beginning finished good inventory

Question 32

cost of goods sold*

Answer 32

cost of good available for sale - ending finished good inventory

Question 33

Underapplied overhead exists when

Answer 33

The amount of overhead applied to jobs during the period using the predetermined overhead rate is less than the total amount of overhead actually incurred during the period.

Question 34

Overapplied overhead exists when

Answer 34

the amount of overhead applied to jobs during the period using the predetermined overhead rate is greater than the total amount of overhead actually incurred during the period.

Question 35

Overhead Applied During the Period

Answer 35

POHR × Actual Direct Labor Hours

Question 36

underapplied

Answer 36

increase cost of goods sold and work in process and finished goods

Question 37

overapplied

Answer 37

decrease cost of goods sold and work in process and finished goods

Question 38

Job-order costing is used in many different types of service companies

Answer 38

For example, law firms, accounting firms, and medical treatment