Job Costing

Chapter 2

Systems Design: Job-Order Costing

True/False

1. Process costing is used in those situations where many different products or services are produced each period to customer specifications.

Level: Easy LO: 1 Ans: F

2. The basic approach in job-order costing is to accumulate costs in a particular operation or department for an entire period (month, quarter, year) and then to divide this total by the number of units produced during the period.

Level: Easy LO: 1 Ans: F

3. If a company uses predetermined overhead rates, actual manufacturing overhead costs of a period will be recorded in the Manufacturing Overhead account, but they will not be recorded on the job cost sheets for the period.

Level: Medium LO: 2 Ans: T

4. In a job-order cost system, indirect labor is assigned to a job by using the labor time ticket as a source document.

Level: Medium LO: 2 Ans: F

5. The formula for computing the predetermined overhead rate is:

Estimated total units in base ÷ Estimated total manufacturing costs

Level: Easy LO: 3 Ans: F

6. The fact that one department may be labor intensive while another department is machine intensive may explain in part the existence of multiple predetermined overhead rates in larger companies.

Level: Easy LO: 3 Ans: T

7. If a company closes any underapplied or overapplied overhead to the Cost of Goods Sold account, then Cost of Goods Sold will be credited if manufacturing overhead is overapplied for the period.

Level: Medium LO: 4,8 Ans: T

8. The following entry would be used to record the transfer of material from the storeroom to production if 80% of the material was direct material and 20% was indirect material:

Level: Easy LO: 4 Ans: T

9. If a job is not completed at the end of the year, then no manufacturing overhead cost should be applied to that job.

Level: Medium LO: 5 Ans: F

10. When raw materials...