True or False

Write T if the statement is true otherwise, Write F.

1. A company that produces sugar will use a job order costing system to track production costs.
2. A company that produces sugar will use a process costing system to track production costs.
3. A company that manufactures custom bridal gowns will use a job order costing system to
track production costs
4. A company that manufactures custom bridal gowns will use a process costing system to track
costs.
5. A company that manufactures small quantities of identifiable products will use a job order
costing system
6. A company that manufactures small quantities of identifiable products will use a process
costing system
7. A company that manufactures large quantities of homogenous goods will use a process
costing system.
8. In an actual job order costing system, factory overhead is assigned to a job on a periodic
basis.
9. A company that manufactures large quantities of homogenous goods will use a job order
costing system.
10. Cost flows and physical flows of units are identical.
11. In an actual job-order costing system, factory overhead is assigned to a job continuously
during the production process.
12. In a normal job order costing system, actual factory overhead is applied at the end of the
period
13. In a normal job order costing system, factory overhead is applied using actual rates times
actual input
14. In a normal job order costing system, factory overhead is applied using predetermined rates
times actual input.
15. In a normal job order costing system, factory overhead is applied using predetermined rates
times standard input
16. In a standard job order costing system, factory overhead is applied using predetermined
rates times standard input.
17. In a standard job order costing system, factory overhead is applied using actual rates times
standard input.
18. In a standard job order costing system, factory overhead is applied using predetermined
rates times actual input.
19. In a job order costing system, costs are accumulated for each individual job
20. When raw materials are placed into production, the materials inventory account is debited
21. When manufacturing overhead is charged to a job, the work in process account is debited.
22. When manufacturing overhead is charged to a job, the manufacturing overhead account is
debited.
23. When manufacturing overhead is charged to a job, the work in process account is credited.
24. When indirect labor is applied to a job in process, the manufacturing overhead account is
debited.
25. When indirect labor is recorded for a job in process, the work in process account is debited.
26. Standards can be computed for materials, labor, and overhead.
27. Standards can be used in a job order costing system if the products manufactured are
similar in nature.
28. Overapplied factory overhead that is material in amount is closed to cost of goods sold at
year end.
29. Overapplied factory overhead that is immaterial in amount is closed to cost of goods sold at
year end.
30. Overapplied overhead that is material in amount is allocated between Finished Goods
Inventory, Work in Process, and Cost of Goods Sold at year end
31. Standards can be used in a job order costing system if the products manufactured are
varied in
32. If a normal loss is anticipated on a specific job, the overhead application rate should include
an amount for the cost of defective units less disposal value.
33. If a normal loss is anticipated on all jobs, the overhead application rate should include an
amount for the cost of defective units less disposal value.
34. Normal spoilage is considered a period cost
35. Abnormal spoilage is considered a period cost
36. The journal entry to record normal spoilage specifically identified with a particular job
includes a debit to Work in Process
37. The journal entry to record normal spoilage specifically identified with a particular job
includes a credit to Work in Process
38. Spoilage occurring on specific jobs should be considered in computing predetermined
factory overhead rates
39. Cost accounting is primarily concerned with accumulating information about product costs.
40. A job order cost system is most appropriate when a large volume of uniform products are
produced.
41. A process cost accounting system is appropriate for homogeneous products that are
continuously mass produced.
42. The perpetual inventory method cannot be used in a job order cost system.
43. A job order cost system and a process cost system are two alternative methods for valuing
inventories.
44. A job order cost system identifies costs with a particular job rather than with a set time
period.
45. A company may use either a job order cost system or a process cost system, but not both.
46. Raw Materials Inventory, Factory Labor, and Manufacturing Overhead are all control
accounts in the general ledger when a job order cost accounting system is used.
47. Accumulating and assigning manufacturing costs are two important activities in a job order
cost system.
48. Recording the acquisition of raw materials is a part of accumulating manufacturing costs.
49. Manufacturing costs are generally incurred in one period and recorded in a subsequent
period.
50. The Purchases account is credited for all raw materials purchase returns and allowances.
51. The stores ledger cards are the subsidiary ledger for Raw Materials Inventory control
account in the general ledger.
52. When raw materials are purchased, the Work in Process Inventory account is debited.
53. Factory labor should be assigned to selling and administrative expenses on a proportionate
basis.
54. Fringe benefits and payroll taxes associated with factory workers should be accumulated as
a part of Factory Labor.
55. Job order cost sheets constitute the subsidiary ledger of the control account Work In
Process Inventory.
56. In a job order cost system, each entry to the Work In Process Inventory account should
beaccompanied by a posting to one or more job cost sheets.
57. Direct materials requisitioned from the storeroom should be charged to the Work In Process
Inventory account and the job cost sheets for the individual jobs on which the material was
used.
58. Manufacturing overhead is the only product cost that can be assigned to jobs as soon as the
costs are incurred.
59. There should be a separate job cost sheet for each job.
60. Actual manufacturing overhead costs are assigned to each job by tracing each overhead
cost to a specific job.
61. The formula for the predetermined overhead rate is estimated annual overhead costs
divided by an estimated activity base.
62. Actual manufacturing overhead costs should be charged to the Work in Process Inventory
account as they are incurred.
63. A good system of internal control requires that the job order cost sheet be destroyed as
soon as the job is complete.
64. Finished Goods Inventory is charged for the cost of jobs completed during a period.
65. When goods are sold, the Cost of Goods Sold account is debited and the Work in Process
Inventory account is credited.
66. Total manufacturing costs for a period consists of the costs of direct material used, the cost
of direct labor incurred, and the manufacturing overhead applied during the period.
67. Overapplied overhead means that actual manufacturing overhead costs were greater than
the manufacturing overhead costs applied to jobs.
68. If monthly financial statements are prepared, underapplied overhead is shown as a prepaid
expense on the balance sheet.

Multiple Choice
Select the letter of the best answer.

1. When job order costing is used, the primary focal point of cost accumulation is the
a. department.
b. supervisor.
c. Item.
d. job.
2. In a job order costing system,
a. standards cannot be used.
b. an average cost per unit within a job cannot be computed.
c. costs are accumulated by departments and averaged among all jobs.
d. overhead is typically assigned to jobs on the basis of some cost driver.

3. What is the best cost accumulation procedure to use when many batches, each differing as to
product specifications, are produced?
a. job order
b. process
c. actual
d. standard

4. Which of the following could not be used in job order costing?

a. standards
b.an average cost per unit for all jobs
c. normal costing
d. overhead allocation based on the job's direct labor hours

5. Which of the following costing methods of valuation are acceptable in a job order costing
system?
Actual Standard Actual Pdm
Material Material Labor OH
Cost Cost Cost Cos

a. yes yes no yes

b. yes no yes no
c. no yes yes yes
d. yes yes yes yes

6. Which of the following costing systems allows management to quickly recognize materials,
labor, and overhead variances and take measures to correct them?
Actual Cost System Normal Cost System
a. yes yes
b. yes no
c. no yes
d. no no

7. In a normal cost system, a debit to Work in Process Inventory would not be made for
a. actual overhead.
b. applied overhead.
c. actual direct material.
d. actual direct labor.
8. Which of the following are drawbacks to applying actual overhead to production?
a. A delay occurs in assigning costs to jobs or products.
b. Fluctuations in quantities produced during a period could cause varying per-unit charges for
fixed overhead.
c. Seasonality of overhead costs may cause distortions in job or product costs.
d. all answers are correct.

10. A credit to Work in Process Inventory represents

a.work still in process.
b. raw material put into production.
c.the application of overhead to production.
d. the transfer of completed items to Finished Goods Inventory.

11. In a job order costing system, the dollar amount of the entry that debits Finished Goods
Inventory and credits Work in Process Inventory is the sum of the costs charged to all jobs
a. started in process during the period.
b. in process during the period.
c. completed and sold during the period.
d. completed during the period.

12. Total manufacturing costs for the year plus beginning Work in Process Inventory cost equals
a. cost of goods manufactured in the year. b.
ending Work in Process Inventory.
c. total manufacturing costs to account for
d.cost of goods available for sale.

13. Which of the following would be least likely to be supported by subsidiary accounts or
ledgers in a company that employs a job order costing system?
Work in Process Inventory
b. Raw Material Inventory
c. Accounts Payable
d. Supplies Inventory

14. A journal entry includes a debit to Work in Process Inventory and a credit to Raw Material
Inventory. The explanation for this would be that
a. indirect material was placed into production.
b. raw material was purchased on account.
c. direct material was placed into production.
d. direct labor was used for production.

15. The source document that records the amount of raw material that has been requested by
production is the
a. job order cost sheet.
b. bill of lading.
c. interoffice memo.
d. material requisition.

16. A material requisition form should show all of the following information except
a. job number.
b. quantity required.
c. unit cost.
d. purchase order number.

17. Which of the following statements about job order cost sheets is true?
a. All job order cost sheets serve as the general ledger control account for Work in Process
Inventory.
b. Job order cost sheets can serve as subsidiary ledger information for both Work in Process
Inventory and Finished Goods Inventory.
c. If material requisition forms are used, job order cost sheets do not need to be maintained.
d.Job order cost sheets show costs for direct material and direct labor, but not for manufacturing
overhead since it is an applied amount.

18. The primary accounting document in a job order costing system is a(n)
a. bill of materials.
b. job order cost sheet.
c. employee time sheet.
d. materials requisition.

19. The cost sheets for incomplete jobs at the end of the period comprise the subsidiary ledger
for
a. Finished Goods Inventory.
b. Raw Material Inventory.
c. Work in Process Inventory.
d. Supplies Inventory.
The ____ provides management with a historical summation of total costs for a given product.
a. job order cost sheet
b. employee time sheet
c. material requisition form
d. bill of lading

21. The source document that records the amount of time an employee worked on a job and
his/her pay rate is the
a. job order cost sheet.
b. employee time sheet.
c. interoffice memo.
d. labor requisition form.

22. Which of the following journal entries records the accrual of the cost of indirect labor used in
production?
a. debit Work in Process Inventory, credit Wages Payable
b. debit Work in Process Inventory, credit Manufacturing Overhead
c. debit Manufacturing Overhead, credit Work in Process Inventory
d. debit Manufacturing Overhead, credit Wages Payable

23. In job order costing, payroll taxes paid by the employer for factory employees are commonly
accounted for as
a. direct labor cost.
b. manufacturing overhead cost.
c. indirect labor cost.
d. administrative cost.

24. The logical explanation for an entry that includes a debit to Manufacturing Overhead control
and a credit to Prepaid Insurance is
a. the insurance company sent the company a refund of its policy premium.
b. overhead for insurance was applied to production.
c. insurance for production equipment expired.
d. insurance was paid on production equipment.

25. The journal entry to apply overhead to production includes a credit to Manufacturing
Overhead control and a debit to
a. Finished Goods Inventory.
b. Work in Process Inventory.
c. Cost of Goods Sold.
d. Raw Material Inventory.

26. Production overhead does not include the costs of

a. factory depreciation and supplies.
b. factory employees' cafeteria departments.
c. production line labor.
d. the maintenance department for the factory.

27. In a job order costing system, the use of indirect material would usually be reflected in the
general ledger as an increase in a. stores control.
b. work in process control.
c. manufacturing overhead applied.
d. manufacturing overhead control.

28. A credit to the Manufacturing Overhead control account represents the

a. actual cost of overhead incurred.
b. actual cost of overhead paid this period.
c. amount of overhead applied to production.
d. amount of indirect material and labor used during the period.

29. The journal entry to record the incurrence and payment of overhead costs for factory
insurance requires a debit to
a. Cash and a credit to Manufacturing Overhead.
b. Manufacturing Overhead and a credit to Accounts Payable.
c. Manufacturing Overhead and a credit to Cash.
d. Work in Process Inventory and a credit to Cash.

30. Overhead is applied to jobs in a job order costing system

a. at the end of a period.
b. as jobs are completed.
c. at the end of a period or as jobs are completed, whichever is earlier.
d. at the end of a period or as jobs are completed, whichever is later.

31. In a job order costing system, the subsidiary ledger for Finished Goods Inventory is
comprised of
a. all job order cost sheets.
b. job order cost sheets for all uncompleted jobs.
c. job order cost sheets for all completed jobs not yet sold.
d. job order cost sheets for all ordered, uncompleted, and completed jobs.

32. Underapplied overhead resulting from unanticipated and immaterial price increases for
overhead items should be written off by
a. decreasing Cost of Goods Sold.
b. increasing Cost of Goods Sold.
c. decreasing Cost of Goods Sold, Work in Process Inventory, and Finished Goods Inventory.
d. increasing Cost of Goods Sold, Work in Process Inventory, and Finished Goods Inventory.

33. Overapplied overhead would result if

a. the plant were operated at less than normal capacity.
b. overhead costs incurred were less than costs charged to production.
c. overhead costs incurred were unreasonably small in relation to units produced. d.
overhead costs incurred were greater than costs charged to production.

34. Debits to Cost of Goods Sold typically represent the

a. transfer of completed items to Finished Goods Inventory.
b. costs of items sold.
c. selling price of items sold.
d. the cost of goods manufactured.

35. In a perpetual inventory system, a transaction that requires two journal entries (or one
compound entry) is needed when
a. raw materials are purchased on account.
b. goods are sold for either cash or on account.
c. goods are finished and transferred out of Work in Process Inventory.
d. overhead is applied to Work in Process Inventory.

36. Which of the following statements is false?

a. While the use of standard costing is acceptable for job order costing systems, actual cost
records should still be maintained.
b. It is normally more time-consuming for a company to use standard costs in a job order costing
system.
c. Standards can be used in a job order costing system, if the company usually produces items
that are similar in nature.
d. Standard costs may be used for material, labor, or both material and labor in a job order
costing environment.

37. The trend in job order costing is to

a. eliminate the data entry function for the accounting system.
b. automate the data collection and data entry functions.
c. use accounting software to change the focal point of the job order system.
d. create an Intranet to share information between competitors.

38. As data input functions are automated, Intranet data becomes more
a. complicated to access.
b. manufacturing, but not accounting, oriented.
c. real-time accessible.
d. expensive to install, but easier to use.

39. The use of standard material or labor costs in job order costing
a. is similar to the use of predetermined overhead rates in a normal costing system.
b. will keep actual costs of jobs from fluctuating due to changes in component
c. is appropriate for any company making units to customer specification
d. all answers are correct

40. After the completion of production, standard and actual costs are compared to determine the
of the production process.
a. effectiveness
b. complexity
c. homogeneity
d. efficiency

41. A company producing which of the following would be most likely to use a price standard for
material?
a. furniture
b. NFL-logo jackets
c. picture frames
d. none of the above

42. A company producing which of the following would be most likely to use a time standard for
labor?
a. mattresses
b. picture frames
c. floral arrangements
d. stained-glass windows

43. A service organization would be most likely to use a predetermined overhead rate based on
a. machine hours.
standard material cost.
c. direct labor.
d. number of complaints.

44. Knowing specific job costs enables managers to effectively perform which of the following
tasks?
a. estimate costs of future jobs.
b. establish realistic job selling prices.
c. evaluate job performance.
d. all answers are correct.

45. A job order costing system is likely to provide better

(1) inventory valuations for financial statements.
(2) control over inventory.
(3) information about ability to accept additional production work.

(1) (2) (3)

a yes no no
b no yes yes
c no no no
d yes yes yes

46. In a production environment that manufactures goods to customer specifications, a job order
costing system
a. can be used only if standard costs are used for materials and labor.
b. will provide reasonable product cost information only when all jobs utilize approximately the
same quantities of material and labor.
c. may be maintained using either actual or predetermined overhead rates.
d. emphasizes that large customers create the most costs even though they also provide the
most revenues.

47. A unit that is rejected at a quality control inspection point, but that can be reworked and sold,
is referred to as a
a. spoiled unit.
b. scrap unit.
c. abnormal unit.
d. defective unit.

48. The cost of abnormal losses (net of disposal costs) should be written off as

Product cost Period cost

a yes no
b yes yes
c no yes
d no no

49. In a job order costing system, the net cost of normal spoilage is equal to
a. estimated disposal value plus the cost of spoiled work.
b. the cost of spoiled work minus estimated spoilage cost.
c. the units of spoiled work times the predetermined overhead rate.
d. the cost of spoiled work minus the estimated disposal value.

51. In a job order costing system, the net cost of normal spoilage is equal to
a. estimated disposal value plus the cost of spoiled work.
b. the cost of spoiled work minus estimated spoilage cost.
d. the unstorspilled work mines the sedated disposalhad rate.

52. Shrinkage should be treated as

a. defective units.
b. spoiled units.
c. miscellaneous expense.
d. a reduction of overhead.

53. Spoiled units are

a. units that cannot be economically reworked to bring them up to standard.
b. units that can be economically reworked to bring them up to standard.
c. the same as defective units.
d. considered abnormal losses.

54. Abnormal spoilage is

a. spoilage that is forecasted or planned.
b. spoilage that is in excess of planned.
C. accounted for as a product cost.
d. debited to Cost of Goods Sold.

55. Normal spoilage is defined as unacceptable production that

a. arises because of a special job or process.
b. occurs in on-going operations.
с. is caused specifically by human error.
d. is in excess of that which is expected.

56. Which of the following would fall within the range of tolerance for a production cycle?

Abnormal Loss Normal Loss

a yes yes
b yes no
c no no
d no yes

57. The net cost of normal spoilage in a job order costing system in which spoilage is common
to all jobs should be
a. assigned directly to the jobs that caused the spoilage.
b. charged to manufacturing overhead during the period of the spoilage.
c. charged to a loss account during the period of the spoilage.
d. allocated only to jobs that are completed during the period.