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1. Which of the following costing methods of valuation are acceptable in a job order costing system?

Actual Standard Actual Predetermined


Material Material Labor Overhead
Cost Cost Cost Cost
a. yes yes no yes
b. yes no yes no
c. no yes yes yes
d. yes yes yes yes

ANSWER: d EASY

2. Which of the following costing systems allows management to quickly recognize materials, labs, 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

ANSWER: d EASY

3. In a normal cost system, debits to Work in Process Inventory would not be made for

a. actual overhead.
b. applied overhead.
c. actual direct material.
d. actual direct labor.

ANSWER: a EASY

4. 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 of the above.

ANSWER: d EASY

5. Job order costing and process costing have which of the following characteristics?

Job Order Costing Process Costing


a. homogeneous products heterogeneous products
and large quantities and small quantities
b. homogeneous products heterogeneous products
and small quantities and large quantities
c. heterogeneous products homogeneous products
and large quantities and small quantities
d. heterogeneous products homogeneous products
and small quantities and large quantities

ANSWER: d EASY

6. 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.

ANSWER: d EASY
7. Additional accounts that comprise the balance of a single general account is a

a. worksheet.
b. journal.
c. subsidiary ledger.
d. book of original entry.

ANSWER: c EASY

8. 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.

ANSWER: d EASY

9. 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.

ANSWER: c EASY

10. 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?

a. Work in Process Inventory


b. Raw Material Inventory
c. Accounts Payable
d. Supplies Inventory

ANSWER: d EASY

11. 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 utilized for production.

ANSWER: c EASY

12. 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.

ANSWER: d EASY

13. 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.

ANSWER: d EASY

14. 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.

ANSWER: b EASY

15. Clyde Jenkins is an auditor for the General Accounting Office. Clyde is investigating invoices sent by Proper Paper Products
charging the Army $30 per roll for toilet paper. Proper Paper uses a job order costing system. Where should Clyde look to find total
production costs related to the toilet paper?

a. material requisition form


b. bill of materials
c. sales invoice
d. job order cost sheet

ANSWER: d EASY

16. 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.

ANSWER: b EASY

17. 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.

ANSWER: c EASY

18. The __________ provides management with an 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

ANSWER: a EASY

19. 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

ANSWER: d EASY

20. 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.

ANSWER: b EASY

PROBLEMS:

PROBLEM 1 (1-5)
The following partially completed T-accounts summarize transactions for Faaberg Company during the year:

Raw Materials
Bal. 4,500 8,000
4,700

Finished Goods
Bal. 1,700 19,900
21,700

Work in Process
Bal. 3,600 21,700
5,700
8,000
7,800

Manufacturing Overhead
2,300 7,800
3,000
2,700

Wages & Salaries Payable


19,900 Bal. 2,000
11,000

Cost of Goods Sold


19,900
1. The Cost of Goods Manufactured was:
A) $19,900
B) $21,700
C) $41,600
D) $7,700

Journal entry for Cost of Goods Manufactured:


Finished Goods 21,700
Work in Process 21,700

2. The direct labor cost was:


A) $11,600
B) $19,900
C) $8,000
D) $11,000

Journal entry for direct labor cost:


Work in Process 8,000
Manufacturing Overhead 3,000
Wages and Salaries Payable 11,000

The direct labor cost is the debit to Work in Process in this journal entry.

3. The direct materials cost was:


A) $2,300
B) $5,700
C) $3,600
D) $8,000

Journal entry for direct materials used:


Work in Process 5,700
Manufacturing Overhead 2,300
Raw Materials 8,000

The debit to Work in Process represents the direct materials cost.


4. The manufacturing overhead applied was:
A) $2,700
B) $3,000
C) $7,800
D) $13,700

The credit to Manufacturing Overhead is the manufacturing overhead applied.

5. The manufacturing overhead was:


A) $200 overapplied
B) $2,700 overapplied
C) $200 underapplied
D) $2,700 underapplied

Actual manufacturing overhead


(2,300 + 3,000 + 2,700)........................... $8,000
Applied manufacturing overhead* ............. 7,800
Underapplied manufacturing overhead ...... $ 200
* The credit to Manufacturing Overhead is the manufacturing overhead applied.

PROBLEM 2
Gilford Inc. uses a job-order costing system. Costs going through the company's work in process account during June are
given below. Manufacturing overhead is applied to production using a predetermined overhead rate based on
direct labor cost.

Work in Process
Balance 0 Transferred out 95,000
Direct materials 20,000
Direct labor 30,000
Manufacturing overhead 60,000
Balance 15,000
Only Job 105 was still in process at the end of the month. This job had been charged with $3,000 in direct materials cost.

Required:

a. Complete the following job-order costing card for Job 105:

Direct materials ................. $3,000


Direct labor........................ _______
Manufacturing overhead ... _______
Total cost at June 30 .......... _______

b. Determine the total amount of materials cost charged to completed jobs during the month.

Ans:

a. Since only Job 105 was in process at the end of the month, all of the $15,000 balance in the Work in
Process account must apply to it.

Total cost in Work in Process (all Job 105) .................... $15,000


Less materials cost in Job 105 ......................................... 3,000
Direct labor and manufacturing overhead cost ............... $12,000
From the Work in Process T-account, it appears that manufacturing overhead is being applied at
200% of direct labor cost.

Let = Direct labor cost


X + 2.00X = $12,000
3X = $12,000
X = $4,000

Thus, direct labor cost in Job 105 is $4,000, and manufacturing overhead cost is 200% $4,000 =
$8,000. Therefore,

Direct materials ............................. $ 3,000


Direct labor.................................... 4,000
Manufacturing overhead ............... 8,000
Total cost at June 30 ...................... $15,000

b. Since $20,000 in materials cost was charged to Work in Process, and since only $3,000 in materials
cost applies to Job 105, the difference of $17,000 represents the cost charged to completed jobs
during the month.

Alagan Company is a manufacturing firm that uses job-order costing. At the beginning of the year, the
company's inventory balances were as follows:

Raw materials $10,000


Work in process $81,000
Finished goods $20,000

The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the
beginning of the year, the company estimated that it would work 37,000 machine-hours and incur $222,000 in
manufacturing overhead cost. The following transactions were recorded for the year:

a.Raw materials were purchased, $372,000.


b.Raw materials were requisitioned for use in production, $367,000 ($345,000 direct and $22,000 indirect).
c.The following employee costs were incurred: direct labor, $309,000; indirect labor, $44,000; and
administrative salaries, $155,000.
d.Selling costs, $140,000.
e.Factory utility costs, $21,000.
f.Depreciation for the year was $163,000 of which $154,000 is related to factory operations and $9,000 is
related to selling, general, and administrative activities.
g.Manufacturing overhead was applied to jobs. The actual level of activity for the year was 37,000 machine-
hours.
h.The cost of goods manufactured for the year was $894,000.
i.Sales for the year totaled $1,233,000 and the costs on the job cost sheets of the goods that were sold totaled
$879,000.
j.The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.

Required:
Prepare the appropriate journal entry for each of the items above. You can assume that all transactions with
employees, customers, and suppliers were conducted in cash.
Ans:

a. Raw Materials Inventory 372,000


Cash 372,000

b. Work in Process Inventory 345,000


Manufacturing Overhead 22,000
Raw Materials Inventory 367,000

c. Work in Process Inventory 309,000


Manufacturing Overhead 44,000
Administrative Salary Expense 155,000
Cash 508,000

d. Selling Expenses 140,000


Cash 140,000

e. Manufacturing Overhead 21,000


Cash 21,000

f. Manufacturing Overhead 154,000


Depreciation Expense 9,000
Accumulated Depreciation 163,000

g. Work in Process 222,000


Manufacturing Overhead 222,000

h. Finished Goods 894,000


Work in Process 894,000

i. Cash 1,233,000
Sales 1,233,000

Cost of Goods Sold 879,000


Finished Goods 879,000

j. Cost of Goods Sold 19,000


Manufacturing Overhead 19,000

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