Question 1

The new manufacturing environment is characterized by its shift toward labor intensive production and declining manufacturing overhead costs.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would likely be the most appropriate cost driver to allocate machinery set-up costs to products?

Accepted Answer

A)  Machine hours. 
B)  Direct labor hours. 
C)  Number of production runs. 
D)  Repair work orders. 
A)  Machine hours. 
B)  Direct labor hours. 
C)  Number of production runs. 
D)  Repair work orders.

Question 3

A debit balance in the manufacturing overhead account at month end indicates overhead applied to jobs was greater than the actual overhead costs.

Accepted Answer

A) True 
 B)False

Question 4

A job order cost system requires the cost of direct materials, direct labor, and manufacturing overhead applicable to each department or process for a given time period be compiled.

Accepted Answer

A) True 
 B)False

Question 5

Manufacturing overhead is:

Accepted Answer

A)  A direct cost that can traced to a specific job. 
B)  An indirect cost that can be traced to a specific job. 
C)  A direct cost that cannot be traced to a specific job. 
D)  An indirect cost that cannot be traced to a specific job. 
A)  A direct cost that can traced to a specific job. 
B)  An indirect cost that can be traced to a specific job. 
C)  A direct cost that cannot be traced to a specific job. 
D)  An indirect cost that cannot be traced to a specific job.

Question 6

Management can compute the per-unit cost of finished goods accurately only when a job order cost system is in use.

Accepted Answer

A) True 
 B)False

Question 7

Debits to the Manufacturing Overhead account record:

Accepted Answer

A)  The actual amounts of overhead costs incurred during a period. 
B)  The amount of overhead applied to production during a period. 
C)  The amount of overhead incurred on a specific job. 
D)  All conversion costs of a period. 
A)  The actual amounts of overhead costs incurred during a period. 
B)  The amount of overhead applied to production during a period. 
C)  The amount of overhead incurred on a specific job. 
D)  All conversion costs of a period.

Question 8

If actual overhead costs are less than the amount of overhead applied to production, this indicates that manufacturing overhead is over-applied.

Accepted Answer

A) True 
 B)False

Question 9

What is the cost of goods sold during November? $___________

Accepted Answer

The answer of What is the cost of goods sold...

Question 10

What are the factory foremen salaries allocated to Car Seats during the current month?

Accepted Answer

A)  $11,607. 
B)  $26,786. 
C)  $36,607. 
D)  $75,000. 
A)  $11,607. 
B)  $26,786. 
C)  $36,607. 
D)  $75,000.

Question 11

Overhead costs are assigned to production using an overhead application rate, whereas no such "application rate" is used to assign the costs of direct materials and direct labor to production. The reason for this difference in procedures is that:

Accepted Answer

A)  Overhead is an indirect cost which cannot be traced easily and directly to specific units of product. 
B)  Overhead is always larger in dollar amount than either direct materials or direct labor. 
C)  The amounts of direct material and direct labor applicable to each unit of production cannot be determined as easily as the amount of overhead. 
D)  Overhead is always equal to a constant percentage of direct labor costs. 
A)  Overhead is an indirect cost which cannot be traced easily and directly to specific units of product. 
B)  Overhead is always larger in dollar amount than either direct materials or direct labor. 
C)  The amounts of direct material and direct labor applicable to each unit of production cannot be determined as easily as the amount of overhead. 
D)  Overhead is always equal to a constant percentage of direct labor costs.

Question 12

Job order costing cannot be used for a service company.

Accepted Answer

A) True 
 B)False

Question 13

An overhead application rate is a device used to assign overhead costs to units of product in proportion to some "activity base" that can be traced directly to the manufactured products.

Accepted Answer

A) True 
 B)False

Question 14

The document that provides information for the cost of goods manufactured is:

Accepted Answer

A)  The job cost sheet. 
B)  Time cards. 
C)  Material requisition. 
D)  Payroll check. 
A)  The job cost sheet. 
B)  Time cards. 
C)  Material requisition. 
D)  Payroll check.

Question 15

Edwards Auto Body uses a job order cost system. Overhead is applied to jobs on the basis of direct labor hours. During the current period, Job No. 337 was charged $425 in direct materials, $475 in direct labor, and $190 in overhead. If direct labor costs an average of $16 per hour, the company's overhead application rate is:

Accepted Answer

A)  $7.27 per direct labor hour. 
B)  $6.40 per direct labor hour. 
C)  $17.50 per direct labor hour. 
D)  $40 per direct labor hour. 
A)  $7.27 per direct labor hour. 
B)  $6.40 per direct labor hour. 
C)  $17.50 per direct labor hour. 
D)  $40 per direct labor hour.

Question 16

Pepsi Cola would most likely use a job order costing system.

Accepted Answer

A) True 
 B)False

Question 17

Langdon Company manufactures custom designed toy sailboats. They use a job order costing system. Overhead is applied based on direct labor hours. Estimated overhead for 2012 is $11,840 and the company estimates it will use 7,400 direct labor hours. The following events occurred in March.
(a.) The company purchased materials for $800 on account.
(b.) The production supervisor requisitioned 15 sheets of fiberglass for constructing the boats. The fiberglass was in stock and originally cost $3 a sheet.
(c.) Direct labor on the boats cost $500.
(d.) More materials were purchased for $350 on account.
(e.) Indirect labor costs were $210.
(f.) A utility bill for the boat factory was $230 and was paid in cash.
(g.) A repair bill for the salesman's car was $75 and will be paid next month.
(h.) Additional materials were placed into production which cost $215.
(i.) Manufacturing overhead was applied (direct labor during March totaled 500 hours).
(j.) One sailboat was completed which cost $325.
(k.) The completed sailboat was sold for $750. Record the sale and the cost of sale.
Required:
(1.) Determine the overhead application rate.
(2.) Prepare journal entries for the above transactions.
(3.) What is the cost of the remaining Work in Process?

Accepted Answer

(1.) $1.60
(2.) Jour

Question 18

Activity-based costing systems always result in more accurate measurements of unit costs.

Accepted Answer

A) True 
 B)False

Question 19

An activity-based costing system cannot help managers make better product pricing decisions.

Accepted Answer

A) True 
 B)False

Question 20

What is the work in process at November 30? $___________

Accepted Answer

The answer of What is the work in process at...

Exam 17: Job Order Cost Systems and Overhead Allocations

The new manufacturing environment is characterized by its shift toward labor intensive production and declining manufacturing overhead costs.

Which of the following would likely be the most appropriate cost driver to allocate machinery set-up costs to products?

A debit balance in the manufacturing overhead account at month end indicates overhead applied to jobs was greater than the actual overhead costs.

A job order cost system requires the cost of direct materials, direct labor, and manufacturing overhead applicable to each department or process for a given time period be compiled.

Manufacturing overhead is:

Management can compute the per-unit cost of finished goods accurately only when a job order cost system is in use.

Debits to the Manufacturing Overhead account record:

If actual overhead costs are less than the amount of overhead applied to production, this indicates that manufacturing overhead is over-applied.

What is the cost of goods sold during November? $___________

What are the factory foremen salaries allocated to Car Seats during the current month?

Overhead costs are assigned to production using an overhead application rate, whereas no such "application rate" is used to assign the costs of direct materials and direct labor to production. The reason for this difference in procedures is that:

Job order costing cannot be used for a service company.

An overhead application rate is a device used to assign overhead costs to units of product in proportion to some "activity base" that can be traced directly to the manufactured products.

The document that provides information for the cost of goods manufactured is:

Pepsi Cola would most likely use a job order costing system.

Activity-based costing systems always result in more accurate measurements of unit costs.

An activity-based costing system cannot help managers make better product pricing decisions.

What is the work in process at November 30? $___________

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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