Question 1

Moira Company has just finished its first year of operations and must decide which method to use for adjusting cost of goods sold.Because the company used a budgeted indirect-cost rate for its manufacturing operations,the amount that was allocated ($435,000)to cost of goods sold was different from the actual amount incurred ($425,000).
Ending balances in the relevant accounts were:
 $$\begin{array} { l r } 
\text { Work-in-Process } & \$ 40,000 \
\text { Finished Coods } & 80,000 \
\text { Cost of Goods Sold } & 680,000
\end{array}$$ Required:
a.Prepare a journal entry to write off the difference between allocated and actual overhead directly to Cost of Goods Sold.Be sure your journal entry closes the related overhead accounts.
b.Prepare a journal entry that prorates the write-off of the difference between allocated and actual overhead using ending account balances.Be sure your journal entry closes the related overhead accounts.

Accepted Answer

The answer of Moira Company has just finished its first...

Question 2

Assigning direct costs to a cost object is called ________.

Accepted Answer

A)  cost allocation 
B)  cost assignment 
C)  cost pooling 
D)  cost tracing

Question 3

Costs that are subject to short-run fluctuations for given jobs are ________.

Accepted Answer

A)  actual costs 
B)  budgeted direct costs 
C)  budgeted indirect costs 
D)  normal costs

Question 4

Which account would be credited if the following labor wages were incurred in a furniture manufacturing company? $$\begin{array}{l}
\text { Assem bly workers } \quad \$ 20,000\
\text { Janitors } \quad \$ 10,000
\end{array}$$

Accepted Answer

A)  Work-in-Process Control, 30,000 
B)  Manufacturing Overhead Control, 30,000 
C)  Wages Payable Control, 30,000 
D)  Accounts Payable Control, 30,000

Question 5

If indirect-cost rates are calculated monthly,distortions might occur because of ________.

Accepted Answer

A)  rental costs paid monthly 
B)  property tax payments made in July and December 
C)  routine monthly preventive-maintenance costs that benefit future months 
D)  salary hikes at the beginning of the financial year

Question 6

Using job costing,the 2014 actual indirect-cost rate is ________.

Accepted Answer

A)  $6.00 per machine-hour 
B)  $5.80 per machine-hour 
C)  $6.50 per machine-hour 
D)  $6.75 per machine-hour

Question 7

For each item below indicate the source documents that would most likely authorize the journal entry in a job-costing system.
Required:
a.direct materials purchased
b.direct materials used
c.direct manufacturing labor
d.indirect manufacturing labor
e.finished goods control
f.cost of goods sold

Accepted Answer

The answer of For each item below indicate the source...

Question 8

The actual indirect-cost rate is calculated by dividing actual total indirect costs by the budgeted total quantity of the cost-allocation base.

Accepted Answer

A) True 
 B)False

Question 9

Constanza Company has the following balances as of the year ended December 31,2014:
 $$\begin{array} { l r l } 
\text { Direct Materials Inventory } & \$ 30,000 & \mathrm { Dr } \text {. } \
\text { WIP Inventory } & 69,000 & \mathrm { Dr } \text {. } \
\text { Finished Goods Inventory } & 99,000 & \mathrm { Dr } \text {. } \
\text { Underapplied Factory Department Overhead } & 8,000 & \mathrm { Dr } \text {. } \
\text { Cost of Goods Sold } & 149,000 & \mathrm { Dr } \text {. }
\end{array}$$ Additional information is as follows:
 $\begin{array}{lr}
\text { Cost of direct materials purchased during 2014 } & \$ 82,000 \
\text { Cost of direct materials requisitioned in 2014 } & 74,000 \
\text { Cost of goods completed during 2014 } & 204,000 \
\text { Factory overhead applied (120\% of direct labor) } & 96,000
\end{array}$ Required:
a.Compute beginning direct materials inventory.
b.Compute beginning WIP inventory.
c.Compute beginning finished goods inventory.
d.Compute actual factory overhead incurred.

Accepted Answer

The answer of Constanza Company has the following balances as...

Question 10

In the service sector ________.

Accepted Answer

A)  direct labor costs are always easy to trace to jobs 
B)  a budgeted direct-labor cost rate may be used to apply direct labor to jobs 
C)  normal costing may not be used 
D)  overhead is generally applied using an actual cost-allocation rate

Question 11

Luke employs 20 professional cleaners.Budgeted costs total $1,800,000 of which $1,550,000 is direct costs.Budgeted indirect costs are $750,000 and actual indirect costs were $795,800.Budgeted professional labor-hours are 1,000,000 and actual hours were 1,218,000.What is the budgeted direct cost-allocation rate?

Accepted Answer

A)  $1.80 per hour 
B)  $1.7857 per hour 
C)  $0.75 per hour 
D)  $1.55 per hour

Question 12

Job-cost records for Boucher Company contained the following data:
 $$\begin{array} { l l l l c } 
& \text { Date } & \text { Date } & \text { Date } & \begin{array} { c } 
\text { Total Cost } \
\text { of Job }
\end{array} \
\text { job No. } & \text { Started } & \text { Finished } & \text { Sold } & \text { at June 30 } \
\hline 220 & \text { May 18 } & \text { June 12 } & \text { June 20 } & \$ 6,000 \
221 & \text { May 20 } & \text { June 19 } & \text { June 21 } & 4,000 \
222 & \text { June 7 } & \text { July 5 } & \text { July 12 } & 7,000 \
223 & \text { June 10 } & \text { June 28 } & \text { July 1 } & 6,500 \
224 & \text { June 19 } & \text { July 16 } & \text { July 25 } & 8,000
\end{array}$$ Required:
a.Compute WIP inventory at June 30.
b.Compute finished goods inventory at June 30.
c.Compute cost of goods sold for June.

Accepted Answer

The answer of Job-cost records for Boucher Company contained the...

Question 13

It is appropriate for service organizations such as public accounting firms to use job costing.

Accepted Answer

A) True 
 B)False

Question 14

Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs: A. Identify indirect costs
B. Compute the total cost of the job
C. Select cost-allocation bases
D. Compute the indirect cost rate

Accepted Answer

A)  ACDB 
B)  CADB 
C)  BACD 
D)  DCAB

Question 15

Answer the following questions using the information below:
Apple Valley Corporation uses a job cost system and has two production departments, A and B. Budgeted manufacturing costs for the year are:
 $\begin{array}{lll}&\text { Department A }&\text { Department B }\
\text { Direct materials } & \$ 700,000 & \$ 100,000 \
\text { Direct manufacturing labor } & \$ 200,000 & \$ 800,000 \
\text { Manufacturing overhead } & \$ 600,000 & \$ 400,000
\end{array}$
$\text { The actual material and labor costs charged to Job \#432 were as follows: }$
$\begin{array}{lr}
\text { Direct materials: } & \$ 25,000 \
\text { Direct labor: } & \
\text { Department A } & \$ 8,000 \
\text { Department B } & \$ 12,000 \
& \$ 20,000
\end{array}$ Apple Valley applies manufacturing overhead costs to jobs on the basis of direct manufacturing labor cost using departmental rates determined at the beginning of the year.
-For Department B,the manufacturing overhead allocation rate is ________.

Accepted Answer

A)  50% 
B)  100% 
C)  200% 
D)  300%

Question 16

For normal costing,even though the indirect-cost rate is based on actuals,indirect costs are allocated to products based on the normal capacity of the cost-allocation base.

Accepted Answer

A) True 
 B)False

Question 17

Goods are ready to be sold when their respective costs are debited to work-in-process inventory.

Accepted Answer

A) True 
 B)False

Question 18

A company may use job costing to assign costs to different product lines and then use process costing to calculate unit costs within each product line.

Accepted Answer

A) True 
 B)False

Question 19

The cost allocation base ________.

Accepted Answer

A)  is a grouping of individual indirect cost items 
B)  are costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way 
C)  is anything for which a measurement of costs is desired 
D)  is a systematic way to link an indirect cost or group of indirect costs to cost objects

Question 20

Actual (rather than allocated)manufacturing overhead costs are first recorded in the ________.

Accepted Answer

A)  Work-in-Process Control account 
B)  Finished Goods Control account 
C)  Manufacturing Overhead Control account 
D)  Cost of Goods Sold account

Exam 4: Job Costing

Assigning direct costs to a cost object is called ________.

Costs that are subject to short-run fluctuations for given jobs are ________.

Which account would be credited if the following labor wages were incurred in a furniture manufacturing company? $\begin{array}{l}\text { Assem bly workers } \quad \$ 20,000\\\text { Janitors } \quad \$ 10,000\end{array}$

If indirect-cost rates are calculated monthly,distortions might occur because of ________.

Using job costing,the 2014 actual indirect-cost rate is ________.

For each item below indicate the source documents that would most likely authorize the journal entry in a job-costing system. Required: a.direct materials purchased b.direct materials used c.direct manufacturing labor d.indirect manufacturing labor e.finished goods control f.cost of goods sold

The actual indirect-cost rate is calculated by dividing actual total indirect costs by the budgeted total quantity of the cost-allocation base.

In the service sector ________.

It is appropriate for service organizations such as public accounting firms to use job costing.

Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs: A. Identify indirect costs B. Compute the total cost of the job C. Select cost-allocation bases D. Compute the indirect cost rate

For normal costing,even though the indirect-cost rate is based on actuals,indirect costs are allocated to products based on the normal capacity of the cost-allocation base.

Goods are ready to be sold when their respective costs are debited to work-in-process inventory.

A company may use job costing to assign costs to different product lines and then use process costing to calculate unit costs within each product line.

The cost allocation base ________.

Actual (rather than allocated) manufacturing overhead costs are first recorded in the ________.