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Job Costing Multiple Choice Questions
Job Costing Multiple Choice Questions
3. Which of the following product costs would be 9. The journal entry to transfer production from the
charged to Work in Process assuming a standard Finishing Department to Finished Goods would
costing system? include a:
a. Actual direct material costs a. credit to Finished Goods.
b. Actual overhead costs b. debit to Cost of Goods Manufactured.
c. Actual direct labor costs c. credit to WIP – Finishing.
d. Applied overhead costs d. credit to Cost of Goods Manufactured.
4. Select the incorrect job order costing system 10. M Corporation manufactures a specialty line of
characteristic. jeans using a job-order-cost system. During May, the
a. Costs are accumulated by job. following costs were incurred in completing Job M1:
b. A job may consist of multiple units provided all direct materials, $13,700; direct labor, $4,800;
units are similar. administrative, $1,400; and selling, $5,600.
c. Costs of different jobs cannot logically be Overhead was applied at the rate of $25 per
averaged so a unique cost must be determined machine hour, and Job M1 required 800 machine
for each job. hours. If Job M1 resulted in 7,000 good jeans, the
d. Jobs are usually produced to distinct customer cost of goods sold per unit would be
specifications. a. $5.50.
b. $6.30.
5. Which of the following serves at a subsidiary c. $5.70.
ledger for the Work in Process account? d. $8.50.
a. Standard cost card
b. Material requisition form 11. Q Company uses a normal cost system. The
c. Job requisition form following information is from its financial records for
d. Job order cost sheet the year: Total manufacturing costs, $2,500,000
Cost of goods manufactured, $2,425,000 Applied
6. Which of the following is not a source document overhead, 30% of total manufacturing costs
used in job order costing systems? Predetermined OH rate, 80% of direct labor cost
a. Cost of production report Assuming the company’s work in process inventory
b. Employee time sheet at January 1 was 75 percent of its December 31 work
c. Job cost sheet in process inventory, what is the carrying value of the
d. Material requisition form company’s work in process inventory at December
31?
a. $75,000
b. $100,000
c. $225,000
7. Select the response that represents the correct d. $300,000
flow of costs in a job order costing system.
12. Which of the following costing systems does not 16. Cost of goods sold is a component of the income
involve computing cost variances? statement. In a merchandising establishement,
a. Actual costing system this refers to purchases adjusted for changes in
b. Normal costing system inventory. In a manufacturing company, what
c. Standard costing system replaces purchases to arrive at cost of goods
d. All of the above systems involve computing sold.
cost variances a. Fixed mfg. overhead.
b. WIP
13. Select the incorrect statement concerning c. Finished Goods
standard costs and job order costing. d. CGM
a. A standard cost system determines product
cost by using predetermined norms in the 17. Actual costs are:
inventory accounts for prices and/or quantities of a. the costs incurred
cost components. b. budgeted costs
b. Standards can be used in a job order cost c. estimated costs
system only if a company typically engages in d. forecasted costs
jobs that produce fairly similar products.
c. Under GAAP, standard cost job order systems 18. Budgeted costs are:
may not substitute for actual or normal costing a. the costs incurred this year
systems. b. the costs incurred last year
d. Standard cost variances can be computed for c. planned or forecasted costs
actual-to-standard differences regardless of d. competitor’s costs
whether standards have been established for
both quantities and prices or for prices or rates
only. 19. Classifying a cost as either direct or indirect
depends upon:
15. Which of the following statements is true a. the behavior of the cost in response to volume
concerning job order costing and management changes
decision making? b. whether the cost is expensed in the period in
a. Job order costing assists managers in their which it is incurred
planning, controlling, decision making and c. whether the cost can be easily identified with
performance evaluations functions. the cost object
b. Job order costing allows managers to trace d. whether an expenditure is avoidable or not in
costs associated with specific current jobs to the future
better estimate costs of future jobs.
c. Job order costing provides a means by which 20. All of the following are true EXCEPT that indirect
managers can better control the costs costs:
associated with their operations. a. may be included in prime costs
d. All of the above are true statements. b. are not easily traced to products or services
c. vary with the selection of the cost object
16. Select the incorrect statement regarding the d. may be included in manufacturing overhead
accounting for product losses.
a. Normal losses that are anticipated on all jobs
are estimated and included in the development of
the predetermined OH rate.
b. Normal losses that are associated with a
particular job are charged to a loss account in the
period they are incurred.
c. Abnormal losses are charged to a loss account
in the period they are incurred.
d. The difference between normal and abnormal
loss is one of degree and therefore must be
determined by management.
1. All of the following are reasons for using 4. Select the incorrect matching of cost and cost level.
predetermined overhead rates in product costing a. Unit level : Direct material
except: b. Facility level : Equipment maintenance
a. to overcome the problem of fluctuations in c. Product level : Product development
activity levels that have no impact on fixed d. Batch level : Setup costs
overhead costs.
b. to overcome the problem caused by 5. Which costing system assigns costs within multiple
overhead containing both fixed and variable
cost pools to products using multiple drivers?
costs.
a. Activity-based costing
c. to adjust for variations in actual overhead
b. Variable costing
costs that are unrelated to fluctuations in
activity. c. Traditional costing
d. to allow management to determine whether d. None of the above
a product, product line, or customer is
profitable. 6. The use of activity-based costing normally results in:
a. substantially lower unit costs for low-volume
2. What is the best method for disposing of products than is reported by traditional product
significant underapplied factory overhead? costing.
a. Charge the underapplied amount to cost of b. equalizing setup costs for all product lines.
goods sold c. decreased setup costs being charged to low-
b. Prorate the underapplied amount to cost of volume products.
goods sold, finished goods, and work in d. substantially greater unit costs for low-volume
process products than is reported by traditional product
c. Prorate the underapplied amount to costing.
inventory only (work in process and finished
goods)
d. Charge the underapplied amount to a loss
account at the end of the period 7. Because of the changes that are occurring in the
basic operations of many firms, all of the following
3. Select the incorrect statement concerning represent trends in the way indirect costs are
overapplied overhead. allocated except:
a. The overhead control account will have a a. treating direct labor as an indirect
debit balance. manufacturing cost in an automated factory.
b. The amount of overhead transferred to WIP b. using throughput time as an application base to
from the overhead control account exceeded increase awareness of the costs associated with
the actual amount of overhead incurred. lengthened throughput time.
c. Overapplied overhead must be closed at c. preferring plant-wide application rates that are
year-end because a single year’s activity applied to machine hours rather than incurring
level was used to set the predetermined the cost of detailed allocations.
overhead rate. d. using several machine cost pools to measure
d. Overapplied overhead may result if the
product costs on the basis of time in a machine
company’s actual utilization of capacity is
center
greater than expected.
8. Activity-Based Costing is appropriate for which of B) customers
the following organizations? C) departments
a. One that produces and sells a wide variety of D) All of these answers are correct.
products.
b. One that produces and sells a single complex 2) Actual costs are:
product.
A) the costs incurred
B) budgeted costs
c. One that provides a single service to customers.
C) estimated costs
d. All of the above D) forecasted costs
9. A number of barriers must be overcome to 3) The general term used to identify both the tracing
implement activity-based costing systems and the allocation of accumulated costs to a cost
successfully. Select the barrier that is not matched object is:
up properly with its type. A) cost accumulation
a. Fear of change Individual barrier B) cost assignment
b. Regulatory agencies Environmental barrier C) cost tracing
c. Corporate culture issues Organizational barrier D) conversion costing
d. All of the above barriers are properly classified
10. The document that summarizes the expected 5) The collection of accounting data in some
quantities and costs needed to produce a unit is organized way is:
called a A) cost accumulation
a. bill of materials. B) cost assignment
b. total cost of ownership document. C) cost tracing
c. operations flow document. D) conversion costing
d. standard cost card.
6) Budgeted costs are:
11. Which of the following items is not included in annual
inventory carrying costs?
A) the costs incurred this year
a. Inventory storage cost B) the costs incurred last year
b. Inventory purchase cost C) planned or forecasted costs
c. Insurance on inventory D) competitor's costs
d. Property taxes on inventory
7) Cost assignment :
12. When the level of safety stock is increased: A) is always arbitrary
a. lead time will increase. B) is includes tracing and allocating
b. carrying costs will decrease. C) is the same as cost accumulation
c. the frequency of stock outs will decrease. D) is finding the difference between budgeted and
d. lead time will decrease.
actual costs
Answer: B
11) Cost accounting:
A) provides information on the efficiency of factory 8) A cost system determines the cost of a cost object
labor by:
B) provides information on the cost of servicing A) accumulating and then assigning costs
commercial customers B) accumulating costs
C) provides information on the performance of an C) assigning and then accumulating costs
operating division D) assigning costs
D) All of these answers are correct.
2) Which of the following statements about the
direct/indirect cost classification is NOT true?
A) Indirect costs are always traced.
1) Cost objects include: B) Indirect costs are always allocated.
A) products
C) The design of operations affects the direct/indirect 11) All of the following are true EXCEPT that indirect
classification. costs:
D) The direct/indirect classification depends on the A) may be included in prime costs
choice of cost object. B) are not easily traced to products or services
C) vary with the selection of the cost object
D) may be included in manufacturing overhead
3) Cost tracing is:
A) the assignment of direct costs to the chosen cost A band of normal activity or volume in which specific
object cost-volume relationships are maintained is referred to
B) a function of cost allocation as the:
C) the process of tracking both direct and indirect A) average range
costs associated with a cost object B) cost-allocation range
D) the process of determining the actual cost of the cost C) cost driver range
object D) relevant range
2) The difference between actual costing and normal 2) The Materials Control account is increased when:
costing is: A) direct materials are purchased
A) normal costing uses actual quantities of direct- B) indirect materials are purchased
costs C) materials are requisitioned for production
B) actual costing uses actual quantities of direct-costs D) Both A and B are correct.
C) normal costing uses budgeted indirect-costs
D) actual costing uses actual quantities of cost- 3) All of the following are true of the Work-in-Process
allocation bases Control account EXCEPT that:
A) it tracks all direct material purchases
B) the balance equals the sum of amounts from all in-
3) Which of the following statements about normal process individual job-cost records
costing is true? C) it is an asset account
A) Direct costs and indirect costs are traced using an D) it tracks job costs from beginning through
actual rate. completion
B) Direct costs and indirect costs are traced using
budgeted rates. 5) All of the following increase (are debited to) the
C) Direct costs are traced using a budgeted rate, and Work-in-Process Control account EXCEPT:
indirect costs are allocated using an actual rate. A) actual plant insurance costs
D) Direct costs are traced using an actual rate, and B) direct materials
indirect costs are allocated using a budgeted rate. C) allocated manufacturing overhead costs
D) direct manufacturing labor
6) When direct materials are requisitioned the A) Work-in-Process Control is debited
________ account is increased. B) Finished Goods Control is credited
A) Manufacturing Overhead Control C) the cost of the job is transferred to Manufacturing
B) Work-in-Process Control Overhead Control
C) Materials Control D) actual direct materials, actual direct manufacturing
D) Accounts Payable Control labor, and allocated manufacturing overhead will
comprise the total cost of the job
7) Payment of the factory rent increases the:
A) Work-in-Process Control account 19) During an accounting period, job costs are
B) Manufacturing Overhead Control account computed on an ongoing basis by the use of:
C) Both A and B are correct. A) actual allocation rates
D) None of these answers are correct. B) budgeted indirect-cost rates
C) overallocated indirect-cost rates
9) Actual (rather than allocated) manufacturing D) underallocated indirect-cost rates
overhead costs are included in the:
A) Work-in-Process Control account
B) Finished Goods Control account 20) The advantage of using normal costing instead of
C) Manufacturing Overhead Control account actual costing is:
D) Both A and B are correct. A) indirect costs are assigned at the end of the year
when they are known
10) The ending balance in the Work-in-Process B) the job cost is more accurate under normal costing
Control account represents the costs of all jobs that: C) indirect costs are assigned to a job on a timely
A) have not been completed basis
B) have been completed but not sold D) normal costing provides a higher gross profit
C) have been completed and sold to customers margin
D) are reported on the income statement
1) The spreading of underallocated or overallocated
11) For externally reported inventory costs, the Work- overhead among ending work-in-process, finished
in-Process Control account is increased (debited) by: goods, and cost of goods sold is called:
A) marketing costs A) the adjusted allocation rate approach
B) allocated plant utility costs B) the proration approach
C) the purchase costs of direct and indirect materials C) the write-off of cost of goods sold approach
D) customer-service costs D) None of these answers are correct
14) All of the following items are debited to Work-in- 2) The method that restates all overhead entries in the
Process EXCEPT: general ledger and subsidiary ledgers using actual cost
A) allocated manufacturing overhead rates rather than budgeted cost rates is called
B) completed goods being transferred out of the plant A) the adjusted allocation rate approach
C) direct labor consumed B) the proration approach
D) direct materials consumed C) the write-off of cost of goods sold approach
D) None of these answers are correct.
17) Which of the following statements regarding
manufacturing overhead allocation is FALSE?
A) It includes all manufacturing costs that cannot be 3) When the allocated amount of indirect costs are less
directly traced to a product or service. than the actual amount, indirect costs have been:
B) The costs can be grouped in either a single indirect- A) overabsorbed
cost pool or in multiple indirect-cost pools. B) underapplied
C) Total costs are unknown at the end of the C) underallocated
accounting period. D) Both underapplied and underallocated are correct.
D) Allocated amounts are debited to Work-in-Process.
5) Traditional cost systems distort product costs 17) Each of the following statements is true EXCEPT:
because: A) traditional product costing systems seek to assign
A) they do not know how to identify the appropriate all manufacturing costs to products
units B) ABC product costing systems seek to assign all
B) competitive pricing is ignored manufacturing costs to products
C) they emphasize financial accounting requirements C) traditional product costing systems are more
D) they apply average support costs to each unit of refined than an ABC system
product D) cost distortions occur when a mismatch (incorrect
association) occurs between the way indirect costs are
6) Which of the following statements about activity- incurred and the basis for their assignment to
based costing is NOT true? individual products
A) Activity-based costing is useful for allocating
marketing and distribution costs. 1) The most likely example of an output unit-level
B) Activity-based costing is more likely to result in cost is:
major differences from traditional costing systems if A) general administrative costs
the firm manufactures only one product rather than B) paying suppliers for orders received
multiple products. C) engineering costs
C) Activity-based costing seeks to distinguish batch- D) machine depreciation
level, product-sustaining, and facility-sustaining costs,
especially when they are not proportionate to one 2) The most likely example of a batch-level cost is:
another. A) utility costs
D) Activity-based costing differs from traditional B) machine repairs
costing systems in that products are not cross- C) product-designing costs
subsidized. D) setup costs
3) Design costs are an example of: 1) Put the following ABC implementation steps in
A) unit-level costs order:
B) batch-level costs A Compute the allocation rates.
C) product-sustaining costs B Compute the total cost of the products.
D) facility-sustaining costs C Identify the products that are the cost objects.
D Select the cost allocation bases.
4) ________ costs support the organization as a A) DACB
whole. B) DBCA
A) Unit-level C) BADC
B) Batch-level D) CDAB
C) Product-sustaining
D) Facility-sustaining
2) ABC systems identify ________ costs used by
products.
5) It is usually difficult to find good cause-and-effect A) all
relationships between ________ and a cost allocation B) short-term fixed
base. C) short-term variable
A) unit-level costs D) long-term fixed
B) batch-level costs
C) product-sustaining costs
D) facility-sustaining costs 4) When designing a costing system, it is easiest to:
A) calculate total costs first and then per-unit cost
B) calculate per-unit costs first and then total costs
6) To set realistic selling prices: C) calculate long-term costs first and then short-term
A) all costs should be allocated to products costs
B) costs should only be allocated when there is a D) calculate short-term costs first and then long-term
strong cause-and-effect relationship costs
C) only unit-level costs and batch-level costs should
be allocated 6) A manufacturing firm produces multiple families of
D) only unit-level costs should be allocated products requiring various combinations of different
types of parts. Of the following, the most appropriate
8) Unit-level cost drivers are most appropriate as an cost driver for assigning materials handling costs to
overhead assignment base when: the various products is:
A) several complex products are manufactured A) direct labor hours
B) only one product is manufactured B) number of units produced
C) direct labor costs are low C) number of parts used
D) factories produce a varied mix of products D) number of suppliers involved
9) With traditional costing systems, products 2) It only makes sense to implement an ABC system
manufactured in small batches and in small annual when:
volumes may be ________ because batch-related and A) ABC provides information to make better
product-sustaining costs are assigned using unit- decisions
related drivers. B) its benefits exceed implementation costs
A) overcosted C) ABC traces more costs as direct costs
B) fairly costed D) there is a strong cause-and-effect relationship
C) undercosted between costs in the cost pools and their cost-
D) ignored allocation bases
3) Which of the following is a sign that an ABC 3) One department indirect-cost rate is sufficient
system may be useful? when:
A) There are small amounts of indirect costs. A) activities relate to more than one level of the cost
B) Products make diverse demands on resources hierarchy
because of differences in volume, process steps, batch B) product costs are significantly cross-subsidized
size, or complexity. C) the same allocation base is appropriate for all
C) Products a company is less suited to produce and departmental activities
sell show small profits. D) it is a service department
D) Operations staff agrees with accountants about the
costs of manufacturing and marketing products and
services. 16) Using activity-cost rates rather than department
indirect-cost rates to allocate costs results in different
4) Smaller cost distortions occur when the traditional product costs when:
systems' single indirect-cost rate and the activity-cost- A) a single activity accounts for a sizable portion of
driver rates: department costs
A) use the same total costs for computations B) there are several homogeneous cost pools
B) are similar in proportion to each other C) different activities have the same cost-allocation
C) are more different than alike base
D) use the same cost driver units D) different products use different resources in the
same proportion
5) Activity-based costing systems provide better 17) A key reason for using an ABC system rather than
product costs when they: a department-costing system is because ABC assigns
A) employ more activity-cost drivers indirect costs:
B) employ fewer activity-cost drivers A) using broader averages
C) identify and cost more indirect cost differences B) more simply than a department-costing system
among products C) in a less costly manner
D) always yield more accurate product costs than D) to reflect differences required by different
traditional systems processes as well as customers
3) Activity-based-costing information:
A) should be used when services place similar 2) Unacceptable units of production that are
demands on resources discarded or sold for reduced prices are referred to as:
B) usually results in peanut-butter costing A) reworked units
C) will yield inaccurate cost numbers when products B) spoilage
are similar C) scrap
D) may assist in improving product design and D) defective units
efficiency