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Exam 17: Job Order Cost Systems and Overhead Allocations

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Question 21

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The basic types of cost accounting systems are:

A) Job order cost systems, activity based cost systems, and process cost systems.
B) Direct cost systems and indirect cost systems.
C) Completed job cost systems and work in process cost systems.
D) Fixed cost systems and variable cost systems.

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Question 22

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When goods are sold, a journal entry is made transferring the goods from cost of goods sold to finished goods.

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Question 23

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If the manufacturing overhead account at month end has a credit balance before adjustment, this indicates that overhead is under-applied.

114.Which of the following businesses would most likely use job order costing?

A job order cost system would be appropriate in the manufacturing of:

All of the following are advantages of developing a predetermined overhead application rate except:

Overhead application For a single product manufacturing company, all overhead must be assigned to the one product. Since this is the case, why would such a firm not simply assign actual overhead cost to production as it is incurred throughout the year?

The purpose of an overhead application rate is to:

Overhead application rates allow overhead to be assigned at the completion of a period to help set prices.

Job order cost system Century Pools designs and builds custom pools and spas to the customer's order and uses a job order system. The predetermined overhead rate for the current year is 60% of direct labor cost. At the end of the current year, Century Pools' direct labor cost totaled $170,000 and actual overhead amounted to $105,000. A pool built for F. Becker required $32,000 of direct materials and $6,500 of direct labor. It was completed in May of the current year. (a) Compute the total cost of the Becker pool as shown on the job cost sheet at date of completion. (b) Compute the amount of under- or over-applied manufacturing overhead for Century's operations for the current year. (c) What disposition is made of over- or under-applied overhead at the end of the year (assume that the amount is not material)?

The Work in Process controlling account of a manufacturing firm shows a debit balance of $5,000 at the end of an accounting period. The job cost sheet of the two uncompleted jobs shows charges of $700 and $1,300 for materials used and charges of $400 and $600 for direct labor used. From this information, it appears that the company is using a predetermined factory overhead rate (as a percentage of direct labor cost) of:

The method used by managers when comparing unit costs with budgeted costs or other measures is broadly known as:

A job order cost system would be suitable for which of the following:

A job order cost system traces direct materials cost to a particular job by means of:

In activity-based costing, only one cost driver should be used in applying overhead.

The journal entry to transfer the completed Jefferson Apartments project to Canfield's finished goods inventory would include:

Accounting terminology Listed below are nine technical accounting terms introduced or emphasized in this chapter: $\begin{array} { | l | l | l | } \hline \text { Finished Goods Inventory } & \text { Overapplied overhead } & \text { Activity-based cost system } \\\hline \text { Work-in-Process Inventory } & \text { Underapplied overhead } & \text { Job order cost system } \\\hline \text { Job cost sheet } & \text { Materials Inventory } & \text { Process cost system } \\\hline\end{array}$ Each of the following statements may (or may not) describe one of these technical terms. In the space provided below each statement, indicate the accounting term described, or answer "None" if the statement does not correctly describe any of the terms. _______ (a) The balance remaining in the Manufacturing Overhead account when the overhead application rate used during the period is too low. _______ (b) The account credited as component parts are transferred into production. _______ (c) A schedule used to accumulate manufacturing costs and to determine the unit costs associated with a specific customer's order. _______ (d) The inventory account credited when the cost of goods sold is recorded. _______ (e) The type of cost accounting system most likely used by an oil refinery engaged in the continuous production of petroleum products. _______ (f) The inventory account debited when manufacturing cost accounts (such as Direct Labor or Materials Inventory) are credited. _______ (g) The type of cost accounting system likely to be used by a machine shop that manufactures items to the specifications provided by its customers.

Objectives of a cost accounting system What are the major objectives of a cost accounting system in a manufacturing company?

Which of the following would be the most appropriate basis for allocating the costs of plant insurance which covers equipment theft and damage?

A principal objective of cost accounting systems is to ensure that cost reports to management are prepared in accordance with generally accepted accounting principles.