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Chapter 3 Systems Design: Job-Order Costing

True/False Questions

1. Job-order costing is used in manufacturing companies and process costing is used inservice companies.

Ans: False AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting %&: 1 %evel: 'as(

). A flour manufacturer is more li!el( to use process costing tan *ob-order costing+ereas a manufacturer of customi,ed leater *ac!ets is more li!el( to use *ob-ordercosting tan process costing.

Ans: True AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ing

A"C#A F$: Reporting %&: 1 %evel: 'as(

. $ormall( a *ob cost seet is not prepared for a *ob until after te *ob as beencompleted.

Ans: False AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting %&: ) %evel: edium

/. Job cost seets contain entries for actual direct material0 actual direct labor0 and actualmanufacturing overead cost incurred in completing a *ob.

Ans: False AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting %&: ) %evel: 'as(

. ultiple departmental overead rates generall( provide more accurate product coststan a single plant-+ide overead rate.

Ans: True AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting %&: %evel: 'as(

2. "f direct labor-ours is used as te allocation base in a *ob-order costing s(stem0 butoveread costs are not caused b( direct-labor-ours0 ten *obs +it ig direct labor

re3uirements +ill tend to be overcosted relative to *obs +it lo+ direct laborre3uirements.

Ans: True AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting %&: %evel: 'as(

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 3-7

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Chapter 3 Systems Design: Job-Order Costing

4. Te *ournal entr( for cost of goods manufactured includes onl( te costs of units tatare finised.

Ans: True AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting %&: / %evel: edium

5. Te follo+ing entr( +ould be used to record depreciation on manufacturinge3uipment:

Ans: False AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting %&: / %evel: edium

6. "ncluding manufacturing overead costs in product costs ensures tat eac product+ill earn a profit.

Ans: False AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting %&: %evel: edium

17. A debit balance in te anufacturing &veread account at (ear end means tatoveread +as underapplied.

Ans: True AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ing

A"C#A F$: Reporting %&: 405 %evel: edium

11. $onmanufacturing costs are e8pensed as incurred0 rater tan going into te 9or! in#rocess account.

Ans: True AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting %&: 4 %evel: 'as(

1). "ndirect materials are not carged to a specific *ob but rater are included inmanufacturing overead.

Ans: True AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting %&: 4 %evel: 'as(

3-8 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

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Chapter 3 Systems Design: Job-Order Costing

1. &veread is underapplied if actual overead costs for a period are greater tan teamount of overead cost +ic as been carged to 9or! in #rocess.

Ans: True AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting %&: 5 %evel: 'as(

1/. T+o of te reasons +( overead ma( be underapplied are: 1; te estimated overeadcost ma( be too lo+0 and ); te estimated base ma( be too ig.

Ans: True AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting %&: 5 %evel: 'as(

1. "f te predetermined overead rate is based on te estimated total amount of te

allocation base at capacit(0 it is more li!el( tat overead +ill be underapplied tanoverapplied.

Ans: True AACSB: Reflective Tin!ing A"C#A BB: Critical Tin!ingA"C#A F$: Reporting Appendi8: A %&: 6 %evel: edium

Multiple Choie Questions

12. 9ic of te follo+ing statements is correct concerning *ob-order costing