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Exam 15: Job Order Costing and Analysis

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Question 41

True/False

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The raw materials section of a job cost sheet shows the materials costs assigned to a job, but the direct labor section only shows the total hours of labor exerted by employees on the job.

A) True
B) False

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Question 42

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The R&R Company's manufacturing costs for August are: direct labor, $13,000; indirect labor, $6,500; direct materials, $15,000; taxes on raw materials and work in process, $800; heat, lights and power, $1,000; and insurance on plant and equipment, $200. R&R Company's factory overhead incurred for August is:

A) $2,000
B) $6,500
C) $8,500
D) $21,500
E) $36,500

F) A) and C)
G) D) and E)

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Question 43

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Job order costing systems normally use:

Selected information from the budget of the Khalid Corp. at the beginning of the year follows: Calculate the predetermined overhead allocation rate if the company uses the following as a basis: (a) Direct labor hours. (b) Direct labor cost. (c) Machine hours.

Service firms, unlike manufacturing firms, should only use actual costs when determining a selling price for their services.

Briefly describe how manufacturing firms dispose of overapplied or underapplied factory overhead.

If actual overhead incurred during a period exceeds applied overhead, the difference will be a credit balance in the Factory Overhead account at the end of the period.

The predetermined overhead allocation rate for Forsythe, Inc. is based on estimated direct labor costs of $400,000 and estimated factory overhead of $500,000. Actual costs incurred were: (a) Calculate the predetermined overhead rate and calculate the overhead applied during the year. (b) Determine the amount of over- or underapplied overhead and prepare the journal entry to eliminate the over- or underapplied overhead assuming that it is not material in amount.

The Goods in Process Inventory account of a manufacturing company that uses an overhead rate based on direct labor cost has a $7,750 debit balance after all posting is completed. The cost sheet of the one job still in process shows direct material cost of $6,000 and direct labor cost of $1,000. Therefore, the company's overhead application rate is:

Canoe Company's manufacturing accounting system uses direct labor costs to apply overhead to goods in process and finished goods inventories. Canoe Company's manufacturing costs for the year were: direct labor, $30,000; direct materials, $50,000; and factory overhead applied, $6,000. The overhead application rate was:

Labor costs in manufacturing can be:

Overapplied overhead is the amount by which overhead applied to jobs using the predetermined overhead allocation rate exceeds the overhead incurred during a period.

A job cost sheet includes:

Describe how materials flow through a job order cost accounting system, and identify the key documents in the system.

The cost of all direct materials used on a job is debited to the Finished Goods Inventory account.

Cost accounting systems used by manufacturing companies are based on the:

Job order manufacturing systems would be appropriate for companies that produce custom homes, specialized equipment, and special computer systems.

When factory payroll costs are recorded in a job cost accounting system:

A job cost sheet shows information about each of the following items except:

The Goods in Process Inventory account of a manufacturing company that uses an overhead rate based on direct labor cost has a $4,400 debit balance after all posting is completed. The cost sheet of the one job still in process shows direct material cost of $2,000 and direct labor cost of $800. Therefore, the company's overhead application rate is: