True / False

1. Manufacturing and service firms producing unique products or services require job-order
accounting systems.

2. The key feature of job-order costing is that the cost of one job differs from that of another job
and must be kept track of separately.

3. Production costs consist of direct materials, direct labor, and overhead.

4. The difference between actual overhead and applied overhead is called an overhead variance.

5. If actual overhead is greater than applied overhead, the variance is called underapplied
overhead.

6. Costs reported on the financial statements must be estimated costs.

7. If the overhead variance is immaterial, it is allocated among the ending balances of Work in
Process, Finished Goods, and Cost of Goods Sold.

8. Departmental overheads cannot be added together to get plantwide overhead.

9. In an actual cost system, actual direct materials, actual direct labor and estimated overhead are
used to determine unit cost.

10. Overhead costs are assigned to Finished Goods using a predetermined rate.

11. A job-order cost sheet is the source document where direct labor costs are assigned to
individual jobs.

12. Using a time ticket, the cost accounting department can enter the cost of direct materials onto
the correct job-order cost sheet.

13. The work-in-process account consists of all the job-order cost sheets for the completed jobs.

14. There are other source documents besides the time ticket and the material requisition form
used to fill out the job-order cost sheet.

15. The raw materials account is an inventory account located on the income statement.

16. The three manufacturing cost elements are direct materials, direct labor, and overhead.

17. The use of normal costing means that actual overhead costs are assigned directly to jobs.

18. The use of a departmental rate has the advantage of being simple and reduces data collection
requirements.

19. Actual overhead is reconciled with applied overhead at the beginning of the period.
20. In a normal costing system, actual overhead is used to arrive at the cost of goods
manufactured.

21. The cost of goods sold appearing on the income statement as an expense, when using a
normal costing system, is the normal cost of goods sold.

22. When materials are put into production, they are taken from the Raw Materials account and
put into the Work in Process account.

23. Actual overhead costs are accumulated in the overhead control account.

24. The cost of completed units is always debited to Work-in-Process and credited to Finished
Goods.

Identification
25. __________________________ is a costing system that accumulates production costs by
process or by department for a given period of time.

26. The ___________________________ is calculated at the beginning of the year by dividing

the total estimated annual overhead by the total estimated level of cost driver.

27. _________________ is found by multiplying the predetermined overhead rate by the actual

use of the associated activity for the period.

28. The difference between actual overhead and applied overhead is called a (n)
_________________.

29. If actual overhead is greater than applied overhead, then the variance is called
___________________.

30. A _____________________ is a single overhead rate calculated by using all estimated

overhead for a factory divided by the estimated activity level across the entire factory.

31. Which of the following is not a characteristic of job-order costing?

  a. Wide variety of distinct products.
  b. Unit cost is computed by dividing process costs of the period by the units produced in
the period.
  c. Unit cost is computed by dividing total job costs by units produced on that job.
  d. Costs accumulated by job.
  e. Typically, the cost of one job is different from that of another job.

32. Which of the following businesses uses a process costing system?

  a. A printing business
  b. A dental clinic
  c. An interior designing firm
  d. An automobile service center
  e. A refinery

33. Which of the following is not true about job-order costing?

  a. It is used in firms that produce homogeneous products.
  b. The cost of each job is accumulated on the job-order cost sheet.
  c. The key document for accumulating manufacturing costs is the job-order cost sheet.
  d. All of these are correct.
  e. None of these are correct.

34. Which of the following is the assignment process used with normal costing?
  a. Actual direct materials, actual direct labor and actual overhead cost are assigned to
products.
  b. Actual direct materials cost is assigned to products, but direct labor and overhead
costs are assigned using predetermined rates.
  c. Actual direct labor cost is assigned to products, but direct material and overhead costs
are assigned using predetermined rates.
  d. Actual direct material and direct labor costs are assigned to products, but overhead
costs are assigned using predetermined rates.
  e. All manufacturing costs are assigned using predetermined rates.

35. Trust Company applies overhead based on direct labor hours. At the beginning of the year,
Trust estimates overhead to be $700,000, machine hours to be 200,000, and direct labor hours to
be 35,000. During February, Trust has 5,000 direct labor hours and 10,000 machine hours.

What is the predetermined overhead rate?

  a. $15.00 per machine hour
  b. $14.00 per direct labor hour
  c. $20.00 per direct labor hour
  d. $18.00 per machine hour
  e. None of these are correct.

36. Trust Company applies overhead based on direct labor hours. At the beginning of the year,
Trust estimates overhead to be $700,000, machine hours to be 200,000, and direct labor hours to
be 35,000. During February, Trust has 5,000 direct labor hours and 10,000 machine hours.

What is the amount of overhead applied for February?

  a. $69,500
  b. $22,000
  c. $124,000
  d. $185,200
  e. $100,000

37. Victryl Company applies overhead based on direct labor hours. At the beginning of the year,
Victryl estimates overhead to be $700,000, machine hours to be 200,000, and direct labor hours
to be 35,000. During February, Victryl has 5,000 direct labor hours and 10,000 machine hours.
If the actual overhead for February is $98,300, what is the overhead variance, and is it
overapplied or underapplied?
  a. $1200 underapplied
  b. $800 overapplied
  c. $1,000 underapplied
  d. $1,700 overapplied
  e. $600 overapplied

38. At the beginning of the year, Titanium Inc. estimated that overhead would be $100,000 and
direct labor hours would be 20,000. At the end of the year, actual overhead was $175,900 and
there were actually 35,000 direct labor hours.

 
What is the predetermined overhead rate?
  a. $5 per direct labor hour
  b. $3 per direct labor hour
  c. $4 per direct labor hour
  d. $6 per direct labor hour
  e. None of these are correct.

39. Bronzit Company estimated the following at the beginning of the year:

Assembly Department Testing Department Total

Overhead $700,000 $100,000 $800,000
Direct Labor Hours 150,500 40,500 191,000
Machine Hours 37,000 72,000 109,000

Bronzit uses departmental overhead rates. In the assembly department, direct labor hours are used
to apply overhead. Machine hours are used to apply overhead in the testing department.

Actual data for the month of May is as follows:

Assembly Department Testing Department Total

Overhead $50,000 $11,000 $61,000
Direct Labor Hours 20,000 2,500 22,500
Machine Hours 3,500 14,000 17,500

If Bronzit uses a plant wide overhead rate based on direct labor hours, instead of departmental
rates, what is the predetermined overhead rate rounded to the nearest cent?
  a. $5 per direct labor hour
  b. $8.65 per direct labor hour
  c. $4.19 per direct labor hour
  d. $4.50 per direct labor hour
  e. $0.33 per direct labor hour
40. Mitchell's Softball Gloves Company estimated the following at the beginning of the year:

Assembly Department Testing Department Total

Overhead $570,000 $130,000 $700,000
Direct Labor Hours 142,500 hrs. 32,500hrs. 175,000hrs.
Machine Hours 32,000hrs. 65,000hrs. 97,000hrs.

Mitchell uses departmental overhead rates. In the assembly department, direct labor hours are
used to apply overhead. Machine hours are used to apply overhead in the testing department.

Actual data for August is as follows:

Assembly Department Testing Department Total

Overhead $42,000 $12,000 $54,000
Direct Labor Hours 13,500hrs. 2,430hrs. 15,930hrs.
Machine Hours 4,020hrs. 11,000hrs. 15,020hrs.

Using departmental overhead rates, which of the following is correct?

  a. Applied overhead for the assembly department is $54,000.
  b. Applied overhead for the testing department is $4,860.
  c. Applied overhead for both departments combined is $63,720.
  d. Overhead for the assembly department is underapplied.
  e. None of these are correct.