JOB ORDER AND PROCESS COSTING

Costing systems that are used for the costing of like or similar units of products in mass production are
called:
a. inventory-costing systems
b. job-costing systems
c. process-costing systems
d. weighted-average costing systems

Which of the following manufactured products would not use process costing?
a. 767 jet aircraft
b. 19-inch television sets
c. Custom built houses
d. Both a and c are correct.

Process costing should be used to assign costs to products when the:

a. units produced are similar
b. units produced are dissimilar
c. calculation of unit costs requires the averaging of unit costs over all units produced
d. Either a or c are correct.

Which one of the following statements is true?

a. In a job-costing system, individual jobs use different quantities of production resources.
b. In a process-costing system each unit uses approximately the same amount of resources.
c. An averaging process is used to calculate unit costs in a job-costing system.
d. Both a and b are correct.

Conversion costs:
a. include all the factors of production
b. include direct materials
c. in process costing are usually considered to be added evenly throughout the production
process
d. Both b and c are correct.

An example of a business which would have no beginning or ending inventory but which could use process
costing to compute unit costs would be a:
a. clothing manufacturer
b. corporation whose sole business activity is processing the customer deposits of several banks
c. manufacturer of custom houses
d. manufacturer of large TVs
Which of the following statement(s) concerning conversion costs is correct?
a. Estimating the degree of completion of direct materials in a partially completed unit is usually
easier to calculate than estimating the degree of completion for conversion costs.
b. The calculation of equivalent units is relatively easy for the textile industry.
c. Estimates are usually not considered acceptable.
d. Both (b) and (c) are correct.
The purpose of the equivalent-unit computation is to:
a. convert completed units into the amount of partially completed output units that could be made
with that quantity of input.
b. assist the business in determining ending inventory.
c. convert partially completed units into the amount of completed output units that could be made
with that quantity of input.
d. Both b and c are correct.

In a process-costing system, the calculation of equivalent units is used for calculating:

a. the dollar amount of ending inventory
b. the dollar amount of the cost of goods sold for the accounting period
c. the dollar cost of a particular job
d. Both a and b are correct.

When a bakery transfers goods from the Baking Department to the Decorating Department, the accounting
entry is
a. Work in Process — Baking Department
Work in Process — Decorating Department
b. Work in Process — Decorating Department
Accounts Payable
c. Work in Process — Decorating Department
Work in Process — Baking Department
d. Work in Process — Baking Department
Accounts Payable

Injection Molding, Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost
categories, direct materials and conversion costs. Each product must pass through Department A and
Department B. Direct materials are added at the beginning of production. Conversion costs are allocated
evenly throughout production.

Data for Department A for February 20X5 are :

Work in process, beginning inventory, 40% converted 200 units
Units started during February 600 units
Work in process, ending inventory 100 units

Costs for Department A for February 20X5 are :

Work in process, beginning inventory:
Direct materials $100,000
Conversion costs $100,000
Direct materials costs added during February $1,000,000
Conversion costs added during February $1,250,000

What is the unit cost per equivalent unit in Department A?

a. $1,000
b. $1,750
c. $3,500
 d. $3,750

How many units were completed and transferred out of Department A during February?
a. 100 units
b. 600 units
c. 700 units
d. 800 units

Injection Molding, Inc., manufactures plastic moldings for car seats. Its costing system uses two cost
categories, direct materials and conversion costs. Each product must pass through Department A
and Department B. Direct materials are added at the beginning of production. Conversion costs are
allocated evenly throughout production.

Data for Department A for February 20X5 are :

Work in process, beginning inventory, 40% converted 200 units
Units started during February 600 units
Work in process, ending inventory: 100 units
30% complete as to conversion costs
100% complete as to materials

Costs for the Department A for February 20X5 are :

Work in process, beginning inventory:
Direct materials $100,000
Conversion costs $100,000
Direct materials costs added during February $1,000,000
Conversion costs added during February $1,250,000

What were the equivalent units of direct materials and conversion costs, respectively, at the end of
February? Assume Injection Molding, Inc., uses the weighted-average process costing method.
a. 800; 730
b. 800; 800
c. 800; 700
d. 600; 500
The Swiss Clock Shop manufactures clocks on a highly automated assembly line. Its costing system uses
two cost categories, direct materials and conversion costs. Each product must pass through the Assembly
Department and the Testing Department. Direct materials are added at the beginning of the production
process. Conversion costs are allocated evenly throughout production. Swiss Clock Shop uses weighted-
average costing.

Data for the Assembly Department for June 20X5 are :

Work in process, beginning inventory 250 units
Direct materials (100% complete)
Conversion costs (50% complete)

Units started during June 800 units

Work in process, ending inventory: 150 units
Direct materials (100% complete)
Conversion costs (75% complete)

Costs for June 20X5:

Work in process, beginning inventory:
Direct materials $180,000
Conversion costs $270,000
Direct materials costs added during June $1,000,000
Conversion costs added during June $1,000,000

What are the equivalent units for direct materials and conversion costs, respectively, for June?
a. 1,200.5 units; 1,160.64 units
b. 1,050 units; 1,012.5 units
c. 1,050 units; 1,050 units
d. 962 units; 990 units

Direct materials Conversion costs

Completed and transferred out 900 900.0
Work in process, ending 150 112.5
Total equivalent units 1,050 1,012.5

What is the total amount debited to the Work-in-Process account during the month of June?
a. $450,000
b. $2,000,000
c. $2,270,000
d. $2,450,000
What is the direct materials cost per equivalent unit during June?
a. $1,123.81
b. $1,730.20
c. $1,579,00
d. $1,890.35
What is the conversion cost per equivalent unit in June?
a. $1,254.32
b. $1,579.14
 c. $1,730.20
d. $1,890.35

What amount of direct materials costs is assigned to the ending Work-in-Process account for June?
a. $168,571.50
b. $283,552.50
c. $259,530
d. $236,850

What amount of conversion costs are assigned to the ending Work-in-Process account for June?
a. $101,956.64
b. $141,111.00
c. $126,450.50
d. $188,148.00

The Rest-a-Lot Chair Company manufacturers a standard recliner. During February, the firm's Assembly
Department started production of 75,000 chairs. During the month, the firm completed 85,000 chairs and
transferred them to the Finishing Department. The firm ended the month with 10,000 chairs in ending
inventory. All direct materials costs are added at the beginning of the production cycle. Weighted-average
costing is used by Rest-a-Lot.

How many chairs were in inventory at the beginning of the month? Conversion costs are incurred uniformly
over the production cycle.
a. 10,000 chairs
b. 20,000 chairs
c. 15,000 chairs
d. 25,000 chairs

What were the equivalent units for materials for February?

a. 95,000 chairs
b. 85,000 chairs
c. 80,000 chairs
d. 75,000 chairs

What were the equivalent units for conversion costs for February if the beginning inventory was 70%
complete as to conversion costs and the ending inventory was 40% complete as to conversion
costs?
a. 89,000
b. 75,000
c. 85,000
d. 95,000
Of the 75,000 units Rest-a-Lot started during February, how many were finished during the month?
a. 75,000
b. 85,000
c. 65,000
d. 95,000

When the allocated amount of indirect costs are less than the actual amount, indirect costs have been:
a. overabsorbed
b. underapplied
c. underallocated
d. Both underapplied and underallocated are correct.

One reason indirect costs may be overapplied is because:

a. the actual allocation base quantity exceeds the budgeted quantity
b. budgeted indirect costs exceed actual indirect costs
c. requisitioned direct materials exceed budgeted material costs
d. Both a and b are correct.

The __________ approach adjusts individual job-cost records to account for underallocated or
overallocated overhead.
a. adjusted allocation-rate
b. proration
c. write-off to cost of goods sold
d. Both a and b are correct.

The simplest approach to dealing with underallocated or overallocated overhead is the __________
approach.
a. adjusted allocation-rate
b. proration
c. write-off to cost of goods sold
d. Both a and b are correct.

The __________ approach carries the underallocated or overallocated amounts to overhead accounts in
the following year.
a. adjusted allocation-rate
b. proration
c. write-off to cost of goods sold
d. None of these answers are correct.

In the service sector:

a. direct labor costs are always easy to trace to jobs
b. a budgeted direct-labor cost rate may be used to apply direct labor to jobs
c. normal costing may not be used
d. overhead is generally applied using an actual cost-allocation rate

Sara employs 25 professional cleaners. Budgeted costs total $900,000 of which $525,000 are direct costs.
Budgeted indirect costs are $375,000 and actual indirect costs were $396,900. Budgeted
 professional labor-hours are 500,000 and actual hours were 504,000. What is the budgeted direct
cost-allocation rate?
a. $1.80 per hour
b. $1.7857 per hour
c. $0.75 per hour
d. $1.05 per hour

For 20X5, Marcotte’s Animal Supply Manufacturing uses machine-hours as the only overhead cost-
allocation base. The accounting records contain the following information:

Estimated Actual
Manufacturing overhead costs $100,000 $120,000
Machine-hours 20,000 25,000

Using job costing, the 20X5 budgeted manufacturing overhead rate is:
a. $4.00 per machine-hour
b. $4.80 per machine-hour
c. $5.00 per machine-hour
d. $6.00 per machine-hour

Using normal costing, the amount of manufacturing overhead costs allocated to jobs during 20X5 is:
a. $150,000
b. $125,000
c. $120,000
d. $100,000

Using job costing, the 20X5 actual indirect-cost rate is:

a. $4.00 per machine-hour
b. $4.80 per machine-hour
c. $5.00 per machine-hour
d. $6.00 per machine-hour

Using actual costing, the amount of manufacturing overhead costs allocated to jobs during 20X5 is:
a. $150,000
b. $125,000
c. $120,000.
d. $100,000

Rhett Company has two departments, Machining and Assembly. The following estimates are for the coming
year:
Machining Assembly
Direct manufacturing labor-hours 10,000 50,000
Machine-hours 40,000 20,000
Manufacturing overhead $200,000 $400,000
A single indirect-cost rate based on direct manufacturing labor-hours for the entire plant is:
a. $ 8 per direct labor-hour
b. $10 per direct labor-hour
c. $20 per direct labor-hour
d. None of these answers is correct.

The budgeted indirect-cost driver rate for the Machining Department based on the number of machine-
hours in that department is:
a. $5 per machine-hour
b. $10 per machine-hour
c. $20 per machine-hour
d. None of these answers is correct.

Joni’s Kitty Supplies applies manufacturing overhead costs to products at a budgeted indirect-cost rate of
$60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy
Mouse product. Estimates for this order include: Direct materials $40,000; 500 direct manufacturing labor-
hours at $20 per hour; and a 20% markup rate on total manufacturing costs.

Manufacturing overhead cost estimates for this special order total:

a. $10,000
b. $30,000
c. $36,000
d. None of these answers is correct.

Estimated total product costs for this special order equal:

a. $96,000
b. $50,000
c. $80,000
d. None of these answers is correct.

The bid price for this special order is:

a. $50,000
b. $60,000
c. $80,000
d. $96,000
Sunny Company manufactures pipes and applies manufacturing overhead costs to production at a
budgeted indirect-cost rate of $15 per direct labor-hour. The following data are obtained from the
accounting records for June 20X2:

Direct materials $280,000

Direct labor (7,000 hours @ $11/hour) $ 77,000
Indirect labor $ 20,000
Plant facility rent $ 60,000
Depreciation on plant machinery and equipment $ 30,000
Sales commissions $ 40,000
Administrative expenses $ 50,000

The actual amount of manufacturing overhead costs incurred in June 20X2 totals:
a. $557,000
b. $200,000
c. $110,000
d. $ 80,000

The amount of manufacturing overhead allocated to all jobs during June 20X2 totals:
a. $77,000
b. $105,000
c. $110,000
d. $200,000

For June 20X2, manufacturing overhead was:

a. overallocated
b. underallocated
c. neither overallocated nor underallocated
d. indeterminable

Gibson Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to
allocate manufacturing overhead costs to the various jobs contracted during the year. The following
estimates are provided for the coming year for the company and for the Winfield High School band jacket
job.
Company Winfield High School Job
Direct materials $40,000 $1,000
Direct labor $10,000 $200
Manufacturing overhead costs $30,000
Machine-hours 100,000 mh 900 mh

For Gibson Manufacturing, what is the annual manufacturing overhead cost-allocation rate?
a. $0.50
b. $0.80
c. $0.30
d. $33.33
What amount of manufacturing overhead costs will be allocated to this job?
a. $270
b. $720
c. $450
d. $30,000

What are the total manufacturing costs of this job?

a. $1,200
b. $1,470
c. $1,650
d. $1,920

What is the bid price for the Winfield High School job if the company uses a 40% markup of total
manufacturing costs?
a. $2,310
b. $588
c. $1,680
d. $2,058

Bauer Manufacturing uses departmental cost driver rates to allocate manufacturing overhead costs to
products. Manufacturing overhead costs are allocated on the basis of machine-hours in the Machining
Department and on the basis of direct labor-hours in the Assembly Department. At the beginning of 20X3,
the following estimates were provided for the coming year:
Machining Assembly
Direct labor-hours 30,000 60,000
Machine-hours 80,000 20,000
Direct labor cost $500,000 $900,000
Manufacturing overhead costs $420,000 $240,000

The accounting records of the company show the following data for Job #316:

Machining Assembly
Direct labor-hours 120 70
Machine-hours 60 5
Direct material cost $300 $200
Direct labor cost $100 $400

For Bauer Manufacturing, what is the annual manufacturing overhead cost-allocation rate for the Machining
Department?
a. $4.00
b. $4.20
c. $4.67
d. $5.25
What amount of manufacturing overhead costs will be allocated to Job #316?
a. $439
b. $502
c. $595
d. $532

What are the total manufacturing costs of Job #316?

a. $715
b. $880
c. $1,595
d. $1,000

Wayland Manufacturing uses a normal cost system and had the following data available for 20X5:
Direct materials purchased on account $ 74,000
Direct materials requisitioned 41,000
Direct labor cost incurred 65,000
Factory overhead incurred 73,000
Cost of goods completed 146,000
Cost of goods sold 128,000
Beginning direct materials inventory 13,000
Beginning WIP inventory 32,000
Beginning finished goods inventory 29,000
Overhead application rate, as a percent of direct-labor costs 125 percent
The journal entry to record the materials placed into production would include a:
a. credit to Direct Materials Inventory for $41,000
b. debit to Direct Materials Inventory for $74,000
c. credit to WIP Inventory for $41,000
d. debit to WIP Inventory for $74,000
The ending balance of direct materials inventory is:
a. $46,000
b. $87,000
c. $41,000
d. $54,000
The ending balance of work-in-process inventory is:
a. $219,250
b. $73,250
c. $65,000
d. $211,000
The ending balance of finished goods inventory is:
a. $29,000
b. $18,000
c. $47,000
 d. $146,000

Apple Valley Corporation uses a job cost system and has two production departments, A and B. Budgeted
manufacturing costs for the year are:
Department A Department B
Direct materials $700,000 $100,000
Direct manufacturing labor $200,000 $800,000
Manufacturing overhead $600,000 $400,000

The actual material and labor costs charged to Job #432 were as follows:
Total
Direct materials: $25,000
Direct labor:
Department A $ 8,000
Department B $12,000
$20,000

Apple Valley applies manufacturing overhead costs to jobs on the basis of direct manufacturing labor cost
using departmental rates determined at the beginning of the year.

For Department A, the manufacturing overhead allocation rate is:

a. 33%
b. 66%
c. 300%
d. 100%

For Department B, the manufacturing overhead allocation rate is:

a. 50%
b. 100%
c. 200%
d. 300%

Manufacturing overhead costs allocated to Job #432 total:

a. $30,000
b. $12,000
c. $24,000
d. $36,000

Answer: a Difficulty: 3 Objective: 4

Terms to Learn: manufacturing overhead allocated
[($8,000 x $600,000 / $200,000)] + [$12,000 x $400,000/$800,000] = $30,000
Manufacturing costs estimated for Job #432 total:
a. $55,000
b. $65,000
c. $70,000
d. $75,000
Because the Abernathy Company used a budgeted indirect-cost rate for its manufacturing operations, the
amount allocated ($200,000) was different from the actual amount incurred ($225,000).
Ending balances in the relevant accounts are:
Work-in-Process $ 10,000
Finished Goods 20,000
Cost of Goods Sold 170,000

What is the journal entry used to write off the difference between allocated and actual overhead directly to
cost of goods sold?
a. Manufacturing Overhead Allocated 200,000
Cost of Goods Sold 25,000
Manufacturing Overhead Control 225,000
b. Manufacturing Overhead Control 200,000
Cost of Goods Sold 25,000
Manufacturing Overhead Allocated 225,000
c. Manufacturing Overhead Allocated 200,000
Work-in-Process Control 30,000
Cost of Goods Sold 170,000
d. Manufacturing Overhead Control 225,000
Work-in-Process Control 55,000
Cost of Goods Sold 170,000