1.
What costing system is used to avoid any
delay in the costing of jobs as experienced
in actual
costing?
a. Process costing
b. Job order costing
c. Historical costing
d. Normal costing
Answer: D. NORMAL COSTING
A credit balance in manufacturing overhead
control account is:
a. Over applied overhead
b. Under applied overhead
c. Idle capacity variance
d. Spending variance
Answer: A. Over applied overhead
A debit balance in the manufacturing
overhead control account is:
a. Over applied overhead
b. Under applied
c. Idle capacity variance
d. Spending variance
Answer: B. Under applied
Over applied manufacturing overhead would
result if:
a. Manufacturing overhead costs incurred
were less than costs charged to production.
b. Manufacturing overhead costs incurred
were unreasonably large in relation to units
produced.
c. Manufacturing overhead costs incurred
were greater than costs charged to
production
d. The plant were operating at less than
normal capacity.
Answer: A. Manufacturing overhead costs
incurred were less than costs charged to
Production
When the amount of over applied
manufacturing overhead is significant, the
entry close Over
Applied Manufacturing Overhead will most
likely require:
a. A debit to Cost of Goods Sold
b. Debits to Cost of Goods Sold, Finished
Goods Inventory, and Work in Process
Inventory
c. A credit to Cost of Goods Sold
d. Credits to Cost of Goods Sold, Finished
Goods Inventory, and Work in Process
Inventory
Answer: D. Credits to Cost of Goods Sold,
Finished Goods Inventory, and Work in
Process
Inventory
The most common treatment of the under
applied overhead at the end of the year
would be to:
a. Carry it as a deferred charge on the
balance sheet
b. Report it as a miscellaneous expense on
the income statement
c. Debit it to Cost of Goods Sold
d. Prorate between Work in Process
Inventory and Finished Goods Inventory
Answer: C. Debit it to Cost of Goods Sold
All of the following phrases are used as
alternate terminology for manufacturing
overhead
except:
a. Manufacturing expense
b. Indirect manufacturing cost
c. Factory expense
d. Other expense
Answer: D. Other expense
What does a favorable variance represent?
a. The actual overhead costs were less than
the costs applied to production.
b. The actual overhead costs were more
than the costs applied to production.
c. The spending variance is more than the
volume variance.
d. The spending variance is less than the
volume variance.
Answer: A. The actual overhead costs were
less than the costs applied to production.
In a normal cost system, a debit to Work in
Process Inventory would not be made for
a. actual overhead.
b. applied overhead.
c. actual direct material.
d. actual direct labor.
ANS: A
A credit to Work in Process Inventory
represents
a. work still in process.
b. raw material put into production.
c. the application of overhead to production.
d. the transfer of completed items to
Finished Goods Inventory.
ANS: D

2.In a job order costing system, the dollar
amount of the entry that debits Finished
Goods Inventory and credits Work in
Process Inventory is the sum of the costs
charged to all jobs
a. started in process during the period.
b. in process during the period.
c. completed and sold during the period.
d. completed during the period.
ANS: D
Total manufacturing costs for the year plus
beginning Work in Process Inventory cost
equals
a. cost of goods manufactured in the year.
b. ending Work in Process Inventory.
c. total manufacturing costs to account for.
d. cost of goods available for sale.
Which of the following would be least likely
to be supported by subsidiary accounts or
ledgers in
a company that employs a job order costing
system?
a. Work in Process Inventory
b. Raw Material Inventory
c. Accounts Payable
d. Supplies Inventory
ANS: D
A journal entry includes a debit to Work in
Process Inventory and a credit to Raw
Material
Inventory. The explanation for this would be
that
a. indirect material was placed into
production.
b. raw material was purchased on account.
c. direct material was placed into
production.
d. direct labor was used for production.
ANS:C
The source document that records the
amount of raw material that has been
requested by
production is the
a. job order cost sheet.
b. bill of lading.
c. interoffice memo.
d. material requisition.
ANS: D
A material requisition form should show all
of the following information except
a. job number.
b. quantity required.
c. unit cost.
d. purchase order number.
ANS: D
Which of the following statements about job
order cost sheets is true?
a. All job order cost sheets serve as the
general ledger control account for Work in
Process Inventory.
b. Job order cost sheets can serve as
subsidiary ledger information for both Work
in
Process Inventory and Finished Goods
Inventory.
c. If material requisition forms are used, job
order cost sheets do not need to be
maintained.
d. Job order cost sheets show costs for
direct material and direct labor, but not for
manufacturing overhead since it is an
applied amount.
ANS: B
The primary accounting document in a job
order costing system is a(n)
a. bill of materials.
b. job order cost sheet.
c. employee time sheet.
d. materials requisition.
ANS: B
The cost sheets for incomplete jobs at the
end of the period comprise the subsidiary
ledger for
a. Finished Goods Inventory.
b. Raw Material Inventory.
c. Work in Process Inventory.
d. Supplies Inventory.
ANS: C
 c. insurance for production equipment
expired.
3.Which of the following journal entries d. insurance was paid on production
records the accrual of the cost of indirect equipment.
labor used in ANS: C
production?
a. debit Work in Process Inventory, credit The journal entry to apply overhead to
Wages Payable production includes a credit to
b. debit Work in Process Inventory, credit Manufacturing Overhead
Manufacturing Overhead control and a debit to
c. debit Manufacturing Overhead, credit a. Finished Goods Inventory.
Work in Process Inventory b. Work in Process Inventory.
d. debit Manufacturing Overhead, credit c. Cost of Goods Sold.
Wages Payable d. Raw Material Inventory.
ANS: D ANS: B

19. The primary accounting document in a The source document that records the
job order costing system is a(n) amount of time an employee worked on a
a. bill of materials. job and his/her
b. job order cost sheet. pay rate is the
c. employee time sheet. a. job order cost sheet.
d. materials requisition. b. employee time sheet.
ANS: B c. interoffice memo.
d. labor requisition form.
20. The cost sheets for incomplete jobs at ANS: B
the end of the period comprise the
subsidiary ledger for Which of the following journal entries
a. Finished Goods Inventory. records the accrual of the cost of indirect
b. Raw Material Inventory. labor used in
c. Work in Process Inventory. production?
d. Supplies Inventory. a. debit Work in Process Inventory, credit
ANS: C Wages Payable
b. debit Work in Process Inventory, credit
21. The __________ provides management Manufacturing Overhead
with a historical summation of total costs for c. debit Manufacturing Overhead, credit
a givadministrative cost. Work in Process Inventory
a. job order cost sheet. d. debit Manufacturing Overhead, credit
b. employee time sheet. Wages Payable
c. interoffice memo. ANS: D
d. labor requisition form.
In job order costing, payroll taxes paid by
ANS: A the employer for factory employees are
commonly
The logical explanation for an entry that accounted for as
includes a debit to Manufacturing Overhead a. direct labor cost.
control and b. manufacturing overhead cost.
a credit to Prepaid Insurance is c. indirect labor cost.
a. the insurance company sent the company d. administrative cost.
a refund of its policy premium. ANS: B
b. overhead for insurance was applied to
production.

4.Production overhead does not include the
costs of
a. factory depreciation and supplies.
b. factory employees' cafeteria
departments.
c. production line labor.
d. the maintenance department for the
factory.
ANS: C
The logical explanation for an entry that
includes a debit to Manufacturing Overhead
control and
a credit to Prepaid Insurance is
a. the insurance company sent the company
a refund of its policy premium.
b. overhead for insurance was applied to
production.
c. insurance for production equipment
expired.
d. insurance was paid on production
equipment.
ANS: C
The journal entry to apply overhead to
production includes a credit to
Manufacturing Overhead
control and a debit to
a. Finished Goods Inventory.
b. Work in Process Inventory.
c. Cost of Goods Sold.
d. Raw Material Inventory.
ANS: B
A credit to the Manufacturing Overhead
control account represents the
a. actual cost of overhead incurred.
b. actual cost of overhead paid this period.
c. amount of overhead applied to
production.
d. amount of indirect material and labor
used during the period.
ANS: C
The journal entry to record the incurrence
and payment of overhead costs for factory
insurance
requires a debit to
a. Cash and a credit to Manufacturing
Overhead
b. Manufacturing Overhead and a credit to
Accounts Payable.
c. Manufacturing Overhead and a credit to
Cash.
d. Work in Process Inventory and a credit to
Cash.
ANS: C
Overhead is applied to jobs in a job order
costing system
a. at the end of a period.
b. as jobs are completed.
c. at the end of a period or as jobs are
completed, whichever is earlier.
d. at the end of a period or as jobs are
completed, whichever is later.
ANS: C
In a job order costing system, the subsidiary
ledger for Finished Goods Inventory is
comprised
of
a. all job order cost sheets.
b. job order cost sheets for all uncompleted
jobs.
c. job order cost sheets for all completed
jobs not yet sold.
d. job order cost sheets for all ordered,
uncompleted, and completed jobs.
ANS: C
Underapplied overhead resulting from
unanticipated and immaterial price
increases for
overhead items should be written off by
a. decreasing Cost of Goods Sold.
b. increasing Cost of Goods Sold.
c. decreasing Cost of Goods Sold, Work in
Process Inventory, and Finished Goods
Inventory.
d. increasing Cost of Goods Sold, Work in
Process Inventory, and Finished Goods
Inventory.
ANS: B

5.Overapplied overhead would result if
a. the plant were operated at less than
normal capacity.
b. overhead costs incurred were less than
costs charged to production.
c. overhead costs incurred were
unreasonably small in relation to units
produced.
d. overhead costs incurred were greater
than costs charged to production.
ANS: B
Debits to Cost of Goods Sold typically
represent the
a. transfer of completed items to Finished
Goods Inventory.
b. costs of items sold.
c. selling price of items sold.
d. the cost of goods manufactured.
ANS: B
In a perpetual inventory system, a
transaction that requires two journal entries
(or one
compound entry) is needed when
a. raw materials are purchased on account.
b. goods are sold for either cash or on
account.
c. goods are finished and transferred out of
Work in Process Inventory.
d. overhead is applied to Work in Process
Inventory.
ANS: B
Which of the following statements is false?
a. While the use of standard costing is
acceptable for job order costing systems,
actual cost records should still be
maintained.
b. It is normally more time-consuming for a
company to use standard costs in a job
order costing system.
c. Standards can be used in a job order
costing system, if the company usually
produces items that are similar in nature.
d. Standard costs may be used for material,
labor, or both material and labor in a job
order costing environment.
ANS: B
The trend in job order costing is to
a. eliminate the data entry function for the
accounting system.
b. automate the data collection and data
entry functions.
c. use accounting software to change the
focal point of the job order system.
d. create an Intranet to share information
between competitors.
ANS: B
The use of standard material or labor costs
in job order costing
a. is similar to the use of predetermined
overhead rates in a normal costing system.
b. will keep actual costs of jobs from
fluctuating due to changes in component
costs.
c. is appropriate for any company making a
units to customer specification.
d. all answers are correct.
ANS: A
In a job order costing system, the net cost of
normal spoilage is equal to
a. estimated disposal value plus the cost of
spoiled work.
b. the cost of spoiled work minus estimated
spoilage cost.
c. the units of spoiled work times the
predetermined overhead rate.
d. the cost of spoiled work minus the
estimated disposal value.
ANS: D
Shrinkage should be treated as
a. defective units.
b. spoiled units.
c. miscellaneous expense.
d. a reduction of overhead.
ANS: B
6.Cajun Company. uses a job order costing
system. During April 20X6, the following
costs
appeared in the Work in Process Inventory
account:

Beginning balance $ 24,000

Direct material used 70,000 COMPLETION
Direct labor incurred 60,000
Applied overhead 48,000 1. All manufacturing costs other than direct
materials are referred to as
Cost of goods manufactured 185,000
ANS: conversion costs
Cajun Company applies overhead on the 2. The process costing system that
basis of direct labor cost. There was only computes equivalent units on beginning
one job left work in process inventory as
in Work in Process at the end of April which well as work done in the current period is
contained $5,600 of overhead. What known as a.
amount of direct material was included in ANS: weighted average process costing
this job? method
a. $4,400
b. $4,480 3. The process costing system that
c. $6,920 computes equivalent units on work done in
d. $8,000 the current period is
ANS: A known as a.
ANS: FIFO process costing method

4. The number of completed units that could

have been produced from the inputs applied
is referred to as.
ANS: equivalent units

5. Two methods of accounting for cost flows

in process costing are and.
ANS: weighted average; FIFO

6. A ______________ costing system is

appropriate where products manufactured
have different direct
materials but similar processing techniques.
ANS: hybrid

7. Costs of normal shrinkage and normal

continuous losses in a process costing
environment are handled
by the method of ______________.
ANS: neglect
8. The __________________________
report details all manufacturing quantities
and costs, shows
computation of EUP, and indicates cost
assignments to goods manufactured.
ANS: cost of production
4. A process costing system is used by a
company that
a. produces heterogeneous products.
b. produces items by special request of
customers.
c. produces homogeneous products.

1. Which cost accumulation procedure is d. accumulates costs by job.

most applicable in continuous mass-
production manufacturing ANS:C
Environments?

a. standard 6. Equivalent units of production are equal

to the
b. Actual a. units completed by a production
c. process department in the period.
b. number of units worked on during the
d. job order period by a production department.
c. number of whole units that could have
ANS: C been completed if all work of the period had
been
2. Process costing is used in companies used to produce whole units.
that d. identifiable units existing at the end of the
period in a production department.
a. engage in road and bridge construction.b. ANS: C
produce sailboats made to customer
specifications. 7. In a process costing system using the
weighted average method, cost per
c. produce bricks for sale to the public. equivalent unit for a given
cost component is found by dividing which
d. construct houses according to customer of the following by EUP?
plans. a. only current period cost
b. current period cost plus the cost of
ANS: C beginning inventory
c. current period cost less the cost of
3. A producer of ________ would not use a beginning inventory
process costing system. d. current period cost plus the cost of
ending inventory
a. gasoline ANS: B

b. potato chips 8. The weighted average method is thought

by some accountants to be inferior to the
c. blank videotapes FIFO method
because it
d. stained glass windows a. is more difficult to apply.
b. only considers the last units worked on.
ANS: D c. ignores work performed in subsequent
periods.
d. commingles costs of two periods. ANS: D

8…9. The first step in determining the cost
per EUP per cost component under the
weighted average method
is to
a. add the beginning Work in Process
Inventory cost to the current period's
production cost.
b. divide the current period's production cost
by the equivalent units.
c. subtract the beginning Work in Process
Inventory cost from the current period's
production
cost.
d. divide the current period's production cost
into the EUP.
ANS: A
10. The difference between EUP calculated
using FIFO and EUP calculated using
weighted average is the
equivalent units
a. started and completed during the period.
b. residing in beginning Work in Process
Inventory.
c. residing in ending Work in Process
Inventory.
d. uncompleted in Work in Process
Inventory.
ANS: B
11. EUP calculations for standard process
costing are the same as
a. the EUP calculations for weighted
average process costing.
b. the EUP calculations for FIFO process
costing.
c. LIFO inventory costing for merchandise.
d. the EUP calculations for LIFO process
costing.
ANS: B
12. In a FIFO process costing system,
which of the following are assumed to be
completed first in the
current period?
a. units started this period
b. units started last period
c. units transferred out
d. units still in process
ANS: B
13. To compute equivalent units of
production using the FIFO method of
process costing, work for the
current period must be stated in units
a. completed during the period and units in
ending inventory.
b. completed from beginning inventory, units
started and completed during the period,
and
units partially completed in ending
inventory.
c. started during the period and units
transferred out during the period.
d. processed during the period and units
completed during the period.
ANS: B
14. The FIFO method of process costing will
produce the same cost of goods transferred
out amount as the
weighted average method when
a. the goods produced are homogeneous.
b. there is no beginning Work in Process
Inventory.
c. there is no ending Work in Process
Inventory.
d. beginning and ending Work in Process
Inventories are each 50 percent complete.
ANS: B
15. The primary difference between the
FIFO and weighted average methods of
process costing is
a. in the treatment of beginning Work in
Process Inventory.
b. in the treatment of current period
production costs.
c. in the treatment of spoiled units.
d. none of the above.
ANS: A
Material is added at the beginning of a
process in a process costing system. The
beginning Work in
Process Inventory for the process was 30
percent complete as to conversion costs.
Using the FIFO
method of costing, the number of equivalent
units of material for the process during this
period is
equal to the
a. beginning inventory this period for the
process.
b. units started this period in the process.
c. units started this period in the process
plus the beginning Work in Process
Inventory.
d. units started and completed this period
plus the units in ending Work in Process
Inventory.
ANS: D ,6-4
9.17. In a cost of production report using
process costing, transferred-in costs are
similar to the
a. cost of material added at the beginning of
production.
b. conversion cost added during the period.
c. cost transferred out to the next
department.
d. cost included in beginning inventory.
ANS: A
18. In a process costing system, the journal
entry to record the transfer of goods from
Department #2 to
Finished Goods Inventory is a
a. debit Work in Process Inventory #2, credit
Finished Goods Inventory.
b. debit Finished Goods Inventory, credit
Work in Process Inventory #1.
c. debit Finished Goods Inventory, credit
Work in Process Inventory #2.
d. debit Cost of Goods Sold, credit Work in
Process Inventory #2.
ANS: C
19. Transferred-in cost represents the cost
from
a. the last department only.
b. the last production cycle.
c. all prior departments.
d. the current period only.
ANS: C
22. Averaging the total cost of completed
beginning inventory and units started and
completed over all
units transferred out is known as
a. strict FIFO.
b. modified FIFO.
c. weighted average costing.
d. normal costing.
ANS: B
23. A process costing system
a. cannot use standard costs.
b. restates Work in Process Inventory in
terms of completed units.
c. accumulates costs by job rather than by
department.
d. assigns direct labor and manufacturing
overhead costs separately to units of
production.
ANS: B
27. When standard costs are used in
process costing,
a. variances can be measured during the
production period.
b. total costs rather than current production
and current costs are used.
c. process costing calculations are made
simpler.
d. the weighted average method of
calculating EUPs makes computing
transferred-out costs
easier.
ANS: D
28. Which of the following is subtracted from
weighted average EUP to derive FIFO
EUP?
a. beginning WIP EUP completed in current
period
b. beginning WIP EUP produced in prior
period
c. ending WIP EUP not completed
d. ending WIP EUP completed
ANS: B ,6-4
29. The cost of abnormal continuous losses
is
a. considered a product cost.
b. absorbed by all units in ending inventory
and transferred out on an equivalent unit
basis.
c. written off as a loss on an equivalent unit
basis.
d. absorbed by all units past the inspection
point.
ANS: C