Chapter 4 Job Costing Complete Solution
Cost Accounting: A Managerial Emphasis, 16e (Horngren)
4.1 Objective 4.1
1) A cost is considered direct
... [Show More] if it can be traced to a particular cost object in a cost effective way which means it can be
A) traced easily with the aid of technology
B) traced in a manner that is accurate
C) traced in an economically feasible way
D) possibly traced accurately with an investment in hardware and software
Answer: C
Diff: 1
Objective: 1
AACSB: Analytical thinking
2) A ________ is anything for which a measurement of costs is desired.
A) cost-allocation base
B) cost pool
C) cost object
D) cost-application base
Answer: C
Diff: 1
Objective: 1
AACSB: Analytical thinking
3) A ________ is a grouping of individual indirect cost items.
A) cost-allocation base
B) cost assignment
C) cost pool
D) job-costing system
Answer: C
Diff: 1
Objective: 1
AACSB: Analytical thinking
4) A manufacturer utilizes three separate indirect cost pools. Which of the following is true?
A) Each indirect cost pool utilizes a separate cost-allocation rate
B) Each indirect cost pool is a subset of total direct costs
C) Each indirect cost pool relates to multiple cost centers
D) Each indirect cost pool utilizes the same cost-allocation rate for all costs incurred
Answer: A
Diff: 1
Objective: 1
AACSB: Analytical thinking
5) Direct costs ________.
A) are anything for which a measurement of costs is desired
B) are costs related to a particular cost object that can be traced to that cost object in an economically feasible manner
C) focus specifically on the costing needs of the CFO
D) are costs related to a particular cost object that cannot be traced to that cost object in a cost-effective manner
Answer: B
Diff: 2
Objective: 1
AACSB: Analytical thinking
6) In a costing system, ________.
A) cost tracing allocates indirect costs
B) cost allocation assigns direct costs
C) a cost-allocation base can be either financial or nonfinancial
D) a cost object should be a product and not a department or a geographic territory
Answer: C
Diff: 2
Objective: 1
AACSB: Analytical thinking
7) Assigning direct costs to a cost object is called ________.
A) cost allocation
B) cost assignment
C) cost pooling
D) cost tracing
Answer: D
Diff: 1
Objective: 1
AACSB: Analytical thinking
8) ________ is the process of assigning indirect costs to products.
A) Cost allocation
B) Job cost recording
C) Cost pooling
D) Cost tracing
Answer: A
Diff: 1
Objective: 1
AACSB: Analytical thinking
9) Allocating indirect costs to departments based on the relative revenue earned by those departments is done based on which of the following criterion?
A) direct hours utilized
B) benefits received
C) material resources used
D) cause-and-effect relationships
Answer: B
Diff: 1
Objective: 1
AACSB: Analytical thinking
10) Which of the following includes both traced direct costs and allocated indirect costs?
A) cost tracing
B) cost pools
C) cost assignments
D) cost allocations
Answer: C
Diff: 1
Objective: 1
AACSB: Analytical thinking
11) The cost allocation base ________.
A) is a grouping of individual indirect cost items
B) are costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way
C) is anything for which a measurement of costs is desired
D) is a systematic way to link an indirect cost or group of indirect costs to cost objects
Answer: D
Diff: 1
Objective: 1
AACSB: Analytical thinking
12) Direct costs are allocated to the cost object using a cost-allocation method.
Answer: FALSE
Explanation: Indirect costs are allocated to the cost object using a cost-allocation method.
Diff: 1
Objective: 1
AACSB: Analytical thinking
13) A cost object is anything for which a measurement of costs is desired.
Answer: TRUE
Diff: 1
Objective: 1
AACSB: Analytical thinking
14) Direct costs of a cost object are costs related to a particular cost object that can be allocated to that cost object in an economically feasible (cost-effective) way.
Answer: FALSE
Explanation: Direct costs of a cost object — costs related to a particular cost object that can be traced to that cost object in an economically feasible (cost-effective) way.
Diff: 1
Objective: 1
AACSB: Analytical thinking
15) The cost-allocation base is a systematic way to link an indirect cost or group of indirect costs to cost objects.
Answer: TRUE
Diff: 2
Objective: 1
AACSB: Analytical thinking
16) Cost objects may be jobs, products, or customers.
Answer: TRUE
Diff: 1
Objective: 1
AACSB: Analytical thinking
17) When an organization allocated indirect costs to departments by relative size of the budgets, it is based on the criterion of benefits received.
Answer: FALSE
Explanation: When an organization allocated indirect costs to departments by relative size of the budgets, it is based on the criterion of ability to bear costs.
Diff: 1
Objective: 1
AACSB: Analytical thinking
18) For each item below indicate the source documents that would most likely authorize the journal entry in a job-costing system.
Required:
a. direct materials purchased
b. direct materials used
c. direct manufacturing labor
d. indirect manufacturing labor
e. finished goods control
f. cost of goods sold
Answer:
a. purchase invoice
b. materials requisition record
c. labor time card/record
d. labor time card
e. job-cost record
f. sales invoice
Diff: 2
Objective: 1
AACSB: Analytical thinking
19) Differentiate between a cost pool and a cost-allocation base.
Answer: A cost pool is a grouping of individual indirect cost items. The cost-allocation base (number of machine-hours) is a systematic way to link an indirect cost or group of indirect costs (operating costs of all metal-cutting machines) to cost objects (different products).
Diff: 2
Objective: 1
AACSB: Analytical thinking
4.2 Objective 4.2
1) Process costing is ________.
A) used to enhance employees' job satisfaction
B) used by businesses to price unique products or identical products produced in batches
C) used by businesses to price identical products
D) used by businesses when manufacturing goods above normal capacity
Answer: C
Diff: 1
Objective: 2
AACSB: Analytical thinking
2) Process costing ________.
A) allocates all product costs, including materials, and labor
B) results in different costs for different units produced
C) is commonly used by general contractors who construct custom-built homes
D) is used exclusively in manufacturing
Answer: A
Diff: 2
Objective: 2
AACSB: Analytical thinking
3) Job costing is ________.
A) used by businesses to price identical products
B) used by businesses to price unique products for different jobs
C) used to calculate equivalent units
D) used to calculate the percentage of work completed
Answer: B
Diff: 1
Objective: 2
AACSB: Analytical thinking
4) Job costing ________.
A) cannot be used by the service industry
B) records the flow of costs for each product or service
C) allocates an equal amount of cost to each unit made during a time period
D) is used when each unit of output is identical
Answer: B
Diff: 2
Objective: 2
AACSB: Analytical thinking
5) Job-costing is likely to be used by________.
A) oil refining companies
B) advertising agencies
C) Mortgage payment processors
D) breakfast cereal producers
Answer: B
Diff: 2
Objective: 2
AACSB: Analytical thinking
6) Which of the following differentiates job costing from process costing?
A) Job costing is used when each unit of output is identical, and process costing deals with unique products.
B) Job costing is used when each unit of output is identical and not produced in batches, and process costing deals with unique products produced on large scale.
C) Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches.
D) Job costing is used by manufacturing industries, and process costing is used by service industries.
Answer: C
Diff: 3
Objective: 2
AACSB: Analytical thinking
7) Which of the following companies will use a process costing system?
A) an oil refining company
B) a manufacturer of ships
C) a custom kitchen cabinet company
D) an advertising firm
Answer: A
Diff: 1
Objective: 2
AACSB: Analytical thinking
8) A company may use job costing to assign costs to different product lines and then use process costing to calculate unit costs within each product line.
Answer: TRUE
Diff: 2
Objective: 2
AACSB: Analytical thinking
9) In each period, job costing divides the total cost of producing an identical or similar product produced in batches by the total number of units produced to obtain a per-unit cost.
Answer: FALSE
Explanation: Job costing is used to accumulate costs separately for each product or service.
Diff: 2
Objective: 2
AACSB: Analytical thinking
10) Oil refining companies primarily use job costing to estimate costs.
Answer: FALSE
Explanation: Process costing is used to estimate costs in oil refining companies as the same process is used to extract oil.
Diff: 1
Objective: 2
AACSB: Analytical thinking
11) In a job-costing system the cost object is an individual unit, batch, or lot of a distinct product or service.
Answer: TRUE
Diff: 1
Objective: 2
AACSB: Analytical thinking
12) Process costing is used to assign manufacturing costs to unique batches of a product.
Answer: FALSE
Explanation: Job costing is used to assign manufacturing costs to unique batches of a product.
Diff: 1
Objective: 2
AACSB: Analytical thinking
13) Using job costing would not be appropriate in the shipping industry.
Answer: FALSE
Explanation: Since each package or item shipped is unique or has different demand on resources such as packaging, methods of shipping, etc., job costing would be more appropriate than process costing.
Diff: 1
Objective: 2
AACSB: Analytical thinking
14) Whether a company chooses to use either a job ob costing system or process costing system depends on the nature of the product or service - whether the products or services are heterogeneous or homogeneous.
Answer: TRUE
Diff: 2
Objective: 2
AACSB: Analytical thinking
15) Describe job-costing and process-costing systems. Explain when it would be appropriate to use each.
Answer: Job costing accumulates costs for different jobs required by specific customers. Process costing computes and allocates an equal amount of cost to each product. Job costing is the logical choice when the production process has many distinct products or many heterogeneous jobs, while process costing is typically used when it is not necessary to keep separate cost records for individual jobs and the products are relatively homogeneous.
Diff: 2
Objective: 2
AACSB: Analytical thinking
4.3 Objective 4.3
1) Which of the following are reasons for using longer periods, such as a year, to calculate indirect cost rates?
A) shorter the period, the greater is the influence of seasonal patterns on the amount of costs
B) longer the period, the greater is the influence of seasonal patterns on the amount of costs
C) shorter the period, the smaller is the influence of seasonal patterns on the amount of opportunity costs
D) longer the period, the smaller is the influence of seasonal patterns on the amount of opportunity costs
Answer: A
Diff: 1
Objective: 3
AACSB: Analytical thinking
2) The actual indirect-cost rate is calculated by ________.
A) dividing actual total indirect costs by the actual total quantity of the cost-allocation base
B) multiplying actual total indirect costs by the actual total quantity of the cost-allocation base
C) dividing the actual total quantity of the cost allocation base by actual total indirect costs
D) multiplying the actual total quantity of the cost allocation base by actual total indirect costs
Answer: A
Diff: 1
Objective: 3
AACSB: Analytical thinking
3) Actual costing is a costing system that traces direct costs to a cost object by ________.
A) using the budgeted direct cost rates times the budgeted quantities of direct-cost inputs
B) using the actual direct costs rates times the budgeted quantities of the direct-cost inputs
C) using the actual direct cost rates times the actual quantities of the direct-cost inputs
D) using the budgeted direct cost rates times the actual quantities of the direct cost inputs
Answer: C
Diff: 1
Objective: 3
AACSB: Analytical thinking
4) An example of a numerator reason for calculating annual indirect-cost rates includes ________.
A) fewer production workdays in a month
B) cost of raw materials purchased
C) higher snow-removal costs during the winter
D) the number of units produced
Answer: D
Diff: 3
Objective: 3
AACSB: Analytical thinking
5) An example of a denominator reason for calculating annual indirect-cost rates includes ________.
A) Budgeted annual indirect costs divided by actual quantity of cost-allocation base
B) semi-annual insurance payments in March and September
C) higher levels of output demanded during the fall months
D) prepaid rent in January for the months January through June
Answer: C
Diff: 3
Objective: 3
AACSB: Analytical thinking
6) When calculating indirect cost rates, the longer the time period, the greater the
influence of seasonal patterns on the amount of costs.
Answer: FALSE
Explanation: The shorter the time period, the greater the influence of seasonal patterns on the amount of costs.
Diff: 1
Objective: 3
AACSB: Analytical thinking
7) The formula for the predetermined indirect cost rate is:
A) Budgeted annual indirect costs divided by actual quantity of cost-allocation base
B) Budgeted annual indirect costs divided by budgeted annual quantity of cost-allocation base
C) Actual annual indirect costs divided by budgeted annual quantity of cost-allocation base
D) Actual annual indirect costs divided by actual annual quantity of cost-allocation base
Answer: A
Diff: 1
Objective: 3
AACSB: Analytical thinking
8) The actual indirect-cost rate is calculated by dividing actual total indirect costs by the budgeted total quantity of the cost-allocation base.
Answer: FALSE
Explanation: Actual indirect cost rate = Actual annual indirect costs / Actual annual quantity of the cost-allocation base.
Diff: 1
Objective: 3
AACSB: Analytical thinking
9) A manufacturer estimates that it will incur variable indirect costs for the month of October of $70,000 and $30,000 of fixed costs. The company uses direct labor hours to calculate the predetermined overhead rate and predicted that 3,000 direct labor hours would be used in October. Actual direct labor hours amounted to 3,200.
Required:
A) What is the variable predetermined indirect rate for October?
B) What is the fixed predetermined indirect cost rate for October?
C) What is the total allocation rate per direct labor hour for October?
Answer: A) $70,000/3,000 = $23.33 per direct labor hour
B) $30,000/3000 - $10.00 per direct labor hour
C) $23.33 + $10.00 = $33.33 per direct labor hour
Diff: 2
Objective: 3
AACSB: Analytical thinking
4.4 Objective 4.4
1) A job that shows low profitability may be the result of ________.
A) excessive usage of direct materials
B) inefficient direct manufacturing labor
C) overpricing the job
D) insurance claim of the damaged goods
Answer: B
Diff: 2
Objective: 4
AACSB: Analytical thinking
2) For a given job the direct costs associated with the job are ________.
A) actual overhead that has been applied to the job
B) raw materials that can be traced to the job in an economically feasible way
C) All sunk costs that can be traced to the job in an economically feasible way
D) all fixed costs
Answer: B
Diff: 2
Objective: 4
AACSB: Analytical thinking
3) Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs:
A. Identify indirect costs
B. Compute the total cost of the job
C. Select cost-allocation bases
D. Compute the indirect cost rate
A) ACDB
B) CADB
C) BACD
D) DCAB
Answer: B
Diff: 2
Objective: 4
AACSB: Analytical thinking
4) The basic source document for direct manufacturing labor is the ________.
A) job-cost record
B) materials-requisition record
C) labor-time record
D) labor-requisition record
Answer: C
Diff: 1
Objective: 4
AACSB: Analytical thinking
5) Problems with costing occur when ________.
A) incorrect job numbers are recorded on source documents
B) bar coding is used to record materials used on the job
C) a computer screen requests an employee number before that employee is able to work on information related to a specific job
D) incorrect product delivery forms are entered into the system
Answer: A
Diff: 2
Objective: 4
AACSB: Analytical thinking
6) The budgeted indirect-cost rate for each cost pool is computed as ________.
A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base
B) budgeted annual quantity of cost allocation base divided by budgeted annual indirect costs
C) actual annual indirect costs divided by budgeted annual quantity of cost allocation base
D) budgeted annual indirect costs divided by budgeted actual quantity of cost allocation base
Answer: A
Diff: 2
Objective: 4
AACSB: Analytical thinking [Show Less]