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True/False Questions 1. Job-order costing is used in manufacturing companies and process costing is used in service companies. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 2. A flour manufacturer is more likely to use process costing than job-order costing whereas a manufacturer of customized leather jackets is more likely to use job-order costing than process costing. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 3. Normally a job cost sheet is not prepared for a job until after the job has been completed. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium 4. Job cost
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Which of the following statements is correct concerning job-order costing? A) Job-order costing would be appropriate for a textbook publisher. B) All the costs appearing on a job cost sheet are actual costs. C) Indirect materials are charged to a specific job. D) Job-order costing is mainly used in firms with homogeneous products such as oil refineries. Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,2 Level: Medium 17. Which of the following types of firms typically would use process costing rather than job-order costing? A) A small appliance repair shop. B) A manufacturer of commercial passenger aircraft. C) A specialty equipment manufacturer. D) A breakfast cereal manufacturer. Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
18. Which of the following would usually be found on a job cost sheet under a normal cost system? A) B) C) D) Actual direct material cost Actual manufacturing overhead cost Yes Yes Yes No No Yes No No
Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy 19. In a job-order cost system, which of the following events would trigger recording data on a job cost sheet? A) the purchase of direct materials B) the payment of fire insurance on the factory building C) the payment for product advertising D) none of
Q2. Using budget data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) was allocated to planned production? What was the actual per unit cost of production and shipping?
I do not believe that either a job order or process order cost system would work for Super Bakery, Inc. Job order cost systems are based on one “work in process” account and a determination of total manufacturing costs at job completion. Because Super Bakery, Inc. is outsourcing many of the product production functions, they will not be able to obtain accurate costs for a particular job. As a result, they will again be forced to “average” the costs for multiple jobs which will result in an inaccurate overhead assessment.
I do not believe that either a job order or process order cost system would work for Super Bakery, Inc. Job order cost systems are based on one “work in process” account and a determination of total manufacturing costs at job completion. Because Super Bakery, Inc. is outsourcing many of the product production functions, they will not be able to obtain accurate costs for a particular job. As a result, they will again be forced to “average” the costs for multiple jobs which will result in an inaccurate overhead assessment.
1.For which of the following products would job order costing be least likely to be used?
Consolidated Company makes cardboard boxes. During the most recent accounting period Consolidated paid $60,000 for raw materials, $48,000 for labor, and $52,000 for overhead costs that were incurred to make boxes. Consolidated started and completed 400,000 boxes. Based on this information, what is the average manufacturing cost per box?
“Companies can choose to use the accounting job order costing method when they have a single product line or numerous products to manufacture. However, it is less costly and less time-consuming if they elect to use process costing when calculating the manufacturing of a single product line. With similarities
A. The table below lists each category and states whether the cost is relevant, if it is an implicit or explicit cost, and if the cost has been properly calculated (note: company is currently operating at 65% capacity).
3. For each of the individual overhead accounts at Bridgeton, do you believe the given cost is variable, fixed, or something else? Why? (Use information or evidence from the case to support your evaluation, if possible. For most of these costs, there is no single right answer from the case information, so the goal is to come up with a reasonable estimate.)
3) Using the budget Data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocate to planned production? What was the actual cost per unit of production and shipping?
Businesses – from manufacturing, merchandising and service industries alike – take careful considerations for their costing systems. Setting-up competitive prices in the market can be a result of proper costing methods. Misallocation of costs may lead to incorrect price estimates, continuous production of unprofitable products, and ineffective processing schedules. In this case study, we will discuss the costing methods Zauner Ornaments are currently using and upon conclusion, it will enable us to distinguish the advantages and disadvantages of each costing method.
1. Define and explain the meaning of a predetermined manufacturing overhead rate that is applied in a job-order costing system.
Process costing is an easier system to use when costing homogenous products compared to other cost allocation methods. Each process applies direct materials, labor and manufacturing overhead to the production cost total. Management accountants take the total number of goods leaving the process and divide the total process cost by this number. This creates a simple average cost for each item produced. Another advantage is that business owners use process costing because it creates a flexible production process. Companies needing to refine their process can simply add or remove a process as necessary. This also allows companies to lower their production cost for each good. Adding a process allows companies to produce slightly different goods or improve product quality. This flexibility ensures companies can produce at the most competitive cost in the economic marketplace. Also process costing provides an approach to allocate costs to
INTRODUCTION Businesses – from manufacturing, merchandising and service industries alike – take careful consideration in the analysis of their costing systems in order to be able to set up competitive prices in the market. Misallocation of costs may lead to incorrect price estimates, continuous production of unprofitable products, and ineffective processing schedules. In this case study, we will discuss the costing methods which Zauner Ornaments have used or is currently using and, in conclusion, be able to distinguish the advantages and disadvantages of each costing method. CASE CONTEXT The case seeks to assist Zauner’s comptroller, Yu Chia-yi, in determining the best costing method for their overhead costs. In addition we also aim to
A direct cost can be traced to a product or service which includes: Direct labor- which is the cost of the labor that’s directly connected to a product or services. Direct labor is sometimes called touch labor, since direct labor workers typically touch the product while it is being made.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p 39-40) An example of direct labor is an assembly line worker. Labor cost that cannot be physically traced to the creation of products, or that can be traced only at great cost and inconvenience, are considered to be indirect labot.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p 40) Direct material are those materials that become an integral part of the finished product and whose cost can be traced to the finished product.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p39-40) Manufacturing overhead is the third element so manufacturing cost, it includes all costs of manufacturing except direct materials and direct labor. Manufacturing overhead includes items such as indirect materials; indirect labor; maintenance and repairs on production equipment; and heat and light, property taxes, depreciation, and insurance on manufacturing facilities. Only cost associated with operating the factory are consider to be manufacturing overhead cost. A company also incurs other costs associated with its selling administive functions, but these costs are not included as part of manufacturing overhead. Only those
Assuming Top That uses the first-in, first-out (FIFO) method to account for inventories, the assignment of costs to units completed and transferred to the Sewing Department during February is