Multiple Choice Questions
112. If Custom Craft uses a job order cost system, each of the following is true except:
A. Individual job cost sheets accumulate all manufacturing costs applicable to each job and together constitute a subsidiary ledger for the Work in Process Inventory account.
Direct labor cost applicable to individual jobs is recorded when paid by a debit to Work in Process Inventory and a credit to Cash, as well as by entering the amount on the job cost sheets.
C. The amount of direct materials used in individual jobs is recorded by debiting the Work in Process Inventory account and crediting the Materials Inventory account, as well as by entering the amount used on job cost sheets.
D. The manufacturing overhead applied to each job is transferred from the Manufacturing Overhead account to the Work in Process Inventory account, as well as entered on the individual job cost sheets.
113. When job costing is in use, under-applied overhead:
A. Represents the cost of manufacturing overhead that relates to unfinished jobs.
B. Is indicated by a credit balance remaining at year-end in the Manufacturing Overhead account.
C. Is closed out at year-end into the Cost of Goods Sold account if the amount is not material.
D. Results when actual overhead costs incurred during a year are less than the amounts applied to individual jobs.
114. 114.Which of the following businesses would most likely use job order costing?
A. A print shop that specializes in wedding invitations.
B. A company that makes frozen pizzas.
C. A brewery.
D. An oil refinery.
115. The purpose of an overhead application rate is to:
A. Assign a portion of indirect manufacturing costs to each product manufactured.
B. Determine the type and amount of costs to be debited to the Manufacturing Overhead.
C. Charge the Work-in-Process Inventory amount with the appropriate amount of direct of manufacturing costs.
D. Allocate manufacturing overhead to expense in proportion to the number of units manufactured during the period.
116. Which of the following are true regarding activity-based costing?
A. A primary goal of using ABC is the accurate allocation of manufacturing overhead to product lines.
B. Under ABC, direct labor hours is never used to allocate overhead costs to activity pools or product lines.
C. The use of ABC is indicated when it is suspected that each of the firm’s product lines consume approximately the same amount of overhead resources but the current allocation scheme assigns each line a substantially different amount.
D. ABC can be used in conjunction with process costing.
117. Which of the following would be the most appropriate basis for allocating the costs of plant insurance which covers equipment theft and damage?
A. Direct labor hours.
B. Value of equipment.
C. Machine hours.
D. Square feet of plant space.
118. 118.Using ABC to allocate manufacturing overhead can help managers to:
A. Identify what activities drive overhead costs.
B. Set product prices.
C. Locate inefficiencies in the production process.
D. Do all of the above.
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