Cost Accounting Chapter 2 Flashcards

Questions and Answers

A cost accounting system is used to control costs of manufacturing activities. (Select all that apply)

Assists in minimizing waste (correct)

Increases production time

Is only applicable to large companies

Helps managers determine selling prices (correct)

Producing products that are individually designed to meet the needs of a specific customer is known as:

Job order production

To determine the cost of producing each job or job lot, companies use a:

Job order costing system

Choose the product(s) that are most likely to be manufactured as a job, rather than as a job lot. (Select all that apply)

Customized home Signup and view all the answers

Designate the following as either job order or process operations:

Custom Orders = Job Order operations Mass Production = Process operations Signup and view all the answers

A cost accounting system includes which of the following?

It accumulates production costs and assigns them to products and services. Signup and view all the answers

Job order production is most likely used by companies that produce:

Customized wedding cakes Signup and view all the answers

All of the following are manufacturing costs except:

Office salaries Signup and view all the answers

A job order costing system requires the company to keep separate records for each job.

True Signup and view all the answers

All of the following are inventory accounts for a manufacturer except:

Indirect materials inventory Signup and view all the answers

A job which involves producing more than one unit of a custom product is called a:

Job lot Signup and view all the answers

Job cost sheets can be used to: (Select all that apply)

Provide a subsidiary ledger for the Finished Goods Inventory account Signup and view all the answers

Manufacturing of products in a repetitive manner is referred to as (process/job order) operations while manufacturing custom products is referred to as (process/job order) operations.

Process; Job order Signup and view all the answers

After jobs are completed and delivered to customers, the job cost sheet is used to provide a permanent record for:

Cost of Goods Sold Signup and view all the answers

List the following documents in the order in which they are used when recording direct materials costs in job order cost accounting, with the first document on top.

Receiving Reports Signup and view all the answers

The three types of manufacturing costs in a job order costing system include:

Direct materials, direct labor, overhead Signup and view all the answers

Which of the following are characteristics of materials ledger cards? (Select all that apply)

Perpetual records Signup and view all the answers

The correct order of cost flows in a job order costing system is:

Work in process; finished goods; cost of goods sold Signup and view all the answers

The journal entry to record the purchase of materials on account is to:

Debit Raw Materials Inventory and credit Accounts Payable Signup and view all the answers

Companies use job cost sheets to track the costs of:

Materials, labor, and overhead costs of a job Signup and view all the answers

Journal entries for materials used in production are posted to: (Select all that apply)

Subsidiary records Signup and view all the answers

During production, job cost sheets represent:

The balance in the work in process inventory account Signup and view all the answers

Time tickets are used in job order costing to:

Report hours worked on specific jobs during the payroll period Signup and view all the answers

List the following documents in the order in which they are used when recording indirect materials costs in job order cost accounting, with the first document on top.

Material Requisitions Signup and view all the answers

List the following documents in the order in which they are used when recording direct labor costs in job order costing, with the first document on top.

Factory wages payable Signup and view all the answers

Receiving reports are used in job order costing to record the cost and quantity of materials:

Delivered from suppliers Signup and view all the answers

The journal entry to record the purchase of materials on account is a(n):

Increase in assets and an increase in liabilities Signup and view all the answers

The journal entry to record the use of direct materials in production is to:

Debit Work in Process Inventory and credit Raw Materials Inventory Signup and view all the answers

The journal entry to record the use of direct labor includes a debit to factory wages payable and a credit to work in process inventory.

False Signup and view all the answers

Time tickets are used in job order costing to record the time and cost of:

Both direct and indirect labor in the production department Signup and view all the answers

Manufacturing costs include direct materials, direct labor, and:

Applied overhead costs Signup and view all the answers

List the following documents in the order in which they are used when recording indirect labor costs in job order costing, with the first document on top.

Time tickets Signup and view all the answers

The predetermined overhead rate is based on total _________ costs and activity base.

Overhead Signup and view all the answers

The base to which overhead costs are linked, such as direct labor or machine hours, is known as the overhead ________ base.

Allocation Signup and view all the answers

A company has a predetermined overhead rate of $14 per machine hour. Job 846 uses 27.5 machine hours. Overhead allocated to Job 846 will be $________.

$385 Signup and view all the answers

The journal entry to record direct labor in production is a(n):

Increase in assets and an increase in liabilities Signup and view all the answers

The journal entry to record the allocation of factory overhead is:

Debit Work in Process Inventory and credit Factory Overhead Signup and view all the answers

Managers use a predetermined overhead rate for which of the following reasons? (Select all that apply)

To assist in setting prices for jobs Signup and view all the answers

Factory overhead includes direct materials and direct labor.

False Signup and view all the answers

A company uses direct labor hours as its allocation base. Management estimates the company will have 10,000 hours of direct labor during the year and total overhead costs of $120,000. The predetermined overhead rate will be $_______ per hour.

$12 Signup and view all the answers

The journal entry to record indirect materials in production is to:

Debit Factory Overhead and credit Raw Materials Inventory Signup and view all the answers

Overhead may be applied based on:

Direct labor Signup and view all the answers

The journal entry to record indirect labor costs used in production includes a debit to Factory ________.

Overhead Signup and view all the answers

A company has a predetermined overhead rate of 50% of direct labor costs. Job 62 incurs $560 in labor costs. Overhead allocated to Job 62 will be $_______.

$280 Signup and view all the answers

The journal entry to record the accrual of factory utilities is to:

Debit Factory Overhead and credit Utilities Payable Signup and view all the answers

The journal entry to record the allocation of factory overhead to work in process is:

Debit Work in Process Inventory and credit Factory Overhead Signup and view all the answers

Match the following activities to their effect on the general ledger accounts.

Allocate indirect labor = Credit Factory Wages Payable Pay factory property tax = Debit Factory Overhead Purchase materials = Debit Raw Materials Inventory Use direct materials = Credit Raw Materials Inventory Complete job = Debit Finished Goods Inventory Sold job = Credit Finished Goods Inventory Signup and view all the answers

Match the following overhead costs with their source documents.

Indirect materials = Material requisition forms Indirect labor = Time tickets Factory utilities = Vouchers authorizing payment Depreciation on factory equipment = Adjusting entries Signup and view all the answers

A Schedule of Cost of Goods Manufactured includes all of the following costs:

Direct materials used Signup and view all the answers

The journal entry to record the use of indirect materials in production is to:

Debit Factory Overhead and credit Raw Materials Inventory Signup and view all the answers

The Factory Overhead account is (debited/credited)________ for applied overhead costs.

Credited Signup and view all the answers

The journal entry to record indirect labor used in production is to:

Debit Factory Overhead and credit Factory Wages Payable Signup and view all the answers

If the factory overhead is overapplied, then the adjusting journal entry to close the factory overhead account includes a: (Select all that apply)

Debit to Factory Overhead Signup and view all the answers

The journal entry to record depreciation on factory equipment is to:

Debit Factory Overhead and credit Accumulated Depreciation - Equipment Signup and view all the answers

Study Notes

Cost Accounting Systems

A cost accounting system controls manufacturing costs and helps determine selling prices.
Job order costing systems track unique producing costs for each individual job or job lot.

Job Order Production

Job order production customizes products for specific customers, manufactured separately.
Likely products include customized homes and tailored wedding dresses.

Manufacturing Operations

Custom Orders are associated with job order operations.
Mass Production aligns with process operations.

Cost Accumulation

Cost accounting systems accumulate production costs and assign them to products/services.
The three types of manufacturing costs include direct materials, direct labor, and overhead.

Cost Tracking and Reporting

Job cost sheets serve as records for Cost of Goods Sold and Finished Goods Inventory.
Time tickets report hours worked on specific jobs for payroll.

Inventory Management

Inventory accounts include Work in Process, Finished Goods, and not indirect materials inventory.
Receiving reports record costs and quantities of materials upon delivery.

Journal Entries in Costing

Recording direct materials usage involves debiting Work in Process Inventory and crediting Raw Materials Inventory.
The allocation of factory overhead requires a debit to Work in Process Inventory and credit to Factory Overhead.

Overhead Allocation

Predetermined overhead rates help estimate job costs and assist in pricing strategies.
Overhead may be applied based on direct labor or machine hours.

Adjusting Overhead Accounts

If factory overhead is overapplied, adjust by debiting Factory Overhead and crediting Cost of Goods Sold.
Underapplied overhead indicates actual costs surpass applied costs, leading to potential debit balances in the Factory Overhead account.

Cost of Goods Manufactured

A Schedule of Cost of Goods Manufactured includes work in process inventory, direct labor, direct materials, and applied factory overhead.
Cost of goods sold is not included in the manufacturing costs calculation.

Direct and Indirect Costs

Direct labor hours and machine hours are common allocation bases.
Indirect materials and labor used in production are recorded as factory overhead expenses.

Effects on Financial Statements

Adjustments for over- or underapplied overhead can impact net income, with overapplied increasing net income.
Service companies share some cost characteristics with manufacturing firms, such as direct labor and overhead, but lack raw materials inventory.

Example Calculations

Predetermined overhead rate calculations can derive costs; e.g., if it’s $14 per machine hour and a job uses 27.5 hours, the overhead allocated is $385.
Direct labor and applied overhead together contribute to job costs; e.g., a consulting firm’s job costing $170 total includes both direct pay and overhead.

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Description

Test your knowledge on cost accounting principles with these flashcards focused on Chapter 2. This chapter covers key concepts such as cost control systems and job order production. Perfect for students looking to strengthen their understanding of manufacturing costs.