28 Questions
What is the purpose of a control account?
To summarize a set of subsidiary ledger accounts
Which inventory account records supplies and materials not directly charged to jobs?
Direct materials inventory
In a job shop's production process, what is the first step after assigning a job number?
Identify and secure components required for the job
What type of costs should follow the physical flows of resources in the cost accounting system?
Direct materials, direct labor, and manufacturing overhead
Which account is NOT one of the three inventory accounts for a manufacturing firm?
Raw materials inventory
When does the job in a job shop production process become considered sold?
After invoicing the client once the order is accepted
What is the main difference between a job and a job shop?
A job is a cost object while a job shop is where jobs are produced.
Why are separate documents kept for recording the costs of individual jobs?
To estimate costs on similar work in the future.
What purpose does the job cost sheet serve in a cost accounting system?
It records and tracks costs incurred for a specific job.
Why is it common in job shops that the product or service price is related to the recorded cost of the job?
To ensure pricing reflects actual production costs.
In what way does a job differ from a project?
Jobs are unique while projects are standardized.
What does a subsidiary ledger account do in a cost accounting system?
Details financial transactions for specific customers, vendors, or jobs.
What is the difference called when the actual overhead costs incurred are in excess of the applied overhead costs?
Underapplied overhead
Which account is credited when overhead is applied to jobs based on the predetermined overhead rate?
Applied manufacturing overhead
What approach involves writing off over- or underapplied overhead to the cost of goods sold account?
Prorating approach
What happens to the balances in the Manufacturing overhead control and Applied manufacturing overhead accounts?
They have no remaining balances.
In which case is the difference called overapplied overhead?
When applied costs exceed actual costs.
What does underapplied overhead refer to?
Actual costs exceed applied costs.
Why does the unit cost fluctuate from month to month for essentially the same product?
Due to changing overhead cost
What problem arises if the company waits till the end of the year to calculate an overhead rate?
Inability of salespeople to price products appropriately
What does the company decide to do eventually to solve the pricing problem for their products?
Estimate yearly manufacturing overhead costs and calculate a predetermined rate
How are manufacturing overhead costs assigned to jobs in the described procedure?
By applying a predetermined overhead rate
What does the year-end single overhead rate do to the unit cost fluctuations?
Smoothes out fluctuations
What is the formula to calculate the predetermined overhead rate?
Estimated overhead / Estimated allocation base
What is the hourly rate paid for direct labor at Jacob Welding, Inc.?
$15
How are manufacturing overhead costs applied to jobs at Jacob Welding?
Based on direct labor hours
What is the total manufacturing overhead cost incurred in May at Jacob Welding?
$4,650
How many of the jobs completed in May were delivered to customers?
Two (Jobs 304 and 307)
Test your understanding of overhead rates and unit cost fluctuations in cost accounting. Practice calculating unit costs based on varying overhead costs for the same product over different months. This quiz is based on content from Fundamentals of Cost Accounting, 2e, specifically Chapter 7.
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