ACCT 125 | Job Order Costing Multiple Choice Quiz

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In a job-order costing system, where are manufacturing costs initially added?

Cost of goods sold

Direct labor

Finished goods inventory

Work-in-process inventory (correct)

What is the primary purpose of job-order costing in managerial accounting?

Recording direct labor costs

Tracking overhead costs

Assigning costs to each batch of production (correct)

Calculating cost of goods sold

Which type of production environment is most suitable for process costing?

Job-shop production

Batch production

Custom production

Continuous production (correct)

What is the key difference between job-order costing and process costing systems?

Application in different production environments Signup and view all the answers

Why is accurate tracking and assignment of manufacturing costs crucial in a job-costing system?

To allocate costs to each job correctly Signup and view all the answers

What role does product costing play in decision-making processes in managerial accounting?

Evaluating production efficiency Signup and view all the answers

What happens when the actual overhead costs differ from the overhead costs applied to production using the predetermined overhead rate?

A discrepancy arises Signup and view all the answers

How is underapplied or overapplied overhead typically closed at the end of an accounting period?

Into the Cost of Goods Sold account Signup and view all the answers

Which accounts are affected by underestimation or overestimation of the predetermined overhead rate?

COGS, finished goods inventory, and work-in-process inventory Signup and view all the answers

What is an example of a cost that grows over time as mentioned in the text?

Electricity consumption Signup and view all the answers

Why do electricity and labor costs typically have variances according to the text?

Due to fluctuations in consumption and prices or labor skills and work ethic Signup and view all the answers

What is the purpose of determining whether variances in costs are good or bad according to the text?

To assess the accuracy of budget forecasts Signup and view all the answers

What is the purpose of a product costing system in financial accounting?

To value inventory and compute the cost of goods sold Signup and view all the answers

What is the primary difference between job-order costing and process costing?

Job-order costing is for batch-productions, while process costing is for companies that produce identical units in bulk. Signup and view all the answers

What accounts for the flow of costs in the cost of goods sold statement?

Purchase of raw materials and utilization of raw materials Signup and view all the answers

In the context of purchases, what does 'PA' refer to?

Reduction of goods due to damaged or defective items Signup and view all the answers

What comprises the Total Manufacturing Costs (TMC) in a manufacturing process?

Raw Materials Used, Direct Labor, and Factory Overhead Signup and view all the answers

How are underapplied or overapplied overhead costs handled at the end of an accounting period?

Prorating among cost accounts Signup and view all the answers

What is the significance of tracking direct labor costs through time records?

To monitor labor expenses for each job Signup and view all the answers

'RMAL' in the context of a manufacturing process stands for:

Raw Materials Available Signup and view all the answers

'CGM' in the context of manufacturing represents:

Cost of Goods Manufactured Signup and view all the answers

What does 'WIP' stand for with respect to manufacturing operations?

Work-in-Process Inventory Signup and view all the answers

In a job-order costing system, what is the purpose of a material requisition form (MRF)?

To authorize the release of materials from the warehouse Signup and view all the answers

Which department in a manufacturing company is responsible for recording time spent by employees on production jobs?

Cost accounting department Signup and view all the answers

What is the purpose of a predetermined overhead rate (POHR) in a job-costing system?

To determine the amount of the cost driver used for allocating overhead Signup and view all the answers

Why is it crucial to accurately record time spent on production jobs by employees?

To track and allocate direct labor costs to specific jobs Signup and view all the answers

What is the main purpose of allocating manufacturing overhead costs to production jobs in a job-costing system?

To determine the total cost of each job Signup and view all the answers

How does underapplied or overapplied overhead occur in a job-order costing system?

When there are errors in calculating the predetermined overhead rate Signup and view all the answers

Which of the following is NOT considered part of manufacturing overhead costs?

Direct materials used in production Signup and view all the answers

What role does the production department supervisor play in the use of material requisition forms?

Authorizing the release of materials from the warehouse Signup and view all the answers

What is the purpose of using material-requirements planning (MRP) in complex manufacturing operations?

To plan and manage inventory levels efficiently Signup and view all the answers

How are time records used in a job-costing system?