Chapter 02
Systems Design: Job-Order Costing
True / False Questions
1. Job-order costing would be more likely to be used than process costing in situations where
many different products or services are produced each period to customer specifications.
True False
2. In a job-order costing syste...
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Chapter 02
Systems Design: Job-Order Costing
True / False Questions
1. Job-order costing would be more likely to be used than process costing in situations where
many different products or services are produced each period to customer specifications.
True False
2. In a job-order costing system, costs are traced to departments and then allocated to units of
product using an average process.
True False
3. Job-order costing is used in those situations where units of a product are homogeneous,
such as in the manufacture of sugar.
True False
4. Job-order costing is usually not used in service organizations such as hospitals and law
firms.
True False
5. The three cost categories appearing on a job cost sheet are: selling expense, manufacturing
expense, and administrative expense.
True False
6. The labor time ticket contains the details of how much time an employee takes on each task
throughout the day.
True False
2-2
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7. In order to improve the accuracy of unit costs, most companies recompute the
predetermined overhead rate each month.
True False
8. Use of a single, plantwide overhead rate is generally appropriate only for very large
manufacturing companies.
True False
9. Predetermined overhead rates are based on actual cost and activity data.
True False
10. The following journal entry would be made to apply overhead cost to jobs in a job-order
costing system:
True False
11. When completed goods are sold, the transaction is recorded as a debit to Cost of Goods
Sold and a credit to Work in Process.
True False
12. When the predetermined overhead rate is based on direct labor-hours, the amount of
overhead applied to a job is proportional to the amount of actual direct labor-hours incurred
on the job.
True False
13. Actual manufacturing overhead costs are traced to specific jobs.
True False
2-3
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14. A credit balance in the Manufacturing Overhead account at the end of the year means that
overhead was underapplied.
True False
15. The sum of all amounts transferred from the Work in Process account and into the
Finished Goods account represents the Cost of Goods Manufactured for the period.
True False
16. The most common accounting treatment of underapplied manufacturing overhead is to
transfer it to the Manufacturing Overhead control account.
True False
Multiple Choice Questions
17. Which of the following companies would be most likely to use a job-order costing system
rather than a process costing system?
A. fast food restaurant
B. shipbuilding
C. crude oil refining
D. candy making
18. Computing unit product costs involves averaging in:
A. A
B. B
C. C
D. D
2-4
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