If Manufacturing Overhead Has Been Overallocated During The​ Period, Then

Accounting chapter 3

A paper mill company like International Paper would most likely use job costingF
A food and beverage company like Coca-Cola would most likely use job costingF
Process costing is used by companies that produce large numbers of identical units of production in a continuous fashionT
Job costing systems accumulate the costs for each individual jobT
Companies should always use job costing rather than process costingF
Generally Accepted Accounting Principles (GAAP) mandates the type of product costing system (job costing or process costing) that must be used by a manufacturer.F
Job costing should only be used by manufacturersF
The end goal of process costing and job costing at a manufacturing company is the same: to find the cost of producing one unit of productT
Job costing is often used by professional service providers, such as law firms.T
All manufacturers use either a pure process costing system or a pure job costing systemF
Companies use job costing when their products or services vary in terms of materials needed, time required to complete the product, and/or the complexity of the production processT
A receiving report is typically a duplicate of the purchase order but without the prices and quantities pre-listed on the formT
For a manufacturing system, inventory flows from raw materials inventory to work in process inventory to finished goods inventory.T
A job cost record is a document that accumulates direct materials costs, direct labor costs and manufacturing overhead costs assigned to each individual jobT
At a manufacturing company, inventory flows from work in process inventory, to raw materials inventory, to finished goods inventory.F
When raw materials are transferred out of the storeroom to the factory, their cost is transferred out of raw materials inventory and into work in process inventory.T
When the products are shipped to customers, the cost of manufacturing those products becomes Cost of Goods Sold (COGS) shown on the company’s balance sheet.F
A production schedule indicates the quantity and types of inventory that are scheduled to be manufactured during the period.T
The bill of materials lists all of the raw materials needed to manufacture the job.
A labor time record identifies the employee and the amount of time the employee spent on a particular jobT
A production schedule always covers a one-year period of timeF
A purchase order is used to order needed materials from suppliersT
The quantities of incoming shipments of raw materials are counted and recorded on a purchase order.F
Manufacturing overhead may include depreciation on the factory plant and equipment, utilities to run the plant, property taxes and insurance on the plant, and salaries of plant janitors.T
Generally accepted accounting principles (GAAP) mandate that manufacturing overhead must be treated as an inventoriable product cost for financial reporting purposesT
Manufacturing overhead costs cannot be directly traced to jobsT
The key to allocating indirect manufacturing costs to jobs is to identify an appropriate allocation baseT
Allocating manufacturing overhead to jobs simply means “splitting up” the total manufacturing overhead costs among the jobs produced during the year.T
An equal amount of manufacturing overhead should be allocated to each jobF
Manufacturers follow four steps to implement a manufacturing overhead allocation system. In the first step, the company estimates its total manufacturing overhead costs for the coming yearT
Manufacturers follow four steps to implement a manufacturing overhead allocation system. In the last step, to the company allocates some manufacturing overhead to each individual jobT
Manufacturers follow four steps to implement a manufacturing overhead allocation system. In the last step, the company estimates the total amount of manufacturing overhead costs for the yearF
The predetermined manufacturing overhead rate is calculated by dividing the total estimated manufacturing overhead costs by the total estimated amount of the allocation baseT
The predetermined manufacturing overhead rate is calculated by multiplying the total estimated manufacturing overhead costs by the total estimated amount of the allocation base.F
The cost of wages paid to assembly-line workers should be treated as a manufacturing overhead costF
The overhead allocation base should be the cost driver of manufacturing overhead costs.T
Management can use job cost information to help to determine how it will deal with pricing pressure from competitors.T
Management can use job cost information to control costs on jobs produced in the futureT
The total cost of a job shown on the job cost record is the sum of the direct materials and direct labor traced to the job and the manufacturing overhead allocated to the job.T
The total cost of a job shown on the job cost record is the sum of the direct materials traced to the job and the manufacturing overhead allocated to the jobF
If a job consists of a batch of identical units, managers find the unit cost by dividing the total job cost by the number of units in the job.T
The total cost of a job shown on the job cost record is the sum of the direct labor traced to the job and the manufacturing overhead allocated to the job.F
The total cost of a job shown on the job cost record is the sum of the direct materials and direct labor traced to the job divided by the manufacturing overhead allocated to the job.F
The gross profit on the sale of a job is the difference between the sales price and the total unit cost reported on the job cost record.T
If a manufacturer finds that the amount of manufacturing overhead allocated to a job is less than the actual amount of manufacturing overhead incurred, then the jobs are overcostedF
Overallocated manufacturing overhead costs occur when the manufacturing overhead costs allocated are greater than the amount actually incurred.T
If manufacturing overhead has been underallocated during the year, it means the jobs have been
undercosted
T
If manufacturing overhead has been overallocated during the year, it means the jobs have been
overcosted.
T
If the actual amount of the manufacturing overhead allocation base is greater than the estimated amount of the allocation base used to calculate the predetermined rate, then manufacturing overhead must have been
underallocated.
F
The underallocation or overallocation of overhead is a direct result of using a predetermined manufacturing overhead rate rather than the actual manufacturing overhead rateT
The amount of overallocation or underallocation is found by taking the difference between the amount of overhead allocated during the year and the amount of overhead estimated for the yearF
The amount of overallocation or underallocation is typically corrected by adjusting Cost of
Goods Sold on the income statement
T
An overallocation of manufacturing overhead is typically corrected by decreasing Cost of Goods Sold on the income statementT
The amount of overallocation or underallocation is found by taking the difference between the amount of overhead allocated during the year and the amount of overhead incurred during the year.T
An underallocation of manufacturing overhead is typically corrected by decreasing Cost of Goods Sold on the income statementF
In job costing, the purchase of raw materials is recorded as a debit to the Raw Materials Inventory account and a credit to accounts payableT
When an item is sold, Finished Goods Inventory account is credited and Cost of Goods Sold is debitedT
In job costing, when indirect materials are requisitioned for a job, the Raw Materials Inventory account
is credited.
T
In job costing, when raw materials are requisitioned for a job, the Raw Materials Inventory account is
credited
T
The Work-in-Process account is debited for the cost of direct labor in a job cost system
Actual manufacturing overhead costs are accumulated as debits to a single general ledger account called Manufacturing Overhead.T
The entry to allocate manufacturing overhead costs to work-in-process requires a debit to Work-in Process accountT
The Manufacturing Overhead account is credited for actual manufacturing overhead costs incurred during the period.F
The entry to transfer sold goods includes a debit to the Finished Goods Inventory account.F
The Finished Goods Inventory account is debited when the product is sold.F
Job costing is not commonly used by service firms (such as law firms) or trades people
(such as auto mechanics).
F
Service firms follow the same approach for indirect costs as manufacturing companies because they develop a predetermined indirect cost allocation rate.T
A service firm’s costs are comprised of direct materials, direct labor and manufacturing overheadF
A labor time record is an essential component of accounting in a service firmT
Since a service firm does not carry a large amount of inventory, it is not necessary to know the individual costs related to each individual job.F
The most significant cost for a service firm is direct labor costT
The main driver of indirect costs for service firms is usually labor hoursT
When job costing is used at a service company, direct costs of serving the client are traced to the job, whereas the indirect costs of serving the client are allocated to the job.T
) At a service company, the indirect costs of serving the client consists of operating expensesT
At a service company, the indirect costs of serving the client include manufacturing overheadF
Which product costing system would be better for custom-order products?Job costing system
A job costing system can be used by which types of companies?Service, manufacturing, and merchandising businesses
Which product costing system would better account for a unique product?Job costing system
The two basic types of costing systems arejob costing and process costing
Which of the following industries would be most likely to use a job costing system?Commercial building construction
Which of the following is an example of an industry that would use a process costing—rather than a job costing—system?Coca-Cola
Which of the following is an example of an industry that would use a process costing—rather than a job costing—system?Pepsi
Which of the following is most likely not to use process costing?Ashley Custom Furnishings
A manufacturer of plywood would use what type of product costing system?Process costing
A manufacturer of luxury yachts would use which type of costing system?Job costing
An example of an industry that uses process costing might be acompany that makes cement.
Job order costing might be used by acustom home builder.
________ is the system for assigning costs to unique cost objects.Job costing
Which of the following types of costing is used for many similar products?Process costing
Which of these documents authorizes the purchase of specific raw materials from a specific supplier?Purchase order
A ________ is used to accumulate the costs of a job.job cost record
The ________ substantiates the total of the raw materials inventory account shown on the company’s balance sheet.raw materials records
Which of these documents informs the storeroom to send specific materials to the factory floor?Materials requisition
When direct materials are requisitioned, they flow directly intowork in process inventory account.
The assignment of direct and indirect materials to a cost object reduces theraw materials inventory account.
A ________ is a source document used to track employee hours.labor time record
A ________ is used to accumulate all of the direct materials and direct labor used on the job, as well as the manufacturing overhead allocated to the job.job cost record
In the basic flow of inventory through a manufacturing system, which of the following occurs first in a job costing system?Raw materials inventory
In the basic flow of inventory through a manufacturing system, which of the following occurs second in the job costing system?Work in process inventory
In the basic flow of inventory through a manufacturing system, which of the following occurs third in the job costing system?Finished goods inventory
In the basic flow of inventory through a manufacturing system, which of the following occurs last in the job costing system?Cost of goods sold
A ________ is a document manufacturing production personnel use to request that the itemized materials be sent from the showroom into the factory.materials requisition
An internal request to transfer raw materials requires personnel to complete amaterials requisition document.
When used, raw materialscannot be determined with the information provided.
Payroll-related costs for factory employees who do not work directly on the product are consideredmanufacturing overhead.
The first three steps to allocating manufacturing overhead are taken before the year begins and include all of the following exceptallocating some manufacturing overhead to each individual job.
What is the primary factor that causes a “cost” called?Cost driver
A(n) ________ is an estimated manufacturing overhead rate computed during the year.predetermined manufacturing overhead rate
Assigning manufacturing overhead costs and other indirect costs is calledcost allocation
Manufacturers follow four steps to implement a manufacturing overhead allocation system. The last step isallocate some manufacturing overhead to each individual job.
Manufacturers follow four steps to implement a manufacturing overhead allocation system. What is the first step?Estimate total manufacturing overhead costs for the coming year.
Manufacturers follow four steps to implement a manufacturing overhead allocation system. Which step is not performed before the year begins?Allocate some manufacturing overhead to each individual job.
Manufacturing overhead is allocated on the basis ofmachine hours.
direct labor hours.
direct labor costs.
D) all of the above.
Allocating manufacturing overhead costs is doneduring the period.
When is the predetermined manufacturing overhead rate computed?Before the period starts
How do you calculate the predetermined manufacturing overhead rate used to allocate manufacturing overhead costs?By dividing the total estimated manufacturing overhead costs by the total estimated amount of the allocation base
Which of the following would be an example of a typical manufacturing overhead cost?Depreciation on factory equipment
A typical manufacturing overhead cost would bedepreciation on the plant.
Manufacturing overhead would includeall manufacturing costs except direct materials and direct labor.