Question

A.   Job OrderCosting would be most suitable to account for the manufacture of:

a. buildings

b. breakfast cereal

c. motor cars

d. computer keyboards

B. For which of the following products is a process costing system most appropriate?

a. breakfast cereal

b. automobiles

c. houses

d. furniture

C. Cost of Goods Manufactured (COGM) is needed to calculate:

a. Cost of Sales (COS)

b. Factory overhead rate

c. Direct materials used

d. Finished goods inventory

D. Which of the following is an inventory account of a manufacturer, but not of a retailer (eg. supermarket)?

a. Cost of goods manufactured (COGM)

b. Products inventory

c. Work in Progress (WIP)

d. Direct labour (wages)

E. What purpose does a Job Cost Sheet / Record serve?

a. Lists total materials, labour, and overhead costs charged to a job

b. Is management’s internal document that helps to control cost in a job cost system

c. Both of the above ( a&b)

d. None of the above

F. A key difference between job order costing and process costing is that:

a. Costs are assigned to direct materials in job costing and to indirect materials in process costing

b. Job costing uses a single work in process account and process costing uses a separate work in process account            for each department

c. Job order costing, but not process costing, uses conversion costs

d. Factory overhead is used in process costing but not in job order costing.

G. Which of the following is a period cost?

a. Materials

b. Direct Labour

c. Factory Overhead

d. Selling and Marketing Expenses

H. In process costing, lost units in production will

            Choose: (increase) (decrease) (no change) (equivalent-unit costs).

I. Work in process (WIP) considerations are relevant in job order costing.:

True / False

Answer 1

A) (c) Motor Cars

Explanations:-

A hybrid cost system exists where one type of cost system (job costing or process costing) is used for one phase of the production process, and another system is used for a subsequent phase. For example, in manufacturing cars, the various parts, subassemblies, engines, transmissions, and so forth may be produced where a job cost system is used. In assembly, every car, regardless of model, has the same assembly operations performed.

B) (a) breakfast cereal

Explanations:-

A process costing system is used by companies that produce similar or identical units of product in batches employing a consistent process.

C) (a) Cost of Sales (COS)

Explanations:-

Cost of goods manufactured consists of the cost of all goods completed during the period. It includes total manufacturing costs plus the beginning work in process inventory minus the ending work in process inventory.

Cost of Goods Sold=Beginning Finished Goods Inventory + Cost of Goods Manufactured – Ending Finished Goods Inventory

Thus, Cost of Goods manufactured is used to calculate Cost of Sales

D) (a) Cost of goods manufactured (COGM)

Explanations:-

The cost of goods manufactured (COGM), also called cost of goods completed, calculates the total value of inventory that was produced during the period and is ready for sale. In other words, this is the total amount of expenses incurred to turn work in process inventory into finished goods.

E) (c) Both of the above (a &b)

Explanations:-

The accounting department is responsible to record all manufacturing costs (direct materials, direct labor, and manufacturing overhead) on the job cost sheet. Job cost sheet is not only used to charge cost to jobs but is also a part of the company’s accounting record, that helps to control the cost of the company.

F) (b) Job costing uses a single work in process account and process costing uses a separate work in process account for each department

Explanations:-

Job cost systems have one Work in Process Inventory account for each job. Process cost systems have a Work in Process Inventory account for each department or process.

G) (d) Selling and Marketing Expenses

Explanations:-

A period cost is any cost that cannot be capitalized into prepaid expenses, inventory, or fixed assets. A period cost is more closely associated with the passage of time than with a transactional event. Since a period cost is essentially always charged to expense at once, it may more appropriately be called a period expense. A period cost is charged to expense in the period incurred. This type of cost is not included within the cost of goods sold on the income statement. Instead, it is typically included within the selling and administrative expenses section of the income statement.

H) (decrease)

Explanations:-

In process costing, the lost units will decrease the expected output of the production. Hence, the production will decrease.

I) False

Explanations:-

WIP is a concept used to describe the flow of manufacturing costs from one area of production to the next, and the balance in WIP represents all production costs incurred for partially completed goods. However, several work-in-process inventory accounts are typically used in a process costing system to track the flow of product costs through each production department. Thus, Work in process are more relevant in Process Costing rather than Job Order Costing.