Process costing is used in those situations where many different products or services are produced
each period to customer specifications.
Job-order costing is used in those situations where units of a product are homogeneous, such as in th
manufacture of sugar.
The three cost categories appearing on a job cost sheet are: selling expense, manufacturing expense,
and administrative expense.
Period costs are expensed as incurred, rather than charged to jobs.
The use of predetermined overhead rates in a job-order cost system makes it possible to estimate the
total cost of a given job as soon as production is completed.
The fact that one department may be labor intensive while another department is machine intensive
explains in part why multiple predetermined overhead rates are often used in larger companies.
The process of assigning overhead cost to jobs is known as applying overhead.
To apply overhead to a job, actual overhead costs are added to manufacturing overhead.
The cost of goods sold in a single product company is equal to the number of units sold multiplied by
any overapplied overhead or underapplied overhead.
If the amount charged to Manufacturing Overhead Incurred account during a period is less than the
manufacturing overhead charged to jobs during the period, overhead was underapplied.
If the actual manufacturing overhead costs for a period exceed the manufacturing overhead costs
applied, then overhead would be considered to be overapplied.
The cost of goods manufactured equals beginning work in process inventory, plus the total
manufacturing cost charged to jobs, less ending work in process inventory.
Cost of goods sold equals beginning finished goods inventory, plus cost of goods manufactured, plus
ending finished goods inventory.
Which of the following companies would be most likely to use a job-order costing system rather than
a process costing system?
The manufacturing operation that would be most likely to use a job-order costing system is:
A process cost system is employed in those situations where:
where manufacturing involves a single, homogeneous product that flows evenly through the
production process on a continuous basis.
What document is used to determine the actual amount of direct labor to record on a job cost sheet?
Which of the following is the correct formula to compute the predetermined overhead Rate?
Estimated total manufacturing overhead costs divided by estimated total units in the allocation
Which of the following would probably be the least appropriate allocation base for allocating
overhead in a highly automated manufacturer of specialty valves?
direct labor hours
Which of the following statements is true?
Statements I, II, and III are all true.
In a job-order costing system, the amount of overhead cost that has been applied to a job that remains
incomplete at the end of a period:
is part of the ending balance of the Work in Process inventory account.
Which of the following situations always results in underapplied overhead?
Actual overhead is greater than applied overhead
Overapplied overhead occurs when:
applied overhead exceeds actual overhead.
The Work in Process inventory account of a manufacturing company shows a balance of $18,000
at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges
of $6,000 and $3,000 for materials, and charges of $4,000 and $2,000 for direct labor. From this
information, it appears that the company is using a predetermined overhead rate, as a percentage of
direct labor costs, of:
Job 607 was recently completed. The following data have been recorded on its job cost
The following data have been recorded for recently completed Job 501 on its job cost sheet. Direct
materials cost was $3,067. A total of 30 direct labor-hours and 104 machine-hours were worked on the
job. The direct labor wage rate is $12 per labor-hour. The company applies manufacturing overhead
on the basis of machine-hours. The predetermined overhead rate is $11 per machine-hour. The total
cost for the job on its job cost sheet would be:
Karvel Corporation uses a predetermined overhead rate based on machine-hours to apply
manufacturing overhead to jobs. For the month of August, Karvel estimated total manufacturing
overhead costs at $300,000 and total machine-hours at 75,000 hours. Actual results for the period
were manufacturing overhead costs of $290,000 and 76,000 machine-hours. As a result, Karvel would
applied more overhead to jobs than the actual amount of overhead cost for the year.
Harrell Company uses a predetermined overhead rate based on direct labor-hours to apply
manufacturing overhead to jobs. At the beginning of the year the company estimated its total
manufacturing overhead cost at $400,000 and its direct labor-hours at 100,000 hours. The actual
overhead cost incurred during the year was $350,000 and the actual direct labor-hours incurred o
jobs during the year was 90,000 hours. The manufacturing overhead for the year would be:
At the beginning of the year, manufacturing overhead for the year was estimated to be $702,450. A
the end of the year, actual direct labor-hours for the year were 33,100 hours, the actual manufactur
overhead for the year was $697,450, and manufacturing overhead for the year was overapplied by
$40,680. If the predetermined overhead rate is based on direct labor-hours, then the estimated direc
labor-hours at the beginning of the year used in the predetermined overhead rate must have been:
31,500 direct labor-hours
Brabo Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the
year, the estimated direct labor-hours were 15,700 hours. At the end of the year, actual direct labor-
hours for the year were 16,700 hours, the actual manufacturing overhead for the year was $352,960,
and manufacturing overhead for the year was overapplied by $27,800. The estimated manufacturing
overhead at the beginning of the year used in the predetermined overhead rate must have been:
Crimp Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of
the year, the estimated direct labor-hours were 15,000 hours and the total estimated manufacturing
overhead was $258,000. At the end of the year, actual direct labor-hours for the year were 13,100
hours and the actual manufacturing overhead for the year was $253,000. Overhead at the end of the
Dagnon Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning
of the year, the total estimated manufacturing overhead was $299,130. At the end of the year,
actual direct labor-hours for the year were 17,400 hours, manufacturing overhead for the year was
overapplied by $13,850, and the actual manufacturing overhead was $294,130. The predetermined
overhead rate for the year must have been closest to: