Cost Accounting: A Managerial Emphasis, 16e, Global .

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EACost Accounting: A Managerial Emphasis, 16e, Global Edition (Horngren)Chapter 4 Job Costing4.1 Objective 4.11) A cost is considered direct if it can be traced to a particular cost object in a cost effective way whichmeans it can beA) traced easily with the aid of technologyB) traced in a manner that is accurateC) traced in an economically feasible wayD) possibly traced accurately with an investment in hardware and softwareAnswer: CDiff: 1Objective: 1AACSB: Analytical thinking2) A is anything for which a measurement of costs is desired.A) cost-allocation baseB) cost poolC) cost objectD) cost-application baseAnswer: CDiff: 1Objective: 1AACSB: Analytical thinking3) A is a grouping of individual indirect cost items.A) cost-allocation baseB) cost assignmentC) cost poolD) job-costing systemAnswer: CDiff: 1Objective: 1AACSB: Analytical thinking4) A manufacturer utilizes three separate indirect cost pools. Which of the following is true?A) Each indirect cost pool utilizes a separate cost-allocation rateB) Each indirect cost pool is a subset of total direct costsC) Each indirect cost pool relates to multiple cost centersD) Each indirect cost pool utilizes the same cost-allocation rate for all costs incurredAnswer: ADiff: 1Objective: 1AACSB: Analytical thinking1Copyright 2018 Pearson Education, Ltd.

EA5) Direct costs .A) are anything for which a measurement of costs is desiredB) are costs related to a particular cost object that can be traced to that cost object in an economicallyfeasible mannerC) focus specifically on the costing needs of the CFOD) are costs related to a particular cost object that cannot be traced to that cost object in a cost-effectivemannerAnswer: BDiff: 2Objective: 1AACSB: Analytical thinking6) In a costing system, .A) cost tracing allocates indirect costsB) cost allocation assigns direct costsC) a cost-allocation base can be either financial or nonfinancialD) a cost object should be a product and not a department or a geographic territoryAnswer: CDiff: 2Objective: 1AACSB: Analytical thinking7) Assigning direct costs to a cost object is called .A) cost allocationB) cost assignmentC) cost poolingD) cost tracingAnswer: DDiff: 1Objective: 1AACSB: Analytical thinking8) is the process of assigning indirect costs to products.A) Cost allocationB) Job cost recordingC) Cost poolingD) Cost tracingAnswer: ADiff: 1Objective: 1AACSB: Analytical thinking2Copyright 2018 Pearson Education, Ltd.

EA9) Allocating indirect costs to departments based on the relative revenue earned by those departments isdone based on which of the following criterion?A) direct hours utilizedB) benefits receivedC) material resources usedD) cause-and-effect relationshipsAnswer: BDiff: 1Objective: 1AACSB: Analytical thinking10) Which of the following includes both traced direct costs and allocated indirect costs?A) cost tracingB) cost poolsC) cost assignmentsD) cost allocationsAnswer: CDiff: 1Objective: 1AACSB: Analytical thinking11) The cost allocation base .A) is a grouping of individual indirect cost itemsB) are costs related to a particular cost object that cannot be traced to that cost object in an economicallyfeasible wayC) is anything for which a measurement of costs is desiredD) is a systematic way to link an indirect cost or group of indirect costs to cost objectsAnswer: DDiff: 1Objective: 1AACSB: Analytical thinking12) Direct costs are allocated to the cost object using a cost-allocation method.Answer: FALSEExplanation: Indirect costs are allocated to the cost object using a cost-allocation method.Diff: 1Objective: 1AACSB: Analytical thinking13) A cost object is anything for which a measurement of costs is desired.Answer: TRUEDiff: 1Objective: 1AACSB: Analytical thinking3Copyright 2018 Pearson Education, Ltd.

EA14) Direct costs of a cost object are costs related to a particular cost object that can be allocated to that costobject in an economically feasible (cost-effective) way.Answer: FALSEExplanation: Direct costs of a cost object — costs related to a particular cost object that can be traced tothat cost object in an economically feasible (cost-effective) way.Diff: 1Objective: 1AACSB: Analytical thinking15) The cost-allocation base is a systematic way to link an indirect cost or group of indirect costs to costobjects.Answer: TRUEDiff: 2Objective: 1AACSB: Analytical thinking16) Cost objects may be jobs, products, or customers.Answer: TRUEDiff: 1Objective: 1AACSB: Analytical thinking17) When an organization allocated indirect costs to departments by relative size of the budgets, it isbased on the criterion of benefits received.Answer: FALSEExplanation: When an organization allocated indirect costs to departments by relative size of thebudgets, it is based on the criterion of ability to bear costs.Diff: 1Objective: 1AACSB: Analytical thinking4Copyright 2018 Pearson Education, Ltd.

EA18) For each item below indicate the source documents that would most likely authorize the journal entryin a job-costing system.Required:a. direct materials purchasedb. direct materials usedc. direct manufacturing labord. indirect manufacturing labore. finished goods controlf. cost of goods soldAnswer:a. purchase invoiceb. materials requisition recordc. labor time card/recordd. labor time carde. job-cost recordf. sales invoiceDiff: 2Objective: 1AACSB: Analytical thinking19) Differentiate between a cost pool and a cost-allocation base.Answer: A cost pool is a grouping of individual indirect cost items. The cost-allocation base (number ofmachine-hours) is a systematic way to link an indirect cost or group of indirect costs (operating costs ofall metal-cutting machines) to cost objects (different products).Diff: 2Objective: 1AACSB: Analytical thinking4.2 Objective 4.21) Process costing is .A) used to enhance employees' job satisfactionB) used by businesses to price unique products or identical products produced in batchesC) used by businesses to price identical productsD) used by businesses when manufacturing goods above normal capacityAnswer: CDiff: 1Objective: 2AACSB: Analytical thinking5Copyright 2018 Pearson Education, Ltd.

EA2) Process costing .A) allocates all product costs, including materials, and laborB) results in different costs for different units producedC) is commonly used by general contractors who construct custom-built homesD) is used exclusively in manufacturingAnswer: ADiff: 2Objective: 2AACSB: Analytical thinking3) Job costing is .A) used by businesses to price identical productsB) used by businesses to price unique products for different jobsC) used to calculate equivalent unitsD) used to calculate the percentage of work completedAnswer: BDiff: 1Objective: 2AACSB: Analytical thinking4) Job costing .A) cannot be used by the service industryB) records the flow of costs for each product or serviceC) allocates an equal amount of cost to each unit made during a time periodD) is used when each unit of output is identicalAnswer: BDiff: 2Objective: 2AACSB: Analytical thinking5) Job-costing is likely to be used by .A) oil refining companiesB) advertising agenciesC) Mortgage payment processorsD) breakfast cereal producersAnswer: BDiff: 2Objective: 2AACSB: Analytical thinking6Copyright 2018 Pearson Education, Ltd.

EA6) Which of the following differentiates job costing from process costing?A) Job costing is used when each unit of output is identical, and process costing deals with uniqueproducts.B) Job costing is used when each unit of output is identical and not produced in batches, and processcosting deals with unique products produced on large scale.C) Process costing is used when each unit of output is identical, and job costing deals with uniqueproducts not produced in batches.D) Job costing is used by manufacturing industries, and process costing is used by service industries.Answer: CDiff: 3Objective: 2AACSB: Analytical thinking7) Which of the following companies will use a process costing system?A) an oil refining companyB) a manufacturer of shipsC) a custom kitchen cabinet companyD) an advertising firmAnswer: ADiff: 1Objective: 2AACSB: Analytical thinking8) A company may use job costing to assign costs to different product lines and then use process costingto calculate unit costs within each product line.Answer: TRUEDiff: 2Objective: 2AACSB: Analytical thinking9) In each period, job costing divides the total cost of producing an identical or similar product producedin batches by the total number of units produced to obtain a per-unit cost.Answer: FALSEExplanation: Job costing is used to accumulate costs separately for each product or service.Diff: 2Objective: 2AACSB: Analytical thinking10) Oil refining companies primarily use job costing to estimate costs.Answer: FALSEExplanation: Process costing is used to estimate costs in oil refining companies as the same process isused to extract oil.Diff: 1Objective: 2AACSB: Analytical thinking7Copyright 2018 Pearson Education, Ltd.

EA11) In a job-costing system the cost object is an individual unit, batch, or lot of a distinct product orservice.Answer: TRUEDiff: 1Objective: 2AACSB: Analytical thinking12) Process costing is used to assign manufacturing costs to unique batches of a product.Answer: FALSEExplanation: Job costing is used to assign manufacturing costs to unique batches of a product.Diff: 1Objective: 2AACSB: Analytical thinking13) Using job costing would not be appropriate in the shipping industry.Answer: FALSEExplanation: Since each package or item shipped is unique or has different demand on resources such aspackaging, methods of shipping, etc., job costing would be more appropriate than process costing.Diff: 1Objective: 2AACSB: Analytical thinking14) Whether a company chooses to use either a job ob costing system or process costing systemdepends on the nature of the product or service - whether the products or services are heterogeneous orhomogeneous.Answer: TRUEDiff: 2Objective: 2AACSB: Analytical thinking15) Describe job-costing and process-costing systems. Explain when it would be appropriate to use each.Answer: Job costing accumulates costs for different jobs required by specific customers. Process costingcomputes and allocates an equal amount of cost to each product. Job costing is the logical choice when theproduction process has many distinct products or many heterogeneous jobs, while process costing istypically used when it is not necessary to keep separate cost records for individual jobs and the productsare relatively homogeneous.Diff: 2Objective: 2AACSB: Analytical thinking8Copyright 2018 Pearson Education, Ltd.

EA4.3 Objective 4.31) Which of the following are reasons for using longer periods, such as a year, to calculate indirect costrates?A) shorter the period, the greater is the influence of seasonal patterns on the amount of costsB) longer the period, the greater is the influence of seasonal patterns on the amount of costsC) shorter the period, the smaller is the influence of seasonal patterns on the amount of opportunity costsD) longer the period, the smaller is the influence of seasonal patterns on the amount of opportunity costsAnswer: ADiff: 1Objective: 3AACSB: Analytical thinking2) The actual indirect-cost rate is calculated by .A) dividing actual total indirect costs by the actual total quantity of the cost-allocation baseB) multiplying actual total indirect costs by the actual total quantity of the cost-allocation baseC) dividing the actual total quantity of the cost allocation base by actual total indirect costsD) multiplying the actual total quantity of the cost allocation base by actual total indirect costsAnswer: ADiff: 1Objective: 3AACSB: Analytical thinking3) Actual costing is a costing system that traces direct costs to a cost object by .A) using the budgeted direct cost rates times the budgeted quantities of direct-cost inputsB) using the actual direct costs rates times the budgeted quantities of the direct-cost inputsC) using the actual direct cost rates times the actual quantities of the direct-cost inputsD) using the budgeted direct cost rates times the actual quantities of the direct cost inputsAnswer: CDiff: 1Objective: 3AACSB: Analytical thinking4) An example of a numerator reason for calculating annual indirect-cost rates includes .A) fewer production workdays in a monthB) cost of raw materials purchasedC) higher snow-removal costs during the winterD) the number of units producedAnswer: DDiff: 3Objective: 3AACSB: Analytical thinking9Copyright 2018 Pearson Education, Ltd.

EA5) An example of a denominator reason for calculating annual indirect-cost rates includes .A) Budgeted annual indirect costs divided by actual quantity of cost-allocation baseB) semi-annual insurance payments in March and SeptemberC) higher levels of output demanded during the fall monthsD) prepaid rent in January for the months January through JuneAnswer: CDiff: 3Objective: 3AACSB: Analytical thinking6) When calculating indirect cost rates, the longer the time period, the greater theinfluence of seasonal patterns on the amount of costs.Answer: FALSEExplanation: The shorter the time period, the greater the influence of seasonal patterns on the amount ofcosts.Diff: 1Objective: 3AACSB: Analytical thinking7) The formula for the predetermined indirect cost rate is:A) Budgeted annual indirect costs divided by actual quantity of cost-allocation baseB) Budgeted annual indirect costs divided by budgeted annual quantity of cost-allocation baseC) Actual annual indirect costs divided by budgeted annual quantity of cost-allocation baseD) Actual annual indirect costs divided by actual annual quantity of cost-allocation baseAnswer: ADiff: 1Objective: 3AACSB: Analytical thinking8) The actual indirect-cost rate is calculated by dividing actual total indirect costs by the budgeted totalquantity of the cost-allocation base.Answer: FALSEExplanation: Actual indirect cost rate Actual annual indirect costs / Actual annual quantity of the costallocation base.Diff: 1Objective: 3AACSB: Analytical thinking10Copyright 2018 Pearson Education, Ltd.

EA9) A manufacturer estimates that it will incur variable indirect costs for the month of October of 70,000and 30,000 of fixed costs. The company uses direct labor hours to calculate the predetermined overheadrate and predicted that 3,000 direct labor hours would be used in October. Actual direct labor hoursamounted to 3,200.Required:A) What is the variable predetermined indirect rate for October?B) What is the fixed predetermined indirect cost rate for October?C) What is the total allocation rate per direct labor hour for October?Answer: A) 70,000/3,000 23.33 per direct labor hourB) 30,000/3000 - 10.00 per direct labor hourC) 23.33 10.00 33.33 per direct labor hourDiff: 2Objective: 3AACSB: Analytical thinking4.4 Objective 4.41) A job that shows low profitability may be the result of .A) excessive usage of direct materialsB) inefficient direct manufacturing laborC) overpricing the jobD) insurance claim of the damaged goodsAnswer: BDiff: 2Objective: 4AACSB: Analytical thinking2) For a given job the direct costs associated with the job are .A) actual overhead that has been applied to the jobB) raw materials that can be traced to the job in an economically feasible wayC) All sunk costs that can be traced to the job in an economically feasible wayD) all fixed costsAnswer: BDiff: 2Objective: 4AACSB: Analytical thinking11Copyright 2018 Pearson Education, Ltd.

EA3) Place the following steps in the order suggested by the seven steps used to assign costs to individualjobs:A.B.C.D.Identify indirect costsCompute the total cost of the jobSelect cost-allocation basesCompute the indirect cost rateA) ACDBB) CADBC) BACDD) DCABAnswer: BDiff: 2Objective: 4AACSB: Analytical thinking4) The basic source document for direct manufacturing labor is the .A) job-cost recordB) materials-requisition recordC) labor-time recordD) labor-requisition recordAnswer: CDiff: 1Objective: 4AACSB: Analytical thinking5) Problems with costing occur when .A) incorrect job numbers are recorded on source documentsB) bar coding is used to record materials used on the jobC) a computer screen requests an employee number before that employee is able to work on informationrelated to a specific jobD) incorrect product delivery forms are entered into the systemAnswer: ADiff: 2Objective: 4AACSB: Analytical thinking6) The budgeted indirect-cost rate for each cost pool is computed as .A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation baseB) budgeted annual quantity of cost allocation base divided by budgeted annual indirect costsC) actual annual indirect costs divided by budgeted annual quantity of cost allocation baseD) budgeted annual indirect costs divided by budgeted actual quantity of cost allocation baseAnswer: ADiff: 2Objective: 4AACSB: Analytical thinking12Copyright 2018 Pearson Education, Ltd.

EA7) If indirect-cost rates are calculated monthly, distortions might occur because of .A) rental costs paid monthlyB) property tax payments made in July and DecemberC) routine monthly preventive-maintenance costs that benefit future monthsD) salary hikes at the beginning of the financial yearAnswer: BDiff: 2Objective: 4AACSB: Analytical thinking8) Smith Office Equipment Company's budgeted manufacturing overhead is 5,400,000. Overhead isallocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 30,000.What is the manufacturing overhead rate?A) 15.00B) 54.00C) 195.00D) 180.00Answer: DExplanation: 5,400,000 / 30,000 hours 180.00Diff: 2Objective: 4AACSB: Application of knowledge9) X-Industries manufactures 3-D printers. For each unit, 3,400 of direct material is used and there is 2,600 of direct manufacturing labor at 16 per hour. Manufacturing overhead is applied at 20 per directmanufacturing labor hour. Calculate the profit earned on 46 units if each unit sells for 9,500.A) 65,320B) 35,880C) 11,500D) 3,250Answer: CExplanation: 3,400 2,600 (( 2,600 / 16) 20) 9,250Profit earned on 46 units ( 9,500 9,250) 46 units 11,500Diff: 3Objective: 4AACSB: Application of knowledge10) In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate theallocated to a job.A) direct materialsB) direct laborC) manufacturing overhead costsD) total costsAnswer: CDiff: 2Objective: 4AACSB: Analytical thinking13Copyright 2018 Pearson Education, Ltd.

EA11) A job-cost sheet details the .A) direct materials purchased and paidB) direct labor costs incurredC) indirect labor costs incurredD) actual indirect overhead costs incurredAnswer: BDiff: 2Objective: 4AACSB: Analytical thinking12) A job-cost record uses information from .A) a materials-requisition record to record raw material purchases from suppliersB) a materials-requisition report to record the type and quantity of item received in an order from asupplierC) a labor-time card to record an employee's wage rate and hours spent on a particular jobD) the bill of materials to ensure the goods are of the prescribed qualityAnswer: CDiff: 2Objective: 4AACSB: Analytical thinking13) is used to record and accumulate all the costs assigned to a specific job.A) Job-cost recordB) Materials-requisition recordC) Cost-allocation baseD) Labor-requisition recordAnswer: ADiff: 1Objective: 4AACSB: Analytical thinking14) An increase in direct labor cost per unit .A) increases the fixed costB) increases profitsC) increases the variable costD) increases overhead costsAnswer: CDiff: 2Objective: 4AACSB: Analytical thinking14Copyright 2018 Pearson Education, Ltd.

EA15) Fixed costs remain constant at 450,000 per month. During high-output months variable co

Cost Accounting: A Managerial Emphasis, 16e, Global Edition (Horngren) Chapter 4 Job Costing 4.1 Objective 4.1 1) A cost is considered direct if it can be traced to a particular cost object in a cost effective way which means it can be A) traced easily with the aid of technology B) traced in a manner that is accurate

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