Multiple Choice Questions
1. Which of the following statements is true?
a. Job-order costing is used only in manufacturing firms.
b. Process costing is used only for services.
c. Job-order costing is simpler to use than process costing because the recordkeeping requirements are less.
d. The job cost sheet is subsidiary to the work-in-process account.
e. All of the above are true.
2. The ending balance of which of the following accounts is calculated by summing the totals of the open (unfinished) job-order cost sheets?
a. Raw Materials
b. Overhead Control
c. Work in Process
d. Finished Goods
e. Cost of Goods Sold
3. In a normal costing system, the cost of a job includes
a. Actual direct materials, actual direct labor, and estimated (applied) overhead.
b. Estimated direct materials, estimated direct labor, and estimated overhead.
c. Actual direct materials, actual direct labor, actual overhead, and actual selling cost.
d. Actual direct materials, actual direct labor, and actual overhead.
e. None of the above. Job-order costing requires the use of actual, not normal, costing.
4. The predetermined overhead rate equals
a. Actual overhead divided by actual activity level for a period.
b. Estimated overhead divided by estimated activity level for a period.
c. Actual overhead minus estimated overhead.
d. Actual overhead multiplied by actual activity level for a period.
e. One-twelfth of estimated overhead.
5. The predetermined overhead rate is
a. Calculated at the end of each month.
b. Calculated at the end of the year.
c. Equal to actual overhead divided by actual activity level for a period.
d. Equal to estimated overhead divided by actual activity level for a period.
e. Calculated at the beginning of the year.
6. Applied overhead is
a. An important part of normal costing.
b. Never used in normal costing.
c. An important part of actual costing.
d. The predetermined overhead rate multiplied by estimated activity level.
e. The predetermined overhead rate multiplied by estimated activity level for the month.
7. The overhead variance is underapplied if
a. Actual overhead is less than applied overhead.
b. Actual overhead is more than applied overhead.
c. Applied overhead is more than actual overhead.
d. Estimated overhead is less than applied overhead.
e. Estimated overhead is more than applied overhead.
8. Which of the following is typically a job-order costing firm?
a. Paint manufacturer
b. Pharmaceutical manufacturer
c. Large regional medical center
d. Cement manufacturer
e. Cleaning products manufacturer
9. Which of the following is typically a process-costing firm?
a. Paint manufacturer
b. Custom cabinetmaker
c. Large regional medical center
d. Law office
e. Custom framing shop
10. When materials are requisitioned for use in production in a job-order costing firm, the cost of materials is added to the
a. Raw materials account.
b. Work-in-process account.
c. Finished goods account.
d. Accounts payable account.
e. Cost of goods sold account.