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web.groovymark@gmail.com
- December 8, 2024
Question 41
Which of the following is a common measure used to allocate overhead in traditional costing systems?
a) Number of products sold
b) Direct labor hours
c) Sales revenue
d) Units produced
Answer: b) Direct labor hours
Explanation: In traditional costing systems, direct labor hours or machine hours are commonly used to allocate overhead costs to products.
Question 42
In job order costing, what is the journal entry when raw materials are issued to production for use in a specific job?
a) Debit work-in-process inventory, credit raw materials inventory
b) Debit manufacturing overhead, credit raw materials inventory
c) Debit cost of goods sold, credit work-in-process inventory
d) Debit finished goods inventory, credit work-in-process inventory
Answer: a) Debit work-in-process inventory, credit raw materials inventory
Explanation: When raw materials are used for production, they are transferred from raw materials inventory to work-in-process inventory.
Question 43
Which of the following statements is true about job order costing?
a) It uses equivalent units to calculate the cost per unit.
b) It tracks costs for each individual job separately.
c) It is used for mass production of similar products.
d) It averages costs over all units produced.
Answer: b) It tracks costs for each individual job separately.
Explanation: Job order costing is used to track the costs of producing custom jobs or batches, where each job is tracked separately.
Question 44
Which cost category is typically not included in direct product costs?
a) Direct materials
b) Direct labor
c) Administrative expenses
d) Manufacturing overhead
Answer: c) Administrative expenses
Explanation: Administrative expenses are not directly related to the production process and are considered period costs, not product costs.
Question 45
What is the main purpose of a job cost sheet?
a) To summarize total sales for each job
b) To record the amount of time spent on a job
c) To track the direct and indirect costs associated with a specific job
d) To list the raw materials used for production
Answer: c) To track the direct and indirect costs associated with a specific job
Explanation: A job cost sheet is used to record all the direct materials, direct labor, and applied overhead for a specific job in job order costing.
Question 46
What does the predetermined overhead rate represent?
a) The total manufacturing costs for the year
b) The rate used to apply overhead to jobs based on a specific activity base
c) The difference between applied and actual overhead
d) The direct materials cost per unit
Answer: b) The rate used to apply overhead to jobs based on a specific activity base
Explanation: The predetermined overhead rate is used to apply overhead costs to jobs or products and is based on an activity measure such as direct labor hours or machine hours.
Question 47
What happens when overhead is underapplied?
a) Actual overhead is less than applied overhead
b) Applied overhead is less than actual overhead
c) The company overestimates the costs of production
d) The company records a higher profit
Answer: b) Applied overhead is less than actual overhead
Explanation: Underapplied overhead means the company applied less overhead than it actually incurred, resulting in actual overhead exceeding applied overhead.
Question 48
Which of the following would most likely use a job order costing system?
a) A company manufacturing identical water bottles
b) A law firm providing legal services
c) A candy manufacturer producing large quantities of chocolates
d) A gasoline refinery
Answer: b) A law firm providing legal services
Explanation: Job order costing is appropriate for businesses like law firms that provide custom services and track costs for each specific job or client.
Question 49
In a process costing system, what is a key characteristic of how costs are assigned to products?
a) Costs are traced to specific products or services
b) Costs are averaged over all units produced during the period
c) Costs are accumulated by each job separately
d) Costs are allocated only to finished goods
Answer: b) Costs are averaged over all units produced during the period
Explanation: In process costing, costs are averaged over the entire production for the period because the products are usually identical or similar.
Question 50
What does the term ‘conversion costs’ refer to in a process costing system?
a) Direct materials and manufacturing overhead costs
b) Direct labor and direct materials costs
c) Direct labor and manufacturing overhead costs
d) Direct materials and administrative costs
Answer: c) Direct labor and manufacturing overhead costs
Explanation: Conversion costs in process costing are the combined costs of direct labor and manufacturing overhead, which are incurred to convert raw materials into finished products.
